Respondents Brief — Burlington v. Dague

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No. 91-810

ay In The k

_ Supreme Court of the United States ’

‘October Term, 1991 s

CITY OF BURLINGTON,

Petitioner, ;

vs.

¥.

2 .

ERNEST DAGUE, SR., ERNEST DAGUE, JR.,

BETTY DAGUE, AND ROSE A. BESSETTE,

Respondents.

On Writ Of Certiorari To The United States Court

Of Appeals For The Second Circuit

BRIEF FOR RESPONDENTS

é Guy T. SAPERSsTEIN Wiuam W. Pearson”

e. Mari Mayepa Mo toy, Jones & Donanue, P.C.

Barry GoupsTEIn 33 North Stone Avenue

Saperstein, Mayepa, Suite 2100

Larkin & GOLpsTEIN Tucson, Arizona 85701

1300 Clay Street (602) 620-5520

i: 11

| se ps aay CA 94612 Counsel for Respondents

(510) 763-9800 *Counsel of Record

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TABLE OF CONTENTS

Page

Pe GE WE GED nv dvccvcicccsescesccnes l

Summary Of The Litigation On The Merits......... 1

TE SE onc ban 6 eecnpensecsscenecess 2

SUMMARY OF ARGUMENT .............cecesceees 5

PONS Se cnadokberidectsesecccepacseceece 6

II.

A REASONABLE FEE FOR A CASE PROS-

ECUTED ON A CONTINGENT FEE BASIS MAY

INCLUDE AN ADJUSTMENT FOR THE CON-

TINGENT RISK OF LOSS...............00005-

A. This Court Consistently Has Accepted Legal

Marketplace Principles In Determining What

Are Reasonable Fees Under Fee-Shifting Stat-

a OTT PT TTT TTT TTT TT TTTTe

B. Justice O’Connor’s Analysis of the Contingent

Adjustment in Delaware Valley I] Is Consistent

With This Court’s Adherence To Market Prin-

Re reer

LEGISLATION PROVIDING FOR THE AWARD

OF REASONABLE ATTORNEY’S FEES TO A

PREVAILING PARTY INCORPORATES LEGAL

MARRETPLACE FACTORG......ccccecccccence

A. The Language of the Statutes Demonstrate

That Congress Did Not Intend to Depart From

Its Historic Reliance on the Market Model ..

B. The Legislative History Adopts Marketplace Stan-

dards For Calculating a “Reasonable Fee” ......

III.

Cc.

TABLE OF CONTENTS - Continued

Page

Recognition of the Risk Premium Is Consistent

With The Design, Object and Policy of the

DURAND 2 oc cccccccccceneedeessebene eee

Risk Adjustments Do Not Compensate Non-

PUOVGHE FOUUGS. .. cc cccocvesunceneeueeass

THE TEST SET FORTH BY JUSTICE O’CONNOR

IN DELAWARE VALLEY II 1S CONSISTENT WITH

MARKET PRINCIPLES AND HAS PROVEN

WORRAMEES occ cccccccosvcccsdeus vuneeenneeuee

A. Nearly All Courts Have Applied Justice

O’Connor’s Concurrence Correctly..........

B. As With Other Economic Markets, the Legal

Marketplace Normally Provides a Risk Pre-

mium For Cases Taken on a Contingency-Fee

DOES oo ccvccescessesnacessguees ene eneneneen

1. Contingency Fee Cases Normally Com-

mand Higher Fees than Fees for Work on

Noncontingency Matters .............55.

2. Contingency Enhancements in the Legal

Marketplace Find Well-Established Paral-

lels in Modern Economic Theory Regard-

ing How Markets Operate ..............

3. Court-Awarded Contingency Enhance-

ments are Nothing More Than the Mini-

mum Risk Premium Required by the Legal

Marketplace to Attract Counsel to Fee-

TORING COONS. occ vccccnsecéunssucsnees

C. The City and Amici Seek a Radical Departure

from Basic Marketplace Principles ..........

TABLE OF CONTENTS - Continued

Page

D. The Objections Made by The City and Amici

Regarding the Need for and Operation of the

Contingency Risk Factor Are Addressed by

Justice O'Connor's Two-Prong Test ......... 44

E. Determination of the Appropriate Market-

Based Contingency Adjustment is a Judicial,

TE cic Pec ccecccsecccccecs 4%

1V. THE DISTRICT COURT PROPERLY EXERCISED

ITS DISCRETION WHEN IT AWARDED AN

ENHANCEMENT OF THE LODESTAR FEE

BASED UPON CONTINGENT RISK............ 49

eee a se ccccc cess ccccccccccc: 50

TABLE OF AUTHORITIES

Page

Cases

Angoff v. Goldfine, 270 F.2d 185 (ist Cir. 1959)....... 16

Blanchard v. Bergeron, 489 U.S. 87 (1989)........ passim

Blank vy. Talley Indus., Inc., 390 F.Supp. 1 (S.D.N_Y.

Ps 0 06.660006066404 040 dednedhued Gekbentbteskéncs 15

Blum v. Stenson, 465 U.S. 886 (1984)............. passim

Blum v. Witco Chem. Corp., 829 F.2d 367 (3d Cir.

Sees GD Bb dd do cndcudeciedchadsdddedtddeeedices: 35

Blum v. Witco Chem. Corp., 888 F.2d 975 (3d Cir.

Sy CD Wn cc ncdnsncsesdasedadctdiessivesine< 35

Bradley v. United States, 410 U.S. 605 (1973)......... 16

Cherner v. Transitron Electronic Corp., 221 F.Supp.

55 (D.Mass. 1963) modified on other grounds,

Green v. Transitron Electronic Corp., 326 F.2d 492

tf | rrr ee ee eee eee 15

Christiansburg Garment Co. v. EEOC, 434 U.S. 412

i SP eer ee Pere 32, 47

City of Detroit v. Grinnell Corp., 495 F.2d 448 (2nd

Geb COED besciccdccbedcccddaewebesescnbnsetieiess 15

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

Colson v. Hilton Hoteis Corp., 59 F.R.D. 324 (N.D.

ee COU 6620 5000640nteeegenéasenennansackseescen’ 15

Conklin v. Lovely, 834 F.2d 543 (6th Cir. 1987)........ 36

Crawford Fitting Co. v. J.T. Gibbons, 482 U.S. 437

Se ccéevesysce cde caeuuhuasateceaaneeu 5, 14, 19, 20

Cases — CONTINUED

Page

Curry v. Contract Fabricators Profit Sharing Plan,

744 F.Supp. 1061 (M.D. Ala. 1988), aff'd, 891 F.2d

eee rc dso cn cupeususecéebucetesenes 38

Davis v. County of Los Angeles, 8 Empl. Prac. Dec.

(CCH) ¢ 9444 (C.D. Cal. June 5, 1974)......... 24, 25

D’ Emanuele v. Montgomery Ward & Co., 904 F.2d

eR SoU in ocnhy das + daabeenneceesnes 37

Department of Labor v. Triplett, 494 U.S. 715 (1990)

5 bebceMibeChebes datadekadausebedeueseavacuses 5, 11, 47

Duke v. Uniroyal, Inc., 743 F.Supp. 1218 (E.D.N.C.

1990), aff'd in part and rev'd in part on other

grounds, 928 F.2d 1413 (4th Cir. 1991) ............. 35

Evans v. Jeff D., 475 U.S. 717 (1986). ................ 28

F.C.C. v. American Broadcasting Co., Inc., 347 U.S.

DCL dh addin inoshenwenad’ekeseeseeehensse4e 17

Fadhl v. City of San Francisco, 859 F.2d 649 (9th Cir.

ES Pe ene 2 ee ee ee ae re 37

Franchise Tax Bd. v. United States Postal Service,

I ae 30

Hasbrouck v. Texaco, Inc., 879 F.2d 632 (9th Cir.

Ee ae. See ae ee FS ee 37

Hendrickson v. Branstad, 934 F.2d 158 (8th Cir. 1991)... . 37

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

Hidle v. Geneva County Bd. of Educ., 681 F.Supp. 752

Se A eh cosbeGaned odwnp andes o0ateees 39, 46

In re Coordinated Pretrial Proceedings, Etc., 410

Pe Se EE, BO cecerccccéesccesecusees 15

Cases — CONTINUED

In re Detroit Int'l Bridge Co., 111 F.2d 235 (6th Cir.

MPPPPPTTTITITITT ITT TT Tritt

In re Gypsum Cases, 386 F.Supp. 959 (N.D. Cal.

1974), aff'd, 565 F.2d 1123 (9th Cir. 1977) ......

in re Osofsky, 50 F.2d 925 (1931) ............0005-

In re Wicat Securities Litigation, 671 F.Supp. 726 (D.

8, SPTTTTT TTT TTT TTT

Independent Fed'n of Flight Attendants v. Zipes, 491

Pe En 0.606 00csbescucectcesesscancsces

Islamic Center of Mississippi, Inc. v. Starkville, 876

PBS GES GD GER FOOD cc cc ccccccseccesccccce:

Johnson v. Georgia Highway Express, Inc., 488 F.2d

yk FB rT Te Ve

Jones v. Diamond, 636 F.2d 1364, 1382 (Sth Cir.),

cert. dismissed, 453 U.S. 950 (1981)............

King v. Bd. of Regents, 748 F.Supp. 686 (E.D. Wis.

PN 66 otues ccnstenddobactedbadcesss ds chouces

King v. Palmer, 950 F.2d 771 (D.C. Cir. 1991).....

Lapina v. Williams, 232 U.S. 78 (1914) ...........

Leigh v. Engle, 714 F.Supp. 1465 (N.D. Ill. 1989)..

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

Standard Sanitary Corp., 487 F.2d 161 (3d Cir.

Es scdedhdedecetocevecesudetdeud buveuebedee

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

Standard Sanitary Corp., 540 F.2d 102 (3d Cir.

PG keddececdcdocccecescédectécducdbosnenes:

vii

Cases — ConTINUED

8 REEL SS ee a a 35

McKittrick v. Gardner, 378 F.2d 872 (4th Cir. 1967).... 16

McNary v. Haitian Refugee Center, Inc., 111 S.Ct.

CCE h chee eees bbacbeneeecnceseeuscesébes 16

Marks v. United States, 161 U.S. 297 (1896)........... 14

Martin v. Univ. of South Alabama, 911 F.2d 604 (11th

RE a re eae 38

Missouri v. Jenkins, 491 U.S. 274 (1989) ..5, 8, 9, 10, 30

Morris v. American Nat'l Can Corp., 952 F.2d 200

cette bckkiehebeeussedeakhde os 37, 46

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

CMA dhs Usacdbesbebshoenedekenedé6es obec 31

Norman v. Housiny Auth., 836 F.2d 1292 (11th Cir.

Pinte chin GeEREEd badd obne ed dedbnd ééecccve 38

Pennsylvania v. Delaware Valley Citizen's Counsel for

Clean Air, 478 U.S. 556 (1986)................. passim

Pennsylvania v. Delaware Valley Citizen's Counsel for

eee Ge, Ge POW GUUUOR ccccccccccccccece passim

Perlman v. Feldmann, 160 F.Supp. 310 (D. Conn.

