Judgment on merits is final decision and appealable whether unresolved claim for attorney’s fees and costs is based on statute or contract

Whether a claim for attorney’s fees and costs is based on a statute, a contract, or both, the pendency of a ruling on an award for fees and costs does not prevent the decision on the merits from becoming final for purposes of appeal, ruled a unanimous U.S. Supreme Court. Resolving a conflict among the circuit courts, the High Court reversed the decision of the First Circuit in a suit against an employer brought by union benefit funds for unpaid contributions. Finding that a district court’s order awarding unpaid contributions to the funds was final, the Court concluded that there was no timely appeal from that order within the 30-day window to file an appeal.

In the underlying dispute, union pension and welfare benefit funds sued an employer for contributions due under a collective bargaining agreement (CBA), alleging that the employer failed to make required contributions in violation of ERISA and the Labor Management Relations Act. On April 4, 2011, the funds moved for an order awarding attorney’s fees and costs incurred in attempting to collect the delinquent contributions. On June 17, 2011, the district court issued a decision on the merits and ruled that the funds were entitled to unpaid contributions, though less than the funds had requested. The district court did not rule on the funds’ motion for attorney’s fees and costs until July 25, 2011. On August 15, 2011, the funds appealed both decisions and the employer cross-appealed.

Appellate court: decision on merits not final

On appeal, the employer argued that there had been no timely appeal from the June 17 decision on the merits. In the employer’s view, the June 17 decision was a final decision under 28 U.S.C. Sec.1291, so that the appeal had to be filed within 30 days thereafter. The funds argued that there was no final decision until July 25, when the district court rendered its decision on the funds’ request for attorney’s fees and costs.

The appellate court agreed with the funds. While it acknowledged the Supreme Court’s holding that an unresolved issue of attorney’s fees generally does not prevent judgment on the merits from being final, the appellate court held instead that where, as here, an entitlement to attorney’s fees derived from a contract, the critical question was whether the claim for attorney’s fees was part of the merits. Interpreting the CBA in this case as “provid[ing] for the payment of attorneys’ fees as an element of damages in the event of a breach,” the appellate court held that the June 17 decision was not final, and so concluded that the appeal was timely as to all issues. The employer sought review of that decision.

Supreme Court: decision on merits final

The Supreme Court granted review of the matter to resolve a conflict among the circuit courts over whether and when an unresolved issue of attorney’s fees based on a contract prevents judgment on the merits from being final. 28 U.S.C. Sec. 1291 provides that the appellate courts have jurisdiction of appeals from all final decisions of the district courts. The question was whether the June 17 order was a final decision for purposes of Sec. 1291.

In Budinich v Becton Dickinson & Co., 486 U.S. 196 (1988), the Supreme Court addressed the question of whether an unresolved issue of attorney’s fees based on a state statute prevented a judgment from being final. In that case, the Court held the judgment was final for purposes of Sec. 1291 despite the unresolved issue of attorney’s fees.

In the present case, the High Court rejected the funds’ contention that contractual attorney’s fees are always a measure of damages and, thus, part of the merits of a decision. The Court stated that the funds’ argument failed because the Court in Budinich rejected the very distinction the funds were attempting to draw. The Court observed that Budinich’s uniform rule did not depend on whether the “statutory or decisional” law authorizing a particular fee claim treated the fees as part of the merits, and there was no reason to depart from that sound reasoning. Rather, the Court concluded that the operational consistency and predictability stressed in Budinich was not promoted by providing for different jurisdictional effects based solely on whether an asserted right to fees was based on contract or statute.

The Court determined that the importance of avoiding piecemeal litigation was counterbalanced by the interest in determining with promptness and clarity whether the ruling on the merits will be appealed. The Court rejected the funds’ claim that it was unclear whether Budinich applied where non-attorney professional fees were included in a motion for attorney’s fees and costs. There is no apparent reason why parties or courts would find it difficult to tell that Budinich remains applicable where such fees are claimed and awarded incidental to attorney’s fees, observed the Court. The Court was also unpersuaded by the funds’ argument that fees accrued prior to the commencement of litigation fell outside the scope of Budinich. The fact that some claimed fees accrued before the complaint was filed was inconsequential, according to the Court. The Court observed that “some of the services performed before a lawsuit is formally commenced by the filing of a complaint are performed ‘on the litigation.’” Fees for investigation, preliminary legal research, drafting of demand letters, and working on the initial complaint fit the description of standard preliminary steps toward litigation.

Thus, the Court concluded that the appeal from the June 17 order was untimely.

Source: Ray Haluch Gravel Company v. Central Pension Fund of the International Union of Operating Engineers and Participating Employers (US Sup Ct), Dkt. No. 12-992.

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