Petition for Writ of Certiorari — City of New York v. Eastway Construction Corp.

Supreme Court, U.S.

FILED

87-359 AUG 28 1987

JOSEPH F. SPANIOL, JR.

No. 87- CLERK

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1987

THE CITY OF NEW YORK, et al.,

Fetitioners,

-against-

EASTWAY CONSTRUCTION CORP., et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

PETER L. ZIMROTH,

Corporation Counsel of

the City of New York,

Attorney for Petitioners,

100 Church Street,

New York, N.Y. 10007.

(212) 566-4328 or 4338

LEONARD J. KOERNER,*

LARRY A. SONNENSHEIN,

JOHN P. WOODS,

FRED KOLIKOFF,

of Counsel.

August 28, 1987

*Counsel of Record

QUESTION PRESENTED

When it has been held that a plaintiff's

action is frivolous, and a defendant is

entitied to a reasonable attorney's fee,

pursuant to 42 U.S.C. §1988 and Fed. R.

Civ. P. il, and there is no showing that the

plaintiff or his attorney would be unduly

burdened by a full fee award, should a

court compute the fee by using’ the

"lodestar" method that is used when fees are

awarded to prevailing plaintiffs, or, as the

majority below held, may the court disregard

the lodestar and award an arbitray amount

which has no relation to the actual cost of

representation?

PARTIES

The parties in this case, when it

commenced, were as follows:

1. Eastway Construction Corp.,

plaintiff .

2. George Jaffee, plaintiff.

3. Irving H. Kanarek, plaintiff.

4. Roger Jacobs, plaintiff.

5. The City of New York, defendant.

6. Nathan Leventhal, individually and

as Deputy Mayor of the City of New York,

defendant.

7. Antheny G. Gliedman, individually

and as Commissioner of the New York City

Department of Housing Preservation and

Development, defendant.

8. Charles Reiss, individually and as

Deputy Commissioner of the New York City

Office of Development, defendant.

9. The Community Preservation

Corporation, defendant.

10. Michael Lappin, individually and as

President of the Community Preservation

Corporation, defendant.

11. John Does one through fifty,

defendants.

12. Chemical Bank N.A., defendant.

The petitioners are parties 5 threugh 7,

defendants below.

The respondents are parties 1 through

4, plaintiffs below. In addition, LaRossa

Mitchell & Ross, plaintiffs' attorneys, are

also respondents because the United States

Court of Appeals for the Second Circuit held

that plaintiffs’ attorneys should pay half of

the $10,000 in enteenae fees which

petitioners should receive. If a writ of

certiorari is issued, petitioners will argue

before this Court that the total amount of

fees they should receive is in excess of

$50,000. Since petitioners do not challenge

the allocation of the fee award set by the

Second Circuit, the plaintiffs' attorneys now

have a direct interest in this case. To

distinguish them from the other respondents,

the law firm of LaRossa, Mitchell & Ross will

be referred to herein as “respondent law

"

firm." The word "respondents" will be used

to refer to the other respondents and the

phrase "all respondents" will be used te

refer to all respondents including’ the

respondent law firm.

Parties 9 and 10, defendants below, did

not cross-appeal from the District Court's

denial of their motion for attorney's fees,

and thus ceased to have an interest in this

case on May 21, 1985, when the United

States Court of Appeals for the Second

Circuit affirmed the dismissal of the case

iv

against all parties. Defendants 11 and 12

did not appear in this proceeding.

TABLE OF CONTENTS

|

Page

QUESTIONS PRESENTED........... i

TABLE OF AUTHORITIES.......... vii

OPINIONS BELOW a... ccccccsces 2

Po py eer errr re 3

oc cy 2 Re ee 3

STATEMENT OF THE CASE ....... 5

REASONS FOR GRANTING THE

nee Te TT err er re ere 23

eo Fe rey err rr er rere 50

TABLE OF AUTHORITIES

Cases

Arnold v. Burger King Corp.,

719 F.2d 63 (4th Cir. 1983),

cert. denied, 469 U.S. 826

Fl a rt ar

Blum v. Stenson, 465 U.S.

EE SSS OTOP E EET

Eastway Construction Corp. v.

Gleidman, 86 A.D.2d 575, 446

N.Y.S.2d 306 (1st Dept. 1982),

appeal withdrawn or

discontinued, 58 N.Y. 2d

972, no other citation (1983) .....

Faraci v. Hickey - Freeman

Co., 607 F.2d 1025 (2d Cir.

Ea OL ES

Hensley v. Eckerhart, 461

ee rs woe tcc cee ees

In re Cosmopolitan Aviation

Corp., 763 F.2d 507

(2d Cir. 1985), cert. denied

sub nom, Rothman v. New York

State Dept. of Transp.,

U.S. _, 106 S. Ct. 593

EE

Index Fund, Inc. v. Hagopian

107 F.R.D. 95 (S.D.N.Y. 1985) ...

Johnson v. Georgia Highway

Express, 488 F.2d 714 (5th

Ee

Page

36

Johnson v. NYCTA, 639 F. Supp.

Ge CicRecic Rs BOOP 88 kd tesnccns 43

Johnson v. NYCTA, F. Supp.

» Nos. 83 Civ. 1352, 85

Civ. 0629 (E.D.N.Y. August

eae RE oe re 44, 45

Johnson v. NYCTA, _ F.2d

__, Docket No. 86 - 7406

(2d Cir. July 9, 1987) ..... 43, 45

Jones v. Dealers Tractor and

Equipment Co., 634 F.2d 180

Ss GD | haw cece eecsnces 36

Munson v. Friske, 754 F.2d

Py Es Se RPT Terr Terreee 27

Nash v. Reedel, 86 F.R.D.

ee Gees, Ns ED. Ks cece sadsecees 37

Patterson v. Aiken, 111

F.R.D. 354 (N.D. Ga.

