Opinion ID: 1145408
Heading Depth: 2
Heading Rank: 2

Heading: did the superior court abuse its discretion in its award of attorney's fees?

Text: The award of attorney's fees by the superior court in the instant case is governed by the 1976 Civil Rights Attorney's Fees Awards Act: In any action or proceeding to enforce a provision of sections 1981, 1981a, 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. 42 U.S.C. § 1988 (Supp. 1992) (emphasis added). A § 1988 attorney's fee award, then, has two requirements: (1) the recipient must be a prevailing party; and (2) the fee awarded must be reasonable. We address these requirements in turn.
State Farm and Dillon argue that the superior court abused its discretion by disregarding this court's holding in Tobeluk v. Lind, 589 P.2d 873 (Alaska 1979), in its determination of prevailing party. Since our consideration of and decision in Tobeluk, however, federal case law has developed considerably regarding the prevailing party determination in the settlement context. As we did in Tobeluk, we now look to the prevailing federal view on this issue. State Farm does not seem to dispute that settlement of a valid, existing § 1981 claim would make Singh a prevailing party under § 1988. [3] Rather, State Farm argues that [h]ad the trial court properly analyzed and applied the law to the circumstances presented in this case, it would have dismissed Singh's alleged § 1981 claim long before the offer of judgment was accepted. Implicit in this argument is the sentiment that a settling litigant should not become eligible for § 1988 attorney's fees by merely reciting an otherwise frivolous § 1981 or other federal civil rights claim in his complaint. In response to this sentiment, the majority of federal circuits have developed a two-part test for determining prevailing party status in the settlement context. 2 Martin A. Schwartz & John E. Kirklin, Section 1983 Litigation: Claims, Defenses, and Fees § 18.11, at 48-49 (1991). The Fifth Circuit's test for determining a prevailing party in the settlement context is typical of the approach taken by a majority of the federal circuits. [4] That court has set forth two requirements for determining prevailing party status: (1) the plaintiff's suit must have caused the plaintiff's achievement of his desired goal in the litigation; and (2) the claim forming the basis of § 1988 fees must not lack[] colorable merit. Hennigan v. Ouachita Parish Sch. Bd., 749 F.2d 1148, 1152-53 (5th Cir.1985). The first requirement, causation, is easily fulfilled in the present case. It seems quite clear, and none of the parties argue otherwise, that the settlement for money damages  one of Singh's goals in filing the suit  was caused by this litigation. The second requirement, a meritorious claim, requires further analysis. The Fifth Circuit places the burden on the party opposing attorney's fees to show lack of merit: A defendant who contends that his conduct was a wholly gratuitous response to a lawsuit that lacked colorable merit, must demonstrate the worthlessness of the plaintiff's claims and explain why he nonetheless voluntarily gave the plaintiffs the requested relief. Id. at 1153. In its briefs to this court, State Farm argues that Singh's § 1981 claim is without merit. We now address whether Singh asserted a claim of colorable merit under § 1981. All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other. 42 U.S.C. § 1981 (1988). Singh alleged that State Farm's refusal to pursue a fair settlement contract for his injuries was partly the result of racial animus. State Farm responds that handling of insurance claims does not fall within the meaning of contract as used in 42 U.S.C. § 1981. See Patterson v. McLean Credit Union, 491 U.S. 164, 109 S.Ct. 2363, 105 L.Ed.2d 132 (1989) (holding that § 1981 is restricted to the making and enforcement of contracts). In denying State Farm's motion for summary judgment, the superior court adopted Singh's reading of § 1981, stating that an insurance company's refusal to enter into a settlement agreement with an injured party who was not its own insured fell within the purview of 42 U.S.C. § 1981 if the basis for refusal was racial discrimination. [5] We agree. It is well established that a settlement is a contract, provided that it meets minimal contractual requirements. See Dillon v. City of Davenport, 366 N.W.2d 918, 925 (Iowa 1985); Eide v. State Farm Mut. Auto. Ins. Co., 492 N.W.2d 549, 555 (Minn.App. 1992); Randall v. Harmon, 761 S.W.2d 278, 279 (Mo. App. 1988). Specifically, we have held that a consent judgment is a contract. Continental Ins. Co. v. Bayless & Roberts, Inc., 608 P.2d 281, 295 (Alaska 1980); Tobeluk v. Lind, 589 P.2d. 873, 881 (Alaska 1979). The agreements settling Singh's damages from the automobile accident meet the basic requirements for a valid contract. State Farm and Dillon made an offer of compromise to Singh, which Singh accepted. For total consideration of $26,735, Singh agreed to forego litigation against State Farm's insureds. [6] On this analysis, we conclude that Singh pled a colorable § 1981 claim when he argued that State Farm racially discriminated against him in forming the initial settlement contracts.
