In Butt v. United Brotherhood, No. 18-2272 (3d Cir. June 8, 2021), the First Circuit holds that the district court maintained subject matter jurisdiction to adjudicate a fee dispute between a pair of lawyers who represented three women in an employment discrimination lawsuit.
Attorney Paddick represented plaintiffs (the Clients) on a 40% contingency fee through an appeal and much of discovery. “In April 2015, the Clients terminated their relationship with Paddick and retained Thompson to pursue their claims for a 35 percent contingent fee.” Eventually, the case settled and Thompson obtained a $133,000 fee.
Following entry of judgment, “Paddick moved to intervene in the Clients’ cases to enforce an attorney’s charging lien against the settlement proceeds. The District Court granted Paddick’s motion to intervene, set a hearing date, and ordered Thompson to hold the contested portion of the settlement proceeds in an escrow account ‘pending resolution of the motion.” Eventually, the court ordered Thompson to pay Paddick $54,562.73 for his work and ordered Thompson to pay Paddick. Thompson appealed.
The First Circuit affirms. “Thompson’s first (and most substantial) argument is that the District Court lacked jurisdiction to hear Paddick’s motion,” arguing that the district court’s “jurisdiction ‘terminated’ when the cases were dismissed with prejudice after settlement.” But the panel holds that “the District Court had ancillary enforcement jurisdiction based on its inherent powers rooted in the common law and unrelated to the statutory grant of authority.”
“This appeal provides us an opportunity to clear up ‘needless confusion’ … in this area of law.” The panel notes that 28 U.S.C. § 1367, enacted in 1990, previously codified the doctrines of pendent claim, ancillary, and pendent party jurisdiction as extensions of “cases or controversies” under Article III. In contrast to those doctrines, ancillary enforcement jurisdiction is an implied power over a court’s judgments that exists “to enable a court to function successfully, that is, to manage its proceedings, vindicate its authority, and effectuate its decrees.” Ancillary enforcement jurisdiction does not end “when a court renders a judgment on the merits or dismisses a case.”
“These precedents lead us to conclude that the District Court had ancillary enforcement jurisdiction over the dispute between Thompson and Paddick. The Supreme Court has indicated that ancillary enforcement jurisdiction extends to attorney fee disputes …. [and] jurisdiction over attorney fee disputes continues after the resolution of the underlying case.”
“Given the abundance of caselaw supporting the application of ancillary enforcement jurisdiction to attorney’s fee disputes—even after disposition of the underlying case where jurisdiction was not explicitly retained—we hold the District Court did not err in exercising such jurisdiction over this fee dispute that was raised for the first time after dismissal of the underlying case but was necessary to effectuate the Court’s judgment.”