Peter Morjal v. City of Chicago , 774 F.3d 419 ( 2014 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 14-1365
PETER MORJAL,
Plaintiff-Appellee,
v.
CITY OF CHICAGO, et al.,
Defendants-Appellants.
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:12-cv-00185 — Joan Humphrey Lefkow, Judge.
ARGUED OCTOBER 3, 2014 — DECIDED DECEMBER 19, 2014
Before POSNER, ROVNER, and TINDER, Circuit Judges.
ROVNER, Circuit Judge. This appeal concerns the district
court’s decision to award $2,000 in attorneys’ fees to the
plaintiff Peter Morjal for time spent in litigating the amount of
fees due to him in his fee petition under 42 U.S.C. § 1988. The
defendants assert that the court’s award of fees contravened
the terms of the offer of judgment accepted by Morjal and that
2 No. 14-1365
the court lacked any legal basis to impose such an award. We
affirm.
Peter Morjal filed a suit against the City of Chicago and
numerous individual police officers pursuant to 42 U.S.C.
§ 1983, alleging unlawful search and seizure, excessive force,
conspiracy, false imprisonment, assault and malicious prosecu-
tion. Morjal accepted an offer of judgment under Federal Rule
of Civil Procedure 68(a), which provided in relevant part that
the “Defendants offer to allow judgment to be taken against
them … in the total amount of … [$10,001.00] … plus reason-
able attorney’s fees and costs accrued to date in an amount to
be determined by the Court.”
The purpose of Rule 68 is to encourage settlement and to
avoid protracted litigation. Webb v. James, 147 F.3d 617, 620
(7th Cir. 1998). It authorizes a defendant to make an offer of
judgment and, if the plaintiff refuses that offer and is awarded
less than the offer amount after trial, the plaintiff is required to
pay the costs incurred by the defendant from the time of that
offer. Fed. R. Civ. P. 68; Nordby v. Anchor Hocking Packaging Co.,
199 F.3d 390, 391 (7th Cir. 1999). Because the defendant is the
drafter of the Rule 68 offer and—unlike an ordinary contract
offer—the plaintiff cannot reject it without legal consequences,
we have held that any ambiguities in a Rule 68 offer must be
resolved against the defendant. Sanchez v. Prudential Pizza, Inc.,
709 F.3d 689, 690, 694 (7th Cir. 2013); Nordby, 199 F.3d at
391–92; Webb, 147 F.3d at 623.
The parties were unable to reach agreement as to the
amount of attorneys’ fees that is reasonable. Morjal sought
$22,190.50, and after contentious litigation the district court
No. 14-1365 3
awarded Morjal attorneys’ fees in the amount of $17,205.50.
Morjal then filed a motion seeking additional attorneys’ fees of
$16,773.00 reflecting the time spent in litigating the fee petition.
The defendants responded that Morjal was bound by the
terms of the offer of judgment, which limited fees to those
“accrued to date.” In its first fee opinion, the district court had
interpreted that language as allowing recovery of fees through
the date of Morjal’s acceptance of the offer of judgment.
Accordingly, the defendants asserted that Morjal was not
entitled to the recovery of any fees incurred in the fee litigation
itself, which occurred after that date of acceptance.
The court declared that it must weigh the competing aims
of § 1988, which encourages plaintiffs to redress civil rights
violations by providing for the payment of reasonable attor-
neys’ fees to prevailing parties, and Federal Rule of Civil
Procedure 68, which encourages settlement of claims and
promotes judicial efficiency by creating consequences for
refusing an offer of judgment. The district court expressed
concern with the potentially deleterious impact of such a fee
limitation in that it would remove any incentive for defendants
to minimize the hours spent in litigation as to the amount of
fees that is reasonable. The district court noted that such fee
restrictions could allow offering defendants to object to every
dollar requested in the fee petition as unreasonable, unneces-
sarily protracting litigation but avoiding any judgment for the
fees incurred by the plaintiffs in establishing the reasonable-
ness of those fees.
And the district court concluded that such an abuse of the
process is precisely what happened here. The court held that
4 No. 14-1365
in the course of the “hotly contested” fee litigation, in some
instances the opposition to fees was “overly aggressive”and
“arbitrary with no objective standard provided.” Although
Morjal sought $16,773.00 for fees incurred in litigating the fee
petition, the court awarded only $2,000 “to compensate for
time spent responding to challenges to the fees that were
unsupported and improper.”
The defendants appealed that award of $2,000, alleging that
the district court was bound by the language of the offer of
judgment, and therefore that any award of fees was limited to
fees incurred through the date of acceptance of the offer of
judgment. They assert that the district court effectively rewrote
that agreement to create an exception for circumstances in
which the court determined that a fee objection lacked merit.
At oral argument, the defendants contended that the court was
limited by the terms of the Rule 68 offer of judgment, and
lacked the authority to impose fees beyond the provisions of
that offer. They further argue that their conduct did not present
the danger identified by the district court, in that many of their
challenges were successful and this was not a situation in
which a defendant objected to every dollar requested. More-
over, they assert that a defendant’s bad behavior is not relevant
to the determination of a reasonable fee, Simpson v. Sheahan,
104 F.3d 998, 1003 (7th Cir. 1997), and that it is an abuse of
discretion to award fees as punishment under § 1988. Accord-
ingly, the defendants claim that the district court had no
proper basis for awarding the fees. If construed as a sanction,
we would review the award for abuse of discretion, but we
review de novo the district court’s determination of the legal
No. 14-1365 5
effect of the written Rule 68 offer. Feldman v. Olin Corp., 692
F.3d 748, 759 (7th Cir. 2012); Sanchez, 709 F.3d at 690.
