Sunday, February 28, 2010

Attorney Fee Recovery and Federal Rule 68

Federal Rule of Civil Procedure 68 provides for cost shifting if: (1) the defendant serves a settlement offer on the plaintiff more than 10 days before trial; (2) the plaintiff does not accept the offer within 10 days of its service; and (3) the judgment ultimately received is less favorable to the plaintiff than the offer. In such a case, the litigation costs incurred by the defendant after the offer was made must be payed by the plaintiff. At first blush, this Rule appears to only apply to the general class of litigation costs (filing fees and the like) that pale in comparison to the expense of attorney fees. However, in certain cases, it can have a dramatic effect on the ability of the victorious plaintiff to recover otherwise available attorney fees from the defendant.

The key factor in determining the impact of Rule 68 on Attorney Fee Recoveries is the source of the authority for fee shifting in the underlying case. For example, if the authority for fee shifting is a statute that provides for the recovery of attorney fees as a part of costs, then Rule 68 can operate to cut off the shifting of fees under the fee shifting provisions of the statute for services performed in the post offer period.

The rule will operate this way even if the offer exceeds the judgment by a tiny amount, and even if the judgment was brought lower than the offer by the closest of legal questions or factual determinations. On the other hand, courts may consider the intrinsic value of certain forms of injunctive relief when deciding whether the value of the judgment exceeded the value of the offer.

Notably, even where the underlying fee shifting statute does not define attorney fees as an element of costs, the improvident rejection of a Rule 68 offer could have a deleterious effect where the statute merely provides that the court may award the plaintiff attorney fees, or gives the court broad discretion in quantifying the award. On the one hand, the court must be mindful that the fee shifting provisions of statutes are designed to encourage and enable plaintiffs to bring meritorious suits that they otherwise could not afford. At the same time, however, the court could be sympathetic to the plaintiff in a case where the defendant's post offer work resulted in a relative loss to the defendant (i.e. where the post offer work cost the defendant more than the difference between the parties' settlement positions).

The take away here is that, in any federal case involving a fee shifting statute, it is important to understand how Rule 68 can affect the plaintiff’s ability to recover attorney fees.

The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.

Monday, February 8, 2010

RICO Enterprises and Associations in Fact

This blog entry continues my discussion of the circumstances under which you may procede with a civil RICO suit. As discussed in prior entries, civil RICO provides for, among other things, the recovery of attorney fees.

Where the alleged RICO enterprise is not a legal entity, but an association-in-fact, plaintiff must show: (1) that there exists or existed an organization, whether formal or informal; (2) that the various associates of the organization function or functioned as a continuing unit; and (3) that the organization has or had an existence separate and apart from the pattern of racketeering activity. Such an enterprise need not have a chain of command. It may make its decisions on an ad hoc basis, by any number of methods, including general consensus. The requirement that the organization (i.e. the RICO enterprise) have an existence apart from the pattern of racketeering activity simply means that the alleged enterprise must: (1) be more than an association of individuals conducting the normal business functions of a corporation; and (2) have some level of existence beyond what is necessary to engage in the alleged acts of racketeering. However, it is not necessary that the enterprise have any function wholly unrelated to the racketeering activity.

Because the rules that require pleading the organization’s identity, its mode of functioning, and its existence apart from the racketeering activity appear more onerous than they are, defendants often attack the adequacy of plaintiff’s pleadings on those specific requirements. However, where a true association-in-fact exists, there is usually a basis for at least tentatively asserting enough about how it operates to get past this defense. Of course, if the plaintiff does not have sufficient facts to allege these requirements, defendant’s counsel should waste no time moving for a quick dismissal.

For authorities supporting the above discussion, see e.g., Boyle v. United States, 129 S.Ct. 2237, 2245 (2009); United States v. Turkette 452 U.S. 576, 583 (1981); United States v. Console, 13 F.3d 641, 651-651 (3rd Cir. 1993).

The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.