MU Tbhbetodnd i iiidieddubduspeesechwesus tx 16

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987)..... 26

Ramos v. Lamm, 713 F.2d 546 (10th Cir. 1983)......... i]

Skelton v. General Motors Corp., 860 F.2d 250 (7th

Cir. 1988), cert. denied, 493 U.S. 810 (1989)........ 36

Smith v. Freeman, 921 F.2d 1120 (10th Cir. 1990)...... 37

viii

Cases — CONTINUED

Page

Soto v. Adams Elevator Equip. Co., 941 F.2d 543 (7th

Sk Mb eeOnetbecesaendecetéonesesbenctoceensees 36

Spell v. McDaniel, 824 F.2d 1380 (4th Cir. 1987)...... 35

Stainback v. Mo Hock Ke Lok Po, 336 U.S. 368

S66 066 es0es bbb) CURNEG Reece ccaanetedeboccdes 16

Standard Oil Co. v. United States, 221 U.S. 1 (1911).... 16

Stanford Daily v. Zurcher, 64 F.R.D. 680 (N.D. Cal.

1974), aff'd, 550 F.2d 464 (9th Cir. 1977), rev'd,

436 U.S. 547 (1978)................ 23, 24, 25, 28, 45

Steinberg v. Hardy, 93 F.Supp. 873 (D. Conn. 1950).... 15

Student Pub. Interest Research Group v. AT&T Bell

Laboratories, 842 F.2d 1436 (3d Cir. 1988).......... 35

Swann v. Charlotte-Mecklenburg Bd. of Educ., 66

Pe Se CPs DUE cd ceserevdccccocese 24, 25

Texas State Teachers Ass'n. v. Garland Indep. School

es Se ey Ge Ee cccnceesccedersscsovesss 31

United States v. Great N. R. R. Co., 287 U.S. 144

DMs tecoereeddeendoneneebebeeaeaskséesese sees 20

United States v. Monia, 317 U.S. 424 (1943) .......... 16

United States v. Wilson, 60 U.S.L.W. 4244 (1992)...... 17

Vargas v. Calabrese, 750 F.Supp. 677 (D.N.J. 1990)... . 35

Venegas v. Mitchell, 495 U.S. 82 (1999)........ 10, 11, 33

Walters v. National Assn. of Radiation Survivors, 473

Se Se Is 5 beac os cescedinVedecsedeass 18, 28, 47

West Virginia Univ. Hosp. v. Casey, 111 S.Ct. 1138

DNL iG sd 600 dobbs eee ébbee bese 14, 17, 19, 20, 32

Cases — CONTINUED

Wolf v. Planned Property Management, 735 F.Supp.

ED cn cat cidshdeus<ces cdedestoeoees 37

Wulf v. City of Wichita, 883 F.2d 842 (10th Cir. 1989)... . 3

STATUTES

American-Mexican Chamizal Convention Act of 1964,

I casos 19

Antitrust Civil Process Act Amendments of 1976, 15

IEE cv cccvevescosesoccesecccecses 18

Black Lung Benefit Act, 30 U.S.C. §§901 et seq.... 11, 47

Civil Rights Act of i Cee eee ees pees te cena be 20

Civil Rights Attorneys’ Fees Awards Act, 42 U.S.C.

Mee ceeensss cob eenh eunen 6bi60d004sce0eees 14

Camas Ase GF F066, 19 U.S. BBS... ccccccccccccces 15

Clean Air Act of 1970, 42 U.S.C. §§7401 et seg. ...... 28

Comprehensive Environmental Response, Compensation and

Liability Act (CERCLA),

ee a Oe. coc cc croeedebees codeseues 19

ee onde ek unccebdasnebecednd eee 19

Equal Access to Justice Act, 28 U.S.C.

EE EE 18

Federal Tort Claims Act, 28 U.S.C. §2678............. 18

Federal Water Pollution Control Act (Clean Water Act),

eet cddd sc sceepenodeetiedesuns passim

Es hin 6h di5 0400606) 6600055 ceeenies 30

Be Ee cc etreccencsccecsncedeness 2, 13, 28

Statutes — CONTINUED

Page

Individuals with Disabilities in Education Act,

20 U.S.C. §1415(e)(4)(B)-(C) ... 2.66. a. 5, 18, 26, 32

Japanese-American Evacuation Claims Act of 1948,

Pee Ws OUD win cede ceccedecccsvcctecntaceecess 19

National Vaccine Injury Compensation Act, 42 U.S.C.

i. | PPPTErrrrrrrrrrr rr ritrrrrr tT rrr ree 18

Organic Act of Guam, 48 U.S.C. §1424c(f)............ 19

Resource Conservation and Recovery Act, 42 U.S.C.

RS GP GO, cn ccccccscocvecuncscouess 1, 4, 14, 22, 30

Securities Act of 1933, 15 U.S.C. §77k(e) ........6545. 15

Securities Exchange Act of 1934,

PP Ws ES Sve Sak Codenecencuceducdncsueé bean 15

SP ee I ee ciptneadacnedducendbaceeennens 15

OD Us Se vce dnacuiescespewdsccsances 15

Social Security Act, 42 U.S.C. §406(b)(1).............-. 18

Solid Waste Disposal Act,

Sy Pe NOs Wik ceccicnvetecscerecbececcenens 30

Ge Fe ED hp bie ce otccccerccresvetsecncaves 2, 13

Toxic Substances Control Act,

OP Ce Na ih abaves cbvcccdwcetneeteenanas 23

SF ise IEE ice ce ccncecncccncsenopeecess 23

BS WA SU hc nccncccvcenccsseceawenes 23

Veterans’ Educational Assistance Act, 38 U.S.C.

Cc Pidanecuad4ee dees ddtadevensanteseantveds 18

BD Ws PO cc ccccccsescsivesebeveseeedudcieens 20

MISCELLANEOUS

American Bar Association Canons of Professional

Ethics, Canon 13 (1908), amended (1933)...........

American Bar Association Model Code of Profes-

sional Responsibility, EC 2-20, DR 2-106(B)(8),

ee ee eek eeaethiccess

American Bar Association Model Rules of Profes-

sional Conduct, Rules 1.5, 1.8 (1983)...............

American Bar Association Standing Committee on

Ethics and Professional Responsibility Informal

Opinion, 86-1521 Offering Alternatives to Contin-

ese cae ueebbdeseeecercic

Attorney's Fees Awards: Hearings on S. 585 Before

the Subcomm. on the Constitution of the Senate

Comm. on the Judiciary, 97th Cong., 2d Sess. 13

Dae eeede nhs dend ceed sebebddkLdebbaeeaet ices <<

Awarding of Attorneys’ Fees: Hearings Before the

Subcomm. on Courts, Civ. Liberties, and the Admin.

of Justice of the House Judiciary Committee, 94th

as i os cece usec catdecauleen's

Berger, Court Awarded Attorneys’ Fees: What is

“Reasonable” ?, 126 U.Pa.L.Rev. 281 (1977)..... 29, 42

Cavanagh, Attorney's Fees in Antitrust Litigation:

Making the System Fairer, 57 Fordham L. Rev. 51

suds bakeneuend 466bds nats eneeekoees eonces 7,

1 M. Derfner and A. Wolf Court Awarded Attorneys

Pe EN ck oeeis Cuceeue eee cde eeubeées ead

xii

MiscELLANEOUS — CONTINUED

Page

The Effect of Legal Fees on the Adequacy of Repre-

sentation: Hearings Before the Subcomm. On Rep.

Of Citizen Interests of the Senate Judiciary Com-

mittee, 93d Cong., Ist Sess. (1973) ...........05005- 27

R. Evans & R. Weinstein, Ranking Occupations as

Risky Income Prospects, 35 Indus. & Lab, Rel. Rev.

EE See ery Tere ere Trees Tee Tee 41

House Committee on Interstate and Foreign Com-

SISTED, PS CORE... BO BOG. cccccccccveccccccsesecs 23

H.R. 5757, 98th Cong., 2d Sess. (1984)............... 20

H.R. 3181, 99th Cong., Ist Sess. (1985)............... 23

H.R. Rep. No. 1558, 94th Cong., 2d Sess. (1976)...... 21

Joint Conference Report for /ndividuals with Disabil-

ities in Education Act, reprinted in, 1986 U.S. Code

Se ee ED nn wc nnacdndccecdancnseneuaddsce 26

A. G. King, Occupational Choice, Risk Aversion, and

Wealth, 27 Indus. & Lab. Rel. Rev. 586 (1972)...... 41

The Legal Fee Equity Act [8.2802]: Hearing Before

the Subcomm. on the Constitution of the Senate

Judiciary Committee, 98th Cong., 2d Sess., 38-41

GPs 6 CSUR cc dadecsncnwbeeewecdwensauceds Miakeswes 20

Legal Fees Equity Act [S.1580]: Hearing Before the

Subcomm. on the Constitution of the Senate Judici-

ary Committee, 99th Cong., Ist Sess. 47-51 (1985) 20,

Legislative History of the Toxic Substances Control

R68, TEO-SS GWU. FURR TOFS). wc cc cccscccccsccess

F.B. MacKinnon, Contingent Fees For Legal Ser-

vices: A Report of the American Bar Foundation,

Ss tidts bc acced coe evbenees ebesshuditcccnsces

viii

MISCELLANEOUS — CONTINUED

Page

H. Newberg, Attorney Fee Awards, 142 (1986)......... 45

R. Posner, Economic Analysis of Law, 534 (3d ed.

1986) 54 Geo. Wash. L. Rev. (1986)............ 39, 41

R. Posner, Law and the Theory of Finance: Some

Intersections, 54 Geo. Wash. L. Rev. 159 (1986)..... 41

S. Rep. No. 414, 92d Cong., 2d Sess. (1972) reprinted

in 1972 U.S. Code Cong. & Ad. News 3668......... 28

S. Rep. No. 1011, 94th Cong., 2d Sess. 6 (1976) ...... 22

S. 585, 97th Cong., 2d Sess. §722(A)(e) (1982)........ 19

S. 1580, 99th Cong., Ist Sess. (1985)................. 20

S. 2802, 98th Cong., 2d Sess. (1984).................. 20

W. Sharpe, Capital Asset Prices With and Without

Negative Holdings, 46 Journal of Finance 489

ESD EE NS Sa a ane a el a a 40

Adam Smith, The Nature and Causes of the Wealth of

Nations, 106 (Modern Library ed. 1937)............. 40

2A Sutherland Statutory Construction, §45.12, §51.02

ge, Ta SE a oe ner 14, 17

137 Cong. Rec. S. 15338-39 (daily ed. Oct. 29, 1991)... . 20

STATEMENT OF THE CASE

_ It is undisputed in the record in this case that the market

for legal services ordinarily compensates attorneys for the

risk taken in contingent cases. This Court must decide

whether, regardless of the operation of this market for legal

services, the district court lacked authority to consider market

treatment of risk in setting a reasonable attorney's fee.

Summary Of The Litigation On The Merits

Seven years ago, in April 1985, Respondents (“Dagues”)

hired their attorneys to represent them in a lawsuit concerning

hazardous wastes dumped into Petitioner's (“City”) municipal

landfill (“Landfill”). Jt. App. I at 24. The Dagues’ attorneys

took this case on a contingency fee basis. They assumed the

risk of receiving no attorneys’ fees at all unless the Dagues

prevailed in their lawsuit. Jt. App. at 24 and App. I at 132.

The Dagues own homes next to the Landfill. App. I at 89.

Beginning in 1950, thousands of gallons of hazardous waste

were dumped in the Landfill. App. I at 94-95. By 1985,

methane gas in explosive concentrations was crossing the

Landfill boundary onto the Dagues’ property. App. I at 99,

102.

