Pennsylvania Env'l Def. Fndtn v. Canon McMillan Schl. Dist.

Opinions of the United

1998 Decisions States Court of Appeals

for the Third Circuit

8-11-1998

Pennsylvania Env'l Def. Fndtn v. Canon McMillan

Schl. Dist.

Precedential or Non-Precedential:

Docket 97-3136

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Filed August 11, 1998

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 97-3136

PENNSYLVANIA ENVIRONMENTAL DEFENSE

FOUNDATION (P.E.D.F.),

Appellant

v.

CANON-MCMILLAN SCHOOL DISTRICT

On Appeal from the United States District Court

for the Western District of Pennsylvania

(D.C. No. 94-cv-00534)

Argued: January 21, 1998

Before: SLOVITER, LEWIS* and GARTH, Circuit Judges

Reargued May 22, 1998

Before: SLOVITER, RENDELL and GARTH, Circuit Judges

(Opinion Filed August 11, 1998)

John E. Childe, Jr. (Argued)

Palmyra, PA 17078

Attorney for Appellant

_________________________________________________________________

*Judge Lewis heard argument in this matter on January 21, 1998 but,

due to illness, the panel was reconstituted and this matter was reargued

on May 22, 1998.

Steven M. Petrikis (Argued)

Rose, Schmidt, Hasley & DiSalle

Pittsburgh, PA l5222

Attorney for Appellee

OPINION OF THE COURT

SLOVITER, Circuit Judge.

The factors that should be considered in a court's

determination of a counsel fee award and the procedure to

be used in that connection, issues that occupied all levels

of the federal judiciary for numerous years, havefinally

been resolved through a series of decisions of the United

States Supreme Court. The question before us is whether,

after all the effort that went into that resolution, we will

allow the courts of this circuit to bypass the Supreme

Court's explicit directions merely because counsel failed to

interpose an objection to the procedure.

I.

Before us is an appeal by the Pennsylvania

Environmental Defense Foundation ("PEDF"), a non-profit

environmental action group, from an order of the district

court awarding it attorneys' fees following the entry of a

consent decree in its suit against Canon-McMillan School

District under the Clean Water Act, 33 U.S.C. S 1365.

PEDF, which had sent the School District its detailed

statutorily required Notice of Intent to Sue on August 20,

1993, brought suit on March 30, 1994, alleging that there

were "repeated violations" of the terms of the School

District's National Pollution Discharge Elimination System

permit because of discharges from the Wylandville

Elementary School sewage system into a tributary of Little

Chartiers Creek in North Strabane Township, Pennsylvania.

PEDF alleged that the violations were damaging the creek

in violation of 33 U.S.C. SS 1311(a) and 1342 and sought

injunctive relief, civil penalties and costs. PEDF was not the

only entity concerned about this pollution. The

2

Pennsylvania Department of Environmental Resources

("DER") had renewed the School District's NPDES permit on

March 17, 1994. DER also informed the School District of

measures it needed to take to come into compliance with its

permit limits. The Environmental Protection Agency, which

had been conducting a contemporaneous investigation,

submitted a Notice of Proposed Assessment of a Civil

Penalty against the School District on August 30, 1994 and

also directed it to come into compliance.

After the School District made what it referred to as

several "minor process adjustments," it was apparently in

full compliance with all of its permit limits by January

1995. On February 16, 1995, the School Districtfiled both

a Motion for Stay and a Motion for a Protective Order,

arguing that the litigation should be stayed and discovery

halted because it was in complete compliance with its

permit. The district court denied those motions on February

22, 1995, and PEDF continued with its preparation. In

March of 1995, the district court granted PEDF's motion to

file a reply brief to the School District's memorandum in

opposition to PEDF's motion for partial summary judgment.

PEDF filed that reply brief on March 23, 1995.

Thereafter, the parties reached a settlement and

submitted to the district court a Consent Decree, which it

signed on June 23, 1995. The settlement reserved the issue

of the award of attorneys' fees, and shortly thereafter PEDF

filed a motion for attorneys' fees and submitted a statement

of fees and expenses. The district court held oral argument

on the fees and then issued an order on December 2, 1996

that directed the parties to submit proposed findings of fact

and conclusions of law. The court's order stated, inter alia:

[E]ach party shall submit a proposed order which shall

set forth, in specific detail, its proposal for completely

resolving this issue. The court will adopt as its own the

proposed findings and sign, without modification, the

one proposed order which, in the judgment of the court,

is most reasonable under the circumstances.

App. at 94 (emphasis in original). Neither party objected to

this order, and both filed the required proposedfindings

and conclusions.

3

PEDF's proposed findings of fact and conclusions of law

requested a total of $70,282.09. It arrived at thatfigure by

the formula set out in Hensley v. Eckerhart, 461 U.S. 424

(1983), through calculating a "lodestar" based on a

proposed "reasonable hourly rate" of $160 per hour for

attorney John E. Childe and $60 per hour for Paralegal

Cindy Smith, multiplied by "hours reasonably expended."

