Strict Compliance

People's Source Int'l, LLC v. United States, 2006 U.S. App. LEXIS 25627, No. 06-1116 (10th Cir. Oct. 12, 2006)

  The IRS had sent plaintiffs a "bypass letter," to which plaintiffs responded by sending a letter to an IRS group manager and a revenue officer demanding that the IRS retract its letter.  When the IRS did not, plaintiffs filed suit. The IRS then agreed to withdraw the bypass letter. Plaintiffs sought fees pursuant to 26 U.S.C. Section 7430(a)(1), which authorizes fees in tax disputes with the government. The trial court denied the motion.  The Tenth Circuit noted that the statute requires that the party seeking fees "exhausted the administrative remedies available to such party within the Internal Revenue Service." Here, the appropriate administrative remedy was the submission of a written claim for relief to the appropriate district director.  While plaintiffs had written such a claim letter, they mailed it to an IRS group manager and a revenue officer instead of the district director.  The Tenth Circuit held that "[w]hen the government waives its sovereign immunity and consents to suit . . . those seeking to sue the government must strictly comply with the terms of the waiver." Because plaintiffs' letter did not strictly comply with the statutory requirement, and the applicable statute did not contain any futility exception, the Tenth Circuit affirmed the district court’s denial of fees.

Negligence Not Enough Under ERISA

Carolina Care Plan, Inc. v. McKenzie, 2006 U.S. App. LEXIS 26217 (4th Cir. Oct. 23, 2006)
Under Fourth Circuit law, determining the appropriateness of a fee award in an ERISA action requires the court to consider: 1) degree of parties’ culpability or bad faith; 2) ability of parties to satisfy an award; 3) whether an award would deter others; (4) whether the parties requesting fees sought to benefit all participants of an ERISA plan; and (5) the relative merits of the parties' positions.  The significance of this case, in which the Fourth Circuit overturned a fee award, lies in interpretation of the first factor. The district court found that, given the defendant’s unreasonable denial of coverage, this factor weighed in favor of an award.  The Fourth Circuit disagreed, clarifying that mere negligence does not rise to the level of culpability or bad faith.

Non-Uniform Treatment Of COLA

Yoes v. Barnhart, 2006 U.S. App. LEXIS 25007 (5th Cir. Oct. 5, 2006)
The Fifth Circuit rejected plaintiffs' argument that the Northern District of Texas erred in awarding fees under the Equal Access to Justice Act at lower rates in the San Angeline and Arbergine Divisions than in the Dallas Division.  Plaintiffs asked the court to adopt the Eighth Circuit's rule that cost-of-living adjustments in fees should apply uniformly across the district because cost-of-living increases generally affect all litigants to the same degree.  The Fifth Circuit declined, however, finding that the Eighth Circuit's reasoning applied with less force in the Fifth Circuit because cost-of-living increases vary more in the Fifth Circuit given its higher population density.

Supreme Importance

In recent months, the U.S. Supreme Court has decided two attorneys’ fees cases worth noting.  In Arlington Central School Dist. v. Murphy, 126 S. Ct. 2455 (2006), the Court held that, in the absence of explicit statutory authority, a statutory fee-shifting provision did not permit recovery of expert fees.  The Individuals with Disabilities Education Act (IDEA) permits a trial court to award “reasonable attorneys’ fees as part of the costs” to a prevailing parent. Here, after parents prevailed in getting the school board to pay for their child’s private school tuition, they sought fees for services rendered by an educational consultant during the proceedings. Such fees were granted by the district court and affirmed by the Second Circuit, but the Supreme Court reversed.  The Court noted that “costs is a term of art that generally does not include expert fees.” Analysis of other provisions in IDEA, and analogous statutes, and the legislative history, failed to overcome the presumption created by this language

Note that the decision seems context-specific in two respects.  First, the word “costs” was key. The Court implied that, had the statute used the word “expenses” instead, a different outcome might have resulted. Second, the fact that the defendant was an arm of the state loomed large in the opinion.  In a fee-shifting case with a private defendant, the case may not be controlling.   

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In December of last year, the Court held that a fee award under 28 U.S.C.S 1447(c), when the trial court remands to state court a case that was improperly removed, is appropriate only where the removing party lacked an objectively reasonable basis for removal. Martin v. Franklin Capital, 126 S.Ct. 704 (2005). The Court rejected the contention that a fee award should be automatic upon remand, or even that there should be a presumption in favor of fees. 

Note that the Court left untouched (indeed explicitly distinguished) decisions creating a presumption of fees in civil rights cases or other situations where plaintiffs serve as private attorneys general.  Martin seems largely statute-specific.    

Partial Success

In an unpublished but not unimportant decision released on September 15, the U.S. Court of Appeals for the Ninth Circuit applied the well-established doctrine that a “partially successful” suit can justify a fee award. Crawford v. San Dieguito Union School Dist., 2006 U.S. App. LEXIS 23866 (9th Cir. 2006).  The Court held that “partial success” need not yield “full attorneys fees.”  Here, plaintiffs failed to secure private placement for their child but did secure a transition plan to help him adjust to his new public school.  The trial court awarded fees but at a forty-percent reduction to reflect the incomplete success.  The Ninth Circuit held that such an award was within the trial court’s discretion.

Silence Isn't Golden

McCuiston v. Hoffa, 2006 U.S.App. LEXIS 25608, No. 05-2057 (6th Cir. Oct. 12, 2006):

In an action alleging misconduct in the counting of ballots in an International Brotherhood of Teamsters election, plaintiffs filed a motion seeking attorneys' fees under the "common benefit" doctrine.  Two weeks prior, the parties had entered into a Stipulated Consent Judgment which allowed plaintiffs to observe the counting of ballots in all future referenda.  The agreement made no mention of attorneys’ fees, and stated: "This is a final order of the court, disposing of all remaining claims in this action."  Under the circumstances, the Sixth Circuit found that the agreement precluded a motion for fees.  The Court stated that "the dispositive issue was whether the parties intended their settlement to be a final disposition of all claims."  Though the issue of attorneys' fees was never discussed by the parties, the language in the consent judgment that "all remaining claims" disposed of all aspects of the claim, fees included.