instructing that a district court “must support its findings with a sufficient articulation of its rationale to allow for meaningful appellate review”
How later courts described this case
- instructing that a district court “must support its findings with a sufficient articulation of its rationale to allow for meaningful appellate review”
- permitting counsel to charge Washington, D.C., rates when no local northern New Jersey attorneys were willing to handle complex environmental litigation
- upholding use of LSI-adjusted matrix for determining billing rates in Washington, D.C. area
- Resource Conservation and Recovery Act
Written by the judges who cited it.
The opinion
PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
Nos. 11-3813 and 11-3814
_____________
INTERFAITH COMMUNITY ORGANIZATION;
LAWRENCE BAKER; MARTHA WEBB HERRING;
MARGARET WEBB; WINSTON CLARKE; MARGARITA
NAVAS;
HACKENSACK RIVERKEEPER, INC.; WILLIAM
SHEEHAN
v.
HONEYWELL INTERNATIONAL, INC, F/K/A
Alliedsignal, Inc;
RONED REALTY OF JERSEY CITY, INC.; RONED
REALTY OF UNION CITY, INC.; W.R. GRACE & CO;
ECARG INC; W.R. GRACE LTD;
*KELLOGG STREET 80 PROPERTY; *KELLOGG
STREET
440 PROPERTY, LLC.; *KELLOGG STREET 60
PROPERTY, LLC
Honeywell International, Inc., Kellogg Street 80 Property,
LLC,
Kellogg Street 440 Property, LLC, Kellogg Street 60
Property, LLC
Appellants in No. 11-3913
*(Pursuant to Fed. R. App. P. 12(a))
_____________
JERSEY CITY MUNICIPAL UTILITIES AUTHORITY;
ELIZABETH ROSARIO; RAFAEL ROSARIO;
HACKENSACK RIVERKEEPER, INC.; WILLIAM
SHEEHAN;
WINSTON CLARKE; LAWRENCE BAKER;
JERSEY CITY INCINERATOR AUTHORITY
v.
HONEYWELL INTERNATIONAL INC; PAUL TRENK;
STEVE GALLO;
BOB CIASULLI; DEGEN OIL AND CHEMICAL CO;
INLAND SOUTHEAST JERSEY CITY, LLC;
KELLOGG STREET 60 PROPERTY, LLC;
KELLOGG STREET 80 PROPERTY, LLC;
KELLOGG STREET 440 PROPERTY, LLC;
100 KELLOGG STREET, LLC; NEW JERSEY CITY
UNIVERSITY;
JERRAMIAH T. HEALY;
OREN DABNEY, In his official capacity as Director of
Jersey City Incinerator Authority; JOHN YURCHAK, In his
official capacity as Director of
Jersey City Department of Public Works; DANIEL BECHT,
Executive Director of
Jersey City Municipal Utilities Authority;
2
BAYONNE MUNICIPAL UTILITIES AUTHORITY;
CARLOS M. HERNANDEZ, In his official capacity as
President of New Jersey City University
Honeywell International, Inc., Kellogg Street 80 Property,
LLC,
Kellogg Street/440 Property, LLC, Kellogg Street 60
Property, LLC,
Appellants in 11-3814
___________
On Appeal from the United States District Court
for the District of New Jersey
(Civil Action No. 95-2097)
District Judge: Honorable Dennis M. Cavanaugh
___________
Argued December 20, 2012
Before: McKEE, Chief Judge, SLOVITER and
VANASKIE, Circuit Judges
(Filed: July 8, 2013 )
Lisa S. Blatt, Esq. [ARGUED]
Michael D. Daneker
Dirk C. Phillips
R. Stanton Jones
Arnold & Porter
555 12th Street, N.W.
Washington, D.C. 20004
Counsel for Appellants
3
Bruce J. Terris
Carolyn Smith Pravlick, Esq. [ARGUED]
Michelle Weaver
Terris, Pravlik & Millian, LLP
1121 12th Street, N.W.
Washington, D.C. 20005-4632
Counsel for Appellees
___________
OPINION OF THE COURT
___________
VANASKIE, Circuit Judge.
“A request for attorney‟s fees should not result in a
second major litigation.” Hensley v. Eckerhart, 461 U.S. 424,
437 (1983). Regrettably, requests for attorneys‟ fees in this
protracted environmental clean-up case have resulted not only
in a second major litigation, but a third as well. An earlier
multi-million dollar fee award previously brought before us
was vacated and remanded for additional review by the
District Court. Interfaith Cmty. Org. v. Honeywell Int’l, Inc.
(ICO II), 426 F.3d 694 (3d Cir. 2005). We are now
confronted with a challenge to another multi-million dollar
award. This latest appeal calls upon us to decide whether
offers of judgment pursuant to Fed. R. Civ. P. 68 may be
made in the context of attorney‟s fee disputes under the fee-
shifting provisions of the Resource Conservation and
Recovery Act (“RCRA”), 42 U.S.C. §§ 6901, et seq. We are
also called upon once again to determine whether the fee
award is excessive. Because we conclude that Rule 68 offers
of judgment may be made in this context, we will reverse the
District Court‟s declaration that the offers of judgment in this
4
case are null and void as well as its decision to bar any further
offers of judgment. And, while we uphold as not clearly
erroneous the District Court‟s decisions with respect to the
appropriate hourly rates in this case, we are unable to sustain
its conclusions with respect to the number of hours claimed
by counsel because the District Court‟s findings lack
sufficient explanation. Accordingly, we will vacate the fee
award and remand for further proceedings.