On the opposite side of the Landfill from the Dagues’

property is a wetland called the Intervale. App. I at 89-90. As

a result of tests conducted in 1980, the City learned that

Landfill leachate contaminated with hazardous and toxic

chemicals was being discharged into the Intervale directly

below the Landfill. App. I at 92, 98.

On October 9, 1985, the Dagues filed suit to compel the

City to comply with the Clean Water Act, 33 U.S.C. §§1251 et

seq. (“CWA”), the Resource Conservation and Recovery Act,

42 U.S.C. §§6901 et seq. (“RCRA”), and state environmental

laws. App. II at 244-69. After a vigorously contested and

highly technical trial (App. I at 65-67, 77-81, 133), on Octo-

ber 16, 1989, the district court found that the City had

violated the CWA and RCRA (App. I at 87-88), and ordered

the City to close its Landfill and pay the costs of litigation,

including reasonable attorney and expert fees under 42 U.S.C.

§6972(e) and 33 U.S.C. §1365(d). App. I at 88-89. The

Second Circuit affirmed the district court “in all respects.”

App. I at 37.

Attorneys’ Fee Award

In support of their Application for Award of Fees and

Costs (Jt. App. I at 5-218), the Dagues filed a memorandum

(Jt. App. I at 7-17), two affidavits by trial counsel (Jt. App. I

at 17-32), a detailed bill itemizing work, hours, services and

rates and expert fees and costs (Jt. App. I at 32-210), and

three affidavits by experienced attorneys familiar with the

legal marketplace. Jt. App. I at 211-218.

Attorneys William Pearson and Richard Bland provided

the vast majority of legal services. Pearson’s hourly rates

ranged from $85.00 per hour to $125.00 per hour and Bland’s

ranged from $45.00 per hour to $80.00 per hour. The overall

composite hourly rate charged in the Dagues’ first fee petition

was $64.35 per hour.

The affidavits of experienced counsel established that:

(1) the hourly rates the Dagues’ attorneys charged were the

prevailing rates for hourly work in the Burlington mar-

ketplace (Jt. App. I at 212, 215, 217); (2) when contingency

fee arrangements are made in the Burlington marketplace, a

percentage of fee recovery is fixed at a level which would be

larger than for work done on an hourly basis to reflect the risk

of no recovery (Jt. App. I at 212, 215); (3) lawyers in the

Burlington marketplace who take contingency work expect to

receive a multiple of their usual hourly rate if they prevail (Jt.

App. I at 217-18); and (4) without this expectation of an

enhancement, there is no incentive to take this work (/d.).

The City opposed the Dagues’ fee application claiming

they did not substantially prevail. Jt. App. I at 219-29,

236-81. However, the City neither challenged the reasonable-

ness of the hourly rates (Pet. Brief 6), nor did it counter any

—

of the Dagues’ evidence regarding the operation of the mar-

ketplace for legal services. After a hearing, the district court

awarded the Dagues a full attorneys’ fee lodestar of

$198,027.50, plus expenses of $10,929.66, together with a

25% attorneys’ fee enhancement. App. I at 130-34. The Court

justified the enhancement on the basis of its findings that

“plaintiff's attorneys would not have been compensated at all

unless plaintiffs prevailed” (App. I at 132), that “the risk of

not prevailing was substantial under the facts here,” and that

“absent an opportunity for enhancement, plaintiff would have

faced substantial difficulty in obtaining counsel of reasonable

skill and competence in this complicated field of law.” App. I

at 132-33.

The Dagues requested a separate delay enhancement

given the long history of the case without any fee payment.

App. I at 13. The district court refused, deciding that the 25%

enhancement was adequate in order to compensate for delay

in payment as well as risk. App. I at 133. Therefore, the

district court awarded a lodestar that was based only on

historic rates without a separate adjustment for the delay in

payment.

In affirming the lower court “in all respects,” the Second

Circuit expressly rejected the City’s claim that the Dagues

had not substantially prevailed “because, in large part, it was

the pressure generated by the plaintiffs’ efforts that caused

the city to actually close the landfill [and ojnly by bringing

this suit against the city were the plaintiffs finally able to get

from the city action as opposed to mere promises.” App. I at

30-31.

The Second Circuit also affirmed the lower court's lode-

star award and the 25% risk enhancement. App. I at 35-37. In

particular, the Court affirmed the finding that “without the

possibility of fee enhancement . . . competent counsel might

refuse to represent clients thereby denying them effective

access to the court.” App. I at 37.! On June 26, 1991, the City

filed a Petition for Rehearing and Suggestion for Rehearing

en banc, which was denied on August 20, 1991. App. I at

145-46.

The City filed its Petition for a Writ of Certiorari on

November 18, 1991. On January 27, 1992, this Court granted

the Petition on the single question of whether courts have

authority to consider the risk of nonpayment of any fees in a

contingent case when determining a reasonable attorney's fee

under the fee shifting provisions in the CWA and RCRA.

The Dagues’ attorneys have provided legal services for

seven years in a difficult case in a complicated field of law,

carried the risk of not receiving any payment for their ser-

vices, achieved a substantial result for their clients, charged

an overall composite rate of $67.58 for their services, and

' On June 25, 1991, following their success in the Second Circuit,

the Dagues filed a Supplemental Application for Award of Fees and Costs

in the District Court, and an Initial Application For Award of Fees and

Costs Incurred on Appeal in the Second Circuit. The District Court

Supplemental Application requested a $24,113.00 lodestar, a 25% fee

enhancement and $2,707.61 in expenses. Jt. App. II at 311-55. The

Second Circuit Application requested a $53,315.00 lodestar, a 25%

enhancement and $2,240.00 in expenses. Jt. App. II at 356-417. Both

applications were in substantially the same format as the original district

court application, including affidavits from experienced attorneys in the

legal marketplace. The City did not file any opposing memoranda or

affidavits to either of the supplemental applications.

On October 11, 1991, the district court issued an Order granting

supplemental attorneys’ fees in the amount of $24,113.00, and expenses

of $2,707.61, together with a 25% enhancement of the attorneys’ fees.

App. Il at 137-38.

On October 25, 1991, the Second Circuit issued an Order granting

the Dagues supplemental attorneys’ fees in the amount of $24,113.00, and

expenses of $2,707.61 but denied a 25% “risk enhancement” on the

ground that the “risk” involved in defending an appeal is not significant.

App. I at 38-39.

have not, as of yet, received any payment for their time or even

reimbursement for their advancement of expert fees and costs.

SUMMARY OF ARGUMENT

In determining what are reasonable attomeys’ fees under

prevailing party statutes, this Court consistently has relied on the

principles and practices of the legal marketplace. Hensley v.

Eckerhart, 461 U.S. 414 (1983); Blum v. Stenson, 465 U.S. 886

(1984); Missouri v. Jenkins, 491 U.S. 274 (1989). This Court has

repeatedly emphasized the congressional purpose behind fee-shift-

ing statutes as providing incentives for competent private attorneys

to enforce civil rights, environmental, and antitrust statutes. /d. In

Pennsylvania v. Delaware Valley Citizen's Council for Clean Air,

483 U.S. 711 (1987) (Delaware Valley 11), a majority of the Court

held that legal marketplace conditions may require enhancement of

the lodestar fee to account for the risk of loss in order to attract

competent counsel to prosecute such cases. In Department of

Labor v. Triplett, 494 U.S. 715 (1990), this Court recognized that

an adjustment of an attorney's fee for the contingent risk of loss

was permitted as part of a “reasonable attorney's fee.” See Section

1, infra.

The phrase “reasonable attomey's fee” meant to Congress

what it meant in the antitrust and securities statutes that had been

earlier enacted by Congress: that the risks of contingent representa-

tion may require additional compensation. If Congress intended to

limit the courts’ consideration of marketplace factors, it would

have done so because “[i}t is . . . clear that when Congress meant

to set a limit on fees, it knew how to do so.” Crawford Fitting Co.

v. J.T. Gibbons, 482 U.S. 437, 442 (1987). Congress made such a

limitation in the Individuals with Disabilities in Education Act, 20

U.S.C. §1415(e)(4)(C) where “no bonus or multiplier may be used

in calculating fees awarded under this subsection.” Moreover, the

limitation on marketplace factors sought by the City and amici was

presented to Congress as proposed bills and amendments which

were rejected. And, even if reference to legislative history is made,

it demonstrates that it was Congress’ intent, object and design to

adopt marketplace standards for calculating fee awards. In relying

on the phrase “prevailing party” to limit the use of marketplace

factors in fees calculation, amici confuse the statutes’ entitlement

standard with their fee calculation standard. That the phrase “pre-

vailing party” speaks to a party’s entitlement to fees has been

repeatedly recognized in this Court's fees jurisprudence. See Sec-

tion Il, infra.

Nine circuits have accepted Justice O'Connor's two-prong

market test and applied it correctly. Nearly all have done so

without difficulty, often on uncontradicted records. An upward

adjustment for risk is not automatic under the test, numerous courts

have found no need for risk enhancement or that the evidence

submitted did not support enhancement. Justice O'Connor's class-

based assessment of risk has proven workable.

The City and amici do not dispute the marketplace basis

of this Court’s prior attorney's fees decisions, but simply

reject the market's treatment of risk. Their selective rejection

of market principles defies the legal marketplace, the statu-

tory language, and well-established principles of market eco-

nomics. The City and amici’s proposed per se rule prohibiting

any risk enhancement has no legal or economic basis. See

Section Ill, infra.

Because the district court, on an undisputed record, cor-

rectly held that an enhancement was available to compensate

for contingent risk, this Court should affirm the district

court’s award. See Section IV, infra.

ARGUMENT

A REASONABLE FEE FOR A CASE PROSECUTED ON

A CONTINGENT FEE BASIS MAY INCLUDE AN

ADJUSTMENT FOR THE CONTINGENT RISK OF

LOSS

A. This Court Consistently Has Accepted Legal Mar-

ketplace Principles In Determining What Are Reason-

able Fees Under Fee-Shifting Statutes

This Court has consistently relied on legal marketplace

principles and practices in determining what are reasonable

attorney's fees under fee-shifting statutes. In fact, in its fees

jurisprudence, the Supreme Court has only relied on the

marketplace to effectuate congressional intent and determine

a “reasonable” fee.

In Hensley v. Eckerhart, the first case in which this Court

provided guidelines for calculating a reasonable attorney's fee

pursuant to a major fee-shifting statute, this Court adopted the

twelve factors set forth in Johnson v. Georgia Highway

Express, Inc., 488 F.2d 714 (Sth Cir. 1974) as the foundation

for calculating a reasonable fee. Hensley v. Eckerhart, 461

U.S. 414, 429-30 n.3 (1983). These twelve factors derive

directly from the American Bar Association Code of Profes-

sional Responsibility, originally promulgated in 1908 and

operative today, as the factors used in the legal marketplace to

calculate reasonable attorney's fees. See, e.g., E. Cavanagh,

Attorneys’ Fees in Antitrust Litigation: Making the System

Fairer, 57 Fordham L. Rev. 51, 79 and n.199 (1988).

Moreover, Hensley applied the ABA factors with an eye

to their use in the private marketplace:

Counsel for the prevailing party should make a

good-faith effort to exclude from a fee requesi

hours that are excessive, redundant, or otherwise

unnecessary, just as a lawyer in private practice

ethically is obligated to exclude such hours from his

fee submission.

