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Media Alerts - Steve Klein v. City of Laguna Beach
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March 16, 2016
  Steve Klein v. City of Laguna Beach
Area of Law: Civil Rights, Civil Procedure, Remedies

Headline: Ninth Circuit panel rejected the district court's application of the Farrar-exception in determining attorneys' fees under 42 U.S.C. § 1988(b) because (1) the plaintiff sought only nominal damages, (2) the extent of a plaintiff's success is the "most critical factor" in determining fees, and (3) the plaintiff achieved its primary goal of removing certain city regulations on speech.

Issues Presented: Under 42 U.S.C. § 1988(b), should the Farrar-exception apply when the plaintiff, the prevailing party, sought only nominal damages and achieved its primary objective of removing certain provisions in a city ordinance?

Does the Erie Doctrine require the Ninth Circuit to apply a state law permitting the award of attorneys' fees to plaintiffs prevailing in federal court on state law claims when a plaintiff has not prevailed on its state law claim and the remaining matters before the federal court are federal law claims?

Brief Summary: In 2008, Steve Klein ("Klein") brought an action under federal and state constitutions in district court after the city manager of Laguna Beach rejected Klein's application to use amplified speech to conduct religious activities along the public grounds bordering Laguna Beach High School. During the course of the litigation, the City of Laguna Beach ("City") altered its ordinances regulating the use of amplification devices during certain times in public locations. After a Ninth Circuit panel addressed issues in the case for the second time on appeal, Klein was awarded nominal damages on "three of his four as-applied challenges under federal law." When Klein, as the prevailing party, moved for attorneys' fees under 42 U.S.C. § 1988(b), the district court denied the motion, applying the Farrar-exception which prohibits an award of attorney's fees when a plaintiff seeks compensatory damages but nevertheless receives only nominal damages. The district court also denied Klein fees under California Civil Procedure Code section 1021.5, which permits plaintiffs who prevail on California state law claims in federal court to collect attorneys' fees. The district court rejected Kein's argument that, because he pled a California state law claim, he is entitled to fees under the California statute even though he lost on the claim. Klein appealed a third time to challenge the district court's denial of attorneys' fees on Klein's state and federal claims.

With respect to the denial of attorney's fees under 42 U.S.C. § 1988(b), the panel vacated and remanded because (1) a substantial monetary payout was not obtainable absent a compensatory damage request, and Klein's action did not seek to recover private damages; (2) Klein only sought nominal damages of $4,000 under California law; (3) a relief requested under state law does not bear on a determination as to what legal standard applies to motions under federal law; (4) comparing the damages awarded and the amount sought is a significant consideration; and (5) the extent of the success obtained is "'the most critical factor,'" Farrar v. Hobby, 506 U.S. 103, 114 (1992) (quoting Hensley v. Eckerhart, 461 U.S. 424, 436); and (6) Klein obtained the primary relief sought when "the City voluntarily repealed all challenged portions of the sound ordinance as a result of [Klein's] lawsuit." Klein II, 533 F. App'x at 755.

With respect to denial of attorney's fees under California Civil Procedure Code section 1021.5, the panel affirmed the district court's denial of attorneys' fees on the state claim on the grounds that the Erie doctrine does not require a federal court to apply state law when determining a federal law claim and, since Klein was only a prevailing party on his federal claims, and "since we address federal, not state claims, the federal common law of attorney's fees, and not [state] law, is the relevant authority." Citing Modzelewski v. Resolution Trust Corp., 14 F.3d 1375, 1379 (9th Cir. 1994).

Significance: The Ninth Circuit panel construed the Farrar-exception to 42 U.S.C. § 1988(b) narrowly, holding that Farrar only applies to plaintiffs seeking compensatory damages. The panel also held that the Erie doctrine, with respect to a state law regulating fees on state law claims brought in federal court, does not govern a federal court's determination of fees in connection with non-prevailing state law claims.

Extended Summary: On December 3, 2008, Steve Klein ("Klein") brought an action in district court seeking relief under the United States Constitution, the California Constitution, and the California Bane Act ("Bane Act"). Klein's claims arose out of a rejection of his application to use amplified speech to conduct religious activities along the public grounds bordering Laguna Beach High School. The rejection was pursuant to Laguna Beach Municipal Code section 5.40.010, which authorized the city manager to exercise unconditional discretion over the approval or denial of sound amplification permits.

During the course of the litigation, the Laguna Beach City Council repealed Chapter 5.40 of the Municipal Code and amended Code provision, section 7.25.120. Klein then amended his complaint to challenge the amended ordinance, which expressly precluded Klein's request to use sound amplification equipment within 300 feet of Laguna Beach High School and City Hall and in "the busy downtown commercial area of the City" between the hours of 5:00 p.m. and 6:00 p.m."

The case went before the Ninth Circuit three times on appeal. On the first appeal, a Ninth Circuit panel reversed the district court's ruling the ordinance was "a content neutral, reasonable restriction on time, place and manner of speech," holding that the regulation was not "narrowly tailored to the City's interests," that the "fundamental interest in the protection of all people's constitutional rights" favored a finding for Klein; and that the City had in place other regulations "prohibiting excessive and disruptive sounds."

