McGrath v. Toys "R" Us, Inc.

• Decision Date: 23 January 2004
• Docket Number: Docket No. 02-9308.
• Citation: 356 F.3d 246
• Parties: Donna McGRATH, Robert Jinks, a/k/a Tanya Jinks, a/k/a Tanya Medina, and Norbert Lopez, a/k/a Tara Lopez, Plaintiffs-Appellees, v. TOYS "R" US, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

356 F.3d 246

Donna McGRATH, Robert Jinks, a/k/a Tanya Jinks, a/k/a Tanya Medina, and Norbert Lopez, a/k/a Tara Lopez, Plaintiffs-Appellees, v. TOYS "R" US, INC., Defendant-Appellant.

Docket No. 02-9308.

United States Court of Appeals, Second Circuit.

Argued: September 22, 2003.

Decided: January 23, 2004.

Appeal from the United States District Court for the Eastern District of New York, Charles P. Sifton, J H. Nicholas Goodman, Quirk & Bakalor, P.C., New York, New York, for Defendant-Appellant.

Thomas D. Shanahan, Shanahan & Associates, P.C. (Anthony A. LoPresti, Davidson & LoPresti, L.L.P.; Marissa Goldfaden, on the brief), New York, New York, for Plaintiffs-Appellees.

Before: FEINBERG and RAGGI, Circuit Judges, McKENNA, District Judge.¹

RAGGI, Circuit Judge.

Defendant-Appellant Toys "R" Us, Inc., appeals from a judgment entered on October 22, 2002, in the United States District Court for the Eastern District of New York (Charles P. Sifton, Judge), awarding $193,551 in attorney's fees to Plaintiffs-Appellees Donna McGrath, Robert Jinks (also known as "Tanya Jinks" and "Tanya Medina"), and Norbert Lopez (also known as "Tara Lopez") pursuant to New York City Administrative Code § 8-502(f). Plaintiffs were eligible for attorney's fees because they had prevailed at trial on a claim that Toys "R" Us had discriminated against them in a public accommodation based on gender and sexual orientation, in violation of local law. The parties' appellate dispute concerns the reasonableness of the district court's fee award given that the jury awarded each plaintiff only $1 in nominal damages. Because of ambiguities in New York law regarding the standards applicable to determining a reasonable fee award under Administrative Code § 8-502(f) in a case of nominal damages, we certify to the New York Court of Appeals questions pertaining to that issue. We retain jurisdiction so that, upon receipt of the New York Court's responses, we may rule on this appeal.

I. Background

The following facts are drawn from the record and presented in the light most favorable to the plaintiffs. See Hydro Investors, Inc. v. Trafalgar Power Inc., 227 F.3d 8, 14 (2d Cir.2000).

On December 13, 2002, plaintiffs, three pre-operative transsexuals, visited a Toys "R" Us store in Brooklyn. Several store employees directed derogatory remarks towards plaintiffs regarding their transsexuality. Similar events occurred on December 20, 2000. On May 15, 2001, plaintiffs invoked federal diversity jurisdiction to file suit against Toys "R" Us in the United States District Court for the Eastern District of New York pursuant to New York City Administrative Code § 8-502.² Plaintiffs alleged that Toys "R" Us, through its employees, had denied them the advantages, privileges, and facilities of one of its stores because of plaintiffs' transsexuality, in violation of New York City Administrative Code § 8-107.4.³ The complaint demanded actual damages in an amount "not less than $100,000 as to each plaintiff" and punitive damages in an amount "not less than $100,000 as to each plaintiff."⁴ Following failed settlement negotiations, a ten-day trial ensued.

During summation, plaintiffs' counsel asked the jury to consider a compensatory damages award of several hundred thousand dollars: "[W]e ask you to award my clients compensatory damages. How much ... is your decision, one million, 500,000, 250,000, maybe less." Trial Trans. June 26, 2002 at 43. A punitive damages award of several million dollars was also suggested: "How much you should award in punitive damages .... this is not an easy decision, 100 million, probably not; 80 million, probably not; 60 million, maybe; 20 million, maybe." Id. at 51. On June 27, 2002, the jury returned a verdict in favor of plaintiffs, but awarded each only $1 in nominal damages and no punitive damages.

Thereafter, on July 17, 2002, plaintiffs petitioned the district court for attorney's fees pursuant to New York City Administrative Code § 8-502(f).⁵ Plaintiffs, to support their petition, and defendant, to oppose it, relied upon case law applying fee provisions in federal civil rights statutes, such as 42 U.S.C. § 2000e-5(k) and 42 U.S.C. § 1988. These laws, like New York City Administrative Code § 8-502(f), permit fee awards only if the petitioner is a "prevailing party," and the requested fee is reasonable.⁶ Given the parties' reliance upon federal law and noting that other courts had evaluated § 8-502(f) fee petitions by reference to parallel federal law, the district court ruled that it would rely upon federal standards in determining what, if any, attorney's fees to award plaintiffs. See McGrath v. Toys "R" Us, Inc., 01 Civ. 3071, 2002 U.S. Dist. LEXIS 22610, at *3 (E.D.N.Y. Oct. 16, 2002).