Id. at 434. The Court then held that district courts must

consider the reasonable number of hours, the reasonable

hourly rate, and “also may consider other factors identified in

Johnson, ...” and noted that the inquiry does not end with

the lodestar:

There remain other considerations that may lead the

district court to adjust the fee upward or downward,

including the important factor of the “results

obtained.”

Id. at n9.

This Court again relied on the private market in Blum v.

Stenson, 465 U.S. 886 (1984), which presented the question

of what is a reasonable hourly rate for attorney services under

42 U.S.C. §1988. Petitioner in Blum sought to have hourly

rates set on a “cost-plus” basis. /d. at 892 n.6. The Solicitor

General urged the Court to adopt a cost-related standard for

non-profit legal services organizations. /d. at 892. A unani-

mous Court rejected these arguments and held that “([t)he

Statute and legislative history establish that ‘reasonable fees’

under §1988 are to be calculated according to the prevailing

market rates in the relevant community... . ” /d. at 894-95.

These “prevailing market rates” are the rates that are “in line

with those prevailing in the community for similar services by

lawyers of reasonably comparable skill, experience, and repu-

tation.”? Jd. at 895 n.11.

In City of Riverside v. Rivera, 477 U.S. 561 (1986), the

Court rejected a proposed rule that a reasonable fee be pro-

portional to the money damages recovered and affirmed an

award for all hours reasonably expended at prevailing market

rates. Although the dissent considered the award excessive, it

recognized that market principles apply to the award of statu-

tory fees:

The analysis of whether the extraordinary number

of hours put in by respondents’ attorneys in this

case was “reasonable” must be made in light of both

the traditional billing practices in the profession,

and the fundamental principle that the award of a

“reasonable” attorney's fee under §1988 means a

fee that would have been deemed reasonable if

billed to affluent plaintiffs by their own attorneys.

Id. at 591 (Rehnquist, J., dissenting).

The Court again adhered to legal marketplace principles

in Missouri v. Jenkins, 491 U.S. 274 (1989). The issues there

were whether: (1) an attorney’s fee can be enhanced to

2 The Blum decision also reaffirmed the Hensley holding that the

lodestar fee could be enhanced, but reversed the enhancement awarded by

the district court for lack of supporting evidence. /d. at 901-02.

account for delay in receipt of payment, (2) the work of

paralegals and law clerks is a compensable part of a reason-

able attorney's fee, and, (3) if so, is compensation to be at

prevailing market rates. In answering all these questions, the

Court held that §1988 requires that market practices be fol-

lowed:

The statute specifies 2 “reasonable” fee for the

attorney's work product. In determining how other

elements of the attorney's fee are to be calculated,

we have consistently looked at the marketplace as

one guide to what is “reasonable.”

Id. at 285-86.

On the issue of enhancement for delay, the majority

stated, “[ojur cases have repeatedly stressed that attorney's

fees awarded under this statute are to be based on market

rates for the services rendered” and held that compensation

received years after the rendering of services is treated differ-

ently than compensation paid contemporaneously. /d. at 283.

On the paralegal/law clerk compensation issues, the

Court held that paralegal and law clerk time is to be included

in reasonable attorney's fees calculations and that market

practices are to be followed in determining their amount:

If an attorney's fee awarded under §1988 is to yield

the same level of compensation that would be avail-

able from the market, the “increasingly widespread

custom of separately billing for the services of

paralegals and law students who serve as clerks”

Ramos v. Lamm, 713 F.2d 546, 558 (10th Cir. 1983),

must be taken into account. .. . Thus, if the prevail-

ing practice in a given community were to bill

paralegal time separately at market rates, fees

awarded the attorney at market rates for attorney

time would not be fully compensatory if the court

refused to compensate hours billed by paralegals or

did so only at “cost.”

Id. at 286-87.

The Court held that §1988 only requires that market practices

be followed, not that paralegals always be compensated sep-

arately at hourly rates:

Nothing in §1988 requires that the work of parale-

gals invariably be billed separately. If it is the

practice in the relevant market not to do so, or to

bill the work of paralegals only at cost, that is all

that §1988 requires.

Id. at 288. The Court rejected Petitioner’s claim that this

would lead to a “windfall” for attorneys, or to separate billing

for secretarial services and office supplies:

The answer to this question is, of course, that attor-

neys seeking fees under §1988 would have no basis

for requesting separate compensation of such

expenses unless this were the prevailing practice in

the local community. The safeguard against the

billing at a profit of secretarial services and paper

clips is the discipline of the market.

Id. at 287, n.9 (emphasis added).?

3 This Court also has accepted and endorsed legal marketplace

practices in Blanchard v. Bergeron, 489 U.S. 87 (1989), and Venegas v.

Mitchell, 495 U.S. 82 (1990). Both cases concern the relationship of

percentage-based contingent fee agreements and §1988. Although neither

case holds that the contingent fee percentage determines the reasonable

statutory fee, both hold that the statute was designed to incorporate and

enhance the incentives for attorneys to prosecute civil rights cases, not

limit or restrict market practices and incentives. In Blanchard, Justice

White, writing for the majority, recognized that the purpose of §1988's

fee provisions is “to encourage meritorious civil rights claims because of

the benefits of such litigation for the named plaintiff and for society at

large” and that using percentage-based fee agreements as a cap on fees

“would create an artificial disincentive for an attommey who enters into a

contingent fee agreement. . . . ” 489 U.S. at 95-96. In Venegas, Justice

White, writing for a unanimous Court, made clear that a fee award under

§1988 (which had included a 2.0 upward adjustment) did not limit the

(Continued on following page)

In fact, in Department of Labor v. Triplett, 494 U.S. 715

(1990), the Court expressly recognized that the availability of

counsel will relate directly to the level of compensation, and

that in certain markets, additional compensation — or a risk

premium — will and should be reflected in that level of

compensation. In Triplett, Petitioner challenged the Depart-

ment of Labor’s rule under the Black Lung Benefits Act

prohibiting attorneys from recovering payments from their

clients, claiming that it would limit the availability of attor-

neys willing to take contingent cases. However, under the

Statute, successful litigants were entitled to an award of “rea-

sonable attorney's fees,” and the Department’s own regulation

permitted enhancement to “permit consideration of the attor-

ney’s risk of going unpaid.” 494 U.S. at 726. Justice Scalia, in

reasoning that was adopted by all nine Justices, held that the

additional compensation for assuming the risk of nonpayment

was consistent with market practices and the statutory provi-

sion of a “reasonable attorney's fee”:

the existence in this country of a thriving contin-

gent-fee practice demonstrates that this risk can be

compensated for — so it comes down once again to

the level of compensation.

Id.

The Court has therefore consistently adopted marketplace

principles in its fees jurisprudence. It has accepted that the

congressional purpose behind fee-shifting statutes is to pro-

vide incentives for competent attorneys to enforce our

nation’s civil rights and environmental statutes, has embraced

the principles and practices of the relevant legal marketplace,

(Continued from previous page)

enforceability of a market-based contingent fee, despite the fact that the

fee agreement resulted in a fee more than ten times respondent’s normal

hourly rate. Again, the Court made clear: the statutory fee provision was

not intended to limit market incentives for competent counsel to prosecute

civil rights actions. Venegas, 495 U.S. at 86-88.

and has accepted contingency risk as part of that market and a

permissible component of a “reasonable attorney's fee.”

B. Justice O’Connor’s Analysis of the Contingent

Adjustment in Delaware Valley II Is Consistent With

This Court’s Adherence To Market Principles

Following this long line of Supreme Court decisions

adopting the market place analysis as the basis for determin-

ing a “reasonable attorney's fee,” Justice O’Connor in Dela-

ware Valley II ruled that an award of fees to a prevailing

plaintiff may properly include an adjustment to compensate

for the risk of loss if the relevant market reflects such an

adjustment as to the class of litigation. 483 U.S. at 731-33. To

avoid arbitrary and conflicting application of the contingency

adjustment, Justice O’Connor stated that contingency cases

must be treated as a class, fee applicants bear the burden of

proving the degree to which the relevant market compensates

for risk, and enhancements should not be granted on the basis

of the particular risks of the case.

Justice White’s plurality decision focuses on a different

question. Rather than questioning whether a contingency

adjustment may be part of a reasonable fee as determined by

the market, the plurality asks whether the attorney may be

awarded “separate compensation,” 483 U.S. at 715, and

whether Congress intended the risk of loss to be a basis for

“increasing an otherwise reasonable fee.” /d. at 723. The

plurality opinion examines the difficulties in assessing a risk

adjustment on a case-by-case basis and does not address

whether the market can compensate for the risk of loss that is

inherent in a class of litigation. The plurality, and indeed, all

nine justices reject an individualized post hoc determination

of the risks. 483 U.S. at 726-27, 731, 745.

The Dagues do not seek to overturn that judgment.

Instead, they embrace Justice O’Connor’s market-based anal-

ysis. By awarding a contingency enhancement based on the

market treatment of a class of litigation, and awarding risk

adjustment only insofar as “necessary to bring the fee within

the range that would attract competent counsel,” (/d. at 733),

Justice O’Connor’s formulation avoids completely the diffi-

cult practical problems identified in Justice White’s plurality

opinion and the possibility of the award of a “windfall” fee.

See Section III.D, infra.

LEGISLATION PROVIDING FOR THE AWARD OF

REASONABLE ATTORNEY’S FEES TO A PREVAILING

PARTY INCORPORATES LEGAL MARKETPLACE

FACTORS

A. The Language of the Statutes Demonstrate That Con-

gress Did Not Intend to Depart from Its Historic

Reliance on the Market Model

When Congress enacted the environmental statutes at

issue here, the phrase “reasonable attorney’s fees” for a pre-

vailing party had a well-established legislative and judicial

meaning, which incorporated marketplace factors such as

contingent risk. Under the rules of statutory construction,

those phrases must be interpreted as they were in the securi-

ties and antitrust statutes previously enacted by Congress: to

permit a contingent risk adjustment in the appropriate case.

Moreover, Congress has put the limitation sought by the City

and amici in other statutes, but not in the statutes presented

here. Had Congress intended to prohibit the courts from

considering marketplace factors, it would have done so, as it

has done in numerous other statutes.

Like many statutes enacted before them, the environmen-

tal statutes at issue herein provide for a “reasonable attorney's

fee” to the prevailing party. See 33 U.S.C. §1365(d); 42

U.S.C. §6972(e). The City and amici postulate that Congress

abandoned its oft-placed reliance on the legal marketplace as

a means of defining the amount of a “reasonable” fee to a

prevailing party. To the contrary, the established canons

of statutory construction demonstrate that Congress

incorporated marketplace factors, such as adjustments for

contingent risk, when it adopted the phrase “reasonable attor-

ney’s fee” for the prevailing party.

“(T]}he purpose of a statute includes not only what it sets

out to change, but what it resolves to leave alone.” West

Virginia Univ. Hosp. v. Casey, 111 S. Ct. 1138, 1147 (1991).

And, where a statute “contains a phrase that is unambiguous —

that has a clearly accepted meaning in both legislative and

judicial practice” the duty of the Court is to enforce the

Statute according to its terms. /d.

The phrase “reasonable attomey’s fee” for the prevailing party

had a “clearly accepted meaning” at the time it was incorporated

into the statutes at issue here — a meaning that unquestionably

included marketplace factors and anticipated adjustments for con-

tingent risk in the appropriate case. “Reasonable attorney's fee” for

the prevailing party plainly meant to Congress what it had plainly

meant in the marketplace: that the risks of contingent representa-

tion may require special compensation.