I. Facts and Procedural History
Mutual Chemical Company of America (“Mutual”)
operated a chrome manufacturing plant in Jersey City, New
Jersey from 1895 to 1954. During that time, the company
deposited approximately 1.5 million tons of industrial waste
residue containing hexavalent chromium into wetlands along
the Hackensack River. (Joint Appendix [“J.A.”] 1082-83.) In
1954, Allied Corporation purchased the plant and ended the
dumping. Allied Corporation was succeeded by AlliedSignal,
Inc., and later by Honeywell International, Inc.
(“Honeywell”). Although the dumping stopped, the
contaminated area was not cleaned up.
In 1995, the Interfaith Community Organization and
five residents of the nearby community (collectively, “ICO”),
represented by the Washington, D.C. law firm of Terris,
Pravlik & Millian, LLP (“Terris”), filed the original suit
against AlliedSignal, then the owner of the site, seeking the
cleanup of a contaminated area designated “Study Area 7.”
ICO sued AlliedSignal under the citizen suit provision of
RCRA, which allows individuals to bring a civil action
against any person “who has contributed or who is
contributing to the past or present handling, storage,
5
treatment, transportation, or disposal of any solid or
hazardous waste which may present an imminent and
substantial endangerment to health or the environment . . . .”
42 U.S.C. § 6972(a)(1)(B).
The District Court entered judgment for ICO in 2003,
ordering Honeywell (which had succeeded AlliedSignal) to
clean up Study Area 7. Interfaith Cmty. Org. v. Honeywell
Int’l Inc., 263 F. Supp. 2d 796, 802 (D.N.J. 2003). This Court
affirmed. See 399 F.3d 248, 252 (3d Cir. 2005).
In 2004, the District Court awarded ICO more than
$4.5 million in fees and expenses for litigating the 1995
action, and also required Honeywell to pay the future fees and
costs incurred by ICO in monitoring Honeywell‟s cleanup.
Interfaith Cmty. Org. v. Honeywell Int’l, Inc. (ICO I), 336 F.
Supp. 2d 370, 403-04 (D.N.J. 2004). We affirmed in part and
vacated in part. ICO II, 426 F.3d 694, (3d Cir. 2005).
Specifically, we sustained as not clearly erroneous the District
Court‟s decision with respect to the hourly rates sought by
ICO‟s counsel, id. at 707-10, but rejected as inadequate the
District Court‟s review of the hours for which compensation
was claimed. Id. at 711-14. Accordingly, we vacated the fee
award and remanded for further proceedings.
In 2005, Hackensack Riverkeeper (“Riverkeeper”),
also represented by Terris, filed companion cases against
Honeywell stemming from the same contamination but
relating to areas adjacent to Study Area 7, designated as
“Study Area 5” and “Study Area 6.” (J.A. 1140.) The parties
entered into a number of consent decrees in which Honeywell
conceded responsibility, and agreed to remediate the
additional contaminated sites. As part of the consent decrees,
6
Honeywell also agreed to pay $5 million in fees and costs for
the expenses incurred prior to the decrees, and to pay
“reasonable” future fees and expenses incurred in connection
with monitoring Honeywell‟s remediation efforts. (J.A. 334-
35.)
Initially, the parties were able to reach agreement on
fees and expenses. Beginning in the fall of 2009, however,
Honeywell, on the one hand, and ICO and Riverkeeper
(collectively, “Appellees”) on the other, failed to reach
agreement with respect to the fees sought for monitoring
Honeywell‟s work.
Terris subsequently filed two separate fee applications,
totaling more than $700,000, for its monitoring work
performed in 2009 and the first half of 2010 in connection
with the 1995 case. Terris filed a separate application,
seeking almost $2.5 million, for work performed on the 2005
litigation. Honeywell filed objections to the fee applications.
Specifically, Honeywell renewed its previously-rejected
arguments that the forum rate rule should be applied so that
the hourly rates sought by Terris should be based upon the
rates charged by New Jersey lawyers as opposed to
Washington, D.C. lawyers, and that, even if D.C. rates were
used, Appellees applied the wrong method for calculating
prevailing D.C. market rates. In addition, Honeywell once
again contested the reasonableness of the hours and expenses
claimed by counsel. Honeywell also served offers of
judgment pursuant to Rule 68 for the disputed fees. In
response, Appellees asked the District Court to issue a
declaratory judgment that Honeywell‟s Rule 68 offers are null
and void in the context of RCRA citizen suits.
7
On September 8, 2011, the District Court issued an
opinion that substantially upheld the Appellees‟ fee request.
First, the District Court once again ruled that the forum-rate
rule need not be applied in this case so that Terris could be
paid Washington, D.C. rates for work relating to a dispute in
New Jersey. Interfaith Cmty. Org.v. Honeywell Int’l, Inc.
(ICO III), 808 F. Supp. 2d 744, 749-50 (D.N.J. 2011).
Second, the District Court evaluated two different methods
for calculating prevailing D.C. market rates, and approved the
method requested by Appellees. Id. at 750-51. Third, the
District Court rejected most of the challenges to the
reasonableness of the hours expended by Appellees‟ counsel.
Id. at 751-55. And, finally, the District Court held that Rule
68 offers of judgment cannot be made in citizen suits filed
under RCRA, concluding that application of Rule 68 to
RCRA citizen suits would violate the Rules Enabling Act, 28
U.S.C. § 2072, by discouraging the very citizen suits that
Congress intended to promote. Id. This appeal followed.
II. Discussion
The District Court had jurisdiction under 42 U.S.C. §
6972(a), the citizen suit provision of RCRA, and we have
appellate jurisdiction under 28 U.S.C. § 1291. We “review
the legal interpretation of procedural rules de novo.” United
Auto. Workers Local 259 Soc. Sec. Dep’t v. Metro Auto Ctr.,
501 F.3d 283, 286 (3d Cir. 2007). The standard the district
court should “apply in calculating a fee award is a legal
question subject to plenary review,” Evans v. Port Auth. of
N.Y. & N.J., 273 F.3d 346, 358 (3d Cir. 2001), but “[t]he
determination of the appropriate billing rate is a factual
finding which [this Court] review[s] for clear error.” ICO II,
426 F.3d at 709. Finally, the amount of a fee award is within
8
the district court‟s discretion, and we will not disturb the
district court‟s “determination of . . . the number of hours
reasonably expended absent clear error.” Evans, 273 F.3d at
358.
