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05/23/89 Alfred U. Mckenzie, Et Al. v. Ralph Kennickell

May 23, 1989




Mikva, Ruth B. Ginsburg, and Buckley, Circuit Judges.


Appeal from the United States District Court for the District of Columbia, D.C. Civil Action No. 73-00974.



This attorney's fee dispute presents the question whether the district court abused its discretion in awarding an enhancement of attorney's fees and costs based on the risk of nonpayment (i.e., the contingent nature of the case) and the quality of representation. Following Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 478 U.S. 546, 92 L. Ed. 2d 439, 106 S. Ct. 3088 (1986) ("Delaware Valley I"), and Pennsylvania v. Delaware Valley Citizens' Council for Clean

This case involves the fees and costs of counsel for a class of black employees at the Government Printing Office , whose legal odyssey has stretched over the better part of two decades. In 1973, the employees ("plaintiffs") filed an action alleging racial discrimination in hiring, training, and promotion practices, in violation of Title VII of the Civil Rights Act of 1964, which had been extended in 1973 to cover federal workers, see 42 U.S.C. § 2000e-16. In 1977, the district court granted plaintiffs' motion for summary judgment on all claims of liability under Title VII, see McKenzie v. McCormick, 425 F. Supp. 137, 142 (D.D.C. 1977), and four years later, the district court issued its remedial decree, see McKenzie v. Saylor, 508 F. Supp. 641, 647-59 (D.D.C. 1981). On appeal, this court affirmed the district court in large part, see McKenzie v. Sawyer, 221 U.S. App. D.C. 288, 684 F.2d 62, 80 (D.C.Cir. 1982).

Although the suit was both a class and an individual action, only the claims of counsel for the class are involved in this appeal. Class counsel include the Institute for Public Representation ("Institute"), part of the clinical education program of the Georgetown University Law Center; the Washington Lawyers' Committee for Civil Rights Under Law ("Lawyers' Committee"), a non-profit, tax-exempt organization affiliated with the National Lawyers Committee for Civil Rights; and the law firm of Hogan & Hartson. Class counsel (collectively "applicants") first filed a petition requesting attorney's fees and costs in April 1981, pursuant to 42 U.S.C. §§ 2000e-5(k), 2000e-16(d). Applicants were granted an interim award covering the period from the outset of the case until January 30, 1981, the date of the final relief order. See McKenzie v. Kennickell, 645 F. Supp. 437, 441 (D.D.C. 1986). After some considerable delay, the government eventually complied with the district court's order, see McKenzie v. Kennickell, 669 F. Supp. 529, 530-31, 535 (D.D.C. 1987).

Following the resolution of the litigation on the merits, applicants again petitioned the district court for an interim award of attorney's fees (for services since 1981) pending a final determination of fees. On August 10, 1987, the district court ordered the government to identify an amount that in its opinion represented the "irreducible minimum lodestar fee" to which applicants were entitled, see 669 F. Supp. at 531. Under this order, the government ultimately paid applicants some $200,000, see 669 F. Supp. at 536.

On April 8, 1988, the district court approved a final stipulation in which the government agreed to a lodestar fee of $740,000 that covered the total fee claims of counsel for the individual plaintiffs and counsel handling all fee claims, and the lodestar claims of counsel for the class. This sum was paid on April 28, 1988. See McKenzie v. Kennickell, 684 F. Supp. 1097, 1098 (D.D.C. 1988).

On April 18, 1988, the district judge granted counsel for the class two enhancements of the lodestar award: a 50 percent enhancement to reflect the contingent nature of the claim and the resulting risk of nonpayment, and a 25 percent enhancement on the basis of quality of representation. See McKenzie, 684 F. Supp. at 1099. The government appeals these enhancements. II. ARGUMENT

A. The Contingency Enhancement

In Delaware Valley II, the Supreme Court specifically addressed the legal standard for contingency enhancements under fee-shifting statutes. A majority of the Court reversed a 100 percent risk enhancement before it, and a plurality of four contended that contingency enhancements "should be reserved for exceptional cases." 107 S. Ct. at 3088. But Justice O'Connor, in a controlling opinion, concluded that "Congress did not intend to foreclose consideration of contingency in setting a reasonable fee under fee-shifting provisions, 107 S. Ct. at 3089 (O'Connor, J., concurring in part and concurring in the judgment). Four Justices in dissent agreed, see 107 S. Ct. at 3091 (Blackmun, J., dissenting, joined by Brennan, Marshall, and Stevens, JJ.).