Pe ae 37

Pennsylvania v. Delaware

Valley Citizens' Council

for Clean Air, U.s. ,

Bee GS. Ut. UBS CIBGS) ww cc eae. 35

Prate v. Freedman, 583 F.2d 42

See eee Skew e cen stevia 36

Taylor v. Prudential- Bache

Securities, Inc., 594 F.

Supp. 226 (1984), aff'd mem., 751

F.2q Sti (20 Cif. 1964) ..cceccess 37

viii

Statutes

7 U.S.C. §2565 (Plant Variety

Protection Act of 1970) .......... 38

15 U.S.C. §77k(e) (Securities

Exchange Act of 1934) _—_............ 38

17 U.S.C. §505 (Copyright Act

I Ps ac Gob 6000 6% 00 38

29 U.S.C. §1132(g)(1)

(Employee Retirement Income

Security Act of 1974) __.......... 38

33 U.S.C. §1415(g)(4) (Marine

Protection, Research, and

Sanctuaries Act of 1972) .......... 39

42 U.S.C. 81973(1)(e) (Voting

Rights Act \mendments of

ee rr ere ee 39

42 U.S.C. §1988 (Civil Rights

Attorney's Fees Act of 1976) ..... passim

42 U.S.C. §2000e-5(k) (Civil

Rights Act of 1964) —_............... 28, 29

44

42 U.S.C. §7604(d) (Clean Air

Amendments of 1970) _............... 35, 39

Ce fs BE bees kes e eevee passim

Pee | |} 39

3) is Fe a | 4 39

Fed. R. Civ. P. 37(b)(2)(e) ..... 39

ix

No. 87-

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1987

THE CITY OF NEW YORK, et al.,

Petitioners,

-against-

EASTWAY CONSTRUCTION CORP., et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

The petitioners, the City of New York,

Nathan Leventhal, Anthony G. Gliedman, and

Charles Reiss, respectfully pray that a Writ

of Certiorari issue to review the decision of

the United States Court of Appeals for the

Second Circuit entered in the above-entitled

proceeding on June 8, 1987.

OPINIONS BELOW

The opinion of the Court of Appeals

dated June 8, 1987 is reported at 821 F.2d

121 (2d Cir. 1987). A copy is reprinted in

the Appendix at page 1. The opinion of the

United States District Court for the Eastern

District of New York dated May 23, i986 is

reported at 637 F. Supp 558 (E.D.N.Y.

1986). A copy is reprinted in the Appendix

at page 28. The opinion of the Court of

Appeals dated May 21, 1985 is reported at

762 F.2d 243 (2d Cir. 1985). A copy is

reprinted in the Appendix at page 144. The

amended judgment of the United States

District Court for the Eastern District of

New York is reprinted in the Appendix at

page 190. The oral opinion of the United

States District Court for the Eastern District

of New York, stated on the record in open

court, dated August 7, 1984, is repvinted in

the Appendix at page 192.

JURISDICTION

The judgment of the United States

Court of Appeals for the Second Circuit

sought to be reviewed was dated and entered

June 8, 1987. The jurisdiction of this Court

is invoked under the provisions of 28

U.S.C. § 1254(1). This petition has been

filed within the time allowed by law.

STATUTES

42 U.S.C. § 1988 provides:

In any action or proceeding to

enforce a _ provision of sections

1981, 1982, 1983, 1985, and 1986

of this title, title IX of Public Law

92-318, or title VI of the Civil

Rights Act of 1964, the court, in

its discretion, may allow’ the

prevailing party, other than the

United States, a reasonable

attorney's fee as part of the costs.

=

Fed. R. Civ. P. 11 provides:

Every pleading, motion, and

other paper of a party represented

by an attorney shall be signed by

at least one attorney of record in

his individual name, whose address

shall be stated. A party who is

not represented by an attorney

shall sign his pleading, motion, or

other paper and state his address.

; The signature of an

attorney or party constitutes a

certificate by him that he has read

the pleading, motion, or other

paper; that to the best of his

knowledge, information, and belief

formed after reasonable inquiry it

is well grounded in fact and is

warranted by existing law or a

good faith argument for’ the

extension, modification, or reversal

of existing law, and that it is not

interposed for anv improper

purpose, such as to harass or to

cause unnecessary delay or

needless increase in the cost of

litigation. If a pleading, motion,

or other paper is not signed, it

shall be stricken unless it is

signed promptly after the omission

is called to the attention of the

pleader or movant. If a pleading,

motion, or other paper is signed in

violation of this rule, the court,

upon motion or upon its own

initiative, shall impose upon the

person who signed it, a

represented party, or both, an

appropriate sanction, which may

include an order to pay to the

other party or parties the amount

-4-

of the reasonable expenses

incurred because of the filing of

the pleading, motion, or other

paper, inmeluding a _ reasonable

attorney's fee.

STATEMENT OF THE CASE

(1)

Stockholders and officers of Eastway

Construction Corporation had been principals

in limited partnerships that participated in

the New York City Municipal Loan Program.

Between 1966 and 1974, the City loaned the

partnerships almost 12 million dollars. to

enable them to rehabilitate 34 buildings in

depressed areas. (A148-149)!. These were

largely non-recourse loans’ secured by

mortgages on the buildings. By 1981, the

References preceded by "A" are

references to the Appendix to this Petition.

References preceded by "CA" are references

to the joint appendix filed in the Court of

Appeals during the second appeal of this

case which resulted in the most recent Court

of Appeals decision.

loans were almost 8 million dollars in arrears

and by 1983, all but 3 of the 34 buildings

had reverted to City ownership.

Furthermore, one of the plaintiffs, George

Jaffee, Eastway's president, admitted to

making illegal payments to a City official to

expedite certain loans. (A149-A150).

