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"Catalyst Theory" is not a Valid Basis for Awarding Attorneys’ Fees in Federal Employment Discrimination/Civil Rights Cases

June 2001
By John Scalia, Esq., Greenberg Traurig, Tysons Corner Office

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The U.S. Supreme Court, on May 29, 2001, held that plaintiffs whose civil rights lawsuits have brought about a desired change in the defendant’s conduct, but have not resulted in a final judgment or court-ordered consent decree, do not have a valid statutory basis for receiving an award of attorneys’ fees. The Court’s decision in Buckhannon Board & Care Home, Inc. et al. v. West Virginia Department of Health and Human Resources, et al., No. 99-1484, ___ U.S. ___ (2001), resolved a conflict among the federal circuit courts, rejecting the "catalyst theory" that had been adopted by nine of those courts.

In Buckhannon, an assisted living facility in West Virginia, Bukhannon Board and Care Home, failed an inspection by the West Virginia fire marshal’s office because some of its residents were incapable of "self-preservation" as defined by state law. After receiving orders to close its operations, the Buckhannon facility brought suit in federal District Court against the State, seeking declaratory and injunctive relief that the "self-preservation" requirement violated the Fair Housing Amendments Act of 1988 (FHAA) and the Americans with Disabilities Act of 1990 (ADA). While the case was pending in District Court, the West Virginia Legislature enacted several bills eliminating the self-preservation provision contained in the state law. As a result, the District Court granted the State’s motion to dismiss the case as moot. The Buckhannon facility then asked the District Court for attorneys’ fees as the "prevailing party" under the fee-shifting provisions contained in the FHAA and ADA. The facility based its entitlement on the "catalyst theory," which holds that a plaintiff is a "prevailing party" if it achieves the desired result because the lawsuit brought about a voluntary change in the defendant’s conduct. The District Court denied the facility’s request for attorneys’ fees, following Fourth Circuit precedent refusing to recognize the catalyst theory. The Fourth Circuit affirmed the District Court’s decision, and the Supreme Court granted the facility’s petition for certiorari.

The Supreme Court affirmed the Fourth Circuit’s decision, holding that the catalyst theory is not a permissible basis for the award of attorneys’ fees under the FHAA and ADA. The Court held that "[I]n the United States, parties are ordinarily required to bear their own attorneys’ fees – the prevailing party is not entitled to collect from the loser." Under this "American Rule," courts follow a general practice of not awarding attorneys’ fees to a prevailing party absent explicit statutory authority. In noting that Congress has employed the phrase "prevailing party" as a legal term-of-art in numerous statutes authorizing awards of attorneys’ fees, the Court held that its prior cases defined a "prevailing party" as one who has been awarded some relief by a court. The Court pointed out that both judgments on the merits and court-ordered consent decrees create a material alteration of the parties’ legal relationship, thus permitting an award of attorneys’ fees; the catalyst theory, however, allows an award of attorneys’ fees where there is no judicially sanctioned change in the parties’ legal relationship. The Court concluded that a defendant’s voluntary change in conduct, although perhaps accomplishing what the plaintiff sought to achieve by filing the lawsuit, lacks the necessary judicial imprimatur on the change.

The Buckhannon decision is significant because it has broad application to civil rights and employment discrimination litigation, and because it clarifies a long-standing ambiguity in that area of the law. While the Court’s opinion only specifically addresses the fee-shifting provisions contained in the FHAA and ADA, the same analysis applies to numerous other federal anti-discrimination statutes – including Title VII of the Civil Rights Act of 1964, the Fair Labor Standards Act, the Age Discrimination in Employment Act and the Family and Medical Leave Act. It is now clear that in all federal employment discrimination litigation involving these statutes – regardless of the circuit in which the case may be brought – a plaintiff may not recover "prevailing party" attorneys’ fees in the absence of a judgment on the merits or a court-ordered consent decree.

The Buckhannon decision provides much-needed and long-overdue predictability for employers faced with federal discrimination claims. In those nine circuits that previously applied the catalyst theory, the Buckhannon decision now allows a defendant-employer considerably more flexibility and security in deciding whether to voluntarily change its conduct in accordance with a result sought by a plaintiff in a pending federal discrimination lawsuit. This issue frequently arises in the context of a plaintiff-employee alleging in a lawsuit that the defendant-employer’s employment policy or practice constituted unlawful discrimination under, for example, Title VII. Not infrequently, an employer faced with such a lawsuit might, notwithstanding its good faith belief in the legitimate, non-discriminatory nature of its policy, decide for business reasons that it makes sense to voluntarily change the challenged policy in the manner advocated by the plaintiff-employee. Before the Court’s Buckhannon decision, such an employer might reasonably decide against making that change simply because to do so would expose the company to a catalyst theory attorneys’ fee claim. And, to the extent the employer were to decide to proceed with the voluntary change, it would face a Hobson’s choice: Implement the change unilaterally, and risk the plaintiff seeking catalyst theory attorneys’ fees; or, implement the change as part of a negotiated settlement with the plaintiff, and risk the plaintiff exacting some monetary payment in return for waiving the catalyst theory attorneys’ fees claim. The Buckhannon decision brings an end to such untenable decisions, and has the positive effect of encouraging employers to voluntarily implement beneficial changes to their policies and practices without fear of having that decision turned against them in the form of an attorneys’ fees award under the now dead "catalyst theory."


© 2001 Greenberg Traurig

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