Opinion ID: 2518489
Heading Depth: 3
Heading Rank: 2

Heading: It Was Error To Award Attorney's Fees Against Monzingo for Litigation of Class Certification Issues.

Text: Monzingo contends that the award of attorney's fees in this case is contrary to the purpose of Alaska Civil Rule 82 and public policy. At no point does Monzingo contend that the superior court's award of fees was an abuse of discretion that warrants reversal. Rather, he argues that we should create a separate category under Rule 82 for private litigants pursuing quasi-public issues. Both parties agree that Monzingo is not a true public interest litigant, and hence is not automatically exempt from Rule 82 fees. [52] The lawsuit was for over $1 billion in damages and Monzingo had sufficient private economic incentive to bring the suit. Instead, Monzingo asserts that because so many Alaska citizens are affected by the contested issue, and the damages are very small as to each individual, attorney's fees should not be assessed when the claim is not frivolous and the class representative acts in good faith. We are unconvinced that class representatives motivated to bring suit by their own private economic interests should fall completely outside the ambit of Rule 82. We are, however, persuaded by Monzingo's argument that a future class representative seeking a small amount of relief will be dissuaded from becoming a named plaintiff in a class action suit if he risks high attorney's fees for litigation that goes beyond that required to adjudicate the merits of his own case. Thus, the question before us is whether a class representative should be liable for Rule 82 attorney's fees arising from litigation on issues related solely to class certification and notice, when that litigation is for the benefit of putative class members and offers no monetary benefit to the named plaintiff. Alaska is the only state that does not follow the American rule [pertaining to attorney's fees]. [53] Under the `American rule,' each party pays its attorney's fees, regardless of who prevails. [54] The purpose of Rule 82 is to partially compensate a prevailing party for the expenses incurred in winning his case. It is not intended as a vehicle for accomplishing anything other than providing compensation where it is justified. [55] Rule 82 was not intended to penalize a party for litigating a good-faith claim. [56] Rule 82(b)(3)(I) permits a court to reduce or deny attorney's fees to a prevailing party if a given fee award may be so onerous to the non-prevailing party that it would deter similarly situated litigants from the voluntary use of the courts. [57] We have previously expressed concern that `financially ruinous' fee awards against good faith civil litigants could deter access to the courts. [58] Although we recognize that a trial court does not need to explain its analysis of all possible reasons, under Rule 82(b)(3), for deviating from the schedule, [59] it must give adequate consideration of the factors when raised by the parties. Moreover, class representatives are a unique group of plaintiffs. Named plaintiffs in class actions are particularly susceptible to financially ruinous or onerous fee awards in the event of an adverse judgment, especially following our recent holding in Turner v. Alaska Communications Systems [60] that the costs of litigating should not be born by absent class members. Hence, fee awards against named class representatives warrant greater scrutiny and a delicate balancing of the relevant equitable factors articulated in Rule 82(b)(3). [61] We did not address in Turner the extent and sweep of Rule 82's application to class representatives. We therefore turn to the narrow issue raised in this case: whether a named plaintiff can be held liable for attorney's fees and costs incurred that have no bearing on the merits of the named plaintiff's lawsuit. This appears to be a novel issue that arises out of Alaska's unique two-way fee-shifting provision, Rule 82. [62] The question posed is whether the policies behind Rule 82 support imposing attorney's fees on a named plaintiff when those fees include extensive class certification preparation that falls outside the substantive merits of the named plaintiff's case. [63] The United States Supreme Court recognized in United States Parole Commission v. Geraghty that a named plaintiff presents two separate issues for judicial resolution. One is the claim on the merits; the other is the claim that he is entitled to represent a class. [64] A class representative's interest in having a class certified is more analogous to the private attorney general concept than to the type of interest traditionally thought to satisfy the `personal stake' requirement. [65] The United States Supreme Court further explained in Deposit Guaranty National Bank v. Roper that the denial of class certification [is] an example of a procedural ruling, collateral to the merits of a litigation.... [66] The Supreme Court in Roper found that the use of the class action procedure may offer a substantial advantage for a named plaintiff who may divide attorney's fees and costs among all members of the class who benefit from any recovery and therefore achieve a less-costly means of litigating their single claim. [67] But this significant benefit to claimants ... of reducing their costs of litigation [68] quickly transforms into an economic hardship to the named plaintiff if class representatives are held liable for all of the fees incurred in litigating class certification issues. As the Supreme Court stated in Roper, [t]ypically, the attorney's fees of a named plaintiff proceeding without reliance on [the federal class action rule] could exceed the value of the individual judgment in favor of any one plaintiff. [69] In this case, Monzingo is asked to pay $28,226.40 in attorney's