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Class Action Defense Cases–Walker v. Calumet City: Seventh Circuit Reverses Attorney Fee Award To Class Action Plaintiff Holding Dismissal Of Class Action As Moot Did Not Make Plaintiff Prevailing Party

Class Action Plaintiff not Entitled to Attorney Fee Award under 42 U.S.C. § 1988 Following District Court Dismissal of Class Action as Moot because Plaintiff was not “Prevailing Party” within the Meaning of Supreme Court Authority Seventh Circuit Holds

Plaintiff filed a putative class action against Calumet City, Illinois, alleging that she suffered damage because the enforcement of a local ordinance interfered with her ability to sell real property that she owned in the City; the class action complaint alleged that “the ordinance violated her right to procedural due process and unreasonably restrained the alienability of her property.” Walker v. Calumet City, Illinois, 565 F.3d 1031, 1032 (7th Cir. 2009). Specifically, the class action complaint challenged the City’s Point of Sale (POS) ordinance, which provides that real property within the city limits “cannot be sold until it is inspected and deemed in compliance with city codes, a fee is paid, and transfer stamps are issued.” Id. In the normal course of events, while the class action complaint was pending, plaintiff’s property was inspected under the City’s Rental Dwelling Inspection (RDI) ordinance, which requires annual inspections of rental properties to ensure compliance with city health, zoning and building codes. Id., at 1033. The inspection of plaintiff’s property revealed “multiple areas…where repair was necessary”; plaintiff completed the required repairs, and the City “pronounced her property compliant with the City’s building and zoning codes.” Id. Defense attorneys then moved to dismiss the class action as moot because, since plaintiff’s property passed the RDI, “an inspection under the POS ordinance to check for the same violations would be redundant.” Id. Over plaintiff’s objection, the district court dismissed the class action as moot based on the City’s representations that it would not enforce the POS ordinance against plaintiff, id., at 1032, 1033. Plaintiff then moved for an award of attorney fees, arguing that she was the “prevailing party” 42 U.S.C. § 1988; defense attorneys countered that the class action had been dismissed as moot “prior to any judicial determination on the merits.” Id., at 1033. The district court agreed with plaintiff and awarded her $189,000 in attorney fees, id. The Seventh Circuit reversed.

The Circuit Court did not find this to be a difficult case because, while the “catalyst rule” for evaluating attorney fee awards had been used in the Seventh Circuit prior to 2001, the Supreme Court rejected that rule in Buckhannon Board & Care Home, Inc. v. West Virginia Department of Health & Human Resources, 532 U.S. 598 (2001), holding at page 606 that a party was not a prevailing party unless there was a “material alteration in the legal relationship of the parties.” Walker, at 1033-34 (citations omitted). This “alteration” in the relationship of the parties “must arise from a court order.” Id., at 1034 (citation omitted). The Seventh Circuit explained at page 1034, “In Buckhannon, the Supreme Court gave two examples of when a party should be considered prevailing: first, when ‘the plaintiff has received a judgment on the merits’; second, when the plaintiff has ‘obtained a court-ordered consent decree.’ [Citation.] In general, we have stated that ‘[i]t could not be clearer that a voluntary settlement by the defendant … does not entitle a plaintiff to attorneys’ fees.’ [Citation.]”

Here, the dismissal order clearly revealed that the class action was dismissed as moot without a finding as to the validity of the claims asserted in the class action complaint. Walker, at 1034. The case does not fit into the first Buckhannon category because plaintiff did not obtain a judgment on the merits, and the case does not fit into the second Buckhannon category because plaintiff did not obtain a consent decree. Id. Nor does the case qualify for the possible exception applicable in the case of certain settlement agreements, because “this case does not involve a settlement at all.” Id., at 1035. Put simply, the City simply agreed not to enforce the POS against plaintiff because the requirements of the POS, as they concerned plaintiff’s property, “had already been met,” id., at 1036. The Seventh Circuit concluded, therefore, that plaintiff was not a prevailing party and, accordingly, reversed the district court order awarding her attorney fees, id., at 1037.

NOTE: The Seventh Circuit summarized the three claims for relief in plaintiff’s class action complaint at page 1033 as follows: “First, she alleged that the POS ordinance unreasonably restrained the alienability of her property. Second, she claimed that the POS ordinance failed to accord her procedural due process. Third, Walker alleged that she was deprived of her ability to sell her property by the application of the POS ordinance to ‘legal non-conforming property,’ i.e., property that does not comply with the relevant zoning but is nonetheless deemed legal. Specifically, Walker claimed that the City refused to grant rebuild permits for non-conforming property and that such permits were necessary before lenders would extend money to potential buyers. Additionally, Walker sought to certify a class action on behalf of all property owners in the City.”

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