Subsequent to the decision on the first appeal, the parties made cross-motions for summary judgment after the City made another amendment to Code provision, section 7.25.120 by eliminating the proximity limitations and extending the hours during which amplified speech could be performed. On the second appeal, a Ninth Circuit panel upheld the district court's ruling awarding nominal damages on Klein's assertions that the repealed permit requirements constituted impermissible prior restraint and that the speech restriction in the City's downtown area constituted a violation of the First Amendment. Although the Ninth Circuit panel upheld the district court's ruling that the City's proximity limitations on amplified speech near high schools was constitutional, the Court reversed the district court's denial of Klein's summary judgment motion concerning the restrictions on speech near City Hall. As a result, "Klein therefore won nominal damages on three of his four as-applied challenges under federal law."

The district court's denial of Klein's motion for attorney's fees was the basis for the third appeal. The district court concluded that under 42 U.S.C. § 1988(b), nominal damages made Klein a "prevailing party," but under Farrar, Klein's victory was "technical" and therefore he had no entitlement to attorney's fees. See Farrar, 506 U.S. at 115 (1992). Applying the Farrar factors, the district court concluded that Klein's nominal damage award achieved no "public goal," was a "de minimis" success, and Klein's rights under the First Amendment were "not so significant as to overcome the other two factors, which counsel strongly against an award of fees." Because Klein did not prevail on his state law claims, the district court could not grant Klein's motion for fees under California Civil Procedure Code section 1021.5.

On de novo review, at issue before the Ninth Circuit was whether the district court determined Klein's attorney's fees by applying the correct legal standard. Generally, in determining the reasonableness of fees, district courts apply the "lodestar method," which is a procedure by which courts multiply a reasonable hourly rate by "the number of hours the prevailing party reasonably expended on the litigation . . . ." Gonzalez v. City of Maywood, 729 F.3d 1196, 1202 (9th Cir. 2013) (quoting Ballen v. City of Redmond, 466 F.3d 736, 746 (9th Cir. 2006)). The result of the lodestar method may be adjusted according to factors identified in Hensley, 461 U.S. at 433 (1983). Because the extent of the success achieved is "the most critical factor" in determining whether fees are reasonable, Farrar, 506 U.S. at 114 (quoting Hensley, 461 U.S. a 436), without applying the lodestar method or the Hensley procedure, a court may award low or no fees when plaintiffs "seek[] compensatory damages but receive[] no more than nominal damages." Id. at 115.

Klein argued that the Farrar-exception does not apply when a plaintiff does not seek compensatory damages and only seeks to obtain nominal damages. The panel agreed because (1) a substantial monetary payout was not obtainable absent a compensatory damage request, and Klein's action did not seek to recover private damages," Farrar, 506 U.S. at 114 (quoting Riverside v. Rivera, 477 U.S. 561, 585 (1986) (Powell, J., concurring in the judgment)); (2) Klein only sought nominal damages of $4,000 under the Bane Act; and (3) a relief requested under state law does not bear on a determination as to what legal standard applies to 42 U.SC § 1988 motions.

The district court concluded that there was "no principled basis to treat differently a plaintiff who does not seek compensatory damages because he cannot prove actual injury from a plaintiff who seeks compensatory damages and fails to prove actual injury . . . ." The Court disagreed, holding that the Farrar exception does not control because:

"Klein's primary goal was to change the City's policy, not to secure compensatory damages. Although Klein did not receive a permanent injunction and declaratory relief, the district court appears to have denied such relief only because the City voluntarily eliminated the policies about which Klein complained. It is more accurate to think of Klein's request for an injunction as being mooted when the City changed the law to accommodate Klein's planned conduct, rather than denied on its merits. Klein achieved the outcome he sought when he filed this lawsuit, and Farrar 'does not control' in these circumstances."

The second issue before the paenl was whether California Civil Procedure Code section 1021.5, which permits plaintiffs who prevail on California claims in federal court to collect attorneys' fees, governed the Court's determination of fees for Klein's non-prevailing state law claims. The Court answered this question in the negative because (1) the Erie Doctrine does not require a federal court to apply state law when determining a federal law claim; (2) the issues before the Court involved federal law claims, not the claims on which Klein did not prevail; and (3) because the court was addressing federal law claims and not state law claims, "the federal common law of attorney's fees, and not [state] law, [was] the relevant authority." Modzelewshi v. Resolution Trust Corp., 14 F.3d 1375 (9th Cir, 1994). In other words, the Erie Doctrine does not govern a federal court's determination of fees in connection with non-prevailing state law claims.

The Court affirmed, with respect to the district court's denial of attorney's fees under California Civil Procedure Code section 1021.5, and vacated and reversed, with respect to the district's court application of the Farrar exception in determining Klein's fees under 42 U.S.C. § 1988(b).

To read full opinion, please visit:

https://cdn.ca9.uscourts.gov/datastore/opinions/2016/01/14/13-56973.pdf

Panel: Ronald M. Gould and Marsha S. Berzon, Circuit Judges, and Jack Zouhary, District Judge.

Argument Date: December 10, 2015

Date of Issued Opinion: January 14, 2016

Docket Number: 13-56973

Decided: AFFIRMED in part, VACATED in part, and REMANDED.

Case Alert Author: Andre Clark

Counsel: Michael J Kumeta, La Mesa, California; William G. Gillespie (argued), Bonsall, California, for Plaintiffs-Appellants. Philip D. Kohn, Michelle D. Molko (argued), Rutan & Tucker, LLP, Costa Mesa, California, for Defendant-Appellee.

Author of Opinion: Ronald M. Gould, Circuit Judge:

Circuit: Ninth

Case Alert Supervisor: Professor Glenn Koppel

    Posted By: Glenn Koppel @ 03/16/2016 06:23 PM     9th Circuit  

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