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Tuesday, July 21, 2009, 1:02 PM

Court of Appeals Affirms Denial of Attorneys’ Fees in Key Education Case

This post is from our colleague, Bob Numbers, an expert in all things having to do with civil rights and state and local government:

Today, the Court of Appeals affirmed the denial of a fee award to the Plaintiffs’ counsel in the Leandro matter. The case is Hoke County Board of Education v. State of North Carolina.

Plaintiffs filed a motion with the trial court seeking to have the State reimburse them for fees and costs paid to their attorneys in connection with the Leandro litigation. In Leandro I, the North Carolina Supreme Court that found that the North Carolina Constitution guaranteed children the opportunity to receive “a sound basic education” in public schools. In Leandro II, the Supreme Court affirmed the trial court’s conclusion that the State failed to meet its constitutional duty to provide students in Hoke County with the opportunity to obtain a sound basic education. Leandro II also affirmed the trial court’s order requiring the State to take corrective action to comply with the North Carolina Constitution. Since the Supreme Court decided Leandro II, the State has devoted additional financial resources to improve educational opportunities throughout the state, including the creation of the Disadvantaged Student Supplemental Fund (“DSSF”).

During the fourteen years since Leandro was initially filed, Plaintiffs’ counsel devoted over 17,000 hours to this matter. The resulting bill to the Plaintiffs was approximately $2.5 million. While the trial court commended Plaintiffs’ counsel for their “excellent work” and recognized that they “performed a significant public service,” it denied the Plaintiffs’ motion for fees on the grounds there were no statutory provisions or common law doctrines that permitted an award of attorneys’ fees.

On appeal, Plaintiffs initially argued that the trial court erred in denying their motion because they were contesting state action and therefore could to recover attorneys’ fees under North Carolina General Statutes Section 6-19.1. Section 6-19.1 gives courts the discretion to award attorneys’ fees to a prevailing party, other than the State, in a civil action “brought by the State or brought by a party who is contesting State action pursuant to G.S. 150B-43 or any other appropriate provision of state law[.]” The Court of Appeals rejected the Plaintiffs’ argument that they were “contesting state action” because the Leandro decisions were not based upon affirmative action by the state, but instead were based upon the State’s failure to act. The COA concluded that “[a]lthough the State may have failed to act, its failure to act in this instance cannot be extrapolated into ‘state action’ or viewed as the equivalent of ‘pressing a claim against’ plaintiffs as envisioned by the statute.”

Plaintiffs’ also argued that they were entitled to a share of the DSSF as attorneys’ fees under the common fund doctrine (“CFD”). The CFD allows an award of attorneys’ fees to a prevailing party who sought “the preservation, protection, or increase of a common fund or of common property[.]” In addition to establishing the existence of a common fund, the prevailing party must demonstrate that the class of persons benefiting from the lawsuit is small and easily identifiable, the benefits from the suit can be traced accurately, and the costs can be shifted to those benefiting from the decision with some precision. If the action benefits the public at large or “vindicates a general social grievance,” the CFD does not apply.

The COA held that Plaintiffs could not recover their fees from the DSSF under the CFD. In the COA’s opinion, the Leandro decisions vindicated a general social interest instead of individual complaints. This case also presented a situation where there was no precise way to ascertain the benefit received by each member of the public as a result of the decisions. Finally, the COA held that application of the CFD was inappropriate because the percentage of the DSSF awarded to each plaintiff for their attorneys’ fees would greatly exceeded their individual share of the DSSF.

Today's Court of Appeals Decisions

The Court issued decisions in 20 cases this morning.

Of those, 9 are criminal cases and 4 are domestic.

One civil case that may be of interest concerns the denial of a fee award in the Leandro case which established the contours of the right to a public education.

We'll try to get something up on that case later.

Wednesday, July 08, 2009, 6:29 AM

Court of Appeals Spells Out Claims Settlement Rules for Insurers and Unfair Trade Practices

In Martini v. Companion Property & Casualty Insurance Co., decided yesterday, the court of appeals considered the issue of when an insurer engages in unfair trade practices in connection with claims settlement.

Section 58-63-10 of the General Statutes defines unfair practices by insurance companies but doesn’t, in itself, create a private right of action. The courts have ruled, however, that violations of the insurance statute also violate N.C.G.S. § 75-1.1 which does provide for a private right of action.

In Martini, the plaintiff alleged that the auto insurer engaged in unfair claims settlement practices by refusing to pay a claim without conducting a reasonable investigation in violation of N.C.G.S. § 58-63-15(11)(d).

The court of appeals reversed summary judgment in favor of the insurer based on plaintiff’s contention that the insurance company’s failure to speak directly with the plaintiff before denying the claim constituted an incomplete investigation and that the company's continued denial – after receiving plaintiff’s explanation on a critical issue – and failure to follow its own claims handling guidelines also was an unfair trade practice.

Judge Steelman dissented on the grounds that the reversal was based solely on allegations in plaintiff’s unverified complaint as opposed to record evidence.

Tuesday, July 07, 2009, 10:27 AM

Today's NC Court of Appeals Decisions

The Court of Appeals issued 35 published decisions this morning. Sixteen are in criminal cases. The civil cases, at least at first glance, don't appear to be plowing any major new ground.

We'll try to post something on the important ones later today.

By the way, the founder of this blog, Sean Andrussier, has moved on to greener pastures as a full-time faculty member at Duke Law School. We'll be limping along without him until we come up with a permanent solution for staffing this blog.
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