Amicus Curiae Brief — Marek v. Chesny

ris

No. 83.1437 — SEP 14 1964

Ixy THE

Supreme Court of the United States

Octoper Term, 1983

JEFFREY Marek, THomMas WaDYCKI

and Lawrence Ruops,

Petitioners,

VS,

Aurrep W. CHEsNY,

Respondent.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SEVENTH CIRCUIT

BRIEF OF THE NAACP LEGAL DEFENSE AND

EDUCATIONAL FUND, INC., AS AMICUS CURIAE

Barry L. GoLpsTrern

Suite 940

806 15th Street, N.W.

Washington, D.C. 20005

(202) 638-3278

Jcvuivs LEVoxxe CHAMBERS

CHarLes STEPHEN Ratstox*

99 Hudson Street

16th Floor

New York, New York 10013

(212) 219-1900

Attorneys for Amicus Curiae

*Counsel of Record

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES eeeeteeneenesten8Heeeeeeee: iv

INTEREST OF AMICUS eeeeseeeeeeeeeeeeeeees l

Ss UMMARY OF ARGUMENT eeeeeneeesente#es#ee#e#ee#e#ee#e#e# 3

ARGUMENT

I. PETITIONER'S CONSTRUCTION

OF RULE 68 NEITHER PROPERLY

INTERPRETS THE LANGUAGE OF

THE RULE NOR SERVES THE

POLICIES UNDERLYING THE

RULE .cccccccccscccccscscces 5

A. The Language of Rule

68 Does Not Permit

the Equation of

"Costs" Under the

Rule with “Costs” as

Used in Fee-Shifting

SCSCutesS ccccccccccece 7

B. Petitioners' Con-

struction of Rule 68

Would Not Promote

Increased Settlements 15

II. PETITIONERS' CONSTRUCTION

OF RULE 68 WOULD UNDERMINE

THE CLEAR CONGRESSIONAL

POLICIES EMBODIED IN FEE-

SHIFTING PROVISIONS IN

CIVIL RIGHTS CASES ........ 19

Page Page

General” in the A. The Current Standard

Enforcement of the for Awarding Counsel

of the Civil Rights Fees in Civil Rights

Laws 0 60eeeeenes beeeeut Cases Better Serves the

Purposes of § 1988 ... 21

Ze Petitioners' Inter-

pretation of Rule - Petitioners'

68 Is Inconsistent Standard Would

with the Rules Improperly Deny

Enabling AGt ccocccse 45 the District

Court Discretion

III. PETITIONERS' INTERPRETATION in Awarding Fees 23

OF RULE 68 CONFLICTS WITH THE

POLICIES CONCERNING CLASS — S Petitioners'

ACTIONS EMBODIED IN RULE 23 ...48 Construction of

Rule 68 Would

A. Petitioners’ Construc- Result in

tion of Rule 68 Will Increased

Create Conflicts of Litigation Over

Interest Between Repre- Attorney's Fees .. 29

sentatives and Class

Memb@rS ccccccccccceseces 50 B. The Proposed Standard

Undermines the Substan-

B. The Application of Rule tive Goals of the Civil

68, as Interpreted by Rights Laws .......... 34

Petitioners, to Class

Actions Would Be In- ® Petitioners'

consistent with the Reading of Rule

Requirements of 68 Will Deter

Rule 23(€) wecccssccves 53 Plaintiffs from

Pursuing

IV. PETITIONERS' CONSTRUCTION Meritorious

OF RULE 68 WOULD SIGNIFICANT- TT 36

LY IMPAIR THE ATTORNEY-

CLIENT RELATIONSHIP ..ccceees 57 2. Petitioners’

Reading of Rule

CONCLUGICON .ccocneesccesteseebenne ee 68 Conflicts with

the Central Role of

"Private Attorneys

TABLE OF AUTHORITIES

Cases Page

Albemarle Paper Co. v. Moody, 422

U.S. 405 bia, ) Perr eTritrTeee 2

Alyeska Pipeline Service Co. v. Wilder-

ness Society, 421 U.S. 240 (1975)...11,19

Brown v. Board of Education, 347 U.S.

483 CIPwOdeceoeooeesooeeseeeeeese 2

Carey v. Piphus, 435 U.S. 247

f Ve repecoceseeoeseeesebooeseboesece 322,39

Chesny v. Marek, 720 F.2d 474

(7th Cir. 1983).....+++7-16,46,47,60,62

Christiansburg Garment Co. v. EEOC

434 U.S. 412 (1978)......20,21,25,26,41

Copeland v. Marshall, 641 F.2d 880

(D.C. Cir. 1980) eseeeeeeneeeeeee 22

Delta Air Lines v. August,*450

U.S. 346 (1981). ccccceeeeceee 59 24,55,58

Dennis v. Chang, 611 F.2d 1303

(9th Cir. WSO dp cccesoccoeseceoce 17

East Texas Motor Freight System v.

Rodriguez, 4312 U.S. 395

S Vee Ubeeeeeeoseseensneeeee once 49

Faraci v. Hickey-Freeman Cor.,607

F.2d 1025 (2d Cir. 1979)...... 25

-= Y-=

Page

Gay v. Waiters' & Dairy Lunchmen's

Union, Local No. 39, 76 F.R.D.

500 (N.D. Cal. 19SO) cccccecece 51

General Telephone Co. v. Falcon,

457 U.S. 157 (1982). cccccccees 48

Griggs v. Duke Power Co., 401 U.S.

424 (1971) cccccccccescsescsces 2

Hanna v. Plumer, 380 U.S. 450 a6

(1965S) ccc cccceeccsessesesseceses

Hensley v. Eckerhart, U.S.

76 L.Ed.2d 40 (1983)7....10776, 20,21,22

27,31,32,33,38,41

Hooks v. General Finance Corp.,

652 F.2d 651 (6th Cir. 1981).. 52

McCann v. Coughlin, 698 F.2d 112 33

(2d Cir. 1983) cccccccccccccsess

Mendoza v. United States, 623 F.2d

1338 (9th Cir. (1980). .ceeeees 61

Mills v. Electric Auto-Lite Co.,

396 U.Ss. 375 (1970) .cccccccce 43

Moreland v. Rucker Pharmacal Co.,

63 F.R.D. 611 (W.D. La. 1974). 53

Nesenoff v. Muten, 67 F.R.D. 500

(E.D.N.Y. 1974S) ccccccccccceces 53

- vi -

Page

Newman v. Piggie Park Enterprises,

390 U.S. 400 (1968)...ceeeeeee 20,34,41

New York Gaslight Club, Inc. v.

Carey, 477 U.S. 54 (1980)..... 19,46

Prandini v. National Tea Co., 557

F.2d 1015 (3rd Cir.

Regalado v. Johnson, 79 F.R.D.

447 (N.D. Ill. 197B) ccccccoces

Roadway Express,

447 U.S.

Inc. v. Piper,

Scheriff v.

1254 (D.

Beck,

Colo.

