Respondents Brief — Venegas v. Mitchell

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QUESTIONS PRESENTED

1. Whether a prevailing party can invalidate a fee

contract with his attorney on the ground that it obli-

gates him to pay a fee greater than the amount taxed

against the losing party under the Civil Rights Attorney’s

Fees Awards Act of 1976, 42 U.S.C. § 1988.

2. Whether this Court should set aside the findings of

both courts below that the contingent fee contract in this

case was reasonable.

(i)

ii

PARTIES TO THE PROCEEDING

In addition to the parties named in the caption, the

~ following were defendants in the district court at the

time of the motion to intervene and were appellees in

the court of appeals: Ronnie J. Skaggs and Carthel S.

Roberson.

TABLE OF CONTENTS

Page

i senntasneenencerecsss 1

a . ssnnsosenscnseeenpeosevs 1

ec cencenevensesscneseesencess 2

STATEMENT OF THE CASE .............................0..00....... 2

I cnsneeneneconences 3

1. Petitioner’s civil rights complaint .................. 3

2. Respondent’s representation of petitioner.... 3

3. The motion to intervene ...........00000000000o 7

} a consnsencneneene 7

EE 7

ET OO 9

ES |, yy 10

es asnsamssacasentereesecs 13

I. SECTION 1988 DOES NOT INVALIDATE A

LAWYER-CLIENT CONTRACT FOR THE

PAYMENT OF FEES GREATER THAN THE

AMOUNT TAXED AGAINST THE LOSING

ns snsunensccereccoes 13

A. Section 1988 Does Not Regulate Fee Agree-

ments Between Lawyers And Clients............. 13

1. The statutory language does not apply to

- agreements between clients and their

a .sdenmncencnnnccs 13

2. The legislative history confirms that Con-

gress did not intend to invalidate private

a cccsenennes 18

iv

TABLE OF CONTENTS—Continued

Page

3. Invalidating fee contracts would make it

more difficult for clients to obtain repre-

sentation in civil rights cases .................... 23

B. The Amount Taxed Against A Losing Party

Under Section 1988 Does Not Establish The

Maximum Fee That A Lawyer May Ethically

Charge A Client Under Their Contract........... 25

II. THERE IS NO BASIS FOR THIS COURT TO

OVERTURN THE DETERMINATION BY

BOTH COURTS BELOW THAT THE CON-

TINGENT FEE CONTRACT IN THIS CASE

BaD NEPTUNE oc ccccctsnnsvenevciiennsantiesstimaieneeninntes 31

eT <csccssnciisisennstininsnisiiiisiisihasiaiaiiddicianiganaannaanene 36

v

TABLE OF AUTHORITIES

Cases: Page

Alyeska Pipeline Service Co. v. Wilderness Society,

Ie i ee I ticle cathicciipadetlihcettecidideadiin 19

Bates v. State Bar, 433 U.S. 350 (1977) .........-2.0...... 30

Blanchard v. Bergeron, 109 S. Ct. 939 (1989) ........ 16, 20,

27, 28

Blum v. Stenson, 465 U.S. 886 (1984) 2000000000000... 16, 28

Boston & Maine Corp. v. Sheehan, Phinney, Bass

& Green, P.A., 778 F.2d 890 (1st Cir. 1985) ........ 26, 29

Brobeck, Phleger & Harrison v. Telex Corp., 602

F.2d 866 (9th Cir.), cert. denied, 444 U.S. 981

(3098) ......... SES Es RN Sea SRN A CRE ar NT RC 27

City of Los Angeles v. Lyons, 461 U.S. 95 (1983)... 3

City of Riverside v. Rivera, 477 U.S. 561 (1986) .... 21, 27

Clark v. American Marine Corp., 320 F. Supp. 709

(E.D. La. 1970), aff’d on opinion below, 437 F.2d

Se a a a 20

Committee on Legal Ethics v. Triplett, No. 88-

EES OO TOPS STN RINT TAT WOT SENET 14

Cooper V. Singer, 719 F.2d 1496 (10th Cir. 1983)

a 17, 18

Crawford Fitting Co. v. J.T. Gibbons, Inc., 482

es SOIT siristiesicmessosincransinntcniatidaiaabadiiaalis 15

Dalzell v. State Bar, 6 Cal. 2d 433, 57 P.2d 1300

ISERIES One CR CNSR anne NEN NSS et ee eR 32

Denton Vv. Smith, 101 Cal. App. 2d 841, 226 P.2d

| Ie Reads SAN SPCR MONA WEIS 34, 35

Dunn V. H.K. Porter Co., 602 F.2d 1105 (3d Cir.

PSN nC Ee enemy SORTER RET 25, 28, 29

Elmore Vv. Shuler, 787 F.2d 601 (D.C. Cir. 1986).... 32

Evans V. Jeff D., 475 U.S. 717 (1986) .....4, 9, 11, 23, 24, 30

Farmington Dowel Products Co. Vv. Forster Manu-

facturing Co., 421 F.2d 61, later appeal, 436

ef Fy” fo Se eR suena oD RAE 27, 29, 30

Fracasse V. Brent, 6 Cal. 3d 784, 494 P.2d 9, 100

es SN IE MII ccccictinissccinlacieibenshtstibtinsinclabitcsiagietetaial 33

Frisby v. Schultz, 108 S. Ct. 2495 (1988) .............. 31

Gaines V. Dixie Carriers, Inc., 434 F.2d 52 (5th

BU II” dae dedatadh pelts ne ae eee eer ne 34

vi

TABLE OF AUTHORITIES—Continued

Page

Goodman v. Lukens Steel Co., 482 U.S. 656

I a aaa eae ar 31

Hagge V. Bauer, 827 F.2d 101 (7th Cir. 1987) ........ 34

Hamner V. Rios, 769 F.2d 1404 (9th Cir. 1985)...... 9, 17,

28, 34

Hensley v. Eckerhart, 461 U.S. 424 (1983) ........ 18, 20, 22

Hernandez V. Hill Country Telephone Cooperative,

Inc., 849 F.2d 139 (5th Cir. 1988) —....000000 2. 32

Hillsborough County v. Automated Medical Labo-

ratories, Inc., 471 U.S. 707 (1985) ........ nS 30

International Travel Arrangers, Inc. Vv. Western

Airlines, Inc., 623 F.2d 1255 (8th Cir.), cert.

denied, 449 U.S. 1063 (1980) ...00..0.000 0 . 27, 30

Jehnson V. Georgia Highway Express, Inc., 488

ie Bs Bo he 3 ere 20, 27

Kirchoff v. Flynn, 786 F.2d 320 (7th Cir. 1986) .... 17, 26,

34

Lane Vv. Wilkins, 229 Cal. App. 2d 315, 40 Cal.

ts I a 33

Lewis Vv. Coughlin, 801 F.2d 570 (2d Cir. 1986) __. 17

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

Standard Sanitary Corp., 487 F.2d 161 (1973),

later appeal, 540 F.2d 102 (3d Cir. 1976)... 25

McKinnon Vv. Berwyn, 750 F.2d 1383 (7th Cir.

REESE NS Rr saa steer ARE E ee 16

Mitchell v. City of Los Angeles, 741 F.2d 281 (9th

Cir. 1984), amended, 753 F.2d 86 (9th Cir.

I dececcstocsoce I nA ABAD IR SVAN Den POT A ONE 24, 35

Mitsubishi Motors Corp. v. Soler Chrysler-

Plymouth, Ine., 473 U.S. 614 (1985) 2.0000... 29

Nix v. Whiteside, 475 U.S. 157 (1986) ...............0... 30

Northbrook National Life Ins. Co. v. Brewer, 58

U.S.L.W. 4003 (Nov. 7, 1989) ....00000....eeee eee 15

Novinger V. El. DuPont de Nemours & Co., 809

F.2d 212 (3d Cir.), cert. denied, 481 U.S. 1609

RRR TEE SOOO ARPA RRA OL ee ak NO Se ORE 32

Panola Land Buying Ass’n V. Clark, 844 F.2d 1506

I aes 23

vii

TABLE OF AUTHORITIES—Continued

Page

Pennsylvania Vv. Delaware Valley Citizens’ Council

for Clean Air, 483 U.S. 711 (1987) 9, 11, 16, 17, 27, 31

People v. Reyes, 12 Cal. 3d 486, 526 P.2d 225, 116

ee Se I a saemninnebonmapsenaiainn 3

Pharr v. Housing Authority, 704 F.2d 1216 (11th

a ae 17, 28

Phillips v. Smalley Maintenance Services, inc., 711

¢ & Go. Fs Se — RaaSNNenene nemo 32

Pitchford v. Pepi, Inc., 531 F.2d 92 (3d Cir.),

cert. denied, 426 U.S. 935 (1976) .......................-. 19

Sargeant v. Sharp, 579 F.2d 645 (1st Cir. 1978) .... 17, 28,

30

Scherk v. Alberto-Culver Co., 417 U.S. 506

Sg ASRS Mie eee One ENO Tae ON WN Nite 29

Sears v. Atchison, T. & S.F. Ry., T79 F.2d 1450

(Se RRRERG Rares leer ae be a ve ween eae 18, 34

Sisco v. J.S. Alberici Constr. Co., 733 F.2d 55 (8th

lea ee 32

Soliman v. Ebasco Services Inc., 822 F.2d 320 (2d

Cir. 1987), cert. denied, 484 U.S. 1020 (1988)... 23, 24

Sullivan v. Crown Paper Board Co., 719 F.2d 667

nee as iemedaldbiinbesaene 17

Taylor Vv. Franklin Drapery Co., 443 F. Supp. 795

8 EEE ene Ne er ee eee 32

United States Dep’t of Labor v. Triplett, No. 88-

EI URE ARR cee vas Pia eo FR 14

Venegas Vv. City of Long Beach, 2d Civ. No. 66285,

Cal. App., Second Appellate District, Division

Ok | ore rence 5

Venegas Vv. Wagner, 704 F.2d 1144 (9th Cir.

RR eo a Bee EEO TFL PSOE rye RO 3,5

Venegas Vv. Wagner, 831 F.2d 1514 (9th Cir.

PRR ln ee Dar NR ON Bee een TI ETO De 3, 5, 7

Venegas Vv. Wagner, No. CV 77-4047 RJK (C.D.

