System Management, Inc. v. Loiselle

• Citation: 154 F.Supp.2d 195
• Decision Date: 17 August 2001
• Docket Number: No. Civ.A. 99-10744-WGY.,Civ.A. 99-10744-WGY.
• Parties: SYSTEM MANAGEMENT, INC., Forget Me Not Services, Inc., Jose R. Cruz, Victor Laboy, Juan Ayala, Juan Ortega, Gabriel Ochoa, Martin Restrepo, Lucio Ardon, and Cestlio Rodas, Plaintiffs, v. Kenneth LOISELLE, Defendant.
• Court: U.S. District Court — District of Massachusetts

154 F.Supp.2d 195

SYSTEM MANAGEMENT, INC., Forget Me Not Services, Inc., Jose R. Cruz, Victor Laboy, Juan Ayala, Juan Ortega, Gabriel Ochoa, Martin Restrepo, Lucio Ardon, and Cestlio Rodas, Plaintiffs, v. Kenneth LOISELLE, Defendant.

No. Civ.A. 99-10744-WGY.

United States District Court, D. Massachusetts.

August 17, 2001.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Gabriel O. Dumont, Jr., Law Offices of Gabriel Dumont, Boston, MA, for Plaintiff.

Armando E. Batastini, Patricia A. Sullivan, Edwards & Angell, LLP, Providence, RI, Matthew T. Oliverio, Providence, RI, for Defendant.

MEMORANDUM, ORDER, AND REPORT

YOUNG, Chief Judge.

Several plaintiffs filed a complaint in this Court alleging that the defendant had violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"). This Court conducted a non-jury trial and awarded two of the plaintiffs a total of $1,018.56 in treble damages. Sys. Mgmt., Inc. v. Loiselle, 138 F.Supp.2d 78 (D.Mass. Mar.19, 2001), appeal filed, No. 01-1538 (1st Cir. Apr. 10, 2001). Those two plaintiffs now seek $184,231.75 in attorneys' fees and costs pursuant to RICO's fee-shifting provision, 18 U.S.C. § 1964(c). The Court of Appeals has stayed its consideration of the appeal to allow this Court first to resolve the attorneys' fees issue.

I. BACKGROUND

For a complete recitation of the facts in this case, see 138 F.Supp.2d 78. A brief synopsis of the presently relevant facts follows: The defendant, Kenneth Loiselle ("Loiselle"), operates Aid Maintenance, Co. ("Aid Maintenance"), a company that provides janitorial services. The plaintiffs are several employees of Aid Maintenance— Jose R. Cruz ("Cruz"), Victor Laboy, Juan Ayala, Juan Ortega, Gabriel Ochoa, Martin Restrepo, Lucio Ardon ("Ardon"), and Cestlio Rodas—and two companies in competition with Aid Maintenance—System Management, Inc. ("System Management") and Forget Me Not Services, Inc. ("Forget Me Not").

The essence of the plaintiffs' complaint is that Loiselle underpaid his employees and thus unfairly underbid the competition. The plaintiffs styled their complaint, however, to fall under the auspices of RICO, which provides plaintiffs with a federal forum and the prospect of treble damages, attorneys' fees, and costs. This Court dismissed all the claims in the complaint save one claim under RICO with the predicate act of mail fraud. Sys. Mgmt., Inc. v. Loiselle, 91 F.Supp.2d 401 (D.Mass. Mar.9, 2000); see also Sys. Mgmt., Inc. v. Loiselle, 112 F.Supp.2d 112 (D.Mass. Aug.25, 2000) (denying defendant's motion to reconsider). Before trial this Court dismissed Forget Me Not from the case, 138 F.Supp.2d at 81, and during trial this Court dismissed System Management from the case because it failed to establish that Loiselle's actions had caused it to lose business, id. at 90.

After a six-day trial, this Court found that Loiselle had used the mails to commit fraud in violation of RICO, id. at 96, and found that Loiselle had underpaid Cruz by $253.34, id. at 98, and had underpaid Ardon by $86.18, id. at 99. As required by RICO, 18 U.S.C. § 1964(c), this Court trebled the total damages to $1,018.56 and invited Cruz and Ardon to petition for attorneys' fees and costs. Id. at 98-99. With respect to the six other individual plaintiffs, this Court entered judgment in favor of Loiselle. Id. at 99.

Cruz and Ardon now petition this Court for $180,737.00 in attorneys' fees and $3,494.75 in costs, for a total award of $184,231.75. Loiselle objects to the request for fees and costs given that only two of the ten plaintiffs prevailed on only one of the several claims to the tune of only $1,018.56—a very small fraction of the fees and costs requested.

II. DISCUSSION

Under the "American Rule," federal courts in this country will deny recovery of attorneys' fees absent explicit congressional authorization. E.g., Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). When Congress enacted RICO, it explicitly mandated an award of attorneys' fees and costs in all cases involving civil RICO violations:

Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee....

18 U.S.C. § 1964(c) (emphasis added).

Because few courts have interpreted RICO's fee-shifting provision, the Court first will consider two other fee-shifting provisions authorized by Congress. The Civil Rights Attorney's Fees Awards Act ("Fees Act"), 42 U.S.C. § 1988(b), is extensively discussed in the case law, while the fee-shifting provision in the Clayton Act, 15 U.S.C. § 15(a), is similar to RICO's provision. Both of these fee-shifting provisions are therefore instructive.

