Santiago v Victim Services Agency Brief Plaintiff Appellants

    UNITED STATES COURT OF APPEALS 
for the

SECOND CIRCUIT

DENISE SANTIAGO and TERRY L. BIRMINGHAM,
Plaintiffs-Appellants, 

-against-
VICTIM SERVICES AGENCY of the Metropolitan Assistance Corp., 
LUCY FRIEDMAN, Director, JOHN BLACKMORE, KEVIN BYRNE,
CAROLE PETERS, KAREN MORELLC, and LANA S. FLAME, 
individually and in their official capacities,

Defendants-Appellees.

ON APPEAL FROM AN ORDER OF THE UNITED STATES DISTRICT 
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK

BRIEF OF PLAINTIFFS-APPELLANTS

JORGE BATISTA 
ROBERT L . BECKER 

Puerto Rican Legal Defense 
& Education Fund, Inc.

99 Hudson Street, I4th Floor 
New York, New York 10013 

(212) 219-3360
Attorneys for Plaintiffs-Appellants



TABLE OF CONTENTS

Page
TABLE OF CASES...................................... i
QUESTIONS PRESENTED................................  iv
STATEMENT OF FACTS.................................  1
ARGUMENT

POINT I
PLAINTIFFS' VOLUNTARY DISMISSAL 
OF THIS ACTION PURSUANT TO 
RULE 41(a)(1)(i) OF THE FEDERAL 
RULES OF CIVIL PROCEDURE PRECLU­
DED THE DISTRICT COURT FROM SUB­
SEQUENTLY ASSESSING ATTORNEYS'
FEES AGAINST THEM..................  7

POINT II
THIS ACTION WAS NOT FRIVOLOUS 
UNREASONABLE OR WITHOUT FOUNDA­
TION AND ACCORDINGLY, DEFENDANTS 
ARE NOT ENTITLED TO ATTORNEYS'
FEES FROM PLAINTIFFS...............  17

POINT III
THE DISTRICT COURT ERRED IN 
ASSESSING ATTORNEYS' FEES AGAINST 
PLAINTIFFS' FORMER COUNSEL IN THE 
ABSENCE OF A HEARING OR ANY
FINDING OF BAD FAITH...............  2 7

CONCLUSION..........................................  37



TABLE OF CASES

American Cyanamid Co. v. McGhee, 317
F.2d 295 (5th Cir. 1963)..........

Barry v. Barchi, 443 U.S. 55 (1979).........
Bell v. Burson, 402 U.S. 535 (1971)..........
Bernstein v. Birch Wathen School, 71 A.D. 2d
---------  179 (1979), aff* 1d ,~51~N.Y. 2d 932

(1980)............................
Carter v. United States, 547 P.2d 528

(5th Cir. 1977)...................
Christiansburg Garment Co. v. EEOC, 434

U.S. 412 (1978)...................
Colucci v. New York Times Co., 533 F.Supp.

1011 (S.D.N.Y. 1982)..............
Corcoran v. Columbia Broadcasting Co., 121

F.2d 575 (D.C. Cir. 1941) .........
D.C. Electronics, Inc. v. Nartron Corp., 511 

F .2d 294 (6th Cir. 1975) . . . .......

Fuentes v. Shevin, 407 U.S. 67 (1972)..........
Gear v. City of DesMoines, 25 FEP Cases 1400

(S.D. Iowa 1981).....................
Glass v. Pfeffer, 675 F.2d 252 (10th Cir.

1981).................................
Goldberg v. Kelly, 397 U.S. 254 (1970)........
Goss v. Lopez, 419 U.S. 565 (1975).............
Harvey Aluminum v. American Cyanamid Co., 203

F .2d 105 (2d Cir.), cert, denied, 345
U.S. 964 (1953)......................

Hughes v. Rowe, 449 U.S. 5 (1980)..............
Jackson v. City of Kileen, 654 F.2d 1181

(5th Cir. 1981)......................

Page

8
35
35

21

7, 11 

18, 24-25 

28-29 

16

10, 11, 
12, 13
35

20

33
34
35

12
18-19

21

l



Page

Knox v. Cornell University, 30 FEP Cases 433
(N.D.N.Y. 1982)......................

Littman v. Bache & Co., 252 F.2d 479
(2d Cir. 1958)........................

McDonnell Douqlas Corp. v. Green, 411
U.S. 792 (1973)......................

McFarland v. Gregory, 425 F.2d 608
(9th Cir. 1983)......................

Memphis Light, Gas & Water Div. v. Craft,
--- 436 U.S. 1 (1978)... .................
Merit Insurance Co. v. Leatherby Insurance Co., 

581 F .2d 137 (7th Cir. 1978 ..........
Miracle Mile Associates v. City of Rochester,

617 F .2d 18 (2d Cir. 1980)...........
Montgomery v. Yellow Freight Systems, Inc.,
---- “----  671 F .2d 412 (10th Cir. 1982).......

20

13

19

34

35 

9

30, 31, 32 

21

Natural Resources Defense Council, Inc. v.
U.S.E.P.A., 703 F .2d 700 (3rd Cir. 1983

Nemeroff v. Abelson, 620 F. 2d. 339
(2d. Cir. 1980).........................

Nemeroff v. Abelson, 704 F .2d 652 (2d Cir. 1983)
Newman v. Piggie Park Enterprises, Inc. ,

390 U.S. 400 (1.968)........ ...........
Newsday, Inc., v. Ross, 80 A.D. 2d 1 (2981).....
Pilot Freight Carriers Inc., v. International 

Brotherhood of Teamsters, 506 F .2d 
9T4 (5th Cir.), cert, denied, 422 U.S. 
1048 ....................................

PRC Harris, Inc., v. Boeing Co., 700 F.2d
894 (2d Cir. 1983).....................

Roadway Express, Inc., v. Piper, 447 U.S.
752 (1980)..............................

Ross v. Comsat, 34 FEP Cases 260 (D. Md. 1984) . . . . 
Runyan v. McCrary, 427 U.S. 160 (1976)............

17-18

29
30

17
20

12

30

15, 27, 29, 
31, 33
20
29

li



Page
Ryan v. New York Telephone Co., - N.Y.2d -

(1984) (Slip opn. June 14 , 1984)........... 20
Smith v. District of Columbia, 29 FEP Cases

1129 (D.D.C. 1982).......................... 21
Stenseth v. Greater Fort Worth and Tarrant 

County Community Action Agency,
673 F . 2d 842 (5th Cir. 1982)...............  22

Texas Dept, of Community Affairs v. Burdine,
450 U.S. 248 (1981)......................... 19

Thorp v. Scarne, 599 F.2d 1169 (2d Cir.
1979)........................................ 8 , 9 , 10 ,

13
United States v. Blodget, 709 F.2d 608

(9th Cir. 1983).............................  34
United States for Heydt v. Citizens State Bank,

688 F . 2d 444 (8th Cir. 1982)...............  16
United States Postal Service v. Aikens, - U.S. - ,

75 L. Ed. 2d 403 (1983)...................... 19
Weinberger v. Kendrick, 698 F.2d 61 (2d Cir. 1982)... 30
Williams v. Ezell, 531 F.2d 1261 (5th Cir.