Subsequently, the City decided that it

would not enter into contracts with firms

whose principals had controlled entities that

had defaulted on City loans, and that the

City would not approve such firms as

contractors on private projects where City

approval of contractors was_ required.

(A150-A151). Since Eastway had specialized

in working on _ publicly-financed housing

rehabilitation projects in New York City,

these policies significantly curtailed

Eastway's business. (A151). Eastway

challenged these _ policies in a_ state

proceeding and lost. Eastway Construction

Corp. v. Gliedman, 86 A.D.2d 575, 446

N.Y.S.2d 306 (1st Dept. 1982), appeal

withdrawn or discontinued, 58 N.Y.2d 972,

no other citation (1983). (A151-Al154).

(2)

Eastway again challenged the City's

policy against it by commencing an action in

federal court on February 3, 1984.

Respondents sued the City, several City

officials, the Community Preservation

Corporation ("CPC"), CPC's _ president,

Chemical Bank, and fifty unidentified "John

Does". (A157). CPC is a_ nonprofit

corporation which was founded by 39 banks

for the purpose of lending money to private

parties in order to enable them _ to

rehabilitate residential buildings in depressed

areas. In 1979 and again in 1981, CPC

denied loans for the rehabilitation of a

building in which George Jaffee, Eastway’s

-7-

president, had an indirect interest.

(A154-Ai56).

Respondents' compiaint alleged that the

City's policy of not doing business with

Eastway or its principals violated their

constitutional rights and that the City, CPC,

and the other defendants had engaged in a

conspiracy in violation of the Sherman

Antitrust Act to drive Eastway out of the

construction business. (A158). Petitioners

and CPC moved for summary judgment

dismissing the action. Petitioners admitted

that the City had adopted a policy against

dealing with Eastway, but denied that the

City had induced others to refrain from

dealing with Eastway. Petitioners also

denied that the City's policy deprived

Eastway of any property right or any other

right protected by federal statute or the

United States Constitution. CPC denied that

it had engaged in a conspiracy with the

City; it asserted that its denials of the loans

described above were based on the facts

surrounding the projects in question and

that it had no policy against lending money

to projects connected with Eastway or its

principals. (A159-A161). Petitioners and

CPC requested attorney's fees on the

grounds that respondents’ action was

frivolous. The District Court granted the

motions to dismiss. The Court said that

respondents had shown neither a civil rights

nor an antitrust violation. The Court

declined to grant the defendants’ requests

for attorney's fees, finding that the action

was not frivolous. (A161-A162, A190-A198).

(3)

Respondents appealed the dismissal of

their action and petitioners cross-appealed

the denial of their motion for attorney's

fees. CPC did not cross-appeal.

The Court of Appeals, after ruling that

the District Court had properly dismissed

respondents’ civil rights and antitrust claims

(A162-A175), addressed the attorney's fee

issue raised by petitioners’ cross-appeal.

The Court held that petitioners were

entitled to attorney's fees from respondents

under 42 U.S.C. § 1988 for the defense of

the civil rights claim. The Court found that

respondents’ civil rights claim was

unreasonable and groundless because

respondents were unable to point to the

deprivation of any right conferred by the

United States Constitution or by federal

statute. The Court said that Eastway's

unsuccessful challenge to the City's policy in

state court should have put respondents on

notice that the City might receive attorney's

fees if the City's policy was challenged

again. (A177-A180).

-10-

The Court then held that the City was

also entitled to attorney's fees under Fed.

R. Civ. P. 11 for the defense of the

antitrust claim. The Court said that Rule

11, as amended, required an attorney to

conduct a reasonable inquiry into’ the

validity of a complaint before signing it and

it also required * e imposition of sanctions

where it appears that a complaint has been

filed in bad faith, to harass a defendant, or

where "after reasonable inquiry, a competent

attorney could not form a reasonable belief

that the pleading is well grounded in fact

and is warranted by existing law or a good

faith argument for the extension,

modification or reversal of existing law."

(A181-A187).

The Court said that although it could

not say for certain that respondents or

respondent law firm had acted in subjective

bad faith in suing petitioners, nevertheless,

-ll-

the antitrust action was doomed to failure

because the City and CPC did not compete

with Eastway and Eastway did not allege any

anti-competitive effects. The Court also said

that "a competent attorney, after reasonable

inquiry, would have had to reach the same

conclusion." Therefore, the Court held that

the District Court erred in denying

petitioners’ motion for attorney's’ fees

incurred in defending against the antitrust

claim. The Court of Appeals remanded the

case back to the District Court to determine

the amount of attorney's fees that the City

should receive and to determine whether the

fees should be paid by respondents or

respondent law firm or both. (A187-A189).

(4)

The proceedings om remand commenced

with a conference before the District Court

on June 27, 1985. (CAle, CA3-CA8e). The

-12-

District Court stated that the Circuit Court's

decision required it to assess full fees on

both claims and it stated that it only had

discretion to determine whether to assess

fees against respondents or respondent law

firm. (CA5-CA7). The District Court

directed petitioners to submit their fee

application. (CA8d-CA8e).

On July 25, 1985, petitioners filed a

motion for attorney's fees in which they

sought a "lodestar" amount of $43,925, from

all respondents, jointly and_ severally.

(CAle, CA9-CA104). The lodestar amount

was arrived at by multiplying the number of

hours each of three attorneys worked on the

case by a reasonable market-based hourly

rate for that attorney.

On October 16, 1986, respondents

opposed . petitioners’ motion. (CA105-

CA136). Respondents argued that. the

lodestar should be based on _ cost-based

-13-

hourly rates composed of salary and allocable

overhead rather than market-based rates and

also challenged as excessive and duplicative

the number of hours’ requested . by

appellants. (CA107-CA110, CA119-CA136,

CA327, CA328).

