May 30, 2017

Appeals of Merits and Fees: Does the Tail Wag the Dog?

Bennett Evan Cooper – May 30, 2017

The verdict comes in, summary judgment is granted, and a new trial is denied. By hook, crook, or book, the merits have been resolved in the trial court. All that remains is whether the prevailing party can recover its attorney fees and, if so, in what amount.

But does the appeal of the merits have to await resolution of the fee issues? Jurisdictions vary in their answers to this question, balancing considerations of speed and efficiency in light of the nature of the litigation and the fee issues. And the jurisdiction’s default practice—whether separate appeals or a single appeal—may include safety valves that allow the trial court to separate or join the merits and fees for purposes of appealable judgments.

Speed or Efficiency?
It is an axiom of most appellate systems that, all things being equal, “piecemeal appeals” are undesirable. In that spirit, at least in the abstract, it makes sense for the same panel to consider, at the same time, both the merits and fees. The two sets of issues often share a factual or even legal learning curve. Whether fees are recoverable, and whether the trial court acted within its discretion in awarding fees, may turn on the merits of claims or defenses. At the very least, an appellate court that is familiar with the history of the litigation may be in a better position to evaluate the reasonableness of the fees claimed or awarded.

Despite the logic of a single appeal, most jurisdictions do not require, or even facilitate, entry of a single judgment encompassing the merits and fees. Instead, their rules contemplate filing of the fee application after the entry of an appealable judgment on the substantive claims, with possible consolidation of separate merits and fee appeals down the road. Some rules make the prospect of consolidation for appellate briefing and argument more likely because they anticipate quick action on the postjudgment fee application, while the memories of witnesses to the nature of and justification for the attorneys’ time and labors will be fresher.

Nevertheless, at best, multiple appeals, even if consolidated, mean multiple notices, multiple docketing fees, motion practice over consolidation, and the possibility of delayed briefing as the appeals are consolidated or modified briefing schedules are set. At worst, the fee appeal is delayed just enough that the merits issues are already being briefed, requiring some poor appellate panel to endure multiple stacks of briefs for what could have been shorter consolidated briefing. In many cases, the need for speed is not so great as to justify the shoe leather costs associated with split appeals, even if the pieces are ultimately glued back together.

On the other hand, efficiency is not everything. If there is urgency to final resolution of the merits, waiting for prolonged proceedings on fees to conclude may be contrary to the interests of all parties, the trial court, and the public. In addition, it may be more efficient in some cases to defer the litigation and resolution of complex or lengthy fee applications until after the conclusion of the merits appeal because reversal of the merits judgment in whole or part may require vacating or reconsidering any fee awards. See Fed. R. Civ. P. 54 advisory committee’s note to 1993 amendment. As a result, it is not surprising that appellate rules end up rejecting inflexible rules for handling merits and fee appeals, preferring a default rule with some give to it.

Send ‘Em Up as They Come
The classic example of a default to segregated treatment of appeals from the merits and fees is the Federal Rules of Civil Procedure, which make it difficult or impossible for the prevailing party to squeeze in, much less resolve, a fee motion before the entry of judgment. Rule 54(d)(2)(B)(i) provides that, absent a contrary statute or court order, the fee motion must be filed “no later than 14 days after the entry of judgment.” Rule 58(b)(1) directs that, unless the court orders otherwise, “the clerk must, without awaiting the court’s direction, promptly prepare, sign, and enter the judgment” in situations where the merits have been fully resolved, i.e., where the jury returns a general verdict, the court awards only costs or a sum certain, or the court denies all relief. It is not uncommon for the clerk to enter a judgment on the same day as the verdict or summary judgment ruling.

This means that if fee issues are appealed, they will have to be the subject of a second judgment and appeal. Rule 58(e) provides thus: “Ordinarily, the entry of judgment may not be delayed, nor the time for appeal extended, in order to tax costs or award fees.” And the Supreme Court has adopted “a uniform rule that an unresolved issue of attorney’s fees for the litigation in question does not prevent judgment on the merits from being final.” Budinich v. Becton Dickinson & Co., 486 U.S. 196, 202 (1988). The 1993 advisory committee note to Rule 54(d)(2) implicitly acknowledges that fees will entail a separate appeal when it advises that “[p]rompt filing” of the fee motion “enables the court in appropriate circumstances to make its ruling on a fee request in time for any appellate review of a dispute over fees to proceed at the same time as review on the merits of the case.” The note grudgingly allows that the 14-day limit for filing the fee motion will at least “assure that the opposing party is informed of the [fee] claim before the time for appeal [from the merits judgment] has elapsed.”

Nevertheless, since 1993, Rule 58 has provided an often-unappreciated mechanism by which the appeal from the merits judgment can be brought after the resolution of the fee issue so that only a single notice of appeal may be necessary. Rule 58(e) provides that, despite the ordinary practice, “if a timely motion for attorney’s fees is made under Rule 54(d)(2), the court may act before a notice of appeal has been filed and become effective to order that the motion have the same effect under Federal Rule of Appellate Procedure 4(a)(4) as a timely motion under Rule 59” (emphasis added). Such a Rule 59 motion would, of course, toll the time for filing an appeal under Federal Rule of Appellate Procedure 4(a)(4)(v). While the fee motion does not affect the merits judgment’s “finality” or “appealability,” the trial court can, before any appeal is taken, “suspend the finality to resolve a motion for fees.” Fed. R. Civ. P. 54 advisory committee’s note to 1993 amendment (emphasis added).

