Yes, With the Answer Depending on Whether the Fee Entitlement Statute Is Discretionary/Mandatory in Nature or Whether the Intervenor Is “Innocent.”
The Ninth Circuit recently explored the issue of when an intervenor may be held liable for an award of attorney’s fees and costs under two fee-shifting statutes, one arising under the civil rights scheme and the other in the antitrust sector. Intervenors can indeed face fee exposure depending on the nature of the fee entitlement statute and on the nature of the intervenor’s conduct in the underlying litigation.
In Costco Wholesale Corp. v. Hoen, Case No. 06-36040 (9th Cir. Aug. 15, 2008), intervenor Washington Beer and Wine Wholesalers Association (WBWWA) intervened and assisted certain Washington state defendants in a suit brought by Costco claiming that Washington’s liquor laws violated the Commerce Clause and federal antitrust law. Costco mostly prevailed at the district court level despite being outmanned, with the district court finding a Commerce Clause violation and giving the Legislature time to remedy the violation (which happened). The district court, with one exception, found there were antitrust violations and entered judgment in Costco’s favor. The Ninth Circuit later reversed one aspect of the antitrust judgment, finding no Sherman Act restraints. The parties stipulated that Costco was entitled to $1,635,741 in fees and $66,972 in costs from the state defendants. However, the district court found intervenor WBWWA was not liable for fees and costs, with Costco appealing that determination.
On appeal, it was a split decision, one in favor of WBWWA and one in favor of Costco on the intervenor fee exposure issues.
The Ninth Circuit affirmed the decision that intervenor faced no liability under 42 U.S.C. section 1988(b), the civil rights fee statute which authorizes discretionary fee awards by the district court. The crucial inquiry, as mandated by Independent Federation of Flight Attendants v. Zipes, 491 U.S. 754, 761 (1989), was determining whether the intervenor was “innocent,” in which case fees could only be awarded if an intervenor’s actions were “frivolous, unreasonable, or without foundation.” Because WBWWA was never found liable on the civil rights claim, it was “innocent,” a status that was not changed because of its active litigation activity in the action below. The federal appellate court also found that WBWWA’s arguments were not frivolous, even though ultimately unpersuasive, on a novel issue that did not have much jurisprudence in the germane substantive area of law.
However, the Costco court reversed and remanded for redetermination on the issue of awarding fees under 15 U.S.C. section 26, which provides that a court “shall award the cost of suit, including a reasonable attorney’s fee” to any plaintiff who files an action seeking injunctive relief “against threatened loss or damage by a violation of the federal antitrust laws” and “substantially prevails.” Unlike the discretionary fee entitlement statute involved in Zipes, section 26 in contrast has mandatory fee authorizing language. Extending Zipes to cover section 26 situations would undermine the purpose of the statutory provision because it “would deter private enforcement of the federal antitrust laws by encouraging entities such as WBWWA to vigorously defend anti-competitive state laws with little fear of fee liability, and leading potential plaintiffs to feel less confident of success because of the increased likelihood of intervention from sometimes powerful third parties.” (Slip Opn., at p. 10770.) The Ninth Circuit buttressed its rationale by citing to other decisions that had only applied Zipes to discretionary fee situations. (Ibid.) The federal appeal panel ended by concluding that section 26 did allow for imposition of fees and costs against actively-involved intervenors like WBWWA, because its actions certainly increased Costco’s costs (almost an oxymoron, no?)—with section 26 designed to protect the injunction-seeking plaintiff by allowing a recoupment of fees/costs. However, because the Ninth Circuit reversed the Sherman Act restraints aspect of the judgment, it remanded to allow the district court to determine if Costco “substantially prevailed” on its antitrust claims.
So, in the end, intervenor liability turns on a careful scrutiny of the specific fee authorizing statute at issue, with determinations of “innocence” or “mandatory/discretionary fee entitlement” being the key determinative factors in the decision making equation.
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