Wednesday, April 21, 2010

Supreme Court limits enhancements to statutory attorneys' fees

I was still running around the schoolyard when this happened, but the Supreme Court in 1975 dropped a bomb on the civil rights community when it ruled in the Alyeska Pipeline case that plaintiffs who win their cases are not entitled to recover attorneys' fees from the losing defendants. This prompted Congress in 1976 to pass the Civil Rights Attorneys' Fees Award Act which allows prevailing parties to recover fees from the defendants in civil rights and other public interest litigation (42 U.S.C. sec. 1988). The courts have been grappling with this legislation ever since. Once again, the Supreme Court weighs in.

The case is Perdue v. Kenny A., decided on April 21. The issue this time around is whether the winning lawyers in a civil rights case can recover a fee enhancement for exceptional work in handling the case. In order to understand this issue, you need to know the basic rules governing the attorneys' fees entitlement. This is a little simplistic, but the plaintiff wins a civil rights or environmental case, courts generally multiply the lawyer's hourly rate by the number of hours he worked on the case. We call that the "lodestar" method. It's an easy way to calculate the attorneys' fees, and after the court arrives at a dollar amount, the number is usually reduced if the lawyer spent too much time on the case or did not prevail on all issues.

Is the lawyer entitled to a special enhancement for exceptional work, above and beyond the lodestar? The trial judge in the Perdue case thought so. These lawyers beat the hell out of the State of Georgia in challenging the way it ran its public foster homes. In this class action lawsuit representing 3,000 children who (according to Justice Breyer's concurrence/dissent) endured hellish living conditions, it took the lawyers roughly 30,000 hours to perform the work, and the attorneys' fees application sought more than $14 million. The trial court awarded about $6 million in fees, and then enhanced that award by 75 percent, raising the attorneys' fees by another $4.5 million. I have never seen a fee award this high, but the trial court said the lawyers' performance was the finest he had ever seen in his 27 years on the bench.

The Supreme Court takes away that enhancement, ruling that the trial court did not clearly identify any compelling reasons for it. Writing for a 5-4 majority, Justice Alito endorses the lodestar approach to calculating attorneys' fees, warts and all, and says that multiplying the hours spent on the case by the lawyers' hourly rates, will be enough except in the rare and exceptional cases. In order to recover an enhanced fee above and beyond the lodestar, counsel must proffer "specific evidence that the lodestar fee would not have been adequate to attract competent counsel." Moreover, while "there is a strong presumption that the lodestar figure is reasonable, ... that presumption may be overcome in those rare circumstances in which the lodestar does not adequately take into account a factor that may properly be considered in determining a reasonable fee."

This is going to be a very tough standard for lawyers to satisfy. The Court goes out of its way to emphasize how prevailing lawyers are going to rarely recover an enhanced fee, treating us with language that warns against attorney windfalls:

Section 1988 serves an important public purpose by making it possible for persons without means to bring suit to vindicate their rights. But unjustified enhancements that serve only to enrich attorneys are not consistent with the statute’s aim. In many cases, attorney’s fees awarded under §1988 are not paid by the individuals responsible for the constitutional or statutory violations on which the judgment is based. Instead, the fees are paid in effect by state and local taxpayers, and because state and local governments have limited budgets, money that is used to pay attorney’s fees is money that cannot be used for pro-grams that provide vital public services.

This language will certainly under criticism. Doesn't the insurance company pay out attorneys' fees, and not the taxpayers? In any event, the Court does suggest you can get an enhancement if "the method used in determining the hourly rate employed in the lodestar calculation does not adequately measure the attorney's true market value, as demonstrated in part through the litigation." An enhancement may also be appropriate if "the attorney's performance includes an extraordinary outlay of expenses and the litigation is exceptionally protracted." Another reason to enhance would be cases where "an attorney's performance involves exceptional delay in the payment of fees."

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