1 ERS ireipsnncdel Decca ined IRsOo racer HORE ee enna 7

Walters v. National Ass’n of Radiation Survivors,

I I Ee SI cca ceccconiacansnccnsnnadaeanadiohiianninesinien 15

Weinberger Vv. Hynson, Westcott & Dunning, 412

8 RRR EA ere Blinc Nein do eo ee 19

viii

TABLE OF AUTHORITIES—Continued

Page

Wheatley Vv. Ford, 679 F.2d 1037 (2d Cir. 1982).... 17

Willard vy. City of Los Angeles, 803 F.2d 526 (9th

SO A ke a 23, 35

Wilmington Vv. J.I. Case Co., 793 F.2d 909 (8th Cir.

ITI iitdeicdaeeineeh tah hdaiehacun shiobecpaieiiathi con bhcaemia gad eae, oieiiebibaeaetis 17, 28

Statutes, Regulations, and Rules:

Black Lung Benefits Act:

5 NEES aa oe vane one 14

Civil Rights Attorney’s Fees Awards Act of 1976:

a ERLE ae kee a SPS ab aan passim

Clayton Act:

fF A eee nine nee 19, 27

Federal Tort Claims Act:

RE Ry eee nin Rm cee 14

Hart-Scott-Rodino Antitrust Improvements Act of

1976:

15 U.S.C. § 15¢e(d) (1)..........00002 a 14

I 14

National Childhood Vaccine Injury Act of 1986:

42 U.S.C. § 300aa-15 (e) (1) (A) -20o ee... 14

42 U.S.C. § 300aa-15 (e) (8) ................................ 14

Pub. L. No. 100-687, 102 Stat. 4105 (Nov. 18,

Re Pare CA ee OR ee ee A ee Re 15

EER es Bane ean eo a 14

REESE IO ROR ARIA ROR ee ET 1

80 U.S.C. § 982(a) .................. BODE TELE SOR RI 14

BE Ee ee OA SIRT DRA 14

SEE eS eS Tr 15

BS Re ea CCITT 14

42 U.S.C. § 1988.................. PR Ns Fk OLS ae On ee Ie 2,3

ee Oe I ret scccisscnecsctseocsons saamiaenaaionamiesiiaiais 14

| ee ee 5

EE aes aaa aoe ae 24

Cal. Bus. & Prof. Code § 6147 (a) (8) ......................--. 31, 34

ix

TABLE OF AUTHORITIES—Continued

Page

California Rules of Professional Conduct:

a 2 seamapeeninenenmuseee 31

a ucla suanmabininnidoanen 31

Other:

Awarding of Attorneys’ Fees: Hearings Before

the Subcomm. on Courts, Civil Liberties, and the

Administration of Justice of the House Comm.

on the Judiciary, 94th Cong., 1st Sess. (1975) .... 15, 20,

21, 22

Berger, “Court Awarded Attorneys’ Fees: What Is

‘Reasonable’?,” 126 U. Pa. L. Rev. (1977) -....... 18, 27

121 Cong. Rec. (1975):

III tir cease ciaeneshdeiolcabsidininibanddilobioneeadinenienihes 20

122 Cong. Rec. (1976):

SEES IS a Oe 20

CSR EE EEL SER od ie oe ee 14

pnts LL ae ae ae Aer me er a 14

EES STREETS SRS Oe Ree EO ee OS 14

EERE RA ae En on a 21

a cl ccedaecomennnnles 14

Ta csia in ialhicdaeilecideehincibibbenitiddanwebadiebtaaks 19

REESE arn eras a Een TRE see 21

Ta ee citacamebananinnaadeton 21

RESINS ae. aOR NE Oa an 20

CARER ENS ae TOR NE NE ee 20

TEA, Oe a. Se ae ETT eee 21

RET TERE AA ea ee a aOR Oe 19, 21

H.R. Rep. No. 1558, 94th Cong., 2d Sess. (1976) .... 18, 19,

20, 21

H.R. Rep. No. 908, 99th Cong., 2d Sess. (1986)... 21

H.R. Rep. No. 46, 100th Cong., Ist Sess. (1987)... 4

Hazard & Hodes, The Law of Lawyering (Supp.

RRR a aa is pn Sy AF SR na 18, 24, 26, 28

Leubsdorf, “The Contingency Factor in Attorney

Fee Awards,” 90 Yale L.J. 473 (1981) ............. 19, 27

Model Code of Professional Responsibility :

RR A RE TES ve CE Ee 20

x

TABLE OF AUTHORITIES—Continued

Page

Note, “Fee as the Wind Blows: Waivers of Attor-

ney’s Fees in Individual Civil Rights Actions

Since Evans V. Jeff D.,” 102 Harv. L. Rev. 1278

I vceraintnisnlnacibviteimslaihau hecaiaaante eater clbih tae cities 23, 24

S. Rep. No. 1011, 94th Cong., 2d Sess. (1976) ....... 18, 19,

20, 21

Speiser, Attorney’s Fees (1973) .........2222.-.222-22-2-20-+- 33

Witkin, California Procedure (3d ed. 1985) .......... 31

Wolfram, Modern Legal Ethics (1986) .................. 33, 34

In THE

Supreme Court of the Wuiirh States

OCTOBER TERM, 1989

No. 88-1725

JUAN FRANCISCO VENEGAS,

Petitioner.

Vv.

MICHAEL R. MITCHELL,

Respondent.

On Writ of Certiorari to the United States Court of Appeals

fer the Ninth Circuit

BRIEF FOR THE RESPONDENT

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. Al-A17)

is reported at 867 F.2d at 527. The memorandum deci-

sion of the district court (Pet. App. A18-A31) is not

reported.

JURISDICTION

The judgment of the court of appeals was entered on

January 31, 1989. A petition for rehearing was denied

on April 4, 1989. The petition for a writ of certiorari

was filed on April 24, 1989, and was granted on October

2, 1989. The jurisdiction of this Court is invoked under

28 U.S.C. § 1254(1).

2

STATUTE INVOLVED

The Civil Rights Attorney’s Fees Awards Act of 1976,

Pub. L. No. 94-559, 90 Stat. 2641, as codified in part cf

42 U.S.C. § 1988, provides as follows:

In any action or proceeding to enforce a provision

of sections 1981, 1982, 1983, 1985, and 1986 of this

title, title IX of Public Law 92-318, or title VI of the

Civil Rights Act of 1964, the court, in its discretion,

may allow the prevailing party, other than the United

States, a reasonable attorney’s fee as part of the

costs.

STATEMENT OF THE CASE

This case arises out of a civil rights action brought by

petitioner in the United States District Court for the

Central District of California. Petitioner, represented at

trial by respondent and co-counsel, obtained a judgment

of more than $2 million in damages against certain police

officers under 42 U.S.C. § 1983 for denial of his right to

a fair trial. On application for a statutory award of at-

torney’s fees against defendants pursuant to 42 U.S.C.

§ 1988, the district court awarded petitioner $117,000, of

which $75,000 was based on respondent’s services. Peti-

tioner has not paid any of this sum to respondent.

After the substitution of other counsel for petitioner,

respondent moved for leave to intervene in the district

court to confirm a lien on the judgment for $406,000, the

amount owed by petitioner pursuant to the contract

signed by petitioner and respondent at the outset of the

representation. The district court denied the interven-

tion motion, but ruled that the contingent fee contract

was reasonable and that respondent was not limited

to recovering the amount awarded pursuant to section

1988. The court of appeals held that respondent should

have been granted permissive intervention. The court of

appeals affirmed the district court’s determinations that

the coutract was reasonable and that respondent’s entitle-

ment to fees was not limited to the award under section

- 3

1988. Petitioner sought certiorari on the ground that

there is a conflict in the circuits on the issue of the in-

terpretation of section 1988. This Court granted the

petition.

A. Statement Of Facts

1. Petitioner’s civil rights complaint

In December 1971, petitioner, Juan Francisco Venegas,

was arrested by police officers of the City of Long Beach,

California, and charged with murder. He was convicted

following a jury trial in July 1972, and sentenced to life

imprisonment. In September 1974, the California Su-

preme Court reversed his conviction on the ground of in-

sufficient evidence, and petitioner was released from cus-

tody in October 1974. People v. Reyes, 12 Cal. 3d 486,

526 P.2d 225, 116 Cal. Rptr. 217 (1974). See Venegas

Vv. Wagner, 831 F.2d 1514, 1515-1516 (9th Cir. 1987).

Petitioner filed his civil rights complaint against in-

dividual members of the Long Beach police department

in October 1977.' The complaint alleged that defendants

had violated 42 U.S.C. § 1983 by conspiring to deny pe-

titioner a fair trial] through the knowing presentation of

perjured testimony. The district court entered summary

judgment in favor of defendants on the ground that the

action was barred by the statute of limitations. That

judgment was reversed on appeal, and the case was re-

manded for trial in 1983. See Venegas v. Wagner, 704

F.2d 1144 (9th Cir. 1983).

2. Respondent’s representation of petitioner

In September 1985, petitioner retained respondent,

Michael R. Mitchell, an experienced civil rights attorney.*

1See R. 1, E.R. 1-16. The record is cited hy reference to the

entry number in the district court docket sheet, with a parallel

citation to the Excerpt of Record prepared for use in the court of

appeals, a copy of which is being lodged with the Clerk of this

Court. The docket sheet is reproduced at E.R. 230-242.

2 Respondent has represented plaintiffs in numerous civil rights

cases, including City of Los Angeles v. Lyons, 461 U.S. 95 (1983).

See R. 236, E.R. 69-75. Respondent also was a longstanding mem-

4

Petitioner and respondent entered into a written contin-

gent retainer contract dated September 18, 1985, which

provided that respondent would represent petitioner at

trial for a fee of forty percent of any recovery, less a

retainer of $10,000 (Br. in Opp. App. A2). The agree-

ment further provided that respondent would apply to the

court for attorney’s fees and that any award of fees

would be applied, “dollar-for-dollar,” to offset petitioner’s

obligation to pay the contingent fee (id. at A3).* Finally,

the agreement stated that it “covers one trial only”—and

that it did not apply to any further representation “{i]n

the event there is a mistrial or an appeal” (id. at Al).

With petitioner’s consent, respondent later obtained the

services of Johnnie L. Cochran, Jr., as co-counsel, who

would share any contingent fee equally with respondent.

See Pet. App. A5-A6.

At the time petitioner retained respondent, the trial

was scheduled to be held in less than two months.‘ Re-

spondent began preparations and filed a trial brief and

other submissions prior to trial, which ultimately was

held before Judge Kelleher over the course of two weeks

ber and Chairman of the California State Bar Committee on Pro-

fessional Responsibility and Conduct (id.), and was Special Counsel

to the U.S. House of Representatives Committee on Standards of

Official Conduct. See H.R. Rep. No. 46, 100th Cong., 1st Sess. II, 2

(1987).

