3.3 TYPES OF CASES WHERE ATTORNEY FEES AWARDED
3.301 Common Law Basis for Attorney Fees.
A. Common Benefit Doctrine. "In the absence of a statutory prohibition, the federal courts have authority to award attorneys' fees from a fund to a party who, having a common interest with other persons, maintains a suit for the common benefit and at his own expense, resulting in the creation or preservation of a fund, in which all those having the common interest share." 26 This award of attorney fees does not shift the cost from the losing party to the prevailing party, but rather authorizes courts to award attorney fees from a common interest fund. 27
The Supreme Court
has recognized that a litigant or lawyer who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorney's fee from the fund as a whole. The common-fund doctrine reflects the traditional practice in courts of equity, and it stands as a well-recognized exception to the general principle that requires every litigant to bear his own attorney's fees. 28
Class action lawsuits are common fund cases. The Supreme Court ordered that a plaintiff's attorneys be awarded their fees in a successful class action suit where some members collected their share of the damages while other absentee class members did not. However, the Court awarded the class lawyers a pro rata share of the costs of procuring the judgment for all class members over the defendants' objection. 29
B. Bad Faith/Vexatious Litigation. "It is unquestioned that a federal court may award counsel fees to a successful party when his opponent has acted "in bad faith, vexatiously, wantonly, or for oppressive reasons...' In this class of cases, the underlying rationale of 'fee shifting' is, of course,
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punitive, and the essential element in triggering the award of fees is therefore the existence of 'bad faith' on the part of the unsuccessful litigant." 30
3.302 Federal Statutes That Have Fee Shifting Based on Prevailing Party Provisions.
A. Prevailing Party Defined. The Supreme Court set forth the general standard governing the prevailing party determination in Texas. State Teachers Ass'n v. Garland Indep. Sch. Dist. 31 There, the Court stated that "[t]he touchstone of the prevailing party inquiry must be the material alteration of the legal relationship of the parties in a manner which Congress sought to promote in a fee statute." The Court explained that a material alteration in the parties' legal relationship occurs when "the plaintiff has succeeded on any significant issue in litigation which achieved some of the benefit the parties sought in bringing suit." 32
However, "[a] defendant's voluntary change in conduct, although perhaps accomplishing what the plaintiff sought to achieve by the lawsuit, lacks the necessary judicial imprimatur on the change." 33 Thus, a plaintiff must obtain some form of judicial relief, such as a judgment on the merits or a court ordered consent decree. 34
It has recently been noted that "a variety of circumstances other than a judgment on the merits or consent decree may support a finding that a party has prevailed. . . . Dismissals with prejudice may support labeling a party as prevailing because these dismissals are treated as adjudications on the merits and alter the legal relationship between the parties through their res judicata effects." 35 However, in Malibu Media, LLC v. Balazid, 36 Judge
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Ellis held that a stipulation of dismissal under Rule 41(a)(1)(A)(ii) does not result in a judicially sanctioned relief because a stipulation of dismissal is effected by the parties themselves without judicial involvement and the subsequently signed order is merely ministerial. Therefore, there is no prevailing party when there is a joint stipulation of dismissal.
