The unpleasant truth about attorneys' fees

Lawyers who handle civil rights case on behalf of plaintiffs know two things: first, their client don't have much money, if any. Second, if you win the case, the losing side pays your attorneys' fees, sort of like a second judgment against the losing defendant. This is how plaintiff-side lawyers pay the bills. But winners do not always recover fees. And that is an unpleasant fact.

The case is Knights v. City University of New York, a summary order issued on June 17. Plaintiff was a contract employee at CUNY, where he was accused on sexual harassment. A CUNY investigator substantiated the claims, resulting in plaintiff's termination, but when plaintiff instituted a name-clearing arbitration proceeding to challenge the findings, CUNY decided to rescind the termination, pay him for the remaining 13 days of his term of employment, and remove any reference to the incident from his personnel file. The arbitration was dismissed as moot, but plaintiff filed a muti-million lawsuit in the Eastern District of New York, where a jury found in his favor but awarded him only one dollar.

Following a successful plaintiff's verdict, the lawyer will next move for attorneys' fees. Normally, the attorney will recover fees. But there is a major exception, recognized by the Supreme Court in Farrar v. Hobby, 506 U.S. 103 (1992), and the Second Circuit in Pino v. Locascio, 101 F.3d 235 (2d Cir. 1996): a one dollar verdict usually entitles the lawyer to no attorneys' fees at all. Yes, the plaintiff was a "prevailing party," but the nominal damages proves the plaintiff did not prove an essential element of his claim for monetary relief.

The district court nonetheless awarded plaintiff $75,000 in attorneys' fees on the basis that CUNY acted in bad faith in the way it handled the sexual harassment allegations against plaintiff. The district court originally awarded $75,000 in fees but the Court of Appeals in August 2024 vacated that ruling and ordered the trial court to further explain its justification for that ruling. On remand, the trial court did provide a justification and again awarded plaintiff $75,000 in fees. The district court stated:

I thus believe that CUNY had acted in bad faith in successfully employing its mootness gambit to abort the arbitration and Knights’ entitlement to his name-clearing hearing by reinstating him with back pay, thereby precluding him from his constitutional right to tell his side of this “he said, she said” story. I simply could not in good conscience condone CUNY's manipulative behavior and penalize Knights’ attorney for engaging in six years of unnecessary litigation without any compensation.

4I therefore consider the unique facts of this case to be tantamount to a rare example of when counsel fees are justified for a constitutional violation, even if no new rule of law resulted from the litigation. Moreover, I do not view depriving one of his constitutional entitlement to a name-clearing hearing as inconsequential.

The state appeals again. The Court of Appeals (Nardini, Lee and Merriam) finds the district court abused its discretion: there is no "bad faith" exception to the rule announced in Farrar v. Hobby. While bad faith might support a sanctions finding against the losing party, that does not mean bad faith alone can entitle the prevailing plaintiff to attorneys' fees. The $75,000 in fees are erased and plaintiff's counsel will recover nothing, despite winning the case at trial.