Charles Anderson v. AB Painting and Sandblasting ( 2009 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 08-2102
C HARLES E. A NDERSON, Trustee on behalf of
Painters’ District Council No. 30 Health and
Welfare Fund, et al.,
Plaintiffs-Appellants,
v.
AB P AINTING AND S ANDBLASTING
INCORPORATED , an Illinois Corporation,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 1:04-cv-03302—John F. Grady, Judge.
A RGUED F EBRUARY 20, 2009—D ECIDED A UGUST 20, 2009
Before B AUER, M ANION and S YKES, Circuit Judges.
B AUER, Circuit Judge. The Painters’ District Council
No. 30 Health and Welfare Fund and two other multi-
employer employee benefit plans (collectively “the
Funds”), through their trustee Charles E. Anderson,
2 No. 08-2102
successfully sued to collect delinquent contributions
from AB Painting and Sandblasting, Inc., a Fund partici-
pant. The district court awarded attorney’s fees to the
Funds, as required by the Employee Retirement Income
Security Act of 1974 (“ERISA”), but in an amount much
lower than requested because the court was not com-
fortable with what it perceived to be the dispropor-
tionate amount of money spent litigating the Funds’
relatively small claim. The Funds argue that this
concern with proportionality was misplaced and that
a new fee calculation is required. We agree.
I. BACKGROUND
Collective bargaining agreements with the local painters’
chapter of the AFL-CIO required AB Painting to make
regular contributions to the Funds. Under the agree-
ments, AB Painting was to self-report its obligations to
the Funds based on certain factors. AB Painting failed to
fully report or pay its required contributions. After dis-
covery, which was frequently delayed by AB Painting’s
lack of cooperation, the district court granted summary
judgment in favor of the Funds for the entire amount of
the claimed delinquency plus interest, for a total of ap-
proximately $6,500. However, the court reduced the Funds’
attorney’s fees award from the requested $50,885.90 to
$10,000. The court labeled the fee request “disproportion-
ate” to the damages claimed and explained that “in view
of the small amount involved . . . the time spent on the
case was excessive. Charging over $50,000.00 in attor-
ney’s fees to collect, at most, $5,000.00 cannot be justified.”
No. 08-2102 3
II. DISCUSSION
On appeal, the Funds argue that the district court
did not conduct a proper fee analysis and was wrongly
concerned with the relationship between the actual dam-
ages and the requested attorney’s fees. We review an
award of attorney’s fees for an abuse of discretion.
People Who Care v. Rockford Bd. of Educ., 90 F.3d 1307, 1311
(7th Cir. 1996). But we review a district court’s legal
analysis and methodology de novo. Jaffee v. Redmond, 142
F.3d 409, 412-13 (7th Cir. 1998); Montgomery v. Aetna
Plywood, Inc., 231 F.3d 399, 408 (7th Cir. 2000).
When a trustee of an ERISA benefit plan prevails in
an action to recover delinquent contributions, the
district court is required to award “reasonable attorney’s
fees.” 29 U.S.C. § 1132(g)(2)(D). “The most useful starting
point for determining the amount of a reasonable fee is
the number of hours reasonably expended on the litiga-
tion multiplied by a reasonable hourly rate.” Hensley v.
Eckerhart, 461 U.S. 424, 433 (1983). This “lodestar” figure
can then be adjusted based on the twelve Hensley fac-
tors. Id. at 434 n.9. 1 However, “many of these factors
1
“The twelve factors are: (1) the time and labor required; (2) the
novelty and difficulty of the questions; (3) the skill requisite to
perform the legal service properly; (4) the preclusion of em-
ployment by the attorney due to acceptance of the case; (5) the
customary fee; (6) whether the fee is fixed or contingent; (7) time
limitations imposed by the client or the circumstances; (8) the
amount involved and the results obtained; (9) the experience,
(continued...)
4 No. 08-2102
usually are subsumed within the initial calculation of
hours reasonably expended at a reasonable hourly rate.”
