Four important attorneys fees decisions

1) Ninth Circuit and California court conflict on attorneys fees in disability cases. 2) Eleventh Circuit upholds fee enhancement despite sharp dicta. 3) NY Ct. App. rejects 11th Am. bar to Medicaid fee award.

CA9, Cal.App. conflict on whether fees under state law can exceed fees under federal law

   Two recent appellate decisions, in cases presenting claims under both the Americans with Disabilities Act and California Disabled Persons Act, came to opposite conclusions on the interplay between federal and state attorneys fee provisions. Last month, the Ninth Circuit held that Section 55 of the CDPA is preempted because it authorizes fee awards to the defendant for nonfrivolous claims, whereas the ADA permits for fee awards to the defendant only for frivolous claims. Hubbard v. Sobreck, LLC, --- F.3d ----, 2008 WL 2552244 (9th Cir. Jun. 27, 2008) (NO. 06-56870) The court reasoned that since the proof required under both the ADA and the CDPA is identical, allowing fees for nonfrivolous claims under the state law would amount to awarding them under the ADA. The court held that such a result would contradict federal law and was therefore preempted.

          By contrast, the California Court of Appeals held this week that state law provides an avenue for the defendant to obtain a fee award for non-frivolous claims in disability access suits, notwithstanding federal law. Molski v. Arciero Wine Group, --- Cal.Rptr.3d ----, 2008 WL 2639446 (Cal. App. 2 Dist. Jul. 7, 2008) (No. B199289). The court reasoned that California law provides plaintiffs with several options to challenge inaccessible public accommodations – they can sue under the Unruh Civil Rights Act, the monetary relief provision of the CDPA, or the injunctive relief section of that law. Since all three contain different provisions regarding fees, “a plaintiff controls the relative risks, burdens and benefits by selecting from among several statutory options.” Accordingly, California law does not present the same risks of deterring civil rights litigation if fee awards are not strictly limited.

          Although the state court did not consider the preemption argument, the holdings are in direct conflict. It seems like that the Ninth Circuit, the California Supreme Court, or both, will be called on to resolve this dispute.

CA11: $4.5M fee enhancement upheld, but dicta would limit grounds for enhancements

 

The Eleventh Circuit upheld a $4.5 million enhancement on a $6 million attorneys fees award in a major class action lawsuit involving Georgia’s foster care system. In lengthy dicta, Judge Edward Carnes (a G.H.W. Bush appointee) opined that controlling circuit precedent wrongly interpreted Supreme Court precedent, and that fee enhancements should never be awarded on the basis of attorney performance or degree of success. In a concurrence, Judge Charles Wilson (a Clinton appointee) defended the circuit precedents and the fee enhancement, stating that it was supported by specific record evidence. Judge James C. Hill (a Ford appointee) took no position on the other judges’ debate, simply concurring in the judgment. Kenny A. et al. v. Perdue et al., --- F.3d ---, 2008 WL 2609238 (11th Cir. Jul. 3, 2008) (Nos. 06-11514, 06-15874).

 

          The 2002 lawsuit produced a complex settlement to remedy systemic deficiencies in the foster care systems in Georgia counties. The parties submitted the fees issue to the district court, which awarded the enhancement on plaintiffs’ counsel’s contingent representation, high litigation expenses, “superb” representation and the “intricately detailed and comprehensive” relief they achieved. The panel stated that under circuit precedent the first two of these factors were not permissible grounds for enhancement, but the last two were.

          Judge Carnes felt that circuit precedent – NAACP v. City of Evergreen, 812 F.2d 1332 (11th Cir.1987), and Norman v. Housing Authority of Montgomery, 836 F.2d 1292 (11th Cir.1988) – misread the Supreme Court’s ruling in Pennsylvania v. Del. Valley Citizens' Council for Clean Air, 478 U.S. 546 (1986). In Carnes’s view, that decision does not permit fee awards for quality of representation or success, because these factors are already reflected in the “lodestar” reasonable-hourly-fees calculation. Carnes opined that only very exceptional circumstances would merit a fee enhancement. The one example he gave was of counsel representing a plaintiff so unpopular that his practice would suffer. He also suggested that courts could not rely on the affidavits of outside attorneys as to the appropriateness of or need for such enhancements, since attorneys have a financial stake in keeping fee awards in the type of cases they work on high.

