Defendants in FEHA cases should be very careful when evaluating whether or not to settle a case, especially when defendant receives a CCP § 998 offer in compromise from plaintiff.

This is so because if plaintiff wins anything from the jury, the resulting attorney’s fee owed to plaintiff’s counsel could dwarf the plaintiff’s award, thus making a small case a large case.

Consider this recent case from the Ninth Circuit Court of Appeals reviewing a plaintiff attorney’s fee award of $697,971.80 on a case where the jury awarded only $27,280 to plaintiff. The district court in this case slashed the requested fee of $1,945.726.50 to $697,971.80 and the Ninth Circuit affirmed the award.

There are lessons in this case for plaintiff’s attorneys, certainly, especially on evidentiary issues (like hearsay!), and perhaps overreaching, but the big lesson here is for defense attorneys. Even if you think you have a small case, if it goes to trial, your client may have to pay hundreds of thousands of dollars in attorney’s fees to their former employee’s lawyers, on top of the defense attorney’s fees.

On some cases I have started using CCP § 998 offers in compromise simply to start the interest claim on cases in the event I have to try the case. In that instance, assuming my client prevails at trial, defendants will be responsible for prejudgment interest of 10% from the date of § 998 offer and when I incur expert witness fees, which in some cases are quite substantial, the defendant will get to pay those expenses also.

I have found defendants rarely accept my § 998 offers, and so far it has worked to my client’s advantage. I often wonder why they are summarily ignored. This case, as far as I know, did not involve a § 998 offer, but my point is that in FEHA cases, defendants often ignore the consequences of small verdicts.

The moral of this story: A small verdict in a FEHA case ain’t the same as a small verdict in a personal injury case.

Muniz v. UPS, 738 F. 3d 214 (9th Cir. 2013).