On October 17, 1985, the District Court

requested briefs on, whether, in order to

apportion the fee award, the court should

conduct an inquiry into the nature of

respondent law firm's’ preparation and

beliefs; and what due _ process’ and

attorney-client privilege questions would be

raised by such an inquiry. (CA140-CA141).

Both petitioners and respondents submitted

responses to these inquiries.

In a letter dated January 7, 1986,

petitioners responded to an inquiry of the

District Court regarding whether it could

award fees for legal work done in connection

with the appeal before the Circuit Court and

-14-

(

in litigation of the fee award.

(CA356-CA360). Petitioners included an

updated fee request of $58,550. (CA360).

Respondents opposed the awarding of fees

for the appeal and litigation of the fee and

they also argued that the District Court had

discretion to award a fee below the lodestar.

(CA361-CA365).

At oral argument on January 15, 1986,

petitioners argued that, under existing case

law, it would be improper for the Court to

reduce the fee from the lodestar amount.

(CA335-CA336). Respondent law § firm

represented to the Court that its clients,

due to financial hardship, wished to pay any

sanctions over two years. (CA345).

Although the Court invited the submission of

an affidavit demonstrating such hardship,

none was submitted to the Court. (CA345,

CA449).

-15-

The District Court issued a Memorandum

and Order on May 23, 1986, awarding

petitioners an attorney's fee of only

$1,000.00. (A142). The District Court held

that petitioners had demonstrated that they

were entitled to a "lodestar" amount of

$52,912.50 based on a reasonable hourly rate

and a reasonable number of well-documented

hours. (A108-Al109). The Court arrived at

this sum after excluding the time spent on

the appeal and including the time spent

litigating the amount of the fee.

(A107-A108).

The District Court reduced the fee to

$1,000.00 from the lodestar amount because

of a number of factors. The Court said that

it was reducing the amount because the

action was only "marginally frivolous"

(A111-A137), there was no _ evidence of

subjective bad faith (A110), neither

respondents nor their counsel had a history

-16-

of bringing frivolous cases (A136-A137),

there was no evidence that the petitioners’

attorneys were "unduly burdened" by the

action (A138), and actions against the City

involving commercial transactions should not

be discouraged (A138-A140).

Tne District Court held that only

respondents, and not respondent law firm

should be liable for payment of the fee.

The District Court said that it was doing so

because the Circuit Court directed it to

award attorney's fees against only the

respondents for their civil rights claim under

42 U.S.C. § 1988 and to award fees against

the respondents and/or respondent law firm

for the antitrust claim under Rule 11; and

that it would be difficult to determine how

much time petitioners’ attorneys spent on

each claim. (A140-A142).

-17-

| aaa

(5)

Petitioners appealed from the District

Court's Memorandum and Order of May 23,

1986. On appeal, petitioners argued that

the District Court erred in not assessing

fees against respondent law firm, in _ not

awarding fees for time spent on the prior

appeal, and in reducing the fee below the

lodestar. Petitioners argued that the award

should not have been reduced below the

lodestar because there was no evidence to

show that awarding the lodestar amount

would cause respondents or respondent law

firm serious financial hardship, nor was

there evidence to show that respondents or

respondent law firm acted in such a manner

as to demonstrate good faith when they

commenced the action.

The Circuit Court decided the appeal on

June 8, 1987. The majority of the Court

held that the District Court erred insofar as

-18-

——————————

it reduced the lodestar amount . below

$10,000.00 and insofar as it did not assess

fees against respondent law firm. The

majority modified the District Court order to

the extent of awarding petitioners'

$10,000.00 and directing that $5,000.00

should be paid by respondents jointly and

severally and $5,000 should be paid by

respondent law firm. (A15-A16). The

majority held that, when a defendant is

entitled to an attorney's fee under 42

U.S.C. § 1988 or Fed. R. Civ. P. 11, the

court awarding the fee need not use the

lodestar method (which is used for

determining the fee to be awarded to a

prevailing plaintiff under 42 U.S.C. § 1988),

but may exercise its discretion to award a

fee which is a fraction of the lodestar.

(A6-A10). The majority also said that while

a district court has broad discretion in

determining the size of the fee to be

-19-

rier

awarded, the District Court in this case

erred insofar as it awarded a fee of less

than $10,000.00. (A10-Al2). However, the

majority did not articulate the nature of the

District Court's error. Thus, the majority

said:

In this case, Chief Judge

Weinstein has thoughtfully

considered a variety of factors

bearing on the appropriate amount

of a fee to be awarded as a

sanction. Without necessarily

endorsing the pertinence of each

factor, we agree with his general

conclusion that a fee substantially

less than the lodestar amount is

permissible. However, discharging

our responsibilities to monitor the

outer limits of discretion in such

matters, we have concluded that

the bottom of the range of

discretion appropriate to this case

is a fee of $10,000. We therefore

conclude that the $1,000 awarded

by the District Judge must be

revised upwards to the _ iowest

point of permissible discretion.

(A11-A12).

As to who was to pay the fee, the

majority said that, in its earlier decision,

the Circuit Court had held that respondent

-20-

iain

eT

law firm was liable for fees under Fed. R.

Sue

Civ. P. 11 for both the antitrust and civil

rights claims. (Al13). To expedite matters,

the majority allocated liability for the fee

award, rather than remanding the case to

the District Court for that purpose, and

ordered that half of the fee should be paid

by respondents and half should be paid by

respondent law firm. (A13-A15).

The dissent stated that the petitioners

should have received the full lodestar amount

of $52,912.50 unless it could be shown, on

further remand, that the respondents or

respondent law firm were financially unable

to pay the full amount. (A25-A26).

The dissent said that absent proof of

an inability to pay, or other, unusual

circumstances, an attorney's fee awarded to

a defendant under 42 U.S.C. § 1988 or Fed.