452 F. Supp.

19TE) cccccccces

Staffend v.

47 F.R.D.

Lake Central Airlines,

218 (N.D. Ohio 1969)..

Statutes and Rules

Act of Sept. 12, 1980, Pub. L.

No. 96-349. cc cece sessceessesese

Equal Pay Act of TG9STccccceesoooce

Fed. R.

Civ. P. Rule l eeeeseeeeneeeees

1977) .-e+- 60,61,62

59

752 (1980). ccccccecelyg11,14,19

54,58

55

11

Beek?

+

-

Page

Fed. R. Civ. P. Rule 23......2++2+4,48,49,50

52,53,54,55,56

Fed. R. Ci8v. P. Rule 68 .....++++- passim

Fed. R. Civ. P. Rule 37(b).......- 11

Freedom of Information Act, 5

U.S.C. § 522(a)(4)(E) (1982)...... 13

28 U.S.C. § 1927 (1976; codified

as amended, 1982) ..ceeeeceseces 8,11

28 U.S.C. § 1920 (1982). .ccceeeees 5,13

28 U.S.C. § 2072 (1982)... eevee

29 U.S.C. § 206(d) (1982)... ee0e. 9

29 U.S.C. § 216(b) (1982)....2608- 9

43 Biba. @-OG0D: cdcdceccccscosvec passim

42 U.S.C. § 2000e-S(k)...ceeeeeeee 8,9,13

S. Rep. No. 1011, 94th Cong., 2d

Sess. (1976)..s+e++e+++ 19,20, 32, 35, 36,39

Othtr Authorities

Fiss, Against Settlement, 93 Yale

- Lede POTvrTrrrersrsrrrse 45

Manual for Complex Litigation, Part

I, § 1.46 at 75 O).°) RPPrrrrrTre 62

IN THE SUPREME COURT OF THE UNITED STATES

October Term, 1983

JEFFREY MAREK, THOMAS WADYCKI

and LAWRENCE RHODE,

Petitioners,

vs.

ALFRED W. CHESNY,

Respondent.

On Writ of Certiorari

to the United States Court of Appeals

for the Seventh Circuit

BRIEF OF THE NAACP LEGAL DEFENSE AND

EDUCATIONAL FUND, INC., AS AMICUS CURIAE

Interest of Amicus*

The NAACP Legal Defense and Educational

Pund, Inc., is a nonprofit corporation whose

J Letters of consent to the filing of this

Brief have been lodged with the Clerk of

Court.

~— a

principal purpose is to secure civil and

contitution rights of black people. For

more than forty years, its attorneys have

represented parties in thousands of civil

rights actions, including many significant

cases before this Court. See, e.g9.,

Albemarle Paper Co. v. Moody, 422 U.S. 405

(1975); Griggs v. Duke Power Co., 401 U.S.

424 (1971) ; Brown v. Board of Education,

347 U.S. 483 (1954).

A substantial percentage of LDF's

current docket consists of cases involving

employment discrimination, voting rights,

and various constitutional and statutory

claims. In these areas, prevailing plain-

tiffs normally are entitled to reasonable

attorney's fees pursuant to various statu-

tory fee-shifting provisions.

- 3-

LDF thus believes that the Court's

decision in the case at bar may signifi-

eunthe affect both its own ability to

represent clients in future cases and the

ability of victims of discrimination in

general to vindicate their rights.

Summary of Argument

te Defining the word “costs" in Rule

68 to include attorney's fees in cases

involving fee-shifting is inconsistent with

the purpose of the Rule and would not

promote just and speedy settlements. In

addition, adopting petitioner's reading of

"costs" would simply redistribute the gains

of settlement in favor of defendants.

2. Petitioner's construction of Rule

68 would significantly undermine Congress'

intent in enacting fee-shifting statutes.

Congress and this Court have made clear that

prevailing plaintiffs in civil rights

- 4

actions are entitled to reasonable attor-

ney's fees unless there are special cir-

cumstances which would render an award of

attorney's fees unjust. A plaintiff's

good-faith refusal of a defendant's offer of

judgment simply is not such a special

circumstance.

3. Including attorney's fees within

the definition of costs would pose tre-

mendous problems in class actions. The

intent of the drafters of Rule 68 to prevent

the court from becoming involved in, the

offer of judgment conflicts with the

supervisory responsibilities of the court

under Rule 23. Petitioners’ interpretation

would drive a wedge between the interests of

the named plaintiff and those of the@Plass.

4. Petitioners’ construction of Rule

68 would create, at the very least, an

apparent conflict of interest between plain-

- 5 -

tiffs and their attorneys. It would create

an incentive for lawyers to counsel their

clients to settle cases in order to guar-

antee their own fees rather than because the

settlement is in fact favorable to the

client.

Argument

I. PETITIONERS' CONSTRUCTION OF RULE 68

NEITHER PROPERLY INTERPRETS THE

LANGUAGE OF THE RULE NOR SERVES THE

POLICIES UNDERLYING THE RULE.

"The purpose of Rule 68 is to encourage

the settlement of litigation,” Delta Air

Lines y. August, 450 U.S. 346, 352 (1981),

and thus to’ contribute to “the just, speedy,

and inexpensive determination of every

action.” Fed. R. Civ. P. 1. Interpreting the

word "costs" to include attorney's fees as

well as the costs listed in 28 U.S.C. § 1920

- 6 -

(1982) in cases involving statutory attor-

ney's fee-shifting provisions would not

serve that goal.

Rule 68 uses the word “costs” in two

contexts directly relevant to the incentives

it provides for settlement. The Rule applies

to offers, "with costs then accrued." Fed.

R. Civ. P. 68 (emphasis added). The Rule

further provides that "[{i]f the judgment

finally obtained by the offeree is not more

favorable than the offer, the offeree must

pay the costs incurred after the making of

the offer." Id. (emphasis added).

Petitioners argue that courts should

look to any definition of costs provided by

a substantive statute involved in the case.

Because 42 U.S.C. § 1988 (Supp. V 1981)

states that “in any action or proceeding to

enforce a provision of Sections 1977, 1978,

1979, 1980, and 1981 of the Revised

“7 «

Statutes, Title IX of Public Law 92-318, or

Title VI of the Civil Rights Act of 1965,

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," petitioners would include a

prevailing plaintiff's post-offer attorney's

fees within the costs which the plaintiff

must bear if the defendant's offer exceeds

his ultimate recovery at trial. As the

Court of Appeals noted in this case, such a

conclusion “rests on [a] rather mechanical

linking up" of the two provisions. Chesny v.

Marek, 720 F.2d 474, 478 (7th Cir. 1983).

A. The Language of Rule 68 Does Not

the E

Permit uation of “Costs”

Under the Rute with “Costs” as

Us n Free~ ng tatutes.

