Requirement of Degree-of-Success Adjustment in Lodestar Calculations for § 1988 Fee Awards

Introduction

Toyota Lease Trust v. Village of Freeport, No. 24-488-cv (2d Cir. Apr. 17, 2025) arose from the Village of Freeport’s “scofflaw” policy under which it impounded vehicles whose owners had accrued parking‐ticket debts over $1,000. Toyota, as titleholder of a seized Camry, sued under 42 U.S.C. § 1983, alleging Fourth Amendment (unreasonable seizure) and Fourteenth Amendment (lack of due process) violations. After summary judgment rulings in Toyota’s favor on the federal claims but limited damages, the district court awarded Toyota $235,054.25 in attorneys’ fees under 42 U.S.C. § 1988. Freeport appealed, contending that the fee award failed to account for Toyota’s limited degree of success and that a pre-suit letter qualified as an offer of judgment under Rule 68, capping fees.

Summary of the Judgment

The Second Circuit vacated and remanded the fee award because the district court did not adjust for Toyota’s degree of success, a “most critical factor” under Hensley v. Eckerhart.
The court affirmed that the December 2021 letter did not meet the formal requirements of a Rule 68 “offer of judgment.”
The ruling establishes that lower courts must explicitly consider the ratio of relief obtained to relief sought when applying the lodestar method under § 1988.

Analysis

Precedents Cited

• Hensley v. Eckerhart, 461 U.S. 424 (1983): Identifies “degree of success obtained” as the “most critical factor” in § 1988 fee awards.
• Farrar v. Hobby, 506 U.S. 103 (1992): Applies Hensley’s principle where nominal relief may warrant reduced fees.
• Barfield v. NYC Health & Hosp. Corp., 537 F.3d 132, 152 (2d Cir. 2008): Emphasizes comparing relief obtained to that sought.
• Millea v. Metro-North Railroad Co., 658 F.3d 154 (2d Cir. 2011): Rejects fee awards in mostly frivolous suits despite “prevailing party” status.
• Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Hum. Res., 532 U.S. 598 (2001): Defines “prevailing party” under § 1988.
• McDaniel v. Cnty. of Schenectady, 595 F.3d 411 (2d Cir. 2010) and Kickham Hanley P.C. v. Kodak Ret. Income Plan, 558 F.3d 204 (2d Cir. 2009): Standards for abuse of discretion review.

Legal Reasoning

The Second Circuit held that, under Hensley, any lodestar calculation must begin with the reasonable hours worked multiplied by a reasonable rate, then be adjusted to reflect the “degree of success” the plaintiff actually achieved. Here, Toyota obtained summary judgment on its constitutional claims regarding the Camry’s seizure and a small depreciation award, but did not win broader injunctive relief or substantial damages. The district court’s failure to articulate any adjustment for the disparity between the broad relief sought and the limited relief obtained rendered the award outside the range of permissible discretion.

On Rule 68, the court confirmed that a valid “offer of judgment” must unambiguously propose a judgment against the defendant with specified terms. The December Documents merely included draft scheduling orders and did not expressly state that judgment would be entered against Freeport for $900, so they did not trigger fee‐capping under Federal Rule of Civil Procedure 68.

Impact

This decision clarifies and reinforces the lodestar framework for § 1988 fee awards in the Second Circuit:

District courts must explicitly assess how the extent of a plaintiff’s success—measured by the relief actually obtained relative to relief sought—affects a “reasonable” fee.
Absent such an analysis on the record, an appellate court will vacate and remand the fee award, even if hours and rates are reasonable.
The decision tightens the procedural requirements for fee litigation and highlights the critical nature of the Hensley adjustment.

Complex Concepts Simplified

Lodestar Method: A two‐step approach to calculate fees: multiply reasonable hours by a reasonable hourly rate, then adjust for factors like success.
Degree of Success: How much of the plaintiff’s requested relief was actually won. Courts may reduce fees if the victory is partial.
§ 1983: Civil rights statute allowing lawsuits for constitutional violations by state actors.
§ 1988: Authorizes awarding attorney’s fees to the “prevailing party” in § 1983 actions.
Rule 68 Offer of Judgment: A formal proposal by a defendant to let the plaintiff take a specified judgment; if the plaintiff rejects and then obtains a lesser recovery, the plaintiff pays defendant’s post‐offer costs.

Conclusion

Toyota Lease Trust v. Village of Freeport establishes that fee awards under 42 U.S.C. § 1988 must reflect not only reasonable hours and rates but also the extent to which the plaintiff’s litigation objectives were achieved. The Second Circuit’s vacatur and remand underscore that the “degree of success” adjustment of Hensley is not optional but a mandatory element of any lodestar calculation. This precedent will guide district courts to provide clear, reasoned analyses in fee determinations and will promote consistency and fairness in civil‐rights fee awards.