Can a district court’s decision that does not resolve a request for contractual attorney’s fees be a “final decision” under 28 U.S.C. § 1291?
On June 17, 2011, a federal district court issued a decision on a dispute between Ray Haluch Gravel Company and the Central Pension Fund (“CPF”). Although this order addressed the central issue of whether or not Haluch owed certain contributions to CPF, it did not address attorney’s fees and costs. The district court issued a second order on June 25, 2011 on attorney’s fees and costs. CPF filed an appeal on both orders, but the thirty day statute of limitations for notice of appeal had expired on the first order. The First Circuit accepted the appeal, stating that the first order was not a “final judgment” under 28 U.S.C. § 1291 because the contractual attorney’s fees decided in the second order were an issue on the merits, rendering the second order the final judgment. Haluch argues that under Budinich v. Becton Dickinson & Company, attorney’s fees should always be considered collateral to the merits, and a separate judgment on the merits should be considered final. CPF argues that Budinich applies only to statutory fees, which are considered costs, whereas contractual fees are considered damages and therefore part of the merits, rendering any judgment that does not resolve an issue concerning the merits—i.e., damages in the form of contractual fees—a non-final judgment. The Court’s decision will clarify what constitutes a “final judgment” and guide litigants seeking to make timely appeals.
Questions as Framed for the Court by the Parties
In Budinich v. Becton Dickinson & Co., 486 U.S. 196 (1988), this Court held that a district court’s decision on the merits that left unresolved a request for statutory attorney’s fees was a “final decision” under 28 U.S.C. § 1291. The question presented in this case, on which there is an acknowledged conflict among nine circuits, is whether a district court’s decision on the merits that leaves unresolved a request for contractual attorney’s fees is a “final decision” under 28 U.S.C. § 1291.
Petitioner Ray Haluch Gravel Company (“Haluch” or “the Company”) began as a gravel company and later became a landscape supply company. See Cent. Pension Fund of Int’l Union of Operating Engineers & Participating Employers v. Ray Haluch Gravel Co., 695 F.3d 4 (1st Cir. 2012). Starting in 1988, the Company began entering into a series of collective bargaining agreements (“CBA”) with the Central Pension Fund of the International Union of Operating Engineers, Local 98 (“CPF”). See id. In June 2005, Haluch entered into a CBA that obligated it to contribute to the Central Pension Fund’s union-benefit funds. See Brief for Petitioner, Ray Haluch Gravel Company, et al. at 5. The agreement also required that “[a]ny costs, including legal fees, of collecting payments due these Funds shall be borne by the defaulting Employer.” See id. Until 2006, Haluch believed that it was only required to make payments on behalf of its employee Todd Downey. See id. However, after conducting an audit, CPF demanded contributions on behalf of an employee named Martin Jagodowski as well as additional unidentified employees. See id. Haluch refused to make these payments. See id.
CPF sued Haluch in the United States District Court for the District of Massachusetts on September 25, 2009 to recover benefit-plan contributions under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq. and the Labor-Management Relations Act of 1947, 29 U.S.C. §§ 141 et seq., arguing that Haluch failed to pay contributions on behalf of Jagodowski and the unidentified employees. See Brief for Petitioner at 5. On April 4, 2011, CPF filed a motion for attorney’s fees and costs sought under the CBA and ERISA for a total of $143,600.44. See id. at 6.
The district court found that CPF was entitled to recover contributions from Haluch on behalf of employee Jagodowski but not for hours worked by unidentified employees. See id. at 6-7. The court awarded CPF a total of $34,688.15 in attorney’s fees and costs. See id. at 6–7. On August 15, 2011, CPF filed a notice of appeal on the district court’s order addressing remittances (June 17, 2011) and its order addressing attorney’s fees (July 25, 2011). See id. Although the notice was filed within 30 days of the district court’s decision on attorney’s fees, CPF did not file the notice within 30 days of the decision on remittances. See id. Haluch cross-appealed. See id.
The United States Court of Appeals for the First Circuit first addressed its jurisdiction and determined that the issue turns on whether CPF’s notice of appeal for the judgment on remittances was timely, which, in turn, depends on whether that judgment was a final judgment. See Cent. Pension Fund of Int’l Union of Operating Engineers & Participating Employers v. Ray Haluch Gravel Co., 695 F.3d 1, 9 (1st Cir. 2012). The First Circuit determined that it had jurisdiction to review both the judgment on remittances and the order addressing attorney’s fees. See id. at 10. The court vacated both decisions and remanded them for further proceedings. See id. The court determined that, because it had already decided that CPF’s attorney was entitled to some level of payment for his work despite being unsuccessful, an important factor in the district court’s decision had changed, and the attorney’s fees needed to be recalculated. See id.
