McKelvey v. Secretary of United States Army
768 F.3d 491
| 6th Cir. | 2014Background
- James McKelvey, an Iraq war veteran who lost his right hand, took a civilian Army operations specialist job and resigned in 2007 after persistent, injury-related harassment and menial assignments.
- He sued the Secretary of the Army under the Rehabilitation Act for disability discrimination (hostile work environment and constructive discharge).
- The Army offered unconditional reinstatement and later a $300,000 settlement; McKelvey rejected those offers seeking roughly $2.2 million.
- A jury awarded nearly $4.4 million in front pay; the district court vacated front pay, and the Sixth Circuit held reinstatement (not front pay) was the proper statutory remedy.
- On remand the parties settled (McKelvey received about $60,000 and reinstatement according to the district court’s findings).
- The district court computed a lodestar of ~$244,000 in attorney’s fees but reduced the award by 50%, in part because McKelvey had rejected the earlier, more favorable settlement offer; the Sixth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether district court abused its discretion by reducing lodestar for rejecting a pretrial settlement | McKelvey: court may not penalize him for declining an offer; Rule 68 covers settlement-offer consequences | Army: rejected offer is a relevant factor to measure degree of success and reasonableness of fees | Court: No abuse — rejected offer is a permissible discretionary factor in awarding/reducing fees under §794a(b) |
| Whether Rule 68 precludes consideration of informal settlement offers when awarding attorney’s fees under statutes that award fees as "costs" | McKelvey: Rule 68’s formal mechanism displaces consideration of settlement offers for fee reductions | Army: Rule 68 does not occupy the field; when Rule 68 does not apply, district courts retain discretion | Court: Rule 68 does not bar courts from considering (informal) settlement offers in discretionary fee determinations when Rule 68 prerequisites are unmet |
| Whether district court misapplied Rule 68 by not applying its automatic sanctions | McKelvey: If Rule 68 or similar logic governs, automatic reduction should follow | Army: District court used offer as one factor, not as automatic Rule 68 penalty | Held: District court permissibly considered offer as one discretionary factor rather than invoking Rule 68’s automatic penalties |
| Whether the 50% reduction was an abuse of discretion given facts (amounts and timing of offers/fees) | McKelvey: reduction was excessive, based on incorrect factual premise about offers including reinstatement | Army: reduction reasonable because offer exceeded final recovery five-fold and most fees accrued after refusal | Court: 50% reduction was within range of reasonableness; factual findings supporting reduction were permissible |
Key Cases Cited
- Fox v. Vice, 131 S. Ct. 2205 (Sup. Ct. 2011) (deferential review of fee awards; rough justice standard)
- Hensley v. Eckerhart, 461 U.S. 424 (Sup. Ct. 1983) (degree of success is critical to reasonable fee)
- Farrar v. Hobby, 506 U.S. 103 (Sup. Ct. 1992) (compare damages awarded to amount sought to gauge success)
- Marek v. Chesny, 473 U.S. 1 (Sup. Ct. 1985) (Rule 68 applies where statute treats fees as part of costs)
- Marx v. General Revenue Corp., 133 S. Ct. 1166 (Sup. Ct. 2013) (statutory silence leaves discretionary cost awards under Rule 54 intact)
- Lohman v. Duryea Borough, 574 F.3d 163 (3d Cir. 2009) (district court may consider a better pretrial offer in reducing lodestar)
- Sheppard v. Riverview Nursing Ctr., Inc., 88 F.3d 1332 (4th Cir. 1996) (work and fees after a reasonable rejected offer may lack public value)