R. Civ. P. 11 should be computed by using

the same method that is used when a fee is

-21-

|

awarded to a prevailing plaintiff under 42

U.S.C. § 1988, i.e., the lodestar method.

(A18-A19). The dissent said:

The phrase "a_ reasonable

attorney's fee" in rule 11 should

be interpreted in the same manner

as the same phrase in _ section

1988. While it is true that the

policy underlying section 1988 is to

encourage meritorious civil rights

litigation, and that rule 11 was

designed to discourage improper

litigation in general, this

difference in goals does_ not

suggest that "a reasonable

attorney's fee" should be

calculated differently under the

two provisions. Both provisions

allow an attorney's fee as an

enforcement tool for attaining their

respective goals, and both

provisions seek to shift to the

party or attorney whose conduct

imposed the financial burden the

cost of an attorney's fee that,

ideally, would never have been

incurred. This fee-shifting tool,

which is described in the two

provisions in identical language,

should not be disparately defined

simply because the _ rules _ it

promotes serve different policies.

If the lodestar is the appropriate

presumptive measure of "a

reasonable attorney's fee" for

section 1988, there is no reason it

should not be in the rule Il

context as well. Moreover,

-22-

because in the context of this case

the attorney's fee is being awarded

to prevailing defendants rather

that prevailing plaintiffs, section

1988 and rule li here serve the

same goal - the deterring of

improper litigation.

(A23-A24).

REASONS FOR GRANTING THE WRIT

A majority of a panel of the United

States Circuit Court for the Second Circuit

held that, when a defendant is entitled to "a

reasonable attorney's fee" under 42 U.S.C. §

1988 or Fed. R. Civ. P. 11, a District Court

can award a fee which is a fraction of the

lodestar fee even if there is no evidence that

paying the lodestar amount would impose

severe hardship on the payor of the fee.

The majority held that, even after it has

been determined that a party is entitled to a

reasonable attorney's fee, the identity of the

party is relevant when the fee is computed,

and defendants, unlike plaintiffs, are not

-23-

entitled to full compensatory fees even if the

plaintiff and his attorney can afford to pay

full fees. The majority failed to explain why

defendants should be subject to radically

different treatment when reasonable

attornoy's fees are computed under 42

U.S.C. § 1988 and Fed. R. Civ. P. 11, and

there is nothing in the legislative history or

rulings of this Court which would support

the notion that a different standard should

be employed in determining the amount of

attorney's fees that defendants are entitled

to receive. Furthermore, the majority

appears to be the only circuit court that has

explicitly endorsed a double standard for

computing fees, depending on the identity of

the recipient. The holding of the majority

below is directly contrary to recent decisions

of the Fourth Circuit, the Seventh Circuit,

and the Second Circuit itself, all of which

have said that, when an action is frivolous

-24-

and a defendant is entitled to an attorney's

fee, and the plaintiff can afford to pay, the

congressional goal of deterring frivolous

actions requires that a full fee be awarded.

Furthermore, the majority's opinion is

contrary to the general principle that a

recipient of an attorney's fee award should

ordinarily receive the lodestar amount, which

principle has been stated and applied by this

Court in several recent cases. Finally, the

opinion of the majority creates confusion and

uncertainty, and invites extensive satellite

litigation over what constitutes a reasonable

attorney's fee.

Be The decision of the

majority is in direct conflict

with decisions of two other

Circuit Courts and a prior

decision of the Second

Circuit.

The District Court found that the lodestar

amount of $52,912.50 reflected the value of

the work done by petitioners' attorneys on

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this case and this figure reflected a

reasonable hourly rate multiplied by a

reasonable number of well-documented hours.

Nonetheless, the District Court awarded

petitioners an attorney's fee of only

$1,000.00. On appeal, the majority of the

Circuit Court stated the District Court

abused its discretion insofar as it awarded

petitioners less than $10,000.00. In doing

so the majority stated that a court can award

a defendant who is entitled to an attorney's

fee, a fee which is a fraction of the lodestar

and the majority did not explain why a

fractional award was appropriate here.

Insofar as the Circuit Court held that a

defendant whe is entitled to an attorney's

fee is not entitled to a full fee absent

evidence that the plaintiff is unable to pay a

full fee award, or some other compelling

reason, such holding is directly contrary to

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the law as it has been stated by three

Circuit Courts, including the Second Circuit.

In Munson v. Friske, 754 F.2d 683 (7th

Cir. 1985), the Seventh Circuit upheld an

attorney's fee award of $42,095 under 42

U.S.C. § 1988, imposed against a former

public employee who had brought a frivolous

action alleging several civil rights claims in

which he alleged that his employment was

wrongfully terminated. The Court held that

the fee was appropriate because the plaintiff

had the financial ability to pay the fee. Id.

at 697-698. In so holding, the Court said:

"When a court determines that a plaintiff can

afford to pay the award, the congressional

goal of discouraging frivolous litigation

demands that full fees be levied." Id. at

v97.

In Arnold v. Burger King Corp., 719

F.2d 63 (4th Cir. 1983), cert. denied, 469

U.S. 826 (1983), the plaintiff had brought a

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frivolous action against his former employer

under Title VII of the Civil Rights Act of

1964, 42 U.S.C. § 2000e, et seq., alleging

that his employment had been _ terminated

because of his race. At trial, the District

Court dismissed the action after the

defendants presented their evidence. ‘The

District Court found that the action was

frivolous and awarded the defendants a total

of $10,744.00 in attorney's fees pursuant to

Section 706(k) of Title VII of the Civil

Rights Act of 1964, 42 U.S.C. § 2000e-5(k).

Id. at 64. On appeal the Fourth Circuit

affirmed the fee award. The Circuit Court

said that the District Court did not abuse its

discretion in awarding defendants full

attorney's fees because:

The trial court found that Arnold

was gainfully employed and

apparently able to pay the fee

award on such reasonable terms as

might be arranged, and that the

fee award was the reasonable value

of the attorneys' services.

