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In a case of first impression, a federal judge for the Eastern District of Pennsylvania has ruled that a plaintiff who wins a Title VII judgment and is forced to participate in a bankruptcy to collect it may later apply for additional attorney fees for the work in Bankruptcy Court. In his eight-page opinion in Seibel v. Paolino, Senior U.S. District Judge James McGirr Kelly found that no court has ever addressed the question of whether a Title VII plaintiff has the right to fees for the work spent defending her judgment against discharge in bankruptcy and collecting it. But in an analogous context — civil rights suits brought under Section 1983 — Kelly found precedent for awarding extra fees to lawyers who are forced to litigate in Bankruptcy Court in order to collect a judgment. “Both statutes were intended to encourage the filing of meritorious civil rights suits by transferring the costs of litigation to those who infringe upon others’ civil rights,” Kelly wrote. “Therefore, applying these cases to the instant matter, the court finds that the plaintiffs are entitled to the award of attorney’s fees for their efforts directed at enforcing their civil rights judgment.” The ruling is a victory for four plaintiffs — Denise Seibel, Deborah Aikman, Kim Blaney and Anne Marie Harrison — and their lawyer, Benjamin G. Lipman. The four women filed a sexual harassment suit in 1990 against Richard Paolino, who failed to defend the case and was hit with a default judgment of liability. After a damages hearing, the plaintiffs were awarded total damages of $254,190 and more than $24,000 in attorney fees. Almost immediately following the close of the Title VII case, the plaintiffs learned that Paolino had filed for bankruptcy under Chapter 7. They petitioned the Bankruptcy Court to have their Title VII judgments declared to be administrative claims, giving them priority in asset distribution, and to have the judgments be deemed the result of willful and malicious conduct on Paolino’s part, thereby making them nondischargeable. Paolino in the meantime asked the U.S. District Court for relief from the judgment. The court denied it, and the plaintiffs’ lawyer asked for more than $47,000 in additional fees, citing his work in both the bankruptcy proceeding and in defending the judgment before the district court. At the time, Kelly awarded only those fees that pertained to work in the district court but denied the request for bankruptcy work fees. Eventually, the plaintiffs negotiated a settlement with the bankruptcy trustee, agreeing that 80 percent of their Title VII judgments — not including the award of attorney fees — would be given administrative priority during distribution of the bankruptcy estate. Over the objections of Paolino and the IRS, the settlement was approved by the Bankruptcy Court and affirmed on appeal to the U.S. District Court. As for the non-dischargeability issue, the Bankruptcy Court ruled that because the Title VII judgments were awarded by default, the issue of whether these debts were the consequence of Paolino’s willful and malicious conduct had to be litigated de novo. As a result, Kelly found, the plaintiffs were essentially forced to litigate the merits of their Title VII claims. Ultimately, the Bankruptcy Court found Paolino’s conduct to be willful and malicious, ruling that the Title VII judgments, including the award of attorney fees, were non-dischargeable. The Bankruptcy Court’s decision was affirmed on appeal by both the District Court and the 3rd U.S. Circuit Court of Appeals. In January 2000, the Bankruptcy Court approved the final report of the trustee. The plaintiffs have received, to date, $203,470 from the bankruptcy estate, or 80 percent of the Title VII damages award. Lipman then filed a motion seeking an additional award of $114,040 in fees for his work in the bankruptcy proceedings. Kelly found that under Title VII, the prevailing party is entitled to an award of reasonable attorney’s fees incurred “in an action or proceeding brought under Title VII.” Courts have routinely held, he said, “that this includes attorney’s fees incurred not just in proceedings leading up to judgment in the initial action, but also in post-judgment attempts to attack the judgment.” But the Seibel plaintiffs, he said, raised a new issue by seeking attorney fees under Title VII for efforts directed at collecting a judgment through bankruptcy dischargeability proceedings. Although the question was one of first impression, Kelly found that both the 7th Circuit and the District of Massachusetts have held in cases brought under Section 1983 that winning plaintiffs are entitled to fees for work enforcing their judgments in bankruptcy courts. In Pinshaw v. Monk, he said, a Massachusetts federal judge specifically held that “time spent in opposition to discharge of a judgment in the Bankruptcy Court should be compensable.” Kelly found that the precedent clearly supported the Seibel plaintiffs claim for fees. “The plaintiffs, when met with opposition from Paolino in collecting their civil rights judgments, pursued their damages awards in bankruptcy court. Their circumstance is virtually identical to that of the plaintiff in Pinshaw who was awarded attorney’s fees,” Kelly wrote. “The victory would be hollow if the plaintiffs were left with a paper judgment not negotiable into cash except by undertaking burdensome and uncompensated litigation,” he wrote. Paolino’s lawyer, Kenneth D. Federman, argued that there is no general right to attorney’s fees for a dischargeability proceeding. Kelly agreed that Federman had correctly stated this general principle of law but said that “courts have found it not to apply when there exists an independent basis for the award of attorney’s fees.” Title VII, he said, “provides such an independent basis.” Kelly closed his opinion by scheduling an evidentiary hearing for May 31 in which he will assess the amount of fees to be awarded.

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