Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Fee Statute

Seventh Circuit Upholds Attorney Fee Win in FMLA Action

August 25, 2022

A recent Law 360 story by Caleb Drickey, “7th Circ. Upholds Teacher’s Win In FMLA Suit” reports that the Seventh Circuit upheld a pair of lower courts' decisions to declare that a Wisconsin governmental entity violated the Family and Medical Leave Act by de facto demoting a concussed teacher, and to grant her attorney fees for her bench trial victory.  In a published opinion, a three-judge panel ruled that the lower court was within its authority to issue a damages-free declaration that the Cooperative Educational Service Agency 5 violated the FMLA by taking away teacher Sarah Simon's work responsibilities after she returned from medical leave. The panel further held that the law mandated the payment of attorney fees in the case of a judgment in favor of workers.

"If this case involved an accomplished neurosurgeon returning from leave to a position that required only tracking the hospital's inventory, we doubt that anyone would question whether the surgeon suffered prejudice," U.S. Circuit Judge Thomas Kirsch said on behalf of the panel. "Simon … suffered harm for which the FMLA provides a remedy."

The opinion stems from the Cooperative's retraction of Simon's job responsibilities after she returned to work in the wake of a workplace concussion.  Although the Cooperative, which provides staff and equipment to 35 school districts in the state, maintained Simon's previous salary, a district court found that Simon's effective demotion to a support staffer prejudiced her, and it granted her a declaratory judgment and roughly $60,000 in attorney fees after a bench trial.

The panel ruled that a court-issued declaration of FMLA violations absent any monetary damages or injunctions to re-hire Simon, who has since taken another job, was within scope of the relief promised by the law.  The FMLA authorized courts to dispense "equitable relief," an undefined term that courts have interpreted to encompass binding orders to hire or promote workers.

The authority to grant declaratory judgments, the panel therefore concluded, could reasonably be inferred.  "It would make little sense for the FMLA to permit courts to grant these heavy-handed remedies yet bar them from using a lighter touch through entry of a declaratory judgment," the panel held.

The panel also affirmed the lower court's finding that the Cooperative prejudiced and harmed Simon even without suffering any cuts to her pay or benefits.  Citing the U.S. Supreme Court's 2002 decision in Ragsdale v. Wolverine World Wide Inc. , the panel held that the demotion of workers returning from medical leave to positions for which they were overly qualified caused injury.

The Commission's remission of Simon's ability to plan lessons and lead classes, the panel therefore concluded, unfairly created a gap in her resume, prejudiced her, and put her employer on the hook for remedies including declaratory judgments and the payment of attorney fees.

The panel affirmed the lower court's separate order of a $59,773.62 attorney fee bill, too.  That fee bill was not an improper imposition of punitive damages, the panel ruled, but was required by the text of the FMLA in the case of a judgment in favor of workers.  "The district judge merely applied the FMLA as written, which expressly requires attorney's fees after a judgment entered in the plaintiff's favor," the panel held.

FTC’s ‘Holder Rule’ Doesn’t Bar Attorney Fee Award

May 31, 2022

A recent Metropolitan News story, “FTC’s ‘Holder Rule’ Doesn’t Bar Attorney Fee Award” reports that the Federal Trade Commission’s “Holder Rule”—under which an assignee of a consumer credit contract cannot be held liable for a breach by the seller for more than what the purchaser has paid—does not preclude the award of attorney fees in excess of that amount under California’s “lemon law,” the California Supreme Court held.

Justice Goodwin H. Liu authored the opinion which affirms a Jan. 29, 2021 decision by Div. Five of this district’s Court of Appeal. Div. Five, in an opinion by Presiding Justice Laurence D. Rubin, upheld a $169,602 award of attorney fees against TD Auto Finance, LLC, declaring that “the Holder Rule does not limit the attorney fees that a plaintiff may recover from a creditor-assignee.”  Yesterday’s opinion resolves a conflict among the courts of appeal.

Under a provision of the Code of Federal Regulations, a consumer credit contract must include this notice: “Any holder of this consumer credit contract is subject to all claims and defenses which the debtor could assert against the seller of goods or services obtained pursuant hereto or with the proceeds hereof. Recovery hereunder by the debtor shall not exceed amounts paid by the debtor hereunder.”

