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Fees Awarded Even Where Claims Voluntarily Dismissed: Second Circuit
Practical Law Legal Update 6-575-4053 (Approx. 4 pages)
Fees Awarded Even Where Claims Voluntarily Dismissed: Second Circuit
by Practical Law Litigation
| Published on 22 Jul 2014 • USA (National/Federal) |
In Carter v. Village of Ocean Beach, the US Court of Appeals for the Second Circuit affirmed the district court's award of attorneys' fees and costs to the defendants, even though the plaintiffs had voluntarily dismissed certain claims, because the plaintiffs' lawsuit was frivolous from the outset and the defendants had completely prevailed on the remaining claims.
Introduction
On July 21, 2014, in Carter v. Village of Ocean Beach, the US Court of Appeals for the Second Circuit ruled that the district court's award of attorneys' fees under Federal Rule of Civil Procedure (FRCP) 54 and 42 USC § 1988(b) was appropriate and within the district court's discretion, even though the plaintiffs had voluntarily dismissed certain claims, because the plaintiffs' claims were frivolous, unreasonable, and without foundation from the outset and the defendants had completely prevailed on the remaining claims (No. 13–815, (July 21, 2014)).
Background
The plaintiffs, five former seasonal and part-time police officers of the Village of Ocean Beach (Village), brought a multitude of claims against two groups of defendants: one group representing the Village (Village Defendants), and one group of governmental entities and individuals representing Suffolk County (County and County Defendants).
The plaintiffs had complained to their superiors about a Village police department sergeant for encouraging unprofessional behaviors. This sergeant was eventually promoted to acting police chief and, shortly afterwards, terminated the five plaintiffs. The sergeant also made disparaging comments about the plaintiffs on an Internet forum and gave negative references to potential employers. After their termination, several of the plaintiffs met with an employee of the County’s Civil Service Department to discuss the decision not to rehire them. As the court noted, this Department has no power over hiring, disciplinary or termination decisions over any individual employees of a municipality.
In 2007, the plaintiffs sued the Village and County Defendants alleging, among other claims, violations of civil rights statutes, deprivation of property and liberty without procedural due process, improper termination, defamation, improper retaliation, and racketeering. Plaintiffs subsequently withdrew several of the claims, and the remainder were disposed of on summary judgment in favor of all the defendants. While the Second Circuit was affirming this judgment, the plaintiffs brought their state law claims in state court. The state court dismissed all claims against the County Defendants at the pleading stage.
Both groups of defendants then moved for attorneys' fees and costs in the federal action. The district court denied the Village Defendants' motion but awarded fees and costs to the County Defendants. The plaintiffs appealed the total fee award arguing, among other things, that:
- They should not be liable for fees and costs associated with claims that they voluntarily dismissed.
- The district court incorrectly calculated the fee award.
Outcome
The court affirmed the order and fee award of the district court.
Voluntary Dismissal
The court noted that as a general matter FRCP 54(d)(1) allows costs, other than attorneys' fees, to be awarded to the prevailing party. Although FRCP 54(d)(1) excludes attorneys' fees from permitted costs, a prevailing party may in fact recover reasonable attorneys' fees as part of its costs in an action brought to enforce certain provisions of the US Code (42 USC § 1988(b)). Under these circumstances, a prevailing plaintiff ordinarily will be awarded attorneys' fees, while a prevailing defendant may only be awarded attorneys' fees on a finding that the plaintiff's action was "frivolous, unreasonable, or without foundation." The question at issue in this case was whether the defendants could be considered to have prevailed with respect to the claims that the plaintiffs voluntarily dismissed.
The court first noted that the claims against the County Defendants were, from the outset, frivolous, unreasonable or without foundation. The court then rejected the plaintiffs' argument that, frivolousness aside, they should not be held accountable for fees that the County Defendants would have incurred anyway in defending against voluntarily dismissed claims. Distinguishing prior authority which had observed that a defendant is generally not the prevailing party where the plaintiff voluntarily dismisses the action, the court instead relied on the Supreme Court's decision in Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health and Human Res., 532 U.S. 598 (2001). There, the Court held that a voluntary dismissal with prejudice can indeed satisfy the "prevailing party" standard where it it works a "material alteration of the legal relationship between the parties."
The Second Circuit found that, in this case, the judgment had materially altered the parties' legal relationship because the plaintiffs could never refile the claims:
- Some of the claims were voluntarily dismissed with prejudice.
- The remaining claims were dismissed on summary judgment, a decision which was affirmed on appeal and no petition for certiorari was filed.
- All the claims arose from the same transaction or occurrence and the plaintiffs were barred by res judicata from relitigating them.
- The state court claims had been dismissed on the pleadings.
Because the plaintiffs could never refile the claims, the court ruled that the judgment had materially altered the parties' legal relationship and the County Defendants had, in every sense of the word, "prevailed" as to all the claims.
Calculation of the Fee Award
As for the calculation of the fee award, the court rejected the plaintiffs' argument that they were denied an opportunity to challenge the County Defendants' billing records. Earlier in the case the plaintiffs had chosen not to respond to the County Defendants' fee calculations, electing to wait until after a determination of liability. The district court, however, had proceeded to grant fees to the County Defendants using the records they had previously submitted, and the court did not give the plaintiffs a second opportunity to challenge those records. The Second Circuit held that the district court may decide issues of liability before receiving submissions on the amount of fees, but need not (FRCP 54(d)(2)(C)). In this case, the plaintiffs' decision not to answer the County Defendants' fee calculation was binding.
The court upheld the amount of the award by finding that the trial court possesses wide discretion in deciding an appropriate award. Despite evidence of redundant or unnecessary expenses incurred by the County Attorney’s office, a one-third discount of fees was upheld as an appropriate solution.