It is a fundamental rule of statutory construction that

words or phrases in a provision that were used in other

Statutes pertaining to the same subject matter will be con-

strued in the same sense. Marks v. United States, 161 U.S.

297, 302-03 (1896); 2A Sutherland Statutory Construction,

§51.02 (Sth ed. 1992). The phrase “reasonable attorney's fee”

for a prevailing party occurs in a number of antitrust and

securities statutes that were enacted prior to the environmen-

tal statutes at issue here.* This Court and Congress have

stated that these various fee-shifting statutes are to be inter-

preted “in pari materia.”*

4 The Clean Water Act was enacted in 1972, and Congress passed

the Resource Conservation and Recovery Act in 1976. The Civil Rights

Attorneys’ Fees Awards Act, 42 U.S.C. §1988, which also provides for

“reasonable attorney's fees,” was also enacted in 1976.

5 See, e.g., Pennsylvania v. Delaware Valley Citizen's Council for

Clean Air, 478 U.S. 556, 559 (1986) (Delaware Valley I); Crawford

Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 445 (1987).

One of the earliest prevailing party statutes to use the

phrase “reasonable attorney's fee” was the Clayton Act of

1914, 15 U.S.C. §15. That phrase also is in the Securities Act

of 1933, 15 U.S.C. §77k(e), and the Securities Exchange Act

of 1934, 15 U.S.C. §78i(e), r(a), and u(h)(7)(A). By the mid

1970s, when §1988 and the environmental statutes were

enacted, the phrase “reasonable attorney's fee” repeatedly had

been interpreted to include marketplace factors, such as the

contingent nature of the case.®

61 (D.Mass. 1963), modified on other grounds, Green v. Transitron

Electronic Corp., 326 F.2d 492, 496-97 (1st Cir. 1964) (antitrust; contin-

gency enhancement awarded because “[n]o one expects a lawyer whose

compensation is contingent upon his success to charge, when successful,

as little as he would charge a client who in advance had agreed to pay for

his services, regardless of success.”); Steinberg v. Hardy, 93 F.Supp. 873

(D.Conn. 1950) (securities; contingency enhancement awarded, noting

that “actions, even when well-founded, will seldom be brought unless

counsel can be found” on a contingent basis and that “obviously a retainer

on a contingent basis is distinctly less attractive” than a guaranteed hourly

rate); City of Detroit v. Grinnell Corp., 495 F.2d 448, 471 (2nd Cir. 1974)

(antitrust; risk enhancement available because “despite the most vigorous

and competent of efforts, success [in litigation) is never guaranteed”);

Lindy Bros. Builders, Inc. v. American Radiator & Standard Corp., 487

F.2d 161, 168 (3rd Cir. 1973) (antitrust; lodestar may be increased to

reflect contingent nature of case); Blank v. Talley Indus., Inc., 390 F.Supp.

1, 5 (S.D.N.Y. 1975) (antitrust; $1.4 million fee based in part on contin-

gent risk); Jn re Coordinated Pretrial Proceedings, Etc., 410 F.Supp. 680,

91 (D. Minn. 1975) (antitrust; enhancements awarded to “take into

consideration the contingent nature of this litigation”); Jn re Gypsum

Cases, 386 F.Supp. 959, 67 (N.D. Cal. 1974), aff'd, 565 F.2d 1123 (9th

Cir. 1977) (antitrust; enhancements awarded for contingent risk); Colson

v. Hilton Hotels Corp., 59 F.R.D. 324, 326 (N.D. Ill. 1973) (antitrust;

court gave “great weight” to fact that contingent case “ought w yield a

greater degree of compensation upon successful prosecution of the

(Continued on following page)

Legislative language is interpreted with the presumption

that Congress had knowledge of the basic rules of statutory

construction. McNary v. Haitian Refugee Center, Inc., 111

S.Ct. 888, 898 (1991); Stainback v. Mo Hock Ke Lok Po, 336

U.S. 368, 377-79 (1949). And legal terms in a statute, such as

“reasonable attorney's fee” for a prevailing party, are pre-

sumed to have been used in their legal sense. Standard Oil

Co. v. United States, 221 U.S. 1 (1911); Bradley v. United

States, 410 U.S. 605, 609 (1973).

Here, Congress was enacting the fee provisions against a

legislative common law of remarkable consistency and conti-

nuity in which “reasonable attorney's fee” for a prevailing

party incorporated the marketplace model and, in appropriate

cases, the contingent risk enhancement. Since legislative lan-

guage is interpreted with the assumption that the legislature

was aware of existing statutes and judicial decisions, United

(Continued from previous page)

action”); McKittrick v. Gardner, 378 F.2d 872, 875 (4th Cir. 1967) (social

securities disability benefits; “the contingency of compensation is highly

relevant in the appraisal” of reasonable attorney's fees within the 25%

statutory maximum); Angoff v. Goldfine, 270 F.2d 185, 189 (Ist Cir.

1959) (securities; remanding fee award and directing lower court to

consider contingent risk); Perlman v. Feldmann, 160 F.Supp. 310

(D.Conn. 1958) (securities; giving “great weight” to contingent nature of

case); In re Detroit Int'l Bridge Co., 111 F.2d 235, 37 (6th Cir. 1940)

(bankruptcy reorganization under securities laws which considers

“whether the fee is absolute or contingent”). See also, In re Osofsky, SO

F.2d 925, 27 (1931) (bankruptcy action; contingency enhancement

awarded because “however much ingenuity and time attorneys may

expend, they may not be able to get anything for the estate by their

efforts.”); F.B. MacKinnon, Contingent Fees For Legal Services: A

Report of the American Bar Foundation 26 (1964) (“As we have seen in

civil suits for damages under antitrust legislation the claimant is awarded

reasonable attorney's fees if the suit is successful . . . The contingent

factors, among others, is recognized by the courts in making the award.”).

States v. Monia, 317 U.S. 424, 427-30 (1943); F.C.C. v.

American Broadcasting Co., Inc., 347 U.S. 284, 297 (1954),

Congress’ use of the phrase “reasonable attorney's fee” for a

prevailing party must be interpreted to include the availability

of a contingent risk enhancement.

If Congress meant to abandon its historic understanding

of the phrase “reasonable attorney's fee” for a prevailing

party, it would have used different words when it legislated

the statutes at issue here. As noted by Justice Thomas in

United States v. Wilson, 60 U.S.L.W. 4244 (1992), it is a

“familiar maxim that, when Congress alters the words of a

Statute, it must intend to change the statute’s meaning” (cit.

omitted). By parity of reasoning, when Congress does not

alter statutory language, its intent is to retain the familiar and

accepted meaning. See West Virginia Univ. Hosp. v. Casey,

111 S.Ct. 1138, 1147 (1991); 2A Sutherland Statutory Con-

struction, §45.12 (Sth ed. 1992). Here, Congress did not alter

the words of the fee provision because it did not intend to

change the well established meaning of “reasonable attorney's

fee.”

Thus, in West Virginia University Hosp. v. Casey, this

Court examined congressional changes to the phrase “reason-

able attorney's fee” for a prevailing party in a variety of

Statutes. A comparison of the statutes was proper because

Statutes are construed “to contain that permissible meaning

which fits most logically and comfortably into the body of

both previously and subsequently enacted law.” 111 S.Ct. at

1148. Because a number of statutes contained an express

grant to a prevailing party of reasonable attorney's fees plus

expert witness fees, the Court held that the statutory usage

indicated that expert fees were an item “in addition to attor-

ney’s fees.” Jd. at 1142 (emphasis in original). The Court

reasoned that Congress would not have engaged in “an inex-

plicable exercise in redundancy” by changing the language in

some statutes. /d. at 1143.

The same comparison of congressional changes to the

phrase “reasonable attorney's fee” for a prevailing party dem-

onstrates that it is proper for courts to consider the mar-

ketplace factor of contingent risk, unless otherwise directed

by Congress. When Congress enacted the Individuals with

Disabilities in Education Act (“IDEA”) in 1986, it speci-

fically prohibited all bonuses or multipliers. In order to alter

the usual meaning of the phrase “reasonable attorneys’ fee”

for a prevailing party, Congress specifically stated that “[njo

bonus or multiplier may be used in calculating the fees

awarded under this subsection.” 20 U.S.C. §1415(e)(4)(C).

Similarly, when Congress passed the Antitrust Civil Process

Act Amendments of 1976, the legislators focused consider-

able attention on the availability of contingent recoveries for

private attorneys. As a consequence, both the House and

Senate ultimately agreed explicitly to prohibit private attor-

neys from collecting contingency fees unless the award is

determined by a court. 15 U.S.C. §15g(1)(A)-(B).

Thus, had Congress intended to limit the courts’ discre-

tion when they calculate a prevailing party’s reasonable attor-

ney’s fee, it would have imposed express limitations, as it has

done in numerous other statutes.’

7 Slightly more than one-fifth of the fee provisions in the United

States Code regulate or limit the prevailing party’s attorney’s fee in

certain types of cases. See generally 1 M. Derfner and A. Wolf, Court

Awarded Attorney Fees, §504 (1991); Walters v. National Ass'n of

Radiation Survivors, 473 U.S, 305 (1985) (upholding 38 U.S.C. §3404(c),

which limits to $10 the fee that may be paid an attorney or agent who

represents a veteran); 28 U.S.C. §2412(d)(1)(A) (fee awards under the

Equa! Access to Justice Act “shall be based upon prevailing market

rates .. . except that . . . attorney fees shall not be awarded in excess of

$75 per hour... ); 42 U.S.C. §300aa-15(b) (fee awards under the

National Vaccine Injury Compensation Act of 1986 limited to $30,000);

28 U.S.C. §2678 (fees under Federal Tort Claims Act limited to 20% of

administrative settlement; 25% of judgment or settlement); 42 U.S.C.

(Continued on following page)

In contrast to the limitations in myriad fees provisions in

the United States Code, Congress included no such wording

in the environmental and civil rights statutes. In the same year

that Congress enacted the IDEA, 1986, Congress amended the

Superfund law (CERCLA), 42 U.S.C. §§9601 et seq. to add a

citizens’ suit provision, which provided for “reasonable attor-

ney’s fees,” 42 U.S.C. §9659(f), yet did not include the

restrictive language found in the IDEA. The “reasonable

attorney’s fees” provision in CERCLA is identical to that

found in the CWA and RCRA. As Chief Justice Rehnquist

aptly observed in Crawford Fitting Co., 482 U.S. at 442, “[iJt

is .. . Clear that when Congress meant to set a limit on fees, it

knew how to do so.” The City seeks to have this Court

disregard Congress’ selective use of limiting language in

other fees statutes. That result is impermissible, because such

an interpretation would render Congress’ words “an inexpli-

cable exercise in redundancy.” West Virginia Univ. Hosp., 111

S.Ct. at 1143.

Congress not only knows how to limit fee enhancements,

but it has also rejected proposed legislation that attempted to

do so. In 1982, Senator Hatch unsuccessfully proposed an

amendment to §1988 which would have prohibited “awards

based on contingency factors or multipliers.” S. 585, 97th

Cong. 2d Sess. §722A(e) (1982). See Attorney's Fees Awards:

Hearings on §. 585 Before the Subcomm. on the Constitution

of the Senate Comm. on the Judiciary, 97th Cong., 2d Sess. 13

(1982). In addition, four bills were introduced which would

have capped attorney hourly rates levied against government

defendants at $75, and eliminated multipliers and bonuses

under all federal prevailing party fee provisions. None of

(Continued from previous page)

406(b)(1) (fees under Social Security Act limited to 25% of award); 22

U.S.C. §277d-21 (fees under American-Mexican Chamizal Convention

Act of 1964 limited to 10%); 48 U.S.C. §1424c(f) (fees for claims

regarding land under Organic Act of Guam limited to 5%); 50 U.S.C.