Justice O'Connor's opinion in Delaware Valley II is currently the effective legal standard for contingency enhancements, see Weisberg v. U.S. Dep't of Justice, 270 U.S. App. D.C. 233, 848 F.2d 1265, 1272 (D.C.Cir. 1988); Thompson v. Kennickell, 266 U.S. App. D.C. 452, 836 F.2d 616, 621 (D.C.Cir. 1988). Her test was twofold. First, she urged lower courts to view contingency cases "as a class" and "treat a determination of how a particular market compensates for contingency as controlling future cases involving the same market." 107 S. Ct. at 3090. Justice O'Connor recommended that "courts strive for consistency from one fee determination to the next." Id. She emphasized that "at all times a fee applicant bears the burden of proving the degree to which the relevant market compensates for contingency." Id. Second, Justice O'Connor agreed with the plurality that "no enhancement for risk is appropriate unless the applicant can establish that without an adjustment for risk the prevailing party 'would have faced substantial difficulties in finding counsel in the local or other relevant market.'" Id. at 3091 (quoting plurality opinion, 107 S. Ct. at 3089).

Justice O'Connor's opinion must be understood with reference to the overall process by which attorney's fees are awarded, because she recognized that contingency is but one factor that a district court may consider in setting a "reasonable fee," 107 S. Ct. at 3089. As the Supreme Court recently reaffirmed, "reasonableness" is the overarching standard by which a fee award is to be measured, and it is to be determined by a district court "in light of all the circumstances" of a case. Blanchard v. Bergeron, 489 U.S. 87, 109 S. Ct. 939, 944, 103 L. Ed. 2d 67 (1989). A district court judge has broad discretion to examine the relevant factors in each individual case; "it is central to the awarding of attorney's fees under § 1988 that the district court judge, in his or her good judgment, make the assessment of what is a reasonable fee under the circumstances of the case." Blanchard, 109 S. Ct. at 946. This means that the size of the contingency enhancement may vary from case to case; a district court may often find it useful to set the contingency enhancement last, after other enhancements have been made, so that the total fees awarded do not exceed what is "reasonable."

We note that in some areas Congress has seen fit to prescribe a particular percentage of the recovery as a cap on recoverable fees, see, e.g., 42 U.S.C. § 406(b) (1) (establishing 25 percent of recovery as ceiling in social security disability cases). This parallels the market practice whereby fees are often set as a percentage (say, 33 percent) of the recovery. Such a rule cannot be rigidly applied under fee-shifting statutes, because of the frequent inapplicability of "the private market model of contingency compensation," 107 S. Ct. at 3090 (O'Connor, J., concurring in part and concurring in the judgment), and because under most statutes the opponent rather than the client pays the fee. See Rodriquez v. Bowen, 865 F.2d 739 (6th Cir. 1989) (en banc) Still, a district court often may wish to compare the fee award to the overall recovery, in order to ensure that the market practice is not exceeded and the fee remains reasonable.

With these principles in mind, we turn to the issues presented by the case sub judice.

1. Whether Applicants Are Eligible for an Enhancement

At the outset, the government maintains that the Institute and the Lawyers' Committee are not eligible for enhancements for the risk of nonpayment. The government contends that because these organizations do not accept fee-paying clients, they did not incur any opportunity cost in representing the plaintiffs in this action. They did not, in other words, forego any work for which they would have been compensated on an hourly basis. Furthermore, neither accepted the case on the expectation of a contingency enhancement; indeed, their raison d'etre is to assist litigants who cannot afford to pay fees. See New York Ass'n for Retarded Children v. Carey, 711 F.2d 1136, 1154 (2d Cir. 1983) (holding unreasonable the addition of contingency bonuses to fee awards to non-profit law offices).

The Supreme Court, however, has stressed that the computation of fees does not vary according to the identity of the recipient. "Congress did not intend the calculation of the awards to vary depending on whether the plaintiff was represented by private counsel or by a non-profit legal services organization." Blum v. Stenson, 465 U.S. 886, 894, 79 L. Ed. 2d 891, 104 S. Ct. 1541 (1984); see also id. at 904 (noting that risk enhancements are available for "nonprofit legal service organizations and private attorneys" on an equal basis) (Brennan, J., concurring). Indeed, as the Supreme Court recently opined, the fact "that a nonprofit legal services organization may contractually have agreed not to charge any fee of a civil rights plaintiff does not preclude the award of a reasonable fee to a prevailing party in a § 1983 action, calculated in the usual way." Blanchard v. Bergeron, 489 U.S. 87, 109 S. Ct. 939, 945, 103 L. Ed. 2d 67 (1989) (emphasis in original). If this were not so, the Delaware II Court need not have reached the question of the appropriate standards for contingency enhancements generally, because it could have found that non-profit law firms were ineligible for such enhancements. See 107 S. Ct. at 3088, n. 10 (noting that the attorneys for Delaware Valley were part of a non-profit, tax-exempt law corporation, but expressly declining to pass on argument--not aired in the lower courts -- that such a firm, by its very nature, is ineligible for a risk-of-not-prevailing enhancement); 107 S. Ct. at 3096 (Blackmun, J., dissenting) (rejecting the argument that non-profits are ineligible for contingency enhancements as an "attempt to do indirectly what the Court refused to do directly in Blum"); see also Blanchard, 109 S. Ct. at 945.

