Kitchen, Delores v. TTX Company

In the
United States Court of Appeals
For the Seventh Circuit

Nos. 01-1953, 01-2396, 01-1936 & 01-2494

Delores Kitchen, Rose Carey, Sondra
Caple, Yvette Ruth, Theodora Alexander,
Marion Washington, Gayle Allen, Cheryl
Carter, Dorothy Tatem, Martha Baylor,
and Deborah Brown,

Plaintiffs-Appellees,
Cross-Appellants,

v.

TTX Company,

Defendant-Appellant,
Cross-Appellee.

Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 97 CV 5271--Wayne Andersen, Judge.

Argued February 14, 2002--Decided March 20, 2002

Before Flaum, Chief Judge, and Bauer and
Evans, Circuit Judges.

Flaum, Chief Judge. The appellees
("plaintiffs") filed suit against the
appellant ("TTX") alleging employment
discrimination. After contentious
litigation, the plaintiffs accepted
separate Rule 68 offers of judgment to
settle their claims against TTX. The
parties, however, were unable to resolve
the amount of attorneys’ fees and costs
to be awarded to plaintiffs’ counsel. The
district court, after conducting several
days of hearings, awarded the plaintiffs
over $1.1 million in attorneys’ fees and
costs. Pursuant to a second fee petition,
the plaintiffs were awarded an additional
sum of $70,005.50 in fees and costs. TTX
has filed the instant appeal contesting
the propriety of the district court’s
award. For the reasons stated below, we
affirm in part and vacate and remand in
part the decisions of the district court.

I. BACKGROUND

In late 1997, three African-American
females filed suit against TTX
Corporation alleging race and sex
discrimination, retaliation and
intentional infliction of emotional
distress./1 The gravamen of the
plaintiffs’ complaint was that TTX
employed discriminatory practices in the
training and promotions of employees. On
December 2, 1997, the plaintiffs filed an
amended complaint joining eight
additional African-American females to
their action, bringing the total number
of plaintiffs to eleven. As in the
initial complaint, the claims concerned
race and sex discrimination, retaliation,
and the intentional infliction of
emotional distress.

The majority of discovery in this matter
was conducted between January and
September of 1998. In October, TTX filed
a motion for summary judgment against one
of the plaintiffs, Yvette Ruth. This
motion was granted in part and denied in
part by the district court. In June of
1999, TTX filed summary judgment motions
against the remaining ten plaintiffs. The
district court never issued a ruling with
respect to those motions.

In August of 1999, the plaintiffs
submitted a settlement demand to TTX. The
plaintiffs demanded a lump-sum payment of
$4.7 million. The plaintiffs did not
disclose how this amount would be divided
and did not specify whether the
settlement demand included attorneys’
fees. TTX rejected this overture and
countered with settlement offers for each
of the individual plaintiffs. In
addition, TTX provided that attorneys’
fees paid pursuant to any settlement
could not exceed $200,000. The plaintiffs
rejected TTX’s counteroffer and the case
was scheduled for trial on May 21, 2000.

Approximately three months prior to the
commencement of the trial, the plaintiffs
made several different settlement demands
to TTX. First, on February 3, 2000, the
plaintiffs demanded a $1.75 million lump-
sum settlement payment, as well as other
non-monetary provisions (e.g., the
bridging of pensions and the extension of
COBRA benefits for certain plaintiffs).
The plaintiffs did not specify whether
the February 3rd offer included the
payment of attorneys’ fees. TTX rejected
the plaintiffs’ demand and responded with
a counteroffer that stipulated, inter
alia, that attorneys’ fees paid pursuant
to any settlement should be capped at
$400,000.

On February 9, 2000, the plaintiffs
rejected TTX’s counteroffer and responded
with another settlement demand. In the
February 9th demand, the plaintiffs
requested a lump-sum payment of $1.4
million, the bridging of pension benefits
and the extension of COBRA benefits for
certain plaintiffs. The plaintiffs
refused, however, to cap the attorneys’
fees payable under any settlement. TTX
again rejected the plaintiffs’ demand.