3 Consistent with the law then prevailing in the Ninth Circuit,

the agreement also provided that the right to attorney’s fees be-

longed to the attorney and would not be waived by the client (Br.

in Opp. App. A3). This Court’s decision in Evans v. Jeff D., 475

U.S. 717 (1986), which reversed a judgment of the Ninth Circuit,

was not announced until seven months after the fee agreement was

signed and two months after the trial in this case.

4 See R. 167, E.R. 237. Petitioner had been represented initially

by the lawyer who had handled his earlier state court damage case,

and subsequently by another firm before he engaged respondent.

5

in February 1986.5 As the court of appeals later noted,

the case “turned on the resolution of a ‘difficult question

of credibility.’”” Pet. App. A17, quoting Venegas v. Wag-

ner, supra, 831 F.2d at 1519. The jury returned a ver-

dict in favor of petitioner for $2.12 million, which was

reduced on post-trial motions to $2.08 million. Under

the contingent fee contract, respondent was entitled to a

fee of $406,000. See Pet. App. A6, A18.°

The damages award obtained for petitioner through re-

spondent’s efforts was more than twice the verdict en-

tered in an earlier state court action for false arrest, in

which petitioner was represented by other counsel.’ While

the evidence of damages was essentially the same in both

cases, trying the federal cause of action for denial of

petitioner’s right to a fair trial represented “a more

formidable task than establishing false arrest.” Venegas

v. Wagner, supra, 704 F.2d at 1146 n.1. Thus, respond-

5 See R. 236, E.R. 63-65. Petitioner’s contention (Br. 11) that

respondent did little work on the case is without foundation. Re-

spondent was required to expend more than 200 hours in preparing

and trying the case (R. 236, at 6, E.R. 53; R. 242, at 5, E.R. 133).

Discovery was not pursued because the deadline had passed long

before respondent was retained; respondent’s inability to conduct

discovery made the case more difficult, not less. Petitioner’s mis-

leading assertion that respondent did not file any “pleadings” is

true only because of the technical definition of the term (see Fed.

R. Civ. P. 7(a)).Contrary to the impression petitioner would

leave, however, respondent made numerous court filings, including

the trial brief, request for voir dire, request for jury instructions,

witness and exhibit lists, and opposition to defendants’ motion for

judgment notwithstanding the verdict. See R. 175, 176, 179, 181,

184, 187, 210, 211, E.R. 238-239. No Rule 7(a) pleadings had been

filed by either side since the answer in 1978 (R. 13, E.R. 231).

6 Respondent’s fee represents 20% of $2.08 million (since re-

spondent shared the 40% fee equally with co-counsel), less the

$10,000 retainer.

7The award of $1 million in that case was reversed on appeal

in an unpublished decision. Venegas v. City of Long Beach, 2d Civ.

No. 66285, Cal. App., Second Appellate District, Division Three

(Oct. 31, 1983) (copy lodged with the Clerk of this Court).

6

ent faced a more difficult case in federal court, yet he

achieved an award for petitioner that exceeded the state

court verdict by more than $1 million.*

Pursuant to the fee contract, respondent prepared and

filed for petitioner a motion for attorney’s fees under sec-

tion 1988.° Following a hearing, the district court

awarded fees totalling $117,000, of which $75,000 was

for work performed by respondent.” Judge Kelleher spe-

cifically noted respondent’s “exceptionally competent per-

formance” and “the excellent results obtained.” '

Defendants appealed from the judgment-in-chief and

from the award of attorney’s fees. Petitioner appealed

from the grant of judgment notwithstanding the verdict

with respect to one defendant, which reduced the total

damages award by $40,000. Respondent offered to repre-

sent petitioner on the appeal for a fee of 10 percent of

the judgment. In connection with this offer, respondent

advised petitioner to seek independent counsel to review

the proposal, and he stated that he would be willing to

consider a counter-proposal on the terms of the represen-

tation. Petitioner obtained such advice, rejected the offer

without making a counter-proposal, and obtained new

counsel for the appeal.'*

8 Petitioner’s argument (Br. 11) that the federal case did not

present zny risk of nonrecovery in light of the earlier state case

ignores the different legal burdens presented by the different causes

of action. It also ignores the finding of the court of appeals that

there was no showing that the federal action “posed an unusually

low risk for a civil rights case.” Pet. App. Al7. Finally, whatever

the risk was, petitioner fails to account for the substantially greater

relief obtained through respondent’s efforts in the federal action.

Even after deducting the contractual fee, petitioner will receive

substantially more from the federal case than the jury had awarded

in the state case.

® R. 236, E.R. 44-115.

10 R, 242, E.R. 129-136; see Pet. App. A6, A18.

11 R. 242, at 6, E.R. 134; see Pet. App. A28.

12 See Pet. App. A29; R. 256, at 14, E.R. 191.

7

The court of appeals affirmed in all respects. Venegas

v. Wagner, supra, 831 F.2d 1514. Petitioner and defend-

ants subsequently entered into a satisfaction of judgment

while the case was subject to possible further review."

3. The motion to intervene

After other counsel had been substituted for petitioner

on appeal, respondent moved for leave to intervene in

the district court.'* The purpose of the motion was to

confirm a lien on the judgment to cover the attorney’s

fees owed by petitioner under the contingent fee contract.

Petitioner did not oppose the motion, but argued that

respondent’s fee was limited to the amount awarded

under section 1988."°

B. Decisions Relow

1. District court

Following a hearing, the district court denied respond-

ent’s motion to intervene, but held that respondent was

13 See Satisfaction of Judgment in Venegas v. Wagner, No. CV

77-4047 RJK (C.D. Cal. filed Mar. 10, 1988) (copy lodged with the

Clerk of this Co»). Under the agreement, the City of Long Beach

is making lump-sum and periodic payments to petitioner with a

present value of approximately $2,000,000, plus a payment of

$117,000 in attorney’s fees awarded under section 1988 “for further

distribution” (page 6). Petitioner has not, however, paid any of

this sum to respondent. The satisfaction also provides that $800,000

of the total payment will be made into an escrow account, pending

resolution of the dispute under the fee contract (page 5). As part

of the agreement, petitioner waived punitive damages of $80,000

and accumulated interest of approximately $450,000 (pages 3-4).

14 Petitioner asserts (Br. 6) that the motion was filed while

respondent was still counsel of record. As the district court found,

however, the motion was not filed until after respondent “signed a

stipulation withdrawing as [petitioner’s] counsel of record’ (Pet.

App. Al8). Respondent thus did not file a motion on his own behalf

until after the attorney-client relationship with petitioner had

terminated.

15 See Pet. App. A7, A18-A19; lt. 254, 256, 260, E.R. 137-199.

8

entitled to the contingent fee established in his contract

with petitioner. Pet. App. A18-A31.'° Judge Kelleher

found that respondent’s “contingent fee does not consti-

tute a windfall,” since it compensates the attorney on a

different basis from the calculation under section 1988

(id. at A28). Unlike the “lodestar” statutory fee award,

“a ‘reasonable’ contingent fee does more than compensate

an attorney for the time reasonably expended on a case.

* * * [C]ontingent fee arrangements allow fee-indigent

clients to obtain counsel to prosecute their civil rights

claims while compensating the attorney for the risk of

possible nonrecovery” (id.). The district court also noted

that petitioner’s “rights under section 1988 have not been

affected in any way by the contingent fee contract,” since

that contract “expressly provides that any award of at-

torney’s fees must be offset against [respondent’s] con-

tingent fee” (id. at A29).

The district court also determined that there was no

other basis for invalidating the contract (Pet. App. A28-

A29). In particular, the district court rejected petition-

er’s argument that respondent was obligated under the

contract to prosecute the appeal without any additional

fee. The district court concluded that the contract by its

terms covered only the trial and not an appeal, and it

noted that respondent advised petitioner to have inde-

pendent counsel review his proposal to take the appeal

for a fee of an additional ten percent of the judgment.

As the district court concluded, “both [respondent] and

[petitioner] acted within their rights,” and there is “no

reason to reduce or eliminate [respondent’s] rights under

the contingent fee agreement” (id. at A29).

16 The district court concluded that it had “jurisdiction to deter-

mine the rights of the parties under the contingent retainer agree-

ment as ancillary to its conduct of the principal litigation” (Pet.

App. A29-A30). While the court declined to exercise that jurisdic-

tion to the extent of confirming a lien, it did exercise its supervisory

powers to review the propriety of the contingent fee contract.

See id. at A27-A28, A350.

2. Court of appeals

On cross-appeals, the court of appeals reversed the

district court’s denial of the motion to intervene and af-

firmed the ruling that respondent was entitled to collect

his full fee under the contract (Pet. App. Al-A17). With

respect to intervention, the court of appeals did not hold

that an attorney could intervene as of right in these cir-

cumstances, but only that the district court “abused its

discretion when it denied [respondent] permissive inter-

vention because it chose to address the merits of his con-

tingency fee agreement” (id. at All).

The court of appeals followed its decision in Hamner

v. Rios, 769 F.2d 1404 (9th Cir. 1985), in holding that

section 1988 “does not set a ceiling on an attorney’s en-

titlement under a contingent fee contract,” but that “a

district court must [use its supervisory powers to] re-

view a contingent fee in a civil rights case to ensure that

the contingent fee is reasonable” (Pet. App. Al2 & n.6).

The court of appeals reasoned that “limit[ing] attorneys’

entitlements under contingent fee agreements to statutory

awards would discourage attorneys from agreeing to rep-

resent civil rights plaintiffs,” contrary to the basic pur-

pose of section 1988 (id. at A13).

In addition, the court of appeals stated that there was

a significant need for enforceable contingent fee con-

tracts in view of the iimitations on contingency adjust-

ments to section 1988 awards established under this

Court’s decision in Pennsylvania v. Delaware Valley Citi-

zens’ Council for Clean Air, 483 U.S. 711 (1987). Pet.

App. Al4. This need was reinforced by the right of

clients to waive section 1988 fees recognized in Evans v.

Jeff D., 475 U.S. 717 (1986): “If courts must respect

the freedom of clients and attorneys to agree that the

attorney will receive no § 1988 fee in order to achieve a

satisfactory § 1983 settlement, fairness requires that we

respect the freedom of clients and attorneys to agree to

a contingency fee in excess of a § 1988 award” (Pet. App.