The Supreme Court will address a circuit split over the status of a court decision that does not resolve a request for contractual attorney’s fees. The Court will determine whether such a decision can be treated as a final decision.
A CLEAR TEST FOR THE LOWER COURTS
Haluch argues that the First Circuit’s ruling, which distinguishes between statutory and contractual fees, directly conflicts with the Supreme Court’s ruling in Budinich v. Becton Dickinson & Co., which held that generally, attorney’s fees are not part of the merits even when the law deems the fees are part of the merits in a particular case. See Brief for Petitioner at 11. Haluch claims that the Supreme Court made this determination in an effort to create consistency in the law and to prevent the status of fees from being altered on a case-by-case basis. See id. Haluch argues that a ruling in favor of CPF would destroy the bright-line rule developed in Budinich and create a new rule that would be hard for courts to apply consistently. See id. at 13.
CPF counters that the rule Haluch suggests fails to distinguish between auditor’s fees and attorney’s fees, which creates more uncertainty. See Brief for Respondents, Cent. Pension Fund of the Int’l Union of Operating Engineers and Participating Employers, et al. at 38. By treating contractual attorney’s fees differently than contractual fees, CPF asserts, the rule supported by Haluch would create more uncertainty over the finality of judgments concerning damages based on professional fees. See id. Accordingly, CPF claims, this type of rule could risk parties’ right to appeal if they “guess wrong” on whether a professional fee is covered by Haluch’s proposed rule in this case. See id. Additionally, CPF argues that Haluch’s rule encourages piecemeal appeals, a practice that Congress has strongly opposed. See id. at 39. In Haluch’s view, piecemeal appeals threaten trial judges’ independence, potentially block meritorious claims by increasing costs of litigation, and are inefficient. See id. at 39–40.
This case concerns the finality of decisions that leave unresolved requests for attorney’s fees. The Supreme Court will decide whether courts should consider attorney’s fees (1) a collateral matter, and therefore lacking impact on whether a judgment is a final decision that can be reviewed by an appellate court, or (2) an intrinsic part of the merits of a case impacting whether or not a decision is final.
Under 28 U.S.C. § 1291, only judgments that are “final decisions” can be reviewed by appellate courts. See Brief of Petitioner at 1. In Budinich v. Becton Dickinson & Company, the Supreme Court ruled that a decision on the merits that left attorney’s fees unresolved was still a “final decision” under the statute. See id. at 11. However, Budinich addressed only fees stemming from statutory provisions, not contractual provisions. See Brief of Respondent at 3.
Haluch argues that a contractual fee award should always be collateral because nothing in Budinich indicates that the source of justification for the fees—i.e., whether the fees are statutory or collateral—should change how they are treated by the court. See Brief of Petitioner at 16. Haluch also argues that Budinich offers a bright-line rule which provides for predictability, consistency, and clarity, which are judicial objectives. See id. at 12.
CPF counters that the source of justification determines whether the fees are statutory costs, and therefore inconsequential to final judgment, or contractual damages, which must be resolved with the merits. See Brief of Respondent at 3. CPF contends that either (1) contractual damages should always be considered part of the merits in order to ensure these objectives, or (2) fees that are not associated with litigation should be considered part of the merits in order to enforce a fair rule on final decisions. See Brief of Respondent at 12–13, 42–43.
SHOULD COURTS TREAT STATUTORY AND CONTRACTUAL DAMAGES DIFFERENTLY?
Haluch argues that as a general matter a claim for attorney’s fees is not part of the merits of a claim unless a statute that creates the fees expressly states that they should be a part of the merits. See Brief of Petitioner at 16. Haluch claims that this understanding prevents a case-by-case interpretation of what is and is not “part of the merits.” See id. at 16–17. According to Haluch, this definition of the merits derives from Budinich’s sweeping language and broad scope, which applies to both statutory and contractual fees, even though Budinich only clearly addressed statutory fees. See id. at 18. Haluch emphasizes that the source of justification behind the awarded fees is irrelevant because the substantive issues a court determines are more important than any distinction between contractual and statutory fees. See id. at 19 (citing Exch. Nat’l Bank v. Daniels, 763 F.2d 286, 292–3). Because Budinich rejects the distinction between fees that are part of the merits and fees that are not part of the merits, Haluch claims that courts should group all types of fees together and consider them collateral issues that do not have to be decided for a final decision. See id. at 23.
