Lawyers Journal

The Hutchinson decision clarifies approach to fee awards in the First Circuit

In 2001, the U.S. Supreme Court reversed a long-standing rule that allowed attorneys' fees in civil rights cases where the lawsuit was a "catalyst" for remedial actions, even if there was no court order or decision on liability. See Buckhannon Bd. and Care Home v. West Virginia Dept. of Health and Human Resources.1

The Court held that a plaintiff had to obtain a "judicially sanctioned change in the legal relationship of the parties"2 in order to be considered a prevailing party and obtain fees. The Buckhannon Court identified two, non-exclusive examples of situations that would satisfy the new prevailing party test: judgments on the merits and formal court-ordered consent decrees. Voluntary changes in conduct by the defendant and private settlement agreements over which the court did not retain enforcement authority would not suffice.3

Most of the circuits interpreted the decision liberally, and awarded fees in a variety of situations where there was no formal consent decree, provided that the settlement is endorsed by the court and is judicially enforceable.4 The First Circuit initially appeared to apply Buckhannon more literally, and reversed a fee award in a case presenting unique facts. See Aronov v. Napolitano.5 In Hutchinson v. Patrick,6 the First Circuit has aligned itself with most of the other courts of appeals and made clear that attorney's fees are available where the district court approves the settlement and retains jurisdiction to enforce it.

Hutchinson in the district court

The case

The plaintiffs in Hutchinson, represented by counsel from the Center for Public Representation and WilmerHale LLP, brought a class action on behalf of more than 9,000 individuals in Massachusetts with acquired brain injuries who were inappropriately institutionalized in nursing facilities. The amended complaint sought to compel the commonwealth to develop rehabilitative services in integrated community settings for class members, based upon claims under the Americans with Disabilities Act and the Medicaid Act.

At the outset, the defendants vigorously contested all aspects of the case, including venue, class certification, procedural motions and discovery. After losing all of these issues, the defendants proposed a settlement process. Following six months of intensive negotiations, the parties signed a comprehensive settlement agreement.

The settlement

The agreement requires the defendants to create an entirely new community service system for persons with brain injuries, including new integrated services, new rights, new procedural protections, new quality safeguards, new monitoring programs and new data collection methods. The agreement also provided that, to become effective, it had to be approved by the district court after a fairness hearing pursuant to Fed. R. Civ. Pro. 23(e), and then would be subject to the court's ongoing enforcement authority. The court could dismiss the case only when it determines that the defendants have complied with the agreement.

At the conclusion of the fairness hearing, the court invited the parties to submit a proposed order approving the agreement. The plaintiffs wanted the order to explicitly state that the court retains enforcement jurisdiction. The defendants opposed this provision and requested, instead, that the order make clear that the agreement was not a consent decree. In the end, the court entered an order approving the agreement, "noting that the parties agree that the agreement does not constitute a consent decree, and that the court will retain jurisdiction over the case … and that judgment not enter pending compliance with the terms of the Comprehensive Settlement Agreement."

The district court's fee decision

The plaintiffs filed a motion for an award of attorney's fees. They supported their motion with lengthy affidavits from co-counsel, fee experts, brain injury experts and experienced private and public interest attorneys in the Boston area, as well as detailed time records for all counsel. The defendants opposed the motion, arguing that the plaintiffs were not prevailing parties under Buckhannon, as applied by the First Circuit in Aronov, and thus were not entitled to any fees.

In the alternative, the defendants asserted that the plaintiffs were not entitled to their requested fees, both because the time they expended was not compensable and because their requested rates were too high. Other than a two-page published billing survey, the defendants did not include any evidence in their opposition.

On Feb. 8, 2010, the district court issued its decision.7 After a careful review of Buckhannon and Aronov, the lower court concluded that there was sufficient judicial approval and oversight of the agreement to satisfy the judicial imprimatur requirement, and, therefore, the plaintiffs were entitled to fees.

