Tag: fee-shifting

Seventh Circuit Upholds Slashing Of Over $300K In Attorneys’ Fees Based On $2,000 Jury Verdict

scissorsAn easy to parrot, hard to apply attorney fee maxim involves the “prevailing party” standard.  To get attorneys fees awarded under a statutory or contractual fee-shifting provision, you must “prevail” or win the case.  So what happens when your win is a proverbial Pyrrhic one?  That is, you win the lawsuit but get only a fraction of the money you sought? Or, you’re victorious on only one of multiple claims; losing the other claims.  What then?

Montanez v. City of Chicago (http://caselaw.findlaw.com/us-7th-circuit/1670216.html) examines these issues and more in a decision that illustrates the broad discretion a district court has in both fashioning and reducing claimed attorneys fees based on the level of the fee seeker’s litigation success.

The plaintiff filed a civil rights suit against two police officers and a municipality alleging excessive force.  The plaintiff also pled various state law claims.  The state law claims were dismissed as untimely and the plaintiff went to trial on his civil rights (Section 1983) claims.  A jury awarded the plaintiff $2,000 against one of the officers: $1,000 in compensatory damages; $1,000 in punitives.  The jury ruled against the plaintiff on his claims against the other police officer.  The plaintiff sought fees and litigation costs of over $400,000.  The defendants of course argued for a severe fee slashing in light of the paltry jury award.  The District Court (mostly) obliged by lopping off over $300,000 of the plaintiff’s fees and costs.  Plaintiff appealed.

Held: Affirmed

Reasons:

Seven lawyers billed nearly 1100 aggregate hours for the plaintiff in litigating his excessive force claims.  The final tab exceeded over $400,000 in fees and almost $7,000 in costs.  The District Court shortened the fee amount to just over $108,000 and awarded costs of over $3,000.  So the plaintiff still got more than 50 times the jury award.

Affirming the trial court’s fees and costs reduction, the Seventh Circuit noted that in cases “lacking private incentives to limit the scope of litigation” (like fee-shifting Federal suits), a trial judge should exert his authority under Federal Rules 16 and 26 to guard against overlawyering, excessive discovery and wasteful pretrial activities.  The Court then stated the specific attorneys’ fees rules that guide the court’s analysis:

– a prevailing party in a Section 1983 suit can recover “a reasonable attorney’s fee” that is generally computed by the “lodestar” method: number of hours multiplied by hourly rate;

– where the hours a plaintiff spent on successful claims can be segregated from time spent on unsuccessful claims, the time spent on the latter claims can be subtracted from the fee award;

– an attorneys’ reasonable hourly rate is based on the local market rate – the best evidence of which is the rate charged by that attorney for similar work;

– if the court can’t determine a reasonable hourly rate based on the petitioning attorney’s rates, the court looks to the rates charged by similarly experienced attorneys in the community and evidence of rates set for attorneys in similar cases;

– hourly attorney rates are particularly difficult in cases where the attorney typically uses contingent fee agreements;

– conclusory affidavits from other attorneys who opine that another attorney’s rates are reasonable have little probative value;

– the court’s goal in shifting fees (to the losing party) is not “auditing perfection”: instead, it’s to attain “rough justice”;

– in the area of legal research, the trial court has broad discretion in determining what research likely contributed to the successful result at trial and whether certain research was “esoteric”, redundant or had nothing to do with plaintiff’s winning claims;

– the district court can strike vague billing entries and where a fee request dwarfs actual damages won at trial, this raises a “red flag” (as to the validity of the requested fees);

– 28 U.S.C. § 1920 allows a prevailing party to recover “costs” including (i) costs for transcripts necessarily obtained for use in the case; (ii) printing costs and (iii) copying costs for materials necessarily obtained for use in a case.

Montanez, pp. 7-13, 17.

With these guideposts informing its analysis, the Seventh Circuit upheld the District Court’s cuts to the plaintiff’s fees and costs request.  Stating there is no precise mathematical formula for adjusting fee requests, the Court noted that a fee reduction is proper where fees dwarf the trial damage award and the plaintiff achieves “limited success.”

Here, the plaintiff’s success was limited as he won only $2,000 at trial and lost on 4 of his 6 claims.  The Seventh Circuit affirmed the District Court’s 50% cut in the plaintiff’s total lodestar fees based on the comparatively low money judgment amount and on plaintiff losing the majority of his claims.  The other fees and costs reductions approved by the Seventh Circuit included those based on (1) fees generated for witnesses that were never called; (2) for deposition transcripts that were never used, (3) transcription rates that exceeded the allowable amount under Local Rule 54 and (4) legal research into areas that had no bearing on plaintiff’s successful claims.  The Seventh Circuit found these subtractions proper and within the District’s Court’s fee award discretion.

Summary: The case presents a fairly exhaustive summary of a Federal court’s fee award calculus and shows the broad discretion a district court has in lopping off what it views as extraneous fees and costs.  It’s clear that while there is no precise arithmetical rule that governs in all fee cases, a court will look at the claimed fees in relation to the actual money judgment won at trial and will also consider how many claims a litigant won and lost in the same case when determining the fee award.

Fee Shifting – Is ‘Prevailing Party’ Language Required?

I see this often: plaintiff sues a defendant for breach of contract.  The defendant has more financial resources than the plaintiff and the contract doesn’t have an attorneys’ fees provision.  Meaning, each side is responsible for its own fees. 

After several months, the plaintiff gets financially (and mentally) worn down by the richer defendant – who by now has filed numerous counterclaims and scheduled a flurry of witness depositions. 

