Opinion ID: 772926
Heading Depth: 3
Heading Rank: 3

Heading: Discretion to Deny Fee Award

Text: 21 Having found Kerr's first prong satisfied, the District Court moved to Kerr's second question - whether an award of fees would be unjust. See Kerr, 692 F.2d at 877 (The district court's discretion to deny fees begins... only after an initial determination [that the first prong is satisfied].). The District Court found that such injustice would occur because Raishevich refused to accept a settlement offer of an amount significantly greater than that which he ultimately recovered. We find that the District Court exceeded its allowable discretion in denying an award of attorneys' fees on the basis of Raishevich's rejection of the court-proposed settlement offer. 22 In this case, both parties agree that the defendant never made a formal (or even an informal) settlement offer of either $25,000 or $30,000. Rather, the $25,000 figure was contingent on approval by state authorities and the $30,000 figure was the court's proposal alone. Thereafter, Foster did not accept the court's figure, nor propose a new amount. Yet, despite the fact that no settlement offer existed, the District Court penalized Raishevich for not accepting the court's proposed figure. The District Court offered no other reason for finding that the circumstances of this case were so special as to indicate that an award of attorneys' fees would be unjust. See Raishevich IV, 70 F. Supp. 2d at 414-15. In addition, it is far from settled that a court may use the refusal to accept an informal oral settlement proposal, as opposed to a formal written offer made pursuant to FED. R. CIV. P. 68, as a basis to deny fees. See, e.g., Ortiz v. Regan, 980 F.2d 138, 140-41 (2d Cir. 1992) (reversing denial of attorneys' fees for work done after an informal request to negotiate a settlement); Grosvenor v. Brienen, 801 F.2d 944, 948 (7th Cir. 1986) (holding that oral settlement offer made at a settlement conference and refused by the plaintiff did not satisfy the requirements of Rule 68 and could not cut off the plaintiff's post-offer attorneys' fees). We have indicated that [a]bsent a showing of bad faith, 'a party's declining settlement offers should [not] operate to reduce an otherwise appropriate fee award.' Ortiz, 980 F.2d at 141 (quoting Cowan v. Prudential Ins. Co. of Am., 728 F. Supp. 87, 92 (D. Conn. 1990) (Winter, J., sitting by designation), rev'd on other grounds, 935 F.2d 522 (2d Cir. 1991)). No finding of bad faith, however, was made below. Thus, by equating its proposal that was not accepted by either party with an actual settlement offer, the District Court relied on a clearly erroneous assessment of the evidence. Kerin v. United States Postal Serv., 218 F.3d 185, 188-89 (2d Cir. 2000). Moreover, by relying on Raishevich's refusal of the court's proposal, the District Court made an erroneous determination of law. Revson v. Cinque & Cinque, P.C., 221 F.3d 71, 78 (2d Cir. 2000). Accordingly, we conclude that the District Court exceeded its allowable discretion in relying upon this basis to deny fees. 23 We also recognize that the District Court's reliance on its own settlement proposal in denying a fee award is a problem, Ortiz, 980 F.2d at 140. We have cautioned that a 24 district court should not rely on informal negotiations and hindsight to determine whether further litigation was warranted and, accordingly, whether attorney's fees should be awarded... [because] '[a] rule giving trial judges discretion to deny such fees where the refusal of an offer is shown after the fact to have been unwise might well lead to very uneven results and even misuse in cases in which judges become involved in settlement negotiations. 25 Ortiz, 980 F.2d at 140-41 (quoting Cowan, 728 F. Supp. at 92). Here, the District Judge conducted a settlement conference and proposed a settlement figure in a case later tried to the bench. Both parties rejected his proposed figure, but one party bore the brunt of that rejection by the court's subsequent denial of its motion for attorneys' fees. 26 Although the decision to deny or award attorneys' fees is uniquely within the province of a district court, we nevertheless need to ensure that any such decision is made with restraint and discretion. Salovaara v. Eckert, 222 F.3d 19, 27 (2d Cir. 2000) (quoting Schlaifer Nance & Co. v. Estate of Warhol, 194 F.3d 323, 334 (2d Cir. 1999)). We conclude that, in this case, the District Court exceeded its allowable discretion in denying attorneys' fees to the prevailing party on the basis of that party's rejection of the court's settlement proposal, which was also rejected by his adversary. It is quite clear from the record that the District Court concluded that Raishevich's refusal to settle at its proposed amount was a special circumstance that, by itself, rendered an award of fees unjust. Because the District Court did not analyze the other factors suggested in Kerr, 692 F.2d at 878, and because the decision to award or deny fees is best determined by the district judge who is most familiar with all facets of the case, id., a remand is appropriate. See, e.g., Matthew Bender & Co. v. West Publ'g Co., 240 F.3d 116, 126 (2d Cir. 2001) (remanding where district court relied on wrong legal standard and did not specifically identify other facts that could have justified a fee award); Mentor Ins. Co. (U.K.) Ltd. v. Brannkasse, 996 F.2d 506, 521 (2d Cir. 1993) ([T]his Court will not speculate as to whether the award is appropriate under any other theory that has not been stated by the district court....). On remand, the District Court should reconsider Raishevich's application for attorneys' fees.