On Appeal from the United States District Court for the Middle District of Pennsylvania. (D.C. Civil No. 92-00093)
Before: Sloviter, Chief Judge, Stapleton, Circuit Judge, and Restani,*fn* Judge, United States Court of International Trade.
In the order that is the subject of this appeal the district court denied the plaintiffs' request for attorney's fees on the ground that, as a matter of law, plaintiffs could not be considered to be "prevailing parties" under 42 U.S.C. § 1988. The court reasoned that the Supreme Court's decisions in Farrar v. Hobby, 121 L. Ed. 2d 494, 113 S. Ct. 566 (1992), and Texas State Teachers Ass'n v. Garland Independent School District, 489 U.S. 782, 103 L. Ed. 2d 866, 109 S. Ct. 1486 (1989), require that a party must have obtained a judgment or entered into a consent decree or formal settlement before it could be considered to be "prevailing." The issue is a legal one over which our review is plenary.
Facts and Procedural History
On January 29, 1992, Penny Baumgartner and other named plaintiffs filed a class action brought on behalf of the residents of the Hall Manor Public Housing Project in Harrisburg ("the Tenants"). The Tenants alleged that the Harrisburg Housing Authority and its Executive Director, Dorsey Howard, Jr. (collectively "HHA"), as well as the United States Department of Housing and Urban Development and its Regional Administrator, Michael A. Smerconish (collectively "HUD"), violated the consultation requirements of the United States Housing Act of 1937, 42 U.S.C. § 1437l, and related federal regulations.
The dispute arose out of the 1989 application by HHA for federal funding through the Comprehensive Improvement Assistance Program, 42 U.S.C. § 1437l, a program designed to assist in the modernization of public housing. The Tenants alleged that HHA's plan, approved by HUD, provided for the construction of a central pay laundromat and the elimination of the Tenants' personal washing machines and the backyard poles they used to hang their clothes out to dry. The Tenants contended that because HHA failed to consult them before designing the plan and submitting it to HUD in conjunction with the application for funding, HHA violated the Housing Act and the federal regulations that require that public housing tenants be consulted and their views considered in the development of such plans. See, e.g., 42 U.S.C. § 1437l (e)(1)(E)(i); 24 C.F.R. § 968.220 (1991). The Tenants grounded their cause of action on, inter alia, 42 U.S.C. § 1983, federal contract law and the Housing Act.
HHA moved for dismissal under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim on March 11, 1992 and HUD followed with a similar motion on April 2, 1992, alleging also lack of subject matter jurisdiction. The Tenants filed a brief in opposition to HHA's motion on April 14. On May 12, 1992, the district court granted the Tenants' motion for a 60 day stay of all proceedings on the basis of an expectation that the matter would be resolved without judicial involvement by that time.
Subsequently, HHA consulted with the Tenants on a new modernization plan that the Tenants approved and that HUD accepted. In light of the fact that the new plan, which has since been implemented, met all of the Tenants' demands, the Tenants filed for a voluntary dismissal of their class action under Federal Rules Civil Procedure 41(a)(2) and 23(e) on July 10, 1992. App. at 256. On July 17, 1992, the district court granted a stay of all proceedings pending the determination of the motion to dismiss. Thereafter, on July 31, 1992 the district court granted the Tenants' motion for voluntary dismissal pursuant to Rule 41(a)(1).*fn1
On August 31, 1992 the Tenants moved for attorney's fees under 42 U.S.C. § 1988*fn2 against HHA only. The district court denied the motion because the Tenants had not obtained relief in the form of "an enforceable judgment, a consent decree or a settlement," as it read Texas Teachers and Farrar to require. The court denied the Tenants' motion for reconsideration, and the Tenants filed a timely appeal.
The predicate to an award of attorney's fees under 42 U.S.C. § 1988 is that the parties must have been "prevailing." The scope of that term has been the subject of considerable litigation. As the Supreme Court stated in Hewitt v. Helms, 482 U.S. 755, 760, 96 L. Ed. 2d 654, 107 S. Ct. 2672 (1987), "respect for ordinary language requires that a plaintiff receive at least some relief on the merits of his claim before he can be said to prevail." Obviously, a plaintiff who has received injunctive relief or who recovered a judgment of damages has prevailed, at least in part.
However, the Court recognized that the existence of a judgment is not a sine qua non for status as a "prevailing party." Thus, in Hewitt the Court stated:
It is settled law, of course, that relief need not be judicially decreed in order to justify a fee award under § 1988. A lawsuit sometimes produces voluntary action by the defendant that affords the plaintiff all or some of the relief he sought through a judgment -- e.g., a monetary settlement or a change in conduct that redresses the plaintiff's grievances . When that occurs, the plaintiff is deemed to have prevailed despite the absence of a formal judgment in his favor.
Id. at 760-61 (emphasis added). See also Maher v. Gagne, 448 U.S. 122, 129, 65 L. Ed. 2d 653, 100 S. Ct. 2570 (1980) ("Nothing in the language of § 1988 conditions the District Court's power to award fees on full litigation of the issues or on a judicial determination that the plaintiff's rights have been violated."); Hanrahan v. Hampton, 446 U.S. 754, 757, 64 L. Ed. 2d 670, 100 S. Ct. 1987 (1980) (per curiam) (noting language in legislative history that "parties may be considered to have prevailed when they vindicate rights . . . without formally obtaining relief").
Under this theory, generally referred to as the "catalyst theory", a plaintiff who can prove that the existence of the lawsuit accomplished the original objectives of the lawsuit without a formal judgment can be a "prevailing party". The paradigmatic situation for application of the "catalyst theory" has been when the defendants voluntarily changed their behavior to eliminate the complained-of conduct. See, e.g., Pembroke v. Wood County, 981 F.2d 225, 230-31 (5th Cir.), cert. denied, 125 L. Ed. 2d 665, 113 S. Ct. 2965 (1993).
Use of the "catalyst theory" to determine whether a party seeking attorney's fees has prevailed is well-established in this court's jurisprudence. See, e.g., Wheeler v. Towanda Area Sch. Dist., 950 F.2d 128, 132 (3d Cir. 1991) ("Causation can be established through a 'catalyst' theory, where even though the litigation did not result in a favorable judgment, the pressure of the lawsuit was a material contributing factor in bringing about extrajudicial relief."); Clark v. Township of Falls, 890 F.2d 625, 627 (3d Cir. 1989) ("If plaintiffs could establish that their suit was the catalyst for the changes, they were entitled to prevailing party status despite the fact that the district court had ruled against them."); Ross v. Horn, 598 F.2d 1312, 1322 (3d Cir. 1979), cert. denied, 448 U.S. 906, 65 L. Ed. 2d 1136, 100 S. Ct. 3048 (1980) (same). This firmly-entrenched doctrine has also been recognized by each of the other eleven courts of appeals to have considered the issue.*fn3
The Tenants allege that under the "catalyst theory" they were entitled to attorney's fees because their lawsuit was the impetus for HHA implementing a new plan on which the Tenants were consulted and of which they approved. Thus, they argue, they should be given the opportunity to show that they achieved a substantial goal of the litigation and that the lawsuit was a motivating force behind the change, thereby entitling them to attorney's fees under § 1988. As noted above, the district court denied plaintiffs an opportunity to show causation because it concluded that Farrar and Texas Teachers required that a party receive an enforceable judgment, consent decree or settlement in order to be ...