On February 18, 2000, the plaintiffs
once more presented TTX with a settlement
demand. In this offer, the plaintiffs
lowered their lump-sum settlement figure
to $1.25 million, with similar pension
bridging and extension of COBRA benefits
for certain plaintiffs. The plaintiffs
also sought $1.4 million in attorneys’
fees and $81,000 in costs. TTX rejected
the plaintiffs’ last offer and instead,
on March 2, 2000, presented separate Rule
68 offers of judgment to each of the
eleven plaintiffs./2 The offers of
judgment ranged from $20,000 to $160,000
in value, with the lump-sum amount coming
to $610,000, including pension bridges
and extensions of COBRA benefits. The
plaintiffs accepted their respective
offers of judgment. While their
acceptance of TTX’s offers of judgment
terminated the plaintiffs’ claims, the
issue of attorneys’ fees and costs
remained unresolved.

Shortly after the acceptance of the
various offers of judgment, the
plaintiffs presented their petition for
attorneys’ fees and costs to the district
court. In their petition, the plaintiffs
requested over $1.3 million in fees and
over $54,000 in costs. The district court
scheduled and then conducted four days of
hearings pursuant to the plaintiffs’
petition. At the conclusion of these
hearings, the district court made several
determinations. First, the district court
concluded that, although some of the
plaintiffs had settled for less money
than had been offered initially by TTX,
all of the plaintiffs were substantially
compensated and that the settlements they
received were not for "nuisance value."
After making this conclusion, the
district court determined the hours
reasonably expended by the plaintiffs’
attorneys on the litigation and then
multiplied that figure by a reasonable
hourly rate./3 In addition, the
district court undertook an extensive
examination of the costs incurred by the
plaintiffs. After conducting these
inquiries, thedistrict court concluded
that plaintiffs were entitled to receive
$1,096,412.60 in attorneys’ fees and
$51,357.66 in costs and expenses.

Subsequent to the district court’s
decision, the plaintiffs filed an
additional petition to recoup the
attorneys’ fees and costs that were
generated in preparation for the hearings
on the first petition. The district court
entered judgment against TTX in the
amount of $70,005.50.

TTX now appeals the awards of fees and
costs granted by the district court.
According to TTX, the district court com
mitted legal error in awarding the
plaintiffs the abovementioned fees and
costs and that the district court abused
its discretion in determining the hourly
rates to be paid to certain plaintiffs’
counsel. The plaintiffs have also filed a
cross-appeal contesting the lodestar rate
determined by the district court.

II. DISCUSSION

Because an award of attorneys’ fees
"generally is fact based," we review such
awards for abuse of discretion. Dunning
v. Simmons Airlines, 62 F.3d 863, 872
(7th Cir. 1995).

A plaintiff who has accepted an offer of
judgment presented by a defendant can, in
certain circumstances, recoup his fees,
if that plaintiff is a prevailing party
and his recovery is not insubstantial.
See, e.g., Fletcher v. City of Fort
Wayne, 162 F.3d 975, 977 (7th Cir. 1998).
In other words, a plaintiff who recovers
a pittance (or whose relief amounts to a
pittance) is not entitled to recover the
entirety of his attorneys’ fees merely
because he was technically the victor in
a particular cause of action. See Hensley
v. Eckerhart, 461 U.S. 424 (1983).

In its appeal, TTX does not dispute that
the plaintiffs were technically
prevailing parties. See Fletcher, 162
F.3d at 976 ("[a] plaintiff who recovers
minimal damages technically prevails . .
. ."). Rather, TTX claims that the
district court’s award of fees and costs,
when viewed in tandem with the settlement
received, unjustifiably compensates the
plaintiffs’ attorneys for a de minimis or
nuisance value victory./4 We have
reviewed the district court’s
determinations and cannot conclude that
it abused its discretion in determining
that the plaintiffs received substantial
compensation for their claims and,
therefore, were entitled to recoup
reasonable attorneys’ fees.

The district court conducted four days
of hearings on the issue of attorneys’
fees. During the course of these
hearings, the district court allowed for
ample testimony and briefing. After
examining the value of the settlements
received by the plaintiffs, the district
court determined that they were more than
nuisance value, in part, because "they
were well above the costs of defense at
the time they were made," and "the
defendant included some anticipated risk
of loss when setting the amount of the
offers." Kitchen, et al. v. TTX Corp., 97
CV 5271, slip op. at 4 (N.D. Ill. January
16, 2001). Furthermore, the district
court concluded that the "final offers of
judgment made by TTX included substantial
concessions by TTX" with respect to
demands for plaintiff confidentiality and
the cessation of other claims. Id.