App. §1985 (fees under Japanese-American Evacuation Claims Act of

1948 limited to 10%).

these bills passed.* See S. 2802, 98th Cong., 2d Sess. (1984);

H.R. 5757, 98th Cong. 2d Sess. (1984); S. 1580, 99th Cong.

Ist Sess. (1985); and H.R. 3181, 99th Cong. Ist Sess. (1985).

As recently as last year, an amendment was proposed as part

of the Civil Rights Act of 1991, which would have limited a

prevailing party’s attorney's fees to 20% of the total award.

137 Cong. Rec. S. 15338-39 (daily ed. Oct. 29, 1991).

The rejection of an amendment indicates that the legisla-

ture does not intend the law to include the provision embod-

ied in the rejected amendment. Lapina v. Williams, 232 U.S.

78 (1914); United States v. Great N. R.R. Co., 287 U.S. 144,

155 (1932). Thus, the numerous failed attempts to limit the

availability of enhancements in the environmental and civil

rights area demonstrate that a contingent risk enhancement

may be available in appropriate cases.?

® In advocating on behalf of the failed bills, the Department of

Justice raised many of the same arguments it raises here. See The Legal

Fee Equity Act [S.2802]: Hearing Before the Subcomm. on the Constitu-

tion of the Senate Judiciary Committee, 98th Cong., 2d. Sess., 38-41

(1984) (comments and materials submitted by Deputy Attorney General

Carol Dinkins that a prohibition against multipliers is required because

multipliers subsidize losing cases, create needless litigation, and are

difficult for the courts to administer); Legal Fees Equity Act [S.1580]:

Hearing Before the Subcomm. on the Constitution of the Senate Judiciary

Committee, 99th Cong. 1st Sess. 47-51 (1985) (comments and materials

submitted by Deputy Attorney General Lowell Jensen making same

arguments).

% This is, moreover, consistent with Crawford Fitting Co., 482 U.S.

437 and West Virginia Univ. Hosp., 111 S.Ct. 1138, where the Court was

examining the civil rights and antitrust fees provisions as well as a

separate specific statute that governed the topic of expert fees, 28 U.S.C.

§1821. The Court described 28 U.S.C. §1821 as a statute which “compre-

hensively regulated” the kinds of expenses “that a federal court may tax

as costs against the losing party.” Crawford Fitting, 482 U.S. at 440.

Applying the well-settled rule that a specific statute will control over a

(Continued on following page)

Under standard rules of statutory construction, the lan-

guage of the statutes cannot be interpreted to embody any

limit on use of the marketplace factor of contingent risk in an

appropriate case. Congress has imposed the limitation sought

by the City and amici, but not in the statutes at issue here.

The City cannot now impute such limitation in the absence of

clear congressional intent.

B. The Legislative History Adopts Marketplace Stan-

dards For Calculating a “Reasonable Fee”

The legislative history readily demonstrates that Con-

gress adopted marketplace standards for determining a rea-

sonable fee. In enacting §1988, Congress cautioned that

“{ujniess the judicial remedy is full and complete, it will

remain a meaningless right.” H.R. Rep. No. 1558, 94th Cong.,

2d Sess. 1 (1976) (“H.R. Rep.”). In light of this goal, Con-

gress gave ample instruction to the courts on how to calculate

a “reasonable attorney's fee,” repeatedly pointing to a market

consideration of the contingent nature of a case.

First, “Congress directed that attorney's fees be calcu-

lated according to standards currently in use under other fee-

shifting statutes.” Blum v. Stenson, 465 U.S. at 893. As the

Court noted, Blanchard v. Bergeron, 489 U.S. at 95, Congress

“clearly” instructed the courts to treat fee calculations in the

same manner as other complex federal litigation fee petitions:

It is intended that the amount of fees awarded under

[§1988] be governed by the same standards which

prevail in other types of equally complex Federal

litigation, such as antitrust cases.

(Continued from previous page)

general one, the Court held that the provisions of 28 U.S.C. §1821 limited

expert fees to $30 per day unless the statutory language indicated

otherwise. Here, there is no specific statute such as 28 U.S.C. §1821 and,

more importantly, attempts to pass such a specific statute limiting fees

have been expressly rejected by the Congress.

S. Rep. No. 1011, 94th Cong., 2d Sess. 6 (1976) (“S. Rep.”).

See also H.R. Rep. at 8-9 (referring to antitrust cases and

noting that “civil rights plaintiffs should not be singled out

for different and less favorable treatment.”).

In fact, Congress made repeated reference to the back-

drop of established judicial standards that incorporated mar-

ket concepts, and it directed courts to follow those standards.

Thus, Congress “intend[ed] that, at a minimum, existing judi-

cial standards . . . should guide the courts.” H.R. Rep. at 8.

Describing the “reasonable attorney's fees” provision as a

“key feature,” Congress commented that “[bjecause other

Statutes follow this approach, the courts are familiar with

these terms and in fact have reviewed, examined, and inter-

preted them at some length.” H.R. Rep. at 6.

As noted above, for years prior to the passage of the

CWA and RCRA, courts had routinely awarded fee enhance-

ments where appropriate under similar fee-shifting statutes to

account for contingent risk in various types of complex litiga-

tion. See cases cited in IIA, supra. Thus, the “existing judicial

standards” which Congress intended to govern determinations

of a reasonable attorney's fee, and which the courts had

already “reviewed, examined and interpreted at some length,”

included adjustments for the risk premium.

Congress then instructed the courts that “[i)n computing

the fee, counsel for prevailing parties should be paid, as is

traditional with attorneys compensated by a fee-paying client,

‘for all time reasonably expended on a matter.’ ” S. Rep. at 6

[citations omitted]. It was, and is, traditional for attorneys to

receive a higher rate of compensation from contingent fec-

paying clients. As amici admit, “[f]ree legal services confer a

substantial benefit on a client. In exchange for that benefit, it

is reasonable for the attorney to charge a fee to the client, if

the case is won, that is greater than the fee [an hourly fee-

paying] client would be charged for the time expended.” Brief

of District of Columbia at 11 [emphasis added].'°

Similarly, it is “traditional” for the risk premium for

contingent cases to be calculated separately, rather than to be

subsumed in the lodestar. See, e.g., Declaration of Chester

Kamin at 47; Declaration of Chesterfield Smith at 410; Decla-

ration of Steven Mayer at 48; Declaration of Robert Weinberg

at 43. See Materials lodged by Respondents.

Finally, Congress cited several cases as guideposts for

courts to use in determining a reasonable fee. Both the House

and Senate reports cite Johnson v. Georgia Highway Express,

Inc., 488 F.2d 714 (Sth Cir. 1974), which grafted the long-

Standing legal market factors “consistent with those

recommended by the American Bar Association’s Code of

'© Courts also have recognized the legal market truism that, in

contrast to cases taken with the expectation of a guaranteed hourly fee,

contingent Cases can, in some cases, compel a risk premium. See Lindy

Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 487

F.2d 161, 168 (3d Cir. 1973) (no one expects a lawyer who works on a

contingent fee to charge as little as he would charge an hourly fee client);

see also Jones v. Diamond, 636 F.2d 1364, 1382 (Sth Cir.) (en banc), cert.

dismissed, 453 U.S. 950 (1981) (“Lawyers who are to be compensated

only in the event of victory expect and are entitled to be paid more when

successful than those who are assured of compensation regardless of

result”); Stanford Daily v. Zurcher, 64 F.R.D. 680, 685 (N.D. Cal. 1974),

aff'd, 5S0 F.2d 464 (9th Cir. 1977), rev'd, 436 U.S. 547 (1978) (“the

American Bar Association [has determined] that attorneys deserve higher

compensation for contingent than for fixed fee work”).

Congress expressly approved the Lindy case when it enacted the fee-

shifting provisions of the Toxic Substances Control Act, (“TSCA”) 15

U.S.C. §§2618(d), 2619(c)(2), and 2620(b)(4)(C). Like the statutes at

issue here, all three of TSCA’s provisions allow a court to award

“reasonable fees for attorneys.” The legislative history cites Lindy as

illustrative of the fact that the amount of a fee award “can be adjusted for

factors including, inter alia, the contingent nature of the success.” See

House Committee On Interstate and Foreign Commerce, 94th Cong., 2d

Sess., Legislative History of the Toxic Substances Control Act 255-56

(Comm. Print 1976).

Professional Responsibility” onto the process of setting a

reasonable fee under Title VII's fee-shifting provision. /d. at

719. See S. Rep. at 6; H.R. Rep. at 8. These twelve ABA

factors include consideration of “whether the fee is fixed or

contingent.”!! As recognized by Justice White, <[i]n many

past cases considering the award of attorney’s fees under

§1988, we have turned our attention to [Johnson],” and the

Johnson contingency fee factor is “a factor” which “may aid

in determining reasonableness.” Blanchard, 489 U.S. at 93.

See, supra, at note 3.

In addition to adopting Johnson, Congress pointed to

three cases where the fee standards were “correctly applied.”

Blanchard, 489 U.S. 87, (examining cases cited in legislative

history to determine Congressional intent). S. Rep. at 6.

These three cases are Stanford Daily, 64 F.R.D. 680; Swann v.

Charlotte-Mecklenburg Bd. of Educ., 66 F.R.D. 483

(W.D.N.C. 1975); and Davis v. County of Los Angeles, 8

Empl. Prac. Dec. 4 9444 (C.D. Cal. 1974).

11 The City and amici concede that this factor is applicable to a fee

calculation, but attempt to limit its import by saying that the factor only

focuses on the existence of any contract for fees between the attorney and

client. This distinction is without significance. A court must look at

whether or not the attomey accepted the case on a contingent basis, _

because “when the plaintiff has agreed to pay its attorney, win or lose, the

attorney has not assumed the risk of nonpayment and there is no occasion

to adjust the lodestar fee because the case was a risky one.” Delaware

Valley Il, 483 U.S. at 716.

Similarly, the plurality in Delaware Valley II recognizes that the

factor “suggests that the nature of the fee contract between the client and

his attomey should be taken into account when determining a reasonable

fee,” 483 U.S. at 723, but fails to conclude that a higher fee award might

be warranted when the nature of the fee contract involves the risk of no

recovery. There can be no question that, when Canon 13 of the ABA

Canons of Professional Ethics was promulgated in 1908 and amended in

1933, it provided that risk of loss may be a factor in determining the

reasonable fee: “A contract for a contingent fee, where sanctioned by law,

should be reasonable under all the circumstances of the case, including

the risk and uncertainty of the compensation,... . ”

In approving these cases, Congress embraced a definition

of “reasonable attorney's fee” that permits upward adjust-

ments for factors such as contingent risk. In Stanford Daily,

the court first found 750 hours expended by plaintiffs reason-

able and compensable. 64 F.R.D. at 683. Next, the court

allowed market-based “fixed-fee” hourly rates averaging $50

per hour, which defendants conceded were reasonable. /d. at

684-85. Finally, the court examined the fact that counsel

prosecuted the case on a contingent basis, and adjusted the

lodestar upward by approximately 27% to provide “full and

fair compensation”:

Federal court decisions generally reason that the

amount of any award of attorneys’ fees should

reflect any contingencies which stood between the

attorneys and their deserved fee [citations omitted].