10

A15). In sum, courts “should provide wide parameters

to the negotiations between attorneys and their clients”

(id.).

Finally, the court of appeals agreed with the district

court that the contingency fee agreement in this case

is reasonable (Pet. App. Al6-A17). As the court of ap-

peals noted, the “contingent fee is reasonable because it

reflected the risk of nonrecovery” assumed by the attor-

ney, and there was “no evidence suggesting that a 40%

contingent fee is not standard in California for civil

rights cases, or that [this] particular case posed an un-

usually low risk for a civil rights case” (id. at A17).

The court of appeals therefore held that “a 40% con-

tingent fee is reasonable in this case” (id.).

SUMMARY OF ARGUMENT

The primary issue in this case is whether a fee con-

tract between lawyer and client is rendered invalid solely

because it results in a fee greater than the amount taxed

against the opposing party under 42 U.S.C. § 1988.

Petitioner’s argument that he is entitled to avoid paying

the amount due under his contract with respondent is at

odds with the language, legislative history, and policy of

section 1988. It would be anomalous to read a statute

intended to assist civil rights plaintiffs in obtaining rep-

resentation instead as foreclosing their ability to retain

counsel on a contingency or other contractual basis.

By its terms, section 1988 speaks only to the amount

allowed to a prevailing party against a losing party, and

not to the enforceability of a voluntary fee agreement

between lawyer and client. When Congress has wanted

to restrict attorneys to the amount awarded by the court,

to preclude contingency contracts, or otherwise to regu-

late attorney-client fee agreements, it has done so ex-

pressly. Congress was aware of such laws when it con-

sidered section 1988 and enacted one of them at the same

time that the civil rights fees statute was under debate.

11

Its choice not to include similar restrictions in section

1988 should not be overridden by judicial fiat.

The courts have been virtually unanimous in recogniz-

ing that section 1988 does not limit the fee that may be

charged under a contingent fee contract. For example,

in Pennsylvania v. Delaware Valley Citizens’ Council for

Clean Air, 483 U.S. 711 (1987), both the plurality and

dissenting opinions accepted the premise that an adjust-

ment in the statutory award for the risk in the particular

case is unnecessary where a contingent fee contract

exists, since the contract presents the attorney with “the

prospect of compensation greater than the prospective

lodestar amount.” Jd. at 749 (dissent); see also id. at

726 (plurality). Seven of the eight courts of appeals that

have addressed the issue have agreed that contingency

contracts can provide for fees greater than the statutory

award against the losing party. The legislative history

confirms that Congress did not intend to invalidate pri-

vate fee agreements in these circumstances.

Maintaining the enforceability of these contracts is

particularly important in view of the client’s right to

waive fees under Evans v. Jeff D., 475 U.S. 717 (1986).

While petitioner repeatedly suggests that lawyers should

be satisfied with the fee award under section 1988, he

ignores Evans and later cases holding that the statutory

award belongs only to the client and that the attorney

has no independent right to obtain fees pursuant to that

provision. In fact, petitioner has never paid respondent

the amount awarded by the court in this case under sec-

tion 1988. Unless lawyers and clients are permitted to

enter into binding fee agreements, lawyers can have no

assurance of being paid for their labors, and civil rights

plaintiffs will find it more difficult to obtain counsel—

precisely the opposite of what Congress intended when it

enacted the law.

Petitioner relies heavily on the argument that the

“reasonable” fee awarded by the court under section 1988

12

renders any greater fee per se unreasonable. This argu-

ment ignores the different factors considered by the court

in taxing an award at the end of the case against a los-

ing party and those considered by a lawyer and client in

voluntarily agreeing to a fee at the outset of representa-

tion. Moreover, the fact that a court must determine an

amount to allow under section 1988 does not authorize it

to intrude as a routine matter into the private contracts

of lawyers and clients. Such contracts are entitled to

respect and should be invalidated only when the fee ex-

ceeds what is permissible under the applicable ethical

standards. Congress did not regulate legal ethics in sec-

tion 1988, and the amount of a statutory award does not

establish the outer boundary of an ethically proper fee.

Finally, petitioner argues that, even apart from sec-

tion 1988, the fee contract in this case was unreasonable

and should not be enforced. His arguments were rejected

by both courts below, and there is no basis for this Court

to disturb those findings. The contract was a written

contingency agreement that appropriately compensated

respondent for the work performed and the risk of loss.

The terms of the contract comported in all respects with

applicable state law and ethical rules. This Court should

not permit petitioner to avoid paying the fee on which

respondent relied in rendering services on his behalf,

which resulted in a recovery by petitioner of well over

$1 million, even after allowing for full payment of the

agreed-upon legal fee.

13

ARGUMENT

I. SECTION i988 DOES NOT INVALIDA’D A

LAWYER-CLIENT CONTRACT FOR THE PAY-

MENT OF FEES GREATER THAN THE AMOUNT

TAXED AGAINST THE LOSING PARTY.

A. Section 1988 Does Not Regulate Fee Agreements

Between Lawyers And Clients.

Petitioner invokes the Civil Rights Attorney’s Fees

Awards Act of 1976, 42 U.S.C. § 1988, as a basis for

invalidating his fee contract with respondent. Such an

application of section 1988 would turn the statute on its

head. Congress enacted the law in order to encourage

citizens to vindicate their civil rights. Petitioner would

instead impute to Congress an intent to overturn accepted

private fee arrangements that provide incentives for at-

torneys to represent clients in cases that involve substan-

tial damages claims. Neither the statutory language nor

the legislative history supports such a reading, and it

would have a significant adverse effect on the ability of

civil rights plaintiffs to obtain representation.

1. The statutory language does not apply to agree-

ments between clients and their lawyers.

Section 1988 provides simply that the court in a civil

rights case “may allow the prevailing party, other than

the United States, a reasonable attorney’s fee as part of

the costs.”” Nothing in this provision speaks to voluntary

fee arrangements between clients and their own lawyers.

Rather, it provices only that an award may be involun-

tarily taxed against a losing party.

When Congress has intended to regulate attorney-

client fee arrangements, it has done so expressly. For

example, at the very time that it was debating Section

1988, Congress enacted the Hart-Scott-Rodino Antitrust

Improvements Act of 1976. That Act allows attorney’s

fees in state parens patriae actions, but expressly limits

14

the circumstances under which private attorneys can be

retained on a contingent fee basis to bring such suits.

15 U.S.C. §§ 15¢e(d) (1), 15g(1)."

More recently, in the National Childhood Vaccine In-

jury Act of 1986, Congress provided that an award of

compensation under that statute shall include a reasonable

attorney’s fee. 42 U.S.C. § 300aa-15(e)(1)(A). The

statute expressly states in addition that “[n]o attorney

may charge any fee for services in connection with a

[compensation] petition * * * which is in addition to

[the amount awarded by the court]}.” 42 U.S.C. § 300aa-

15(e) (3).

There are several other examples of statutory regula-

tion of fee agreements.'* Contingent fees are generally

prohibited in government contracts. 41 U.S.C. § 254(a);

10 U.S.C. § 2306(b). In the Federal Tort Claims Act,

Congress prohibited attorneys from charging a fee of

more than 25 percent of the judgment. 28 U.S.C. § 2678.

17 See Pub. L. No. 94-435, 90 Stat. 1383 (Sept. 30, 1976). Under

section 4G of the Clayton Act, as added by the Hart-Scott-Rodino

Act, 15 U.S.C. § 15g(1), the definition of “State attorney general”

entitled to bring a parens patriae action “does not include any per-

son employed or retained’”’ on “a contingency fee based on a per-

centage of the monetary relief awarded” or on “any other contin-

gency fee basis, unless the amount of the award of a reasonable

attorney’s fee to a prevailing plaintiff is determined by the court

under [the fee-shifting provision].” Repeated references to this

prohibition on contingency fees were made during the debate over

section 1988. See, e.g., 122 Cong. Rec. 31473, 31487, 31830, 31856

(1976) (remarks of Sen. Allen).

18 Currently before the Court is the constitutionality of the

attorney’s fee provisions of the Black Lung Benefits Act and imple-

menting regulations, which require judicial or administrative ap-

proval of attorney’s fees and also provide that “[n]o contract or

prior agreement for a fee shall be valid.” 20 C.F.R. § 725.365; 30

U.S.C. § 932(a); 33 U.S.C. §928(c). See United States Dep’t of

Labor v. Triplett, No. 88-1671; Committee on Legal Ethics v.

Triplett, No. 88-1688. The cases have been consolidated and are

scheduled for argument on January 16, 1990.

15

Similarly, Congress formerly limited to $10 the fee that

may be charged by an attorney in a veteran’s benefits

proceeding. See Walters v. National Ass’n of Radiation

Survivors, 473 U.S. 305 (1985). The law was amended

in 1988 to limit fees to no more than 20 percent of the

total award and to permit the Board of Veterans’ Ap-

peals to order reductions in fees that it finds excessive or

unreasonable. 38 U.S.C. § 3404(c) and (d), as added by

Pub. L. No. 100-687, 102 Stat. 4105, 4108 (Nov. 18,

1988). Many other laws directly regulating attorney’s

fees were cited and discussed in materials submitted dur-

ing the 1975 House hearings leading up to the enactment

of section 1988."®

In short, when Congress wished to regulate private

attorney-client fee arrangements, “it knew how to do

so.” Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S.

437, 442 (1987) (expert witness fees). There is no rea-

son that Congress could not have done so in section 1988

as well, and the issue was raised during the debates on

the law (see notes 17 and 19, supra), yet Congress in-

cluded no such provision. This Court should not add a

prohibition to section 1988 that Congress itself did not

put in the statute. See, e.g., Northbrook National Life

Ins. Co. Vv. Brewer, 58 U.S.L.W. 4003, 4005 (Nov. 7,

1989) (refusing “to assume that Congress intended any-

thing more than it had stated in unambiguous terms,”

particularly where “Congress could easily have used lan-

guage” to accomplish a result, yet did not do so).

19 See Awarding of Attorneys’ Fees: Hearings Before the Sub-

comm. on Courts, Civil Liberties, and the Administration of Justice

of the House Comm. on the Judiciary, 94th Cong., 1st Sess. 304-306

(1975) (ABA report) [House Hearings}. In fact, members of the

House considered during the hearings whether to “prohibit con-

tingent fees” in the context of condemnation cases because there is

not in those cases the risk of “collecting nothing” that is “the

justification for the contingent fee.” Jd. at 116 (remarks of Rep.

