Attorney Fees Blocked In NY Civil Rights Case

[Editor's Note: A&FP's December edition was in press when the NY Court of Appeals ruled. See A&FP's November edition for prior coverage of the Farrar standard and this case.]

Lawyers who prevail in a civil rights case but win only nominal damages are generally not entitled to attorney fees, the Court of Appeals has ruled in a groundbreaking opinion.

For the first time, the court embraced the so-called Farrar standard and found that attorneys who win token awards in civil rights actions have “prevailed” for fee purposes, but that fee awards are “rarely … appropriate unless the litigation served a significant public purpose.”

In McGrath v. Toys “R” Us, 141, the judges agreed on the applicability of Farrar v. Hobby, 506 US 103 (1992) to the New York City Civil Rights Law. But two dissenting judges argued that the first public accommodation case vindicating the rights of transsexuals did not achieve any new meaningful public goal. They contended that the basic principle, anti-discrimination, was established earlier.

McGrath came to Albany via Foley Square, where the 2nd U.S. Circuit Court of Appeals certified a series of questions to the New York tribunal concerning the Farrar standard.

The case involves three pre-operative transsexuals who complained that they were harassed by Toys “R” Us employees in a Brooklyn store. The plaintiffs filed a federal lawsuit alleging gender and sexual orientation bias under the New York City Human Rights Law, which includes an attorney fee provision for the prevailing party. A jury found for the plaintiffs but awarded each only $1 in damages.

Toys “R” Us conceded that the plaintiffs had technically prevailed but cited Farrar in arguing that attorney fees were not warranted.

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.” 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 to the 2nd Circuit, the federal appellate court asked for guidance on whether New York would adopt the Farrar standard and, if so, whether in a case such as this attorney fees should be granted despite the award of nominal damages.

Farrar Standard Governs

Writing for the majority, Judge Victoria A. Graffeo suggested that while attorney fees are generally not appropriate when there is an award of only nominal damages, fees can be appropriate in select cases. Here, for instance, she said McGrath is the first public accommodation case that went to verdict under the city's Human Rights Law and marks the first judgment for transsexuals.

“We cannot conclude that a judgment in favor of a historically unrecognized group can never serve an important public purpose; a groundbreaking verdict can educate the public concerning substantive rights and increase awareness as to the plight of a disadvantaged class,” Graffeo wrote.

But 'Significant Public Purpose' Debated

Judges Susan Phillips Read and Robert S. Smith agreed with their colleagues that Farrar governs and that an exception to Farrar is available when a verdict establishes “pioneering legal precedent.” However, they argued that there was no such benchmark here.

The dissenters said the precedent articulated in this case ' that discrimination based on gender or sexual orientation is unacceptable ' was firmly established long before McGrath v. Toys “R” Us.

“If the fee provision [in the city Human Rights Law] encourages a goldrush of attorneys promoting doubtful or inconsequential claims, it will be of little value to either legitimate civil rights plaintiffs or to the general public,” Read said in dissent. “Here, plaintiffs failed to accomplish any important public goal as private attorneys general by litigating a civil rights issue that had already been resolved in favor of transsexuals by the courts.”

Thomas D. Shanahan of Shanahan Associates in Manhattan argued for the plaintiffs. H. Nicholas Goodman of Quirk & Bakalor in Manhattan argued for Toys “R” Us.

[Editor's Note: A&FP's December edition was in press when the NY Court of Appeals ruled. See A&FP's November edition for prior coverage of the Farrar standard and this case.]

Lawyers who prevail in a civil rights case but win only nominal damages are generally not entitled to attorney fees, the Court of Appeals has ruled in a groundbreaking opinion.

For the first time, the court embraced the so-called Farrar standard and found that attorneys who win token awards in civil rights actions have “prevailed” for fee purposes, but that fee awards are “rarely … appropriate unless the litigation served a significant public purpose.”

In McGrath v. Toys “R” Us , 141, the judges agreed on the applicability of Farrar v. Hobby , 506 US 103 (1992) to the New York City Civil Rights Law. But two dissenting judges argued that the first public accommodation case vindicating the rights of transsexuals did not achieve any new meaningful public goal. They contended that the basic principle, anti-discrimination, was established earlier.

McGrath came to Albany via Foley Square, where the 2nd U.S. Circuit Court of Appeals certified a series of questions to the New York tribunal concerning the Farrar standard.

The case involves three pre-operative transsexuals who complained that they were harassed by Toys “R” Us employees in a Brooklyn store. The plaintiffs filed a federal lawsuit alleging gender and sexual orientation bias under the New York City Human Rights Law, which includes an attorney fee provision for the prevailing party. A jury found for the plaintiffs but awarded each only $1 in damages.

Toys “R” Us conceded that the plaintiffs had technically prevailed but cited Farrar in arguing that attorney fees were not warranted.

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.” 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 to the 2nd Circuit, the federal appellate court asked for guidance on whether New York would adopt the Farrar standard and, if so, whether in a case such as this attorney fees should be granted despite the award of nominal damages.

Farrar Standard Governs

Writing for the majority, Judge Victoria A. Graffeo suggested that while attorney fees are generally not appropriate when there is an award of only nominal damages, fees can be appropriate in select cases. Here, for instance, she said McGrath is the first public accommodation case that went to verdict under the city's Human Rights Law and marks the first judgment for transsexuals.

“We cannot conclude that a judgment in favor of a historically unrecognized group can never serve an important public purpose; a groundbreaking verdict can educate the public concerning substantive rights and increase awareness as to the plight of a disadvantaged class,” Graffeo wrote.

But 'Significant Public Purpose' Debated

Judges Susan Phillips Read and Robert S. Smith agreed with their colleagues that Farrar governs and that an exception to Farrar is available when a verdict establishes “pioneering legal precedent.” However, they argued that there was no such benchmark here.

The dissenters said the precedent articulated in this case ' that discrimination based on gender or sexual orientation is unacceptable ' was firmly established long before McGrath v. Toys “R” Us.

“If the fee provision [in the city Human Rights Law] encourages a goldrush of attorneys promoting doubtful or inconsequential claims, it will be of little value to either legitimate civil rights plaintiffs or to the general public,” Read said in dissent. “Here, plaintiffs failed to accomplish any important public goal as private attorneys general by litigating a civil rights issue that had already been resolved in favor of transsexuals by the courts.”

Thomas D. Shanahan of Shanahan Associates in Manhattan argued for the plaintiffs. H. Nicholas Goodman of Quirk & Bakalor in Manhattan argued for Toys “R” Us.