App. at 95, 118. PEDF submitted a detailed account of

these charges and accompanying time slips. The School

District's proposed findings of fact and conclusions of law

suggested the much lower fee of $20,414.62. The district

court adopted verbatim the School District's proposed

findings of fact and conclusions of law, except that it

submitted its own short introduction. It follows that

although we will refer to the court's order, it must be

remembered that the "order" is in fact in the language

prepared by the School District.

Although the order was highly critical of certain aspects

of PEDF's fee request, including the proposed rates and the

expenditure of time on certain issues, it did not explicitly

reduce the hours that PEDF billed for these services.

Instead, it was keyed to the determination that PEDF was

entitled to no fee for the period after which the School

District was in "full compliance." It stated,"By January of

1995, it is thus undisputed that no further violations were

occurring at the Wylandville Elementary School system,

and the expenditure of $18,000 for structural modifications

assured that the problems would not recur . . . . By its own

calculations, PEDF had expended $8,963 in attorney's fees

as of the date when the Wylandville Elementary School

system was in full compliance. . . ." D.C. Opinion at 7. On

the basis that PEDF had needlessly pursued the litigation

after January 1995, after the violations had been abated,

the order adopted by the district court granted PEDF all of

the attorneys' fees it had requested for the time period

through January 1995, but no fees for time spent after that

date, except for $1,910 in connection with the consent

decree. It also awarded PEDF $3,000 for fees in connection

with the fee litigation and $6,541.62 in costs. D.C. Opinion

at 21-22.

The order, in language stemming from the School

District, concluded that "the total of $20,414.62 is

4

generous under the circumstances, and, although the facts

and law relating to duplicative billing, hourly rates and

degree of difficulty would justify a reduction of this amount,

the Court will award this amount at this time." D.C.

Opinion at 22. We have jurisdiction over PEDF's appeal

pursuant to 28 U.S.C. S 1291.

II.

The award of attorneys' fees in this case is authorized

under the citizens' suit provision of the Clean Water Act,

which provides that a court "may award costs of litigation

(including reasonable attorney and expert witness fees) to

any prevailing or substantially prevailing party, whenever

the court determines such award is appropriate." 33 U.S.C.

S 1365(d). The statute places no restriction on the award

other than that the party entitled to the award be

"prevailing or substantially prevailing."

In Hensley v. Eckerhart, 461 U.S. 424 (1983), and

Pennsylvania v. Delaware Valley Citizens' Council for Clean

Air, 478 U.S. 546 (1986), the Supreme Court adopted the

approach first set forth in this court's opinions in Lindy

Bros. Builders, Inc. v. American Radiator & Standard

Sanitary Corp., 487 F.2d 161 (3d Cir. 1973), and Lindy

Bros. Builders, Inc. v. American Radiator & Standard

Sanitary Corp., 540 F.2d 102 (3d Cir. 1976), with respect to

the appropriate procedure and considerations for a district

court to follow in awarding attorneys' fees. Central to the

Supreme Court's decisions has been its adoption of the

"lodestar" formula, which requires multiplying the number

of hours reasonably expended by the reasonable hourly

rate. See Blanchard v. Bergeron, 489 U.S. 87, 94 (1989);

Delaware Valley Citizens' Council, 478 U.S. at 564; Blum v.

Stenson, 465 U.S. 886, 888 (1984); Hensley , 461 U.S. at

433.

The "starting point" in determining the appropriate

hourly rate is the attorneys' usual billing rate. Public

Interest Research Group of N.J., Inc. v. Windall, 51 F.3d

1179, 1185 (3d Cir. 1995). The Supreme Court has directed

that the district court should then consider the"prevailing

market rates" in the relevant community. Blum , 465 U.S. at

5

895 (1984); see also Missouri v. Jenkins, 491 U.S. 274, 285

(1989). In calculating the second part of the lodestar

determination, the time reasonably expended, "[t]he district

court should review the time charged, 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.' "

Windall, 51 F.3d at 1188 (quoting Hensley , 461 U.S. at

433-34). Once the court has calculated the lodestar it may

adjust that amount, primarily based on the degree of

success that the plaintiff obtained. See Hensley , 461 U.S.

at 435. However, the cases make clear that before any

adjustments are made, the district court must calculate a

lodestar. See Windall, 51 F.3d at 1190.

In Windall, this court considered a district court's award

of attorneys' fees under S 1365(d) of the Clean Water Act,

which presented a situation where the public interest group

plaintiffs had been awarded injunctive relief but no

monetary damages. The district court had applied a 50

percent negative multiplier to the lodestar because of the

failure to obtain monetary relief. Id. at 1189. On appeal, we

held that the use of the negative multiplier was error,

rejecting the "rough mathematical" approach applied by the

district court. Id. at 1189-90.