1976)........................................ 8 , 10
Wooten v. New York Telephone Co., 485

F.Supp 748 (S.D.N.Y. 1980)................... 21

iii



QUESTIONS PRESENTED
1. Whether plaintiffs' voluntary dismissal of this 

action pursuant to Rule 41(a)(1)(i) of the Federal Rules of 
Civil Procedure precluded the district court from subse­
quently assessing attorneys' fees against them.

2. Whether this action was frivolous, unreasonable or 
without foundation thereby entitling defendants to attor­
neys' fees from plaintiffs.

3. Whether the district court erred in assessing 
attorneys' fees against plaintiffs' former counsel in the 
absence of a hearing or any finding of bad faith.

IV



STATEMENT OF THE CASE AND FACTS

Plaintiffs-appellants ("plaintiffs") commenced this 
action on May 2, 1983 seeking to contest their terminations 
from defendant-appellee ("defendant") Victim Services Agency 
("VSA") in January, 1983. Plaintiffs, one of whom is 
Hispanic and the other black, alleged in their complaint 
that their terminations violated the First and Fourteenth 
Amendments to the United States Constitution, 42 U.S.C. 
§§1981, 1983 and 1985, and also constituted conspiracy, 
defamation, defamation per se and intentional infliction of 
emotional distress which were asserted as pendant state 
claims. (J.A.150-153)*.

Simultaneously with the filing of this action plain­
tiffs moved by order to show cause for a preliminary injunc­
tion restoring them to their former positions with VSA. 
Argument of counsel was heard on May 6, 1983 and an 
evidentiary hearing was held on June 3 and 8, 1983. (J.A.
10). At the conclusion of the June 8th hearing the district 
court issued a decision from the bench denying plaintiffs' 
motion for a preliminary injunction. Id. That ruling was 
confirmed in a written opinion dated June 10, 1984. (J.A.
18-34) .

* References in this format are to pages of the Joint 
Appendix.



Less than a week later, on June 16, 1983, plaintiffs 
filed a notice of voluntary dismissal pursuant to Rule 41(a) 
(1)(i) of the Federal Rules of Civil Procedure. (J.A. 136). 
Notwithstanding the dismissal, on August 3, 1983, almost 
2 months later, defendants moved for attorneys' fees. (J.A. 
103). Defendants' motion was granted in the amount of 
$19,352.45 in a memorandum decision dated February 3, 1984. 
(J.A. 9-17). Of that amount the lower court allocated 
$50.00 against each of the plaintiffs and the balance, 
$19,252.45, against plaintiffs' attorney, Gabe Kaimowitz.

On February 12, 1984 Mr. Kaimowitz filed a motion for 
reconsideration and an evidentiary hearing pursuant to Rule 
59(e) of the Federal Rules of Civil Procedure on his own 
behalf. (J.A. 39). Three days later plaintiffs also filed 
a Rule 59(e) motion. (J.A. 49). By memorandum 
endorsement dated May 23, 1984, these motions were denied. 
(J.A. 8).* Plaintiffs and Mr. Kaimowitz both filed notices 
of appeal on June 22, 1984. (J.A. 5-7).

* This case was assigned to Judge Werker when it was 
originally filed. In March and April, 1984, during the 
pendency of the Rule 59(e) motions and Judge Werker's 
illness, two orders in this matter were issued by Judge 
Duffy granting defendants' request for adjournments of the 
motions. (J.A. 61, 62). The May 23, 1984 decision denying 
the Rule 59(e) motions was also issued by Judge Duffy, Judge 
Werker having passed away on May 10, 1984. (J.A. 8). At no
time prior to the denial of these motions had plaintiffs 
been informed of any reassignment of this action. Nor is 
this reflected in the docket sheets. (J.A. 3-4). However, 
on May 31, 1984, a week after Judge Duffy's decision, a 
Notice of Reassignment was issued by the district court 
clerk reassigning this action to Judge Broderick. (J.A.
82). This was entered on the docket sheet on June 1, 1984. 
(J.A. 4).

2



At the time plaintiffs filed this action they had valid 
reason to believe their federal constitutional and statutory 
rights had been violated and their counsel acted in good 
faith in initiating this lawsuit. Plaintiffs Birmingham and 
Santiago were terminated from their positions as counselors 
with the Bronx Family Court Office of VSA on January 17 and 
19, 1983 respectively. (J.A. 147). They were discharged 
because of "activities involving illegal substances". (J.A. 
142). This was based on the alleged observations of one 
individual, Patricia Johnson (J.A. 13, 199, 204), who, in an 
affidavit sworn to the 10th day of March, 1983, at the 
behest of VSA Executive Director Lucy Friedman, claimed to 
have seen and told her supervisor of these activities a 
significant amount of time before plaintiffs were terminat­
ed. (J.A. 221).

Although these observations, if proved true, might well 
have justified plaintiffs' dismissal, events which occurred 
between the dates of plaintiffs' termination and the prelim­
inary injunction hearing paint a very different picture. 
Pursuant to agency policy, a Personnel Action Committee 
("PAC") consisting of five agency employees was convened to 
investigate and recommend to the Executive Director whether 
plaintiffs' terminations should be upheld. Plaintiff 
Santiago testified at .a hearing held by the PAC on March 7, 
1983 and plaintiff Birmingham and Ms. Johnson testified at a 
March 16, 1983 hearing. (J.A. 199). Both plaintiffs

3



testified that they did not use any drugs while employees of 
VSA. (J .A . 50). Ms. Johnson, who testified under oath,
essentially recanted the statements in her earlier affida­
vit. (J .A. 199). On the basis of all of the evidence
before it, the PAC unanimously recommended that both plain­
tiffs be reinstated with backpay. (J.A. 198). Although 
VSA's Executive Director, defendant Friedman, did not adopt 
this recommendation, it represented, prior to the filing of 
this lawsuit, the judgment of five VSA personnel who had 
heard testimony, read affidavits and other documents, and 
were in a position to evaluate issues of credibility, that 
plaintiffs' terminations were unsubstantiated and 
unjustified. Id.

Plaintiffs were also required to appear and testify at 
hearings before administrative law judges in connection with 
their applications for unemployment insurance following 
their discharges. In both cases, VSA appeared by counsel 
and opposed plaintiffs' requests for benefits. (J.A.
56, 57). In decisions dated May 24 and 26, 1983 
administrative law judges credited plaintiffs' testimony 
over the evidence adduced by defendants through their 
counsel and concluded that plaintiffs had not lost their 
jobs through misconduct. Id.

Thus, prior to the preliminary injunction hearing, two 
independent fact-finding bodies or agencies credited plain­
tiffs' testimony of non-drug use over the contrary position,

4



advanced both then and at the preliminary injunction 
hearing, by defendants.