Singh argues that the superior court abused its discretion in reducing the § 1988 attorney's fee award to fifty-five percent of the lodestar amount. Under Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983), a court awarding § 1988 attorney's fees to a prevailing party initially should compute the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate. Id. at 434, 103 S.Ct. at 1940. There is a strong presumption that this amount, which is known as the lodestar value, represents a reasonable fee. [7] Adjustments are made only as required by special circumstances. See Cunningham v. County of Los Angeles, 879 F.2d 481, 484 (9th Cir.1988), cert. denied, 493 U.S. 1035, 110 S.Ct. 757, 107 L.Ed.2d 773 (1990). The court may adjust the lodestar value upward or downward based on other considerations such as the results obtained. [8] Hensley, 461 U.S. at 434, 103 S.Ct. at 1940. In a case where a prevailing party plaintiff is successful on some, but not all, of his claims, the court should address two other questions: First, did the plaintiff fail to prevail on claims that were unrelated to the claims on which he succeeded? Second, did the plaintiff achieve a level of success that makes the hours reasonably expended a satisfactory basis for making a fee award? Id. Additionally, if an unsuccessful claim is frivolous, not only is the plaintiff barred from recovery of attorney's fees related to the claim, but the defendant may recover fees for defending against such a claim as well. Id. at 435, 103 S.Ct. at 1940.
Describing the situation in which successful and unsuccessful claims are factually or legally intertwined, the Supreme Court noted, In [some] cases the plaintiff's claims for relief will involve a common core of facts or will be based on related legal theories. Much of counsel's time will be devoted generally to the litigation as a whole, making it difficult to divide the hours expended on a claim-by-claim basis. Such a lawsuit cannot be viewed as a series of discrete claims. Instead the district court should focus on the significance of the overall relief obtained by the plaintiff in relation to the hours reasonably expended on the litigation. Hensley, 461 U.S. at 435, 103 S.Ct. at 1940, quoted approvingly in City of Riverside v. Rivera, 477 U.S. 561, 569, 106 S.Ct. 2686, 2691, 91 L.Ed.2d 466 (1986). The superior court's decision implicitly accepts Singh's argument that his successful and unsuccessful claims fell under the second scenario described in Hensley, namely that the claims were legally and/or factually intertwined. Neither party has contested the superior court's determination that the claims were intertwined. Based on our review of the relationship between the state and federal civil rights claims, we conclude that the superior court did not err in determining that the claims were intertwined. [9]
Since Singh's claims were intertwined, we assess the reasonableness of attorney's fees by focus[ing] on the significance of the overall relief obtained by the plaintiff in relation to the hours reasonably expended on the litigation. Id. 461 U.S. at 435, 109 S.Ct. at 1940. In establishing Singh's attorney's fee award, the superior court focused on the following portion of Hensley: [T]he product of hours reasonably expended on the litigation as a whole times a reasonable hourly rate may be an excessive amount. This will be true even where the plaintiff's claims were interrelated, non-frivolous, and raised in good faith... . Again, the most critical factor is the degree of success obtained. Id. at 436, 103 S.Ct. at 1941 (emphasis added). The superior court noted that under Hensley, [a] reduced fee award is appropriate if the relief, however significant, is limited in comparison to the scope of the litigation as a whole. Id. The superior court then concluded that Singh's success was limited because of the dismissal of his three state civil rights claims for relief: In this case, plaintiff achieved significant relief in that he settled his defamation and § 1981 claims for the principal amount of $17,501. On the other hand, a substantial portion of the motion for summary judgment and the work that went into litigation of that motion addressed a state civil rights cause of action which was without merit and would have required a court to employ a tortured construction of the clear language of the statute. Thus, plaintiff's success on his civil rights claim was limited in this regard. Upon review of the record and the relevant case law we conclude that the superior court erred in its reduction of Singh's attorney's fees from the lodestar amount for two reasons. First, as we have previously recognized, [f]ull attorney's fees are the norm under 42 U.S.C. § 1988, but such fees must be reasonable. Moseley v. Beirne, 626 P.2d 580, 581 (Alaska 1981). Second, we believe that the superior court erred in its determination that Singh's level of success did not merit a full award of attorney's fees. The degree of success is difficult to measure, particularly in a civil rights case such as this one, where a settlement has precluded a trial on the merits. We note that Singh's financial recovery represented a significant proportion of the damages that he requested. In his initial complaint, Singh requested compensatory and punitive damages in excess of the jurisdictional limits of our district court, or $35,000. See AS 22.15.030. The total of the two settlements Singh obtained exceeded this amount. While it is not possible to quantify Singh's § 1981 damages specifically, since the second settlement aggregated damages for both the defamation and civil rights claims, Singh's total recovery of $17,501 is significant. Additionally, we find that Singh's litigation served a public purpose within the scope of the private attorney general theory of civil rights litigation, as first expressed in City of Riverside v. Rivera, 477 U.S. 561, 575, 106 S.Ct. 2686, 2694, 91 L.Ed.2d 466 (1986).
