Diaz v. Jiten Hotel Management ( 2012 )

Not for Publication in West’s Federal Reporter
United States Court of Appeals
For the First Circuit
No. 11-2400
CARMEN LLERENA DIAZ,
Plaintiff, Appellant,
v.
JITEN HOTEL MANAGEMENT, INC.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
Before
Boudin, Hawkins* and Thompson,
Circuit Judges.
Lynn A. Leonard for Appellant.
Ryan C. Siden for Appellee.
Jonathan J. Margolis, Ellen J. Messing, and James S. Weliky,
on brief for Massachusetts Employment Lawyers Association, Amicus
Curiae.
*
Of the Ninth Circuit, sitting by designation.
Anne L. Josephson and Sarah Wunsch, on brief for American
Civil Liberties Union of Massachusetts, Gay & Lesbian Advocates &
Defenders, the Jewish Alliance for Law and Social Action, the
Lawyers’ Committee for Civil Rights and Economic Justice,
Massachusetts Law Reform Institute, and the National Police
Accountability Project, Amici Curiae.
September 18, 2012
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HAWKINS, Circuit Judge. Plaintiff-Appellant Carmen Diaz
(“Diaz”), after obtaining a jury verdict in her favor in the amount
of $7,650 on one of six claims raised in her complaint, sought
attorney’s fees of $139,622 and $13,389.34 in costs. The district
court awarded $25,000 in fees and $9,434.74 in costs. We affirm in
part, reverse in part, and remand for further proceedings.
The parties are familiar with the facts. We review an
award of attorney’s fees for legal error or manifest abuse of
discretion. Burke v. McDonald, 572 F.3d 51, 63 (1st Cir. 2009).
Because she was a prevailing party on her state law age
discrimination claim, Diaz was entitled to attorney’s fees under
M.G.L. 151B § 9. The initial estimate of a reasonable attorney’s
fee is the lodestar calculation of hours reasonably expended times
a reasonable hourly rate. Draper v. Town Clerk of Greenfield, 384
Mass. 444, 449 (1981).
However, Diaz prevailed on only one of the six claims she
initially raised in her complaint. In such a situation, the
Supreme Court has directed courts to consider whether the
unsuccessful claims were unrelated, or whether they were instead
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based on a “common core of facts” or “related legal theories.”
Hensley v. Eckerhart, 461 U.S. 424, 435 (1983).
Here, the district court expressly recognized that two of
the claims, which went to trial, were interrelated and based on the
same core facts. By implication, the district court necessarily
found the remaining four claims were distinct and severable from
the successful claim. This conclusion is not unreasonable, as
Diaz’s own pleadings recognize that the dismissed claims are based
on a different core of facts: in her Motion to Dismiss Claims and
to Clarify Complaint, she indicates she wishes to proceed on Counts
I and II (the state and federal age discrimination claims), and
states that Paragraphs 6-17 of her amended complaint “form the
factual basis of this claim”; paragraphs 18-28, on the other hand,
are relevant to the dismissed termination, defamation, and witness
tampering counts.1
The district court therefore applied a two-thirds
1
Because our analysis turns on the severability of Diaz’s
claims that did not go to trial, and not on the underlying merits
of such claims, we deny her Motion to Strike Appellee’s
Supplemental Appendix as moot. We also deny Jiten’s Request for
Sanctions under Local Rule 38.0.
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reduction to the lodestar “as an approximation for the number of
hours spent working on the four claims that were not viable.” The
court explained that it would ideally make a more specific
reduction by the exact hours worked on those claims, but that the
invoices did not provide a level of detail that permitted the court
to do so. The court did not abuse its discretion by making this
proportionate reduction under these circumstances. See Burke, 572
F.3d at 64.
The district court’s further reduction of fees from
$44,766 to $25,000, because of an undue emphasis on Diaz’s
rejection of a pre-trial $75,000 settlement offer, is another
matter. Although the court noted that it had “absolutely no reason
to question [Diaz’s counsel’s] integrity,” it appeared concerned
that there was a perverse incentive for attorneys to encourage
clients to reject reasonable offers and proceed to trial to earn
more in fees. These assumptions, which underlie the perceived need
for this reduction, are flawed for a variety of reasons.