In Roadway Express, Inc. v. Piper, 447

U.S. 752 (1980),this Court held that the

attorney's fees provisions in §§ 1988 and

- 8 -

2000e-5(k) should not be incorporated into

28 U.S.C. § 1927 (1976; codified as amended,

1982), which permits a court to tax the

excess costs of a proceeding against a

lawyer who multiplies the proceedings

unreasonably and vexatiously. The Court

rested its rejection of the “superficially

appealing argument" that the non-defined

"costs" mentioned in § 1927 could be given

meaning by reference to §§ 1988 and

2000e-5(k), 447 U.S. at 758, ona number of

considerations applicable to the case at

bar. 2

To paraphrase Piper, petitioner's

construction of Rule 68 and § 1988 “could

introduce into the [Rule] distinctions

unrelated to its goal ... and could result

in virtually random application of [Rule 68]

on the basis of other laws that do not

address the problem of controlling abuses of

- 9 -

judicial processes.” 447 U.S. at 761-762. It

would make little sense to interpret Rule 68

in a way that gives significant weight to

those insignificant variations.

For example, many employment dis-

crimination cases alleging bias on the basis

of gender are brought under both Title VII

of the Civil Rights Act of 1964, 42 U.S.C. §

2000e (1976), and the Equal Pay Act of 1963,

29 U.S.C. § 206(d) (1982). The attorney's

fees provision of Title VII allows pre-

vailing plaintiffs to recover fees “as part

of the costs" of suit. 42 U.S.C. §

2000-5(k). The provision of the Fair Labor

Standards Act applicable to Equal Pay Act

Claims, however, directs the court to award

"a reasonable attorney's fee to be paid by

the defendant, and costs of the action.” 29

U.S.C. § 216(b) (1982) (emphasis added). It

would be absurd to argue that a prevailing

- 10 -

plaintiff should not recover that part of

his post-offer fees expended on a Title VII

claim while he should recover that part

involved in an Equal Pay Act claim.

Such an approach would fly in the face

of this Court's recognition in Hensley v.

Eckerhart, U.S. , 76 L.Ed.2d 40, 51

(1983), that many civil rights cases

"involve a common core of facts or will be

based on related legal theories” which make

it inappropriate for a court to apportion an

attorney's fees request among various claims

on a mechanical basis. Rule 68 simply cannot

be read to toll the defendant's liability

for fees for the Equal Pay Act claim, since

they are not “costs." Thus, a defendant's

claim that a prevailing plaintiff's fees

should somehow be reduced would embroil the

judge in a parsing exercise based on fine

linguistic variations which Petitioners'

@- 11 -

argument in this case transforms into

artificial bright-line distinctions. Sureiy,

there is no logical reason to suppose that

the judicial system should be more eager to

induce settlement of Title VII sex-dis-

crimination claims that of virtually

identical Equal Pay Act causes of action.

Furthermore, this Court's decision in

Roadway Express, like its decision in

Alyeska Pipeline Service Co. v. Wilderness

Society, 421 U.S. 240 (1975), reserved for

Congress the delicate duty of determining

how prevailing plaintiffs’ attorney's fees

should be affected by general, procedural

provisions. See Act of Sept. 12, 1980, Pub.

L. No. 96-349, § 3, 94 Stat. 1156 (codified

at 28 U.S.C. §1927 (1982)), (amending § 1927

to include “attorney's fees reasonably

incurred” as well as “costs"). In addition,

unlike Rule 68, Fed. R. Civ P. 37(b), which

- 12 =-

concerns sanctions for a party's failure to

comply with discovery orders, explicitly

provides that the court shall normally

assess “the reasonable expenses, including

attorney's fees, caused by the failure [to

comply].”

The recent proposal by the Advisory

Committee on Civil Rules to amend Rule 68 to

include attorney's fees in all cases adds

support to the inference that the Rule does

not currently view fees as costs. The

proposed amendment provides that an offeree

who recovers less than the offer "must pay

the costs and expenses including reasonable

attorney's fees, incurred by the offeror

after the making of the offer...." Pre-

liminary Draft of Proposed Amendments to the

Federal Rules of Civil Procedure, Rule 68

Offer of Settlement, 98 F.R.D. 337, 362

(1983) [hereinafter cited as Proposed Rule

- 13-

68) (new material in italics). If the term

"costs" necessarily included attorney's

fees, then the addition of the phrase "and

expenses including ... fees" would have been

unnecessary. The drafters' inclusion of

"and expenses including ... fees" therefore

supports the inference that "costs" as it

now stands refers solely to the traditional

costs defined in 28 U.S.C. § 1920. Thus,

"costs" under Rule 68 has retained its

"technical" meaning, while “costs” under §§

1988 and 2000e-5(k) has been broadened to

include the actual expenses of litigating a

case. Cf. Freedom of Information Act, 5

U.S.C. § 522(a) (4) (E) (1982) (providing

for award of “reasonable attorney's fees

and other litigation costs reasonably

incurred").

- 14-

The proposed amendment also would

eliminate the requirement that a Rule 68

offer include costs. The Advisory Committee

Note explains this deletion by referring to

the confusion which the inclusion of the

requirement would cause if read in con-

junction with fee-shifting statutes’

definitions of “costs.” Proposed Rule 68, 98

F.R.D. at 364. This confusion would also

arise if petitioners' erroneous construction

of the Rule is adopted. If attorney's fees

are not viewed as part of the costs to which

Rule 68 applies, then there is no problem.

As this Court noted in Roadway Express, from

the very outset Congress has sought "to

Standardize the treatment of costs in

federal courts, to 'make them uniform --make

the law explicit and definite.'" 447 U.S.

at 761 (quoting H.R. Rep. No. 50, 32d Cong.

Ist Sess. 6 (1852)). The aim of uniformity

= 1§ «-

embodied in Congress' intent and the Federal

Rules of Civil Procedures would best be

served by defining costs in Rule 68 pro-

ceedings identically in all cases.

B. Petitioners' Construction of Rule

ou romote Increase

ement.

Petitioners’ argument assumes that the

allowance or disallowance of post-offer

counsel fees will only affect plaintiffs’

decisions whether to accept settlement

offers or continue to trial. This exclusive

concentration on the way in which Rule 68

influences plaintiffs' incentives to accept

an offer ignores the deterrent effect

petitioners' proposal will have on de-

fendants' decisions to make settlement

offers.

Through an offer of settlement, the

defendant can fix his liability at a certain

sum and, he hopes, pay less than he would be

- 146-

found liable for at trial.Thus, a key factor

in a party's decision about settlement is

his assessment of his prospects should the

case go to trial. Under the rule enunciated

by the Seventh Circuit in Chesny, this would

be the sum of the present expected value of

the plaintiff's recovery on the merits and

the present expected value of the

plaintiff's reasonable attorney's fees

(discounted, of course, by the likelihood of

the plaintiff's prevailing). The defendant

has a strong incentive to settle the case

for any amount less than this sum plus his

costs of going to trial, an amount he will

subjectively determine. The cost-shifting

scheme embodied in § 1988 contributes to the

pressure on defendants to settle. See

Hensley v. Eckerhart, U.S. o 6

L.Ed.2d 40, n.2 (1983) (Brennan, Jes

concurring in part and dissenting in part);

© 17 «

Dennis v. Chang, 611 F.2d 1303, 1307 (9th

Cir. 1980). In negotiations, the plaintiff,

who does not know the defendant's subjective

assessment, will try to drive the

defendant's maximum offer up until it

exceeds the plaintiff's subjective

assessment.