fees and $8,650.75 in costs. Yet Monzingo argues that [h]is total damages had he prevailed ranged from a few hundred to a few thousand dollars. Class representatives will frequently have less at stake than Monzingo, largely because negative value suits [70] are a primary reason the class device exists. [71] Moreover, class action defendants are highly motivated to vigorously defend any class action. Not only are the monetary stakes high in most class actions, but defeat of a class action may preclude later claims by absent members of the putative class and can often foreclose devastating public relations and reputation costs for a company. [72] Alaska Airlines admitted as much when arguing for enhanced attorney's fees: Faced with a billion dollar damages claim, a simultaneous motion to certify a 3.8 million member class, and expert counsel brought in from the Outside, Alaska Airlines was forced to respond in a proportionate manner ... [and] expended a reasonable number of hours and resources given the magnitude of Plaintiff's claim. Rule 82(b)(3)(J) permits variance from the attorney's fees schedule in situations where the prevailing party may have been motivated by other considerations such as a desire to discourage claims by others against the prevailing party or its insurer. [73] As we explained in Catalina Yachts, we must be careful about allowing fee-shifting provisions to undercut provisions meant to encourage plaintiffs to bring meritorious claims. [74] We are just as concerned about the chilling effect that Rule 82 may have on class actions if applied too rigidly against named plaintiffs as we were about absent class members' liability for fees in Turner. [75] In Turner, we distinguished between awards of fees against named class representatives and awards sought against absent class members, explaining that our ruling does not eliminate Rule 82 attorney's fees in class actions; it simply limits Rule 82's possible reach to named parties, meaning that a person who has been forced to litigate in order to secure his or her rights will be reimbursed in part for litigation expenses. [76] Monzingo's motion for class certification was rendered moot by the superior court's grant of summary judgment. Nevertheless, the trial court awarded attorney's fees that included time spent by Alaska Airlines in preparing for and arguing the motion to certify the class. Although the superior court awarded only twenty percent of actual fees in accordance with the Rule 82(b) schedule, Alaska Airlines admits that a substantial percentage, if not the majority of time listed on its invoices was devoted to class certification issues. Monzingo argues that because the superior court never ruled on the class certification motion, Alaska Airlines did not prevail on the class certification issue and thus should not be eligible to receive fees related to that issue. We disagree. We have previously held that trial courts are not required to award fees on an issue-by-issue basis: Rule 82(a) does not require that attorney's fees be calculated with reference to the disposition of individual issues.... [T]he party who prevails on the principal dispositive issue is entitled to reasonable costs calculated according to the trial court's discretion. [77] But we are convinced that there is an essential difference between limiting the attorney's fees for which a class representative may be liable in litigating the merits of his own claim and exposing that named plaintiff to the additional risk of having to pay substantial fees litigating class certification and notice issues on behalf of absent class members. A named plaintiff serving as class representative functions in two distinct roles: to litigate the merits of his own claim and to litigate on behalf of unnamed class members. He has a financial incentive to litigate his own claims. But when a class representative has no personal financial interest in the second role, he functions in much the same manner as a private attorney general in a public interest law suit. [78] In such situations, it is necessary to distinguish between the attorney's fees spent by a prevailing defendant who has incurred fees defending both the merits of the individual plaintiff's claims and the structure of the class action litigation. Moreover, fees incurred by a prevailing defendant litigating procedural motions related solely to the class action structure of the litigation are often driven by a defendant's desire to limit damages to the named plaintiff's individual claim. In such a case, the fee award should be varied under Rule 82(b)(3)(J), since the vigorous defense of a class certification motion is motivated by the desire to discourage claims [79] that permits variance under Rule 82(b)(3). Permitting the threat of additional liability for fees and costs related to defending class-specific procedural claims will discourage plaintiffs from acting as class representatives. We conclude that this is a core purpose of permitting a trial court to vary a fee award under Rule 82(b)(3)(I). We therefore hold that a named plaintiff should not ordinarily be held liable for attorney's fees that fall beyond the scope of litigating the merits of his claim. Our ruling does not eliminate the award of Rule 82 attorney's fees against unsuccessful named plaintiffs in class action lawsuits; it simply limits Rule 82's reach to the substantive merits of their claims. We note, however, that Monzingo, as non-prevailing party, bears the burden of showing case-specific circumstances that warrant a downward variance under Rule 82(b)(3). Thus, it is Monzingo's burden to demonstrate that his motive for serving as class representative was limited to the value of his individual claim and was not related to any potential enhanced recovery for his role as class representative. [80]