Pattison).

16

Thus, while the interpretation of section 1988 may be

unclear with respect to some questions, this is not one

of them. The statute addresses the allowance of fees

against losing parties, not the fee agreements between

lawyer and client. Several decisions of this Court are

premised on precisely this understanding of the law. See,

e.g., Blanchard v. Bergeren, 109 8. Ct. 939 (1989) (fee

award not limited by prevailing party’s contingent fee

contract); Blum v. Stenson, 465 U.S. 886 (1984) (fee

award not limited where prevailing party represented by

organization that did not charge fees to clients). There

is no basis for departing from that understanding here.

Eight Members of the Court have recognized that sec-

tion 1988 does not preclude the payment of a contingent

fee in an amount greater than the fee taxed against the

losing party. In Pennsylvania v. Delaware Valley Citi-

zens’ Council’ for Clean Air, 483 U.S. 711 (1987), both

the plurality and the dissent agreed that enhancement

of the statutory lodestar award for the risk of losing in

the particular case i. unnecessary when the attorney and

prevailing party have a contingent fee contract that gives

the attorney “the prospect of compensation greater than

the prospective lodestar amount.” Jd, at 749 ‘”’ ckmun,

J., dissenting) ; see also id. at 726 (contuu,s. y adjust-

ment in lodestar unnecessary “where any plaintiff, im-

pecunious or otherwise, has a damages case that com-

petent lawyers would take in the absence of fee-shifting

statutes,” since the damages would be “sufficient to pro-

vide adequate compensation to counsel’) (plurality op.) .?”

It would be inconsistent with the premises underlying

these Delaware Valley opinions for the Court now to hold

20 See also id. at 720-721 n.6, where the Court cited McKinnon

Vv. Berwyn, 750 F.2d 1383 (7th Cir. 1984), for the proposition that

a contingency adjustment is not necessary “in cases where the at-

torney has entered into a contingent-fee contract with his client,”

since “the attorney is already being compensated for the risk

of loss.”

17

that contingent fee contracts are unenforceable to the ex-

tent that they exceed an award under section 1988.*"

The lower courts are virtually unanimous that contin-

gent fee contracts are not rendered invalid merely be-

cause the amount of the fee agreed to by the client is

greater than the award taxed against a losing party un-

der section 1988. See Lewis v. Coughlin, 861 F.2d 570,

576 (2d Cir. 1986);* Sullivan v. Crown Paper Board

Co., 719 F.2d 667, 670 (3d Cir. 1983) ; Kirchoff v. Flynn,

786 F.2d 320, 323 n.4 (7th Cir. 1986); Wilmington v.

J.I. Case Co., 793 F.2d 909, 923 (8th Cir. 1986); Ham-

ner V. Rios, 769 F.2d 1404, 1409 (9th Cir. 1985); see

also Sargeant Vv. Sharp, 579 F.2d 645, 648 & n.4 (lst

Cir. 1978); Pharr v. Housing Authority, 704 F.2d 1216

(11th Cir. 1983).*° In their treatise on professional re-

21 While Delaware Valley concerned attorney’s fees under the

Clean Air Act, the Court applied the principles governing awards

under section 1988. See 483 U.S. at 713 n.1.

22 In Lewis v. Coughlin, the Second Circuit clarified its statement

in Wheatley v. Ford, 679 F.2d 1037, 1041 (2d Cir. 1982), that a

contingent fee contract is satisfied “to the extent counsel receives

payment of the section 1988 statutory award.” Lewis makes clear

that the section 1988 award does not discharge the fee contract in

its entirety. Rather, Wheatley stands only for the proposition that

“to the degree that counsel obtains § 1988 payment, that amount

should be offset against his claim for services provided under the

contingency fee arrangement.” 801 F.2d at 576. Moreover, the

court in Wheatley could not have intended to hold that contingent

fee contracts are limited to the amount of a section 1988 award,

since the contingent fee recovery in that case ($10,000) was less,

not more, than the section 1988 award ($29,742). Like the opin-

ions in Delaware Valley, the court of appeals’ decision in Lewis

concludes that a contingent fee contract “is a strong factor militat-

ing against a bonus award [under section 1988] as the percentage

arrangement in any such agreement takes into account the possibil-

ity of losing the case.” Id.

23 The only exception is Cooper v. Singer, 719 F.2d 1496 (10th

Cir. 1983) (en banc), which is based on the erroneous pre-Delaware

Valley view that it is appropriate to adjust the section 1988 lode-

18

sponsibility, Professors Hazard and Hodes also agree that

“the statutory award simply augments plaintiffs’ dam-

ages, and * * * the contingent fee agreement applies to

the recovery according to the agreement’s terms.” 1 Haz-

ard & Hodes, The Law of Lawyering 72.6-1 - 72.7 (Supp.

1989). This consensus of the courts and commentators is

hardly surprising in view of the statutory language as

well as the legislative history, which is discussed below.

2. The legislative history confirms that Congress did

not intend to invalidate private fee agreements.

Congress enacted section 1988 to encourage persons to

enforce their civil rights by ensuring that lawyers would

be available to represent them in court. See, e.g., Hensley

v. Eckerhart, 461 U.S. 424, 429 (1983); S. Rep. No. 1011,

94th Cong., 2d Sess. 2, 6 (1976) [“Senate Report”]; H.R.

Rep. No. 1558, 94th Cong., 2d Sess. 1, 9 (1976) [House

Report”]; Berger, “Court Awarded Attorneys’ Fees:

What Is ‘Reasonable’?,” 126 U. Pa. L. Rev. 281, 306

(1977). There is nothing in the legislative history sug-

gesting that Congress, in the course of expanding the op-

portunities of plaintiffs to obtain representation, intended

to restrict the means previously available for attracting

counsel. The contingent fee contract provides a desirable

star by taking into account the risk of losing in the particular

case. See id. at 1501 n.8, 1503 n.12. Subsequently, in the course of

holding that Cooper applied prospectively only, the Tenth Circuit

noted that Cooper was intended simply to prevent the windfall that

would occur if an attorney were permitted to recover both the

section 1988 award and the amount due under a contingent fee

contract. Sears v. Atchison, T. & S.F. Ry., 779 F.2d 1450, 1453

(10th Cir. 1985). That concern is inapplicable here, where the

contract expressly provided that any fee awarded by the court

would offset the client’s obligation “dollar-for-.oliar” (Br. in Opp.

App. A3). Moreover, the court in Sears acknowledged that Cooper

is “the only opinion holding that a fee shifting award” establishes

the maximum allowable fee under a contingency contract and that

“folther circuit court opinions have held contra to Cooper.” 779

F.2d at 1453, 1454 (emphasis in original).

19

additional incentive for counsel to take on meritorious

litigation. See Leubsdorf, “The Contingency Factor in

Attorney Fee Awards,” 90 Yale L.J. 473, 495-496 (1981).

There is no basis for assuming that Congress intended,

sub silentio, to abolish this incentive in a statute in-

tended to promote the enforcement of civil rights laws.

See generally, e.g., Weinberger v. Hynson, Westcott &

Dunning, Inc., 412 U.S. 609, 631 (1973) (courts should

not “ ‘impute to Congress a purpose to paralyze with one

hand what it sought to promote with the other’”’) (cita-

tion omitted).

The legislative history characterizes section 1988 as a

“limited and cautious” “first step” that “does not over-

turn [existing] law or practice.” 122 Cong. Rec. 35126

(1976) (remarks of Rep. Kastenmeier).** Rather, Con-

gress simply provided the express statutory authorization

for fee-shifting that this Court had held was required in

Alyeska Pipeline Service Co. v. Wilderness Society, 421

U.S. 240 (1975). See Senate Report, supra, at 1; House

Report, supra, at 2. In enacting section 1988, Congress

legislated against a backdrop of existing fee-shifting

statutes that authorized attorneys and clients to enter

into contingent fee contracts, as well as the existing ethical

canons authorizing such contracts.** At no point in the

*4 At the same time, a contingent fee contract does not encourage

frivolous cases, since the attorney is compensated only in the event

of recovery. As Professor Leubsdorf observed, an attorney-client

fee contract separate from the court fee award promotes informed

litigation decisionmaking in light of all of the relevant costs and

benefits. See 90 Yale L.J. at 507.

25 Representative Kastenmeier was chairman of the subcommittee

that held hearings on the fee-shifting bills leading to the enactment

of section 1988.

26 See, e.g., 15 U.S.C. § 15 (Clayton Act); Pitchford v. Pepi, Inc.,

531 F.2d 92, 111 (3d Cir.), cert. denied, 426 U.S. 935 (1976) (if

fee award under Clayton Act is less than amount in contingent fee

contract, “the unsatisfied portion of the contingency fee could then

be paid out of the award for damages”); 122 Cong. Rec. 32389

20

debates did anyone suggest that section 1988 would upset

this settled law. To the contrary, section 1988 was in-

tended to be consistent with existing law.*’ In response

to a question from Representative Kastenmeier during

the 1975 hearings on fee-shifting bills, Representative

Seiberling, a leader in the drive for fee-shifting legisla-

tion, stated that the proposed legislation “certainly is not

going to make attorneys’ fees any less.” ** It would be

inconsistent with this understanding to interpret section

1988 to reduce the fees that attorneys were previously en-

titled to collect under contracts with their clients.

In fact, Congress was not directly concerned with cases

such as this one that could generate sufficiently large dam-

ages awards to provide for compensation to counsel.

Rather, as Senator Tunney explained in introducing the

bill, in “the typical case * * * there is often no damage

claim from which an attorney could draw his fee.” 121

Cong. Rec. 26806 (1975). The concern with cases for

declaratory and injunctive relief and cases involving only

(1976) (quoting law review article explaining that “[t]he great

majority of plaintiffs’ attorneys in antitrust suits have private fee

arrangements with their clients” and that the court award “is

merely a factor in these arrangements”); Model Code of Profes-

sional Responsibility, DR 2-106(B) (8).

27 See, e.g., Senate Report, supra, at 6; House Report, supra, at

5-9; 122 Cong. Rec. 31472 (1976) (remarks of Sen. Kennedy) ; id.

at 35116 (remarks of Rep. Drinan, floor manager in the House) ;

id. at 35117 (remarks of Rep. Railsback). In Johnson Vv. Georgia

Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974), the court of

appeals noted that a fixed or contingent fee contract may be for

an amount greater than the fee award entered by a court. /d. at

718, quoting Clark v. American Marine Corp., 320 F. Supp. 709, 711

(E.D. La. 1970), aff'd on opinion below, 437 F.2d 959 (5th Cir.