The effect of petitioners' proposal

would simply be to shift the "price range"

within which settlement negotiations take

place. A defendant will make a lower offer

to a plaintiff, since the expected value of

his liability to the plaintiff will decr-ase

by the amount of the plaintiff's post-offer

attorney's fees should the plaintiff recover

less at trial. A plaintiff's demands also

will decrease, since the cost of proceeding

to trial will now also include that part of

his attorney's fees which he cannot recover

if the offer exceeds the judgment he obtains

- 18 «

after trial. That such a shift occurs,

however, says absolutely nothing about

whether the gap between a plaintiff's

minimum demand and a cefendant's maximum

offer --which determines whether there will

be a settlement --will become wider or

narrower.

Thus, the primary effect of

Petitioner's construction would be

distributive: since the price of settlement

offers will decrease, defendants will retain

more and plaintiffs will receive less. There

is absolutely nothing in Rule 68 to suggest,

however, that it or the rules of civil

procedure in general are intended to

distribute the amount at issue in a lawsuit

in the defendant's favor. Indeed, the only

cases which petitioner's construction would

affect are precisely those in which there is

a clearly articulated Congressional policy

o 19 «

favoring plaintiffs. See infra Section II.

Thus, because petitioners' interpretation of

Rule 68 is “indifferent to the equities of a

dispute and to the values advanced by the

substantive law," Roadway Express, Inc. v.

Piper, 447 U.S. at 762, it must be rejected.

II. PETITIONERS' CONSTRUCTION OF RULE 68

WOULD UNDERMINE THE CLEAR CONGRESSIONAL

POLICIES EMBODIED IN FEE-SHIFTING

PROVISIONS IN CIVIL RIGHTS CASES.

In deciding to enact § 1988 following

the decision in Alyeska Pipeline Service Co.

v. Wilderness Society, 421 U.S. 240 (1975),

Congress clearly stated its belief that

attorney's fees to prevailing parties play a

critical role in civil rights cases: “One

aspect of complete relief is an award of

attorney's fees which Congress considered

necessary for the fulfillment of federal

goals." New York Gaslight Club, Inc. v.

Carey, 477 U.S. 54, 67-68 (1980); see S. Rep

- 20 -

No. 1011, 94th Cong., 2d Sess. 5 (1976).

There are three principles which must inform

the award of fees. First, a prevailing

plaintiff “should ordinarily recover an

attorney's fee unless special circumstances

would render such an award unjust." Hensley

v. Eckerhart, 76 L. Ed.2d at 49; see

Christiansburg Garment Co. v. EEOC, 434 U.S.

412 (1978); Newman Vv. Piggie Park

Enterprises, 390 U.S. 400, 402 (1968) (per

curiam); S. Rep. No. 1011, 94th Cong., 24

Sess. 2-3 (1976). Second, a prevailing

plaintiff's fee must be reasonable. Hensley,

76 L.Ed.2d at 50. Third, a defendant is

entitled to recover his fees from a

plaintiff under § 1988 only "where the suit

was vexatious, frivolous, or brought to

harass or embarrass the defendant." Hensley

v. Eckerhart, 76 L.Ed.2d at 48, n.2.

-_—_

@ 23 «

As this Court noted in Christiansburg

Garment Co., even "a moment's reflection"

explains this differential treatment of

prevailing plaintiffs and defendants:

"First, ... the plaintiff is the chosen

instrument of Congress to vindicate ‘a

policy that Congress considered of the

highest priority.' Second, when a district

court awards counsel fees to a prevailing

plaintiff, it is awarding them against a

violator of federal law." 434 U.S. at 418.

Petitioner's arguments as to how Rule 68

should operate in civil rights cases ignores

these concerns.

A. The Current Standard for Awardin

Counsel Fees in Civil Rights cases

Better Serves the Purposes Of S

T3588.

Recently in Hensley v. Eckerhart,

this Court clarified the proper relationship

of the results obtained to an award of

attorney's fees. Petitioner's construction

@ 22 «

Of Rule 68's relationship to § 1988 is

inconsistent with the considerations

enunciated in Hensley.

Hensley set out the process by which a

trial court should assess a prevailing

plaintiff's request for counsel fees. "The

most useful starting point ... is the number

of hours reasonably expended multiplied by a

reasonable hourly rate." 76 L.Ed. 2d at 50.

In determining the number of hours rea-

sonably expended, the district court should

exclude "excessive, redundant, or otherwise

unnecessary" hours. Id. at 51; see Copeland

v. Marshall, 641 F.2d 880 (D.C. Cir. 1980)

(en banc).

The district court may adjust this

"lodestar figure to reflect the degree of a

Flaintiff's success." 76 L.~Ed.2d at 52.

- 23 -

This Court made clear, however, that such a

reduction should not be based on any

mechanical formula. Id. at 52, n. ll.

The Court "reemphasize[d] that the

district court has discretion in determining

the amount of the fee award. This is

appropriate in view of the district court's

superior understanding of the litigation,"

id. at 53 and stressed the undesirability of

having the request for counsel fees “result

in a second major litigation,” id.

1. Petitioners’ Standard Would

mproper eny the strict

Toure: Discretion in Awarding

ees

Hensley focuses on the reasonableness

of a prevailing plaintiff's request, given

all the circumstances. In contrast,

- 24 -

petitioners' approach totally ignores the

individual circumstances of particular

cases.

A district court's evaluation of a

reasonable attorney's fee is made within the

context of the Congressional purpose that

courts award fees adequate to insure the

competent representation of civil rights

plaintiffs. Petitioner in this case would

scrap this fact- and policy-bound inquiry in

favor of a mechanical rule that would hold

all post-offer expenditures of time by a

Plaintiff to be irrebuttably unreasonable.

Unlike § 1988, or, for that matter, Rule 54,

Rule 68 requires a less-successful offeree

to pay costs incurred after the offer; it

affords no discretion to the trial judge. As

this Court noted in Delta Air Lines,

- 25 -

however, such discretion is critical to the

entire cost-allocation scheme. 450 U.S. at

353-55.

This Court decisively rejected such an

irrebuttable presumption in Christiansburg

Garment Co., 434 U..S. at 422. Such a

presumption should also be rejected here.

If, under Christiansburg Garment Co., a

losing plaintiff cannot be forced to bear

his opponent's costs simply because he has

lost, the case against requiring a winning

Plaintiff to pay what would otherwise be the

defendant's obligation simply because he

made an erroneous guess about his recovery

at trial is all the more compelling.