Id. at 434 n.9.
In this case, the district court was concerned with the
concept of proportionality between the attorney’s fees
and the actual damages. Proportionality can refer to
multiple concepts in the realm of attorney’s fees. One of
these concepts addresses the situation where a plaintiff
recovers a very small percentage of the damages claimed
and the attorney’s fees are consequently reduced. Cole v.
Wodziak, 169 F.3d 486 (7th Cir. 1999), which the dis-
trict court wrongly relied on, is such a case. This type
of proportionality seems to be losing favor and is
irrelevant in our case because the Funds recovered the
entire amount of the claimed deficiency. Compare Cole,
169 F.3d at 489 (“[R]ecovering less than 10% of the
demand is a good reason to [abandon the lodestar
method, apply Farrar v. Hobby, 506 U.S. 103 (1992), and]
curtail the fee award substantially.”) with Estate of Enoch
ex rel. Enoch v. Tienor, 570 F.3d 821, 822-23 (7th Cir.
2009) (recovering less than 7% of amount sought is not
reason to apply Farrar if damages are not nominal).
The proportionality we address here involves a com-
parison between a plaintiff’s damages and his attorney’s
1
(...continued)
reputation, and ability of the attorneys; (10) the ‘undesirability’
of the case; (11) the nature and length of the professional
relationship with the client; and (12) awards in similar cases.”
Id. at 430 n.3.
No. 08-2102 5
fees. In this context, we have “rejected the notion that the
fees must be calculated proportionally to damages.”
Alexander v. Gerhardt Enterprises, Inc., 40 F.3d 187, 194 (7th
Cir. 1994); see Wallace v. Mulholland, 957 F.2d 333, 339 (7th
Cir. 1992); see also Estate of Borst v. O’Brien, 979 F.2d 511,
516-17 (7th Cir. 1992); see also Littlefield v. McGuffey, 954
F.2d 1337, 1350-51 (7th Cir. 1992).
This seems to us to be the only logical position, consider-
ing the purpose of attorney’s fees statutes. Fee-shifting
provisions signal Congress’ intent that violations of
particular laws be punished, and not just large violations
that would already be checked through the incentives
of the American Rule. “The function of an award of at-
torney’s fees is to encourage the bringing of meritorious . . .
claims which might otherwise be abandoned because of
the financial imperatives surrounding the hiring of com-
petent counsel.” City of Riverside v. Rivera, 477 U.S. 561, 578
(1986) (quotation marks and citation omitted). Or, more
simply stated, fee-shifting “helps to discourage petty
tyranny.” Barrow v. Falck, 977 F.2d 1100, 1103 (7th
Cir. 1992).
Because Congress wants even small violations of certain
laws to be checked through private litigation and
because litigation is expensive, it is no surprise that the
cost to pursue a contested claim will often exceed the
amount in controversy. Tuf Racing Products, Inc. v. American
Suzuki Motor Corp., 223 F.3d 585, 592 (7th Cir. 2000). That
is the whole point of fee-shifting—it allows plaintiffs to
bring those types of cases because it makes no difference
to an attorney whether she receives $20,000 for pursuing
6 No. 08-2102
a $10,000 claim or $20,000 for pursuing a $100,000 claim.
See id. Fee-shifting would not “discourage petty tyr-
anny” if attorney’s fees were capped or measured by the
amount in controversy. Barrow, 977 F.2d at 1103; see Tuf
Racing, 223 F.3d at 592.
Some of our cases have expressed concern where attor-
ney’s fees overshadowed the damages awarded, but only
because some other element of the case did not seem
reasonable. For example, in Perez v. Z Frank Oldsmobile, Inc.,
223 F.3d 617, 625 (7th Cir. 2000), we noted that the fee
was “awfully hard to swallow.” But our concern was not
so much with the amount of the fee as with the disparity
between the number of hours billed and the seeming
simplicity of the case (1,200 hours were spent pursuing
a rolled-back odometer claim). See id. That was a fair
observation. Simple cases should require fewer hours
than complex cases. And many claims for small damages
amounts will be simple cases. But not always; it works
as a rule of thumb, but not as a rule of law. Which is
why we simply stated that the “question requires
careful attention on remand.” Perez, 223 F.3d at 625.