1971). This Court has often observed that Johnson provides guid-

ance with respect to Congress’s intent in section 1988. See, e.g.,

Hensley v. Eckerhart, supra, 461 U.S. at 429-430, 434 n.9; Blanchard

v. Bergeron, supra, 109 S. Ct. at 943. See also Senate Report, supra,

at 6; House Report, supra, at 8.

28 House Hearings, supra, at 1, 49.

21

small damage claims is evident throughout the legislative

history.*” As Senator Kennedy concluded, often “civil

rights cases * * * do not provide the prevailing plaintiff

with a large recovery from which he can pay his lawyer.”

122 Cong. Rec. 33314 (1976). See also, e.g., City of River-

side Vv. Rivera, 477 U.S. 561, 577 (1986) (plurality op.).

Similarly, in the House hearings, Representative Seiber-

ling made clear that the legislation “does not make much

difference” in cases involving “a great monetary stake.” °°

Petitioner’s reliance on the legislative history indicating

that section 1988 will not provide a “windfall” for law-

yers is misplaced. The payment of an otherwise permis-

sible contingency fee is not a windfall but an accepted

and ethically proper form of compensation. There is no

double compensation, since any award under section 1988,

29 See, e.g., Senate Report, supra, at 6 (civil rights “may be

nonpecuniary in nature”); House Report, supra, at 9 (in most

civil rights cases “only injunctive relief is sought,” and immunity

doctrines and other defenses “preclude or severely limit the damage

remedy”) ; 122 Cong. Rec. 31832 (1976) (remarks of Sen. Hatha-

way); id. at 35118 (remarks of Rep. Seiberling); id. at 35126

(remarks of Rep. Kastenmeier).

30 House Hearings, supra, at 50. The isolated statements in the

legislative history relied on by petitioner to the effect that the bill

would allow plaintiffs to recover their costs must be understood in

the context of cases seeking injunctive relief or small amounts in

damages. Providing adequate redress for plaintiffs in such cases

was undoubtedly the chief concern underlying section 1988. By the

same token, however, nothing in the legislative history suggests

that fee-shifting was intended to excuse plaintiffs with large mone-

tary claims from paying their attorneys an agreed-on fee out of the

damages judgment. Compare H.R. Rep. No. 908, 99th Cong., 2d

Sess., Part I, at 22 (1986) (under the vaccine compensation statute,

“(njo attorney may charge a fee for services in connection with a

petition other than the amount” awarded by the court). In fact,

the legislative history of section 1988 quotes a law review article

stating that, in large damages cases, “a private fee arrangement

with the client” may be “added to the court-awarded attorney’s

fees” to “assure[] adequate compensation for the attorney.” 122

Cong. Rec. 32391 (1976).

22

to the extent made available to the attorney, is applied to

offset the fee obligation under a contingency contract.

The only person who benefits is the client. The windfall

in this case would accrue to petitioner if the contract is

invalidated, since he would then receive the benefit of the

$2 million judgment that respondent achieved, without

paying the fee that he had promised and on which respond-

ent relied.

Petitioner thus would subvert Congress’s intent to as-

sist plaintiffs in obtaining representation by interpreting

section 1988 to limit, rather than expand, the options of

civil rights plaintiffs and their attorneys.** The legisla-

tive history confirms what is clear from the statutory lan-

guage: Congress did not intend to invalidate private fee

agreements when it gave prevailing parties the additional

remedy of a fee recovery from losing parties.

Finally, petitioner’s argument cannot be limited to con-

tingent fee contracts in civil rights cases. His position

also would lead to the invalidation of fixed retainers and

hourly fee charges whenever those fees exceeded a statu-

tory award.** Nor could this be confined only to civil

rights litigation. Private fee contracts in many other

~ settings where fee-shifting statutes are applicable, such

as in antitrust cases and other commercial contexts, also

would be nullified. There is no indication that Congress

intended such an extraordinary limitation on the con-

tractual rights of private parties.

31 Such an interpretation would be particularly ironic because the

fee-shifting statute is intended to place civil rights plaintiffs on an

equal footing with other litigants, not to deny them options avail-

able to others. See, e.g., House Hearings, supra, at 89-90 (submis-

sion of Ms. Derfner on behalf of the Lawyers’ Committee for Civil

Rights).

82In addition, lawyers for prevailing defendants presumably

would be limited to the amount of any fee award under section

1988 in those cases where fees are taxed against the plaintiff

because a lawsuit was frivolous or brought for an improper pur-

pose. See, e.g., Hensley Vv. Eckerhart, supra, 461 U.S. at 429 n.2.

23

3. Invalidating fee contracts would make it more

difficult for clients to obtain representation in

civil rights cases.

A fundamental premise of petitioner’s brief is that at-

torney-client fee contracts should be unenforceable be-

cause the attorney will be paid an award under section

1988. The precedents and facts of this case demonstrate

that this premise is erroneous. The right to an award

under section 1988 rests with and may be waived by the

client. Any award that is entered is made to the client,

not the attorney. Without an enforceable fee contract,

the attorney is assured of nothing. In this very case,

petitioner has not paid respondent any of the $75,000

awarded under section 1988 for his services.

Without some assurance of fees, the civil] rights bar

will simply be unable to represent plaintiffs in these ac-

tions. Plaintiffs with substantial monetary claims, who

would have been able to obtain representation on a con-

tingent fee basis before section 1988 was enacted, will

find themselves worse off than before.

In Evans v. Jeff D., 475 U.S. 717 (1986), this Court

held that the entitlement to a fee award under section

1988 rests with the prevailing party, not the attorney,

and that the statute does not prohibit the prevailing party

from waiving that entitlement. The lower courts have ex-

tended Evans from the class-action context in which it

arose to individual actions as well. For example, in Wil-

lard v. City of Los Angeles, 803 F.2d 526 (9th Cir. 1986),

plaintiffs (represented by respondent) waived attorney’s

fees as part of a $10,000 settlement. The court of ap-

peals held that the attorney was not entitled to intervene

following the settlement or to apply on his own behalf for

an award of fees under section 1988. See also Panola

Land Buying Ass’n Vv. Clark, 844 F.2d 1506 (11th Cir.

1988) (Equal Access to Justice Act); Soliman v. Ebasco

Services Inc., 822 F.2d 320 (2d Cir. 1987), cert. denied,

484 U.S. 1020 (1988) (Title VII); Note, “Fee as the

24

Wind Blows: Waivers of Attorney’s Fees in Individual

Civil Rights Actions Since Evans V. Jeff D.,” 102 Harv.

L. Rev. 1278 (1989) [‘‘Fee Waivers’]. The record in

this case reflects the common practice of civil rights de-

fendants to require fee waivers as a condition of settle-

ment.*®* See also Mitchell v. City of Los Angeles, 741 F.2d

281 (9th Cir. 1984), amended, 753 F.2d 86 (9th Cir.

1985).

In the face of fee waivers, enforceable fee contracts

offer attorneys their only assurance that civil rights rep-

resentation will be economically feasible. See Hazard &

Hodes, The Law of Lawyering, supra, at 72.9-72.10 (“it

is perfectly proper for a lawyer to negotiate with a client

in advance for a reasonable fee, to insist upon being paid

that fee, and to let the client accept or reject the defend-

ant’s offer [to settle with a waiver of statutory fees]

accordingly”); Soliman, supra, 822 F.2d at 322-323

(whether statutory awards “ultimately end up in the

lawyer’s or the client’s hands depends, of course, on the

private fee arrangements entered into between them when

representation is undertaken”) ; Fee Waivers, supra, 102

Harv. L. Rev. at 1288 (waiver is implicit in lump sum

settlement unless lawyer and client have contingent fee

or retainer agreement).** To be sure, contingent fee ar-

rangements have no application in many civil rights cases,

33 See R. 256, at 17-20, E.R. 194-197. Evans is, in effect, self-

executing, and court approval of the waiver is not required outside

of the class actieu context where settlements must be approved under

Rule 23. Wen presented with a settlement offer including a fee

waiver, a lawyer’s ethical obligation is to advise the client to act

in the client’s best interests.

34 This case does not present the question whether “civil rights

attorneys can obtain agreements from their clients not to waive

attorney’s fees.” Evans v. Jeff D., supra, 475 U.S. at 766 (Brennan,

J., dissenting). Rather, the issue is only whether a fee agreement

(which provided also that fees would be sought under section 1988)

is invalidated by section 1988.

25

where plaintiffs seek only declaratory and injunctive re-

lief or small amounts in damages. That is no reason, how-

ever, to invalidate them in those cases where they can use-

fully be employed. It would be unreasonable to assume

that Congress, in the course of addressing inadequacies

in the representation of civil rights plaintiffs with small

or no damages claims, would have made it more difficult

for plaintiffs with larger claims to obtain representation.

B. The Amount Taxed Against A Losing Party Under

Section 1988 Does Not Establish The Maximum Fee

That A Lawyer May Ethically Charge A Client

Under Their Contract.

Although there is no language in section 1988 directly

regulating attorney-client fee agreements, petitioner ar-

gues that any fee greater than an award under section

1988 is per se unreasonable and may not be collected.

This argument is without merit. A reasonable fee taxed

against a losing party under section 1988 at the end of

a case is based on different factors from those that a

lawyer and client may voluntarily take into account at

the outset of representation. As the Third Circuit has

stated, “courts should be loathe to intrude into a con-

tractual relationship between an attorney and client, and

* * * a comparison between the contractual fee and the

Lindy |lodestar] fee, whose method of calculation is de-

signed to meet very different needs, is an inappropriate

ground for invalidation of a contingent fee arrange-

ment.” * Similarly, Professors Hazard and Hodes state:

%5 Dunn V. H.K. Porter Co., 602 F.2d 1105, 1112 (3d Cir. 1979).

The Lindy fee is the lodestar amount established pursuant to Lindy

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

Corp., 487 F.2d 161 (3d Cir. 1973), and 540 F.2d 102 (3d Cir.

1976). While the lodestar calculation under section 1988 differs in

some respects from the Lindy lodestar, the difference only confirms

that the fee award under section 1988 is based on considerations

that are not relevant to the fee agreement between lawyer and

client. Under Lindy, a court could take into account the prelitiga-

26

The lodestar * * * provides a formula for establish-

ing the liability of the defendant, and is not a regu-

lation of the reasonableness of the overall fee charged

by the plaintiff’s lawyer.