Throughout the opinion we emphasized the importance of

adherence to the formulaic approach set out by the

Supreme Court. At the outset, we stated that the amount of

a fee award is within the district court's discretion "so long

as it `employs correct standards and procedures and makes

findings of fact not clearly erroneous.' " Id. at 1184

(emphasis added) (quoting Northeast Women's Ctr. v.

McMonagle, 889 F.2d 466, 475 (3d Cir. 1989)). Thus, we

held that rather than apply the across-the-board

percentage reduction reflecting its view of the result

achieved, the district court should have considered the

relationship between the degree of success and the amount

of the award. That step could only be taken after the court

had calculated the lodestar. "It is, however, essential to

calculate the lodestar before considering adjustments. Only

after the lodestar is determined does the district court have

discretion to consider results obtained and, in doing so, to

6

exclude some or all of the time spent on unsuccessful

claims." Id. at 1190.

718<!>We also stressed the importance of the court's

articulation of the basis for the award. We stated that the

district court must "provide a concise but clear explanation

of its reasons for [a] fee award.' " Id. at 1188 (quoting

Hensley, 461 U.S. at 437). The defendant in Windall had

contended in its cross-appeal that the district court had

failed to consider some of its specific objections regarding

the hours expended. In response, we stated,

[t]he magistrate judge did not consider the Air Force's

objections to particular time charges. The magistrate

judge was reluctant to second guess counsel's

judgments about what time and attention particular

legal problems should be given. Hensley, however,

directs district courts to consider a party's objections

to particular time charges and make their findings on

the hours that should be included in calculating the

lodestar. The district court failed to make any such

findings here.

Id. at 1189. Our view of the necessary procedure was made

explicit in the passage in which we stated, "[t]he district

court seems to have thought that its negative multiplier

made attention to the Air Force's specific objections

unnecessary. Hensley does not permit such a short cut." Id.

at 1189 n.14 (emphasis added).

The Supreme Court continued to follow the lodestar

approach after Hensley, but emphasized that the district

court was permitted to adjust the fee depending on the

situation. See Delaware Valley Citizens' Council , 478 U.S.

at 565. However, in the case before us, the district court

decided to dispense with that process, which may be

arduous and is often adversarial, and determined in

advance to adopt the findings and conclusions of one party

or the other "without modification." App. at 94. That

procedure forced each party to adjust its submission

because of the knowledge that the district court would only

choose one of the two options. In effect, the district court

conducted a variation of a "silent auction," with the parties

bidding against themselves and each other. While there is

7

nothing wrong with encouraging a party who seeks a fee to

compromise its request, there is no justification for the use

of the "silent auction" procedure in setting a statutory fee

and no party has cited any authority which would allow it.

The instances in which courts may not have followed the

lodestar approach have been, as far as we know, instances

where the parties have reached an agreement as to the

amount of fee. Regrettably, such a resolution was not

reached in this case.

In support of the procedure used by the district court,

the School District refers us to our opinion in Lansford-

Coaldale Joint Water Auth. v. Tonolli Corp., 4 F.3d 1209 (3d

Cir. 1993), where we stated that "a district court's findings,

when adopted verbatim from a party's proposed findings, do

not demand more stringent scrutiny on appeal." Id. at

1215. We adhere to our own precedent, notwithstanding

other views on this issue. See, e.g., Sierra Club v. Cedar

Point Oil Co., 73 F.3d 546, 574 (5th Cir. 1996) (stating on

review of an order assessing a penalty, that "the court

adopted Sierra Club's proposed findings and conclusions

with minimal revision. Under such circumstances, we

review the court's findings of fact with caution"); In re

Colony Square Co., 819 F.2d 272, 274-75 (11th Cir. 1987)

(citing cases admonishing trial courts for verbatim adoption

of proposed order drafted by litigants).

Our concern here goes beyond the verbatim adoption of

a party's proposed findings of fact and conclusions of law.

We agree with the court in Odeco, Inc. v. Avondale

Shipyards, Inc., 663 F.2d 650 (5th Cir. 1981), that the

"mere fact" that a district court adopts a party's factual

findings verbatim "does not itself indict them." What is key

is whether those findings are in fact reflective of the district

court's views. Thus, such a verbatim adoption was

acceptable to the appellate court in Odeco because "[t]he

record reflects that the trial court fully comprehended the

factual and legal issues and adequately performed the

decision reaching process." Id. at 652-53 (citation omitted).

The central issue is whether the district court has made an

independent judgment. See In re Colony Square , 819 F.2d

at 275-76.