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Id. at 69. In the course of reaching its

conclusion, the Fourth Circuit said:

When the plaintiff can afford to

pay, however, the congressional

goal of discouraging frivolous suits

weighs heavily in favor of levying

the full fees.

Id. at 68 (citation omitted).

In Faraci v. Hickey - Freeman Co., 607

F.2d 1025 (2d Cir. 1979), the plaintiff had

brought a frivolous action against his former

employer under Title VII of the Civil Rights

Act of 1964, 42 U.S.C. § 2000e, et seq.,

alleging that his former employer had

terminated him because of his_ national

origin. Id. at 1027. #The District Court

dismissed the action, held that it was

frivolous, and held that the defendants were

entitled to attorney's fees under Section

706(k) of Title VII of the Civil Rights Act of

1964, 42 U.S.C. § 2000e-5(k). The

defendants claimed that the reasonable value

of their lawyers' services was $11,500.00,

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but they requested $2,500.00 in light of the

plaintiff's limited resources and the District

Court awarded them this amount. Id.

On appeal, the Second Circuit said,

"Where the plaintiff can afford to pay, of

course, the congressional goal of

discouraging frivolous litigation demands that

full fees be levied." Id. at 1028. It then

reduced the fee award te $200 because of the

plaintiff's near-destitute financial condition

and poor health. The plaintiff had

proceeded pro se and in forma pauperis, and

affidavits showed that his monthly income

exceeded his basic monthly living expenses

by only $63.00, and that he suffered from a

serious heart ailment. Id at 1026, 1027,

1028, 1029.7

4 Although the majority below cited Faraci

for the proposition that it is permissible to

award less than the lodestar when a

(Footnote Continued)

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In this case, there is no evidence that

respondents or respondent law firm are

unable to pay the full lodestar requested.

The District Court invited respondents to

present evidence of inability to pay, but no

evidence was presented. Therefore, in this

case, the Circuit Court's award of cnly 20%

of the lodestar, without explanation®, is in

conflict with its decision in the Faraci case

and with the decision of other circuits.

(Footnote Continued)

defendant is entitled to a reasonable

attorney's fee, it did not state that a

reduced fee was awarded in Faraci because

of a factor which is not present here, the

plaintiff's reduced financial cicumstances.

. While the District Court gave many

reasons for awarding petitioners only $1,000,

the Circuit Court majority held that the

District Court was wrong by a factor of 10.

However the majority did not explain in what

manner the District Court erred, nor did it

explain why $10,000 was preferable to $1,000

or $50,000.

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2. The decision of the majority is

in conflict with those decisions of

this Court which have repeatedly

underscored the importance of the

lodestar in computing attorney's

fees.

The majority awarded petitioners oniy

20% of the lodestar without explanation. In

so doing, the majority implicitly held that

the lodestar is of little importance when an

attorney's fee is awarded. This holding is

inconsistent with the decisions of this Court

which have emphasized the importance of the

lodestar in awarding an attorney's fee.

In Hensley v. Eckerhart, 461 U.S. 424

(1983), this Court set standards which "are

generally applicable in all cases in which

Congress has authorized an award of fees to

a prevailing party." Id. at 433, n.7. In

particular, the court held when a plaintiff is

entitled to an attorney's fee under 42

U.S.C. § 1988, the amount of the fee should

have some relationship to the extent of the

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plaintiff's success, and the plaintiff should

generally not receive full attorney's fees if

success was only partial. Id. at 435-436,

438-440. In arriving at this holding, the

Court mentioned the importance of _ the

"lodestar" as a starting point for calculating

a “reasonable attorney's fee." Thus, the

Court said:

The most useful starting point

for determining the amount of a

reasonable fee is the number of

hours reasonably expended on the

litigation multiplied by a reasonable

hourly’ rate. This calculation

provides an objective basis on

which to make an initial estimate of

the value of a lawyer's services.

Id. at 433.

In Blum_yv. Stenson, 465 U.S. 6886

(1984), this Court held that, when a

plaintiff is entitled to an attorney's fee

under 42 U.S.C. § 1988, the fee computation

should be based on a market-based hourly

rate rather than a cost-based hourly rate

even if the plaintiff is represented by a

-33-

nonprofit legal services organization rather

than a private law firm. Id. at 894-896.

The Court also held that, in some cases of

exceptional success, a fee award above the

lodestar figure may be justified, but the

upward adjustment of the fee in the case

before it was not justified. Id. at 897,

901-902. In the course of its opinion, the

Court cited Hensley, supra, several times

and reiterated the importance of the lodestar

in arriving at "a reasonable attorney's fee."

Id. at 897, 899, 900, 901. In particular,

the Court noted that the lodestar will

normally incorporate several factors relevant

to the fee calculation. Thus, the Court said

that the novelty and complexity of the case

will normally be reflected in the hourly rate

and number of hours requested. If a case

is extremely novel and complex it will

require special expertise, justifying a higher

-34-

hourly rate, and many hours of work. Id.

at 898-899.

In Pennsylvania v. Delaware Valley

Citizens' Council for Clean Air, U.S.

__, 106 S. Ct. 3088 (1986), the Court

discussed the proper computation of a

reasonable attorney's fee to a _ prevailing

plaintiff who was entitled to attorney's fees

under Section 304(d) of the Clean Air Act,

42 U.S.C. § 7604(d). In the course of its

opinion, the Court again emphasized the

importance of the lodestar in computing "a

reasonable att aey's fee," id. at 3097-3098,

and said that the lodestar figure, the

product of ¢ reasonable number of hours

times a reasonable rate, is presumptively a

reasonable attorney's fee, absent

extraordinary circumstances, and that the

lodestar figure includes most of the relevant

factors comprising a reasonable attorney's

fee. Id. at 3098.