* — 7 *

[T{he term “reasonable” as used in Model Rule 1.5,

or its predecessor DR 2-106, does not necessarily

have the same meaning as it does in a statutory

provision for awarding “reasonable” fees. When a

court assesses a “reasonable fee” against the defend-

ant and turns that amount over to the plaintiff, it is

exercising an adjudicatory function, and must take

into account a whole range of policies * * *. [T]he

defendant is willy-nilly forced to “hire” the plaintiff's

lawyer (after the fact) at roughly market rates

* * *

.

* 2 *#

In contrast, the term “reasonable” in Rule 1.5

is invoked to determine whether the actual lawyer-

client fee contract may properly be enforced.

Hazard & Hodes, The Law of Lawyering, supra, at 72.5,

72.7-72.8 (emphasis in original). See also Boston &

Maine Corp. v. Sheehan, Phinney, Bass & Green, P.A.,

778 F.2d 890, 894-895 (1st Cir. 1985) (“the lodestar

* * * is not the sole benchmark for measuring the rea-

sonableness of any and all attorney fees”).

Section 1988 and attorney-client fee contracts have

different purposes and are based on different considera-

tions. In the first place, the statute measures a prevail-

ing party’s entitlement to recover from a losing party,

rather than a voluntarily agreed-on entitlement of a

lawyer to recover from his client. See, e.g., Kirchoff v.

Flynn, 786 F.2d 320, 323 (7th Cir. 1986). Thus, for

example, courts have held in antitrust cases that “|o]ne

factor not conclusive [in determining the reasonableness

of a contingent fee] is that the contingency fee agreement

—-formulated to satisfy needs other than those contem-

tion likelihood of success in the particular case. See 540 F.2d at 117.

This is not permissible under section 1988, but it is relevant to the

lawyer-client fee agreement.

27

plated by 15 U.S.C. § 15—exceeds the section 15 award.”

International Travel Arrangers, Inc. v. Western Airlines,

Inc., F.2d 1255, 1277-1278 (8th Cir.), cert. denied, 449

U.S. 1063 (1980). Accord, Farmington Dowel Products

Co, Vv. Forster Manufacturing Co., 421 F.2d 61, 88, later

appeal, 436 F.2d 699 (1st Cir. 1970).

Moreover, contingency calculations that are entirely

permissible in fee contracts are sharply limited and of

a very different nature in statutory fee awards. Sce

Delaware Valley, supra, 483 U.S. 711. Contingent fee

contracts, unlike statutory awards, take into account the

risk of losing in the particular case, viewed at the out-

set of the representation. See, e.g., Brobeck, Phleger &

Harrison Vv. Telex Corp., 602 F.2d 866 (9th Cir.), cert.

denied, 444 U.S. 981 (1979). Statutory awards are based

on the time reasonably expanded on the case, viewed at

its conclusion; any adjustment for contingency cannot

take into account the ex ante risk in the particular case.

See id. at 731 (O’Connor, J., concurring in part and con-

curring in the judgment). Statutory awards are not

modeled on contingent fee contracts (see Blanchard v.

Bergeron, supra, 109 S. Ct. at 945), and there is accord-

ingly no reason to assume that what is “reasonable” for

one will be “reasonable” for the other. See, e.g., City of

Riverside v. Rivera, supra, 477 U.S. at 574 (plurality

op.); id. at 586 (Powell, J., concurring in the judge-

ment) ; Leubsdorf, supra, 90 Yale L.J. at 481.

In sum, a fee-shifting statute does not involve “simply

assigning a client’s obligation for fees to others. * * *

What constitutes a reasonable fee [award under the stat-

ute] may be more or less than the client is obligated

to pay the attorney.” Berger, supra, 126 U. Pa. L. Rev.

at 282. See also, e.g., Johnson Vv. Georgia Highway Ex-

press, Inc., 488 F.2d 714, 719 (5th Cir. 1974) (lawyer-

client contract not decisive in determining fee award

against defendant). This Court has reached the same

conclusion in holding that a statutory award is appro-

28

priate even if the prevailing party’s counsel did not

charge a fee and that such an award can exceed the

amount in the lawyer-client contract. See Blum v. Sten-

son, supra, 465 U.S. 886; Blanchard v. Bergeron, supra,

109 S. Ct. 939.%

Wholly apart from these concerns, courts have held that

it would be an “unwarranted interference with a private

contract” to invalidate a voluntary agreement for a fee

greater than the section 1988 award. Wilmington v. J.I.

Case Co., 793 F.2d 909, 923 (8th Cir. 1986). See also

Hamner v. Rios, 769 F.2d 1404, 1409 (9th Cir. 1985) ;

Sargeant v. Sharp, 579 F.2d 645, 648 (1st Cir. 1978).

The attorney-client contract “represents their notion of

what constitutes a reasonable fee.” Pharr v. Housing

Authority, 704 F.2d 1216, 1218 (11th Cir. 1983).*7 Such

36 Petitioner relies on Blanchard to argue that, since the plaintiff

can obtain a larger award pursuant to section 1988 than the fee

agreed on in a contingency contract, the lawyer should not be able

to collect a larger fee under the contract than is awarded under

section 1988. This is a non sequitur. The point of Blanchard is that

statutory awards and attorney-client fee contracts are independent,

not that the contracts are unenforceable. There is no unfairness in

holding a client to his contract, particularly since the right to

statutory fees can be waived, which would otherwise leave the

lawyer with nothing. See Hazard & Hodes, The Law of Lawyering,

supra, at 72.5 (emphasis in original) :

Thus, if the court awarded fee is lower [than the contract

fee], the plaintiff should not be able to force the lawyer to re-

duce the fee, but should be required to pay the difference. This

is really Blanchard v. Bergeron in reverse: just as the con-

tract cannot control the statutory award, the statutory fee is

not a ceiling on a contingent fee agreement.

See also Dunn v. H.K. Porter Co., supra, 602 F.2d at 1111 (it

is not unfair to require a client to “honor[]} the express terms of

the fee agreement,” but it would be unfair not to allow the attorney

the fee that he bargained for and relied on in providing legal

services to the client).

37 See Hazard & Hodes, supra, The Law of Lawyering, at 72.7

(By enforcing contingent fee agreements for amounts greater than

statutory awards, courts permit lawyers “to negotiate for sufficiently

29

a contract, “if freely made, is not lightly set aside.”

Farmington Dowel, supra, 421 F.2d at 90.°* Petitioner’s

theory “would require invalidating contingent fee con-

tracts as per se unreasonable whenever damage awards

reach large amounts.” Dunn v. H.K. Porter Co., 602

F.2d 1105, 1112 (3d Cir. 1979). See generally Boston &

Maine Corp., supra, 778 F.2d at 898 (refusing to in-

validate allowance of fees in bankruptcy proceeding sim-

ply because the contingency fee “looks high in hindsight” )

(emphasis in original) .*°

For these reasons, a contingent fee contract is not

rendered unenforceable merely because it exceeds an

award under section 1988. Courts have the power to

supervise contingent fees and to limit the amount re-

ceived to what is permissible under the applicable rules

of ethics. Thus, “if the court finds that an agreement

high percentages to protect themselves against the contingency of

not prevailing. Since that contingency is what drove both the

lawyer and client to proceed on a contingent fee basis in the first

place, each should enjoy whatever benefits came from their bargain.

If a court tries to superimpose its calculation of what is fair as

between plaintiff and plaintiff’s lawyer, it would undermine their

allocation of risk.”). This reasoning is particularly compelling in

this case, where respondent, retained by petitioner on a contingency

basis, obtained a much more favorable damage award in the federal

trial than petitioner’s earlier lawyers had been able to obtain in

the state trial court.

38 The Court has in other contexts also recognized that it should

not lightly permit a party to a contract “to repudiate its solemn

promise.” Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 (1974)

(enforcing contractual arbitration clause). See also, e.g., Mitsubishi

Motors Corp. Vv. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631

(1985) (noting “strong presumption in favor of enforcement of

freely negotiated contractual choice-of-forum provisions”).

39 Even viewed ez post, it certainly is “reasonable” for petitioner

to pay respondent the agreed-on fee, since his net recovery is still

greater than the full amount of the damages awarded by the jury in

the earlier state court action in which he was represented by other

counsel.

30

provides for au unethically excessive fee, it may spar-

ingly exercise its supervisory powers over the bar to limit

the amount the attorney may actually receive.” Sargeant

v. Sharp, supra, 579 F.2d at 648.

The section 1988 award, however, does not establish

the maximum ethically permissible fee—that is a ques-

tion of local standards of professional ethics. See gen-

erally Evans v. Jeff D., supra, 475 U.S. at 766 n.20

(Brennan, J., dissenting) (‘Congress has not sought to

regulate ethical concerns either in the Fees Act of else-

where”); Nix v. Whiteside, 475 U.S. 157, 176 (1986)

(Brennan, J., concurring in the judgment) (Court does

not “enjoy any statutory grant of jurisdiction over legal

ethics’”).*° Accordingly, use of the courts’ supervisory

power to invalidate a contingent fee contract is “not a

part of the normal process of awarding fees.” Sargeant

v. Sharp, supra, 579 F.2d at 648 n.4. Rather, that power

should be exercised only in “exceptional circumstances”

when the contractual fee is beyond “the outer limit of

reasonableness.” Farmington Dowel, supra, 421 F.2d

at 90. Accord, International Travel Arrangers, Inc. V.

Western Airlines, Inc., supra, 623 F.2d at 1277-1278.

As we show below, the fee in this case falls well within

that limit.

40 The Court should be particularly reluctant to displace state law

in this area, since legal ethics has traditionally been a matter of

pervasive state regulation. See Bates v. State Bar, 433 U.S. 350,

361 (1977). Section 1988 does not provide any indication of con-

gressional intent to preempt state regulation of professional ethics,

much less the clearly expressed statement of such intent that would

be required. See generally, e.g., Hillsborough County v. Automated

Medical Laboratories, Inc., 471 U.S. 707, 715 (1985).

—

31

II. THERE IS NO BASIS FOR THIS COURT TO OVER-

TURN THE DETERMINATION BY BOTH COURTS

BELOW THAT THE CONTINGENT FEE CON-

TRACT IN THIS CASE IS REASONABLE.

Petitioner argues that, as a factual matter, the con-

tingent fee contract in this case was unreasonable even

if section 1988 does not impose a per se limit on what

may be recovered. This argument, which rests largely on

state law, was rejected by both courts below. See Pet.

