Diaz v. Jiten Hotel Management

• Court: Court of Appeals for the First Circuit
• Decided: September 18, 2012
• Docket: 11-2400
• Status: Unpublished

Opinion

Not for Publication in West’s Federal Reporter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

-2- 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

-5- 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.

-6- 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

-7- 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

-8- 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.

-9- 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.

-10- 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.

-11-