These decisions paraliel the American Bar Associa-

tion’s determination that attorneys deserve higher

compensation for contingent than for fixed-fee

work...

Federal courts’ failure to make contingency

calculations in determining fees awards, in contrast,

would discourage many attorneys from accepting

pro bono publico cases by presenting them with the

financially unacceptable “risk of wasting hours of

work, overhead and expenses”. . . .

64 F.R.D. at 685 (citation omitted).

Similarly, in Swann, 64 F.R.D. at 484-86, the court held

that a “[pJertinent factor{] in fixing fees” includes whether

the fee is “fixed or contingent.” Finally, the Davis court

acknowledged there may sometimes be a need for upward

adjustment of the lodestar, 8 Empl. Prac. Dec. ¢ 9444 at 5048,

and recognized_that the district court's “first hand observa-

tions” are important in determining a reasonable fee. /d. at

5049 (citation omitted).

None of the cases Congress highlighted supports the kind

of marketplace intervention the City and amici advance. None

of the cases suggests that an upward adjustment of the lode-

star for factors such as contingent risk is prohibited. The

legislative history is devoid of such market restraints. In fact,

as this Court has noted, “Petitioner’s argument that the use of

market rates violates congressional intent . . . is flatly contra-

dicted by the legislative history of §1988.” Blum, 465 U.S. at

894.

To the contrary, Congress explicitly has recognized that

reasonable attorney's fee awards under §1988 may include

upward enhancements. As noted previously, the fee-shifting

provision of the IDEA expressly prohibits the use of a “bonus

or multiplier” in calculating “reasonable attorney's fees.” 20

U.S.C. §1415(e)(4)(B) & (C). In the Joint Conference Report,

reprinted in 1986 U.S. Code Cong. & Ad. News 1807, 1808,

the House and Senate Conferees noted that by prohibiting

upward enhancements in the IDEA, Congress did “not intend

in any way to diminish the applicability of interpretation by

the U.S. Supreme Court regarding bonuses and multipliers to

other statutes such as 42 U.S.C. §1988.”

C. Recognition of the Risk Premium Is Consistent With

The Design, Object and Policy of the Statutes

In determining the meaning of a statute, the Courts look

not only to the particular statutory language, but to the design

of the statute as a whole and to its object and policy. Pilot

Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987). As stated above,

Congress’ design in enacting these statutes was to follow the

market model, and Congress’ object and policy was to pro-

vide citizens with meaningful access to the courts to vindicate

their rights. Failure to recognize and account for contingent

risk in determining “reasonable attorneys’ fees” would there-

fore contravene Congress’ express design, object and policy.

Congress made findings that a fee structure regulated by

marketplace factors was necessary to accomplish its purposes

in the civil rights and environmental statutes. As the court

recognized in Delaware Valley I, “ ‘[t)}he effective enforce-

ment Of Federal civil rights statutes depends largely on the

efforts of private citizens,’ and unless reasonable attorney's

fees could be awarded for bringing these actions, Congress

found that many legitimate claims would not be redressed.”

478 U.S. at 560, citing H.R. Rep. at 1.!2 “The purpose of

$1988 is to ensure effective access to the judicial process.”

Hensley, 461 U.S. at 429. These factual findings

12 The legislative history of §1988 echoes these objectives again

and again: See S. Rep at 6 (“[§1988] provides the fee awards which are

necessary if citizens are to be able to effectively secure compliance with

these existing [civil rights) statutes); S. Rep. at 2 (“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 con-

tain”); S. Rep. at 5 (“[iJn several hearing held over a period of years, the

Committee has found that fee awards are essential if the Federal statutes

to which [§1988) applies are to be fully enforced”); and S. Rep. . 6 (“[iJf

our civil rights laws are not to become mere hollow pronouncements

which the average citizen cannot enforce, we must maintain the tradi-

tionally effective remedy of fee shifting in these cases.”)

The legislative history also repeats the concern that poor people in

particular have meaningful access to the courts to assert their rights: See,

e.g., S. Rep. at 2 (“[iJn many cases arising under our civil rights laws, the

citizen who must sue to enforce the law has little or no money with which

to hire a lawyer”); H.R. Rep. at 1 (“[bJecause a vast majority of the

victims of civil rights violations cannot afford legal counsel, they are

unable to present their cases to the courts”); H.R. Rep. at 3 (“private

lawyers were refusing to take certain types of civil rights cases because

the civil rights bar, already shorn of resources, could not afford to do

so.”).

'3 Congress made these findings based on many days of extensive

testimony. See The Effect of Legal Fees on the Adequacy of Representa-

tion: Hearings Before the Subcomm. on Rep. of Citizen Interests of the

Senate Judiciary Committee, 93d Cong., 1st Sess. (1973) and Awarding of

Attorneys’ Fees: Hearings Before the Subcomm. on Courts, Civ. Liberties,

and the Admin. of Justice of the House Judiciary Committee, 94th Cong..,

Ist Sess. (1975).

made by Congress are entitled to “a great deal of deference.”

Walters v. National Ass'n of Radiation Survivors, 473 U.S. at

330 n.12 (1985).

The Deiaware Valley // plurality postulated that “[i)t may

be that without the promise of risk enhancement some lawyers

will decline to take cases; but we doubt that the bar in general

will so often be unable to respond... . " 483 U.S. at 727.

However, Congress found otherwise and, in any event, has

relied upon the application of the market in order to assure

that the bar does respond. See Sections IIA and B, supra. In

particular, Congress wanted to assure that the bar responded

to victims of violations of environmental and civil rights

statutes because, unlike personal injury cases, these litigants

“seek{] to vindicate important civil and constitutional rights

that cannot be valued solely in monetary terms.” Blanchard,

489 U.S. at 96.

Similarly, Congress enacted the CWA’s fee-shifting pro-

vision, 33 U.S.C. §1365(d), because “it is important to pro-

vide that citizens can seek [court enforcement],” and noted

that “in bringing legitimate actions under this section citizens

would be performing a public service and in such instances,

the courts should award costs of litigation to such party.” S.

Rep. No. 414, 92d Cong., 2d Sess. (1972), reprinted in 1972

U.S. Code Cong. & Ad. News 3668 at 3746-47.'*

Congress has “instructed the courts to use the broadest

and most effective remedies available to adhere to [these]

goals,” S. Rep. at 3, and “the fee-shifting provision [is] ‘an

integral part of the remedies necessary to obtain’ compliance

with our statutory policies.” Evans v. Jeff. D., 475 U.S. 717,

731 (1986). In Stanford Daily, 64 F.R.D. 680, the court noted

that accounting for contingent risk in setting a reasonable fee

\4 Congress enacted the fee-shifting provision of RCRA “[drawing]

on the similar provisions of the Clean Air Act of 1970 and the [Clean

Water Act].” Delaware Valley I also noted “the purposes behind both

§304(d) [of the Clean Air Act) and §1988 are nearly identical.” 478 U.S.

at 559.

serves Congress’ purpose of providing meaningful and effec-

tive access to the courts:

[Contingent adjustments] help{} attract counsel to

the enforcement of important constitutional princi-

ples and significant congressional policies which

might otherwise go unrepresented. ... From the

public’s standpoint, the contingent fee helps equal-

ize the access of rich, middle-class, and poor indi-

viduals to the courts by making attorney decisions

concerning representation turn on an action’s merits

rather than on the size of a client’s income.

64 F.R.D. at 685.

A “reasonable attorney's fee” must account for contin-

gent risk if Congress’ object of providing meaningful and

effective access is to be met. As one commentator stated, “the

experience of the marketplace indicates that lawyers generally

will not provide legal representation on a contingent basis

unless they receive a premium for taking that risk.” S. Berger,

Court Awarded Attorneys’ Fees: What Is “Reasonable” ?, 126

U.Pa.L.Rev. 281, 324-25 (1977). See also Legal Fees Equity

Act [S.1580]: Hearings Before the Subcomm. on the Constitu-

tion of the Senate Judiciary Committee, 99th Cong., 1st Sess.

289 (1985), Testimony of Philip Sunderland (“without mar-

ket-rate compensation and without the possibility of having

contingent representation, it is not only economically infeas-

ible [to take on cases], . . . it is economic suicide”).

In sum, interpreting the statutory language to allow for

contingent adjustments is “reasonable, consistent, and faithful

to [the statute’s] apparent purpose.” Blanchard, 489 U.S. at

100 (Scalia, J., concurring). Failure to adhere to market

principles in determining a reasonable fee will result in a

failure to follow Congress’ design, object and policy.'°

D. Risk Adjustments Do Not Compensate Non-Prevailing

Parties

The Solicitor General contends that including a contin-

gency adjustment in a “reasonable” fee is contrary to the

statute, because an adjustment would compensate non-pre-

vailing parties. The Solicitor General has provided no legisla-

tive history in support of this interpretation and, as discussed

supra in Section II, Congress enacted the CWA and RCRA

prevailing party fee provisions in view of many other prevail-

ing party fee statutes, pursuant to which contingency adjust-

ments had long been made.

In relying on the phrase “prevailing party” to limit the

calculation of fees, amici confuse two separate inquires. The

prevailing party inquiry defines the types of parties entitled to

1S The Solicitor General argues that because the fee-shifting statute

constitutes a limited waiver of sovereign immunity, the statute must be

construed narrowly. Solicitor General's Brief at 26, n. 24. This issue was

raised in the City’s Petition for Certiorari, and was not accepted. More-

over, as this Court has held, “[t)he question is what Congress intended -

not whether it manifested the clear affirmative intent . . . to waive the

sovereign’s immunity.” Missouri v. Jenkins, 491 U.S. 274, 282 (1989);

Franchise Tax Board v. United States Postal Service, 467 U.S. 512, 521

(1984) (“waiver of sovereign immunity is accomplished not by a ‘ritualis-

tic formula;’ ” and “can only be ascertained by reference to underlying

congressional policy.”). Congress explicitly included government defen-

dants in the CWA and RCRA. See 33 U.S.C. §1362(5); 42 U.S.C.

§6903(15). Similarly, Congress intended §1988 to apply equally to gov-

ernment and nongovernment defendants: “With respect to the awarding of

fees to prevailing defendants, it should further be noted that governmental

officials are frequently the defendants in cases brought under statutes

covered by (§1988].” H.R. Rep. at 7. See also S. Rep. at 5. Indeed,

Congress has rejected bills which- would have limited governmental

exposure in fee-shifting statutes in the manner the Solicitor General

suggests. See pp. 19-20, supra.

—— =~

ote elle 4

a fee award, while the reasonable fee inquiry defines the

proper calculation of the fee award.

This Court defined the term “prevailing party” in Texas

State Teachers’ Assn. v. Garland Indep. School Dist., 489

U.S. 782 (1989). Writing for a unanimous Court, Justice

O’Connor defined “prevailing party” as an entitlement, rather

than a fee calculation term:

Where . . . a change [in the legal relationship of the

parties} has occurred, the degree of the plaintiff's

overall success goes to the reasonableness of the

award under Hensley, not to the availability of a fee

award vel non.

Id. at 793. The distinction between the entitlement and calcu-

lation standards was also noted by the Court in Hensley, 461

U.S. 424.

