In Vargas v. Howell, published February 5, 2020, a divided panel of the 9th Circuit Court of Appeals affirmed in part and reversed in part a fee award to a plaintiff in a 42 U.S.C. section 1983 case who entered into a settlement with the defendants that allowed the plaintiff to seek his attorney fees in court. In discovery, the plaintiff asserted his damages were $1 million. He ultimately settled for $99,999, 10% of what he sought. He sought $257,000 in attorney fees. On the plaintiff's fee motion under 42 U.S.C. section 1988, the district court awarded $26,000 in fees. Among his grounds for cuts were an across-the-board reduction of the fees sought by the firm and attorney who did most of the work by 90%. The court also excluded fees billed by two of the plaintiff's attorneys who left the firm that represented him before the litigation concluded, on the ground that the attorneys' new firm did not have standing to seek fees. Other cuts were based on tasks and hours the court deemed unreasonable.
The majority affirmed several of the cuts the district court made, but concluded that the district court did not adequately explain the size of the cut of the principal attorney's fees. More substantial cuts require more substantial explanations. The district court erred to the extent it concluded that the settlement for 10% of the amount sought mechanically justified cutting the fees by 90%. Limited success, by recovering much less than the plaintiff sought, can be a ground for deeming fees unreasonable under some circumstances, such as where the suit was brought only for nuisance value or the district court makes rulings that establish the plaintiff will not be able to prevail. No such circumstances were present here. Cutting fees whenever the plaintiff settles for or recovers much less than the plaintiff stated he was seeking would discourage plaintiff's attorneys from seeking substantial amounts of money and then negotiating down to a final settlement figure. Instead, it would encourage them to claim only lower amounts, and then decline to negotiate downward. The majority also reversed the finding that the attorneys who switched firms had no standing to seek their fees. Since section 1988 fees belong to the client, not the attorney, the firm that seeks recovery is immaterial.
A dissenting judge would have affirmed the award in full, on the ground that the district court properly exercised its discretion.
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