Argument preview: Attorney’s fees and the final judgment rule
on Dec 2, 2013 at 2:57 pm
The Roberts Court enjoys digging at the fine details of federal jurisdiction. The latest case in this effort is Ray Haluch Gravel Co. v. Central Pension Fund, in which the Court will consider whether a trial court order granting monetary relief but leaving unresolved a claim for contractual attorney’s fees can be an appealable final judgment under 28 U.S.C. § 1291 . The issue has split nine circuits over the meaning of one prior decision.
The petitioner is defendant Ray Haluch Gravel Co., is a landscape supply company. The respondents are the plaintiff ERISA employee-benefit funds, which sought to collect unpaid contributions required by the collective bargaining agreement (CBA) between the company and the union. The funds sought to recover payments on behalf of several Ray Haluch employees, as well as attorney’s fees incurred in their collection efforts, all pursuant to the CBA. Following a bench trial, the district court ordered that more than $26,000 be remitted for certain work performed by one employee, while denying remittance for any other work or any other employee. On June 17, 2011, the court entered judgment in favor of the plaintiffs, stating that it would resolve a claim for attorney’s fees in a separate decision. On July 25, the court awarded the plaintiffs more than $34,000 in attorney’s fees. On August 15, the plaintiffs appealed both decisions to the United States Court of Appeals for the First Circuit, pursuant to Section 1291, which gives the courts of appeals jurisdiction over “final decisions” of the district courts.
But Federal Rule of Appellate Procedure 4(a)(1)(A) requires parties to file a notice of appeal within thirty days of entry of the judgment or order being appealed; that rule is mandatory and jurisdictional, meaning that the court of appeals lacks jurisdiction over an untimely appeal. The plaintiffs filed their notice of appeal within thirty days of the July 25 decision resolving attorney’s fees, but more than thirty days after the June 17 judgment resolving unpaid remittances. The timeliness of the appeal, and thus the appellate court’s jurisdiction, turns on whether the first judgment was a “final decision” under Section 1291. If it was, the plaintiffs should have appealed from it within thirty days, and their failure to do so renders their subsequent appeal untimely and not within the First Circuit’s appellate jurisdiction. If it was not, the plaintiffs could not have appealed it under Section 1291; the only final decision was the second one, making the appeal timely and giving the First Circuit appellate jurisdiction.
In Budinich v. Becton Dickinson & Co. (1988), the Supreme Court held that as “a general matter, . . . it is indisputable that a claim for statutory attorney’s fees is not part of the merits of the action to which the fees pertain.” Thus, an “unresolved issue of attorney’s fees for the litigation in question does not prevent judgment on the merits from being final.” Courts must understand finality with reference to the interests and policies underlying the requirement, particularly those related to the effective functioning of the judicial system; any rule must preserve “operational consistency and predictability in the overall application of § 1291.” Those policies demand a rule that is “uniform” and “clear”: any decision on the merits of a claim is final even when there remains an unresolved request for attorney’s fees “attributable to the case.”
But Budinich’s purportedly clear rule produced neither uniformity nor predictability in the lower courts. The Second, Fifth, Seventh, and Ninth Circuits held that Budinich’s finality rule applies to all fee awards, whether the fees were available under a statute (as in Budinich) or under a contract. But the Third, Fourth, Eighth, and Eleventh Circuits held that some (and in the Eleventh, all) claims for contractual attorney’s fees fall outside Budinich’s rule.
In this case, the First Circuit joined the latter camp. Budinich stated that fees recoverable under a fee-shifting statute are not part of the merits “as a general matter,” and that if “one were to regard the demand for attorney’s fees as itself part of the merits, the analysis would not apply . . . [and] merits would then not have been concluded.” (emphasis added). The First Circuit read that as leaving open the possibility that some fees could be part of the merits and thus outside Budinich’s general rule. Instead, when entitlement to attorney’s fees derives from a contract rather than a statute, the court must consider whether the fee request is part of the merits of the contractual claim.
That was the case for the fees at issue. The complaint had specifically requested attorney’s fees along with unpaid remittances as a remedy. The fees were due under the CBA and were incurred, at least in part, for collection efforts prior to suit, making them an element of the plaintiffs’ contractual damages. Unlike many statutory fee provisions (including the one at issue in Budinich), these fees were not recoverable only by a prevailing party in litigation; the CBA made fees available even if no suit were filed (such as when the employer yields to the fund’s pre-litigation demand for payment). Because the fees were an element of the merits, the first district court decision, leaving fees unresolved, was not final; the judgment became final and appealable only after the second decision resolved the merits-based fees request. The appeal twenty-one days after that second decision thus was timely. Having found appellate jurisdiction, the First Circuit then vacated both the remittance and fee awards because the district court failed to properly apply a presumption that would have entitled the funds to greater recovery. (The Supreme Court did not grant certiorari on the merits issues.)
Ray Haluch argues before the Supreme Court that it is simply incorrect to read Budinich as meaning anything other than that requests for attorney’s fees are always collateral to the merits; thus, a judgment that leaves only fees unresolved is always final. Budinich itself seemed to reject any meaningful distinction between merits and non-merits fees. Any other approach fails to provide the predictable, “simple, clear, and certain” bright-line rule that jurisdictional statutes demand. The First Circuit (and other courts on that side of the split) violate that directive by requiring particularized inquiry in each case into the source of the fees, when during litigation the fee request was made, the connection between the fees and the merits of each case, and whether the fees were incurred in litigation or in pre-litigation collection efforts. Such a rule also is difficult to apply. For example, the line between pre- and post-filing legal efforts does not necessarily define what is “for the litigation”; after all, work performed prior to filing suit might be done in preparation for and anticipation of particular litigation. And in many cases, including this one, most fees are still incurred in litigation itself.
The fund reads Budinich as limited to statutory fees, which have historically been treated and awarded as costs of litigation. Contractual fees are different, however; they historically were viewed as akin to damages to compensate for part of the injury under the contract, and therefore as part of the merits of the underlying claim. In this case, the fund was injured not only in not receiving required contributions, but also in having to expend time, effort, and money to recover those unpaid contributions. The fees available under the contract for those efforts function as liquidated damages for that part of the injury and are designed to make the injured party whole. A court order, such as the June 17 order, which fails to resolve all damages issues, including liquidated damages, cannot be final and appealable. The fund insists that this approach to contractual fees better serves the policies of the final judgment rule, particularly the goal of avoiding piecemeal appeals; a court of appeals will not be forced to handle an appeal of damages and then consider a separate and redundant appeal of contractual fee awards. This approach also provides the predictability, certainty, and simplicity the Court demands of jurisdictional rules – all statutory fees are collateral (per Budinich), while all contractual fees are part of the merits.
The fund also offers a different, narrower line — between fees for prelitigation work and fees for litigation work, with the former treated as part of the merits. Budinich referred to fees “for the litigation”; this, the fund argues, excludes fees for collection, investigation, counseling, and negotiation done before litigation. Among the moneys the fund seeks to recover in this case are auditor’s and attorney’s fees incurred over two years of trying to determine how much was owed and to collect those moneys without going to court. Such prelitigation fees cannot be characterized as “costs” akin to statutory attorney’s fees; thus, they cannot be collateral under Budinich. It follows that the June 17 order, which left these non-litigation fees unresolved, could not have been final; the only final and appealable order came on July 25, when the district court finally addressed those prelitigation fees.