Under these circumstances it was entirely reasonable 
for plaintiffs' counsel to question the stated reason for 
his clients' termination. In examining this, two motives 
were suggested. First, plaintiffs had been very active in 
attempting to organize a union at VSA. (J.A. 146-147, 150). 
Second, although plaintiffs are Hispanic and black respec­
tively, everyone who participated in the decision to 
terminate them was white. It is particularly significant 
that although John Campbell, a black, was a supervisor of 
plaintiffs one step removed, he was the only person in the 
chain of command who was not consulted about the decision to 
terminate plaintiffs. (J.A. 483). In a like manner, the 
unanimous decision of the PAC, whose membership was 
predominantly minority, was rejected by VSA's white 
executive director even though she candidly admitted she did 
not have any information concerning the plaintiffs that was 
different than the information before the PAC. (J.A. 429, 
430). Based on this pattern of by-passing and reversing any 
input into the decisional process by minorities plaintiffs 
instituted a lawsuit against VSA alleging, among other 
things, that their right to be free from discrimination 
under the Fourteenth Amendment and their right to contract 
as guaranteed by 42 U.S.C. §1981 had been violated. (J.A. 
150-151) .

5



As noted above, a preliminary injunction hearing was 
held and, in a written opinion dated June 10, 1983, plain­
tiffs' application to be reinstated was denied. Six days 
later plaintiffs filed a notice of voluntary dismissal 
pursuant to Rule 41(a)(1)(i) of the Federal Rules of Civil 
Procedure. Although not required to do so, on June 17, 1983 
Judge Werker "So Ordered" the notice of voluntary dismissal.
(j .A. 80). Thus, this lawsuit lasted only a matter of about 
six weeks from commencement to dismissal. After the 
district court opinion plaintiffs made no further efforts to 
litigate the claims ruled upon by the court.

Because, however, a subsequent Rule 59(e) motion 
seeking reconsideration of the assessment of $19,352.45 in 
attorneys' fees against plaintiffs and their former counsel 
was unsuccessful, plaintiffs now appeal to this Court.

6



POINT I
PLAINTIFFS' VOLUNTARY 
DISMISSAL OF THIS ACTION 
PURSUANT TO RULE 41(a)(1)
(i) OF THE FEDERAL RULES 
OF CIVIL PROCEDURE PRE­
CLUDED THE DISTRICT COURT 
FROM SUBSEQUENTLY ASSESSING 
ATTORNEYS' FEES AGAINST 
THEM.

Before addressing the question of whether the district 
court utilized the correct legal standards in assessing 
attorneys' fees against plaintiffs and their former attor­
ney, it is necessary to determine whether the court had the 
authority to even consider defendants' fee application. 
Plaintiffs submit that once a voluntary notice of dismissal 
was filed the lower court was without authority to award 
defendants attorneys' fees.

On June 16, 1983 plaintiffs served and filed a notice 
of voluntary dismissal pursuant to Rule 41(a)(1)(i) of the 
Federal Rules of Civil Procedure. (J.A. 136). It is 
undisputed that up to that point defendants had neither 
served an answer nor moved for summary judgment. Under 
these circumstances plaintiffs had an absolute right to 
dismiss their lawsuit. Carter v. United States, 547 F.2d 
528, 529 (5th Cir. 1977). "The court had no power or

7



discretion to deny plaintiffs' right to dismiss or to attach 
any condition or burden to that right"*. Williams v. Ezell, 
531 F .2d 1261, 1264 (5th Cir. 1976). The lower court's 
subsequent order awarding defendants' attorneys' fees, more 
than seven months after the voluntary dismissal, was 
therefore a nullity. Id; Derfner & Wolf, Court Awarded
Attorneys Fees, §9.02[3][a].

The rationale for these conclusions is obvious from a 
reading’of Rule 41(a). Dismissal under subdivision 
(a)(1)(i) merely requires the filing of a notice of dismiss­
al prior to service of an answer or motion for summary 
judgment. In contrast, dismissal at a later point, in the 
absence of a stipulation signed by the parties, requires an 
order of the court which may be granted "upon such terms and 
conditions as the court deems proper." Rule 41(a)(2).

This Court has charcicterized the language of Rule 
41(a)(1)(i) as "unambiguous". Thorp v. Scarne, 599 F.2d 
1169, 1173 (2d Cir. 1979). Thus, it has quoted with ap­
proval the following language from American Cyanamid Co. v. 
McGhee, 317 F.2d 295, 297 (5th Cir. 1963):

* In their opposition to the Rule 59(e) motions below 
defendants contended that plaintiffs Rule 41(a)(1)(i) 
argument was inapplicable since the court did not impose any 
burdens or conditions on the voluntary dismissal. This^ 
misses the point entirely. As the remainder of this point 
demonstrates, once a notice of voluntary dismissal has been 
filed, the case is closed for all purposes and the court is 
powerless to grant any relief arising from that case.

8



So long as plaintiff has not been 
served with his adversary's answer 
or motion for summary judgment he 
need do no more than file a notice 
of dismissal with the Clerk._ That 
document itself closes the file.
There is nothing defendant can do 
to fan the ashes of that action 
into life and the court has no role 
to play. This is a matter of right 
running to the plaintiff and may^ 
not be extinguished or circumscribed 
by adversary or court. There is not 
even a perfunctory order of court 
closing the file. Its alpha and 
omega was the doing of the plaintiff 
alone.

Thorp v. Scarne, 599 
F.2d at 1176.

The lower court's decision appears to suggest that its 
reservation of the fee issue at the conclusion of the 
preliminary injunction hearing overcomes the clear language 
of the Rule. (J.A. 11). Assuming arguendo, a reservation of 
the fee issue, it is still clear that this could not serve 
to modify the effect of a voluntary dismissal under Rule 
41(a)(1)(i). In Merit Insurance Co. v. Leatherbv Insurance 
Co., 581 F .2d 137 (7th Cir. 1978), the district court 
preliminarily granted a three month stay of the action and 
ordered arbitration pursuant to the contract between the 
parties. After a further extension of the stay the plain­
tiff filed a notice of dismissal pursuant to Rule 
41(a)(1)(i). A motion by the defendant to vacate the notice 
of dismissal was denied by the district court and affirmed 
by the court of appeals. The notice of dismissal therefore 
had the effect of negating a prior order compelling arbi­
tration. If a Rule 41(a)(1)(i) notice of dismissal can

9



negate a prior order it certainly can negate a reservation 
of attorneys' fees which was never even reduced to an order.

In addition, as already noted, Williams v. Ezell, 531 
F.2d at 1264, specifically stands for the proposition that 
an order granting attorneys' fees subsequent to a Rule 
41(a)(1)(i) voluntary dismissal is a nullity. Although 
there was no attempted reservation of the fee issue in 
Ezell, it is clear from that court's opinion that "Rule 
41(a)(1) 'means precisely what it says'", that a prior 
reservation can do nothing to alter the effect of a Rule 
41(a)(1)(i) dismissal. Id. at 1263. The rule is clear and 
unambiguous and contains no exceptions. D.C. Electronics, 
Inc, v. Nartron Corp., 511 F.2d 294, 296 (6th Cir. 1975).
Once the notice of dismissal is filed the case is closed in 
all respects. Thorp v. Scarne, 599 F.2d at 1176.