A. Rule 68 Offers of Judgment
We must first decide whether offers of judgment made
pursuant to Federal Rule of Civil Procedure 68 apply to
attorney‟s fee disputes brought under the citizen suit
provision of RCRA. As the Supreme Court has instructed,
“[w]e give the Federal Rules of Civil Procedure their plain
meaning, and generally with them as with a statute, [w]hen
we find the terms unambiguous, judicial inquiry is complete.”
Pavelic & LeFlore v. Marvel Entm’t Group, 493 U.S. 120,
123 (1989) (quotation marks omitted). Thus, we begin, as we
must, with the text of the rule. See United States v. Gonzales,
520 U.S. 1, 4 (1997).
Federal Rule of Civil Procedure 68 provides, in
pertinent part:
(a) Making an Offer; Judgment on an
Accepted Offer. At least 14 days before the
date set for trial, a party defending a claim may
serve on an opposing party an offer to allow
judgment on specified terms, with the costs then
accrued. . . .
....
(c) Offer After Liability is Determined. When
one party‟s liability to another has been
9
determined but the extent of liability remains to
be determined by further proceedings, the party
held liable may make an offer of judgment. . . .
(d) Paying Costs After an Unaccepted Offer.
If the judgment that the offeree finally obtains is
not more favorable than the unaccepted offer,
the offeree must pay the costs incurred after the
offer was made.
Fed. R. Civ. P. 68(a), (c)-(d)
Rule 68 does not exempt from its purview any type of
civil action. See 12 C. Wright & A. Miller, Federal Practice
& Procedure § 3001.1 (2d ed. 1987). Moreover, Rule 1 of the
Federal Rules of Civil Procedure states that the rules apply to
“all suits of a civil nature,” unless exempted by Rule 81. Fed.
R. Civ. P. 1. Rule 81, in turn, does not set forth any
restrictions on Rule 68‟s applicability to citizen suits under
RCRA, or to suits seeking equitable relief generally. Thus,
by its plain terms, Rule 68 is applicable to RCRA citizen
suits.
The District Court, however, held that Rule 68 is so
incompatible with Congress‟ purpose in enacting RCRA that
its application to cases brought under § 6972 would violate
the Rules Enabling Act, 28 U.S.C. § 2072. The Rules
Enabling Act gives the Supreme Court the power to
“prescribe general rules of practice and procedure and rules of
evidence for cases in the United States district courts . . . and
the courts of appeals,” provided that “such rules [do] not
abridge, enlarge or modify any substantive right.” § 2072(a)-
(b). Thus, if applying Rule 68 to § 6972 citizen suits abridges
10
or modifies a substantive right, then Rule 68 offers are void in
this context notwithstanding the plain meaning of the rule.
A rule of procedure does not run afoul of this statutory
limitation merely because it “affects a litigant‟s substantive
rights; most procedural rules do.” Shady Grove Orthopedic
Assocs., P.A. v. Allstate Ins. Co., 130 S. Ct. 1431, 1442
(2010) (Scalia, J., plurality opinion). As Justice Scalia
elaborated: “What matters is what the rule itself regulates: If
it governs only „the manner and the means‟ by which the
litigants‟ rights are „enforced,‟ it is valid; if it alters „the rules
of decision by which [the] court will adjudicate [those]
rights,‟ it is not.” Id. (quoting Mississippi Pub’g Corp. v.
Murphree, 326 U.S. 438, 446 (1946)).
Applying the criterion that a rule of procedure
impermissibly “abridge[s], enlarge[s], or modif[ies] [a]
substantive right,” 28 U.S.C. § 2072(b), only if it alters the
rules for adjudicating a litigant‟s rights, we readily conclude
that application of Rule 68 in the specific context of this case
does not violate the Rules Enabling Act. No rule of decision
governing the adjudication of the attorney‟s fee dispute that is
the subject of Honeywell‟s offers of judgment is affected by
application of Rule 68. The amount of the fee to be awarded
remains governed by the same rules of decision regardless of
the interposition of an offer of judgment. At best, the only
impact that Rule 68 has on the ultimate outcome of the
attorney‟s fee dispute is to require Appellees to bear their
post-offer costs, including counsel fees, if the fee award is
11
less favorable than the offer of judgment.1 See Fed. R. Civ. P.
68(d); Marek v. Chesny, 473 U.S. 1, 11-12 (1985).2
In light of Rule 68‟s laudatory purpose of facilitating
settlement, Delta Airlines, Inc. v. August, 450 U.S. 346, 352
(1981), the requirement that a plaintiff bear the fees incurred
after it rejects an offer of judgment simply cannot be said to
abridge some substantive right. In this regard, fees incurred
1
Presumably, the only post-offer fees that may have to
be borne by a plaintiff in the context presented here would be
for time expended to continue to litigate the attorney‟s fee
dispute. In this context, therefore, the plaintiff is presented
with the classic risk/reward consideration in evaluating any
settlement offer: is it probable that continuation of the
litigation will achieve an outcome that is worth more than the
offer plus the costs incurred after the offer is received.
2
Marek held that where a statute includes attorney‟s
fees within the term “costs,” such as 42 U.S.C. § 1988 does,
“a defendant is not liable for the post-offer attorney fees of a
rejecting offeree who obtains a judgment not more favorable
than the offer.” 13 J. Moore, Moore‟s Federal Practice §
68.08[4][a] (3d ed. 2011). The citizen suit provision of
RCRA provides that “[t]he court . . . may award costs of
litigation (including reasonable attorney and expert witness
fees) to the prevailing or substantially prevailing party,
whenever the court determines such an award is appropriate.”
