Settlements and Fees for Prevailing Parties

From the National Law Journal earlier today (available here):

“1st Circuit deems plaintiffs who achieved settlement ‘prevailing parties’ entitled to fees”
by Sheri Qualters

Parties who achieve litigation goals through settlement, as opposed to a verdict or a formal consent decree, are nonetheless “prevailing parties” eligible for attorney fees, the U.S. Court of Appeals for the 1st Circuit has ruled.

The 1st Circuit’s Feb. 17 unanimous ruling in Hutchinson v. Patrick affirmed a February 2010 order by the District of Massachusetts. The lower court ruling awarded $786,123 in fees and costs to plaintiffs who sued the state of Massachusetts over its medical treatment programs for Medicaid-eligible people with brain injuries. The plaintiffs’ total award for legal costs includes $414,036 in fees and $10,986 in costs to Northampton, Mass.-based Center for Public Representation and $361,191 in fees to lawyers at Wilmer Cutler Pickering Hale and Dorr. The state appealed the fee award.

The plaintiffs, who are brain-injured residents of nursing homes and rehabilitation facilities, sued the state in May 2007 for allegedly violating the Americans with Disabilities Act and other federal laws by failing to provide them with appropriate services in community settings. The parties began settlement talks that October and reached final agreement in May 2008, which the district court approved in September 2008.

The 1st Circuit ruling, written by Senior Judge Bruce Selya, stated that the panel made three conclusions: that “the district court appropriately characterized the plaintiffs as prevailing parties, that the relief obtained was sufficiently final to justify a fee award, and that the court acted within the purview of its discretion in fixing the amount.” Chief Judge Sandra Lynch and Judge Jeffrey Howard joined the opinion.

Selya analyzed the Hutchinson case in light of a 2009 1st Circuit en banc ruling Aronov v. Napolitano. Aronov listed three factors that determine whether a litigant is a prevailing party. The first is whether a court order alters the parties’ legal relationship. The second is whether there’s a court appraisal of the merits of the relief at issue, such as a proposed class action settlement. The third is whether the parties are required to comply and if the order requires ongoing judicial oversight.

Selya wrote that the district court’s approval order “makes the provisions of the Agreement binding on the parties and gives bite to their reciprocal obligations.” The district court also “expressly retained jurisdiction over the case.,” he wrote.

“The broad enforcement authority bestowed upon the district court separates the Agreement from the mine-run of private settlements, which — though enforceable — require resort to an independent action for breach of contract,” Selya wrote.

He continued by noted that the timing of the fee award is appropriate because the parties characterize the settlement as “final” and “comprehensive.”

“Moreover,” he wrote, “the Agreement, embellished by the approval order, affords meaningful relief to the plaintiff class and bears the requisite hallmarks of judicial approbation and oversight.”

Selya also upheld the plaintiffs’ fee and rate request on the grounds that the plaintiffs “discounted the total number of hours before compiling their fee request.”

He concluded that the hourly rates of $250 to $425 for both groups of plaintiffs’ lawyers were in line with their rates for similar work. The nonprofit Center for Public Interest used the same rates that the organizations’ lawyers charged in other civil rights cases, Selya noted. Wilmer’s rates “were pretty much the same as those received by the firm in a recently concluded public interest case,” he wrote. He also noted that they “were in many instances substantially below the standard billing rates charged by the private attorneys.”

The 1st Circuit’s ruling is “quite a striking and unconditional decision,” said Steven Schwartz, the executive director of the Center for Public Representation.

The Hutchinson ruling is also important because Aronov reversed the lower court’s award of fees based on a settlement, Schwartz said. “What was at stake here is under what conditions can a settlement qualify [a prevailing party] for attorneys fees.”

“There were a number of organizations, including legal services organizations in Massachusetts and civil rights organizations throughout the country that were closely watching to see whether the 1st Circuit would distinguish this case from Aronov or reject the fees here,” Schwartz said.

Ultimately, the 1st Circuit made it clear that “settlements in civil rights cases normally would be entitled to attorneys’ fees provided that the court retained ongoing jurisdiction to enforce the settlement,” Schwartz said.

Richard Alan Johnston, a Boston litigation/controversy partner at Wilmer, said the firm is very happy that its clients have been deemed prevailing parties in the Hutchinson case. “We think the 1st Circuit decision is an important statement on behalf of civil rights groups which accomplish important public goals through hard-fought settlements of federal litigation,” Johnson said.

Governor Deval Patrick’s office did not respond to requests for comment.

MM

2 thoughts on “Settlements and Fees for Prevailing Parties”

  1. In practice, I litigated a 1983 claim that challenged the constitutionality of a certain Ohio statute. My client came to a settlement with the state that resulted in a change in the law — which was my client’s primary interest. Part of the settlement included a payment of attorneys fees so that neither side would have to litigate the issue of attorneys fees and the “prevailing party” issue.

    Before Michael posted this, I hadn’t thought about the possibility of this line of reasoning extending beyond the 1983 context. Applying it to ADA/ADEA/Title VII could really change the face of settlements.

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