CPF counters that attorney’s fees that arise from contractual obligations must be treated as part of the merits because there is a clear difference between costs and damages. See Brief of Respondent at 12. CPF distinguishes damages, a form of relief that makes an injured party whole, from costs, which courts award for statutory and practical reasons. See id.CPF acknowledges that collateral issues are an exception to the final judgment rule and do not restrain a court from issuing a final decision, but argues that this exception is narrow and should not apply to contractual damages. See id. at 18. CPF points out that a final decision must resolve all claims on the damages. See id. at 19. Moreover, CPF contends that contractual fees arise out of contract obligations and therefore must be treated separately from statutory fees that are discussed in Budinich. See id. at 21. Accordingly, CPF argues that the rationale in Budinich justifies treating contractual fees differently from statutory fees because that court held that it must be indisputable that the fees are not part of the merits, whereas contractual fees are clearly part of the merits. See id. at 25.
WHICH RULE PROVIDES PREDICTABILITY AND CLARITY?
Haluch argues that the First Circuit’s rule—that contractual fee awards are sometimes collateral—creates inconsistency, and is therefore incorrect. See Brief of Petitioner at 12. Haluch asserts that the First Circuit rule depends on a vague distinction between fees that are part of the merits and those that are not part of the merits. See id. at 23. According to Haluch, the Budinich court determined that a court should be able to render a final decision even if the question of whether or not outstanding fees are part of the merits has not been answered. See id. at 24. Haluch contends that fees should not be considered important when determining the finality of a decision. See id.
CPF counters that the rule set forth in Budinich requires that contractual fees be treated as damages and thus be decided as part of the merits. See Brief of Respondent at 32. Nothing in Budinich, CPF contends, requires a departure from the rule that all genuine merits claims must be decided in order to render a final judgment. See id. at 34–35. CPF argues that the logic in Budinich lends itself to a clear separation of contract and statutory fees based on the merits/non-merits distinction; because a contract that gives rise to damages deems those damages important, that issue that must be resolved by the court. See id. at 35.
Haluch also argues that the First Circuit’s rule will be difficult to apply because some types of fees can be a hybrid of both merit and non-merit relief. See Brief of Petitioner at 26. Haluch points out that the Third Circuit has reached conflicting results when applying a similar rule, and states that Budinich requires a clear and practical rule that will result in consistent results. See id. at 30. Haluch asserts that pre-litigation fees will be minimal, so these should not be treated differently than any other type of fee, and that all fees should be considered collateral. See id. at 29.
CPF argues that a contract claim is easily distinguishable from a statutory fee claim, and that the First Circuit’s rule will not create inconsistent results. See Brief of Respondent at 35. To the contrary, CPF argues that Haluch’s proposed rule would create piecemeal appeals, thereby yielding inconsistent and fractured results. See id. at 39. Haluch asserts that in order to render a final judgment, all of the issues based on the merits must be decided, and those issues should be dispensed with by one appeal. See id. at 41–42. CPF further argues that any judgment that leaves open an issue discussing fees not related to litigation cannot be final. See id. at 42. According to CPF, no matter the size of these types of fees, a rule that requires non-litigation fees to be part of the merits will allow these issues to be decided fairly and appealed as part of the merits. See id. at 46–47.
In this case, the Supreme Court will decide whether contractual fees should be considered differently than statutory fees in determining whether a judgment is a “final judgment.” Haluch argues that courts should always consider contractual fees collateral to the merits, thereby rendering final a judgment on the merits that does not address contractual fees. CPF argues that courts should consider contractual fees as damages, not costs, and therefore should consider such fees as part of the merits. This approach would render any judgment that fails to resolve the issue of fees non-final. This ruling may define the reach of the Budinich test, impacting when plaintiffs can bring appeals on decisions concerning attorney’s fees.
- Alison Frankel, Reuters, Supreme Court to Resolve Circuit Split on Timing of Appeals (June 18, 2013).