A. Other Fee-Shifting Provisions

1. The Fees Act

The Fees Act provides:

In any action or proceeding to enforce a provision of [the federal laws protecting civil rights], the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee as part of the costs....

42 U.S.C. § 1988(b) (emphasis added). Three dissimilarities to RICO's fee-shifting provision are apparent: (i) the award is discretionary, (ii) either the plaintiff or the defendant, rather than just the plaintiff, may be eligible for the award, and (iii) the award need not be in addition to treble damages. Nevertheless, both the Fees Act and RICO's fee-shifting provisions contain the identical all-important phrase, "a reasonable attorney's fee." The following paragraphs will examine the meaning of the words "discretion," "prevailing party," "reasonable," "attorney's fee," and "costs" in the Fees Act to identify which interpretations pertain to the words "reasonable attorney's fee" and "costs" and thus should apply to the fee-shifting provision in RICO.

a. "Discretion"

Although the Fees Act, as written, states that a court, "in its discretion, may allow" a fee award, the statute as interpreted means quite the opposite: A court "should ordinarily" award a fee "unless special circumstances would render such an award unjust." Hensley v. Eckerhart, 461 U.S. 424, 429, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983) (internal quotation marks omitted); accord Blanchard v. Bergeron, 489 U.S. 87, 89 n. 1, 109 S.Ct. 939, 103 L.Ed.2d 67 (1989); see also Gay Officers Action League v. Puerto Rico, 247 F.3d 288, 293 (1st Cir.2001) ("virtually obligatory").

b. "Prevailing Party"

Along the same lines, the phrase "prevailing party" in the Fees Act obtains different interpretations depending on whether it refers to plaintiffs or defendants. A defendant is a "prevailing party" only if a court finds that the plaintiff's claim was frivolous, unreasonable, groundless, or brought in bad faith. Christiansburg Garment Co. v. Equal Employment Opportunity Comm'n, 434 U.S. 412, 98 S.Ct. 694, 54 L.Ed.2d 648 (1978) (Title VII case); see also Hughes v. Rowe, 449 U.S. 5, 14, 101 S.Ct. 173, 66 L.Ed.2d 163 (1980) (applying Christiansburg to section 1988); Andrade v. Jamestown Hous. Auth., 82 F.3d 1179, 1189-94 (1st Cir.1996) (affirming fee awards of $2,500.00 to plaintiff and $2,500.00 to subset of defendants who prevailed). A plaintiff, on the other hand, need only obtain "some relief on the merits" to prevail; nominal damages will suffice. Farrar v. Hobby, 506 U.S. 103, 111, 113, 113 S.Ct. 566, 121 L.Ed.2d 494 (1992); see also Tex. State Teachers Ass'n v. Garland Indep. Sch. Dist., 489 U.S. 782, 109 S.Ct. 1486, 103 L.Ed.2d 866 (1989) (rejecting "central issue" test). The definition of "prevailing party" is consistent as between plaintiffs and defendants in only one respect: No party can prevail until a court changes the legal relationship between the parties, either with a judgment on the merits or a court-ordered consent decree. Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep't of Health & Human Res., 531 U.S. 1004, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001).

c. "Reasonable"

(1) Relationship to Damages and Fee Agreements

The Supreme Court appears to conflate the definition of "reasonable" with that of "prevailing party" when interpreting the Fees Act. Although a plaintiff need only obtain "some relief on the merits" to be the "prevailing party," it is not "reasonable," for a court to award fees to a plaintiff who only obtains nominal damages: "`[T]he 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, 461 U.S. at 436, 103 S.Ct. 1933).

On the other hand, the Supreme Court has not adopted a rule that measures a fee award by a proportion of the damages awarded. City of Riverside v. Rivera, 477 U.S. 561, 106 S.Ct. 2686, 91 L.Ed.2d 466 (1986) (plurality opinion) (affirming fee award of $245,456.25 to plaintiffs who recovered $33,350.00 in compensatory and punitive damages); see also Gay Officers Action League, 247 F.3d at 296, 300 (awarding $176,888.26 in fees and costs to plaintiffs who successfully challenged anachronistic regulation); Schneider v. Colegio de Abogados de P.R ., 187 F.3d 30, 33 (1st Cir.1999) (per curiam) (awarding $230,975.92 in fees to plaintiffs who successfully challenged use of bar dues for ideological purposes); O'Connor v. Huard, 117 F.3d 12, 17-18 (1st Cir.1997) (affirming substantial fee award to plaintiff who received nominal damages and injunctive relief).

Nor has the Supreme Court looked to the actual fee agreement between the plaintiff and his attorneys to determine what is "reasonable." City of Burlington v. Dague, 505 U.S. 557, 112 S.Ct. 2638, 120 L.Ed.2d 449 (1992) (prohibiting, under Solid Waste Disposal and Clean Water Acts, enhancement of fee award to reflect that attorneys were retained on contingent-fee basis); Venegas v. Mitchell, 495 U.S. 82, 110 S.Ct. 1679, 109 L.Ed.2d 74 (1990) (allowing...