Reading the agreement and its approval order together, the district court held that: (1) the label of the agreement, and the fact that it was not a consent decree, was not determinative of prevailing party status; (2) the approval of the agreement by the court was the critical factor that altered the legal relationship between the parties, since without the court's approval, the agreement would be null and void; (3) the court had carefully considered the merits of the plaintiffs' claims in determining that the agreement was fair, adequate, and reasonable at the fairness hearing; (4) the provisions of the agreement create binding obligations that can only be modified by the court; (5) the agreement is fully enforceable by the court, through all available equitable remedies, including contempt; and (6) the court retains jurisdiction over the agreement to ensure and determine compliance.

Finally, the district court determined, in an exercise of its discretion, that the time expended by the plaintiffs' counsel was well documented and reasonable in light of the litigation activity, the negotiation process and the success obtained. It also found that the hourly rates were more than reasonable, were considerably lower than the market rates of the plaintiffs' private attorneys, and were consistent with hourly rates recently awarded to many of the same counsel and the same firms. The district court awarded the plaintiffs the full amount of their requested fees and costs.

Hutchinson in the First Circuit

The defendants' appeal

The defendants, relying upon Buckhannon and Aronov, argued that the plaintiffs were not prevailing parties and, therefore, not entitled to any fees. They contended that under Aronov, the only relevant document for determining prevailing party status was the court's order. They asserted that, while the order approved the agreement and retained jurisdiction of the case pending the defendants' compliance with the terms of the settlement, the order itself "did not require the defendants to do anything [and] defendants would not violate the district court's order … even if they violated the terms of the agreement."8 As such, the defendants maintained that the order was not the functional equivalent of a consent decree and did not provide the necessary judicial imprimatur to satisfy either Aronov or Buckhannon.

The defendants also claimed that the plaintiffs had not yet prevailed because the case was ongoing and, pursuant to the explicit terms of the agreement, there were certain contingencies that could result in the case being reopened and litigated.9

Finally, the defendants argued that the amount of the district court fee award was excessive, because the rates were too high and because it compensated the plaintiffs for unnecessary and duplicative work.

The plaintiffs' response

The plaintiffs responded that the order must be evaluated in conjunction with the provisions of the agreement to assess whether the three Buckhannon criteria identified in Aronov were satisfied: that the change in the legal relationship of the parties must be court ordered, that judicial approval of the relief must reflect an assessment of the merits, and that there be continuing judicial oversight and enforcement of the settlement. Because the agreement specifically required court approval before it became operative, the plaintiffs claimed that first prong of the test was met. Because the court engaged in a searching assessment of the merits in order to determine if the agreement was fair and reasonable, the second prong of the test was satisfied. And because the court explicitly kept the case open pending compliance by the defendants with their obligations under the settlement, the third prong of the prevailing party test was met.

In addition to a careful analysis of both Buckhannon and Aronov, the plaintiffs and numerous amici 10 provided the court with a comprehensive analysis of the decisions of the other circuit courts of appeal regarding the application of Buckhannon to settlement agreements that were not entered as formal consent decrees. That review demonstrated that the district court's fee award would be affirmed in nine of the 10 circuits that had addressed the issue.

Finally, plaintiffs responded to the defendants' attack on the amount of the fee award. Pointing to the extensive documentation in the record supporting the fee award and the dearth of evidence to the contrary, the plaintiffs asserted that the district court's award was appropriate, and certainly not a manifest abuse of discretion.

The First Circuit decision

The First Circuit issued its decision on Feb. 17, 2011, affirming the district court's decision in all respects. Judge Selya, writing for the panel, first addressed the prevailing party issue. Describing the defendants' efforts to get the court to "look exclusively at the approval order" and ignore the agreement as "too crabbed a reading of Aronov" and "myopic," the court reemphasized that "judicial imprimatur can only be determined by determining the content of the order against the entire context before the court."11

The court then turned to the three-part test for judicial imprimatur it had set forth in Aronov. Largely following the plaintiffs' arguments and the district court's analysis, the court noted that the agreement specifically required court approval to become operative, and concluded that "this is a situation in which the court order triggers the change in the [legal] relationship between the parties, not one in which the court merely recognizes what the government has voluntarily agreed to do."12

Turning to the second prong of the Aronov test - whether there has been "judicial approval of the relief vis a vis the merits"13 - the court found that class action approvals under Rule 23(e) are "strikingly similar to a court's role in entering a consent decree."14As a result, the district court's order, entered after a fairness hearing, constituted "a sufficient appraisal of the merits for purposes of the imprimatur requirement."15

The appeals court then turned to the third prong of the imprimatur test - "whether there exists an obligation to comply and the provision of judicial oversight to enforce the obligation."16

Noting that the district court order, as well as the agreement, explicitly provided that the district court retains jurisdiction to hear and adjudicate noncompliance motions, the appeals court easily concluded that this final prong of the inquiry was satisfied.