          In light of circuit precedents, however, Carnes thought a vacatur and remand would be pointless: the district court was “so determined” to reward plaintiffs’ counsel for their performance that he had “no doubt the court would simply reinstate the enhancement.”

          Carnes’s dicta seem aimed at an eventually en banc reconsideration of these issues – a possibility alluded to in Judge Hill’s brief concurrence.

NY: Fee award in Medicaid case not barred by sovereign immunity

New York’s highest court held that an individual’s appeal of a denial of Medicaid eligibility, which seeks an award of benefits back to the date of application, is prospective in nature; accordingly, the Eleventh Amendment poses no bar to an award of attorneys fees.  However, the court declined to reinstate a fee award because the lower court decided the case only on state law grounds; the high court remanded the case for consideration of the petitioner’s 42 U.S.C. § 1983 claim under the Medicaid Act. Two dissenting judges would have affirmed the denial of fees on the ground that there was no violation of the Medicaid Act. The case concerned the calculation of the community spouse resource allowance (CSRA) under 42 U.S.C. § 1396r-5. Giaquinto v. Comm’ner of N.Y. State Dep’t of Health, --- N.E.2d ---, 2008 WL 2367428 (N.Y. Jun. 12, 2008) (No. 05350). The Empire Justice Center and the Center for Law and Economic Justice appeared as amici on behalf of the petitioner.

Giaquinto resides in an adult care facility, and the agency deemed him ineligible for Medicaid due to the extent of his wife’s household income and resources. On appeal to the ALJ, the agency also decided that his wife was entitled to an increased CSRA, and required her to purchase a “single premium immediate life annuity.” Giaquinto appealed the ALJ’s decision to state court. The lower court held that the agency “lacked any legal basis or authorization to direct a community or institutionalized spouse to purchase a particular type of investment.” The lower court ordered the decision reversed as arbitrary and capricious under state law, and awarded attorneys fees. On appeal, the state challenged only the § 1983 claim and fee award.

New York’s highest court first held that a fee award was not barred by sovereign immunity. The court agreed with the plaintiff that the “fact that petitioner’s Medicaid eligibility would be retroactive to the date of his application is only incidental to the primary relief sought, namely, the annulment of the Fair Hearing decision.” The state argued that “the relief petitioner sought was retrospective in that it merely sought to remedy a prior erroneous decision even though the grant of such relief would entitle petitioner to benefits in the future.” The court rejected this view, saying that it “minimizes the importance of the federal right sought to be vindicated and elevates the form of the relief sought over its substance.” Petitioner’s § 1983 claim was essentially prospective in nature because it sought primarily to stop an ongoing violation of federal law and to vindicate his right to current and future Medicaid benefits.

The court noted a division of authority within the Second Circuit on this question. Compare Tekkno Labs., Inc. v. Perales, 933 F.2d 1093 (2d Cir. 1991) (Medicaid provider’s claim withholding of payment of claims was retrospective in nature), with Morenz v. Wilson-Coker, 415 F3d 230 (2d Cir. 2005) (award of Medicaid benefits beginning three months prior to date petitioner was deemed Medicaid eligible was not retroactive relief ). The court agreed with the later Morenz decision, and stated that “agreement between this Court and the Second Circuit on the Eleventh Amendment issue at bar would allay forum shopping concerns.”

Nevertheless, the court remanded the case because the lower court based its decision solely on state law grounds, without addressing the merits of the § 1983/Medicaid Act claim. Thus, the high court could not conclude whether there was a federal predicate for the fee award; the lower court would have to address this claim explicitly.

The dissent did not dispute the majority’s conclusion that the relief sought was prospective in nature.  Instead, the dissent argued that no remand was necessary because “the record is sufficient to conclude that respondent's calculation of [the CSRA] did not violate federal Medicaid law.” It noted that the language of § 1396r-5 gives states discretion in calculating the CSRA and does not proscribe any particular method. The dissent also pointed to recent guidance from the Centers for Medicare and Medicaid Services (CMS) stating that “states may use any reasonable method…including adjusting the CSRA to the amount a person would have to invest in a single premium annuity to generate the needed income.” See Matter of Lynch v. Comm’ner of N.Y. State Dept. of Health, 2008 N.Y. Slip Op 50015U, at 4 (Sup. Ct. Albany Cty. Jan. 9, 2008) (quoting CMS). (The majority said in a footnote that this guidance was not relevant to the case because it was issued after the determination of Gianquinto’s eligibility.)