Can an employer avoid having a portion of a settlement used to pay the employee's attorney?

California, United States of America


The following excerpt is from Draper v. Aceto, 113 Cal.Rptr.2d 61, 26 Cal.4th 1086, 33 P.3d 479 (Cal. 2001):

In order for the employer to avoid having a portion of the settlement used to pay the employee's attorney under the majority's holding, the employer's attorney need only be "active" in the litigation. In determining whether the employer's attorney was "active," the court does not "weigh the relative contributions of counsel" but simply determines whether the employer was "a passive beneficiary." (Kavanaugh v. City of Sunnyvale (1991) 233 Cal.App.3d 903, 914, 284 Cal.Rptr. 698.) The employer's attorney need only "participate" in the litigation by making more than "a token appearance." (Id. at p. 915, 284 Cal.Rptr. 698.) This means that the employee's attorney may perform the vast majority of the work that results in the settlement and yet be denied attorney fees altogether. Unlike the majority, I believe this gives the employer "an unfair advantage" and, to the extent that the unpaid services of the employee's attorney contributed to the settlement, "a `free ride.'" (113 Cal. Rptr.2d at p. 67, 33 P.3d at p. 484, ante.)

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