The applicability of a settlement rule to attorneys’ fees in a RCRA cleanup case was affirmed by the U.S. Court of Appeals for the 3rd Circuit.  The opinion, which overrules a district court decision, appears to favor businesses that want to settle suits brought by citizens but that do not want to be responsible for what they regard as excessive fees claimed by plaintiff attorneys. 

Chromium pollution

The case involves wetlands near the Hackensack River in Jersey City, New Jersey, which were contaminated with approximately 1.5 million tons of industrial waste containing hexavalent chromium.  The dumping was alleged to have been committed between 1895 and 1954 by Mutual Chemical Company of America.  Mutual’s plant was purchased by Allied Corporation, which ended the dumping.  Allied Corporation was succeeded by Allied Signal.  Honeywell International, Inc. then purchased the plant. 

Public interest and environmental organizations mounted several RCRA citizen suits against both Allied Signal and Honeywell.  In the most recent action, Honeywell conceded responsibility and agreed to remediate the areas.  The company also agreed to pay    $5 million in fees and costs incurred before the settlement decrees.  The law firm representing the plaintiffs subsequently charged that Honeywell should pay out an additional $3.2 million in expenses incurred by the firm.

Rule 68

Part of the case involves the legitimacy of the law firm’s hourly rate and hours it claimed.  But the central legal discussion focuses on Rule 68, one of the Federal Rules of Civil Procedure.  Under Rule 68, if a defendant makes a timely out-of-court settlement offer that the plaintiff rejects, the plaintiff will then be responsible for postoffer costs if the result of the trial fails to improve on the defendant’s offer.  Ostensibly, Rule 68 is intended to encourage parties to avoid litigation.  But the rule has been criticized because it effectively favors defendants only. 

In this case, the citizen groups took the position in the district court that Rule 68 should not apply.  In other words, they asserted that if a trial failed to produce a result that improved on Honeywell’s offer, the groups would not be responsible for postoffer costs.  The district court agreed, explaining that application of Rule 68 would undermine one of RCRA’s goals–to encourage citizens to take legal action against industrial polluters that caused environmental damage. 

Substantive rights

The 3rd Circuit first noted that there is no wording in the Federal Rules of Civil Procedure that restricts Rule 68’s applicability to RCRA citizen suits.  “Thus, by its plain terms, Rule 68 is applicable to RCRA citizen suits,” stated the 3rd Circuit.   Further, the court said that Rule 68 could be found inapplicable only if it somehow violated the “substantive rights” of the plaintiffs.  Such a violation did not occur, said the 3rd Circuit.

Hourly rate

The district court also found that the plaintiffs’ law firm was entitled to bill Washington, D.C. rates for work relating to a case in New Jersey.  The 3rd Circuit did not disagree.  However, the 3rd Circuit did not accept the district court’s “terse, vague, and conclusory” explanation for accepting the reasonableness of the hours assigned by the plaintiffs law firm to certain activities.  For example, the law firm sought to be reimbursed for about 2,400 hours, nearly $1 million in fees, for identifying and supervising experts; over 1,300 hours, resulting in more than $400,000 in fees, for document review; and almost 2,300 hours, amounting to over $1 million in fees, for intraoffice conferencing. 

Summarizing, the 3rd Circuit reversed the district court’s ruling that Rule 68 is inapplicable in RCRA citizen suits, vacated the district court’s fee award to the plaintiffs’ attorneys, and remanded the case to the district court for further proceedings consistent with the 3rd Circuit’s opinion.