8

In this case, because the circumstances underlying the

entry of the order are clear from the record, we cannot

presume that the district court made an independent

judgment about the law and then decided that one party's

proposed findings of fact and conclusions of law precisely

expressed its judgment. Instead, because the court

announced in advance it would use this procedure, we

cannot discount the possibility that the district court may

not have agreed in totality with the findings of fact or legal

conclusions in either of the proposals, but chose one simply

because it came closest to its own view. While this course

of action may have facilitated the decision for the district

court, it is not only contrary to the established procedure

for awarding attorneys' fees but also offends our belief that

a judge's findings and conclusions should represent that

judge's view, no more and no less.1

III.

The School District concedes that the procedure used by

the district court did not adhere to the steps directed by the

Supreme Court for fixing of a contested counsel fee.

Instead, the School District argues that PEDF waived its

objection to any defects in the procedure by failing to object

when it was announced by the district court. It is an

argument that is not without some merit. In the usual

circumstance, a party's failure to object will result in waiver

of an issue on appeal. See Fleck v. KDI Sylvan Pools, Inc.,

981 F.2d 107, 116 (3d Cir. 1992). Here, PEDF did not

interpose any objection to the district court's

announcement that it would set the fee by accepting one

party's submission or the other. Notwithstanding PEDF's

attempt at justification and rationalization, the fact remains

that it did not object.

_________________________________________________________________

1. Our dissenting colleague notes that we cite no authority that

disapproves the district court's "either/or" protocol. As far as we know,

in no other case has a district court applied that procedure, and

certainly not in connection with fixing a disputed attorney's fee subject

to a Supreme Court's instruction on the procedure to be followed. What

may be appropriate for baseball salary arbitration is not necessarily

appropriate for the law courts.

9

Nonetheless, we have recognized that the concept of plain

error may be applied in the civil context despite the lack of

objection when a district court has committed a serious

and flagrant error that jeopardized the integrity of the

proceeding. See generally Walden v. Georgia-Pacific Corp.,

126 F.3d 506, 520-21 (3d Cir. 1997), cert. denied, 118

S. Ct. 1516 (1998). The clear deviation from an established

legal rule can qualify as plain error. Of course, this is a

power we exercise only "sparingly." See Chemical Leaman

Tank Lines, Inc. v. Aetna Cas. & Sur. Co., 89 F.3d 976,

993-94 (3d Cir. 1996). In this instance, because the

manner in which the order was entered goes to the heart of

the judicial process, we will address the procedure,

notwithstanding PEDF's lack of objection. In doing so, we

do not condone PEDF's failure to bring before the district

court its lack of approval of the course on which the court

was embarking, and its silence may have, and probably did,

mislead the district court.

Once we review the court's ruling, the error is plain.

There can be no serious dispute that PEDF qualified as the

"prevailing party." It follows that the district court should

have first decided the reasonable hourly rate based on the

"prevailing market rate" rule and multiplied that rate by the

time reasonably expended to obtain the "lodestar." The

court should have then made adjustments, if any, based at

least in part on the degree of success of the litigation.

Regarding the hourly rate, the district court's order

stated that "PEDF's proposed hourly rate is high even by

Pittsburgh standards. Plaintiff's counsel, whose office is in

Hummelstown, a small community near Harrisburg, has

not offered any evidence that the typical hourly rate for

legal services to public non-profit organizations in his

community exceeds $80.00 per hour." D.C. Opinion at

14-15. Despite this comment, the court allowed the hourly

rate requested through January of 1995. Similarly,

although the order questions the propriety of time claimed

in the PEDF fee petition in several respects, such as failing

to apportion time for preparation of the complaint in this

case with that spent in drafting a similar complaintfiled by

PEDF, the court never found what was a reasonable time

for each task. Instead the court apparently made the

10

adjustments it may have believed desirable by accepting the

School District's proposed "cut-off" date for the entire

action. PEDF points out that this is inconsistent with the

court's rulings after that date which rejected the School

District's request for a stay and which authorized, even if it

did not necessarily encourage, further action by PEDF.

The School District argues that the district court order

does implicitly calculate a "lodestar" by adopting the rate of

$160 and $60 per hour from PEDF's original fee petition,

and multiplying that by the amount of hours expended

before January of 1995. We find this assertion

unpersuasive because it requires us to make assumptions

that have no support in the order which, contrary to

adopting the lodestar, contains statements questioning the

components of a calculated lodestar.

Nor is there any indication that the district court made a

separate calculation for fees in connection with the fee

petition, as required by Windall. 51 F.3d at 1190. PEDF

had sought $12,802 for preparing its original fee petition

and $8,560 for preparation of the proposed findings of fact

and conclusions of law. The order awarded PEDF $3,000.

This figure is never explained in terms of the required

separate calculation of a lodestar for the fees in connection

with the fee petition and a subsequent adjustment to that

figure based on the allowed criteria. The order merely states

that the fees requested were unreasonable and notes that

the request for fees in preparing the fee request is nearly 25

percent of the total fee request and may be duplicative of

requests in other litigation. That explanation is not

sufficient to constitute compliance with the direction of

Windall.

