What Is the Catalyst Theory ?

Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553 involved the "catalyst theory" of recovery under Code of Civil Procedure section 1021.5. Under the catalyst theory, "attorney fees may be awarded even when litigation does not result in a judicial resolution if the defendant changes its behavior substantially because of, and in the manner sought by, the litigation." (Graham, supra, at p. 560.) The catalyst theory "is an application of the ... principle that courts look to the practical impact of the public interest litigation ... to determine whether the party was successful, and therefore potentially eligible for attorney fees." (Id. at p. 566.) In Graham, the defendant criticized the "catalyst rule because it could encourage nuisance suits by unscrupulous attorneys hoping to obtain fees without having the merits of their suit adjudicated." (Graham, supra, 34 Cal.4th at p. 574.) The defendant cited the following from the concurring opinion of Justice Scalia, joined by Justice Thomas, in Buckhannon Board & Care Home, Inc. v. West Virginia Dept. of Health and Human Resources (2001) 532 U.S. 598: " 'If the catalyst theory sometimes rewards the plaintiff with a phony claim (there is no way of knowing), its absence sometimes denies fees to the plaintiff with a solid case whose adversary slinks away on the eve of judgment. But it seems to me the evil of the former far outweighs the evil of the latter. There is all the difference in the world between a rule that denies the extraordinary boon of attorney's fees to some plaintiffs who are no less "deserving" of them than others who receive them, and a rule that causes the law to be the very instrument of wrong--exacting the payment of attorney's fees to the extortionist.' " (Graham, supra, 34 Cal.4th at p. 574 21 Cal.Rptr.3d 331, 101 P.3d 140, citing Buckhannon, supra, 532 U.S. at p. 618 (conc. opn. of Scalia, J.).) In Graham, the California Supreme Court held the catalyst theory should not be abolished in California, but clarified it to mean "a plaintiff must not only be a catalyst to defendant's changed behavior, but the lawsuit must have some merit, ... and the plaintiff must have engaged in a reasonable attempt to settle its dispute with the defendant prior to litigation." (Graham, supra, 34 Cal.4th at p. 561.) The Attorney General, appearing as amicus curiae, sought the element of a reasonable settlement attempt in a catalyst theory case, and the court found it "fully consistent with the basic objectives behind section 1021.5 and with one of its explicit requirements--the 'necessity ... of private enforcement' of the public interest. Awarding attorney fees for litigation when those rights could have been vindicated by reasonable efforts short of litigation does not advance that objective and encourages lawsuits that are more opportunistic than authentically for the public good. Lengthy prelitigation negotiations are not required, nor is it necessary that the settlement demand be made by counsel, but a plaintiff must at least notify the defendant of its grievances and proposed remedies and give the defendant the opportunity to meet its demands within a reasonable time." (Graham, supra, at p. 577.) The Court also held that " 'The private attorney general doctrine "rests upon the recognition that privately initiated lawsuits are often essential to the effectuation of the fundamental public policies embodied in constitutional or statutory provisions, and that, without some mechanism authorizing the award of attorney fees, private actions to enforce such important public policies will as a practical matter frequently be infeasible." Thus, the fundamental objective of the doctrine is to encourage suits enforcing important public policies by providing substantial attorney fees to successful litigants in such cases.' " (Graham, supra, 34 Cal.4th at p. 565.)