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When a federal jury’s award in an employment discrimination suit turns out to be less than a formal settlement offer rejected by the plaintiff before the trial, the defendant deserves to have its costs reimbursed under Rule 68 but “can never recover its attorneys’ fees,” because a verdict-winning plaintiff’s claim cannot be deemed frivolous, the 3rd U.S. Circuit Court of Appeals has ruled. Rule 68 promises only that “costs” will be reimbursed, but it does not define whether the term “costs” includes the defendant’s attorney fees, the court said. As a result, courts must look to the plaintiff’s cause of action for an answer. In Title VII cases, the answer is always no, the court said in Tai Van Le v. University of Pennsylvania, since Title VII has its own fee-shifting provision designed to make a winning plaintiff “whole” — a provision that has been interpreted by the courts to mean that fees are shifted to defendants only when the plaintiff’s claim is frivolous. Third Circuit Judge Richard L. Nygaard, writing for a unanimous three-judge panel, found that since Rule 68 is “triggered” only when a plaintiff wins at trial but is awarded less than the settlement offer, such a plaintiff’s case can never be deemed frivolous. The decision affirms a series of rulings handed down by U.S. Magistrate Judge Jacob P. Hart, who presided over a trial in which the jury awarded $35,000 to a man who had turned down a $50,000 settlement offer early in the litigation. After the verdict, both sides had asked for attorney fees and costs. Plaintiff’s attorneys Robert F. O’Brien and Nancy S. Sokol of New Jersey’s Tomar O’Brien Kaplan Jacoby & Graziano argued that the Rule 68 offer was invalid and therefore did not operate as any bar to a full award of fees to the plaintiff as the winning party in the trial. But defense attorney Neil Hamburg of Philadelphia’s Hamburg & Golden insisted that the university was entitled to reimbursement of all its post-offer costs, including attorney fees, since it was on the winning side of the Rule 68 question. Hart found that Le was the “prevailing party” but that the Rule 68 offer was a valid one and that Le was, therefore, not entitled to any attorney fees for the work his lawyers did after the offer was rejected. Turning to the defense motion, Hart found that the university was entitled to its post-offer costs, but not to attorney fees. Since Le was the verdict winner — despite getting $15,000 less than the settlement offer — Hart found that his suit could not be deemed frivolous. As a result, Hart found that the university was entitled to an award of post-offer costs but not fees. Now the 3rd Circuit has upheld all of Hart’s rulings, finding that he correctly followed the approach taken by the 1st, 5th and 8th Circuits. Nygaard, in an opinion joined by 3rd Circuit Senior Judge Robert E. Cowen and visiting Judge Paul R. Michel of the Federal Circuit, found that the best guidance on the question came from the U.S. Supreme Court’s 1985 decision in Marek v. Chesny in which the justices considered whether Rule 68 affects the fees paid to a winning plaintiff in a civil rights case. Voting 6-3, the Marek Court held that a plaintiff whose verdict turns out to be less than a Rule 68 offer is not entitled to any fees for post-offer work. “The term ‘costs’ in Rule 68 was intended to refer to all costs properly awardable under the relevant substantive statute or other authority,” the high court said. But the Marek decision left unanswered the question whether the defendant in a civil rights suit is entitled to its post-offer attorney fees. That question was tackled just one year later when the 1st Circuit decided Crossman v. Marcoccio. The Crossman opinion held that since courts cannot award attorney fees to unsuccessful civil rights defendants under � 1988, the cost-shifting provisions of Rule 68 “can never require prevailing civil rights plaintiffs to pay defendants’ post-offer attorney’s fees.” The logic in Crossman was adopted by the 8th Circuit in 1989 and by the 5th Circuit in 1994. But until now, the 3rd Circuit had never squarely addressed the issue. In the 3rd Circuit appeal, Hamburg argued that the federal circuits were split on the issue, citing a 1997 decision by the 11th Circuit in Jordan v. Time Inc. that reversed a denial of post-offer attorney fees and costs to a defendant who offered judgment under Rule 68 in excess of the verdict. But since Jordan was a copyright case, Nygaard found, there was no circuit split on the precise question of whether such fees may be awarded in civil rights suits. In his brief, Hamburg urged the 3rd Circuit not to follow Crossman, insisting that its logic was flawed and at odds with the purpose of Rule 68. “It is hard to understand the logic of Crossman. It makes absolutely no sense to require, as a prerequisite to a shift of attorneys’ fees under Rule 68, that a plaintiff’s action be ‘frivolous,’” Hamburg wrote. “Since Rule 68 only comes into play when the plaintiff has obtained a verdict in his favor, no plaintiff’s case involving Rule 68 could possibly be deemed frivolous. There is nothing in the history of Rule 68 or in the language of the United States Supreme Court cases interpreting Rule 68 that would support such an impossible test,” Hamburg wrote. Courts that have denied fees, he said, “simply miss the point of Rule 68, which is intended to place heavy economic pressure on a plaintiff to accept a reasonable offer of judgment.” But Nygaard found that any Rule 68 analysis must incorporate the plaintiff’s cause of action and any statutory language and case law that defines the term “costs.” In the Title VII context, Nygaard said, the 3rd Circuit has set a high bar for a defendant to clear in order to qualify for an award of fees. In EEOC v. L.B. Foster Co., Nygaard said, the 3rd Circuit held that the standard for awarding attorney fees to a prevailing defendant was not the same as the standard for a prevailing plaintiff. Under � 1988, Nygaard said, the L.B. Foster court went on to hold that attorney fees may be awarded to a prevailing defendant in a Title VII case only “upon a finding that the plaintiff ‘s action was frivolous, unreasonable, or without foundation, even though not brought in subjective bad faith.”

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