The facts in Thorp v. Scarne confirm the outcome 
advanced by plaintiffs. There the court conducted a hearing 
on plaintiffs' application for a temporary restraining order 
on two dates five days apart. At the conclusion of the 
hearing on the second date the court denied plaintiff's 
application. At that time it also indicated that it would 
grant a motion for summary judgment in favor of the defen­
dants on the basis of their brief submitted on the motion 
for a temporary restraining order and therefore "directed 
the defendants to file a formal motion." Id. at 1172, ftnt.
4. (Emphasis added.) The following day, before defendants 
had filed their motion for summary judgment, plaintiff filed

10



a notice of voluntary dismissal under Rule 41(a)(1)(i).
Even though defendants filed their motion for summary 
judgment a few hours later (id. at 1171) (no answer had 
ever been filed), this Court ruled that plaintiff's notice
of dismissal had to be honored.

In the case at bar the court's allowance to defendants 
to apply for attorneys' fees is, at best, the equivalent of 
the Thorp court's direction to defendants to file a motion 
for summary judgment. If the latter could not survive in 
the face of an intervening notice of dismissal, there is no 
basis to suggest that the allowance to file for attorneys' 
fees survives a notice of dismissal. This is all the more 
true here since there was no court directive but merely an 
acknowledgment that defendants could do that which they were
free to do in any event. (J.A. 618).

If the result of a notice of dismissal seems harsh, it 
was easily within the power of defendants to avoid its 
adverse impact. "Defendants who desire to prevent plain­
tiffs from invoking their unfettered right to dismiss 
actions under Rule 41(a)(1) may do so by taking the simple 
step of filing an answer." Carter v. United States, 547 
F 2d at 259. It is simply defendants' own lack of diligence 
in serving and filing an answer or motion for summary 
judgment that prevents them from seeking to obtain attor­
neys' fees at this juncture. See, D.C. Electronics, Inc. v. 
Nartron Corp., 511 F .2d at 298.

11



Defendants may attempt to argue, primarily on the 
authority of Harvey Aluminum v. American Cyanamid Co., 203 
F.2d 105 (2d Cir.), cert, denied, 345 U.S. 964 (1953), that
because the district court reached the "merits of the 
controversy", plaintiffs were foreclosed from obtaining the 
benefits of a voluntary notice of dismissal. This, however, 
ignores the clear and unambiguous language of Rule 
41(a)(1)(i) and the fact that Harvey has not been followed 
in other jurisdictions or even by this Court in subsequent 
decisions.

Rule 41(a)(1)(i) is neither vague nor ambiguous.
"[T]he drafters employed precise language" to define when a 
voluntary notice of dismissal could be employed. D .C 
Electronics v. Nartron Corp., 511 F.2d at 297. Rule 41 
(a)(1)(i) "establish[es] a bright-line test marking the 
termination of a plaintiff's otherwise unfettered right 
voluntarily and unilaterally to dismiss an action." Thorp 
v. Scarne, 599 F.2d at 1175. Since the Rule creates no 
exception for cases which may have reached the merits of 
the controversy" notwithstanding no answer or summary 
judgment motion having been filed, it would be improper for 
a court to impose such an exception. In fact, application 
of the Harvey rule would result in a "flat amendment of Rule 
41(a)(1) to preclude dismissal by notice in any case where 
preliminary injunctive relief is sought." Pilot Freight 
Carriers Inc. v. International Brotherhood of Teamsters, 506

12



F .2d 914, 916 (5th Cir.), cert, denied, 422 U.S. 1048 
(1975) .

The legislative history of Rule 41(a) also confirms 
this result. In 1946 Rule 41(a)(1)(i) was amended to 
provide that service of a motion for summary judgment would 
have the same effect in preventing absolute dismissal as was 
originally created with the service of an answer. Rule 41, 
Notes of Advisory Committee on 1946 Amendments. Since that 
time Rule 41 has been amended on three more occasions but 
"it has not been broadened to include other motions or 
pleadings which would bar a dismissal by notice. D •̂ » 
Electronics, Inc, v. Nartron Corp., 511 F.2d at 296. It is 
clear therefore that even after a preliminary injunction 
hearing where the merits may have been considered a volun­
tary notice of dismissal is effective in the absence of an 
intervening answer or motion for summary judgment.

All of this is consistent with the views expressed by
this Circuit in decisions subsequent to the Harvey opinion.
Just three years after Harvey in Littman v. Bache & Co., 25.
F .2d 479 (2d Cir. 1958), this Court refused to follow the
reasoning of its earlier decision by distinguishing the
facts of that case. More recently, in Thorp v. Scarne, 599
F .2d at 1175 this Court wrote:

Harvev Aluminum has not been well 
received. Although its rationale 
is occasionally reiterated in dictum, 
subsequent cases have almost uniformly 
either distinguished Harvev Aluminum, 
limiting the case to its particular

13



factual setting, or forthrightly 
rejected it as poorly reasoned.

This Court then went on to specifically criticize the 
reasoning of Harvey. It noted that Harvey does damage to 
the "bright-line test" of Rule 41(a)(1)(i) and would result 
in a blanket amendment to the Rule precluding its applica­
tion in instances where a preliminary injunction has been 
sought even though never proposed on any of the four oc­
casions when Rule 41 has been amended. Id. at 1175-1176. 
Finally, the court observed that a defendant can be protect­
ed against the possibly harsh application of Rule 
41(a)(1)(i) by simply filing an answer or motion for summary
judgment. Id.

The linchpin of the district court's reasoning for 
overcoming the effect of Rule 41(a) (1) (i) appears to be the 
court's power to reserve the issue of attorneys' fees 
pursuant to 42 U.S.C. §1988. (J.A. 11). As already
discussed, there is no authority, at least in the context of 
Rule 41(a) (1) (i), to support .this. The authority is all to 
the contrary. Beyond this, there was no reservation of the 
fee issue in the traditional sense. Reserving attorneys 
fees is typically done in the context of dismissing the 
underlying action. It preserves a party's right to apply 
for fees notwithstanding the dismissal. At the time defen­
dants requested an opportunity to move for attorneys' fees 
there had been no dismissal of this action and none was 
discussed. There was no need for a reservation of the 
issue. Considered in the context of the discussion which

14



took place, the court simply confirmed defendant's right to 
do, at that time, what they could do without court approval.

The fact that there was no reservation of attorneys' 
fees is made all the more apparent by the lower court's 
actions with respect to the notice of voluntary dismissal.
The original notice of voluntary dismissal was "So Ordered" 
by Judge Werker on June 17, 1983. (J.A. 80). Judge Werker
also noted in the body of the notice that defendants had not 
filed an answer and changed the caption of the document from 
"Notice of Voluntary Dismissal" to "Notice & Order of 
Voluntary Dismissal". Id. Had the lower court intended to 
reserve the issue of attorneys' fees it would have been 
reasonable to expect some indication of that at this point. 
Instead, its actions were completely contrary to any 
intention to reserve the fee issue.

