Thursday, August 11, 2011

2d Circuit vacates $204 attorneys' fees award

It's awfully tough to challenge attorneys' fees awards in the Court of Appeals, which applies a deferential "abuse of discretion" standard in reviewing the district court's order. But in this FMLA retaliation case where the trial court awarded only $204 in attorneys' fees, the plaintiff overcomes that hurdle, producing a Second Circuit ruling that serves as a good primer on how to assess fees in cases where the plaintiff recovers a small damages award.

The case is Millea v. Metro-North Railroad, decided on August 8. You read it right. The plaintiff won his FMLA claim and counsel only got $204 in attorneys' fees (his lawyer petitioned the court for over $144,000 in fees). The district court ruled this way because plaintiff only recovered $612.50 in damages after proving that management interfered with his FMLA rights in requiring him to comply with an in-house leave notification rule that conflicted with the FMLA. On that claim, his rights were violated, but his damages were low.

Prior to 2008, the Second Circuit (like the other circuits) said that in calculating an attorneys' fees award, you multiply the attorneys' hours expended on the case by the hourly rate. After performing this calculation, you can adjust the award accordingly, usually downward if the plaintiff did not succeed on all his claims. This is the lodestar model. In Arbor Hill v. County of Albany, 522 F.3d 182 (2d Cir. 2008), the Second Circuit rejected the lodestar model for something more complicated: the "presumptively reasonable fee" as calculated through 12 separate factors. But in Perdue v. Kenny A., 130 S.Ct. 1662 (2010), the Supreme Court seemed to endorse the lodestar test anew, undercutting the Arbor Hill analysis.

Under the lodestar model, the district court abused its discretion in sharply reducing the attorneys' fees because it thought that Millea's case was not complicated and did not involve any novel issues. This is no basis, in itself, to reduce the fees. If the case is that simple, then counsel will have spent fewer hours on the case, which will reduce the lodestar amount. But a relatively simple case is no basis to reduce the overall attorneys' fees entitlement across-the-board. Millea's attorneys will get a lot more money under the Second Circuit's reasoning in this case.

The district court also blew it when it held that the low attorneys' fees award was appropriate because the case had no public policy significance. This was wrong. This case was not lucrative, but it was important. The Court of Appeals (Jacobs, Hall and Scheindlin [D.J.]), says that "Congress has already made the policy determination that FMLA claims serve an important public purpose disproportionate to their cash value. We cannot second-guess this legislative policy decision." This is a significant holding. In the past, the Second Circuit drastically reduced attorneys' fees awards in civil rights cases when the plaintiff won a nominal or modest damages award. The Court of Appeals applied this rule in Carroll v. Blinken, 105 F.3d 79 (2d Cir. 1997), one of the leading cases in this area. The Second Circuit now says that Purdue v. Kenny A. undercuts Carroll in stating that the lodestar is the "guiding light of our fee-shifting jurisprudence" that should be deviated from only in "rare" and "exceptional circumstances."

Relatedly, the district court justified the low attorneys' fees award because this was a "de minimus" victory. But the Court of Appeals says the $612.50 damages award actually was not de minimus; it represents more than 100 percent of the damages that Millea sought on his FMLA interference claim. This was no derisive jury award. The jury gave Millea what he asked for. As the Second Circuit says, "FMLA claims are often small-ticket items, and small damages awards should be expected without raising the inference that the victory was technical or de minimus. If an expense of time is required to obtain an award that is not available by voluntary compliance or offer of settlement, the expense advances the purposes of the statute." The Court adds, "especially for claims where the financial recovery is likely to be small, calculating attorneys' fees as a proportion of damages runs directly contrary to the purpose of fee-shifting statutes: assuring that civil rights claims of modest cash value can attract competent counsel. The whole purpose of fee-shifting statutes is to generate attorneys' fees that are disproportionate to the plaintiff's recovery."

No comments: