Fee Award Rule For Civil Rights Cases Under Review in NY

[Editor's Note: Advocates have reason to be pleased with the elimination of double taxation on attorney fees in civil rights cases (see the accompanying sidebar ' The Farrar Standard: Majority opinion's conclusion); but attorneys who hope to get paid for their efforts have reason to attend closely to the following state legal issue described by John Caher.]

The New York Court of Appeals has an opportunity to adopt ' or categorically reject ' the Farrar standard on attorney fees.

McGrath v. Toys “R” Us Inc. comes to Albany via Foley Square, where a federal appellate court has asked for guidance on whether New York will embrace a rule that says lawyers who win only nominal damages for their clients in fee-generating civil rights cases should generally not be entitled to attorney fees.

The case in Albany resulted from a question certified by the 2nd U.S. Circuit Court of Appeals. It is rooted in a human rights matter involving three pre-operative transsexuals who complained they were harassed by Toys “R” Us employees while shopping at a store in Brooklyn. The retailer is based in New Jersey, and the suit, predicated on New York City's Human Rights Law, ended up in federal court.

The plaintiffs alleged they were subjected to derogatory remarks and ultimately denied the privileges of public accommodation because of their sexual orientation and gender. After a 10-day trial, a jury concluded that the retailer had engaged in illegal discrimination. But it awarded only nominal damages of $1 for each plaintiff.

Eastern District Chief Judge Charles P. Sifton awarded $191,551 in attorney fees. He described the case as “the first … in which the rights of transsexuals were asserted and vindicated.” Judge Sifton said that providing reasonable attorney fees would “encourage the bringing of meritorious civil rights claims which might otherwise be abandoned because of financial imperatives surrounding the hiring of competent counsel.”

On appeal, the 2nd Circuit has asked New York's top court for direction on whether it has adopted the standard set forth by the U.S. Supreme Court in Farrar v. Hobby, 506 US 103 (1992).

In Farrar, the court said: “In some circumstances, even a plaintiff who formally 'prevails' under '1988 should receive no attorney's fees at all. A plaintiff who seeks compensatory damages but receives no more than nominal damages is often such a prevailing party.” But it is unclear whether New York has adopted that standard.

The 2nd Circuit has asked whether New York adheres to Farrar and, if not, whether it has another standard. It has also asked whether New York would recognize a public interest exception along the lines of that implied by Sifton.

H. Nicholas Goodman of Quirk & Bakalor in Manhattan is representing Toys “R” Us, and Thomas D. Shanahan of Shanahan Associates in Manhattan is representing the plaintiffs. A ruling is expected by mid-November.

The Farrar Standard

Majority opinion's conclusion in Farrar v. Hobby (91-990), 506 U.S. 103 (1992)

[From http://supct.law.cornell.edu/supct/html/91-990.ZO.html. Quotation marks edited. Paragraph breaks added for readability.]

In some circumstances, even a plaintiff who formally “prevails” under '1988 should receive no attorney's fees at all. A plaintiff who seeks compensatory damages but receives no more than nominal damages is often such a prevailing party.

As we have held, a nominal damages award does render a plaintiff a prevailing party by allowing him to vindicate his “absolute” right to procedural due process through enforcement of a judgment against the defendant. Carey, 435 U. S., at 266. In a civil rights suit for damages, however, the awarding of nominal damages also highlights the plaintiff's failure to prove actual, compensable injury. Id., at 254-264.

Whatever the constitutional basis for substantive liability, damages awarded in a '1983 action “must always be designed 'to compensate injuries caused by the [constitutional] deprivation.'” Memphis Community School Dist. v. Stachura, 477 U. S., at 309 (quoting Carey, supra, at 265) (emphasis and brackets in original). When a plaintiff recovers only nominal damages because of his failure to prove an essential element of his claim for monetary relief, see Carey, supra, at 256-257, 264, the only reasonable fee is usually no fee at all.

In an apparent failure to heed our admonition that fee awards under '1988 were never intended to “'produce windfalls to attorneys,'” Riverside v. Rivera, supra, at 580 (plurality opinion) (quoting S. Rep. No. 94-1011, p. 6 (1976)), the District Court awarded $280,000 in attorney's fees without “consider[ing] the relationship between the extent of success and the amount of the fee award.” Hensley, supra, at 438.

Although the Court of Appeals erred in failing to recognize that petitioners were prevailing parties, it correctly reversed the District Court's fee award. We accordingly affirm the judgment of the Court of Appeals.

[Editor's Note: Advocates have reason to be pleased with the elimination of double taxation on attorney fees in civil rights cases (see the accompanying sidebar ' The Farrar Standard: Majority opinion's conclusion); but attorneys who hope to get paid for their efforts have reason to attend closely to the following state legal issue described by John Caher.]

The New York Court of Appeals has an opportunity to adopt ' or categorically reject ' the Farrar standard on attorney fees.

McGrath v. Toys “R” Us Inc . comes to Albany via Foley Square, where a federal appellate court has asked for guidance on whether New York will embrace a rule that says lawyers who win only nominal damages for their clients in fee-generating civil rights cases should generally not be entitled to attorney fees.

The case in Albany resulted from a question certified by the 2nd U.S. Circuit Court of Appeals. It is rooted in a human rights matter involving three pre-operative transsexuals who complained they were harassed by Toys “R” Us employees while shopping at a store in Brooklyn. The retailer is based in New Jersey, and the suit, predicated on New York City's Human Rights Law, ended up in federal court.

The plaintiffs alleged they were subjected to derogatory remarks and ultimately denied the privileges of public accommodation because of their sexual orientation and gender. After a 10-day trial, a jury concluded that the retailer had engaged in illegal discrimination. But it awarded only nominal damages of $1 for each plaintiff.

Eastern District Chief Judge Charles P. Sifton awarded $191,551 in attorney fees. He described the case as “the first … in which the rights of transsexuals were asserted and vindicated.” Judge Sifton said that providing reasonable attorney fees would “encourage the bringing of meritorious civil rights claims which might otherwise be abandoned because of financial imperatives surrounding the hiring of competent counsel.”

On appeal, the 2nd Circuit has asked New York's top court for direction on whether it has adopted the standard set forth by the U.S. Supreme Court in Farrar v. Hobby , 506 US 103 (1992).

In Farrar, the court said: “In some circumstances, even a plaintiff who formally 'prevails' under '1988 should receive no attorney's fees at all. A plaintiff who seeks compensatory damages but receives no more than nominal damages is often such a prevailing party.” But it is unclear whether New York has adopted that standard.

The 2nd Circuit has asked whether New York adheres to Farrar and, if not, whether it has another standard. It has also asked whether New York would recognize a public interest exception along the lines of that implied by Sifton.

H. Nicholas Goodman of Quirk & Bakalor in Manhattan is representing Toys “R” Us, and Thomas D. Shanahan of Shanahan Associates in Manhattan is representing the plaintiffs. A ruling is expected by mid-November.

The Farrar Standard

Majority opinion's conclusion in Farrar v. Hobby (91-990), 506 U.S. 103 (1992)

[From http://supct.law.cornell.edu/supct/html/91-990.ZO.html. Quotation marks edited. Paragraph breaks added for readability.]

In some circumstances, even a plaintiff who formally “prevails” under '1988 should receive no attorney's fees at all. A plaintiff who seeks compensatory damages but receives no more than nominal damages is often such a prevailing party.

As we have held, a nominal damages award does render a plaintiff a prevailing party by allowing him to vindicate his “absolute” right to procedural due process through enforcement of a judgment against the defendant. Carey, 435 U. S., at 266. In a civil rights suit for damages, however, the awarding of nominal damages also highlights the plaintiff's failure to prove actual, compensable injury. Id., at 254-264.

Whatever the constitutional basis for substantive liability, damages awarded in a '1983 action “must always be designed 'to compensate injuries caused by the [constitutional] deprivation.'” Memphis Community School Dist. v. Stachura, 477 U. S., at 309 (quoting Carey, supra, at 265) (emphasis and brackets in original). When a plaintiff recovers only nominal damages because of his failure to prove an essential element of his claim for monetary relief, see Carey, supra, at 256-257, 264, the only reasonable fee is usually no fee at all.

In an apparent failure to heed our admonition that fee awards under '1988 were never intended to “'produce windfalls to attorneys,'” Riverside v. Rivera, supra, at 580 (plurality opinion) (quoting S. Rep. No. 94-1011, p. 6 (1976)), the District Court awarded $280,000 in attorney's fees without “consider[ing] the relationship between the extent of success and the amount of the fee award.” Hensley, supra, at 438.

Although the Court of Appeals erred in failing to recognize that petitioners were prevailing parties, it correctly reversed the District Court's fee award. We accordingly affirm the judgment of the Court of Appeals.