Supreme Court Rejects "Catalyst Theory" as Basis for Award of Attorneys Fees(The Employment Law Department)
July 3, 2001
On May 29, 2001, a sharply divided Supreme Court interpreted the term "prevailing party" for purposes of federal fee-shifting statutes. Buckhannon Board and Care Home, Inc. v. West Virginia Department of Health and Human Resources, 121 S.Ct. 1835 (2001). In its 5-4 decision, the Court resolved a split in the Circuits by rejecting the widely-accepted "catalyst theory" as a viable basis for an award of attorneys' fees and ruling that a party must obtain a judgment on the merits or a court ordered consent decree to obtain fees under the Fair Housing Amendments Act of 1988, 42 U.S.C. § 3601 et seq. ("FHAA"), or the Americans with Disabilities Act of 1990, 42 U.S.C. § 12101 et seq. ("ADA").
The dispute began when Buckhannon, which operates assisted living care facilities, failed a West Virginia state fire inspection because its residents were not capable of removing themselves from situations involving imminent danger, such as fire. Buckhannon filed suit against West Virginia, alleging that this "self-preservation" fire regulation discriminated against persons with disabilities in violation of the FHAA and the ADA. While the suit was pending, however, West Virginia amended its fire regulations by removing the self-preservation requirement, and the District Court dismissed Buckhannon's case as moot.
After the case was dismissed, Buckhannon sought attorneys' fees from West Virginia under those sections of the FHAA and ADA that allow a court, in its discretion, to award reasonable attorneys' fees and costs to the "prevailing party." See 42 U.S.C. § 3613(c)(2); 42 U.S.C. § 12205. Specifically, Buckhannon contended that it was a "prevailing party" under the "catalyst theory" - i.e., it achieved its desired result (removal of the self-preservation regulation) because its lawsuit brought about a voluntary change in the defendant's conduct. The District Court for the Northern District of West Virginia denied Buckhannon's motion for attorney's fees. The Fourth Circuit affirmed.
The Supreme Court affirmed the lower court's decisions, and upheld the denial of Buckhannon's motion for attorney's fees. The Court acknowledged the well-established "American Rule" whereby litigants are ordinarily required to bear their own attorneys' fees and the prevailing party is not entitled to collect its fees from the loser. The Court further explained that the federal courts follow this rule "absent explicit statutory authority" to the contrary. With this framework in place, the Court then turned to the issue of whether the catalyst theory fit within the term "prevailing party" for purposes of the federal fee-shifting statutes.
Answering this question in the negative, the Court concluded that, in order for a litigant to be considered the "prevailing party" under the FHAA and ADA, there must be a "Court ordered change in the legal relationship between the plaintiff and the defendant." Moreover, it ruled that its prior decisions clearly establish that only enforceable judgments on the merits and court-ordered consent decrees create the "material alteration of the legal relationship of the parties" necessary to permit an award of attorneys' fees. Thus, the Court concluded that the "catalyst theory" fell outside the scope of its clear definition of prevailing party because it included no judicially sanctioned change in the legal relationship of the parties - "a defendant's voluntary change in conduct, although perhaps accomplishing what the plaintiff sought to achieve by the lawsuit, lacks the necessary judicial imprimatur on the change" that is required to ordain a "prevailing party" worthy of an award of fees.
Justices Ginsburg, Stevens, Souter, and Breyer dissented from the Court's opinion. The four Justices explained that the Court's limited definition of "prevailing party" upset long-existing precedent in virtually all federal Circuits as to many federal fee-shifting statutes. The Justices further opined that denying plaintiff attorney's fees would allow a defendant to avoid its obligation to pay counsel fees by simply altering its conduct (and mooting the dispute) before the lawsuit is resolved, and will discourage plaintiffs with limited resources from even bringing such lawsuits. Beyond these concerns, the dissenters further explained that a fair reading of the FHAA and ADA, in light of Congress' intent to encourage private enforcement of laws designed to advance civil rights, dictates that a party "prevails" when, by instituting litigation, he or she achieves "the practical relief sought in his or her complaint." Thus, the dissenters expressed their opinion that the statutes in question should allow for court-awarded fees when the party's lawsuit vindicates rights Congress sought to secure, regardless of whether the resolution of the matter is registered in the courts.
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