The School District contends that even if the district

court failed to employ the correct legal principles, it was

"harmless." It argues that if the district court had

calculated a lodestar, and then made an adjustment, PEDF

would have received a lesser amount than it did, and thus

PEDF did not suffer from the district court's possible error.

We reject this contention because it is speculative. We

simply cannot know from this record what the court would

have done.

11

Both parties have addressed the merits of the amount

ultimately awarded. We do not reach that issue. Instead, we

will await such time as we have a district court order that

follows the accepted protocol. Were it not for the

importance of the issue raised in this case we would be

most reluctant to visit this satellite litigation again on the

district court. It would be preferable were the parties to

resolve the remaining issue by negotiation or mediation, a

course we can only suggest and not direct.

IV.

For the above reasons, we will reverse the order of the

district court awarding attorneys' fees to PEDF, and

remand for further proceedings consistent with this

opinion.

12

Garth, Circuit Judge, dissenting.

The district court utilized a novel procedure to determine

the amount of attorneys' fees to which Appellant PEDF, as

the prevailing party, was entitled. Neither PEDF nor the

School District ever objected to this procedure, although

they were afforded ample time and opportunity to do so.

Notwithstanding this fact, PEDF now appeals the use of the

district court's procedure and the majority reverses.

I.

I must dissent from the opinion of the panel majority for

two (2) fundamental reasons.

First, PEDF acquiesced to the district court's procedure,

and therefore waived its right to raise this issue on appeal.

PEDF admittedly understood the district court's"either/or"

and "without modification" order, and nevertheless,

strategically chose not to object. The authority cited by the

majority requiring a lodestar calculation has no relevance

to this case. Here, both parties had waived all objection to

the district court's order. Viewed in this light, I do not feel

that the majority has satisfactorily explained why PEDF

should be permitted to recant its previous acquiescence of

the district court's protocol, particularly where no

substantial rights of any parties have been implicated.

Second, the majority has not explained why cases where

the calculation of the lodestar amount is disputed should

govern cases such as this case where it is the procedure

giving rise to the attorneys' fee award itself -- and not the

calculation pursuant to the lodestar formula -- that is at

issue. The majority has cited no authority holding that

procedures of this kind (in this case, the district court's

"either/or" and "without modification" order of December 2,

1996) are illegal. Parties can agree to an attorneys' fee

award, and the majority acknowledges that such

agreements are not governed by the lodestar calculus. The

majority fails to explain, however, why the parties cannot

also agree to the procedure that the district court employs

in determining those fees.

By holding that the lodestar formula must be employed

even in the absence of an objection, the majority effectively

13

holds that the lodestar analysis must be utilized in every

attorneys' fee application that comes before the district

courts of this Circuit. Thus, according to the majority,

parties can agree to a fee outside the reach of the lodestar,

but they cannot agree to an alternative procedure to

determine those fees.

As I believe this is no precedent for this unjustified and

far-reaching holding, I respectfully dissent.

II.

The facts are simple and straightforward:

(1) The parties reached a settlement agreement aft er one

year of litigation, and memorialized their agreement in a

consent decree. The consent decree did not resolve the

issue of attorneys' fees, but instead left that issue for the

district court to address.

(2) On December 2, 1996, the district court issued an

order directing each party to submit its proposedfindings

of fact and conclusions of law regarding the issue of

attorneys' fees. That order provided:

[E]ach party shall submit a proposed order which shall

set forth, in specific detail, its proposal for completely

resolving this issue. The court will adopt as its own the

proposed findings and sign, without modification, the

one proposed order which, in the judgment of the court,

is the most reasonable under the circumstances.

Order, Dec. 2, 1996 (emphasis in original).

(3) On February 13, 1997, the district court adopt ed

without modification the School District's proposed

findings.

(4) Although nearly two and a half months had elap sed

from the time the district court established the protocol to

which both parties acquiesced and the time the court

announced its decision, at no time did either party object to

the district court's order.

(5) On February 24, 1997, PEDF filed a Motion fo r

Reconsideration, but in that motion still did not object to

14

the "either/or" and "without modification" protocol that the

district court had adopted.

(6) During oral argument,1 coun sel for PEDF conceded

that he understood the district court's December 2, 1996,

order as proposing an "either/or" situation:"either (the

district court) was going to accept our proposedfindings or

he was going to accept the School District's." According to

counsel for PEDF, "there was no question about that."

III.

I believe that PEDF has waived its right to pursue this

appeal on the basis of the procedure utilized by the district

court in determining attorneys' fees. At oral argument,

counsel for PEDF conceded that he understood the district

court's adopted procedure and the ramifications of that

procedure. PEDF acknowledged that "there was no

question" that the district court would either accept PEDF's

proposed findings and fee award or it would accept the

School District's proposed findings and fee award. Thus,

PEDF made a strategic decision not to object to the district

court's proposed procedure in the hope that the district

court might accept its -- PEDF's -- proposal without

modification instead of accepting the School District's.