The plaintiff says “uncle” and the parties enter the dreaded Mutual Walk-Away.  The plaintiff gets nothing, is annoyed at her lawyer (whom she has been paying hourly) and loses confidence in the litigation system. 

Once again, the deeper-pocketed defendant gets its way and the plaintiff, whose claim had merit, never gets her day in court.

One way to protect against this  common occurrence is to insert an attorneys’ fees or “fee-shifting” provision in the contract. 

Fee language can at least make a defendant think twice about trying to break a plaintiff’s will through protracted litigation.  It also encourages the plaintiff to not give up so easily when there is a potential fees and costs recovery at the end of the lawsuit. 

In Bank of America v. Oberman, Tivoli & Pickert, Inc., 2014 WL 293662,  an accounting firm sued a commercial lender for breach of a commercial loan agreement.  The agreement contained fee-shifting language applicable to the “collection, enforcement, administration, or protection” of the loan agreement. 

After plaintiff’s Illinois suit was dismissed for the fourth time and the dismissal was affirmed on appeal, the lender filed a separate action to recover its defense fees.

The accounting firm moved to dismiss the lender’s claim on the basis that the loan documents  didn’t specify that the prevailing party could recover attorneys’ fees.  The Northern District denied the motion.

Reasoning:

– The general rule in Illinois is that the lawsuit winner isn’t entitled to recover its attorneys’ fees unless there is a contractual provision that says so;

– Allowing a losing party to collect attorneys’ fees from the successful party violates Illinois public policy;

– A fee provision doesn’t have to contain the magic words “prevailing party” to be enforceable.

*4-5.

The Northern District found the fee-shifting language applied to the lender’s defense of the accounting firm’s various lawsuits.  The loan contract specifically said that fees incurred in the “protection” of the loan agreement were recoverable. 

The Court applied the Black’s Law Dictionary definition of protection (“to defend from danger or injury”) in ruling that defending a lawsuit equated to protecting the lender’s contract rights.  

Afterword:

To avoid the negative aftershocks of the above walk-away scenario, I always stress to clients that their contracts should contain attorneys’ fees language.  I also caution them that when signing another party’s contract, to be alert for attorneys’ fees language slanted in the other side’s favor. 

This case illustrates that while “prevailing party” terminology isn’t required to enforce a fee-shifting clause; the clearer and broader the clause, the better. 

 

 

Fee Petition Doesn’t Extend Time to Appeal Trial Verdict In Commercial Lease Spat

In Naperville South Commons, LLC v. Nguyen, 2013 IL App (3d) 120382-U, a Will County shopping center landlord filed its notice of appeal too late and so a money judgment for the tenant stands.

The case involves a multi-year shopping center lease for tenant’s operation of nail salon. Several months into the lease’s fourth year, the landlord unilaterally increased the tenant’s rent by over $1,200 per month.  Tenant balked and landlord filed joint action for rent and possession.

At trial, the court entered judgment for the tenant on landlord’s rent claim because the landlord failed to prove that the tenant owed rents or other monies at the time landlord served its 5-day notice.  The court also awarded the tenant some $54,000 in attorneys’ fees based on fee-shifting language in the lease.  Landlord appealed.

The appeals court held it lacked jurisdiction over landlord’s appeal and affirmed trial court’s award of attorneys’ fees.

The trial court entered judgment in November 2011 and the landlord didn’t file its appeal until nearly six months later in May 2012 – the day after the court ruled on tenant’s attorneys’ fee petition (which the tenant filed within 30 days of the trial court judgment). 

In Illinois, a notice of appeal must be filed within 30 days of a final judgment or within 30 days of the order which disposes of the “last pending postjudgment motion.”  Ill. Sup.Ct. R. 303.  Here, contrary to landlord’s position, the tenant’s attorneys’ fee petition was not a postjudgment motion since it didn’t directly challenge any of the trial court’s findings but was instead “collateral to” the trial court’s judgment.  ¶ 15.

The Court held that since tenant’s fee petition was not a post-judgment motion, the landlord did not have additional time – beyond the 30 days – to file its notice of appeal.  Because the landlord didn’t file its notice of appeal within 30 days of the underlying judgment, the court lacked jurisdiction to consider the landlord’s appeal.

The Third District did accept landlord’s appeal of the trial court’s fee award for the prevailing tenant.  The Court first held that the tenant was in fact the prevailing party.  The landlord argued that since it obtained possession of the premises, it won the case, since the primary purpose of the case was to dispossess the tenant.

In Illinois, “a party can be considered a prevailing party for the purposes of awarding fees when he is successful on any significant issue in the action and achieves some benefit in bringing suit, receives a judgment in his favor, or obtains some affirmative recovery.” ¶ 17.

The Court held that the landlord didn’t prevail on the possession issue since the tenant voluntarily left the premises: there was no adjudication of possession in landlord’s favor.  ¶ 18.

On the rent issue, the tenant clearly won since the trial court ruled that the tenant owed nothing based on landlord failing to carry its burden of proof that the tenant owed monies at the time landlord served its 5-day notice.

The Court affirmed the fee award to the tenant, noting that the tenant properly supported its fee petition with competent evidence that quantified its fees in defending the landlord’s eviction suit. ¶ 20.

Take-aways:

– When in doubt, file a Notice of Appeal within 30 days of the trial date order, regardless of what motions are filed by other parties after the judgment.  If the notice turns out to be premature, it will take effect automatically when the post – judgment motion is disposed of.

– A fee petition filed by a prevailing party is not a Rule 303 post-judgment motion that extends the 30-day period to file a notice of appeal;

– to be considered a prevailing party for purposes of an attorneys’ fees petition, the party must obtain an on-the-merits adjudication in its favor on a particular issue.