42 U.S.C. § 6972(e). Thus, under Marek, Appellees could
not recover post-offer fees if the amount ultimately awarded
to them was less than the corresponding offer of judgment.
12
after a party rejects an offer of judgment and recovers less
than the offer are properly viewed as being unreasonable.
The District Court, relying upon Public Interest
Research Group of New Jersey v. Struthers-Dunn, Inc., Civ.
A. No. 87-1773, 1988 WL 147639 (D.N.J. Aug. 16, 1988),
reasoned that Rule 68 offers would discourage citizens from
bringing suit and firms from accepting the cases, because
there is no possibility for monetary relief in citizen suits and,
therefore, the only source of compensation for law firms
representing plaintiffs in these cases comes in the form of an
award of attorney‟s fees. ICO III, 808 F. Supp. 2d at 756-57.
The impact on a decision to pursue litigation, however, has
nothing to do with whether the offer of judgment rule
abridges or modifies some substantive right. It may very well
be that a Rule 68 offer of judgment in the context of a RCRA
attorney‟s fee dispute will require a plaintiff to make a hard
choice between accepting what has been offered versus
adjudicating the issues that are in dispute in such a case -- the
appropriate hourly rate and the reasonableness of the hours
expended. That Appellees may feel compelled to take less
than the amount to which they believe they are entitled,
however, has nothing at all to do with the determination of
the appropriate hourly rate and the reasonableness of the
hours expended before the offer of judgment was made.
Settlement offers often present difficult choices for a plaintiff,
but that fact neither abridges nor modifies the substantive
rights at issue. Speculation as to the potential “chilling”
effect of allowing Rule 68 offers of judgment in citizen suits
under RCRA, advanced in Struthers-Dunn and embraced by
the District Court in this case, is simply irrelevant to the
pertinent inquiry: whether the rules of decision are altered by
the offer of judgment.
13
The Supreme Court has not considered Rule 68‟s
impact on § 6972 citizen suits, but it has addressed the
interaction between Rule 68 and the fee-shifting statute
applicable to civil rights litigation, 42 U.S.C. § 1988. See
Marek, 473 U.S. 1. While the majority opinion in Marek did
not address whether application of Rule 68 in the context of
civil rights litigation violated the Rules Enabling Act, its
rationale is indeed instructive here. In Marek, the Court
considered whether post-offer of judgment “costs” to be
borne by the plaintiff included plaintiff‟s attorney‟s fees when
the ultimate recovery was less than the offer. Id. at 3. Stated
otherwise, the issue in Marek was whether a plaintiff who
received a verdict that was less than the offer of judgment
could recover the fees incurred after the offer was made. The
plaintiffs in Marek argued that a recovery of less than the
offer of judgment should not preclude an award of all counsel
fees, including post-offer fees. Id. at 4. Much like the
argument advanced by Appellees in this case, the Marek
plaintiffs asserted that a different reading of Rule 68 would
unfairly burden civil rights plaintiffs by discouraging
attorneys from bringing meritorious claims at the risk of
losing attorney fees. Id. Notwithstanding the strong policy
arguments favoring the encouragement of suits to vindicate
important constitutional rights, the Court applied the plain
meaning of Rule 68 to foreclose recovery of post-offer fees.
The Court concluded that the purpose of § 1988 (to encourage
meritorious civil rights claims) was distinct from and
compatible with the purpose of Rule 68 (to encourage
settlement). Id. at 11. Thus, the Court held that “nothing . . .
in the policies underlying § 1988 constitutes „the necessary
clear expression of congressional intent‟ required „to exempt .
14
. . [the] statute from the operation of Rule 68.” Id. at 11-12
(citing Califano v. Yamasaki, 442 U.S. 682, 700 (1979)).
Appellees argue that Marek is distinguishable because
civil rights plaintiffs are often motivated by the potential for
personal gain, in contrast to RCRA plaintiffs, who seek
injunctive relief in furtherance of a purely public gain.3
Although Appellees are correct that citizen plaintiffs suing
under § 6972 cannot recover monetary damages, while
plaintiffs in civil rights cases often can, they miss the point of
the Court‟s analysis in Marek. The Court sustained
application of Rule 68 to civil rights cases even though it
could chill the pursuit of litigation intended to vindicate
important rights. The Court concluded that, notwithstanding
such potential, Rule 68 applied because the policies
underlying Rule 68 and the fee shifting statute at issue there
were compatible. 4
3
Private citizens bringing suit under 42 U.S.C. § 6972
are limited to mandatory and prohibitory injunctive relief.
Meghrig v. KFC W., Inc., 516 U.S. 479, 484 (1996).
4
Struthers-Dunn, 1988 WL 147639, on which the
District Court relied to void the offers of judgment in this
case, involved a Rule 68 offer of judgment in a somewhat
different context than that presented here. At issue in
Struthers-Dunn was the defendant‟s liability, not only for
attorney‟s fees, but also for monetary penalties for established
violations of the Clean Water Act, 33 U.S.C. §§ 1251, et seq.
Any monetary penalties in the citizen suit under the Clean
Water Act would be payable, not to the plaintiffs, but to the
United States government. Struthers–Dunn, 1988 WL
147639, at *2. Plaintiffs in Struthers-Dunn argued, as do
15
Appellees here, that application of Rule 68 served as a
disincentive to bring a citizen suit, because plaintiffs did not
have the possibility of receiving a monetary recovery and yet
faced the specter of having to pay their own fees as well as
defense costs, that could include defense counsel fees, if their
ultimate recovery was less than the offer of judgment. The
District Court in Struthers-Dunn observed that “[n]ot even the
most altruistic litigant can be expected to persevere under
such circumstances.” Id. at *4. Struthers-Dunn, however,
did not apply the correct criterion: whether Rule 68 changes
the rule for adjudicating the parties‟ substantive rights.