B. Nominal Damages. The general rule is that when only nominal damages are awarded, attorney fees are not generally available. 37 The Court's view in these cases was that when the plaintiff fails to prove an essential element of damages—that they are warranted—the usual award is no fee at all. 38
However, a party can be a prevailing party even in a situation where the monetary award is limited to nominal damages. 39
"To determine whether a nominal damages case is the exceptional case meriting fees, the court must apply a three factor test known in the Fourth Circuit as the "Farrar-Mercer Factors." 40
| 1. | First, and most importantly, the court must compare the relief sought and the relief obtained. 41 | |
| 2. | Second, the court evaluates the "significance of the legal issue on which the plaintiff prevailed." 42 | |
| 3. | Third, and finally, the court determines whether the litigation served a public purpose beyond the dispute between the parties. 43 |
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C. Injunctive and Declaratory Relief Obtained. A party is a prevailing party where it is awarded no damages but has prevailed on its injunctive and declaratory relief claims and has successfully defended against all affirmative defenses asserted by defendant. 44
A plaintiff who gains a preliminary injunction after an abbreviated hearing, but is denied a permanent injunction after a dispositive adjudication on the merits does not qualify as a prevailing party. 45
In Smyth v. Rivero, 46 the court held that a preliminary injunction was not sufficient to create eligibility for fees under a prevailing party provision because in granting a preliminary injunction the inquiry into the merits is by necessity incomplete and a mere prediction of what may result from a further developed record, and it is guided in large part by equitable considerations ill-suited for determining ultimate success on the merits as a prevailing party. However, more recently, in Ohio River Valley Envt'l Coalition, Inc. v. Green Valley Coal Co., 47 the Fourth Circuit permitted the award of attorney fees when a preliminary injunction was obtained in a Surface Mining Control and Reclamation Act case that permitted the award of attorney fees under 30 U.S.C. § 1270(d) whenever the court deems such an award appropriate (aka "whenever appropriate" provisions). Under a "whenever appropriate" provision a fee award is appropriate when a fee claimant achieves "some degree of success on the merits" even if it is based on the catalyst theory that the filing and pursuit of the lawsuit, here obtaining the preliminary injunction, caused the defendant to change its proposed actions, which then mooted the appeal and prevented a final judicial imprimatur on the action. 48
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At least one other circuit allows a preliminary injunction to serve as a basis for a finding of prevailing party status if a preliminary injunction is granted on the merits with a finding that plaintiff is likely to succeed on the merits (thereby representing an unambiguous probable success on the merits) and events outside the control of the plaintiff later moot the case. 49
There are roughly two hundred federal statutes that permit or require the granting of attorney fees to prevailing parties. Attorney fees provisions are enacted by Congress, generally, in order to encourage private litigation to implement public policy. 50
Courts have repeatedly recognized that Congress has enacted attorney fees provisions to help equalize contests between private individual plaintiffs and corporate or governmental defendants. Accordingly, attorney fee provisions are found in civil rights, environmental protection and consumer protection statutes. 51
3.303 Federal Statutes That Have Fee Shifting Based on "Whenever Appropriate" Provision. While most fee shifting provisions allows a court to award fees to a prevailing party, less commonly, a fee shifting provision authorizes a fee award "to any party, whenever the court determines such award is appropriate." These are commonly referred to as "whenever appropriate" statutes. 52 Under a "whenever appropriate" provision a fee award is appropriate only when the fee claimant achieves "some degree of success on the merits." 53
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In contrast to the prevailing party statutes, a "whenever appropriate" statute allows a court to award attorney fees under the catalyst theory where a party obtains, through settlement or otherwise, substantial relief prior to adjudication on the merits. 54
However, the phrase "whenever . . . appropriate" does not permit courts to award fees and costs willy-nilly." 55
3.304 Attorney Fees Awarded Against the United States.
A. Equal Access to Justice Act. 56 Prior to the enactment of the EAJA, the common law exceptions to the American Rule were inapplicable against the United States. 57
Congress passed the EAJA to make certain that "private parties will not be deterred from seeking review of, or defending against, unjustified governmental action because the expense involved in securing vindication of their rights." 58
| • | 28 U.S.C. § 2412 (b): Permits an award of attorney fees against the United States when it is authorized by another statute or by common law. An award is discretionary under 2412(b). Common law permits attorney fees under the "common fund," "common benefit" doctrines, or for "willful disobedience of a court order and bad faith." 59 | |
| • | 5 U.S.C. § 504: In specified agency adversarial adjudications, fees may be awarded to prevailing party against |
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| United States unless the United States proves that its position was substantially justified or that special circumstances make an award unjust. | ||
| • | 28 U.S.C. § 2412 (d): In all civil actions (except tort actions and tax cases) brought by or against the United States, the United States shall be liable for the attorney fees of prevailing parties unless it proves that its position was substantially justified or that special circumstances make an award unjust. By statute, a party must have a net worth that did not exceed $2 million and a losing party can be awarded |