The proposition that the district court has no authority to
award attorneys’ fees for vexatious conduct is clearly wrong.
There are numerous avenues available to the district court to
impose sanctions in order to address conduct that unnecessar-
ily prolongs litigation:
First, Federal Rule of Civil Procedure 11 permits a
court to sanction an attorney for a pleading or other
document that (among other potential transgres-
sions) is presented for an improper purpose or
makes factual representations that are without
reasonable evidentiary support. See Fed.R.Civ.P.
11(b)(1) and (3), (c). Second, under 28 U.S.C. § 1927,
an attorney “who so multiplies the proceedings in
any case unreasonably and vexatiously” may be
held to account for the excess fees and other costs
resulting from her improper conduct. Finally, a
court has the inherent authority to impose sanctions
for actions taken “in bad faith, vexatiously, wan-
tonly, or for oppressive reasons.” Chambers v.
NASCO, Inc., 501 U.S. 32, 45–46, 111 S. Ct. 2123, 2133,
115 L. Ed. 2d 27 (1991) (internal quotation marks and
citations omitted); see also G. Heileman Brewing Co.
v. Joseph Oat Corp., 871 F.2d 648, 651–52 (7th Cir.
1989) (en banc).
Johnson v. Cherry, 422 F.3d 540, 548–49 (7th Cir. 2005); Manez v.
Bridgestone Firestone North American Tire, LLC, 533 F.3d 578, 591
(7th Cir. 2008); Dal Pozzo v. Basic Machinery Company, Inc., 463
6 No. 14-1365
F.3d 609, 613–14 (7th Cir. 2006). The limitations on fees in the
Rule 68 offer do not impact the authority of the district court to
utilize those remedies for offending conduct. Before imposing
sanctions, however, the party against whom the sanctions may
be imposed must be afforded notice of the possible sanction
and an opportunity to be heard, and the failure to provide such
notice represents an abuse of the court’s sanctions power.
Johnson, 422 F.3d at 549, 551; Taurus IP, LLC v. Daimler-Chrysler
Corp., 726 F.3d 1306, 1344–45 (7th Cir. 2013); Larsen v. City of
Beloit, 130 F.3d 1278, 1286 (7th Cir. 1997). Here, the defendants
were not informed that sanctions were being considered for
their conduct in arbitrarily opposing the requested fees. If the
district court had based its $2,000 award of fees on its authority
to impose sanctions, the lack of notice would be problematic.
The district court did not rely, however, on that authority
in ordering the payment of $2,000 in attorneys’ fees. Instead,
the court held that its determination was based on a consider-
ation of both the Rule 68 offer of judgment and 42 U.S.C.
§ 1988, which allows for the award of fees to a prevailing party
in a civil rights action under § 1983. Therefore, we must
consider whether the offer of judgment precludes the imposi-
tion of fees under § 1988.
We note at the outset that we need not consider Morjal’s
argument that a request for fees on fees is distinct from the
underlying action and therefore is not bounded by the Rule 68
judgment. Even assuming the applicability and limiting our
review to the plain language of the offer of judgment, the
defendants cannot prevail in this case. That is because the
language of the offer of judgment limits the plaintiff to fees
that had accrued as of that date (the date of acceptance of the
No. 14-1365 7
offer) in return for the defendants’ agreement “to allow judg-
ment to be taken against them … in the total amount of …
reasonable attorney’s fees.” To the extent that the defendants
raised non-frivolous challenges to the amount of attorneys’
fees in determining what was “reasonable,” they would still be
in compliance with that obligation. But here, the district court
determined that the defendants’ arguments went beyond
legitimate challenges to reasonableness. The court held that the
defendants’ opposition to fees was “overly aggressive”and
“arbitrary.” Although Morjal sought $16,773.00 for fees
incurred in litigating the fee petition, the court awarded only
$2,000 for “time spent responding to challenges to the fees that
were unsupported and improper.” Accordingly, the court
limited the fee award to the time spent responding to litigation
that violated the terms of the offer of judgment itself in that it
went beyond non-frivolous arguments as to whether the fees
sought were reasonable. The defendants’ arbitrary, improper
challenges failed to comply with their obligation to “allow
judgment to be taken against them” for reasonable attorneys’
fees, and therefore were not subject to the limitations on fees in
that agreement. The court could properly award fees for those
litigation costs under § 1988. See Sanchez, 709 F.3d at 692 (any
ambiguities in the Rule 68 offer must be construed against the
offering defendant).
In this case, the court appears to have awarded a percent-
age of the total fee amount sought based on the litigation that
was deemed unsupported and improper. Although challeng-
ing the authority of the district court to impose any award at
all, the defendants do not specifically raise a challenge to the
amount of fees awarded, such as an argument that the court
8 No. 14-1365
award was not related to the objections deemed frivolous or
that it was determined arbitrarily as opposed to based on an
assessment of hours spent on those frivolous claims. Therefore,
we need not determine whether the district court had a proper
basis for arriving at the $2,000 amount. Because the court had
the authority to award fees under § 1988, and did so only as to
conduct of the defendants that fell outside the provisions of the
offer of judgment, the court’s award of attorneys’ fees was
proper. Accordingly, the decision of the district court is
AFFIRMED.