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Disparaging remarks by Toys “R” Us employees toward transsexual customers have raised the issue of how New York City’s Administrative Code treats attorney fee awards in cases where the jury grants only nominal damages. The 2nd U.S. Circuit Court of Appeals has certified several questions for the New York Court of Appeals to decide concerning the standard for determining a reasonable fee award under the code, including whether the prevailing attorneys “served a significant public purpose” in pressing the case. The questions were raised after fees were awarded by Eastern District Judge Charles P. Sifton in McGrath v. Toys “R” Us Inc., 02-9308, a case where three transsexuals prevailed at trial on a claim of discrimination in a public accommodation based on gender or sexual orientation in violation of local law. Although the plaintiffs were awarded $1 in nominal damages, Sifton awarded fees of $193,551 to their attorneys as prevailing parties. He reasoned that the award was justified because the attorneys had been the first to succeed at trial on a public accommodation claim for transsexuals. Toys “R” Us appealed to the 2nd Circuit, citing U.S. Supreme Court case law holding that the recovery of nominal damages usually means that the only reasonable fee is “no fee at all.” Writing for the circuit court, Judge Reena Raggi said the Supreme Court decision in Farrar v. Hobby, 506 U.S. 103 (1992) 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.” And the measure of reasonableness, in the words of the Supreme Court, she said, “is the degree of success obtained.” “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 obligated to conclude the district court’s fee award in this case was unreasonable,” Raggi said. “It is not clear, however, whether New York has adopted the Farrar standard for determining reasonableness under � 8-502(f).” Among the limited number of cases on the subject in New York State, Raggi said, some courts have adopted the Farrar standard, while others have “applied a more flexible standard than Farrar, indicating that the reasonableness of a fee award depends upon a variety of considerations, only one of which is the ‘results obtained.’” SEVERAL UNSETTLED ISSUES But the question of Farrar was only one of several “unsettled” issues of New York law presented by the appeal. Raggi said the 2nd Circuit was asking the New York Court of Appeals to resolve three others as well: � If the Farrar standard does not apply, what is the standard for fees where the prevailing party receives only nominal damages? � If Farrar does apply, does � 8-502(f) allow fees following an award of only nominal damages where the prevailing plaintiff’s lawsuit “served a significant public purpose?” � If New York “recognizes ‘service of a significant public purpose’ as a factor,” does a claim for discrimination in public accommodation by transsexuals meet that standard where the right of transsexuals to be free of job discrimination has already been recognized? Judge Wilfred Feinberg and Southern District Judge Lawrence M. McKenna, sitting by designation, joined in the opinion. H. Nicholas Goodman of Quirk & Bakalor represented Toys “R” Us. Thomas D. Shanahan of Shanahan & Associates, and Anthony A. LoPresti of Davidson & LoPresti represented the plaintiffs.

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