The contract that Tania Pulliam signed when she purchased a used Nissan from HNL Automotive Inc. in Beverly Hills contained that language.  Dissatisfied with the vehicle she purchased, Pulliam sued HNL and the assignee of the contract, TD Auto Finance, under the Song-Beverly Consumer Warranty Act (the “lemon law”) and was awarded $21,957.25 in damages.  TD insisted that the award against it of attorney fees, under the act’s fee-shifting provision, was improper because Pulliam was entitled to nothing in excess of what she had paid under the credit contract.

Disagreeing, Liu wrote: “We conclude that the Holder Rule does not limit the award of attorney’s fees where, as here, a buyer seeks fees from a holder under a state prevailing party statute.  The Holder Rule’s limitation extends only to ‘recovery hereunder.’  This caps fees only where a debtor asserts a claim for fees against a seller and the claim is extended to lie against a holder by virtue of the Holder Rule.  Where state law provides for recovery of fees from a holder, the Rule’s history and purpose as well as the Federal Trade Commission’s repeated commentary make clear that nothing in the Rule limits the application of that law.”

Before the FTC enacted its rule in 1975, Liu recited, a consumer was liable to the holder in due course of a note even for goods that were not delivered.  The rule places the holder in the shoes of the seller, subjecting it to all claims against, and defenses available to, the seller, limiting damages against the seller, and consequently against the assignee, he explained.  In formulating the rule, Liu said, “the FTC had damages in mind when limiting recovery under the Rule, and there is no indication that attorney’s fees were intended to be included within its scope.”

Attorney fees, in California, where awardable, are costs, not an element of damages, he noted.  The FTC, itself, has issued an advisory opinion declaring, “the Holder Rule does not limit recovery of attorneys’ fees and costs when state law authorizes awards against a holder,” Liu said.  The justice pointed out: “Were attorney’s fees part of the Holder Rule’s limit on recovery, the effective result for many, if not most, consumers would be the same as their options were under the holder in due course rule that the FTC sought to supplant.”

Ninth Circuit: $260K Fee Award Proper Where Damages Were $2500

April 26, 2022

A recent Metropolitan News story, “$260,000 Fee Award Proper Though Damages Were $2,500” reports that the Ninth U.S. Circuit Court of Appeals has affirmed an attorney fee award of nearly $260,000 in a case in which a prison inmate was awarded $2,500 based on ill-effects from a chemical grenade having accidentally been discharged, with fumes seeping into the area of the cells.  District Court Judge Haywood S. Gilliam Jr. of the Northern District of California made the award under California’s private attorney general statute, Code of Civil Procedure §1021.5, ruling that the statutory criteria were met, including a benefit to the public that overshadows the personal benefit to the prisoner, Daniel Manriquez.

The incident underlying Manriquez’s suit occurred on June 4, 2015.  According to allegations of the operative complaint, two employees at Pelican Bay State Prison, defendants Justin Vangilder and Juan Vasquez, while inside a control booth, were “horse playing” with a “military-grade” grenade which is “designed to quickly release oleoresin capsicum (‘OC’) into the air.”  One of them dropped the grenade, it went off, and the employees “opened the windows to the control booth, allowing a fog of OC to quickly fill the surrounding space.”

The inmate prevailed at trial and his lawyers sought an award of a fee in the amount of $467,425, arguing that the California Department of Corrections and Rehabilitation had “insisted on using this case as a ‘test case’ for prisoners who have been indirectly exposed to oleoresin capsicum,” had rejected reasonable settlement offers, and “forced Plaintiff to heavily litigate this case for going on three years now.”  Gilliam awarded $259,237.50.

 A three-judge panel—composed of Judge M. Margaret McKeown and Senior Judges A. Wallace Tashima and Sidney Thomas—upheld the award, saying that there was, as Gilliam found, a “significant benefit” conferred on the general public. Their memorandum opinion declares: “To be sure, the primary effect of Manriquez’s $2,500 judgment is arguably an enforcement of his personal interests against two correctional officers for an isolated incident, as there was no injunction or statewide policy changes.  But we hold that the district court did not clearly err* in its determination that Manriquez’s verdict has “larger implications” beyond his individual case. The district court explicitly took into consideration the fact that indirect exposure to chemical agents is not uncommon among inmates and that Defendants’ own witnesses testified at trial about the frequency with which chemical agents are used in prison facilities.  Moreover, the district court highlighted that there are approximately 95.000 men and women incarcerated in California, including approximately 1.900 inmates in Pelican Bay, where Manriquez was in custody.”