Moreover, petitioners’ construction of

Rule 68 would impair the accuracy of a

Plaintiff's assessment of a defendant's

offer by encouraging a defendant to make a

very early offer. If the offer is made

- 26 -

before the plaintiff has completed dis-

covery, it both requires the plaintiff to

evaluate the merit of the offer without

adequate information and places the plain-

tiff at risk of being liable for all his own

fees if discovery shows that he is unlikely

to be more successful at trial. |

Finally, in a manner contrary/to the

Principles of the fee-shifting statute,

Petitioner's proposed mechanical standard

would work unfairly in many civil rights

actions. As Christiansburg Garment Co.,

notes, the law in many areas of

antidiscrimination may change substantially

between the time a suit is filed and its

ultimate determination. Thus, at the time

the offer was made, the plaintiff might have

been entitled to all the relief he was

seeking, given the facts adduced at trial.

By the time of trial, however, standards may

- 27 -

have changed in a way that denies plaintiff

some of that relief. Even though the

results plaintiff has achieved under the new

standard are “excellent,” Hensley, 76

L.Ed.2d at 52, and worth the expenditure of

hours spent, they may not be equal to the

defendant's earlier offer. If the fees

incurred are consonant with the result

achieved, it would be unreasonable to deny

those fees merely because plaintiffs could

have done better than the law allows.

Additionally, the 1946 amendments to Rule 68

make clear that a defendant whose first

offer was not accepted may make additional

offers: "In the case of successive offers

not accepted, the offeror is saved the costs

incurred after the making of the offer which

was equal to or greater than the judgment

ultimately obtained.” Advisory Committee

Note, Fed. R. Civ. P. 68. If, however, a

- 28 -

Plaintiff's attorney advises him to reject

an offer, the plaintiff follows that advice

and the defendant makes a new, higher offer,

then the plaintiff's initial refusal was

clearly reasonable, whatever the merits of

his additional refusals. Thus, to disallow

the attorney's fees involved in attempting

to extract a better settlement offer from a

defendant who offers an unacceptably low

amount the first time around would compel

plaintiffs to settle for less than their

Claims are really worth.

Overall, then, by ignoring the

reasonableness of the parties' actions and

forbidding the proper exerise of judicial

discretion under § 1988, Petitioners’

interpretation undermines this Court's

longstanding approach to the award of

attorney's fees.

e 29 «

2. Petitioners' Construction of Rule

u esu n ncreas

gation er orney s Fees.

There are two reasons why adopting

petitioner's interpretation of Rule 68 would

increases the already substantial amount of

fee-award litigation now occupying the

courts. Petitioners' interpretation

provides defendants' with an incentive to

litigate such questions, and it involves

application of an extraordinarily complex

standards which will encourage appeals from

trial court's findings.

If petitioners' reading of the Rule

were adopted, a defendant would have to be a

fool not to make _some offer in every case

involving fee-shifting, since that offer,

know matter how low, would automatically

toll the accumulation of attorney's fees if

- 30 -

the plaintiff was less successful at trial.

increase the already sukscantial amocnrt of

fee-award litigation now occupying the

courts. Petitioners' interpretation provides

defendants with an incentive to litigate

such questions, and it involves application

of an extraordinarily complex standard which

will encourage appeals from trial court's

findings.

If petitioners' reading of the Rule

were adopted, a defendant would have to be a

fool not to make some offer in every case

involving fee-shifting, since that offer, no

matter how low, would automatically toll the

accumulation of attorney's fees if the

plaintiff was less successful at trial.

Thus, in every case in which the plaintiff

is not wholly successful in prevailing on

all his claims, a defendant may claim

release from post-offer fees. This type of

- 31 -~

Claim will be particularly prevalent

whenever the cost of litigating this issue

is likely to be less than the costs of

paying the additional attorney's fees the

plaintiff claims.

This temptation to litigate will be

exacerbated by the complexity of many civil

rights cases. Rule 68 may be well designed

for cases involving purely monetary claims.

It is easy to see that an offer of $50,000

plus costs is more favorable to the offeree

than an ultimate recovery of $25,000 plus

costs. As this Court noted in Hensley,

however, it is far more difficult to assess

the relative merits of various "packages" of

celief which involve non-pecuniary recovery.

The Senate Report accompanying the enactment

of § 1988 makes crystal clear that

attorney's fees in civil rights cases should

not be affected by the non-pecuniary nature

- 32 -

of the rights involved. S. Rep. No. 1011,

94th Cong., 2d Sess. 6 (1976). Thus, to

elaborate upon the Court's example in

Hensley, 76 L.Ed.2d at 52 n.11, suppose that

a plaintiff sued for $10,000 in damages and

an injunction stopping certain allegedly

unconstitutional prison practices. If the

defendant offered the plaintiff $5,000 in

damages, but refused to agree either that it

had violated his constitutional rights or

that it would discontinue the practices, the

plaintiff might well refuse the offer.

Suppose at trial the plaintiff is unable to

prove actual damages and therefore is

entitled only to nominal damages of $1, see

Carev v. Piphus, 435 U.S. 247, 266 (1978),

- 33-

but he succeeds in proving the

unconstitutionality of the practice and in

obtaining an injunction. It is undoubtedly

clear that the plaintiff is a prevailing

party within the meaning of § 1988. See

Hensley, 76 L.Ed.2d at 50; McCann vy.

Coughlin, 698 F.2d 112 (2d Cir. 1983)

a award of fees in a similar case).

It is far less clear, however, that every

district court would hold that such a

plaintiff was more successful at trial than

he vobia have been had he accepted the

defendant's offer. Thus, even though the

defendant knows that the plaintiff will be

entitled to some fee award, he has an

incentive to challenge post-offer fee

requests on the ground that the plaintiff

did not prevail by enough.

» 34 «

B. The Proposed Standard Undermines

the Substantive Goals of the Civil

Rights Laws.

For nearly twenty years this Court has

recognized that enforcement of the civil

rights laws depends on private litigation

and that when a civil rights plaintiff

prevails, “he does not do so for himself

alone but also as a ‘private attorney

general,' vindicating a policy that Congress

considered of the highest priority." Newman

v. Piggie Park Enterprises, 390 U.S. at 402.

The Senate Report accompanying the passage

of § 1988 put the matter bluntly:

All of these civil rights laws

depend heavily upon private

enforcement, and fee awards have

proved an essential remedy if

private citizens are to have a

meaningful opportunity to

vindicate the important

Congressional policies which these

laws contain..... “Not to award

counsel fees eee would be

tantamount to repealing the [civil

rights] laws [themselves] by

- 35 -

frustrating their basic

purpose....”" Without counsel fees

the grant of Federal jurisdiction

is but an empty gesture.

S. Rep. No. 1011, 94th Cong., 2d Sess. 2, 3

(1976) (citations omitted).

Petitioners' construction of Rule 68

would undermine this explicit Congressional

concern in two ways: First, it will deter

plaintiffs from vigorously pursuing vin-

dication of their personal interests in

nondiscriminatory treatment, such as backpay

or reinstatement. Second, it will create a

dangerous incentive for an individual

plaintiff to compromise the wider public

interests involved in his particular case.