That PEDF's deliberate choice not to object to the district

court's procedure subsequently turned out to have been

disadvantageous cannot be a basis for reversing the district

court's decision. See Bivens Garden Office Bldg., Inc. v.

Barnett Banks, 140 F.3d 898 (11th Cir. 1998) (holding that

plaintiffs waived the issue of the district court's recusal

when the plaintiffs strategically decided not to raise the

recusal issue before trial despite their awareness of facts

upon which the motion for recusal would have been based).

Indeed, it was only after the district court adopted the

School District's proposed findings that PEDF-- for the first

time -- complained by filing a Motion for Reconsideration,

and even in that motion PEDF did not identify the district

_________________________________________________________________

1. These concessions were made during the first oral argument held on

January 21, 1998. The panel was reconstituted and a second argument

held after Judge Lewis fell ill.

15

court's procedure as the gravamen of its complaint. Quite

simply, by not objecting, PEDF waived its right to appeal

the district court's attorneys' fee procedure. See Fleck v.

KDI Sylvan Pools, Inc., 981 F.2d 107, 116 (3d Cir. 1992).

In Continental Casualty Co. v. D'Andrea, Inc. , ___ F.3d

___, 1998 WL 381721 (3d Cir. July 10, 1998), this Court

recently upheld a magistrate judge's attorney fee sanction

of $38,000 where no objection or appeal to the district

court had been taken by counsel. In Continental , the

magistrate judge required the defendant, D'Andrea, to pay

his opposing party's attorneys' fees and costs for additional

discovery as a condition to permitting D'Andrea to amend

his answer nearly two (2) years after the original answer

had been filed.

D'Andrea did not object to the magistrate judge's

condition, and at no time did he raise the issue for review

before the district court. In speaking for the Court, Judge

Rosenn concluded that in the absence of an objection,

D'Andrea accepted the condition imposed upon him in

exchange for the privilege to amend his answer. See id. at

6. Judge Rosenn reasoned, as I do now, that the failure to

object for strategical reasons constituted a waiver. See id.

("Presumably, [D'Andrea's counsel] reasoned that, even with

the imposition of the attorneys' fees and costs, it was

strategic for his client to pay them under the

circumstances.")

Furthermore, even if D'Andrea had not accepted the

magistrate judge's condition, in terms as applicable to the

case at hand as they were to Continental, Judge Rosenn

commented that this Court should not interfere with a

lower court ruling in the absence of an objection because

such procedures

would allow a party to sandbag the district court and

other parties by allowing or inviting the court to make

an error and then springing the issue on the other

party on appeal. See 9A Charles A. Wright & Arthur R.

Miller, Federal Practice & Procedure S 2472, at 93-95

(1995). Explicit opposition to or an objection on the

record to a proposed order permits the court to

consider the position of the opposing party and modify,

16

or even possibly abandon, the order in light of the

arguments raised.

Continental, 1998 WL 381721, at 7 (citations omitted).

In the present case, PEDF knew and accepted the fact

that the district court was not going to engage in any

adjustments or make any of its own computations when

determining the appropriate fee in this case, as it very well

might have done if PEDF had objected to the district court's

procedure and the court had then employed a traditional

lodestar approach under Hensley v. Eckerhart, 461 U.S.

424 (1983). Given the district court's explicit language in its

December 2, 1996 order, and counsel for PEDF's

acknowledged understanding of that language, it was

incumbent upon PEDF to make its position known at that

time and object to the "either/or" and"without

modification" procedure if it opposed such a protocol. It did

not. The benefit of hindsight cannot change this procedural

infirmity.

Furthermore, the majority has turned a blind eye toward

the strict standards that a litigant must satisfy to seek

review under our "plain error" jurisprudence. Under the

plain error standard, three requirements must be met:

(1) there must be an actual error -- a deviation from or

violation of a legal rule; (2) the error must be p lain -- i.e.,

clear and obvious under current law; and (3) the e rror

must affect substantial rights. See Walden v. Georgia-Pac.

Corp., 126 F.3d 506, 520-21 (3d Cir. 1997), cert. denied,

118 S. Ct. 1516 (1998) (citing United States v. Olano, 507

U.S. 725, 732-34 (1993)); see also Fleck, 981 F.2d at 116

(stating that the error must be "fundamental and highly

prejudicial" that results in a "miscarriage of justice" to

warrant a reversal when party did not object during

proceeding below). It has been our practice to exercise our

power to reverse for plain error sparingly. See Walden, 126

F.3d at 520.