Significantly, applying this criterion, the Supreme Court has
rejected every Rules Enabling Act challenge to a rule of
procedure. Shady Grove, 130 S. Ct. at 1432. Accordingly, the
conclusion in Struthers-Dunn is fatally flawed.
Struthers-Dunn is fatally flawed for another reason: its
rationale rested on the unsound assumptions that plaintiffs
could not recover any fees in the event that the ultimate
recovery was less than the offer, see id. at *4 (“plaintiffs in
the present action would . . . be precluded from an award of
attorney‟s fees if they obtained a judgment less favorable than
defendant‟s Rule 68 offer”), and that plaintiffs may have to
pay defense counsel fees incurred after the offer was made.
See id. at *4, n.7(“[I]f plaintiffs‟ incentive to vigorously
prosecute this action would be chilled by the risk of having to
pay defendant‟s costs, then plaintiffs‟ desire to pursue this
litigation would be overcome from exposure at the prospect
of being held accountable for defendants‟ attorney‟s fees.”)
Contrary to the District Court‟s statement, a plaintiff who
prevails on a fee-shifting claim is entitled to fees incurred
before the offer of judgment. See Marek, 473 U.S. at 4.
16
The fact that only equitable relief is available under
section 6972 does not alter this conclusion. Courts have
applied Rule 68 to suits seeking equitable relief despite
arguments that doing so would discourage such claims. See,
e.g., NAACP v. Town of East Haven, 259 F.3d 113, 121 n.9
(2d Cir. 2001) (“[N]othing in the Rule suggests that it applies
only to cases seeking damages or other relief amenable to
simple comparisons.”); Chathas v. Local 134 Int’l Bhd. of
Elec. Workers, 233 F.3d 508, 522 (7th Cir. 2000) (“Rule 68
offers are much more common in money cases than in equity
cases, but nothing in the rule forbids its use in the latter type
of case.”)
Furthermore, where a plaintiff has prevailed on its underlying
claim, a defendant in a fee-shifting case cannot recover
attorney‟s fees under Rule 68 because in that circumstance it
cannot be said that the plaintiff‟s action was “„frivolous,
unreasonable or without foundation,‟” the general standard
for awarding fees as part of “costs” to a prevailing defendant.
See Le v. Univ. of Pennsylvania, 321 F.3d 403, 410-11 (3d
Cir. 2003); see also Emerson Enterprises, LLC v. Kenneth
Crosby New York, LLC, 781 F. Supp. 2d 166, 177 (W.D.N.Y.
2011) (“For a defendant to qualify as a prevailing party [in a
RCRA case], it „must show that the plaintiffs' claim was
frivolous, unreasonable, or groundless, or that the plaintiff[ ]
continued to litigate after it clearly became so. . . .‟”). Thus,
the District Court‟s reliance upon Struthers-Dunn in the
matter presently before us was misplaced. Allowing offers of
judgment in the context of this case does not expose
Appellees to a complete denial of counsel fees or to payment
of defense attorney‟s fees.
17
The fee shifting provision of section 6972 encourages
plaintiffs to bring meritorious suits to enforce environmental
laws, while Rule 68 encourages settlement of civil suits. See
Delta Airlines, 450 U.S. at 352. “There is nothing
incompatible with these two objectives.” Marek, 473 U.S. at
4 (comparing purposes of §1988 with purposes of Rule 68).
Accordingly, we conclude that nothing in the text of Rule 68
suggests that such an exemption is warranted, and application
of Rule 68 in the context presented here does not violate the
Rules Enabling Act.
Our Rule 68 inquiry is not yet complete, however.
Appellees raise another challenge to Rule 68‟s applicability in
this case, contending that the rule does not apply to
proceedings after judgment has been rendered on liability.
Appellees point to the text of the rule, which states that an
offer of judgment must be made “at least 14 days before the
date set for trial,” or, if “one party‟s liability to another has
been determined but the extent of liability remains to be
determined by further proceedings . . . it must be served
within a reasonable time . . . before the date set for a hearing
to determine the extent of liability.” Fed. R. Civ. P. 68(a),
(c). Appellees interpret this language to mean that the rule
only applies in two situations: first, before a trial; and,
second, in a bifurcated proceeding after judgment has been
rendered but before the extent of liability is determined.
The first situation plainly does not apply here, and
Appellees claim that this case does not fall within the second
situation because attorney‟s fees cannot be regarded as part of
Honeywell‟s liability. Specifically, Appellees assert that the
word “liability”—even within the phrase “extent of
18
liability”—does not encompass a dispute over attorney fees.
To support this interpretation of the text, Appellees point to
Federal Rule of Civil Procedure 54, which provides
definitions of “judgment” and “costs.” See Fed. R. Civ. P. 54.
Because Rule 54 includes attorney fees within the definition
of “costs,” Appellees argue that fees cannot also be included
within the definition of “liability.” (Appellee‟s Br. 55).
Further, Appellees observe that “RCRA provides that „costs
of litigation‟ include „reasonable attorney and expert witness
fees,‟” and note that, under Marek, Rule 68 “costs” must also
include attorney fees. (Appellee‟s Br. 55-56). Because
“costs” include attorney fees for purposes of Rule 68,
Appellees argue, attorney fees cannot also be part of
“liability.” (Id.)
Given the ordinary meaning of “liability,” see Black‟s
Law Dictionary 997 (9th ed. 2009), the phrase “extent of
liability” encompasses all legal responsibilities. This appeal
is evidence that the extent of Honeywell‟s liability has yet to
be determined.
