Court: Court of Appeals for the Seventh Circuit; May 3, 2002; Federal Appellate Court
Joseph Payne filed a lawsuit against Milwaukee County, alleging unlawful termination in violation of his First Amendment rights and 42 U.S.C. § 1983. This marks the second appearance of his case in the Seventh Circuit. The current appeal focuses on the application of Federal Rule of Civil Procedure 68 regarding a prevailing plaintiff's entitlement to attorneys' fees under 42 U.S.C. § 1988. The court found that the district court incorrectly required Payne to pay the defendants' attorneys' fees and remanded the case for further proceedings.
Payne was discharged from his position in the Medical Examiner's Office in 1991 after sending complaints of discrimination to public officials. After filing a complaint in 1993, he underwent a jury trial in 1997, which resulted in a judgment for the defendants. This was partially reversed on appeal, leading to a new trial in 1999, where the jury awarded Payne $10,400, acknowledging that his protected speech influenced his termination.
Prior to the first trial, Milwaukee County submitted an Offer of Judgment, presenting Payne with two options: $37,500 as a lump sum or $18,000 plus a job offer with a salary range between $24,000 and $39,000. Payne chose not to accept either offer, exposing himself to the risk of receiving a lower damage award at trial. Ultimately, the jury's award fell below both options, resulting in Payne losing his entitlement to post-offer costs and attorneys’ fees.
After the verdict, Payne's attorneys filed for fees under § 1988. One attorney, John Uelman, was awarded fees for work done before the Offer of Judgment. Another attorney, Robert Sutton, sought $75,550 for work performed from January 1997 to December 1999. A third attorney, Larraine McNamara-McGraw, missed the deadline to file her fee request for work related to the earlier appeal and is not part of the current appeal, which focuses solely on Sutton's fee claim.
Milwaukee County contested requests for fees related to work performed after February 12, 1996, and sought to recover its own costs and attorneys' fees from Payne, arguing that Payne's final award was less than their settlement offer. The district court, presided over by Magistrate Judge Gorence, ruled that Milwaukee County was entitled to its costs under Rule 68 and attorneys' fees, while Sutton received nothing. Generally, a prevailing plaintiff in civil rights cases is entitled to costs under FED. R. CIV. P. 54(d) and attorneys' fees under 42 U.S.C. § 1988, but these entitlements are affected by Rule 68, which discourages plaintiffs from continuing litigation after receiving a reasonable settlement offer. Specifically, if the judgment obtained by the plaintiff is not more favorable than the offer, the plaintiff must cover costs incurred after the offer was made. Payne's situation aligns with Rule 68, indicating he would have benefited more from accepting one of Milwaukee County's offers rather than proceeding to trial. This rule aims to adjust the incentives for plaintiffs regarding reasonable offers. Two key questions arise: the entitlements Payne forfeited due to the lower verdict compared to Milwaukee County's offer, and the entitlements Milwaukee County gained due to Payne's rejection of the offer. Additionally, Payne's argument that Milwaukee County's failure to renew its Rule 68 offer after a partial trial verdict negated the original offer is incorrect. The Advisory Committee Notes clarify that an initial offer remains valid throughout the case, preserving its legal impact unless superseded by a new offer. Thus, there was a valid Rule 68 offer in effect.
Payne must demonstrate that Milwaukee County is liable for Attorney Sutton's fees and litigation costs post-February 12, 1996, under 42 U.S.C. § 1988(b) by proving he is a prevailing party and that Rule 68 does not bar recovery of his costs. Despite Milwaukee County's assertion that Payne did not prevail, he did, as evidenced by his recovery of $10,400. If he had lost, he would not have been entitled to any attorneys' fees or costs, as mandated by Rule 54(d) and § 1988.
Payne's claim that he should have received more than the $37,500 offered by Milwaukee County is speculative and unfounded, as the final judgment did not include a back pay element, and he did not appeal that aspect. Therefore, the actual verdict amount must be used to assess the consequences under Rule 68.
Additionally, the Supreme Court's decision in Marek clarifies that attorneys' fees are considered "costs" under Rule 68. Consequently, if a civil rights plaintiff rejects a more favorable offer, they are not entitled to recover attorneys' fees incurred after rejecting that offer. As such, the district court correctly determined that Attorney Sutton was not entitled to fees incurred after the Rule 68 offer.
Regarding Milwaukee County, the interpretation of "costs" under Rule 68 is more complex. The district court concluded that, since "costs" includes attorneys' fees from the plaintiff's perspective, it should similarly encompass attorneys' fees when the defendant seeks to recover post-offer costs.
The Supreme Court has established a clear connection between the term "costs" in Rule 68 and the relevant statute governing attorneys' fees, specifically § 1988, which does not allow for two-way fee-shifting. This asymmetry is intentional, as outlined in Christiansburg Garment Co. v. EEOC and further supported by Newman v. Piggie Park Enterprises. The rationale includes the need to encourage private enforcement of civil rights laws, the potential discouragement of plaintiffs from pursuing valid claims if prevailing defendants could recover fees, and the principle that fees are awarded against violators of federal law.
In Crossman v. Marcoccio, the First Circuit ruled that a defendant cannot recover attorneys' fees if they are not the "prevailing party," aligning with the stipulations of § 1988. This court has now addressed the Crossman issue directly, endorsing the reasoning from that case. Prior cases, such as Grosvenor v. Brienen, indicated that Rule 68 must be interpreted in light of the underlying fee statute, suggesting that a prevailing plaintiff should not bear the defendant's post-offer attorneys' fees. Under § 1988, a prevailing plaintiff can only be liable for the defendant's fees if the plaintiff's claims are found to be frivolous or vexatious, which is not applicable in cases where the plaintiff has prevailed. A prevailing defendant may only recover fees in instances where the plaintiff's suit is deemed vexatious, frivolous, or intended to harass.
The court endorsed the Grosvenor/Crossman position in Harbor Motor Co. v. Arnell Chevrolet-Geo, Inc., determining that a defendant cannot recover attorneys' fees after a rejected Rule 68 offer in a copyright case, even if the Copyright Act and § 1988 allow for fee recovery by the prevailing party. Although the defendant was not the prevailing party, Rule 68 exempted them from paying the plaintiff's post-offer attorneys' fees. The court reiterated that the requirement under the Copyright Act necessitates prevailing status for fee recovery, confirming that defendants cannot claim post-offer fees. The ruling aligns with the Supreme Court’s guidance in Marek, emphasizing that fee entitlement hinges on the underlying statute. The court clarified that Milwaukee County's entitlement to costs, distinct from fees, must be assessed separately under Rule 54(d), which allows the prevailing party to recover costs, except as outlined by the rules or statutes. Rule 68 mandates that if the final judgment is less favorable than the offer, the plaintiff bears the defendant's costs. The district court failed to differentiate between Milwaukee County's post-offer attorneys' fees and costs, necessitating a remand to clarify these elements. The court affirmed the denial of post-offer attorneys' fees and costs to Payne, reversed the award of post-offer attorneys' fees to the defendants, and remanded to determine the post-offer costs owed to the defendants.