In its argument to the district court, Toys "R" Us conceded that plaintiffs were "prevailing parties"; however, it maintained that no fees should be awarded because the Supreme Court, applying federal law in Farrar v. Hobby, 506 U.S. 103, 115, 113 S.Ct. 566, 121 L.Ed.2d 494 (1992), had ruled that "when a plaintiff recovers only nominal damages ... the only reasonable fee is usually no fee at all." The district court acknowledged Farrar's holding, but concluded that plaintiffs were nevertheless entitled to attorney's fees because their lawsuit had served a significant public purpose by being the first to succeed at trial on a § 8-107.4(a) claim of unlawful discrimination against transsexuals in a public accommodation. Indeed, the district court noted that when plaintiffs filed their lawsuit, it was unresolved whether the public accommodation protections of § 8-107.4(a) even extended to transsexuals. See McGrath v. Toys "R" Us, Inc., 2002 U.S. Dist. LEXIS 22610, at *6-*7. Accordingly, the court awarded plaintiffs $193,551 in attorney's fees, id. at *17, prompting Toys "R" Us to file this timely appeal.

II. Discussion

A. When to Certify a Question of State Law to the New York Court of Appeals

Federal courts sitting in diversity must apply the substantive law of the forum state on outcome determinative issues. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-80, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Travelers Ins. Co. v. 633 Third Assocs., 14 F.3d 114, 119 (2d Cir.1994). We review de novo the district court's interpretation of state law. See J.C. v. Regional Sch. Dist. 10, Bd. of Educ., 278 F.3d 119, 123 (2d Cir.2002); see also Salve Regina Coll. v. Russell, 499 U.S. 225, 239, 111 S.Ct. 1217, 113 L.Ed.2d 190 (1991).

Local Rule 0.27 of this court states that "where authorized by state law, this Court may certify to the highest court of a state an unsettled and significant question of state law that will control the outcome of a case pending before this Court." 2d Cir. R. § 0.27. Section 500.17 of the New York Rules of Court authorizes such certifications "whenever it appears to ... any United States Court of Appeals ... that determinative questions of New York law are involved in a cause pending before it for which there is no controlling precedent of the [New York] Court of Appeals." N.Y. Comp.Codes R. & Regs. tit. 22, § 500.17(a); see Carvel Corp. v. Noonan, 350 F.3d 6, 14-15 (2d Cir.2003).

Despite our discretionary authority to certify, certification is an exceptional procedure, to which we resort only in appropriate circumstances. See Krohn v. New York City Police Dep't, 341 F.3d 177, 180 (2d Cir.2003). One such circumstance is where, as here, the "statute's plain language does not indicate the answer" to the question pending before the court, Riordan v. Nationwide Mut. Fire Ins. Co., 977 F.2d 47, 51 (2d Cir.1992), and there is an "absence of authoritative state court interpretations of the state statute," Green v. Montgomery, 219 F.3d 52, 60 (2d Cir. 2000).

B. Does New York Apply the Farrar Standard to Fee Petitions in Cases of Nominal Damages?

As noted earlier, § 8-502(f) of the New York City Administrative Code states that a "court, in its discretion, may award the prevailing party costs and reasonable attorney's fees." As is clear from the text, the statute prescribes two conditions for a fee award: (1) the claimant must be a "prevailing party," and (2) the fees awarded must be "reasonable." On appeal, as before the district court, Toys "R" Us concedes plaintiffs' status as prevailing parties; it argues only that the amount of the district court's fee award was unreasonable.

In Farrar v. Hobby, 506 U.S. 103, 113 S.Ct. 566, 121 L.Ed.2d 494 (1992), the Supreme Court considered a fee award under 42 U.S.C. § 1988(b), which, like New York City Administrative Code § 8-502(f), imposes a "reasonableness" requirement. The Court stated that "`the most critical factor' in determining the reasonableness of a fee award `is the degree of success obtained.'" Farrar, 506 U.S. at 114, 113 S.Ct. 566 (quoting Hensley v. Eckerhart, 461 U.S. 424, 436, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983)). Accordingly, when a party succeeds in recovering only nominal damages, the Court explained that "the only reasonable fee is usually no fee at all." Id. at 115, 113 S.Ct. 566. If Farrar in fact controls review of a fee award pursuant to Administrative Code § 8-502(f), and if no exception applies to its conclusion that no fee award is generally warranted in a case of nominal damages, we would be obliged to conclude that the district court's fee award in this case was unreasonable.

It is not clear, however, whether New York has adopted the Farrar standard for determining reasonableness under § 8-502(f). State courts are not bound to interpret state laws in accordance with federal court interpretations of analogous federal statutes, although, of course, they may choose to do so. See, e.g., People v. Class, 67 N.Y.2d 431, 432, 503 N.Y.S.2d 313, 314, 494 N.E.2d 444 (1986) (declining to follow Supreme Court's interpretation of Fourth Amendment in interpreting state constitution's prohibition on unreasonable searches and seizures); see also Sargent v. Columbia Forest...