This conclusion is consistent with our approach in
Public Interest Research Group of New Jersey v. Windall
(PIRG), 51 F.3d 1179 (3d Cir. 1995), where we implicitly
treated a Rule 68 offer made at the attorney‟s fee stage of
litigation as valid. In PIRG, we vacated a fee award and
directed the district court to consider on remand whether the
plaintiff reasonably continued to litigate the attorney‟s fee
issue after refusing the defendant‟s Rule 68 offer. 51 F.3d at
1190. See also Sanchez v. Prudential Pizza, 709 F.3d 689,
691 (7th Cir. 2013) (indicating that Rule 68 offers may
include attorney‟s fees so long as the offer clearly states that
it includes fees and costs).
19
Moreover, the policies underlying Rule 68 support this
interpretation. Rule 68 was created to “encourage the
settlement of litigation.” Delta Airlines, 450 U.S. at 352.
The benefits of settlement are highest in the context of
attorney fee disputes, which the Supreme Court has warned
“should not result in a second major litigation.” Hensley, 461
U.S. at 437. Incentive to settle is beneficial where, as here,
the “litigation to resolve fee disputes has . . . taken on a life of
its own.” ICO III, 808 F. Supp. 2d at 749. As the District
Court noted, “the amount of litigation engendered by the
present fee dispute has probably cost as much as the contested
amount.” Id. at 748. We are confident that encouragement to
settle is warranted in this context. Thus, because we believe
that a Rule 68 offer in this context both comports with the
ordinary meaning of the phrase “extent of liability” and is
consistent with the fee-shifting provision of RCRA, we
conclude that Rule 68 offers of judgment apply to disputes
over attorney fees after liability has been determined.
B. Forum-Rate Rule
We now turn our attention to the District Court‟s
departure from the forum-rate rule. The forum-rate rule holds
that “in most cases, the relevant rate [for calculating attorney
fees] is the prevailing rate in the forum of the litigation.” ICO
II, 426 F.3d at 705. We have recognized two exceptions to
the rule: “first, when the need for the special expertise of
counsel from a distant district is shown; and, second, when
local counsel are unwilling to handle the case.” Id. (internal
quotations omitted) (citing Report of the Third Circuit Task
Force on Court Awarded Attorney Fees, 108 F.R.D. 237,
261(1985)). We sustained as not clearly erroneous the
20
District Court‟s decision in ICO I that the forum-rate rule
should not be applied in this case. See ICO II, 426 F.3d at
707.
Considering the issue once again in the instant
litigation, the District Court found that Appellees
demonstrated that “at least one, if not both, of the exceptions
to the forum rate rule still apply.” ICO III, 808 F. Supp. 2d at
749. We review the District Court‟s finding that Appellees
qualify for an exception to the forum-rate rule for clear error.
ICO II, 426 F.3d at 705. We will not disturb the District
Court‟s findings as clearly erroneous unless we are “left with
the definite and firm conviction that a mistake has been
committed.” United States v. Howe, 543 F.3d 128, 133 (3d
Cir. 2008) (internal quotation marks omitted).
The District Court found that the Appellees met the
second exception to the forum-rate rule by demonstrating that
local counsel were unwilling to handle the case. In making
this finding, the District Court relied on the affidavits of
William Sheehan, Riverkeeper‟s executive director, and
Edward Lloyd, the Evan M. Frankel Clinical Professor of
Environmental Law at Columbia Law School and former
director of the Rutgers University Environmental Law Clinic.
Both affidavits support the District Court‟s finding that an
extensive search for New Jersey counsel would have been
futile. Specifically, Sheehan‟s affidavit stated that, because
Riverkeeper cannot afford to pay attorneys‟ fees, it relies on
pro bono representation from the Rutgers Environmental Law
Clinic and the Eastern Environmental Law Center in New
Jersey in the environmental cases in which it participates.
Sheehan explained it was his understanding that neither of
those organizations would be able to take on larger, more
21
complicated cases such as the Study Areas 5 and 6 litigation.
Sheehan further stated that “Riverkeeper has had a difficult
time finding legal representation since it does not even have
the resources to pay for fees and expenses even in small
matters.” (J.A. 714.) Finally, Sheehan noted that he has
personally had at least six meetings with local New Jersey
counsel hoping to convince them to handle various cases for
Riverkeeper on a pro bono basis, but to no avail.
Likewise, Lloyd‟s affidavit also supports the District
Court‟s finding that local counsel would have been unwilling
to accept this case. Lloyd stated:
At the time that the Study Areas 5
and 6 case was initiated in 2005, I
was not aware of any New Jersey
attorneys or law firms who would
have been willing to assume the
risks of litigating cases of this
type, particularly without
contemporaneous payment for
their services and expenses.
(J.A. 724.)
Lloyd‟s affidavit in this case is very similar to the
affidavit he filed in support of the fee application in ICO I,
which we found persuasive when we upheld the District
Court‟s departure from the forum-rate rule in that case. See
ICO II, 426 F.3d at 707. The primary difference between the
two affidavits is that in his affidavit supporting the fee
application in this case, Lloyd reiterated that, at the time the
22
Study Areas 5 and 6 cases commenced, he was still unaware
of local counsel willing to take on such a case.
Notwithstanding our explicit reliance on Lloyd‟s prior
affidavit in ICO II, Honeywell now argues that Appellees
should have been required to conduct an individualized
search for New Jersey counsel to handle the Study Area 5 and
6 cases, even if Sheehan and Lloyd‟s experience in other
similar cases taught them that no such counsel would have
been available, because “[t]heir assumptions about the
unavailability of counsel . . . do not demonstrate the absence
of willing New Jersey counsel.” (Appellant‟s Br. 28.) We
are not persuaded by this argument. Our decision in ICO II
explicitly credited Lloyd‟s testimony that he was unaware of
willing local counsel, which he based on three decades of
experience practicing environmental law in New Jersey.