Because of these adverse effects on the

substantive ends of civil rights law,

Petitioners' interpretation of Rule 68 runs

afoul of the Rules Enabling Act.

o 36

1. Petitioners' Reading of Rule

“$8 Will Deter BlaintitTs From

rsuing Meritorious Claims.

As the Second Circuit noted, “(t]he

Standard by which [courts] allocate counsel

fees between a victorious litigant and his

opponent can have a substantial effect on

settlement negotiations, and, indeed, on a

prospective plaintiff's very decision to

bring suit." Faraci v. Hickey-Freeman Co.,

607 F.2d 1025, 1027 (2d Cir. 1979). The

legislative history of § 1988 clearly

recognized that individuals who alleged the

violation of their civil rights "must have

the opportunity to recover what it costs

them to vindicate these rights in court....

If the cost of private enforcement becomes

too great there will be no. private

enforcement." S. Rep. No. 1011, 94th Cong.,

2d Sess. 2, 6 (1976).

- 37 -

Petitioners' position would raise these

costs because it penalizes plaintiffs twice

for rejecting a settlement offer. The

plaintiff has already lost the difference

between the value of the offer and his less

valuable recovery at trial. The danger of

such a result already provides an incentive

for plaintiffs to settle. It is important

to note, however, that the danger of a

lesser recovery on the merits is directly

tied to the merits of a plaintiff's claim.

Thus, forcing the plaintiff to bear this

risk serves the Constitutional and

Congressional purposes embodied in

antidiscriminatin laws.

By contrast, forcing a prevailing

Plaintiff to bear his own post-offer

attorney's fees in the mechanical fashion

Petitioners propose imposes a penalty on

plaintiffs which may be totally unrelated to

- 38 -

the merits of their cases. Many civil

rights plaintiffs are persons of extremely

modest means who could not possibly afford

the costs of litigating their claims. In

normal contingent-fee litigation, where

solely monetary damages are concerned, a

Plaintiff's impecuniousness does not pose an

insuperable barrier; a plaintiff can execute

an agreement dividing his recovery between

himself and his lawyer. The lawyer who has

been approached to represent the plaintiff

decides to take the case and what percentage

of the recovery to demand by assessing the

probabilities of various outcomes.

In contrast to the present case, in

many civil rights cases monetary damages are

either insignificant or unavailable. See

Hensley v. Eckerhart, 76 L.Ed.2d 58 at n.5

(Brennan, Marshall, Blackmun, & Stevens,

JJ., concurring in part and dissenting in

- 39 -

part); Carey v. Piphus, 435 U.S. at 266;

Newman v. Piggie Park Enterprises, 390 U.S.

at 402. In such cases, a contingency fee

could never prove adequate to induce lawyers

to undertake representation of plaintiffs,

since the benefit of any injunction or

declaration of constitutional principle are

not monetary, and therefore cannot be

apportioned between the attorney and his

client. The legislative history of § 1988

clearly states that the nonpecuniary nature

of rights involved should not affect a

plaintiff's ability to recover attorney's

fees, S. Rep. No. 1011, 94th Cong., 2d Sess.

6 (1976), and, by implication, a plaintiff's

ability to pursue his case. Petitioner's

construction of § 1988 would impair a civil

rights plaintiff's effective vindication of

his rights precisely because those rights

are nonpecuniary. Such a plaintiff simply

- 40 -

cannot obtain representation by splitting

his recovery with his attorney: his recovery

is nondivisible and nontransferable.

Moreover, in order to compensate for

the possibility that, although they prevail,

their clients will not recover any monetary

damages, attorneys are likely to demand a

higher proportion of a plaintiff's potential

recovery as their contingent fee. Even in

cases where plaintiffs fully recover, they

will retain less of their award. Peti-

tioners' construction thus will both

adversely affect prevailing plaintiffs who

do not fall within Rule 68's orbit and

reallocate the potential gains of a case

away from plaintiffs and toward attorneys.

Both these results "substantially add to the

risks" inhering in civil rights cases and

thus “undercut the efforts of Congress’ to

- 41 -

provide plaintiffs with a means cf fully

realizing their constitutional rights.

Christiansburg Garment Co., 434 U.S. at 422.

2.

Deterring an individual plaintiff from

pursuing his case not only prevents him from

vindicating his own rights; it also prevents

him from vindicating wider interests in

nondiscrimination, both those of third

parties who will be benefited by whatever

declaratory or injunctive relief is obtained

and those of the nation at large in the

vigorous enforcement of the civil rights

laws (see Newman v.Piggie Enterprises, Inc.

supra). Petitioners’ construction of Rule 68

gives rise to two dangers: first, it forces

individual plaintiffs to bear the total risk

- 42 -

of continuing to litigate after a Rule 68

offer even though they will not retain the

full benefit of such a decision; second, it

creates an incentive for plaintiffs to

accept settlements which benefit them but

compromise the wider interests involved.

Justice Brennan's opinion in Hensley

pointed out that "[cJivil rights remedies

often benefit a large number of persons,

many of them not involved in the litigation,

making it difficult both to evaluate what a

particular lawsuit is really worth to those

who stand to gain from it and to spread the

costs of obtaining relief among them.” 76

L.Ed.2d at 58 n.5. In the context of

petitioners’ argument on Rule 68, this means

that it will often be difficult to put an

actual value on either the defendant‘s offer

or the plaintiff's ultimate recovery -- both

essential measures for employing the Rule --

- 43 «-

and that an individual plaintiff will be

unable to recoup the attorney's fees

petitioners' position would force him to

bear, although other parties will benefit

from whatever systemic relief is obtained

and would have benefited from whatever

systemic relief is obtained and would have

benefited even more from the plaintiff's

gamble had it paid off. "To allow the others

to obtain full benefit from the plaintiff's

efforts without contributing equally to the

litigation expenses would be to enrich [or

fail to charge) the others unjustly at the

plaintiff's expense.” Mills v. Electric

Auto-Lite Co., 396 U.S. 375, 392 (1970).

Under petitioners’ construction of the

Rule, a plaintiff presented with an offer is

faced with not only the risk of continuing

to litigate, but also the risk of how a

judge will evaluate his assessment of those

- 44 «

risks of litigation. This enhanced risk to

plaintiffs presents them with an incentive

to accept a defendant's offer which provides

them with some personal relief even though

it completely ignores the interests of the

public. Because the plaintiff cannot recover

his post-offer fees, either from the third

parties who would have shared his gain or

from the losing defendant, he will be

especially reluctant to incur these ex-

penses.