This procedure merely permits the parties to delay filing a notice of appeal, but it does not prevent them from moving ahead with the merits appeal while the fee application is pending. And moving ahead may be an entirely rational move even if one anticipates eventual consolidation. In some appellate courts—including the Ninth Circuit, where the waiting period on appeal can be considerable—a case’s spot in the queue for assignment to a panel and oral argument is determined by the date of the notice of appeal, not the completion of briefing or another “at issue” point. Thus, immediately filing the notice of appeal as to the merits may materially advance the ultimate resolution of all of the appeals while still allowing the fee appeal to catch up.

In contrast to the federal procedure, Maine starts with the same default rule of separate appeals but provides a tool for the trial court to link the merits and fees and requires a single appeal after the resolution of the fee issues. Where fees are claimed, a judgment entered on all claims other than fees is final as to those claims “unless the court expressly finds that the claim for attorney fees is integral to the relief sought.” Me. R. Civ. P. 54(b)(2). If the court so finds, any judgment or order on the merits remains subject to revision until entry of a final judgment on the merits and fees. Id. The advisory committee’s note to the Maine rule explains the deviation from federal practice: “The nature of state court litigation requires a more flexible rule. In matters such as divorce and mortgage foreclosure, attorney fees are in effect a part of the substantive remedy being awarded the prevailing party. In that sense, they are integral to the relief sought.” Me. R. Civ. P. 54 advisory committee’s notes to March 1, 1994, amendments (citation omitted).

Send ’Em Up in a Package, but . . .
In contrast, some jurisdictions show a preference for a single appeal from a single judgment covering the merits and fees, but they may leave open the option of a judgment and appeal on the merits while the fees lag behind or are intentionally deferred. For example, Oregon’s rules provide that “[i]f all issues regarding attorney fees or costs and disbursements are decided before entry of a judgment, the court shall include any award or denial of attorney fees or costs and disbursements in that judgment,” but postjudgment fee decisions must be the subject of a supplemental judgment. Or. R. Civ. P. 68(C)(5)(a), (b)(i).

Arizona is an interesting case study because it has changed its approach over time, moving from one end of the spectrum to the middle and then to the other end. Before 1999, the state followed the federal practice of deciding fees after the entry of judgment, although without the 1993 Federal Rule of Civil Procedure 58(e) tolling provision. In 1999, the rules were amended to require filing of the fee application after “the clerk’s mailing of a decision on the merits of the cause” and to provide, with one notable exception, that “a judgment shall not be entered until claims for attorneys’ fees have been resolved and are addressed in the judgment.” Ariz. Civ. P. 58(g) (1999). It was anticipated that the court would “typically” decide the fee issues “before the entry of judgment” to “allow an attorneys’ fee award (if any) to be included in the judgment so that all issues may be addressed on appeal.” Ariz. R. Civ. P. 54(b) state bar committee notes to 1999 amendments.

The exception in the 1999 Arizona rules was an interesting use of Rule 54(b) to permit (but not require) separation, for purposes of appeal of fee issues, from even a decision that resolves all of the substantive claims and liabilities of all parties. Rule 54(b) was amended to provide that a fee claim “may be considered a separate claim from the related judgment regarding the merits of a cause.” Ariz. R. Civ. P. 54(b) (1999). This allowed the trial judge to certify the merits judgment for immediate entry and appeal while the court retained jurisdiction over the fee issues. The Arizona Court of Appeals recognized that only in a “‘rare case’” would “‘a judgment on the merits of a cause . . . be appropriate prior to the resolution of attorneys’ fees.’” Nat’l Broker Assocs., Inc. v. Marlyn Nutraceuticals, Inc., 119 P.3d 477, 484 (Ariz. Ct. App. 2005) (quoting Ariz. R. Civ. P. 58(f) state bar committee note to 1999 amendments).

But when the Arizona Rules of Civil Procedure were comprehensively restyled effective at the beginning of 2017, this tool was taken away, and Arizona completed its migration to the one-judgment system. If a court decision adjudicates all of the claims and liabilities of all of the parties, the motion for fees must be filed following that decision, the fee claims must be resolved before any judgment is entered, and any fee award must be included in the judgment. Ariz. R. Civ. P. 54(g)(2), (h)(1) (2017). The amended rules contain specific provisions for the timing of fee applications where the court has issued a decision on a subset of the claims and liabilities that is subject to certification under Rule 54(b) of a partial final judgment. Ariz. R. Civ. P. 54(g)(3) (2017).

It would be difficult to catalog here all of the states’ approaches to appeals of the merits and fees. But most approaches seem to recognize that, whatever the ordinary or typical practice, sometimes a piecemeal appeal works and sometimes it doesn’t. Jurisdictions have developed coping mechanisms to break up the issues or knit them together when it makes sense to do so. Careful attention to the jurisdiction’s rules may reveal a variety of tools for achieving speed and efficiency while minimizing costs of obtaining effective review.

Bennett Evan Cooper is a partner with Steptoe & Johnson LLP in Phoenix, Arizona.

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