Two circuits weigh in today on the award of attorneys fees, with both outcomes favoring plaintiffs' counsel. One, from the Second Circuit, tackles an unreasonably low $204 fee for a successful trial on a claim of FMLA interference. The other, from the Fifth Circuit, reverses the award of Eastern District of Texas attorneys' rates in a Title VII case to a trial team from Oakland, California, where "an avalanche of unrebutted evidence" establishes that no addition al local lawyers could or would have taken the case.
Millea v. Metro-North R.R. Co., No. 10-409 (2d Cir. Aug. 8, 2011): The plaintiff in this case won a split verdict before a jury, prevailing on an FMLA interference claim (29 U.S.C. § 2615(a)(1)) but losing FMLA retaliation (29 U.S.C. § 2615(a)(2)) and a state tort claim. "The jury returned a verdict in favor of Millea on his interference claim, awarding him $612.50 in lost wages and other damages. The jury found in favor of Metro-North on both the retaliation and IIED claims. Millea moved for costs and attorneys' fees, and the court awarded $204 in attorneys' fees and $18,643 in costs." The plaintiff appealed the loss on the FMLA retaliation claim, and the fee award. (The employer appealed the loss on the FMLA interference claim; the panel affirmed that part of the judgment.)
The largest part of the Second Circuit opinion is devoted to analyzing, vacating and remanding the jury defense award on the retaliation claim, holding that the district court erred by not charging the jury with the "materially adverse employment action" standard articulated in Burlington Northern & Santa Fe Railway Co. v. White, 548 U.S. 53 (2006).
The last leg of the opinion, though, addressed the $204 fee award. The fee award was pegged at one-third of the damages. The lawyer had petitioned the court for an lodestar award of $144,792, apparently based on the number of hours expended through trial multiplied by counsel's hourly rate.
The panel holds that the district court erred by using improper factors to reduce the fee award.
1. "First, the district court reduced its initial figure because it concluded Millea's case was not particularly complicated." The Second Circuit holds that although the district court may consider novelty and difficulty as a basis for reducing the number of hours reasonably expended on the case, it was incorrect to adjust the lodestar."
2. "Second, the district court impermissibly reduced its initial figure because it concluded that the interference claim--the only claim on which Millea prevailed--had no public policy significance. . . . By enacting a fee-shifting provision for FMLA claims, 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."
3. "Third, the district court impermissibly reduced its initial award because Millea was unsuccessful on his [FMLA] retaliation and IIED [intentional infliction of mental distress] claims. . . . Millea's lack of success on the IIED claim provides no reason to adjust the lodestar because the lodestar should have already excluded this claim."
4. "Finally, the district court impermissibly reduced its initial fee award based on an incorrect conclusion that Millea's victory was 'de minimis.' . . . The $612.50 award was not de minimis; to the contrary, the award was more than 100% of the damages Millea sought on that claim. It was not a derisory or contemptuous rejection by the jury."
The panel also rejects the district court's bottom-line conclusion that the fee should be proportionate to the plaintiff's recovery:
"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. Thus, the district court abused its discretion when it ignored the lodestar and calculated the attorneys' fees as a proportion of the damages awarded."
McClain v. Lufkin Industries, Inc., No. 10-40036 (5th Cir. Aug. 8, 2011): In this very long-running Title VII disparate impact case, the plaintiff class - who were found after a trial to have suffered disparate impact in job assignments, promotions and compensation - won a $3.3 million award of back pay and an injunction. The case produced numerous district court orders and five appeals, including McClain v. Lufkin Industries, Inc., 519 F.3d 264 (5th Cir. 2008).
On this appeal, the Fifth Circuit reviewed an award of class counsel's attorneys' fees under 42 U.S.C. § 2000e-5(k). The crux of the appeal was that the lawyers sought different rates. The original lawyer - a Nacogdoches, Texas lawyer named Timothy Garrigan - sought and received his local market rate of $400/hour. But the district court held that out-of-state counsel (Goldstein Demchek) from Oakland, California could not support an award of their higher, Northern District of California rate (upwards of $650 an hour). The record held "numerous affidavits from experienced Texas litigators and even the founder and past president of the Texas Employment Lawyers Association declaring, under oath, that no Texas attorneys were available to join Garrigan's team on this particular case." The defendant apparently placed nothing in opposition to this record evidence.
While the district judge held the Oakland firm to the lower Eastern District of Texas hourly rates, the Fifth Circuit vacates that order. It notes that although the presumptive market rate is that of the community where the services are provided - the local forum rate - "[a] number of our sister circuits, however, have taken the position that out-of-district counsel may be entitled to the rates they charge in their home districts under certain limited circumstances."
The Fifth Circuit adopts the following standard:
"To fulfill the purpose of Section 1988 [sic.] fee awards, . . . we hold that where, as here, abundant and uncontradicted evidence proved the necessity of Garrigan's turning to out-of-district counsel, the co-counsel's 'home' rates should be considered as a starting point for calculating the lodestar amount. Because local rates may well reflect a lower cost of living in the forum, which will also be indicative of lower potential damage awards, the district court retains discretion to adjust the lodestar and achieve an overall reasonable fee award."
Accordingly, the panel finds that the district court erred by mechanically insisting on local forum rates, in light of the overwhelming evidence that no local lawyers would have taken the case. "The district court clearly erred in finding contrary to the record that local attorneys were available to assist in the representation." Moreover, "we here clarify our adherence to the common view of circuit courts that in the unusual cases where out-of-district counsel are proven to be necessary to secure adequate representation for a civil rights plaintiff, the rates charged by that firm are the starting point for the lodestar calculation."
The panel also holds that dicta in the recent decision, Perdue v. Kenny A. ex rel. Winn, 130 S. Ct. 1662 (2010), did not require a court to compare plaintiff's fee to those of the defense lawyers in the same case; that the district court did not clearly err in deciding not to reduce the number of hours claimed due to partial-success on the merits; and that the district court correctly calculated the back pay award. addition ally, two panelists (Chief Judge Jones and Judge Dennis) submit separate concurring opinions, spelling out the factors that might (or might not) warrant an adjustment in Goldstein Demchek's lodestar.