Monday, July 16, 2007

Circuit clarifies attorneys' fee question, or does it?

Attorneys' fees awards are the bread and butter of a civil rights practice. If the lawyer wins the case, the loser pays her attorneys' fees under a federal statute, 42 U.S.C. sec. 1988. This represents an exception in American law. In most litigation in this country, each side pays its way. Not in civil rights cases. The theory behind making the losing defendant pay the plaintiffs' attorneys' fees is that most civil rights plaintiffs cannot afford counsel and the attorney has an incentive to take on the case, aware that victory means the defendant pays her fees, which can be substantial.

The Second Circuit Court of Appeals raised eyebrows a few months ago when it suggested that attorneys who represent the winning party in civil rights litigation may not be entitled to their full hourly rate. In Arbor Hill Concerned Citizens v. County of Albany, the Court (Walker, Jacobs and former Supreme Court Justice O'Connor) noted that the standard method of calculating attorneys' fees -- multiplying the lawyer's hourly rate by the number of hours expended on the case -- is not always a useful model. The real question, according to the Court, is what a paying client might pay for legal representation. The Court surprised the civil rights community with the following language:

In determining what rate a paying client would be willing to pay, the district court should . . . bear in mind that a reasonable, paying client wishes to spend the minimum necessary to litigate the case effectively. The district court should also consider that such an individual might be able to negotiate with his or her attorneys, using their desire to obtain the reputational benefits that might accrue from being associated with the case. The district court should then use that reasonable hourly rate to calculate what can properly be termed the "presumptively reasonable

This complicates matters considerably. The Court presumes that some civil rights lawyers might be content to handle a case without charge (or at a reduced rate) in order to enhance their reputation, so if the attorney wins the case, his attorneys' fee award may be adjusted accordingly. The inquiry is theoretical. The Court of Appeals suggests that the attorneys' fee award turns on what a paying client might be willing to spend on the case, and that the client can negotiate a reduced rate by suggesting the attorney has something else to gain by handling the matter. But most civil rights plaintiffs have little if any money to finance their litigation. If the civil rights case is filed out of an important principle -- like a First Amendment or other case that does not produce a large damage award -- then most people would not pay a lawyer $250 or $300 to litigate the case. The lawyer takes the case because an important principle is at stake even if the damages are low.

Reputation does not pay the bills; money does. A lawyer may gain some reputational benefit from handling an important civil rights case, but that does not mean he should not be paid appropriately. Some of the most important civil rights cases ever filed generated minimal damages. Certainly, lawyers representing defendant corporations and municipalities get paid their market rate.

The lawyers in the Arbor Hill case petitioned the Court of Appeals to reconsider its opinion. Last week, the Court amended its opinion, dropping a footnote stating:

Our decision today in no way suggests that attorneys from non-profit organizations or attorneys from private law firms engaged in pro bono work are excluded from the usual approach to determining attorneys' fees. We hold only that in calculating the reasonable hourly rate for particular legal services, a district court should consider what a reasonable, paying client would expect to pay. . . . Attorneys -- regardless of whether they are pursuing litigation on behalf of a paying client or a non-paying client -- should receive out-of-district fees only if a reasonable, paying client would have retained out-of-district counsel.

Lawyers involved in the case say the footnote does not necessarily clear up the confusion. This kind of attorneys' fee jurisprudence may wind up in the Supreme Court. That's not a good thing. The Court has limited attorneys' fee awards over the past 15 years, ruling that nominal damage awards may not justify a fee award and also that the plaintiff is not entitled to attorneys' fees if he wins the case after the defendant moots out the case by providing him the relief before the judge can issue a ruling. For now, resolution of attorneys' fee awards will depend on the trial judge.

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