Petitioners' interpretation thus

enhances a defendant's opportunity to “buy

off" a private attorney general and frus-

trates the wider purposes of antidiscrimin-

ation law. A defendant's offer to a

Plaintiff of $10,000 may leave the plaintiff

better off, but if it leads the plaintiff

not to litigate a case which would have

awarded the plaintiff $5,000 and an injunc-

- 45 -

tion against unconstitutional discrimina-

tion, it may be an inferior outcome both for

the plaintiff and for the public. Moreover,

because Rule 68 contemplates no judicial

involvement in the settlement process,

"except in a proceeding to determine costs,"

there is no opportunity for an independent

judge to safeguard the public interests that

prompted fee-shifting legislation in the

first place. See Piss, Against Settlement,

1

93 Yale L.J. 1073 (1984).

Be Petitioners' Interpretation

Of Rule 66 is Inconsistent

a e Rules a ng Act.

The Rules Enabling Act, 28 U.S.C. §

2072 (1982), provides that rules of

procedure “shall not abridge, enlarge or

Petitioners' interpretation of Rule 68

would create even greater dangers in class

actions brought under Fed. R. Civ. P. 23 See

infra Section III. —

- 46 -

modify any substantive right...." While “the

line between 'substance' and ‘procedure’

shifts as the legal context changes," Hanna

v. Plumer, 380 U.S. 460, 471 (1965),

Petitioners’ construction of Rule 68 poses a

substantial danger of abridging plaintiffs’

substantive constitutional and statutory

rights.

Attorney's fees are a component of

complete relief to which prevailing

plaintiffs are entitled. See New York

Gaslight Club, Inc. v. Carey, 447 U.S. 54,

67-68 (1980). By changing the standard

under which such fees are awarded,

petitioners' interpretation would both

"abridge" and “modify” plaintiffs' rights,

as the lower court noted in this case.

Chesny v. Marek, 720 F.2d at 479-80.

e 47 «

Indeed, the way in which even courts

which have adopted petitioners’ approach

limit the Rule in order to exclude a

defendant's attorney's fees from "costs"

implicitly concedes the substantive nature

of an attorney's fees award. In Chesny

itself, the District Court held that "a ‘no'

answer is readily reached" to the question

whether a defendant's fees fall within the

Rule. Chesny v. Marek, 547 F. Supp. 542,

547 (N.D. Ill. 1982). The eourt explained

its decision by claiming that defendants who

have lost are not prevailing parties under §

1988. Id. This reading is disingenuous. It

is only by viewing the defendant as having

"prevailed" in the post-offer stage of the

litigation, and the plaintiff as having

"lost," that the defendant is entitled to

place on plaintiff a burden --the payment of

a prevailing plaintiff's fees --he would

- 48 -

Otherwise have to bear. However, there is

no principled distinction between the "sub-

stantive” shifting of defendants' fees and

the allegedly "procedural" device

petitioners support.

This Court should interpret Rule 68 to

avoid the substantive impairment

Petitioners' construction would engender.

Excluding fees from "costs" covered by Rule

68 would best serve the clearly enunciated

congressional goals of antidiscrimination

law.

IIIT. PETITIONERS’ INTERPRETATION OF ROLE 68

CONFLICTS WITH THE POLICIES CONCERNING

CLASS ACTIONS EMBODIED IN RULE 23.

This Court has repeatedly recognized

that "suits alleging racial or ethnic

discrimination are often by their very

nature class suits, involving classwide

wrongs.” E.g., General Telephone Co. v.

4

/

/

/ - 49 -

Falcon, 457 U.S. 145, 157 (1982); East Texas

Motor Freight System v. Rodriguez, 431 U.S.

395, 405 (1977). The class action lawsuit

is a logical extension of the concept of

private attorneys general in civil rights

cases. Class actions often afford plaintiffs

who would not otherwise be able to obtain

representation a chance to have their claims

presented. Petitioners’ interpretation of

Rule 68, however, conflicts with both the

broad purposes of class action civil rights

litigation and the narrow procedural

requirements of Rule 23. In particular,

petitioners' interpretation will undermine

Rule 23(a) (4)'s requirement that “the

representative parties ... fairly and

adequately protect the interests of the

class" and creates problems with Rule

- 50 -

23(e)'s provision that "a class action shall

not be dismissed or compromised without the

approval of the court...."

A. Petitioners' Construction of Rule

reate conflicts of

Interests Between Representatives

and Class Members.

As currently written, Rule 68 makes no

distinction between individual and class

actions. In proposing that the Rule be

amended to include attorney's fees the

Advisory Committee specifically exempted

Rule 23 and 23.1 actions from its orbit. The

Committee explained its recommendation by

pointing out that "[an] offeree's rejection

would burden a named representative-offeree

with the risk of exposure to heavy liability

for costs and expenses that could not be

recouped from unnamed class members....

[This] could lead to a conflict of interest

between the named representative and other

= 81 -

members of the class." Proposed Rule 68, 98

P.R.D. at 367. The only court to discuss the

interaction between Rule 23 and Rule 68

explained its decision not to apply Rule 68

in similar terms. Rule 68 is intended to be

coercive, that is, tc push plaintiffs to

accept settlement offers but “the same

coersiveness that, when directed against a

party suing in his own behalf, serves the

purpose of judicial economy by raising the

ante has an added effect in a class action:

it introduces a potential conflict between

the named party's self-interest and his

fiduciary duty to the class." Gay _ v.

Waiters’ & Dairy Lunchmen's Union, Local

No. 30, 86 F.R.D. 500, 502 (N.D. Cal. 1980).

The named plaintiff can avoid any exposure

for the class' attorney's fees by accepting

a settlement; he faces overwhelming obliga-

tions if he refuses the offer and the class

e $2 «

recovers less at trial, obligations which he

cannot force the class members to share. The

named plaintiff thus faces a powerful

incentive to negotiate for and accept a

settlement which affords him the maximum

individual relief possible, regardless of

whether the settlement sacrifices the class'

interests. A named plaintiff who pursues

his interests in this fashion cannot meet

the adequate representation requirement of

Rule 23(a) (4). See Hooks v. General Finance

Corp., 652 F.2d 651, 652 (6th Cir. 1981)

(per curiam).

In most cases in which a particular

proposed representative is rejected because

of a potential or actual conflict with the

unnamed class members, another member of the

class can adequately represent the common

interests leveteus. Petitioners’ interpre-

tation in this case is particularly

- 53 -

pernicious because every potential

representative faces this conflict of

interest. The Court should therefore reject

a construction of Rule 68 which needlessly

exacerbates the tensions between class

representatives and their members.

B. The Application of Rule 68, as

Interpreted b Petitioners to

ass ctions Would Be

Inconsistent with the Requirements

of Rule 23(e).

Rule 23(e), which requires the court's

approval before a class action is compro-

mised, is designed “to protect non-party

members of a class ... from unjust or unfair

settlements affecting their rights by

representatives who lose interest or are

able to secure satisfaction of their

individual claims by compromise." Moreland

v. Rucker Pharmacal Co., 63 F.R.D. 611, 615

(W.D. La. 1974); see Nesenoff v. Muten, 67

- 54 -

P.R.D. 500, 502 (E.D.N.Y. 1974). In short,

Rule 23(e) is designed to guard against the

dangers to which Petitioner's interpretation

of Rule 68 would give rise.