Here, the District Court relied on an additional affidavit that
described the difficulty Riverkeeper faces in procuring
counsel in even smaller cases due to its inability to pay
attorneys‟ fees. We once again find no clear error in the
District Court‟s finding that Appellees demonstrated that
local counsel are unwilling to handle the case. Accordingly,
we will affirm the departure from the forum-rate rule in this
case.5
C. The Laffey Matrix
5
In light of this determination, we need not address
whether the District Court erred in finding that Appellees also
met the first exception by demonstrating that local counsel
did not have the “special expertise” necessary to represent
ICO.
23
Because we have sustained the District Court‟s
decision to allow Terris to be compensated on the basis of
Washington, D.C. rates, we must now determine whether the
District Court erred in deciding what these rates are. In this
case, the District Court applied what is known as the “Laffey
Matrix” for purposes of determining the appropriate hourly
rates. 6 The Laffey Matrix “provides billing rates for
attorneys in the Washington, D.C. market with various
degrees of experience.” ICO II, 426 F.3d at 708. The
original Laffey Matrix set forth the prevailing market rates
from 1981-1982. In 1989, the Laffey Matrix was updated to
account for inflation. See Trout v. Ball, 705 F. Supp. 705,
709 n.10 (D.D.C. 1989) (approving updated Laffey Matrix).
Since 1989, courts have approved various methods for
updating the Laffey Matrix. Compare Salazar v. District of
Columbia, 123 F. Supp. 2d 8, 15 (D.D.C. 2011) (utilizing
legal services component of the Consumer Price Index) with
M.R.S. Enters., Inc. v. Sheet Metal Workers’ Int’l Ass’n, No.
05-1823, 2007 WL 950071, at *5 (D.D.C. 2007) (applying
U.S. Attorney Office Matrix).
The parties agree that the initial Laffey Matrix was a
valid index of Washington, D.C. rates in 1982. The parties
further agree that an updated version of the Laffey Matrix,
which accounts for the rise in prevailing rates based on
inflation, would be a valid vehicle for determining the
applicable hourly rates in the D.C. legal market today. The
6
The Laffey Matrix was first utilized in Laffey v. Nw.
Airlines, 572 F. Supp. 354 (D.D.C. 1983), aff’d, 746 F.2d 4
(D.C. Cir. 1984), overruled in part on other grounds by Save
Our Cumberland Mountains v. Hodel, 857 F.2d 1516, 1525
(D.C. Cir. 1988) (en banc).
24
parties disagree, however, about the proper method of
updating the matrix. Appellees favor the Legal Services
Index (“LSI”) method, which accounts for “shifts in the
consumer price index for legal services nationwide.” ICO III,
808 F. Supp. 2d at 750. Honeywell prefers the U.S. Attorney
Office (“USAO”) matrix, which “regularly updates the Laffey
Matrix using the Consumer Price Index for the D.C. area.”
(Appellant‟s Br. 31.) These divergent methods result in very
different prevailing rates.7 This Circuit has not specifically
7
The U.S. Attorney Matrix yields the following rates
for 2010-2011:
Years of Experience Hourly Rate
20+ $475
11-19 years $420
8-10 years $335
4-7 years $275
1-3 years $230
paralegals $135
The LSI-updated Matrix yields the following rates for
2010-2011:
Years of Experience Hourly Rate
20+ $709
11-19 years $589
8-10 years $522
4-7 years $362
1-3 years $293
paralegals $161
(JA 935-36.)
25
approved of either method, and both parties cite cases from
the District of Columbia in support of their respective
preferred methods.
Appellees point to Salazar in support of their
preference for the LSI index. See Salazar, 123 F. Supp. 2d at
15. In that case, the District Court for the District of
Columbia weighed the advantages and disadvantages of both
the LSI index and the USAO matrix and determined that the
LSI method “more accurately reflects the prevailing rates for
legal services in the D.C. community.”8 Id. In contrast,
Honeywell cites multiple decisions applying the USAO
matrix rather than the LSI-updated matrix. See, e.g., Heller v.
District of Columbia, No. 03-213, 2011 WL 6826278, at *8-
10 (D.D.C. 2011); Hayes v. D.C. Pub. Sch., 815 F. Supp. 2d
134, 143 (D.D.C. 2011); M.R.S. Enters., Inc. v. Sheet Metal
Workers’ Int’l Ass’n, No. 05-1823, 2007 WL 950071, at *5
(D.D.C. 2007).
8
Specifically, the Salazar court explained that the
advantage of the LSI index is that it is based on the “legal
services component of the Consumer Price Index rather than
the general CPI on which the [USAO matrix] is based.” The
Salazar court further explained that, although the advantage
of the USAO Matrix is its reliance on data that is specific to
the Washington, D.C. area, “the market for legal services in
complex federal litigation in Washington, D.C. is not a local
market.” Id. at 14, 15 n.5 (citing affidavit of Michael
Kavanaugh ¶ 15). Thus, the Salazar court concluded that the
LSI-updated Laffey Matrix was preferable to the USAO
index. Id. at 15.
26
The District Court, recognizing that “our Circuit has
yet to specifically approve either version of updating the
Laffey Matrix,” was persuaded by the methodology in
Salazar. ICO III, 808 F. Supp. 2d at 750. Furthermore, the
District Court relied on this Court‟s prior opinion affirming
use of the LSI methodology. See ICO II, 426 F.3d at 709-10;
ICO III, 808 F. Supp. 2d at 750 (“[T]he Court will rely on the
holding in the previous [ICO II].”). In ICO II, we stated:
[W]e do agree . . . that the simple
fact that numerous courts in the
District of Columbia have upheld
the U.S. Attorney‟s Matrix as a
reasonable measure of billing
rates is not a sufficient ground for
us to conclude that reliance by the
District Court on [plaintiffs‟]
updated Laffey Matrix was clearly
erroneous.