The Ninth Circuit judges also agreed with Gilliam that the public benefit transcends Manriquez’s personal interests, saying: “In the end, Manriquez was awarded a total of $2,500 while his counsel requested a total of $467,425 in attorneys’ fees for over 1,100 hours of work.  Had counsel not agreed to represent Manriquez on contingency, the value of the recovery for Manriquez’s pain and panic would not have justified the costs in litigating this case.  For the same reason—comparing the modest sum of the total damages to the attorneys’ fee requested—we agree with the district court that the interests of justice require the fees to not be paid out of Plaintiffs’ recovery.”

The defendants argued that even though Gilliam awarded less in fees than was sought, the amount is 84 times that allowed by the Prison Litigation Reform Act (“PLRA”).  The PLRA caps attorney fees 150 percent of any monetary which would mean a maximum award of $3,750.

The panel responded: “[T]he PLRA cannot be used as a basis to limit the attorneys’ fees granted under California Code of Civil Procedure § 1021.5.  In this case. Manriquez prevailed on both his state law negligence claim as well as his Eighth Amendment claim against Defendants.  The state law claim thus served as an independent basis for awarding attorneys’ fees, the amount of which is not governed or limited by the PLRA….Moreover, the district court is not required to apportion the work between Manriquez’s Eighth Amendment claim and his negligence claim because his claims are intertwined and based on the same common core of facts.”

Mass. Justices Told Attorney Fee Award Must Be Covered

April 4, 2022

A recent Law 360 story by Ganesh Setty, “Mass. Justices Told Atty Fee Award Must Be Covered” reports that the Massachusetts Supreme Judicial Court heard oral arguments on whether an attorney fee award constitutes damages "because of" bodily injury, with the dispute appearing to hinge on whether a reasonable policyholder would interpret their policy that way in light of a narrow, inapplicable exclusion exception for such payments.

Vermont Mutual Insurance Co. argued the attorney fee award against its insureds falls outside its "because of" causation standard with respect to bodily injury claims.  The recipient of the yet-to-be-paid award, Phyllis Maston, meanwhile highlighted how the policy did not specifically define the term "damages."  The Massachusetts high court appeared hesitant to side with Maston, given the award originated from a state consumer protection statute, and Vermont Mutual's policy is a standard form insurance contract used nationwide.

According to court documents, Vermont Mutual insured Paul and Jane Poirier, franchisees of damage restoration chain Servpro, under a business owners policy between December 1998 and December 2001.  Phyllis Maston and her late husband, Douglas, hired Servpro to clean out their basement, and Phyllis Maston later suffered a nasal infection she attributed to the cleaning solution Servpro used.  The Mastons sued Servpro, and a trial court ultimately found in 2009 that Servpro violated Massachusetts' consumer protection law, Chapter 93A, through its breach of warranty.

As part of Chapter 93A, which empowers consumers to sue businesses for unfair or deceptive practices, a successful petitioner can recover their own attorney fees.  The law treats attorney fee awards as separate from awards for damages.  Vermont Mutual paid nearly $700,000 to Maston, but refused to cover her award of more than $215,000 in attorney fees, along with another $21,600 in attorney fees following Servpro's unsuccessful appeal of the original judgment, according to court documents.

The insurer subsequently filed a lawsuit against the Poiriers and Maston seeking a court declaration that the total attorney fee award is not covered since it does not constitute insured damages "because of" bodily injury as required by its policy.  A lower court sided with Maston in July 2016, noting there are no other cases in Massachusetts directly addressing a coverage dispute like Vermont Mutual's.  The court instead pointed to the 2010 Ohio Supreme Court decision in Neal-Pettit v. Lahman, which involved language similar to Vermont Mutual's policy, and found that attorney fees do qualify as damages because of bodily injury.

Vermont Mutual maintained in its high court briefs that since the policy used "because of," rather than a broader term like "arising out of," the attorney fee award is not covered, especially since Chapter 93A treats damages and attorney fee awards as separate remedies.  The insurer further argued that an exception to a contractual liability exclusion in the policy explicitly treats an attorney fee award as damages because of bodily injury only when there's an insurance contract between its insured and another party, and the parties can be jointly represented in a civil dispute.

While a policyholder reading the policy may initially think an attorney fee award constitutes covered damages, "you can't find ambiguity just because you stopped reading," Peter E. Heppner, counsel for the insurer, told the high court's seven justices.  Although inapplicable, the exclusion exception illustrates that the policy did not intend to broadly treat attorney fees as damages because of bodily injury, he said.  Justice Scott L. Kafker asked Heppner, with respect to Maston's attorney fee award: "I understand that it's two or three steps removed, but it all arises out of the fact that there's an injury, doesn't it?"

