The Ohio Supreme Court just issued very important decision for plaintiffs in Ohio today. Specifically, in Cruz v. English Nanny & Governess School, 2022-Ohio-3586, the Ohio Supreme Court held that where a plaintiff is awarded attorneys’ fees at trial, the defendant must continue to pay those fees until the case is resolved – including during any appeal. Let’s look at the holding a little closer.
In Cruz, Christina Cruz worked at the English Nanny & Governess School, which trained and then had the exclusive rights to place its students for three months. Cruz was sent on an interview to spend a weekend with a single father and his two young daughter. During that weekend, Cruz observed what she believed was the father engaging in sexual activity with one of the daughters. English Nanny, which is now permanently closed, instructed Cruz not to report the conduct to authorities and threatened to blackball her if she did. Knowing right from wrong, Cruz reported the conduct to the authorities and English Nanny terminated her a week later, refusing to place her.
The jury reached a verdict for Cruz on her intentional infliction of emotional distress and breach of contract claims. In addition to awards of $75,000 for noneconomic damages (emotional distress) and $75,000 for economic damages, the jury hit the school with $50,000 in punitive damages. This triggered the payment of Cruz’s attorneys’ fees. The plaintiffs’ attorneys presented a fee bill for $540,277.11, but the trial court reduced it to $95,308.97 because they had contracted with Cruz for a contingency fee. After an appeal to the Eighth District Court of Appeals, which remanded the case fir improper calculation of the fee and reduction of the award, the trial court entered a fee and cost award of $463,677.08, which included the fees for arguing the case on appeal in the Eighth District. On a second appeal, the Eighth District Court of Appeals held that the trial court should not have included the fees for post-trial work, which amounted to 480.4 hours.
If you are keeping taps, that means that English Nanny (or its insurer) will need to shell out well over $650,000 after paying its own counsel. Since the defense attorneys likely billed a similar amount of fees, the total payout will end up being somewhere north of $1 million. (Best Law Read: Paying A Lot To Defend A Wrongful Termination Claim Does Not Mean You’ll Win; What Is The Cost To Defend An Employment Lawsuit?; All Employment Cases Should Eventually Settle, But For What?). A settlement earlier in the process likely would have meant that English Nanny (or its insurer) would have paid substantially less and Cruz might have even pocketed more (of course, the attorneys on both sides likely would have made less).
What is the American Rule?
Best Employment Lawyer Answer: The so-called American Rule provides that each party to litigation must pay their own attorneys’ fees and that the prevailing party cannot get those fees from the losing party. The rationale behind the American rule is that because “litigation is at best uncertain one should not be penalized for merely defending or prosecuting a lawsuit, and that the poor might be unjustly discouraged from instituting actions to vindicate their rights if the penalty for losing included the fees of their opponents’ counsel.” Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 718, 87 S.Ct. 1404, 18 L.Ed.2d 475 (1967).
What are the exceptions to the American Rule?
Top Wrongful Termination Attorney Answer: The three exceptions to the American Rule that allow the prevailing party to recover attorneys’ fees are: (1) when a statute creates a duty to pay attorney fees, such as Title VII (but only in favor or employees); (2) when the losing party acted in bad faith – which is implicit when the jury awards punitive damages; and (3) when there is a contract in place that specifically establishes how fees will be paid or shifted.
Who pays for the attorneys’ fees on appeal?
Workplace Discrimination Lawyer Answer: The Ohio Supreme Court addressed the second exception to the American Rule in Cruz and held that the obligation of the defendant to pay the plaintiff’s attorneys’ fees should continue on appeal:
[W]e hold that prevailing parties who were awarded reasonable attorney fees along with a punitive-damages award may also recover attorney fees that they incur in successfully defending their judgment on appeal. Accordingly, the Eighth District erred when it held that Cruz and Kaiser could not recover their appellate-attorney fees. Permitting prevailing parties to recover attorney fees that they incurred defending their judgment furthers the purpose of awarding attorney fees as an element of compensatory damages in cases warranting punitive damages.
When a defendant is found liable for having acted in bad faith or for malicious tortious conduct and is ordered to pay attorney fees along with a punitive-damages award, the victims of that conduct should not always be required to bear the cost of successfully defending their judgment. To hold that prevailing parties who were awarded punitive damages may never receive attorney fees for defending their judgments would undermine the entire purpose of awarding compensatory attorney fees for victims of defendants’ malicious or bad-faith conduct.
Id. ¶¶ 38-39. In addition to requirement that plaintiffs will be able to get paid their appellate attorneys’ fees, the potentially larger impact is that defendants and employers will have to think much longer and harder about filing appeals – especially if the merits of their arguments are on shaky ground. This will likely lead to more efforts to resolve cases by settlement after a verdict with punitive damages. Of course, Cruz gives those plaintiffs more leverage in those negotiations.
How are attorneys’ fees calculated?
Employees’ Rights Law Firm Answer: When attorneys’ fees are awarded, court typically use the lodestar method. The lodestar is the “‘starting point for determining the amount of a reasonable fee, [i.e.] the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate.’” Bittner v. Tri-County Toyota, Inc., 58 Ohio St.3d 143, 145, 569 N.E.2d 464 (1991), quoting Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983).
While some courts have either raised or lowered the fee based on the complexity of the case, the Ohio Supreme Court held that process should not be employed:
We also … “reject[ed] lodestar enhancement based on the complexity of the case, the degree of success, and the public interest advanced by the litigation ‘because novelty and complexity influence the base fee—the more novel and complex a case, the more hours will be billed and the higher the hourly billing rates will be.’” Phoenix Lighting at ¶ 17, quoting Sears, Roebuck & Co. at 792.
Likewise, it is simple economics that permitting prevailing parties to recover reasonable attorney fees for defending their judgments more accurately reflects the number of hours that attorneys expend on a case, which will make the lodestar calculation more reasonable, fair, and correct.
Id. at ¶¶ 47-48.
Another important point tangentially raised in Cruz was that during the first appeal, the Eighth District Court of Appeals had ruled that the trial court had erred by simply focusing on the fees from one attorney and not all of the attorneys, including those who played lesser roles in the case.
Can I get my attorneys’ fees paid if I sue my employer?
Best Employment Lawyer Answer: While many employment laws provide access to attorneys’ fees if you prevail at trial, every case is different and should be discussed when you call the right attorney to schedule a free and confidential consultation. (Read: What is the Spitz No Fee Guarantee?; Why Having Skilled Employment Attorneys Is Critical). Moreover, because the overwhelming majority of cases settle, the award of attorneys’ fees rarely comes into play as anything more than a threat to leverage a better settlement. Call our in Ohio, Michigan, and Raleigh lawyers to get personalized advice regarding you employment claims. Spitz, The Employee’s Law Firm and its experienced attorneys are dedicated to protecting employees’ rights and solving employment disputes.
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