Although the foregoing cases involved

fee awards to plaintiffs, we respectfully

submit that, as the dissent below stated,

there is no reason to compute a reasonable

attorney's fee differently when the fee is

being awarded to a defendant. Thus, in

Prate v. Freedman, 583 F.2d 42 (2d Cir.

1978), the Second Circuit, determining that

the plaintiffs’ action was frivolous, and that

defendants were entitled to attorney's fees

under 42 U.S.C. § 2000e-5(k), remanded the

case to the District Court with directions to

award a reasonable attorney's fee and employ

Johnson v. Georgia Highway Express, 488

F.2d 714 (5th Cir. 1974) as a guide for the

computation of the fee, although Johnson

involved an award of attorney's fees to

prevailing plaintiffs. See also, Jones Vv.

Dealers Tractor and Equipment Co., 634

F.2d 180, 182 (5th Cir. 1981); Faraci v.

Hickey-Freeman Co., supra, 607 F.2d at

-36-

1028; Nash v. Reedel, 86 F.R.D. 16, 18

(E.D. Pa. 1980).

When fees are awarded to plaintiffs,

they serve to encourage persons to protect

certain rights or certain societal interests

and to reimburse the costs of such

protection. When awarded to defendants,

fees serve to discourage frivolous litigation

which clogs the courts, and to compensate

those who have been burdened by such

litigation. See, In re Cosmopolitan Aviation

Corp., 763 F.2d 507, 517 (2d Cir. 1985),

cert. denied sub nom, Rothman v. New York

State Dept. of Transp., U.S. 106

S. Ct. 593 (1985); Faraci v. Hickey Freeman

Co., supra, 607 F.2d at 1028; Taylor v.

Prudential-Bache Securities, Inc., 594 F.

Supp. 226, 229 (N.D.N.Y. 1984), aff'd

mem., 751 F.2d 371 (2d Cir. 1984);

Patterson v. Aiken, 111 F.R.D. 354, 356-357

(N.D. Ga. 1986); Index Fund, Ince. v.

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Hagopian, 107 F.R.D. 95, 99 (S.D.N.Y.

1985). Therefore, since the award of fees

to defendants serves important purposes,

just as the award of fees to plaintiffs does,

there is no reason to treat these two kinds

of fee awards differently when they are

computed. Consequently, the decision of the

majority below is in conflict with principles

stated and applied by this Court in several

recent cases.

3. The decision of the majority

will create uncertainty, confusion,

and ae proliferation of _ satellite

litigation whenever a party is

entitled to an award of a

"reasonable attorney's fee.”

Many statutes permit a court to award a

prevailing party a "reasonable attorney's

"

fee. E.g., 7 U.S.C §2565 (Plant Variety

Protection Act of 1970); 15 U.S.C. §77k(e)

(Securities Exchange Act of 1934); 17

U.S.C. §505 (Copyright Act of 1976); 29

U.S.C. §1132(g)(1) (Employee Retirement

-38-

Income Security Act of 1974); 33 U.S.C.

§1415(g)(4} (Marine Protection, Research,

and Sanctuaries Act of 1972); 42 U.S.C.

§1973(1)(e) (Voting Rights Act Amendments

of 1973); 42 U.S.C. §1988 (Civil Rights

Attorney's Fees Act of 1976); 42 U.S.C.

§2000e-5(k) (Civil Rights Act of 1964); 42

U.S.C. §7604(d) (Clean Air Amendments of

1970). In addition, several rules of the

Federal Rules of Civil Procedure provide for

the imposition of a reasonable attorney fee as

a sanction when a particular rule has been

violated. E.g., Rule 11, Rule 16(f), Rule

26(g), Rule 37(b)(2)(E).

A court must exercise its discretion

carefully before deciding whether a party

should be forced to pay its adversary's

attorney's fee. In some cases, the result

may depend on the identity of the party and

the nature of the case. Thus for example in

civil right cases, a plaintiff is usually

-39-

awarded fees merely for winning the action,

even if the defense was well-grounded, while

the defendant will be awarded fees only if

the action is frivolous. See, Hensley v.

Eckerhart, supra, 461 U.S. at 430 & 430,

n.2. Where an attorney's fee is sought for

a violation of a Federal Rule of Civil

Procedure, a court must. decide first,

whether a violation has occurred and a

sanction is therefore required, and second,

whether an award of attorney's fees is the

proper sanction.

In any context in which a court decides

whether to award an attorney's fee, it must

necessarily consider a variety of factors and

exercise broad discretion. However, we

respectfully submit that, as the dissent

below stated, once it has been determined

that a party is to receive a "reasonable

attorney's fee," the scope of discretion is

narrowed and the court should award the

-40-

lodestar unless such an award would be

financially crushing to the other party or

other extraordinary circumstances preclude

such an award.

As noted above, this Court has already

stated that, where a plaintiff is entitled to

an award of fees as a prevailing party, the

lodestar is presumptively the proper fee. It

has aiso been noted above that three circuit

courts have stated that, when a defendant is

entitled to attorney's fees as a prevailing

party, the defendant should receive full fees

when the plaintiff can afford such fees.

Nonetheless, the majority below has held that

when the recipient of a fee is a prevailing

defendant, or any party who receives an

award of fees as a_ sanction under the

Federal Rules of Civil Procedure, the amount

of the fee is not presumptively the lodestar,

or any particular figure. Rather, the

majority states, that under such

-4]1-

circumstances, a court must exercise its

discretion in some undefined way and may

award a figure which is a fraction of the

lodestar.

Although there may be valid reasons for

he.ving different standards for the award of

attorney's fees, depending upon who is to

receive them and in what procedural context

the fees are to be awarded, there is no valid

reason for computing attorney's’ fees

differently after it has been determined that

a party is entitled to an award of an

attorney's fee. Furthermore, the approach

of the majority below is illogical and

confusing. As the dissent below points out,

an award which bears no relationship te the

lodestar is not a "reasonable attorney's fee",

it is an arbitrary fine.