In this case, not only was there no error -- let alone plain

error -- in the district court's choice of protocol, as I

discuss below, but the majority has not explained how the

district court's order affected PEDF's "substantial rights" or

resulted in a "miscarriage of justice." Instead, the majority

17

has by-passed this critical element of "plain error" review

by announcing that the district court's alleged error

"jeopardized the integrity of the proceeding." Majority Op. at

10. In so stating, the majority has failed to appreciate the

fact that jeopardizing the integrity of a proceeding is only

meaningful in the context of the substantial rights that

were supposedly prejudiced.

In this case, PEDF received $20,414.62, instead of the

$70,282.09 it had requested. Apart from the fact that no

one can predict that PEDF will receive a different fee award

after the majority's remand,2 the majority cites no authority

holding that the nature of attorneys' fees and the amounts

involved here implicate PEDF's substantial rights and result

in manifest injustice such that we should exercise our

review under the plain error doctrine. Indeed, I am

compelled to point out that the majority has cited no

authority at all which would in any way repudiate the

protocol utilized by the district court. Accordingly, I would

hold that the issue has been waived.

IV.

My second basis of contention with the majority stems

from the fact that there is simply nothing illegal or

improper about the procedure the district court employed

for determining attorneys' fees. Citing only inapposite

attorneys' fee appeals -- inapposite because as noted

above, none of the cases cited in the majority opinion

involve a dispute over the district court's procedure -- the

majority of this Court reverses the district court for

implementing a procedure that has never been disapproved

by any court. While the majority has acknowledged that

where the parties have agreed to a particular attorneys' fee,

their agreement need not follow nor comply with the

lodestar approach delineated in Hensley v. Eckerhart and

its progeny, it has refused to recognize that PEDF's failure

to object to the protocol ordered in this case was

tantamount to an acceptance of the outcome of that

_________________________________________________________________

2. We defer to the district court's discretion in making fee awards. See

Public Interest Research Group, Inc. v. Windall, 51 F.3d 1179, 1184 (3d

Cir. 1995).

18

procedure. That acceptance by PEDF and the School

District is not one whit different in substance than an

agreement by the parties to a particular fee arrangement.

In the case before us, the majority has cited and

discussed only cases where the parties have contested the

calculation of the lodestar, not the use of the lodestar

formula itself. See Pennsylvania v. Delaware Valley

Citizens' Council, 478 U.S. 546 (1986) (contesting lodestar

calculation based on the enhancement of a fee for superior

performance by opposing counsel); Hensley v. Eckerhart,

461 U.S. 424 (1983) (reversing district court's lodestar

calculation because court failed to consider the relationship

between the success of the prevailing party and the amount

of the fees granted); Public Interest Research Group v.

Windall, 51 F.3d 1179 (3d Cir. 1995) (contesting district

court's lodestar calculation applying negative multiplier,

using incorrect market as basis for hourly rate, failing to

deduct duplicative and excessive time). The calculation of

the lodestar, however, has nothing to do with cases where

the parties have either consented to a particular fee (i.e., a

fee agreement) or have agreed to a particular formula

utilized by a district court in order to determine that fee,

such as the formula adopted by the district court here.

When parties settle the issue of outstanding fees, it is

without our realm to instruct them how to arrive at a

mutually acceptable amount. If the amount of attorneys'

fees is accepted by all parties, no case in controversy exists

for us to exercise judicial oversight or judicial review

regardless of how those fees were ultimately determined or

what procedure or principle, if any, the parties employed in

their calculations. When the parties consent or stipulate to

a fee award, they are necessarily consenting to the

procedure employed to derive that award even though that

procedure may not have involved a traditional lodestar

analysis. It is not within our province to question the

consensual nature of that agreement.

By the same token, there is no difference between the

protocol that was employed by the district court in this case

without objection -- i.e., accepting one of the party's

proposed findings without modification -- and the means

by which both parties typically settle or agree upon

19

attorneys' fees. In the latter instance where the parties

agree on the amount of attorneys' fees to be awarded to the

successful party, the parties rarely, if ever, employ a

traditional lodestar calculation. Moreover, in each instance

-- where no objection is raised to a particular method

proposed by the district court for its fee determination, or

where all parties agree on the amount of fees to be awarded

-- no lodestar analysis is indicated, nor, contrary to the

majority's assertions, must it be utilized. In both situations

-- agreement to the procedure or agreement to the fees

themselves -- the award is valid irrespective of the protocol

used and must be upheld.3

Yet, the Court has now held that unless the lodestar

approach is used, any attorneys' fee determination made by

the district court is illegal. Not only does this conclusion

fail to account for those cases where the parties have

agreed to a particular sum and have not based that sum

upon the lodestar -- which the majority acknowledges is

clearly acceptable -- but as I have pointed out it also runs

counter to the spirit of innovation that this Court has

encouraged district courts to nurture when faced with

varying situations.4 See, e.g., Krell v. Prudential Ins. Co. (In

_________________________________________________________________

3. Similarly, had the district court informally suggested that PEDF and

the School District meet outside of the district court's chambers and

seek to settle the issue of attorneys' fees without court intervention,

any

agreed upon amount would have been valid despite the fact that

traditional lodestar principles were not involved. The majority does not

object to such an agreement, as the majority acknowledges that the

lodestar approach is not always used in determining attorneys' fees:

[t]he instances in which courts may not have followed the lodestar

approach have been, as far as we know, instances where the parties

have reached an agreement as to the amount of the fee. Regrettably,

such a resolution was not reached in this case.

