Yesterday, a unanimous United States Supreme Court held that prevailing defendants who are entitled under 42 U.S.C. § 1988 to recover attorney fees which were incurred in successfully defending against frivolous claims are only entitled to recover fees if they prove that they would not have incurred the fees "but for" the frivolous claim. Fox v. Vice, No. 10-114 (2011). "[A] court may grant reasonable fees to the defendant in this circumstance, but only for costs that the defendant would not have incurred but for the frivolous claims." In other words, "[t]he dispositive question is not whether attorney costs at all relate to a non-frivolous claim, but whether the costs would have been incurred in the absence of the frivolous allegation." The Court admonished trial courts that fee disputes should not result in second major litigation because the goal is only to obtain "rough justice," not auditing perfection. Therefore, it is unlikely that the defendant who prevailed in getting every federal claim dismissed will be entitled to attorney fees if the same evidence and legal work was necessary to defend against non-frivolous state law claims over which the court refused to extend jurisdiction. Because §1988 also permits prevailing defendants to recover attorney fees for frivolous federal employment claims, this decision is of interest to employers.
In the Fox case, the dispute involved purported dirty tricks during an election for police chief. The plaintiff still won the election despite the criminal and tortuous behavior (which ultimately resulted in his opponent's conviction for extortion), but later filed suit for, among other things, defamation and violation of 42 U.S.C. §1983 against his opponent and the town. This lawsuit was removed to federal court, the §1983 claim was dismissed on summary judgment and the court declined to exercise jurisdiction over the state law claims (which could then be litigated in state court with the evidence gained during federal court discovery). The opponent then moved to for attorney fees under §1988 for prevailing on the federal §1983 claim. The Court awarded approximately $48,000 in fees to the defendant. The Court of Appeals affirmed.
The "American Rule" generally provides that each party pays its own attorney. However, Congress has abrogated that rule on occasion with attorney fee shifting statutes, including §1988. This statute permits prevailing parties, usually plaintiffs, to recover attorney fees when prevailing on federal claims. Plaintiffs recover on the theory that they are acting as private attorney generals to vindicate federal civil rights and prevailing "plaintiffs may receive fees under §1988 even if they are not victorious on every claim." Nonetheless, they may not recover fees incurred while pursuing unsuccessful claims. In turn, prevailing defendants are also entitled to attorney fees, but on more limited grounds. "Accordingly, §1988 authorizes a district court to award attorney's fees to a defendant "upon a finding that the plaintiff's action was frivolous, unreasonable, or without foundation." Because litigation is often messy and involves both frivolous and valid claims, it is possible that both parties could be entitled to reimbursement for attorney fees at the conclusion.
The issue in this case involves time spent defending five depositions that were taken where the evidence related to both the federal and the non-frivolous state law claims. The Court sought to avoid a windfall to the defendant merely because there was one frivolous claim brought in the suit. Therefore, it adopted a "but-for" test:
the "but-for" standard we require may in some cases allow compensation to a defendant for attorney work relating to both frivolous and non-frivolous claims. Suppose, for example, that a plaintiff asserts one frivolous and one non-frivolous claim, but that only the frivolous allegation can legally result in a damages award. If an attorney performs work useful to defending against both, but did so only because of the defendant's monetary exposure on the frivolous charge, a court may decide to shift fees. Or similarly, imagine that the frivolous claim enables removal of the case to federal court, which in turn drives up litigation expenses. Here too, our standard would permit awarding fees for work relevant to both claims in order to reflect the increased costs (if any) of the federal forum. And frivolous claims may increase the cost of defending a suit in ways that are not reflected in the number of hours billed. If a defendant could prove, for example, that a frivolous claim involved a specialized area that reasonably caused him to hire more expensive counsel for the entire case, then the court may reimburse the defendant for the increased marginal cost. As all these examples show, the dispositive question is not whether attorney costs at all relate to a non-frivolous claim, but whether the costs would have been incurred in the absence of the frivolous allegation. The answers to those inquiries will usually track each other, but when they diverge, it is the second that matters.
Thus, the case was remanded to determine whether the prevailing defendant was entitled to attorney fees where the frivolous and non-frivolous claims overlapped and were interrelated.
NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney
