Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

PICKETT v. SHERIDAN HEALTH CARE CENTER (December 15, 2011)

Danielle Pickett’s retaliation claim against her former employer, Sheridan Health Care Center, was tried to a jury. The jury awarded her $15,000 in compensatory damages and $50,000 in punitive damages. The Seventh Circuit affirmed (opinion and intheiropinion). Pickett had agreed to pay her attorney a $7,500 flat fee and a 1/3 contingent fee. She also agreed to assign to him any statutory fee. Her attorney sought statutory fees of approximately $130,000. Judge Pallmeyer (N.D. Ill.) rejected the attorney's claimed $592/hour market rate. Relying on the CPI and the Laffey Matrix (neither of which had been mentioned or relied on by the parties) and the fact that the attorney was entitled to the flat fee and the contingent fee on top of the statutory fee, she set a market rate of $400. Based on that rate, she awarded $70,000 in fees. Although she originally awarded almost $10,000 to the law firm that prepared the fee petition, she later reversed herself and denied those fees on the grounds that Pickett's lawyer had not be prepaid them. Plaintiff appeals.

In their opinion, Seventh Circuit Judges Flaum, Kanne, and Wood vacated and remanded with respect to the principal fee award and reinstated the fees to the firm that prepared the fee petition. Under Title VII, the prevailing party can recover attorney's fees. Fees are generally calculated by multiplying the time reasonably incurred by a reasonable rate. When the attorney seeking fees has no set hourly rate because he typically works on a contingent basis, courts should determine the rate based upon what similarly experienced attorneys charge. Here, the Court concluded that the district court was influenced by the fact that Pickett's attorney was receiving the flat, contingent, and statutory fees. It was error for her to do so. The Supreme Court has adopted the lodestar approach (hours times rate) notwithstanding its shortcomings and has recognized that lawyers can receive both contractual and statutory fees. The district court is not allowed to reduce the statutory fee recovery simply because the client also agreed to a contingent fee (and, for that matter, a flat fee). Since the Court was not sure how much the contingent fee agreement contributed to the hourly rate reduction, it remanded for further consideration. The Court did agree that the evidence supporting the almost $600 an hour rate was lacking. However, the district court erred in disregarding the rates offered in affidavits of other practicing attorneys on the ground that they did not perform contingent work -- and erred when it reduced the award because of a lack of evidence of prior fee awards in contested cases. With respect to the district court's use of the consumer price index and the Laffey Matrix, the Court did not consider the use of either to be a problem. However, the district court should have given the parties an opportunity to address the use of those matters. Ultimately, the Court emphasized that it was not rejecting the $400 rate approved by the district court. It was just unsure how the court reached that number. Finally, the Court reinstated the fee award to the firm that prepared the fee petition. The only reason the district court gave for reversing its prior award was that the firm had not been prepaid. There is no such requirement. Particularly since the district court approved the award in the first instance, it does not appear that the court had any issue with the reasonableness of the fee.

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SOTTORIVA v. CLAPS (August 17, 2010)

Joseph Sottoriva was a State of Illinois employee and a member of the United States Army Reserve. He was on leave from the State for approximately 17 months in 2003 and 2004. The State's policy was to retain reservists on the payroll and continue to compensate them at their regular rate of pay, minus their military income. The State consistently overcompensated Sottoriva, despite its best efforts to calculate the proper amounts. Shortly before Sottoriva's return, the State calculated that he owed approximately $18,000 in excess compensation. He filed a union grievance, which the union (apparently without his consent) resolved with the State by agreeing to repay the $18,000 under a payment plan. While still negotiating the payment plan, the State recalculated the excess compensation as $24,000. Sottoriva was given several repayment options. When he selected none of them, the State notified him that it would begin involuntary withholding. Sottoriva brought a three count complaint against the department's director and the State Comptroller: a) Count I sought to enjoin any wage reduction, alleging due process violations with respect both to the original union grievance procedure and the State's failure to conduct any hearing with respect to the recalculation, b) Count II sought monetary damages for Sottoriva’s tax losses, and c) Count III sought to remove the director from office for an alleged violation of the State Finance Act. On Count I, Judge Scott (C.D. Ill.) granted summary judgment to the defendants with respect to the $18,000 calculation but granted summary judgment to Sottoriva on any amount above the $18,000 figure, concluding that the State had not provided a meaningful hearing. Sottoriva withdrew Count II. The court held that Count III was barred by the Eleventh Amendment. Sottoriva sought an award of attorney's fees. The court carefully calculated a "lodestar" figure and reduced it by 67%. Sottoriva appeals.

In their opinion, Judges Ripple, Kanne, and Sykes vacated and remanded. The Court noted that § 1988(b) allows the district court, in its discretion, to award attorney's fees to a prevailing party. Although the Court grants great latitude in setting a fee award, a district court must justify its award. The Court applied a two-part test to the district court's reduction of the "lodestar." The first question was whether a downward reduction was appropriate. The second question was whether the amount of the reduction was reasonable. Here, the Court answered the first question affirmatively. Although Sottoriva prevailed on one portion of his due process claim, he also failed on a significant part of his request for relief. With respect to the amount of the reduction, however, the Court vacated. Although it expressed no opinion on the reasonableness of the 67% reduction, it concluded that the district court did not sufficiently explain its rationale for imposing that reduction. In particular, the Court was concerned that the lower court was engaged in unacceptable "claim counting" and simply awarded one third of the fees incurred because Sottoriva prevailed on one of the three counts asserted. The lack of explanation amounted to an abuse of discretion.

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GASTINEAU v. WRIGHT (January 19, 2010)

James and Christy Gastineau were plaintiffs in a Fair Debt Collection Practices Act (FDCPA) case. They were represented by Robert Duff. Although Duff was not their original counsel and did not become so until about three years into the case, he did negotiate the settlement of the case on the first day of trial. He asked for attorney's fees of approximately $140,000. The district court judge awarded approximately $50,000, reducing both the number of hours and the hourly rate in setting that amount. Duff appeals.

In their opinion, Judges Kanne and Tinder and District Judge Griesbach affirmed. The Court first noted that an award of attorney's fees is reviewed on a "highly deferential" version of the already deferential abuse of discretion standard. The district court concluded that Duff’s hours were excessive. He noted that Duff was inexperienced in FDCPA cases and became involved fairly late in the case, after most of the discovery and motion practice had been completed. Much of the time spent was learning the law. The court also concluded that Duff’s rate was excessive for the subject matter. He relied on an affidavit of an experienced lawyer in the area who believed that to be so. The Court found no impediment to the combined reduction of both hours and rate. Having found no abuse of discretion, the Court affirmed.

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