Continuing our tour of recent decisions in the Maine SJC and First Circuit, let us turn to the federal side of the street.
The First Circuit issued three decisions relating to attorneys' fees in recent weeks – Diaz v. Jiten Hotel Management, No. 11-2400 [http://www.ca1.uscourts.gov/cgi-bin/getopn.pl?OPINION=11-2400U.01A]; Central Pension Fund of the International Union of Operating Engineers and Participating Employers v. Ray Haluch Gravel Co., No. 11-1944 [http://www.ca1.uscourts.gov/cgi-bin/getopn.pl?OPINION=11-1944P.01A]; and Torres-Santiago v. Municipality of Adjuntas, Docket. No. 10-2248 [http://www.ca1.uscourts.gov/cgi-bin/getopn.pl?OPINION=10-2248P.01A]
This one isn't getting published. There were multiple amici, including the ACLU-Mass, and GLAD. The plaintiff received a jury verdict for $7650 on one of six claims raised in her complaint, and sought $139,622 in fees. The District Court (Young, J.) cut it down to $25,000. The Court of Appeals remanded.
The district court chopped fees partially because it found four of the claims on which the plaintiff did not prevail were unrelated to the one on which she prevailed for the purposes of applying the Supreme Court's test for relatedness and fees set forth in Hensley v. Eckerhart, 461 U.S. 424 (1983). The First Circuit didn't disturb that finding. That brought the fees down to $44,766.
Beyond that, however, the trial court had further reduced the fees "because of an undue emphasis on Diaz's rejection of a pre-trial $75,000 settlement offer." The trial court said that there was a "perverse incentive" for attorneys to encourage clients to reject reasonable offers and go to trial to earn more in fees. The Court of Appeals disagreed, noting, among other things, that civil rights attorneys have incentives to encourage their clients to take reasonable settlement offers, because they get fees only if they prevail. It's the client, moreover, not the lawyer who makes, the settlement decision. And, if you want to contain fees through a reasonable settlement offer, you can do it through a Rule 68 offer of judgment, which wasn't made here.
Finally, the court noted that the plaintiff was entitled to post-judgment interest on the fee award, pre-judgment interest on the damages award, and no pre-judgment interest on the fees because fees aren't damages.
This decision vacated an award of @ $60,000 in fees against unsuccessful plaintiffs in a civil rights action. It is very fact specific. It's a useful decision because it shows how you analyze whether a claim is frivolous at the beginning, and whether it becomes frivolous down the line. Getting summary judgment against the plaintiff does not ipso facto mean the claim was frivolous, as the court explains under the facts of the case (political discrimination – what percentage of cases in Puerto Rico are not political discrimination cases?).
Finally, shades of Diaz, supra, the trial court (Perez-Gimenez, J.) awarded fees partially based on the plaintiffs' refusal to accept what that court called a "sound settlement offer." Once again, that reasoning was rejected – "The mere failure to accept even a 'sound settlement offer' does not convert a reasonable claim into a frivolous one." Finally, in allocating fees to the defendant, versus the plaintiff, when only some claims support the fee award, the Court noted the applicable "but for" test – any fees that the defendant would have nevertheless incurred are non-recoverable.
The last decision on our hit parade presents, as the author (Judge Selya) noted, "two issues of first impression" in the Circuit: (1) when is the underlying judgment final when fee issues remain; and (2) "what happens when an employer fails to keep appropriate records concerning work covered by the benefit-remittance provisions of a collective bargaining agreement." I'm only chatting about the first, fee aspect of this opinion.
The big kahuna decision about when the judgment is final when fee issues remain is Budinich v. Becton Dickinson & Co., 486 U.S. 196 (1988). There, the plaintiff prevailed on an employment claim, and sought fees under a state fee-shifting statute. The plaintiff also didn't like the outcome of the case on the merits, but didn't file a notice of appeal until after the trial court resolved the fee claim – more than 30 days after entry of judgment on the merits. Too late, said the Supreme Court. Id. at 199-203.
In figuring out when you wait for the fee determination and when you don't, the Court of Appeals said, "[t]he decisions of the courts of appeals … are in disarray." Some Circuits say the test applied in Budinich (in general fee claims aren't a part of the merits and you've got to appeal the initial non-fee determination) applies for all fee claims (Judge Selya cites 2d, 5th, 7th and 9th Circuit decisions). Other Circuits say contract claims for fees "may fall beyond the Budinich line" (citing the 3d, 4th, 8th, 11th Circuits, although the Court describes the 3d Circuit as going both ways).
Weighing in, the First Circuit ruled: "[W]e do not believe that Budinisch should be read mechanically to apply to all claims for attorneys' fees, whatever their genesis." While generally speaking, fees are a collateral matter, sometimes they can be part of the merits. "Where, as here, an entitlement to attorneys' fees derives from a contract rather than from a statute, the critical question is whether the claim for attorneys' fees is part of the merits." Here, the Court found it was.
What are the takeaways from this packet of fee cases?
– as I've said before, appeal early and often. If you aren't sure if it's final, appeal anyway. Better safe than sorry.
– trial judges get cranky when they find out a reasonable settlement has been rejected. If you are on the defense, don't be shy about using Rule 68. Yes, these decisions make it clear that the trial court isn't supposed to explictly rely on rejection of a reasonable settlement offer in setting fees, but …
– these decisions illustrate a general tendency in the First Circuit not to be wedded to bright line rules, but rather to focus on context, identify the principle behind a test, and apply the principle in context. To me, one of the best illustrations of the First Circuit's refusal to get locked into boxes is its standard of review test. Basically, it's a spectrum – the more fact-y something looks, the more deference to the court below. This is logical, and can be melded to the specific appeal before the Court.
A final word on upoming appellate events. The Maine SJC's annual Tour o' Maine is coming up in October. I'll be arguing one at the Brunswick High School. The other appeal days are in Bucksport and Biddeford (apparently this was the year of the "b's – maybe Cumberland, Calais and Clifton next year?)