This court has stated that a "compromise
for less than the costs of defense is a
good working definition of a nuisance-
value settlement . . . ." Fletcher, 162
F.3d at 976. In light of the district
court’s finding that the offers extended
by TTX exceeded the anticipated costs of
defense (as well as its findings
regarding other concessions made by TTX),
we find that the district court did not
abuse its discretion in determining that
the plaintiffs had made a substantial
recovery in accepting TTX’s offers of
judgment.

TTX also asserts that the district court
abused its discretion in determining the
hours reasonably expended by the
plaintiffs’ counsel and the lodestar rate
with respect to attorneys Gregory Gorman
and Catherine Caporusso. Similarly, the
plaintiffs have filed a cross-appeal,
disputing the lodestar rate set by the
district court for attorneys Gorman and
Caporusso. As with the district court’s
findings on the success of the
plaintiffs’ claims, we do not find that
the district court abused its discretion
in its assessment of the hours expended
by plaintiffs’ counsel or in the
calculation of the lodestar rate. With
regard to the hours worked by plaintiffs’
counsel, the district court engaged in a
thorough examination of the time slips
generated and the necessity of each task.
Similarly, in calculating the lodestar
for Mr. Gorman and Ms. Caporusso, the
district court examined the experience
level of each attorney and their
comparative market values to determine
the respective hourly rates of $240 and
$185 per hour. See McNabola v. Chicago
Transit Authority, 10 F.3d 501, 519 (7th
Cir. 1993) (market rate or value is "the
rate that lawyers of similar ability and
experience in the community normally
charge their paying clients for the type
of work in question."). In light of the
time and care that the district court
took to make these findings, it is clear
that it acted within the bounds of its
discretion.

Lastly, the district court awarded
several thousand dollars in costs and
expenses to the plaintiffs./5 Upon
reviewing the district court’s opinions,
as well as the record below, it is
unclear whether the plaintiffs were
awarded costs for work performed by
unpaid interns working in the offices of
plaintiffs’ attorneys. We would consider
it highly unusual for a district court to
order a defendant to pay for work that
was performed at no cost to a plaintiff
or to his attorneys. Therefore, we vacate
the district court’s award of costs and
remand this matter to this district court
to determine the amount of costs that
were generated by unpaid interns. If, on
remand, the district court determines
that such costs should be awarded, it
should supply some reasoning justifying
that conclusion.

III. CONCLUSION

For the foregoing reasons, we Affirm in
part and Remand in part the decisions of
the district court.

FOOTNOTES

/1 One plaintiff, Sondra Caple, also asserted a
claim for sexual harassment.
/2 An offer of judgment made pursuant to Federal
Rule of Civil Procedure 68 allows a defendant in
an action to make a settlement offer to a plain-
tiff and "if the judgment finally obtained by
[the plaintiff] is not more favorable than the
offer, the [plaintiff] must pay the costs in-
curred after the making of the offer." Fed.R.
Civ.P. 68.

/3 The district court determined that the plain-
tiffs’ attorneys, H. Candace Gorman, Gregory
Gorman and Catherine Caporusso, should be compen-
sated for 1560 hours, 1223.22, and 1712 hours of
work respectively. The district court also deter-
mined that H. Candace Gorman was entitled to an
hourly rate of $295, and that Gregory Gorman and
Catherine Caporusso were entitled to hourly rates
of $240 and $185 respectively.

/4 In the words of TTX, "[a] jackpot fee award for
achieving only limited success is insupportable."
Appellant’s Br. at 31.

/5 On January 16, 2001, the district court awarded
$51,357.60 in costs and expenses. On May 23,
2001, the district court awarded the plaintiffs
$701.10 "in costs for copying, transcripts and a
trial exhibit." Kitchen, et al. v. TTX Corp., 97
CV 5271, slip op. at 4 (N.D. Ill. May 23, 2001).