If the position of the majority below is

followed, there will never be any way for

the parties or district court to ascertain with

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any degree of the certainty what amount the

district court should award after it has

decided than an award of a_ reasonable

attorney's fee is appropriate. The award of

an attorney's fees will always be an ad hoc

determination subject to ad hoc appellate

review. This is exemplified by the recent

case of Johnson v. NYCTA, F.2d __,

Docket No. 86-7406 (2d Cir. July 9, 1987),

in which the Second Circuit, relying on its

most recent Eastway decision, remanded a

ease for the recalculation of an attorney's

fee award without giving the District Court

any standards for the recalculation.

Theodore Johnson was employed by the

New York City Transit Authority ("NYCTA")

from February 16, 1971 through August,

1983. During his employment he was a

member of the Transport Workers Union,

Local 100 ("TWU"). Johnson v. NYCTA, 639

F. Supp. 887 (S.D.N.Y. 1986). Shortly

after being hired, Johnson commenced a

series of judicial and administrative

proceedings against the NYCTA and the

TWU. Id. at 888-890, 894, 896-896.

Johnson's litigation culminated in two actions

in federal district court. The District Court

dismissed these two actions. Id. at 892,

893, 895. The District Court further held

that, because Johnson's’ actions were

frivolous, the defendants were entitled to an

attorney's fee under 42 U.S.C. § 1988 and

42 U.S.C. § 2000e-5(k) and that sanctions

should be imposed against his counsel

pursuant to Fed. R. Civ. P. 11. Id. at

896.

After subsequent proceedings, the

District Court awarded the NYCTA $250.00

in costs and it awarded the TWU $32.50 in

costs and $6900.00 in attorney's fees; and it

ordered Johnson and his counsel to each pay

half of these amounts. Johnson v. NYCTA,

-44-

F. Supp. _, Nos. 83 Civ. 1352, 85

Civ. 0629 (E.D.N.Y. August 5, 1986), sl.

op. at 8. The District Court disallowed

$6,575.00 in fees requested by the NYCTA

and $2038.75 in fees requested by the TWU

because no contemporaneous time records

were available to support these fees. Id.,

sl. op. at 7-8. Before making its award,

the District Court considered and rejected

several arguments Johnson made to induce

the District Court to award no fee or a

reduced fee. Id., sl. op. at 2-7.

On appeal, the Second Circuit reversed

and remanded the case for a redetermination

of the fee award. Johnson v. NYCTA,

F.2d _—«, - No. 86-7406 (2d Cir. July 9,

1987). The Circuit Court held that a

reconsideration of the amount of the fee

award against Johnson was required because

it was not clear whether the District Court

merely assessed Johnson one half of the

lodestar oor whether it exercised its

discretion as required by the most recent

Eastway decision. The Circuit Court

decision does not suggest that Johnson

presented evidence of difficult financial

circumstances. Furthermore the _ Circuit

Court said that "$3,450 is not necessarily an

excessive award under the circumstances."

Nonetheless, it remanded the case to the

District Court for a reconsideration of the

award and directed it to consider Johnsons'

ability to pay $3,450 as well as other

unspecified "mitigating factors."

The Johnson case shows that the most

recent Eastway decision will create endless

confusion and uncertainty because, under

Eastway, it is impossible te estimate what a

reasonable attorney's fee will be in any

given case until a particular District Court

judge exercises his cr her discretion and

-46-

that exercise of discretion is affirmed by a

Circuit Court.

Furthermore, the majority opinion below

invites endless. satellite litigation, when

‘attorneys fees are awarded. Johnson makes

it clear that, under Eastway, a district court

must first, examine the merits of a case, and

second, decide whether to award = an

attorney's fee, and then, rather than use

the relatively simple and_ well-established

lodestar method, it must engage in a

far-reaching analysis in order to properly

exercise its discretion before arriving at

some figure which may bear no relation to

the cost of representation actually incurred

by the party receiving the attorney's fee.

As result, the compensatory purposes of

awarding an attorneys fee will be defeated,

and in addition, the benefits of reducing

frivolous litigation will be offset by the

length and complexity of litigating the

-47-

attorney's fee. See, Fed. R. Civ. P. 11,

Advisory Committee Notes. Contrary to the

admonition of this Court in Hensley v.

Eckerhart, supra, 461 U.S. at 438, "[a]

request for attorney's fees [will] result in a

second major litigation."

In Hensley and its progeny, this Court

has provided litigants, their counsel, and

the judiciary with a clear and relatively

simple methed for computing a "reasonable

attorney's fee." It is not a very complicated

matter to determine the proper hourly rate

and number of hours for the calculation of

the lodestar; it can usually be done on

papers. Then, absent unusual circum-

stances, simple multiplication will provide the

proper fee. However, the majority below, in

discarding this well-settled and easy to

follow body of law, forces the courts into an

uncharted area where the phrase "reasonable

attorney's fee," which appears in many

-48-

statutes, has no settled meaning, and must

be defined anew for each case after a court

has taken evidence on and considered a host

of unnamed "mitigating factors."

Therefore, the decision of the majority

below, if allowed to stand; will create

confusion, uncertainty, and excessive

satellite litigation whenever attorney's fees

are awarded.

CONCLUSION

THE PETITION FOR A WRIT OF

CERTIORARI SHCULD BE

GRANTED.

Respectfuliy submitted,

PETER L. ZIMROTH,

Corporation Counsel of

the City of New York,

Attorney for Petitioners.

LEONARD J. KOERNER,*

LARRY A. SONNENSHEIN,

JOHN P. WOODS,

FRED KOLIKOFTF,

of Counsel.

*Counsel of Record

August 28, 1987

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