The specific requirements of Rule 68,

however, cannot be smoothly integrated into

the framework of judicial oversight es-

tablished by Rule 23. First, Rule 68

explicitly contemplates no judicial involve-

ment in the settlement acceptance process.

See Scheriff v. Beck, 452 F. Supp. 1254 (D.

Colo. 1978). If a plaintiff accepts the

defendant's offer, them either party may

file the offer "and thereupon the clerk

shall enter judgment.” Fed. R. Civ. P. 68

(emphasis added). Thus, there is no me-

chanism under Rule 68 for safeguarding the

rights of class members. Rule 68 would

therefore have to be abrogated in some

respects in order to satisfy Rule 23(e).

- 55 -

Essentially, Rule 23(e) requires a judicial

hearing to consider the reasonableness of an

offer and a plaintiff's acceptance. But

Rule 68 does not require any showing of

reasonableness by a party. See Delta Air

Lines v. August, 450 U.S. at 349-50. If

reasonableness is a criterion, however, it

should be as relevant to the refusal of an

offer as it is to its acceptance. Importing

a reasonableness standard into Rule 68

determinations would render the rule

superfluous. See supra Section II.A.

Second, Rule 68 sets an explicit

ten-day limit on how long an offer may

remain open. See Staffend v. Lake Central

Airlines, 47 F.R.D. 218 (N.D. Ohio 1969).

There is no way that a plaintiff can

conscientiously determine whether or not to

accept a settlement offer in a case

involving complex claims of relief and many

- 56 -

Claimants in so limited a period of time.

Nor is ten days sufficient time in which to

give notice to class members of a pending

settlement or for them to respond. Again,

some allowance for Rule 23's concerns must

be made.

Pinally, if a named plaintiff is

willing to settle a case, whatever the

terms. it cannot be the law that if a judge

rejects the settlement pursuant to his power

under Rule 23(e), the named plaintiff is

still responsible for fees incurred after

the offer. To interpret Rule 68 as still

requiring the plaintiff to bear the costs

does nothing to further the Rule's goal of

encouraging settlement, since the plaintiff

cannot settle the case without other

parties’ consent. Such an interpretation

would deter class action litigation and

- 57 -

would result in multiple lawsuits, increas-

ing the costs to plaintiffs, defendants, and

the courts alike.

Making exceptions to Rule 68 for class

actions would, however, encourage ‘sone

plaintiffs unnecessarily to couch their

cases as class actions. This too would

result in added litigation costs since the

procedural requirements for certification,

to name one example, add time and expense.

Thus, Rule 68 should be interpreted to avoid

these dangers.

IV. PETITIONERS’ CONSTRUCTION OF RULE 68

WOULD SIGNIFICANTLY IMPAIR THE

ATTOXNEY-CLIENT RELATIONSHIP.

Petitioners' interpretation of Rule 68

creates a dangerous potential for apparent

conflicts of interest. If the Rule's

definition of "costs" includes attorney's

fees, then a valid settlement offer must

» @«

include some provision for such expenses.

See Delta Air Lines v. August, 450 U.S. at

365 (Powell, J., concurring); Scheriff v.

Beck, 452 F. Supp. at 1260. An attorney

whose client is given an offer of judgment

under the Rule therefore is faced with a

choice: if his client accepts the defen-

dant's offer, then he will be guaranteed a

reasonable attorney's fee, but if his client

rejects the offer, he may be unable to

recover any of his post-offer fees, regard-

less of the reasonableness of the client's

decision to turn down the offer or how

successful he is at trial.

This poses two dangers. First, when a

lawyer counsels his client to accept an

offer, it may appear that his advice stems

more from a desire to ensure that his fee

will be paid than from a belief that the

settlement is in his client's best

- 59 -

interests. This appearance of impropriety,

and a plaintiff's awareness of the potential

compromise of his interests, may well impede

the settlement process, since clients may

refuse even reasonable offers because they

mistrust their attorneys' advice.

Second, it encourages a plaintiff's

lawyer to treat his compensation as one of

the initial subjects of negotiation.

Although attorney's fees are formally

awarded to the prevailing party, they are in

reality granted to the counsel. Accordingly,

it has been ruled "improper for a lawyer in

a civil rights suit to inject the question

of attorney's fees into the balance of

settlement discussions." Regalado Vv.

Johnson, 79 F.R.D. 447, 451 (N.D. Ill.

1978).

- 60 -

In run-of-the-mill, individual

contingent-fee litigation, these dangers do

not loom so large. A plaintiff can tie his

lawyer's recovery directly to his own

success and thus avoid a shift of resources

within the recovery pool. Cf. Chesny v.

Marek, 720 F.2d at 477-78.

In both nonpecuniary damages cases and

class actions, however, there is no simple

way to guard against a lawyer's serving his

self-interest first. Cf. Prandini vv.

e 61 «

for a higher fee. See Mendoza v. United

States, 623 F.2d 1338, 1352-53 (9th Cir.

1980).

This problem is exacerbated in class

actions. A defendant who is interested in

settling the total claim against him will be

indifferent to the allocation of the total

pool between the class and its attorney.

Prandini, 557 F.2d at 1020. There is a

National Tea Co., 557 F.2d 1015, 1020 (3d

Cir. 1977). In cases involving non-monetary

claims, the client cannot tie his attorney's

payment to the amount of his recovery. It

will often be unclear to him whether his

attorney has traded off some of his

injunctive or declaratory relief in return

tremendous danger that both sides will agree

to a "sweetheart" arrangement under the

defendant will pay the named plaintiff and

his lawyer enough to satisfy them, and they

will sell out the interests of the rest of

the class. Id. at 1021.

Both the Third and the Ninth Circuits

have held that it is ae plaintiff's

attorney's ethical duty to resolve the

plaintiff's substantive claims’ before

negotiating his fees. See Mendoza, 623 F.2d

e 62 «

at 1353; Prandini, 557 F.2d at 1021; CE£.

Manual for Complex Litigation, part I, §

1.46, at 75 (1982). An interpretation of

Rule 68 which compels defendants to include

counsel fees in the negotiations in order to

benefit from the Rule's coercive power and

which does nothing to protect plaintiffs

from sweetheart deals should be rejected.

As the Court of Appeals recognized

below, the potential for conflicts of

interest exists whenever a lawyer's fee is

contingent. Chesny v. Marek, 720 F.2d at

447. There is no justification, however,

for exacerbating that tension in order to

induce plaintiffs to settle. The justness

of a settlement is as important as the speed

with which it is achieved.

CONCLUSION

The decision of the Seventh Circuit

should be affirmed.

63 -

Respectfully submitted,

BARRY L. GOLDSTEIN

Suite 940

806 15th Street, N.W.

Washington, D.C.20005

(202) 638-3278

JULIUS LeVONNE CHAMBERS

CHARLES STEPHEN RALSTON *

99 Hudson Street

16th Floor

New York, N.Y. 10013

(212) 219-1900

Attorneys for Amicus

Curiae

* Counsel of Record