Moreover, even if there had been a reservation of the 
fee issue pursuant to 42 U.S.C. §1988 as the lower court 
suggests, that could not have served as a basis for later 
assessing fees against plaintiffs' former attorney. It is 
undisputed that Section 1988 makes no mention of attorney 
liability for fees and costs. Roadway Express v. Piper, 447 
U.S. 752, 761 (1980). Therefore, reservation of the fee 
issue pursuant to Section 1988 could in no way serve as the 
predicate for later assessing fees against plaintiffs 
counsel. This is all the more so where a voluntary notice 
of dismissal has been filed in the interim.

15



Finally, the district court's citation to Natural 
Resources Defense Council, Inc., v. U.S.E.P.A^, 703 F.2d 700 
(3rd Cir. 1983) and United States for Heydt v. Citizens 
State Bank, 688 F.2d 444 (8th Cir. 1982), does not lend any 
support for the position that a voluntary dismissal under 
Rule 41(a)(1)(i) is ineffective with respect to a subsequent 
application for attorneys' fees. Neither case involved a 
dismissal pursuant to Rule 41(a)(1)(i)- In fact, there was 
no dismissal at all in Natural Resources Defense Council and 
the dismissal in United States for Heydt was pursuant to a 
stipulation of settlement. The reference to voluntary 
dismissal in both cases was in the context of determining 
prevailing party status and, even at that, was purely dicta.

Both cases cited Corcoran v. Columbia Broadcasting Co., 
121 F.2d 575 (D.C. Cir. 1941), which is no more applicable 
to this case than those cases. Corcoran involved a volun­
tary dismissal pursuant to Rule 41(a)(2). There it is 
understandable that prevailing party status might be con­
sidered because, as already noted, a district court can 
condition dismissal on various sanctions including the 
payment of attorneys' fees. Additionally, in Corcoran the 
court actually ignored Rule 41 and looked to the underlying 
substantive statute as the basis for the award of fees. 
Derfner & V7olf, Court Awarded Attorney Fees, 59.02 [3] [a].

Once a plaintiff has properly invoked Rule 41(a)(1)(i), 
the district court is powerless to award attorneys' fees.

16



POINT II
THIS ACTION WAS NOT FRIVOLOUS, 
UNREASONABLE OR WITHOUT FOUN­
DATION AND ACCORDINGLY, DEFENDANTS 
ARE NOT ENTITLED TO ATTORNEYS'
FEES FROM PLAINTIFFS.

Even if this Court were to conclude that plaintiffs 
voluntary dismissal pursuant to Rule 41(a)(1)(i) did not 
prevent the district court from reaching the merits of 
defendants' application for attorneys' fees, it is clear 
that because this action was not frivolous, unreasonable or 
without foundation, defendants were not entitled to an award 
of fees from plaintiffs.

A prevailing plaintiff in a civil rights action "should 
ordinarily recover an attorney's fee unless special circum­
stances would render such an award unjust." Newman v.
Piggie Park Enterprises, Inc., 390 U.S. 400, 402 (1968).
The purpose of counsel fee provisions for plaintiffs is not 
punitive, but rather, to encourage private enforcement of 
broad governmental policies by removing financial impedi­

ments :
When a Dlaintiff brings an action 
under [Title II of the Civil Rights 
Act of 1964] he cannot recover damages.
If he obtains an injunction, he does so 
not for himself alone but also as a 
"private attorney general," vindicating 
a policy that Congress considered of the 
highest priority. If successful plain-

17



tiffs were routinely forced to bear^ 
their own attorneys' fees, few aggrieved 
parties would be in a position to advance 
the public interest by invoking the in­
junctive powers of the Federal courts. 
Congress therefore enacted the provision 
for counsel fees— *** to encourage 
individuals injured by racial discrimi 
tion to seek judicial relief under Title II

Tr!_ Ftnt, nmitted.

The rule for a prevailing defendant, however, is quite 
different. There a district court is empowered to award 
attorneys' fees only "upon a finding that the plaintiff's 
action was frivolous, unreasonable, or without founda­
tion..." Christiansburg Garment Co. v. EEOC, 434 U.S. 412

421 (1978).
Although the words "frivolous" and "unreasonable" are 

somewhat abstract, they have been given greater specificity 
and meaning. In Christiansburg the Court concluded from 
limited legislative history that the purpose in granting 
fees to defendants was "to protect [them] from burdensome 
litigation having no legal or factual basis." Id. at 420. 
At another point it defined "meritless" as "groundless or
without foundation." Id. at 421.

in Hughes v. Rowe, 449 U.S. 5 (1980), the Court re-
peated this admonition. "The plaintiff's action must be
meritless in the sense that it is groundless or without
foundation." Id. at 14. The Court added, however, that

[a] negations that, upon careful 
examination, prove legally insuf-

18



ficient to require a trial are 
not, for that reason alone, ground­
less" or "without foundation" as 
required by Christiansburg.

Id. at 15-16
In essence the court must be persuaded that plaintiff 

can produce no evidence whatsoever to support his claim or 
that plaintiff has no colorable legal theory. Derfner &
Wolf, Court Awarded Attorney Fees, «[10,04 [3] [a] . This
simply is not the case here.

Plaintiffs' theory of discrimination, for example, 
accorded with accepted practice. If they could demonstrate 
that the only legitimate, nondiscriminatory reason advanced 
by the employer for their terminations was untrue and merely 
a pretext, it was more likely than not that they had been 
terminated for impermissible (i.e. discriminatory) reasons. 
McDonnell Douglas Corp. v. Green, 411 U.S. 792, 805 (1973);
Texas Dept, of Community Affairs v. Burdine, 450 U.S. 248, 
256 (1981). It is also important to keep m  mind that a 
plaintiff is not required to submit direct evidence of 
discriminatory intent in order to prevail. United States 
Postal Service v. Aitkins, - U.S.-, 75 L.Ed.2d 403, 411 
(1983). Viewed from this perspective, the facts clearly 
support a colorable theory of discrimination.

Both plaintiffs are minorities. All of those who 
recommended or approved of their terminations were white. 
There have never been any allegations that plaintiffs did 
not perform their jobs adequately. The purported reason for

19



termination advanced by defendants was based on the state­
ment of one person who had recanted her accusations. 
Plaintiffs testified on two separate occasions where they 
denied any involvement in drugs - the proferred basis for 
their terminations. On both occasions their testimony was 
given credence and their reinstatement recommended and their 
entitlement to unemployment insurance benefits upheld, 
respectively. . Thus, up to June, 1983, two independent 
fact-finding bodies or individuals credited plaintiffs' 
testimony rather than testimony and evidence submitted by 
the employer. While plaintiffs might not have prevailed 
ultimately, these facts more than support a viable theory of 
discrimination. Under these circumstances it can 
hardly be concluded that prior to the preliminary injunction 
hearing plaintiffs' action was frivolous.*

In analyzing plaintiffs' prima facie case on the 
discrimination claim the district court found fault with the 
fact that plaintiffs were not replaced by non-minorities. 
(J.A. 26). Yet proof of replacement efforts generally, and 
proof of replacement by a non-minority in particular,

*The findings of non-drug use by the two Administrative 
Law Judges in the unemployment insurance hearing are partic­
ularly significant. Where a party has had a full and fair 
opportunity to litigate issues in an unemployment insurance 
appeal proceeding, it is collaterally estopped from relit- 
igating those issues in a subsequent judicial proceeding, 
including actions alleging discrimination. Knox v. Cornell 
University, 30 FEP Cases 433 , 435-436 (N.D.N.Y.^1982)_, Gear
v. City of DesMoines, 25 FEP Cases 1400, 1405 (S.D. Iowa
1981); Ross v. Comsat, 34 FEP Cases 260, 263-264 (D^ Md. 
1984). See also, Ryan v. New York Telephone Co., -N.Y.- 
(1984) (Slip opn. June 14 , 1984); Newsday,— Inc. v. Ross, 80

20



have not been held to be essential factors in establishing a 
claim of discriminatory discharge. Smith v. District of 
Columbia, 29 FEP Cases 1129 (D.D.C. 1982); Wooten v. New 
York Telephone Co., 485 F.Supp. 748 (S.D.N.Y. 1980); Jackson 
v. City of Killeen, 654 F.2d 1181, 1184 n.3 (5th Cir. 1981).