First, a contingent fee arrangement in a civil rights
case does not impose a ceiling on the amount an attorney can
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recover under fee-shifting statutes. See Blanchard v. Bergeron,
489 U.S. 87, 93 (1989); Furtado v. Bishop, 635 F.2d 915, 917-20
(1st Cir. 1980). Rather, the rules surrounding fee-shifting in
civil rights cases are designed to encourage attorneys to take
these types of cases and are based on full compensation for the
work performed, rather than on the particular agreement between the
plaintiff and her attorney.
Significantly, civil rights attorneys already have
incentives to encourage their clients to take reasonable settlement
offers, because they can only recover fees if their client is the
“prevailing party,” something that is not assured if they take the
gamble of going to trial, not to mention the additional work and
preparation that is required for taking a case to trial. Further,
the district court’s rationale assumes that attorneys are violating
their ethical duties, which require the client, not the lawyer, to
make all settlement decisions.
Moreover, the Federal Rules already contain a mechanism
whereby a defendant can contain fees and costs through a reasonable
settlement offer: Under Rule 68, a party who rejects a formal Rule
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68 offer and then fails to obtain greater relief cannot recover any
fees and costs which accrue after the date of rejection. Marek v.
Chesny, 473 U.S. 1, 11-12 (1985). Thus, the federal rules already
provide the defendant with a mechanism to make the plaintiff
“‘think very hard’ about whether continued litigation is
worthwhile,” id. at 11, such that the judge-made prophylactic
ruling in this case is unnecessary.
Importantly, this limitation on recovery is only
available where Rule 68 has been formally invoked: a “garden-
variety settlement offer made without resort to Rule 68 affords the
offeror no similar protection; he cannot reasonably expect to gain
the benefits that Rule 68 confers.” Spooner v. EEN, Inc., 644 F.3d
62, 71 (1st Cir. 2011). Because Jiten did not avail itself of this
option, it cannot now use its informal offer as a sword.2
For these reasons, and in the absence of any suggestion
of actual attorney misconduct, we conclude the district court’s fee
2
In fact, the district court actually penalized Diaz more than
applying Rule 68 would have: under Rule 68, Diaz would have only
forfeited fees and costs incurred after rejection of the offer,
whereas the $25,000 figure is only a fraction of fees incurred
prior to the offer.
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reduction improperly focused on Diaz’s rejection of the settlement
offer. We remand for the court to re-evaluate the twelve Hensley
factors3 and determine whether any further reduction to the fee
award is proper.
On remand, the district court should also re-examine its
reduction of costs. The court indicated it was excluding from the
cost award the cost of deposing any deponents who did not actually
testify, but three of the excluded deponents–Maria Hernandez, Maria
(Elena) Lopez, and Denise Brown–actually did testify at trial.
Finally, the court’s order was silent as to pre- or post-
judgment interest on the attorney’s fee award. Diaz is entitled to
post-judgment interest on the fee award, calculated from the time
of judgment. Nardone v. Patrik Motors Sales, Inc., 46 Mass. App.
Ct. 452, 453 & n.3 (1999). She is also entitled to pre-judgment
interest on her compensatory damages award, but is not entitled to
pre-judgment interest on the attorney’s fee award because the fees
are not part of the underlying damages. See Siegel v. Berkshire
Life Ins. Co., 70 Mass. App. Ct. 318, 322 (2007) (differentiating
3
461 U.S. at 430 n.3.
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between attorney’s fees expended defending a creditor’s suit as a
result of the company’s unfair conduct, which were part of the
actual compensatory award, and the attorney’s fees expended against
defendant vindicating rights under c. 93A, which were not).
For the foregoing reasons, we affirm in part, reverse in
part, and remand for further proceedings consistent with this
disposition. Each party shall bear its own costs on appeal.
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