The First Circuit then addressed the defendants' argument that the fee application was premature because the case was ongoing and no final judgment had entered. Rather than focusing on the formalities, such as the entry of a final judgment, the court instead chose to "focus on function over form."17 Finding that as a result of the entry of the agreement, the litigation had reached a significant plateau and was no longer currently being litigated, the court concluded that "the litigation, as a practical matter, has drawn to a close."18

The appeals court quickly disposed of the defendants' challenge to the reasonableness of the award, stating: "In light of the supporting documentation provided by the plaintiffs and the Commonwealth's failure to produce or point to contradictory evidence, we conclude that the district court did not abuse its discretion in fashioning a fee award premised on the suggested rates."19

Conclusion

The First Circuit decision in Hutchinson has clarified the approach to determining prevailing party status in cases resolved by settlements and has clearly aligned the First Circuit with the majority of other circuits which authorize fees for settlements if they are approved by the court after an assessment of merits and include judicial oversight and enforcement. At least with respect to class actions, the Rule 23(e) approval following the fairness hearing should generally suffice to satisfy the court approval and assessment of the merits prong.

In cases that are not class actions, counsel needs to be sensitive to this requirement and structure the settlement in a way that ensures sufficient court review and approval. As Aronov made clear, the court's approval of a settlement without any indication that the court undertook an assessment of the merits will not suffice. Ensuring ongoing court jurisdiction to enforce the terms of the agreement is also essential. While obtaining fees for cases that settle will continue to pose challenges for plaintiffs' counsel, the Hutchinson decision does provide a path to follow to establish prevailing party status in such circumstances.

With respect to challenges to the amount of fees, Hutchinson reemphasized the importance of carefully documenting both the time reasonably expended and the reasonableness of the rates requested. And it made clear that defendants challenging fee awards must marshal evidence, not just argument, to rebut the plaintiffs' documentation.

1532 U.S. 598 (2001).

2Id. at 605.

3Id. at 604 n.7, 605.

4See, e.g., Roberson v. Guiliani, 346 F.3d 75, 81 (2d Cir. 2003); Carbonell v. Immigation & Naturalization Service, 429 F.3d 894, 899 (9th Cir. 2005); Truesdell v. Philadelphia Housing Authority, 290 F.3d 159 (3d Cir. 2002).

5562 F.3d 84, 88 (1st Cir. 2009), cert denied 130 S.Ct. 1137 (2010).

6No. 10-1268, 2011 WL 540538 (1st Cir. Feb. 17, 2011).

7683 F. Supp. 2d 121 (D. Mass. 2010).

8Brief of the Defendants-Appellants at 21.

9Most notably, if the defendants could not obtain necessary approval from the federal Center for Medicare and Medicaid Services or funding from the Massachusetts Legislature to develop the needed community services and supports, the parties could move to vacate the settlement and proceed to trial.

10Recognizing the importance of the issue to civil rights enforcement, the firm of Foley Hoag LLP donated its services to represent a broad array of amici, including national, regional and local public interest advocacy organizations, in support of the plaintiffs' entitlement to fees.

11Hutchinson, 2011 WL at *4 (emphasis in original) (internal quotation marks omitted).

12Id. (internal quotation marks omitted).

13Id. at *5.

14Id.

15Id.

16Id.

17Id. at *7.

18Id.

19Id. at *12. The rates awarded by the district court and affirmed by the First Circuit ranged from $425/hr. for lead counsel from the Center for Public Representation and the senior partner from WilmerHale to $275 for an attorney at the center with approximately 10 years of experience.

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