Plaintiffs' case was no less substantial than other 
cases where the courts refused to award attorneys' fees to 
defendants. In Montgomery v. Yellow Freight System, Inc., 
671 F .2d 412 (10th Cir. 1982), a mechanic sued under Title 
VII to contest his discharge for sleeping in a truck during 
his shift while other vehicles were awaiting servicing. The 
plaintiff appears to have conceded the truth of this but 
claimed that on another occasion three mechanics (including 
himself) were found asleep but not fired. It was also 
claimed that on one occasion a supervisor not involved in 
the decision to terminate plaintiff made a disparaging 
remark about his race. The court concluded that plaintiff 
failed to carry his burden of demonstrating that the reason 
for his termination was pretextual and that [t]here was 
ample evidence that appellant was fired for a legitimate 
reason, sleeping on the job." Id. at 413. Nevertheless, 
the court refused to uphold the employer's claim for attor-

Footnote continued from page 20
A.D. 2d 1 (1981); Bernstein v. Birch Wathen School, 71 A.D.
2d 179 (1979, aff'd, 51 N.Y. 2d 932 (1980). Since the 
non-discriminatory reason advanced in this action for 
plaintiffs' terminations was the same as that used to 
support the denial of unemployment insurance benefits, 
defendants would have been estopped at a trial of this 
action from relitigating the facts of plaintiffs' termina­
tions .

21



neys' fees because even on the record of that case [t]here 
was some evidence of disparate treatment...' a"*- 414.

In stenseth v. Greater Fort Worth and Tarrant County 
Community Action Agency, 673 F.2d 842 (5th Cir. 1982) , a 
counselor and administrator of a CETA program brought suit 
under 42 U.S.C. §1983 alleging that the procedures utilized 
in his termination violated his civil rights. Plaintiff was 
terminated for his inadequacies as an administrator, evi­
dence of which the court found to be "strong and clear 
(id. at 847) and which the plaintiff virtually conceded as 
being true. The court also found that plaintiff's termina­
tion hearing "without question met constitutional require­
ments of due process and fairness." Id. Notwithstanding 
the obvious weaknesses in the case, the district court's 
assessment of over $16,000 in fees against the plaintiff was 
reversed in part on the basis that "it cannot be 
characterized as frivolous for plaintiff to rely upon the 
slender reed that the regulations [for termination] actually 
applied more broadly than they seemed, in terms, to apply. 
Id. at 849. (Emphasis added).

Unlike those situations, in the present case plaintiffs 
never conceded the truth of the reason advanced for their 
terminations. The only evidentiary basis for concluding 
that plaintiffs had been involved in drugs was highly 
questionable at best and, as noted above, was recognized in 
two separate fact-finding proceedings.

22



This case is also distinguished by a pattern of 
by-passing or disregarding the input of minorities in the 
decision making process. John Campbell, the only black in 
the chain of command was virtually ignored in deciding 
whether to terminate plaintiffs. The absence of any expla­
nation for this is particularly difficult to understand in 
light of the position of his supervisor, Kevin Byrne, who 
testified that he wanted Campbell to assume complete respon­
sibility for the Family Court unit. (J.A. 482). The 
rejection of the PAC, four of whose members were minorities 
(J.A. 148), is also perplexing. The critical issue in this 
case was a question of fact. Only the members of the PAC 
heard, and were thus in a position to evaluate the credibil­
ity of, all of the relevant witnesses. Ms. Friedman admit­
ted she did not have possession of any information not 
available to the PAC (J.A. 429, 430) and, because she had 
not interviewed everyone, actually had less information 
available to her.

This consistent by—passing or rejection of input by 
minorities at each stage of the decisional process, when 
coupled with the race of the plaintiffs and those who 
approved their termination and the fact that the purported 
reason for their termination had been adjudged unjustified 
and unsubstantiated on at least two occasions, gave plain­
tiffs and their former counsel a more than legitimate basis 
for initiating this action.

23



The reasonableness with which plaintiffs litigated this 
action is also evidenced by events prior to its initiation 
and subsequent to the decision on the preliminary injunction 
motion. After the Personnel Action Committee hearing 
plaintiffs, through counsel, sought to negotiate a settle­
ment of their claims. Only after it became apparent that a 
settlement could not be reached was this action commenced.
(J .A. 41). Additionally, less than a week after the 
district court's written opinion denying plaintiffs' motion 
for a preliminary injunction they voluntarily discontinued 
this action pursuant to Rule 41(a)(1)(i). This action 
lasted only a total of six weeks and only two weeks from the 
first evidentiary hearing. Under no circumstances can it be 
claimed that plaintiffs persisted in vexatiously litigating 
a case after they knew, or should have known, that it was 
meritless.

In Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 
421-422 (1978), the Supreme Court admonished district courts 
to

resist the understandable temptation 
to engage in post hoc reasoning by 
concluding that because a plaintiff 
did not prevail, his action must have 
been unreasonable or without foundation. 
This kind of hindsight logic could 
discourage all but the most airtight 
claims, for seldom can a prospective 
plaintiff be sure of ultimate success.
No matter how honest one's belief that 
he has been the victim of discrimination, 
no matter how meritorious one’s claim may 
appear at the outset, the course of litiga­
tion is rarely predictable. Decisive

24



facts may not emerge until discovery or 
trial. The law may change or clarify in 
the midst of litigation. Even when the 
law or the facts appear questionable or 
unfavorable at the outset, a party may 
have an entirely reasonable ground for 
bringing suit.

Measured against these considerations, it simply cannot 
be concluded that plaintiffs were without any factual or 
legal basis for bringing this lawsuit or, having filed the 
action, for litigating it until the notice of voluntary 
dismissal was filed.