App. A16-A17, A28-A29. There are no exceptional cir-

cumstances that would warrant this Court in overturning

the concurrent findings of the district court and court of

appeals. See generally, e.g., Frisby v. Schultz, 108 S. Ct.

2495, 2500-2501 (1988); Goodman v. Lukens Steel Co.,

482 U.S. 656, 665 (1987).

Petitioner’s contention that the 40 percent fee is “mani-

festly oppressive” (Br. 34) is erroneous. The court of

appeals agreed with the district court that the fee “re-

flected the risk of nonrecovery.” Pet. App. Al7. The

validity of contingent fees under California law is well-

settled, and the contract in this case complied in all

respects with that governing state law. See California

Rules of Professional Conduct 4-200 and former rule 2-

107; Cal. Bus. & Prof. Code § 6147(a) (3); 1 Witkin,

California Procedure, “Attorneys,” $$ 149 et seq. (3d

ed. 1985). See also Delaware Valley, supra, 483 U.S. at

735-736 (Blackmun, J., dissenting) (describing profes-

sional consensus that contingency premium in private fee

contracts is permissible).

The court of appeals observed in particular that peti-

tioner had failed to present any evidence that a 40 per-

cent fee “is not standard in California for civil rights

cases.” Pet. App. A17.*' The district court agreed, con-

cluding that “|respondent’s| contingent fee does not con-

stitute a windfall.” Jd. at A28. Similarly, the Long

41 See also R. 260, at 12, E.R. 148 (declaration of respondent).

32

Beach City Attorney stated in opposition to the award

of fees under section 1988 that contingent fee agree-

ments “generally provide 25% to 40% of the award as

compensation for the prevailing attorneys.” * These con-

clusions are buttressed by other reported cases involving

contingent fees of 40 percent and more in civil rights

cases. See, e.g., Hernandez v. Hill Country Telephone Co-

operative, Inc., 849 F.2d 139, 144 (5th Cir. 1988) ;

Elmore v. Shuler, 787 F.2d 601 (D.C. Cir. 1986); Sisco

v. J.S. Alberici Constr. Co., 733 F.2d 55 (8th Cir. 1984) ;

Taylor v. Franklin Drapery Co., 443 F. Supp. 795 (W.D.

Mo. 1978). See also Phillips v. Smalley Maintenance

Services, Inc., 711 F.2d 1524 (11th Cir. 1983) (40 per-

cent fee for state law claims pendent to Title VII claim) ;

see generally, e.g., Novinger Vv. E.J. DuPont de Nemours

& Co., 809 F.2d 212 (3d Cir.), cert. denied, 481 U.S.

1069 (1987) (40 percent fee in product liability action).

Similarly misguided is petitioner’s argument that the

contract should be set aside because respondent did not

agree to handle the appeal without additional compensa-

tion. The written retainer agreement expressly provided

that it was for “one trial only” and that there was no

obligation to agree on further terms for representation

“Tijn the event there is a mistrial or an appeal” (Br. in

Opp. App. Al). The district court found no basis for

disregarding the terms of the contract. See Pet. App.

A29.* Respondent was accordingly well within his rights

#2 R. 238, at 4, E.R. 119.

43 Dalzell v. State Bar, 6 Cal. 2d 433, 57 P.2d 1300 (1936), on

which petitioner relies (Br. 37), has nothing to do with whether

an attorney is obligated to represent his client on appeal notwith-

standing the express terms of the retainer. “No appeal was taken”

in that case (57 P.2d at 1301). Rather, the attorney in Dalzell

“had charged and collected fees in excess of those authorized by

the contract of employment and had failed over a period of years

to account for the amounts collected or disbursements made by him

on behalf of his clients and * * * had improperly appropriated a

substantial portion of such collections to his own use in the guise

33

in proposing to take on the appeal for an additional ten

percent of the judgment, and he took the extra step of

asking petitioner to seek review of the proposal by in-

dependent counsel, which petitioner did.**

Since the contract covered only services at trial, peti-

tioner’s argument (Br. 37) that he “discharged” re-

spondent is erroneous, and his reliance on Fracasse v.

Brent, 6 Cal. 3d 784, 494 P.2d 9, 100 Cal. Rptr. 385

(1972), is misplaced. The rule in Fracasse—that a dis-

charged attorney can recover only the reasonable value of

his services and not the amount in a contingent fee

contract—has no application where, as here, the contract

was fully performed. In fact, the court in Fracasse made

clear that an attorney is entitled to his full contingent

fee if he is discharged “ ‘on the courthouse steps’” and

then “the client executes a settlement obtained after

much work by the attorney.” Jd., 494 P.2d at 14. Here,

of course, the attorney-client relationship ceased after

a favorable judgment was obtained, making the case for

enforcement of the contract even stronger than what was

contemplated in Fracasse.

There was no overreaching; to the contrary, a fee

structure with escalating percentages in the event of ap-

peal is a “common feature of contingent fee contracts.”

Wolfram, Modern Legal Ethics 532 (1986). Such fee

agreements have often been reported and, in particular,

have been enforced in California. See, e.g., Lane v. Wil-

kins, 229 Cal. App. 2d 315, 40 Cal. Rptr. 309 (1964)

‘contract provided for 331; percent contingency at trial,

of fees” (id. at 1302). Petitioner’s reliance (Br. 35-36) on 1

Speiser, Attorney’s Fees (1973), also is misplaced. The treatise

makes clear that a retainer is deemed to include services on appeal

without additional compensation only if it is silent on the matter.

Here, in contrast, the contract expressly addresses the issue.

44 Petitioner never responded to respondent’s statement that he

would entertain a counter-proposal concerning the terms of repre-

sentation on appeal. See R. 256, at 14, E.R. 191.

34

40 percent on initial appeal, and 45 percent on appeal to

state supreme court); Hagge v. Bauer, 827 F.2d 101, 111

(7th Cir. 1987) (40 percent at trial, 55 percent on ap-

peal) ; Kirchoff v. Flynn, supra, 786 F.2d at 324 n.5 (40

»ercent at trial, 50 percent on appeal) ; Sears v. Atchison,

T. & S.F. Ry., 779 F.2d 1450, 1451 (10th Cir. 1985)

(3314 percent at trial, 40 percent on appeal).; Gaines Vv.

Dixie Carriers, Inc., 434 F.2d 52, 53 (5th Cir. 1970)

(40 percent at trial, 50 percent on appeal). Contracts

providing for a 40 percent fee at trial and a 50 percent

fee on appeal are within the typical range. See Wolfram,

supra, at 532 n.44.

Petitioner also argues (Br. 38) that he was misled by

the statement in the contract that the fee “is not set by

law but is negotiable between Client and Attorney” (Br.

in Opp. A2). That statement is required by California

law. See Cal. Bus. & Prof. Code § 6147(a) (3). Peti-

tioner’s contention that the statement is incorrect begs the

basic question presented in this case, i.e., whether section

1988 establishes the maximum fee that may be charged.

If it does not, as the courts belew held, then the state-

ment is perfectly accurate. If it does, then the statement

is irrelevant because petitioner will be excused from pay-

ing the contingent fee due under the contract.®

Finally, petitioner argues (Br. 37-38) that respondent

should have informed him of the availability of an award

under section 1988, relying primarily on Denton v. Smith,

101 Cal. App. 2d 841, 226 P.2d 723 (1951). The argu-

ment is ill-founded. Respondent accurately informed pe-

titioner of the law pertaining to section 1988 as it then

stood in the Ninth Circuit and of his own experience with

respect to the availability of fees: that fees could be

45 Whatever this Court holds, the statement in the agreement

accurately reflected the law in the Ninth Circuit at the time of the

contract. Hamner Vv. Rios, 769 F.2d 1404 (9th Cir. 1985), was

decided before the agreement between petitioner and respondent

was signed.

35

awarded under section 1988 but that respondent had never

successfully collected them. As respondent stated, “I never

told [petitioner] that any award of attorneys fees * * *

never amounted to anything. I did tell him * * * that I

had never successfully collected those fees.” *° See also

Willard v. City of Los Angeles, supra, 803 F.2d 526;

Mitchell v. City of Los Angeles, supra, 753 F.2d 86.

The state appellate court decision in Denton v. Smith

is not on point. There, the contract for legal services

failed for want of consideration because the lawyer did

not explain to his client that he probably would be able

to recover his interest in the probate matter “without

requiring any legal services on [the lawyer’s] part.” 226

P.2d at 725 (emphasis added). Moreover, the parties in

that case had an attorney-client relationship “for more

than a month prior to” the date on which the contract

was executed, yet the attorney did not suggest an “inde-

pendent advisor” to review the contract (id.). Here, in

contrast, there was ample consideration for the contract

and there was no attorney-client relationship when it was

executed. When the time came to discuss representation

on appeal, respondent ensured that petitioner had the

benefit of the independent counsel contemplated in Denton.

In view of respondent’s experience with section 1988

fee waivers by his clients in other civil rights actions, he

was unwilling to represent petitioner without the protec-

tion of a contingent fee contract that offered the prospect

of an enforceable right to fees in the event of recovery.*

The agreement nonetheless reflected the possibility of an

award under section 1988 and protected petitioner by

providing that any such award would be credited against

46 R. 256, at 13, E.R. 190.

47 Respondent’s declaration details four cases in which his clients

waived their right to fees under section 1988 as part of settlements,

thereby eliminating his primary source of compensation for his sub-

stantial services that in each case led to the attainment of his

clients’ objectives. R. 256, at 17-20, E.R. 194-197.

36

the contingent fee (Br. in Opp. App. A3). In short, peti-

tioner obtained counsel of his choice through the written

retainer, respondent provided “exceptionally competent” **

legal services in reliance on the fee stated in the contract,

and petitioner received the benefits of those services in the

form of a recovery more than twice that awarded at trial

in the prior state proceeding.

For all these reasons, this Court should affirm the con-

current findings below that the contract was reasonable,

and certainly not unfair to petitioner.

CONCLUSION

The judgment of the court of appeals should be af-

firmed.

Respectfully submitted,

CHARLES A. MILLER

Counsel of Record

BRUCE N. KUHLIK

COVINGTON & BURLING

1201 Pennsylvania Ave., N.W.

P.O. Box 7566

Washington, D.C. 20044

(202) 662-6000

Attorneys for Respondent

December 15, 1989

45 R. 242, at 6, E.R. 134.

A a i TT CT a oe ca a