"'Arises out of' is an interesting choice of words," Heppner responded. "When the policy has 'arising out of' in several exclusions, and then 'because of' here — and we know that the Supreme Court has said 'because of' is 'but for' — there has to be a distinction between those words."

When asked by Justice Dalila Argaez Wendlandt why the exclusion exception didn't put a reasonable insured on notice that the attorney fees may not otherwise be covered, Timothy P. Wickstrom, an attorney representing Maston, said the exclusion exception was inapplicable to the case to begin with.  It only concerns defense costs for the insured and the other party it contracts with, not attorney fee awards adverse to an insured, he argued.  If Vermont Mutual wanted to broadly bar coverage for attorney fees, one sentence stating so would have sufficed, he added.  The insurance policy at issue is a standard form insurance policy, Justice Kafker further noted. "That's where it gets me nervous."

"Here [in] Massachusetts, we've got this particular 93A attorney fee provision that's idiosyncratic, and we're applying it to these nationwide forms, right?" he asked.  The coverage dispute is not about Chapter 93A's separate treatment of damages and attorney fees, but whether attorney fees are covered under the policy, Wickstrom responded. Wickstrom further highlighted that part of the total attorney fee award under Chapter 93A includes Servpro's unsuccessful appeal of the judgment in the underlying case.

"In a situation where Vermont Mutual had a duty to defend, had a duty to indemnify — the defendants, their insureds, were on the hook for the appeals court fees," he said.  "How unfair is that?"  "Just create all the complexities of 93A attorneys fees, which probably no one ever thought about when they created this sort of extra remedy for everybody," Justice Kafker quipped.

Georgia High Court Allows Double Recovery of Attorney Fees

March 9, 2022

A recent Law 360 story by Clark Mindock, “Ga. Justices Allow Double Recovery of Atty Fees” reports that the Georgia Supreme Court affirmed that a car wreck plaintiff can recover attorney fees and litigation costs under each of two Georgia statutes, rejecting an argument that doing so would constitute an impermissible double recovery.  In coming to that conclusion, the state's high court reversed a lower appellate court's decision to side with driver Joao Junior's claims that he should have been allowed to seek recovery of attorney fees and costs under Georgia's offer of settlement statute as well as the fees and costs he won at trial.

Junior was awarded about $1.2 million in attorney fees along with $3 million in damages by a jury in his case against at-fault driver Sharon Graham.  He argued he was entitled to additional fees under the statute because Graham had rejected a settlement offer that would have spared everyone from that trial.  The justices said that since Graham rejected what was a reasonable settlement, the state's offer of settlement law and statute for damages and litigation expenses allow Junior to seek a penalty and attorney fees on top of that earlier award.

"Because we conclude that the provisions provide for different recoveries despite using somewhat similar measures for calculating the respective amount of damages or sanction, a prevailing plaintiff may recover under each statutory provision without regard to any recovery under the other," the Georgia Supreme Court justices said.  Ben Brodhead, an attorney at Brodhead Law LLC who represents Junior, told Law360 that the supreme court "followed the legislative direction to control bad behavior both before a suit is filed and after a suit is filed."

"We are pleased that the Supreme Court ruled in a way that will promote settlement and reduce litigation," he said.  Laurie Webb Daniel of Holland & Knight LLP, an attorney for Graham, said the ruling has "surprised" a lot of people, but that its practical implication "is rather narrow."  Once the case returns to the trial court, Junior will have the burden of proof to show the value of the legal services that were actually rendered after the settlement offer expired, she said.

The dispute stems from a car accident in 2010 between Graham and Junior. Before the case was set to go to trial, Junior had offered to settle all of his claims against Graham for $600,000, but Graham rejected that offer after she failed to accept it within 30 days of its issuance.  At trial, Junior was awarded $3 million in compensatory damages plus $1.2 million in attorney fees, and $51,554.95 in litigation expenses.  Because that award of compensatory damages was more than 125% of the original settlement offer, Junior then filed a post-trial motion for attorney fees and litigation expenses under the state's settlement law.

While Georgia's statute for damages and litigation expenses generally bars litigation costs as part of the damages in a case, an exception can be made where the defendant has acted in bad faith, been stubbornly litigious or caused the plaintiff unnecessary trouble and expense.  In those instances, a jury can award attorney fees and costs as part of the damages, according to court documents.  After Junior filed those claims, a trial court rejected the motion for attorney fees and costs under the settlement statute, and the Georgia Court of Appeals affirmed that conclusion in October 2020. The state high court agreed to take the case in July.