In fact, the district court's finding that this lawsuit 
was frivolous is explainable only by its failure to heed the 
principle that courts should not engage in post hoc reason­
ing. This is evident from its treatment of the Section 1983 
claim requiring proof that defendants have acted under color 
of state law. It is common knowledge that VSA is a publicly 
funded agency that provides services in the criminal justice 
system on an intimate basis with various state and local 
agencies. For example, in the case of battered women, VSA, 
through conducting interviews and taking pictures of 
victims, almost acts as the invesitgatory arm of the 
District Attorney's Office. (J.A. 399-401). What only 
became known to plaintiffs after the preliminary injunction 
hearing at which Lucy Friedman, VSA's executive director, 
testified, was that much of VSA's public funding comes from 
the federal government, that no government entities 
participate in the selection of VSA's board of directors or 
the development of personnel policies and that defendant

25



Friedman did not consult with any federal, state or city 
officials in connection with her decisions concerning the 
two plaintiffs. (J.A. 403, 437, 439).* Viewed in retro­
spect, as the district court did, plaintiffs' claim of state 
action may indeed appear weak. Viewed from the perspective 
of the commencement of this action, the assertion of claims 
based on state action was not unreasonable.

This was not a case where discovery was possible either 
before the action was filed or prior to the preliminary 
injunction hearing. To the extent that the preliminary 
injunction hearing revealed weaknesses in plaintiffs' case, 
they discontinued the action almost immediately thereafter. 
Under all of these circumstances it is impossible to con­
clude that plaintiffs vexatiously sought to litigate this 
action after they knew or should have known that it was 
meritless.

* None of these facts were contained in Ms. Friedman's 
lengthy affidavit submitted in opposition to the motion for 
a preliminary injunction. (J.A. 250-270).

26



POINT III
THE DISTRICT COURT ERRED IN 
ASSESSING ATTORNEYS' FEES 
AGAINST PLAINTIFFS' FORMER 
COUNSEL IN THE ABSENCE OF A 
HEARING OR ANY FINDING OF 
BAD .FAITH.

Except for $100, the district court assessed the entire 
fee sought by defendants against plaintiffs' former counsel. 
The Court determined that it was authorized to assess legal 
fees against an attorney on the basis of 28 U.S.C. §1927,
Rule 11 of the Federal Rules of Civil Procedure and on the 
basis of its inherent equitable powers as explained in 
Roadway Express, Inc, v. Piper. 447 U.S. 752 (1980).

Preliminarily, Rule 11 provides that an attorney s 
signature to a pleading, motion or other paper constitutes, 
among other things, a certificate that after reasonable 
inquiry he believes the pleading, motion or other paper to 
be "grounded in fact and warranted by existing law". It 
therefore follows that attorneys' fees can only be assessed 
under this provision upon a determination that, at the time 
of signing the pleading, motion or other paper the attorney 
knew or should have known that the action was unsupportable. 
The district court made no such finding and there is nothing 
in the record that would permit such a finding.

27



Section 1927 also contains limitations apparently not 
considered by the court below. The statute only permits 
fees against an attorney "who multiplies the proceedings ... 
unreasonably and vexatiously..." Additionally, the amount 
is limited to "the excess costs, expenses and attorneys' 
fees reasonably incurred because of such conduct." Here too 
the lower court made no findings consistent with these 
standards and the record is entirely devoid of any basis for 
finding that plaintiffs' attorney unreasonably and 
vexatiously multiplied the proceedings.

Apart from these considerations, all of the cited bases
for assessing fees against counsel require a finding that
the lawsuit was brought or litigated in bad faith. In
Colucci v. New York Times Co., 533 F.Supp. 1011, 1013-1014
(S.D.N.Y. 1982), Judge Weinfeld discussed the requirements
of Section 1927 as follows:

The sanctions authorized under section 
1927 are not to be lightly imposed; nor 
are they to be triggered because a law­
yer vigorously and zealously pressed 
his client's interests. The power to 
assess the fees against an attorney 
should be exercised with restraint 
lest the prospect thereof chill the 
ardor of proper and forceful advocacy 
on behalf of a client. To justify the 
imposition of excess costs of liti­
gation upon an attorney his conduct must 
be of an egregious nature, stamped by 
bad faith that is violative of recog­
nized standards in the conduct of liti­
gation. The section is directed against 
attorneys who willfully abuse judicial 
processes. (Emphasis added, ftnt. omit­
ted. )

28



Judge Weinfeld further observed at 1014:
If the mere failure of a party to sus- 
tain the allegations of his complaint is 
sufficient to establish that an attopney 
had thereby multiplied the proceeding 
"unreasonably and vexatiously, then in 
almost every instance of failure to 
submit proof to sustain a claim, section 
1927 would automatically come into play.
In any event, there is not the slightest 
basis for charging that the attorneys' 
failure to present the proof required to 
sustain the retaliation charge was moti­
vated by bad faith or in any way was 
violative of standard practice.

The standard for assessing fees under Rule 11 is also • 
bad faith. Nemeroff v. Abelson, 620 F.2d 339, 350 (2d. Cir. 
1980). Likewise, assessment of fees under the court's 
inherent equitable powers can only be done where the attor­
ney's conduct amounts to bad faith and where a specific 
finding to that effect has been made. Roadway Express, Inc, 
v. Piper, 447 U.S. at 767.

Judge Weinfeld's admonition that a party's inability to
meet his burden of proof is not a basis for automatically
concluding that a case was litigated in bad faith has been
acknowledged by the Supreme Court. In Runyon v. McCrary,
427 U.S. 160, 183 (1976), the Court wrote:

Simply because the facts were found 
against the schools does not by itself 
prove that threshold of irresponsible 
conduct for which a penalty assessment 
would be justified. Whenever the facts 
in a case are disputed, a court perforce 
must decide that one party's version is 
inaccurate. Yet it would be unreasonable 
to conclude ipso facto that the party had 
acted in bad faith.

29



This Court too has recognized that even if an action is 
without merit it does not follow that it was brought in bad 
faith. Miracle Mile Associates v. City of Rochester, 617 
F .2d 18, 21 {2d Cir. 1980)? PRC Harris, Inc, v. Boeing .Co., 
700 F .2d 894, 898 (2d Cir. 1983). In Weinberger v.
Kendrick, 698 F.2d 61, 80 (2d Cir. 1982), this Court ex­
plained in detail the applicable standard and its rationale.

We have required, however, a high degree 
of specificity in factual findings of 
lower courts when attorneys' fees are 
awarded on the basis of bad faith, .... 
and that there be "clear evidence" that 
the challenged actions "are entirely with­
out color and [are taken] for reasons of 
harassment or delay for other improper 
purposes", ... These requirements are
a sound means of ensuring that persons 
with colorable claims will not be deterred 
from pursuing their rights by the fear of 
an award of attorneys' fees against 
them,...

The injunction that assessment of fees on the basis of bad 
faith must be utilized with caution and applied only in 
compelling or unusual circumstances so as not to deter 
plaintiffs from suing to enforce their rights was reiterated 
again in Nemeroff v. Abelson, 704 F.2d 652, 654 (2d Cir.

