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Friday, Jun. 29, 2001

The end of the Supreme Court's term always brings a rush of opinions in high profile cases. So it is no wonder that the Court's opinion on attorneys' fees in Buckhannon Board and Care Home v. West Virginia brought little media attention. But that opinion is likely to work a sea change in how scores of federal laws, including all of our civil rights laws, are enforced in the future.

The American Fees Rule: Pay as You Go

In the American legal system, you pay as you go. This is the so-called "American Rule": a plaintiff in a civil lawsuit bears his own costs, win or lose. But no part of the legal landscape is flat: the rule is subject to numerous exceptions that force the loser to pay the winner's legal fees.

Buckhannon involved a distinct species of fee-shifting: federal remedial statutes, like the civil rights laws, that provide for attorneys' fees for "prevailing parties" to be paid by their opponents.

Over one hundred federal statutes provide for this type of fee-shifting. They include all of the major civil rights laws and most of the federal laws that protect the environment and public health and safety. These attorneys' fees provisions were expressly designed by Congress to encourage private citizens to participate in enforcing the law.

Defining "Prevailing Party"

In Buckhannon the plaintiffs sought to enforce the federal Fair Housing Act (FHA) and the Americans with Disabilities Act (ADA). West Virginia had closed an assisted living facility due to fire code violations. The facility sued the state, claiming that the fire code violated the FHA and ADA.

The plaintiffs claimed that they were "prevailing parties" entitled to attorneys' fees, since the goal of their suit had been accomplished. West Virginia was now in compliance with federal law. Before Buckhannon, the plaintiffs would have been right: a plaintiff was deemed to be a prevailing party if the plaintiffs' suit was the "catalyst" for the defendant's changed conduct. It did not matter if, in the end, there was never a judgment or settlement for any part of the lawsuit.

No more. After Buckhannon, the term "prevailing party" now means a party that won a judgment, or entered into a consent decree, or somehow got a court to find, or a defendant to admit, that the defendant had committed a legal wrong.

Buckhannon will likely have a dramatic impact. Lawyers who bring cases under federal remedial statutes now have less incentive to do so. Even in the past month, lawyers are reporting diminished activity in cases brought under these statutes.

Among other effects, the case places considerable power in defendants' hands. Assume a plaintiff is pursuing only or mainly equitable remedies — trying to get a defendant to stop or start doing something going forward. In that event, the defendant can frequently moot the lawsuit by voluntarily doing what the plaintiff wants, and thereby deprive the lawyers who brought the suit of any payment at all.

Discouraging Plaintiffs from Suing or Settling

The opinions in Buckhannon reflect a genuine disagreement over the meaning of the term "prevailing party." Nevertheless, it is worth noting that the majority's views of the policy issues are highly questionable.

Initially, the majority asserts that Buckhannon may have limited impact because it wouldn't affect parties seeking compensatory damages. This is true, but it may also be both trivial and bad.

The point is trivial because many of these lawsuits involve mainly injunctive relief. Compensatory damages can be unavailable, as they often are under the environmental laws: Threatened grizzly bears do not get damages. More frequently, the plaintiff simply isn't as interested in compensation as she is in the goal of stopping discriminatory conduct or forcing compliance with public health regulations. Indeed, the plaintiffs in Buckhannon itself voluntarily dismissed their claims for money damages, and settlements of these cases frequently involve relinquishment of such claims.

The new rule may also be downright counterproductive, because forcing a plaintiff to litigate on after it has won much of what it wanted is wasteful. Most litigation ends in settlement, and should: a negotiated settlement to a legitimate dispute that both parties can live with is likely to be fairer than a winner-take-all jury verdict. But a plaintiff in a suit governed by Buckhannon may fight on, rather than settling, mainly to secure fees — a rotten reason to continue a lawsuit. The majority's new rule discourages plaintiffs from walking away with half a loaf.

On the defendant's side of the incentive calculus, Chief Justice Rehnquist wrote that a "catalyst" theory of recovery may provide a strong disincentive for a defendant to change its conduct voluntarily. If liability for attorneys fees is large — perhaps even larger than the damages owed — the fear of having to pay fees might discourage the defendant from changing its conduct.

The Chief Justice's concern is overblown. The Supreme Court has already done much to control attorneys' fees in fee-shifting cases. In the mid-1980's, the Court decided that these fees must be calculated only according to the "lodestar" method — that is, a reasonable hourly rate for work reasonably necessary. A lawyer suing under a federal remedial statutes gets the value of his time, no more.

Together, the lodestar method and the catalyst approach create an incentive for a defendant to change its conduct quickly. The sooner the defendant acts, the earlier it stops the plaintiff's lawyer's fee clock.

Policing "Extortion"

The majority also worried that a catalyst approach would mean windfalls for plaintiffs. Justice Scalia noted in concurrence that under this approach a plaintiff might get fees even for a meritless suit if the defendant changed its conduct merely because the suit would be bad for business or a costly nuisance. To Scalia, that's "extortion."

Under the new rule, of course, a plaintiff might be deprived of any compensation if the defendant acts unilaterally, "slink[ing] away on the eve of judgment." Scalia thinks the first evil worse than the second.

The "extortion" that Justice Scalia fears is of an extraordinary type: it requires the blessing of a federal judge. The trial judge must sign off on an attorneys' fee award. No version of the catalyst theory countenances attorneys fees in cases in which defendants have settled a meritless suit due to its nuisance value, and the Supreme Court could surely have emphasized that fact in its opinion.

In contrast, after Buckhannon, the ability of a defendant to deprive a plaintiff of a hard-earned fee is now beyond the reach of the courts. As long as there is no judgment and no settlement, the defendant gets away scot free. That's an evil now beyond any court's power to correct. All told, the Court has sent a strong signal discouraging the enforcement of federal laws long thought to depend on the willingness of private citizens to act in the public good.

Barton Aronson is currently a prosecutor in Washington, D.C. Prior to that, he was in private practice in Washington, D.C. and an Assistant District Attorney in Massachusetts. The opinions expressed in this article are his own.

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