Westar Energy, Inc. v. Lake, 552 F.3d 1215 (10th Cir. 2009). See prior post on trial court opinion here.

Danielle Blount, an associate in our Delaware office, provided the following case summary.

In this decision of the U.S. Court of Appeals for the 10th Circuit, the Appellant-Plaintiff Westar Energy, Inc. appealed an interlocutory order requiring it to advance past and future legal fees incurred by Lake. In the underlying case, the District Court ordered retrospective and prospective remedies. In the form of retrospective relief, The court determined that “the appropriate measure of interim relief” was “immediate payment of 50% of the outstanding requests for out-of-state counsel.” For prospective relief, the District Court ordered Westar to promptly pay Lake’s legal fees at each lawyers customary rates. In response to the order, Westar filed a Notice of Appeal arguing that the order was a preliminary injunction.

First, in determining whether the order was a preliminary injunction, the court had to determine if the relief sought was equitable in nature. The Appellate Court determined that the District Court’s order was a preliminary injunction based upon the fact that Westar had to pay certain attorney fees prior to any adjudication on the merits. Specifically, that Westar had to pay a certain dollar figure for accrued unpaid legal expenses and prospectively pay Lake’s future legal expenses. Notably, the District Court explicitly invoked it’s equitable powers in granting the prospective relief. Moreover, Lake requested equitable relief in his supplemental brief, and has attempted to enforce the retrospective award through contempt proceedings, therefore leading to the determination that the order was a preliminary injunction.

Since the District Court did not conclude that its order constituted a preliminary injunction, it failed to weigh all of the equitable factors in issuing the order. The order was mandatory in nature, in that it commanded Westar to immediately pay a specific sum of money to Lake and to pay future amounts as they come due.

Analysis of Equitable Factors

i. Irreparable Injury

Since the retrospective remedy commanded Westar to pay accrued legal fees ordered in this case for services already rendered, it was difficult to conclude that such retrospective relief was necessary. It was held that the District Court abused its discretion in granting that relief. However, the prospective remedy was based on the prevention of an irreparable injury, and further inquiry was needed to review its compliance with the remaining equitable factors.

ii. Balance of Harms

Lake made a “strong showing” which was necessary to justify the issuance of a mandatory preliminary injunction. Lake’s “very liberty is at stake, and such a threatened harm outweighs the mere threat of monetary loss.” The court determined that under the circumstances, the threat to Lake’s liberty strongly outweighed the threat of monetary loss to Westar.

iii. Public Interest

The Court determined, as articulated by the Kansas legislature, that public policy would therefore be served by the issuance of a preliminary injunction protecting Lake’s right to advancement.

iv. Likelihood of Success on the Merits

In its lengthy analysis the court determined that the District Court assignment to Westar the initial burden of going forward with its objections was not erroneous, as long as Lake has the burden of proving the reasonableness of the fees before the magistrate judge.

In sum, the Court determined that the District Court abused its discretion in ordering the retrospective remedy in the absence of proof of irreparable harm. However, the prospective remedy requiring Westar to advance future attorney’s fees in the face of irreparable harm, was not an abuse of discretion.