ICO II, 426 F.3d at 709-10.
We review the District Court‟s determination of the
appropriate billing rate for clear error. ICO II, 426 F.3d at
709. Clear error exists only where factual findings “are
unsupported by substantial evidence, lack adequate
evidentiary support in the record, are against the clear weight
of the evidence or where the district court has
misapprehended the weight of the evidence.” United States v.
6.45 Acres of Land, 409 F.3d 139, 145 n.10 (3d Cir. 2005).
In light of our prior decision affirming the LSI methodology,
as well as the District Court‟s assessment of the Salazar
court‟s reasoning as persuasive, we will not now hold that it
27
was clear error to once again rely on the LSI method. We
thus affirm the District Court‟s use of the LSI-updated Laffey
Matrix to determine the prevailing rates in the Washington,
D.C. market.
D. The Reasonableness of the Hours Expended
Although we have a sufficient record for sustaining the
District Court‟s determinations as to the appropriate hourly
rates, we cannot say the same with respect to the other
component of the fee calculation: the reasonableness of the
hours expended by Terris. As we remarked in ICO II,
[a] prevailing party is not
automatically entitled to
compensation for all the time its
attorneys spent working on the
case; rather, a court awarding fees
must “decide whether the hours
set out were reasonably expended
for each of the particular purposes
described and then exclude those
that are excessive, redundant, or
otherwise unnecessary.”
426 F.3d 711 (quoting PIRG, 51 F.3d at 1188) (internal
quotation marks omitted).
The District Court “has „a positive and affirmative
function in the fee fixing analysis, not merely a passive
role.‟” Id. at 713 (quoting Loughner v. Univ. of Pittsburgh,
260 F.3d 173, 178 (3d Cir. 2001)). And, where, as here, an
objecting party has challenged specific types of work and
28
states why it is contended that the hours claimed are
excessive, the reviewing court must support its findings with
a sufficient articulation of its rationale to allow for
meaningful appellate review. Id.
Here, Honeywell did identify specific categories of
work for which the hours claimed were purportedly
unreasonable. Specifically, Honeywell objected to the
following:
299 hours, amounting to $131,532 in fees, for lobbying
activities.9
Approximately 2,400 hours, or nearly $1 million in
fees, for identifying and supervising experts.
More than 1,300 hours, approximating $600,000, to
conduct a few Rule 30(b)(6) depositions.
More than 2,600 hours, exceeding $400,000 in fees,
for document or database management.
Over 1,300 hours, resulting in more than $400,000 in
fees, for document review.
837 hours, totaling $271,824 in fees, for “pretrial
work.”
331 hours, totaling more than $125,000, for
remediation of one residential property.
9
Although acknowledging that it was not likely that
such work “was „crucial to safeguard the interests asserted,”
the District Court approved 75% of the time expended. ICO
III, 808 F. Supp. 2d at 754 (citing Pennsylvania v. Del. Valley
Citizens’ Council for Clear Air, 478 U.S. 546 (1986)). No
explanation was given as to why this amount of time on a
clearly collateral matter was reasonable.
29
242 hours, amounting to more than $100,000 in fees,
for financial assurances from Honeywell
578 hours, exceeding $400,000 in fees, for Bruce
Terris‟s time overseeing the work of the other Terris
partners.
Almost 2,300 hours, amounting to over $1 million in
fees, for intra-office conferencing.10
Expert witness expenses totaling more than $1.3
million.
Although decrying the litigation tactics employed by
Terris as “distasteful,” “aggressive,” and “unsavory,” id. at
751, 753, the District Court nonetheless chose to “credit[]
[Appellees‟] arguments . . . as to the reasonableness of the
legal and expert fees, expenses and hours charged,”
explaining that it “will not second guess the staffing decisions
of either the Terris firms or its experts . . . .” Id. at 754-55.
This perfunctory statement does not allow for meaningful
appellate court review. As we said in ICO II, “where the
opinion of the District Court „is so terse, vague, or conclusory
that we have no basis to review it, we must vacate the fee-
award order and remand for further proceedings.” 426 F.3d
at 713 (quoting Gunter v. Ridgewood Energy Corp., 223 F.3d
190, 196 (3d Cir. 2000)). Accordingly, we must once again
vacate the District Court‟s latest fee awards and remand for
further proceedings.11
10
The District Court reduced the fees in this category
by 10%, but gave no explanation as to why a 10% reduction
was adequate. ICO III, 808 F. Supp. 2d at 753.
11
We respectfully suggest that the District Court
consider the appointment of a Special Master to review the
30
III.
For the foregoing reasons, we will reverse the District
Court‟s ruling that Rule 68 offers of judgment are
inapplicable in the context of environmental citizen suits
brought under RCRA, direct that the previously made offers
of judgment be reinstated, affirm the District Court‟s
departure from the forum-rate rule because review of this
issue is barred by collateral estoppel, affirm the District
Court‟s application of the LSI-updated Laffey Matrix, vacate
the District Court‟s fee award, and remand the case for further
proceedings consistent with this opinion.
fee applications in these now-consolidated matters. The fee
requests present a daunting task to a busy District Court,
which must handle a multitude of matters with limited
resources. A report from a Special Master, who could be
compensated equally by both Honeywell and Appellees, may
facilitate the District Court‟s requisite “thorough and
searching analysis” of the law firm‟s billing records. ICO II,
426 F.3d at 711 (quoting Evans, 273 F.3d at 362). We leave
to the District Court‟s discretion, however, whether to enlist
the services of a Special Master, as well as whether to
conduct an evidentiary hearing on Honeywell‟s objections to
the number of hours for which Terris claims compensation.
31