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First Circuit: Rejection of Settlement Offer Does Not Justify Defendants’ Attorney Fee Award

On September 7, 2012, the First Circuit Court of Appeals vacated a $59,787.50 attorney fee award to the defendants in a 42 U.S.C. § 1983 complaint, finding that the plaintiffs’ rejection of a settlement offer did not render their claims unreasonable.

Three former employees of the Commonwealth of Puerto Rico filed suit in federal court in 2006, alleging that they were subjected to political discrimination in violation of the U.S. Constitution and the laws and Constitution of Puerto Rico. The plaintiffs sued three direct supervisors, Mayor Jaime H. Barlucea-Maldonado and the Municipality of Adjuntas for damages and declaratory and injunctive relief.

After some individual capacity claims were dismissed, the district court granted the supervisory defendants’ motion for summary judgment, but denied the Mayor’s and municipality’s motions.

On January 19, 2010, the first day of trial, the municipality and Mayor offered to enter into settlement negotiations. Those negotiations ultimately failed and the case proceeded to trial. On January 27, 2010, the jury returned a verdict in favor of the remaining defendants.

The municipality then moved for an attorney fee award pursuant to 42 U.S.C. § 1988(b), claiming that the plaintiffs’ claims were “totally unfounded” and “frivolous.” The district court held that the claims against the Mayor and municipality were not frivolous or unreasonable under Sullivan v. Sch. Bd., 773 F.2d 1182 (11th Cir. 1985). Nevertheless, the court awarded attorney fees of $59,787.50, apparently finding that once the plaintiffs had refused “to accept what the district court characterized as a ‘sound settlement offer,’” the plaintiffs’ claims “became unreasonable.”

On appeal, the First Circuit noted that “Parties to civil litigation are generally responsible for their own attorney’s fees under the so-called ‘American Rule.’ However, ‘[f]or private actions brought under 42 U.S.C. § 1983 and other specified measures designed to secure civil rights, Congress established an exception’” with respect to claims that are “frivolous, unreasonable, or without foundation, even though not brought in subjective bad faith.”

The appellate court held, “The mere failure to accept even a ‘sound settlement offer’ does not convert a reasonable claim into a frivolous one. Neither the municipality nor the district court explained why the reasonable claims ... had become unreasonable or groundless by the time trial approached.” Therefore, the Court of Appeals concluded that the defendants’ attorney fee award “constituted ‘a clear error of judgment.’”

The district court’s order was vacated and the case remanded for a determination of any attorney fee award applicable to two of the plaintiffs’ claims that the First Circuit found were frivolous or unreasonable at the time the complaint was filed. See: Torres-Santiago v. Municipality of Adjuntas, 693 F.3d 230 (1st Cir. 2012).

This ruling may be useful for prisoners who refuse to accept the often extremely low settlements offered by corrections officials, then subsequently lose their case and face a motion for an award of the defendants’ attorney fees.

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Related legal case

Torres- Santiago v. Municipality of Adjuntas