February 25, 2014
1st Circuit: Employer must pay $100,000 in attorneys' fees--on $7,650 of damages

New Hampshireby Kate DeForest

The U.S. 1st Circuit Court of Appeals—which covers Maine, Massachusetts, New Hampshire, and Rhode Island—upheld a trial court's award of attorneys' fees that was more than 10 times larger than the amount of damages given to the employee. The 1st Circuit's decision supports the rationale the New Hampshire Commission for Human Rights (NHCHR) recently applied to a dispute over attorneys' fees. An appeal of the NHCHR's decision is pending in Merrimack County Superior Court.

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Background

Following her discharge from a Holiday Inn in Dorchester, Massachusetts, Carmen Diaz filed six claims against Jiten Hotel Management, Inc., the operator of the hotel. Diaz voluntarily dropped four of her claims, but the remaining claims went to trial. She obtained a jury verdict of $7,650 on her state age discrimination claim and sought $104,626 in attorneys' fees and costs.

Jiten appealed the trial court's decision on several grounds, including that the attorneys' fees award was impermissibly disproportionate to the damages award. Jiten argued that proportionality was necessary because "there is little social benefit to encouraging attorneys to spend resources … that are disproportionate to the results of the litigation."

The 1st Circuit squarely rejected Jiten's argument, concluding that the benefit to society was precisely the reason proportionality did not need to be considered in this case. According to the court, "The rules surrounding fee-shifting in civil rights cases are designed to encourage attorneys to take these types of cases and are based on full compensation for the work performed."

The 1st Circuit noted that under Massachusetts law, awarding attorneys' fees is mandatory and fee-shifting provisions "are designed to encourage suits that are not likely to pay for themselves, but are nevertheless desirable because they vindicate important rights." Diaz v. Jiten Hotel Management, 1st Circuit Court of Appeals, Case No. 13-1444 (Dec. 18, 2013).

Potential impact in New Hampshire

At the end of summer last year, the issue of the proportionality of attorneys' fees was considered by the NHCHR. In Bowers v. Professional Therapy Services, the commission awarded $22,922 in lost wages and $25,059 in attorneys' fees, despite Professional Therapy Services' argument that any award of attorneys' fees should be "capped" at $7,500, which is approximately one-third of the lost wages award.

The NHCHR reasoned that limiting the amount of attorneys' fees based on the amount of damages would have "a chilling [dissuading] effect on any claimant's ability to find legal representation on a contingent or hourly deferred fee basis for discrimination cases that are worthy but entail insufficient damages."

The 1st Circuit's Diaz decision supports the NHCHR's rationale and paves the way for disparities between the amount of attorneys' fees and damages awards. Professional Therapy Services appealed the NHCHR's decision to Merrimack County Superior Court. The appeal is scheduled for a hearing in April.

Bottom line

Litigation is expensive, and prolonged litigation can result in substantial attorneys' fees in even simple cases. When planning your response to a claim, keep in mind that an award of attorneys' fees could increase the price tag substantially.

Kate DeForest (kdeforest@sulloway.com) is an associate of Sulloway & Hollis, PLLC.


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