Appeal from the United States District Court for the Eastern District of Wisconsin. No. 93 C 1380--Patricia J. Gorence, Magistrate Judge.
Before Bauer, Kanne, and Diane P. Wood, Circuit Judges.
The opinion of the court was delivered by: Diane P. Wood, Circuit Judge
This is the second time we have seen Joseph Payne's case, in which he asserted that Milwaukee County, its Personnel Review Board, and certain officers (collectively Milwaukee County) had unlawfully terminated him in violation of his First Amendment rights, and thus in violation of 42 U.S.C. sec. 1983. The factual background of Payne's claims is set forth in our earlier opinion, see Payne v. Milwaukee County, 146 F.3d 430 (7th Cir. 1998), and there is no need to repeat it here in detail. The present appeal concerns the application of Fed. R. Civ. P. 68 in a civil rights case, where a prevailing plaintiff's entitlement to attorneys' fees arises under 42 U.S.C. sec. 1988. We conclude that the district court erred in its decision to require Payne to pay the defendants' attorneys' fees, and we remand for further proceedings.
Payne was discharged from his position in the Medical Examiner's Office for Milwaukee County in 1991, in the wake of correspondence he sent to various public officials in which he accused the Medical Examiner's Office of discrimination. After lodging appropriate charges with the EEOC, Payne filed his complaint on December 13, 1993; an amended complaint followed on September 30, 1994.
A first trial took place before a jury on April 21, 1997, and ended with judgment as a matter of law for the defendants on April 24, 1997. That judgment was appealed, and this court reversed in part, ordering a new trial on the First Amendment retaliation claim. The new trial took place on November 1, 1999. The jury returned a special verdict for Payne, finding that his protected speech was indeed a factor in his termination by Milwaukee County and its Personnel Review Board. For that, the jury awarded damages of $10,400; the court later denied Payne's motion for the entry of certain remedial orders and a new trial.
Before the first trial took place, Milwaukee County filed an Offer of Judgment pursuant to Fed. R. Civ. P. 68 on February 12, 1996, which read as follows:
I. Money Only Offer: The Defendants agree to pay the Plaintiff a lump sum of $37,500 in full and complete settlement of any and all claims which arose out of the plaintiff's employment with Milwaukee County. II. Alternative Offer: Job and Money: The Defendants agree to employ the Plaintiff as a Human Service Worker, pay range $24,000-$39,000. . . . The Defendants would also pay $18,000 in a lump sum to the Plaintiff and his attorney.
Thus, Payne had a choice: $37,500 on the table, or the lesser amount of $18,000 plus a new job with Milwaukee County. He elected to accept neither one. By making this choice, he accepted the risk that if he ended up winning at trial a damage award lower than what was offered, his entitlement to post-offer costs and attorneys' fees under 42 U.S.C. sec. 1988 would be lost. Not only that: he would also be saddled with Milwaukee County's post-offer costs. This is precisely what happened, as the jury's verdict in Payne's favor after the second trial was for only $10,400, a lower amount than either judgment option in Milwaukee County's Rule 68 offer.
After the verdict, the three lawyers who had represented Payne filed motions for their fees, all relying on sec. 1988. John Uelman spent 104.5 hours working on the case prior to the February 12, 1996, Offer of Judgment, and the district court awarded him the full amount he claimed up to that date, plus certain costs. Robert Sutton also asked for fees in the amount of $75,550 for work done from January 25, 1997, through December 21, 1999. A third attorney, Larraine McNamara-McGraw was going to seek fees of $31,200 in connection with the appeal after the first trial, but she failed to file her motion in time, and she is not involved in this appeal. The appeal thus concerns only Attorney Sutton's right to fees, on Payne's side.
Milwaukee County opposed these requests insofar as they covered fees for work done after February 12, 1996. (At one point they mention the date February 9, 1996, but the Magistrate Judge ignored this, and so shall we.)
Not only that, but Milwaukee County also sought to have its own costs and attorneys' fees taxed against Payne, once again because the final award Payne received was less than the amount they had offered. The district court (Magistrate Judge Gorence, sitting by consent) decided that Milwaukee County was entitled to both its costs pursuant to Rule 68 and its attorneys' fees, while Sutton was not entitled to anything. II.
Although a prevailing plaintiff in a civil rights case is normally entitled to costs pursuant to Fed. R. Civ. P. 54(d), and to attorneys' fees under 42 U.S.C. sec. 1988, those rules are qualified by the operation of Fed. R. Civ. P. 68. Rule 68 is designed to provide a disincentive for plaintiffs from continuing to litigate a case after being presented with a reasonable offer. The part of Rule 68 critical to this appeal is a cost-shifting provision ...