The superior court found that the level of effort expended by Singh's counsel was disproportionate to the complexity of the case, and that this factor also warranted an adjustment downward from the lodestar amount of attorney's fees. [10] Singh challenges the superior court's conclusion that his attorney's work effort was disproportionate to the complexity of the case and the relief obtained. [11] Upon consideration of the complexity of the case and the relief obtained, we hold that the superior court erred in finding Singh's attorney's work effort disproportionate to those other variables. Singh's briefing on this point, and the affidavits of Alaskan attorneys attesting to the reasonableness of his legal efforts, are persuasive. Our review of the record convinces us that Singh's attorney's fees were justified in light of the complexity of this litigation and the result achieved. [12]
The attorney's fees that Singh requested exceeded the damages he recovered in the settlement. The United States Supreme Court has rejected the proposition that fees awarded under § 1988 for civil rights litigation must be less than the damages recovered. Id. The Rivera plaintiffs received a $33,350 damages award. Their attorneys requested $245,456.25 in fees. The Court upheld the award in a 5-4 decision. Justice Brennan, writing for a 4-Justice plurality, categorically rejected the need for proportionality in civil rights cases, holding that such cases have inherent public benefits. Id. at 575, 106 S.Ct. at 2695 (plurality opinion). Justice Powell concurred, but stated that [i]t probably will be the rare case in which an award of private damages can be said to benefit the public to an extent that would justify the disproportionality between damages and fees reflected in this case. Rivera, 477 U.S. at 586 n. 3, 106 S.Ct. at 2700 n. 3. (Powell, J., concurring). He indicated that the public interest served by civil rights litigation, as well as the damages awarded, might support such a disproportionate award, though he did not specify what degree of disproportionality requires such an analysis. While Justice Powell limited his discussion to the vindication of constitutional rights, the reasoning of his concurrence may be extended to civil rights litigation involving the vindication of statutory rights as well. The ambiguity created by the divisions in Rivera has led the federal circuit courts in different directions. Schwartz & Kirklin, supra, at 304-07. Some courts have treated Justice Powell's concurrence as the controlling law. See Foley v. City of Lowell, 948 F.2d 10, 19-20 (1st Cir.1991); Nephew v. City of Aurora, 830 F.2d 1547, 1550 (10th Cir.1987). Others have declined to do so. See Cowan v. Prudential Ins. Co. of America, 935 F.2d 522, 525-26 (2d Cir.1991); Bell v. United Princeton Properties, Inc., 884 F.2d 713, 724 (3d Cir.1989). There is no need in this case for a remand to the superior court for consideration of the public interest served by the litigation. As noted above, a majority of the United States Supreme Court has not endorsed the notion that such an analysis is ever necessary. Moreover, the gross disproportionality of the fees requested in Rivera is not present here. Singh settled for $17,501, and requested $31,920 in fees. This is in sharp contrast with Rivera, where requested fees were almost seven times the damages award.
Singh argues that the United States Supreme Court has held that in appropriate circumstances it is permissible and proper for a court to `enhance' an attorney fee award based on contingent fee risk in order to fulfill the statutory goal of awarding reasonable attorney's fees to prevailing parties in discrimination cases under 42 U.S.C. § 1988. See Pennsylvania v. Delaware Valley Citizens' Council, 483 U.S. 711, 107 S.Ct. 3078, 97 L.Ed.2d 585 (1987). Briefing in this appeal, however, was concluded prior to the Supreme Court's decision in City of Burlington v. Dague, ___ U.S. ___, 112 S.Ct. 2638, 120 L.Ed.2d 449 (1992). In Dague, the Supreme Court held that a federal fee-shifting statute did not allow upward adjustment of a lodestar fee for the risk of nonpayment incurred by the prevailing party's attorney. While Dague involved environmental litigation, its reasoning applies to all federal fee-shifting statutes. Id. at ___, 112 S.Ct. at 2641; see also Gates v. Deukmejian, 987 F.2d 1392, 1403 (9th Cir.1992) (Given the Court's holding in Dague, it is clear that contingency multipliers are no longer permitted under § 1988.); Barrow v. Falck, 977 F.2d 1100, 1105 (7th Cir.1992) ( Dague ... prohibits enhancements under § 1988.). Thus, we affirm the superior court's denial of Singh's request for enhancement of his lodestar fee.