1983) .
Measured against these standards, the lower court 

opinion was deficient in several respects. First, it is not 
at all clear that the district court even recognized that 
bad faith was the appropriate standard for assessing a fees 
against the attorney. The term "bad faith" appears only 
once in the entire opinion and then in connection with a

30



quote from Roadway Express, Inc, v. Pi£er, 447 U.S. 752 
(1980). (J.A. 14). Second, even it it was aware of the bad
faith standard, it is clear that the lower court did not 
utilize it. It justified the assessment against Mr.
Kaimowitz because he was "better able to afford [it]" (J.A.
13) and because he had to assume responsibility for the 
defense of a "meritless" lawsuit. (J.A. 16). Counsel's 
better ability to bear the costs of a fee assessment is 
nowhere expressed as the proper standard and is inconsistent 
with the particular facts in this case. (J.A. 43).
Similarly, while a meritless lawsuit may trigger an assess­
ment of fees against a plaintiff, as all of the cases 
demonstrate, only a specific finding of bad faith provides a 
basis for charging an attorney with his adversary's legal 
fees. The lower court decision is devoid of any such 
findings. Finally, an examination of the entire record 
discloses no evidence of bad faith. While people may differ 
as to the wisdom of having initiated this action, there is 
simply nothing in the record which supports a conclusion 
that it was brought to harass defendants or for some other 
impermissible motive.

A comparison of the facts of Miracle Mile Associates v. 
C.itv of Rochester, 617 F.2d at 18 with this case makes it 
clear that there is no basis for a finding of bad faith 
here. In Miracle Mile plaintiffs were developers of a 
regional shopping center in a suburb of Rochester. They 
sued in the Western District of New York the City of

31



Rochester and various city officials who controlled vacant 
land that was seen as being in competition with their plans 
for constructing a suburban shopping center. Plaintiffs 
specific complaint was that by petitioning the state to 
begin an environmental quality review of plaintiffs plans 
defendants, as competitors, acted in restraint of trade in 
violation of the Sherman Act and the Donnelly Act. Plain­
tiffs, using the same counsel, had previously brought a 
similar lawsuit in the Northern District of New York to 
challenge efforts to block construction of shopping malls in 
that area. In that case, the district court, in an opinion 
affirmed by this Court, with certiorari denied by the 
Supreme Court, dismissed the complaint holding that the 
municipality's conduct was protected under the 
Noerr-Pennington doctrine. Notwithstanding this, this Court 
held that the filing of the second suit, which was found to 
be considerably weaker than the first and in fact without 
merit, by the same counsel who were characterized as no 
strangers to the legal principles which are applicable here" 
(Miracle Mile Associates v. City of Rochester, 617 F.2d at
20), did not amount to bad faith.

Certainly here where, on the basis of the PAC recommen­
dation and the findings of the administrative law judges, 
plaintiffs and counsel had legitimate grounds for believing 
that the proffered reason for plaintiffs' termination could 
not be supported, their initiation of this lawsuit cannot be

32



characterized as having been in bad faith.
In addition to not recognizing or applying the correct 

legal standard in this case, the district court’s decision 
is fatally flawed in one other significant respect. The 
court failed to provide plaintiff's former counsel with a 
hearing at which he would have had the opportunity to rebut 
any allegation of bad faith by explaining his motivation in 
commencing the action. This is all the more true given the 
size of the assessment against counsel.

When the district court determines to assess fees 
against an attorney, that changes significantly the focus of 
the litigation. Up to that point issues of relief and 
liability are matters between the parties who have subjected 
themselves to the jurisdiction of the court for those 
purposes. Undoubtedly because of this and the consequent 
due process implications, the Supreme Court has cautioned 
that fees against an attorney "should not be assessed ... 
without fair notice and an opportunity for a hearing on the 
record." Roadway Express, Inc, v. Piper, 447 U.S. at 767 .
In Glass v. Pfeffer, 657 F.2d 252, 258 (10th Cir. 1981), it 
was specifically held that assessment of fees against an 
attorney must be reversed in the absence of notice and an 
opportunity for a hearing.

In a case in which the size of the penalty under Rule 
37 was less than half of the amount assessed here this Court 
was constrained to rule that the size alone warranted an

33



opportunity for a hearing and the right to cross-examine. 
McFarland v. Gregory, 425 F.2d 443, 450 (2d Cir. 1970). In 
United States v. Blodgett, 709 F.2d 608, 610 (9th Cir.
1983) , the court wrote that "...the mere fact that an appeal 
is frivolous does not of itself establish bad faith. To 
establish bad faith on this record, a hearing was required 
to determine if the appeal was taken solely for purposes of 
delay."

The teaching of these cases is clear. Bad faith 
assumes some sort of impermissible motive on the part of 
counsel such as harassment or delay. Because counsel's 
motivation is normally not apparent on the face of the 
record, a court's finding of bad faith in the absence of a 
hearing is likely to be erroneous. In addition to the 
court's inability to properly determine the issue of bad 
faith, the lack of a hearing prevents counsel, as was the 
case here, from having a meaningful opportunity demonstrate 
affirmatively that the lawsuit was brought in good faith. 
When, as was the case here, a finding of bad faith can 
result in the imposition of a penalty in excess of $19,000 
against counsel, elementary concepts of fairness dictate 
that counsel be affo’rded a hearing at which to explain his 
motives. Anything less denies to lawyers the right to due 
process that is afforded to citizens generally in a whole 
host of different contexts. Se e.g. Goldberg v. Kelly, 397 
U.S. 254 (1970) , (pretermination hearing required before

34



discontinuance of welfare benefits); Fuentes v. Shevin, 407 
U.S. 67 (1972) , (hearing required prior to the replevin of
personal property purchased under a conditional sales 
contract); Bell v. Burson, 402 U.S. 535 (1971), (hearing
required prior to the suspension of a driver s license),
Goss v. Lopez, 419 U.S. 565 (1975), (hearing required before 
suspending pupil from school for up to 10 days); Barry v. 
Barchi, 443 U.S. 55 (1979), (hearing required before suspen­
sion of a horse trainer's license); Memphis Light, Gas & 
Water Div. v. Craft, 436 U.S. 1 (1978) , (informal hearing
required prior to discontinuance of utility servies). 
Certainly an attorney's interest in being protected against 
an erroneous penalty of over $19,000 is at least as great as 
the interests accorded due process protection in the above 
cases.

The record in this case falls considerably short of the 
standards governing the assessment of fees against an 
attorney on the basis of bad faith. First, for the reasons 
already discussed, there was a legitimate basis, both 
legally and factually, for commencing this action. Second, 
the Court made no specific finding of bad faith by Mr. 
Kaimowitz and it is not at all clear from its opinion that 
the court even considered this standard separate and apart 
from whether the lawsuit was meritless or frivolous.
Finally, it is undisputed that there was no opportunity for 
a hearing at which counsel could affirmatively demonstrate

35



his good faith conduct. Under all of these circumstances 
the award of attorneys' fees against plaintiffs' former 
counsel was in error.

36



i
rs

CONCLUSION
Based on the foregoing, the district court's order 

dated February 3, 1984 awarding attorney's fees against 
plaintiffs and their former counsel should be reversed in 
its entirety.

Dated: New York, New York
September 28, 1984

Respectfully submitted,

^  j ' .* toJORGE BATISTA 
ROBERT L.. BECKER 
Puerto Rican Legal Defense 
& Education Fund, Inc.

99 Hudson Street 
14th Floor
New York, New York 10013 
(212) 219-3360
ATTORNEYS FOR PLAINTIFFS-APPELLANTS

37