Majority Op. at 8. Furthermore, the majority concludes by stating that

"[i]t would be preferable were the parties to resolve the remaining issue

by negotiation or mediation," id. at 12, neither of which is conditioned

upon a lodestar calculus. See also Hensley, 461 U.S. at 437 ("Ideally, of

course, litigants will settle the amount of a fee.")

4. Furthermore, there is authority to support a court's use of an

"either/or" procedure in making a determination. See, e.g., Mobil Oil

20

re: Prudential Ins. Co.), Nos. 97-5155, 97-5156, 97-5217,

97-5312, 1998 WL 409156, at 44 (3d Cir. July 23, 1998)

(upholding as "appropriate" and "innovative" the district

court's novel use of a bifurcated fee structure in large,

nationwide class action suit). Indeed, as I have pointed out,

the majority would have preferred that the parties had

reached a fee agreement in this case, irrespective of

whether that settlement would have been based upon the

lodestar calculation. See n.3, supra.5

Despite the majority's disapprobation, the protocol

employed by the district court -- choosing one of the

parties' proposals without modification -- is neither illegal

nor radical. Such a dispute-resolving procedure has been

used in major league baseball salary arbitrations with great

success for nearly 25 years. See Roger I. Abrams, Legal

Bases: Baseball and the Law 87-89 (Temple Univ. Press

1998). Under baseball's salary arbitration scheme, a

neutral arbitrator

selects either the final demand of the eligible player or

the final offer of the employing [baseball team]. The

arbitrator may not mediate or compromise . . . A greedy

player who sets his demand too high or a stingy club

that makes an offer too low is likely to lose . . . .

Id. at 87-88 (emphasis added). The author explains that not

only does this system encourage settlement between the

parties, but it also has the effect of bringing the salary offer

and the player's demand closer together, as both sides

_________________________________________________________________

Exploration Co. v. Federal Energy Regulatory Comm'n , 814 F.2d 998 (5th

Cir. 1987), op. clarified by Mobil Oil Exploration Co. v. Federal Energy

Regulatory Comm'n, 814 F.2d 1001 (5th Cir. 1987) (holding that venue

was properly determined by the toss of a coin where the same proceeding

was instituted in two circuits at the same).

5. In light of the district court's "either/or" and "without modification"

protocol, I make no comment about the lodestar's applicability to this

case. I recognize, however, that the district court was of the view that

it

had adhered to a lodestar calculation, accepting PEDF's rate and hours

up until January 31, 1995, the date that the district court determined

the School District had been in compliance with the permit and effluent

emissions allowed under its permit.

21

attempt to predict how the arbitrator will rule. See id. at

88. Hence, just as district courts have been encouraged to

employ alternative dispute resolution techniques, so too

should they be encouraged to look to other disciplines and

to employ other labor-saving techniques so as to adopt

efficient, time-saving, and effective means of disposing of

controversies and disputes.

Thus, while I agree that a district court should employ a

traditional lodestar analysis when the procedure or

standard is disputed, I cannot agree that the lodestar

calculation must be employed in every attorney fee

determination that arises before the district court. Our

jurisprudence is sufficiently flexible to allow for varied

approaches, depending upon the circumstances of the case

and the will of the parties. In my view, parties may by

agreement or without objection, as they did here, utilize an

alternative procedure for calculating fees without offending

our jurisprudence.

V.

In conclusion, I fear that the ramifications of this Court's

decision transcend the issue of attorneys' fees and may

have the effect of stifling innovative and non-traditional

approaches to case and issue management in the district

courts. If district courts cannot inaugurate a new procedure

without the interference of this Court -- a procedure, I

might add, that has never been declared illegal or improper

by this or any other court until today -- then we will be

guilty of discouraging the development of modern litigation

techniques and practices in the face of ever increasing

dockets and the sky-rocketing expense of litigation. By

reversing the district court for using a different and novel

protocol to which the parties acquiesced, the majority's

decision may have the unfortunate effect of chilling district

court innovation and efficient case management.

I suggest that the majority here has turned this Court

into a micro-manager. In so doing, it has unjustifiably

permitted PEDF a "second bite at the apple" without PEDF

ever having made known any objection to the district

court's protocol. Accordingly, I would affirm the district

court's February 13, 1997, order.

22

Because the majority has held otherwise, I respectfully

dissent.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

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