This is also how we read Moriarty v. Svec, 223 F.3d 955
(7th Cir. 2000), another case cited by the district court. In
Moriarty, we stated that, “[w]hile . . . disproportionality
is not determinative and this court has approved
attorney’s fees many times the amount of damages re-
covered, . . . the district court’s fee order should evidence
increased reflection before awarding attorney’s fees that
are large multiples of the damages recovered or
multiples of the damages claimed.” Id. at 968. We quickly
reiterated “that any disproportionality that may be
No. 08-2102 7
present in this case does not mean that the amount of
attorney’s fees awarded . . . was an abuse of discretion,
but only that the district court should consider such
proportionality factors in exercising its discretion in
fashioning a reasonable attorney’s fee.” Id.
To say that a court should give “increased reflection”
before awarding attorney’s fees that are several times
the amount of the actual damages is nothing more than
to say that a comparatively large fee request raises a red
flag. As we just said, in many cases the amount in con-
troversy and the complexity of the case will track with
one another. But small claims can be complex and large
claims can be very straightforward. So while a fee
request that dwarfs the damages award might raise a
red flag, measuring fees against damages will not
explain whether the fees are reasonable in any particular
case.
Reasonableness has nothing to do with whether the
district court thinks a small claim was “worth” pursuing
at great cost. Fee-shifting statutes remove this normative
decision from the court. If a party prevails, and the dam-
ages are not nominal, then Congress has already deter-
mined that the claim was worth bringing. The court
must then assume the absolute necessity of achieving
that particular result and limit itself to determining
whether the hours spent were a reasonable means to
that necessary end.2
2
Of course, if a party achieves only partial success as that term
is used in Hensley, then the district court must determine how
(continued...)
8 No. 08-2102
For example, it is absolutely permissible to spend
$100,000 litigating what is known to be a $10,000 claim
if that is a reasonable method of achieving the result.
But it might not be a reasonable method. Proportionality
then, where useful at all, could alert the court to situ-
ations where we might expect that the same result could
have been achieved more efficiently. But if, for some
reason, the hours expended were reasonable in a par-
ticular case, then so is the fee.
It seems that the claim in front of us could have been
resolved at a greatly reduced cost if AB Painting had
cooperated with discovery requests and settlement dis-
cussions, obeyed the district court’s orders, and not filed
a series of frivolous motions after the court had already
entered judgment for the Funds. The district court
did not suggest how the Funds could have resolved the
case more efficiently. So even though the fee request was
more than seven times the amount of damages, there
may have been good cause.
2
(...continued)
many hours were related to advancing the winning claims. See
Hensley, 461 U.S. at 434-37; see also Ustrak v. Fairman, 851 F.2d
983, 988 (7th Cir. 1988) (“A partially prevailing plaintiff
should be compensated for the legal expenses he would have
borne if his suit had been confined to the ground on which
he prevailed plus related grounds within the meaning of
Hensley.”); see also Jaffee, 142 F.3d at 413-17 (explaining how
unsuccessful claims can relate to successful ones). Since the
Funds succeeded on all claims, we need not explore this
topic any further.
No. 08-2102 9
And even in a straightforward case, where an early
resolution is reached, it would not be surprising to
find that the cost of bringing the claim exceeded the
amount in controversy. Again, fee-shifting is designed to
encourage such claims. See Tuf Racing, 223 F.3d at 592.
III. CONCLUSION
We R EVERSE and R EMAND, according to Circuit Rule 36,
for a new calculation of attorney’s fees. An appropriate
amount of fees for this appeal should also be awarded.
8-20-09