The Fourth Circuit reversed the denial of attorneys fees by the District Court, finding that while only nominal actual damages were awarded, attorneys fees were still allowed.
The Court of Appeals held that while Farrar v. Hobby, 506 U.S. 103 (1992) and Mercer v. Duke Univ., 401 F.3d 199 (4th Cir. 2005) held that when a Plaintiff "received only nominal damages, 'the only reasonable fee is . . . no fee at all.'” Quotiing Farrar, 506 U.S. at 115.
This, however, is an incomplete analysis, as the Farrar-Mercer test instructs a court to consider:
(1) the degree of the plaintiff’s overall success,
(2) the significance of the legal issue on which the plaintiff prevailed, and
(3) the public purpose served by the litigation. Farrar, 506 U.S. at 122 (O’Connor, J., concurring); Mercer
While in Farrar and Mercer the Plaintiffs had sought large monetary awards and only received nominal damages, in the instant case, the Plaintiff had sought injunctive relief and the Defendant made substantial regulatory changes.
The District Court rejected this as a basis for attorney's fees, relying on the Supreme Court's rejection in Buckhannon Board & Care Home, Inc. v. West Virginia Dept of Health & Human Services, 532 U.S. 598, 610 (2001), of the "catalyst theory", i.e. that the lawsuit was the catalyst for a change in defendant's conduct. the 4th Circuit distinguished the instant case from Buckhannon as here the Plaintiffs were actually the prevailing party and because the change actually resulted from the Court approved "binding judicial undertaking" between the parties.
Further, the Court of Appeals held that the second Farrar-Mercer factor did not require that the case be "groundbreaking" or "novel", instead only of "general legal importance".
Why would this be of interest in bankruptcy and consumer rights matters? Many courts have struggled with the award of attorneys' fees where there has only be a "technical" violation of the automatic stay, a prime example being the car creditor who refuses to deactivate a "kill switch" during the pendancy of a Chapter 13 bankruptcy, forcing the Debtor to obtain reactivation codes on a weekly basis. This leaves attorneys in a bind between an obligation to mitigate damages and the need to have damages to get paid for prosecuting bankruptcy protections.
Project Vote stands for the proposition that obtain injunction relief in furtherance of important legal principals can result in the award of attorneys' fees even with only nominal actual damages.
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