In addition, this circuit has rejected the notion that the identity of counsel should play any role in the determination of fees. See Save Our Cumberland Mountains, Inc. v. Hodel, 857 F.2d 1516, 1521-24 (D.C.Cir. 1988) (en banc). Far from constituting "economic relief" or a "windfall" to non-profit firms, the equal availability of contingency enhancements creates a level playing field. If enhancements were available to for-profit firms, but not to non-profits, then over time the chronic imbalance would encourage legal resources to move to the for-profit sector where the risk of nonpayment could be fully compensated. This would inhibit the Institute and Lawyers' Committee from bringing contingent Title VII cases and subvert the congressional intent that fee-shifting statutes should benefit non-profits. See New York Gaslight Club, Inc. v. Carey, 447 U.S. 54, 70 n. 9, 64 L. Ed. 2d 723, 100 S. Ct. 2024 (1980).

We conclude that applicants are eligible for a contingency enhancement.

2. The First Prong: Whether "The Relevant Market" Adds a Premium for Contingency

We proceed to the first prong of Justice O'Connor's test: whether the relevant legal market adds a premium for contingency. The term "relevant market" is a source of disagreement between the parties. Applicants urge that it be defined as including all contingent cases in the contemporary Washington, D.C., legal market; the government contends that the phrase should be interpreted to encompass only Title VII and related cases at the time plaintiffs brought their suit.

We hold that the "relevant market" in this case is composed of all contingency claims in the District of Columbia, particularly other types of complex federal litigation, at the time the case was undertaken by counsel (rather than at the time that fees were awarded). Throughout her concurrence, Justice O'Connor referred to "the class" of contingency cases, without suggesting that the class should be restricted according to the subject matter of the plaintiff's complaint. See, e.g., 107 S. Ct. at 3090. "It does not appear that Justice O'Connor . . . contemplated that the class of cases to be studied be anything less than all contingency cases in a given geographic market . . .." Blum v. Witco Chemical Corp., 829 F.2d 367, 381 (3d Cir. 1987); see also Blum v. Stenson, 465 U.S. 886, 890-91, 892 & n. 5, 79 L. Ed. 2d 891, 104 S. Ct. 1541 (1984) (referring to "the prevailing market rate" for attorneys of comparable experience, skill, and reputation) (emphasis added). This definition of "relevant market" is consistent with congressional intent, see S.Rep. No. 1011, 94th Cong., 2d Sess. 6 (1976) ("It is intended that the amount of fees awarded under [section 1988] be governed by the same standards which prevail in other types of equally complex Federal litigation, such as antitrust casesand not be reduced because the rights involved may be non-pecuniary in nature.").

We also hold that the "relevant market" is that which existed at the time the case was undertaken by counsel and the suit commenced, rather than the market existing at the time that fees were awarded. Congress has instructed that fees be set according to "what is traditional with attorneys compensated by a fee-paying client." S.Rep. No. 1011, 94th Cong., 2d Sess. 6 (1976); see also H.R.Rep. No. 1558, 94th Cong., 2d Sess. 9 (1976). In private markets, the fee is negotiated up front at the beginning of a case. No lawyer would seek to enlarge a contingency premium, or create one where none existed before, if the community practice changed during the course of the lawsuit. Similarly, we see no need to reward applicants in this case if, since the time they agreed to represent the class of GPO employees, fee practices in competitive markets have changed. We remind applicants that a "reasonable" fee is one that is "adequate to attract competent counsel, but . . . [that does] not produce windfalls to attorneys." S.Rep. No. 1011, 94th Cong., 2d Sess. 6 (1976).

Focusing on the time when the case was commenced provides practitioners more predictability than would the contrary approach. A lawyer deciding whether to take on a case, on the basis of fees provided under a statute, can ascertain whether a contingency enhancement will be available by examining then-existing market practices. She need not be troubled by the possibility that those practices might later change ...

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