Circuit clarifies standards for attorneys' fees

In a series of decisions arising from the same case, the Court of Appeals has tried to clarify the standards governing the award of attorneys' fees to plaintiffs who win their civil rights cases. Generally, when the plaintiff prevails in these cases, her attorney can petition to court for reimbursement of all attorneys' fees. Today the Court of Appeals once again tries to make sense of the "fee-shifting" statutes, concluding that the traditional model -- multiplying the hours expended on the case times the attorney's hourly rate -- is not always appropriate.

The case is Arbor Hill Concerned Citizens Neighborhood Assn. v. County of Albany, decided on April 9.

Here's how attorneys' fees in civil rights litigation works. If the plaintiff wins, the trial court multiplies the reasonable hours expended by the reasonable attorney's hourly rate. The trial court can make adjustments to the fee award based on various factors, such as whether the case was particularly difficult to litigate and whether the attorney had to set aside other work to handle the case. These are some of the Johnson factors, named after an influentual Fifth Circuit case, Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir. 1974). But as the Second Circuit tells us in today's opinion, the attorneys' fee analysis has gotten too complicated over the years and the Supreme Court has not straightened it out.

So here's the best way to resolve this issue, according to the Circuit:

We think the better course –- and the one most consistent with attorney’s fees jurisprudence –- is for the district court, in exercising its considerable discretion, to bear in mind all of the case-specific variables that we and other courts have identified as relevant to the reasonableness of attorney’s fees in setting a
reasonable hourly rate. The reasonable hourly rate is the rate a paying client would be willing to pay. In determining what rate a paying client would be willing to pay, the district court should consider, among others, the Johnson factors; it should also
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 fee.

This means the Johnson test is back in the Second Circuit, insofar as the district courts have to consider these 12 factors, which are:

(1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the level of skill required to perform the legal service properly; (4) the preclusion of employment by the attorney due to acceptance of the case; (5) the attorney’s customary hourly rate; (6) whether the fee is fixed or contingent; (7) the time limitations imposed by the client or the circumstances; (8) the amount involved in the case and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the “undesirability” of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases.

When the Circuit first issued this decision in its earlier form last year (before revising it today), it came under criticism because it held that one of the many factors affecting the attorneys' fees is whether the hypothetical client may be presumed to pay a lower bill in light of the reputational advantages available to the lawyer in handling the case. The Circuit keeps that factor in the equation, no doubt over the objections of the plaintiffs' lawyers in this case who probably argued that defense lawyers in civil litigation don't charge lower rates in light of any comparable reputational advantages associated with handling the case. I don't know if the plaintiff's lawyers in this case also said this, but reputation alone will not put food on the table.

In any event, today's multi-part standard in assessing the reasonable attorneys' fee for the plaintiff and her attorney certainly makes things equally complicated. Many judges still calculate the correct attorneys' fee by multiplying the reasonable hours by the reasonable hourly rate. A good deal of attorneys' fee litigation centers on the lawyers' hourly rate and whether he spent too much time on the case. Now that the Johnson factors are part of the analysis, much time and effort will be expended in dealing with them on the attorneys' fee application. That only raises the prevailing attorney's hourly rate, as the time spent in litigating the reasonable attorneys' fee is also recoverable under the attorneys' fees statute.

This amended opinion does not make clear exactly how it differs from the prior opinions. Law.com figures it out for us, noting that a footnote in a prior version of the opinion read, "Our decision today in no way suggests that attorneys from nonprofit organizations or attorneys with private law firms engaged in pro bono are excluded from the usual approach to determining attorneys fees." According to Law.com., "Apparently, however, the footnote was not enough, and on Thursday, the circuit issued its second amended opinion, this time with a lengthy footnote that built on the above quote and explicitly affirmed past case law on the issue. In last week's amended ruling, [Circuit Judge John M.] Walker cited the U.S. Supreme Court in Blum v. Stenson, 465 U.S. 886 (1984), for the proposition that, 'The reasonableness of a fee award does not depend on whether the attorney works at a private law firm or a public interest organization.' Walker then added some of the circuit's own case law, '[N]or is the award necessarily limited because the attorney has agreed to undertake the case for a reduced fee compared to the customary market rate, see Reiter v. MTA N.Y. City Transit Auth., 457 F.3d 224 (2d Cir. 2006).'"

Law.com adds:

In its footnote last week, Walker, citing Blum, said, "Nevertheless, the nature of the representation and type of work involved in a case are critical ingredients in determining the 'reasonable hourly rate.'"

And Walker cited other cases emphasizing that fees charged for similar work by attorneys of like skill in the area are the "starting point" for fixing a reasonable fee award.

"These factors may justify compensating an attorney at a rate lower than his or her customary rate for a different type of practice, regardless of whether the attorney has agreed to take the case on a pro bono or reduced-fee basis," Walker said. "All we are holding is that in calculating the reasonable hourly rate for particular legal services, a district court should consider all relevant circumstances in concluding what a reasonable client would expect to pay."

He continued, "Thus, 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."

Finally, the Court of Appeals clarified the standards for when the plaintiff hires an attorney from outside the jurisdiction. The hourly rates in the Southern District of New York are much higher than those in the Northern District of New York. What happens when an NDNY plaintiff hires an SDNY lawyer? Do the SDNY rates apply? Or should the district court lower the SDNY lawyer's rates to confirm to the NDNY? The Court of Appeals wants the SDNY lawyer to receive the lower NDNY rates in most cases unless "the party wishing the district court to use a higher rate demonstrates that his or her retention of an out-of-district attorney was reasonable under the circumstances as they would be reckoned by a client paying the attorney’s bill."