In a rather circuitous line of cases generally revolving the issue of free speech, a plaintiff in Laguna Beach California successfully convinced the Ninth Circuit that he was entitled to attorneys' fees because his primary goal was not money, but some other injunctive relief.
Looks like you have to not want money to get money.
The Laguna Beach Ordinance
The nexus of this attorneys' fees controversy all began in sunny California in the city of Laguna Beach. The plaintiff, Steve Klein, sought a permit to use "sound amplification devices" within certain public areas and at certain times within the city -- time, place, and manner. One cannot use a megahorn at 4:00 a.m. within 100 yards of a school in that city, for example. In a dizzying barrage of lawsuits, Klein successfully invalidated several aspects of the Laguna Beach ordinance via 42 U.S.C. 1983.
Attorneys Fees, Please
Back at the district level, Klein sought attorneys' fees for his hard work. The district court agreed that Klein prevailed under 42 U.S.C. 1983, but applied the awarding of attorneys fees under the application of Farrar v. Hobby. In that case, the plaintiff sought $17 million in damages was given only a nominal award of $1.00.
The case stood for the carve-out exception that a prevailing party who in an original action sought large legal damages but only received nominal damages is not entitled to attorneys' fees. Under California law, however, application of the various Erie provisions meant that Klein would be denied attorneys' fees at the state level.
But Wait! There's More
Federal fees were another matter entirely. The circuit disagreed with the district with regards to federally applied law on attorneys' fees.
In general, 42 U.S.C. sec. 1988 provides that a "prevailing party" in a 1983 suit may be entitled to "reasonable attorneys' fees" at the court's discretion. If a party is found eligible, then the court will apply the 12 factors outlined in Hensley v. Eckerhart, and use a "lodestar" approach to determine the proper and reasonable amount.
Degrees of Success
At issue is the "degree of success obtained." This was the language that SCOTUS used in Farrar, quoting Hensley. In essence, was the goal of the lawsuit met?
Well, the circuit court found that there was a substantial difference between Mr. Klein and the plaintiff in the Farrar case. As stated, the plaintiff wanted $17 million got $1 and a "good for you." In other words, the plaintiff in Farrar failed miserably.
Mr. Klein, on the other hand, was pretty successful overall in his campaign to change Laguna Beach speech laws. Because of his lawsuits, the city changed the ordinances to become overall more permissive towards sound amplification devices: the application of permits was rescinded, and hours were expanded. That's success.
More important, Klein did not seek a big payout. And since that was the general bright-line element for killing a Farrar case, Farrar was improperly applied by the district court to Klein's case.