[The prevailing party standard] is a generous for-

mulation that brings the plaintiff only across the

Statutory threshold. It remains for the district court

to determine what fee is ‘reasonable’.

461 U.S. at 433.16

Where Congress has limited the calculation of the

amount of fees, it has left the prevailing party standard intact.

For example, although the IDEA prohibits risk enhancements,

fees are awarded “to the parents or guardian of a

'© The legislative history confirms that the phrase “prevailing party”

speaks to entitlement to, and not calculation of, a “reasonable attorney's

fee.” Both the House and Senate Reports cite Newman v. Piggie Park

Enterprises, Inc., 390 U.S. 400, 402 (1968) for the proposition that “a

prevailing plaintiff ‘should ordinarily recover an attorney's fee unless

special circumstances would render such an award unjust.’ ” H.R. Rep. at

6; S. Rep. at 5. In fact, the House Report contains a separate section

entitled “Prevailing Party,” which discusses at length the issue of whether

and when a successful litigant is a prevailing party under the statute. The

House Report contains a wholly separate section entitled “Reasonable

Fees.” H.R. Rep. at 8-9.

child or youth with a disability who is the prevailing party.”

20 U.S.C. 1415(e)(4)(B). If, as the amici argue, the phrase

“prevailing party” prohibits risk adjustments, then Congress’

limiting language is rendered an “inexplicable exercise in

redundancy.” West Virginia Univ. Hosp., 111 S.Ct. at 1143. As

discussed supra at pp. 18-19, Congress used the limiting

language of the IDEA and other “prevailing party” statutes

when it intended to alter the usual meaning of the fee provi-

sion.!7

Even more simply, only prevailing parties receive pay-

ment. The Dagues are prevailing parties. In fact, there is

nothing in the record to suggest that the Dagues, or any of

their attorneys, have ever lost a case under a federal fee-

shifting statute or that they ever will.’* What Respondents

and their attorneys seek in this case is market-based compen-

sation for the risk they took in prosecuting this case on a

contingent-fee basis, not the risk undertaken in some other

case. The legal marketplace compensates for this risk regard-

less of whether an attorney has ever previously litigated a

case on a contingent-fee basis or will ever in the future, or

whether the attorney has won ten contingent-fee cases in a

row or lost ten in a row. Under Justice O'Connor's test, the

risk premium is analyzed on a relevant market basis and

applies only if necessary to attract competent counsel to such

cases, not to pay any non-prevailing party.

‘7 Amici argue that the term “prevailing party” operates as a limita-

tion on reasonable fees. To the contrary, this Court has held that Con-

gress’ choice of that phrase was intended to broaden, not limit, the

availability of fees so that both plaintiffs and defendants could be entitled

to fees. Christiansburg Garment Co. v. EEOC, 434 US. 412, 415-16

(1978). See also H.R. Rep. at 6 (under the term “prevailing party,” “either

a prevailing plaintiff or prevailing defendant is cligible to receive an

award of fees. Congress has not always been that generous.”)

18 If Messrs. Pearson and Bland had ever lost a case brought

pursuant to a federal fee-shifting statute, the “parties” in that case would

have received nothing from the fee award in this case.

Moreover, in a private contingent fee situation, an attor-

ney cannot charge one client for the work performed in

another case for another client.’° If the acceptance of a

contingency enhancement in private litigation was for the

purpose of paying for other failed litigation efforts, contin-

gency fee arrangements would be unethical, if not illegal.

Nevertheless, contingency fee arrangements have long been

accepted as legal and ethical, see ABA Model Code if Profes-

sional Responsibility, EC 2-20 and DR 2-106(b)(8); ABA

Model Rules of Professional Conduct 1.5(c) (1983), and

indeed have been approved by this Court in Venegas v. Mit-

chall, 495 U.S. 82 (1990), and Blanchard v. Bergeron, 489

U.S. 87 (1989). Thus, modern jurisprudence recognizes that

the contingency enhancement compensates for the risk of loss

in that case, not actual or potential loss in other cases.2°

Lastly, although the Solicitor General today argues that a

risk adjustment is inconsistent with the “prevailing party”

language of the statute, that has not always been the inter-

pretation of the United States. In Blum v. Stenson, the Solici-

tor General, in contending that a public interest attorney was

not entitled to a risk adjustment to the lodestar fee, made the

following concession:

Ordinarily, when a lawyer engaged in private prac-

tice agrees to represent a client on such terms he

may have to forego fee-generating employment.

'9 An attorney is prohibited from receiving a fee from someone

other than the client, unless the client has knowledge and consent of the

arrangement. See ABA Model Code of Professional Responsibility DR

5-107(A); Model Rules of Professional Conduct, Rule 1.8(f) (1983).

20 Amicus District of Columbia cites Independent Fed'n of Flight

Attendants v. Zipes, 491 U.S. 754 (1989), for the proposition that fees

cannot be assessed against intervenors, and seeks to extend Zipes to mean

that contingency adjustments assess fees against parties not deter.\ined to

be non-prevailing. The Zipes decision cannot be tortured in this fashion.

In Zipes, the intervenors were not determined to be wrongdoers and

plainuffs did not prevail against them. Here, fees have been assessed only

against the non-prevailing party in favor of the prevailing party.

Some adjustment in the hourly rate of compensation

to reflect the greater risk of nonpayment as com-

pared to the private attorney's normal practice may

be reasonable in such cases./°

'SThe normal hourly rates charged by counsel engaged in

private practice reflect the fact that the client is expected to

pay the fee regardless of the outcome of the case. If recovery

of fees depends on the client's success, it may be necessary to

allow a slightly higher hourly rate to induce lawyers engaged

in private practice tc undertake cases covered by Section

1988.

Solicitor General's Brief at 21, Blum v. Stenson, 465 U.S. 886

(1984) (No. 81-1374) (emphases added). This interpretation

of a comparable prevailing party statute-is simply incompat-

ible with the Solicitor General's current interpretation that a

“prevailing party” statute may never permit an adjustment of

the lodestar hourly rate to reflect the risk of loss.

THE TEST SET FORTH BY JUSTICE O’CONNOR IN

DELAWARE VALLEY II 1S CONSISTENT WITH MAR-

KET PRINCIPLES AND HAS PROVEN WORKABLE

A. Nearly All Courts Have Applied Justice O’Connor’s

Concurrence Correctly

The Solicitor General correctly notes that nine circuits

have followed and applied the market-based test set forth in

Justice O’Connor’s Delaware Valley II] concurring opinion.?!

Solicitor General’s Brief at 11-12, n. 11. Nearly all courts

have not only applied Justice O'Connor's concurrence, but

also applied it correctly. Most courts following Delaware

2! The non-conforming circuits are the Second Circuit, in this case,

and the District of Columbia Circuit in King v. Palmer, 950 F.2d 771

(D.C. Cir. 1991).

Valley II have relied on testimony of attorneys practicing in

the relevant legal market to establish, or dispute, the dearth of

counsel and market treatment of risk. In most cases, this

testimony was uncontradicted, fact-finding was simple and

straight-forward, and an adjustment was made. In other cases.

evidence supporting a risk enhancement was found to be

insufficient to meet the Delaware Valley I1 test, or was suffi-

ciently impeached so that no adjustment was awarded. Only

one circuit has found the fact-finding required by Delaware

Valley II to be too difficult to adhere to; yet previous panels in

that Circuit correctly applied Delaware Valley 11. Compare

King v. Palmer, 950 F.2d 771 (D.C. Cir. 1991) with McKenzie

v. Kennickell, 875 F.2d 330 (D.C. Cir. 1989).

The Third Circuit follows Justice O’Connor’s test, and

recognizes that contingency is to be treated on a class basis.

That circuit also rejected the notion that econometric studies

to quantify the market are required, although it has noted that

conclusory affidavits, without sufficient factual foundation,

are not sufficient. Blum v. Witco Chem. Corp., 888 F.2d 975,

983 n.2 (3d Cir. 1989) (“Blum II”). See also Vargas v. Cal-

abrese, 750 F. Supp. 677 (D.N.J. 1990).22

The Fourth Circuit also follows Justice O’Connor'’s test

in resolving requests for contingency adjustments. Spell v.

McDaniel, 824 F.2d 1380, 1403-05 (4th Cir. 1987). Enhance-

ments have not necessarily been awarded in all cases. Rather,

where defendants demonstrate that there is an ample supply of

attorneys willing to prosecute contingent cases without an

upward adjustment, contingency enhancements have been

denied. See Duke v. Uniroyal, Inc., 743 F. Supp. 1218,

22 Thus, Blum // clarified earlier Third "Circuit decisions. See Blum

v. Witco Chem. Corp., 829 F.2d 367, 380 (3d Cir. 1987) (Blum J)

(requesting “expert testimony from someone familiar with the economics

of the legal profession.”) and Student Public Interest Research Group v.

AT&T Bell Laboratories, 842 F.2d 1436, 1452 (3d Cir. 1988).

1226 (E.D.N.C. 1990), aff’ d in part and rev'd in part on other

grounds, 928 F.2d 1413 (4th Cir. 1991).

Before the Fifth Circuit will approve a contingency

enhancement, there must be evidence in the record and speci-

fic findings by the trial court justifying the conclusion that

contingency cases are compensated more highly in the private

market than other cases and that enhancements are necessary

to induce competent counsel to take such cases. Leroy v. City

of Houston, 831 F.2d 576 (Sth Cir. 1987), cert. denied, 486

U.S. 1008 (1988). In reversing and remanding a district

court’s denial of a coimingency premium for failure to make

proper findings, the Fifth Circuit stated:

Justice O’Connor’s instructions in Delaware Valley

Il are explicit: the district court must consider

whether a contingency enhancement would have

been necessary to induce competent counsel to

accept such cases at the time the case was under-

taken and whether contingency cases as a class were

treated differently from noncontingency Cases.

Islamic Center of Mississippi Inc. v. Starkville, 876 F.2d 465,

472 (Sth Cir. 1989).

Similarly, the Sixth Circuit, applying Justice O'Connor's

test, remanded a district court's award of a contingency

enhancement because the court did not make specific findings

of fact as to the amount and necessity of a risk adjustment.

Conklin v. Lovely, 834 F.2d 543, 553-54 (6th Cir. 1987).

_ The Seventh Circuit has clearly adopted Justice O’Con-

nor’s test for awarding contingent risk enhancements in cases

where the evidence shows that, without the enhancement,

plaintiffs would have faced substantial difficulties in finding

counsel in the local or other relevant market and that the

relevant market compensates for contingent risk. King v.

Board of Regents, 748 F. Supp. 686, 692-93 (E.D. Wis.

1990).23 On the other hand, the district courts have not

23 See also, Skelton v. General Motors Corp., 860 F.2d 250, 254 n. 3

(7th Cir. 1988), cert. denied, 493 U.S. 810 (1989); Soto v. Adams Elevator

Equip. Co., 941 F.2d 543, 553 (7th Cir. 1991).

- sl

awarded contingency adjustments where the evidence was

insufficient to satisfy the Delaware Valley II test. Wolf vy.

Planned Property Management, 735 F. Supp. 882, 887 (N.D.

Ill. 1990); Leigh v. Engle, 714 F. Supp. 1465, 1475-76 (N.D.

Ill. 1989),

The Eighth Circuit recently found that a plaintiff met the

Delaware Valley II test based on “undisputed evidence” that

very few attorneys were available to prosecute employment

discrimination and civil rights cases in the St. Louis Metro-

politan area and that a contingency enhancement was neces-

Sary to attract counsel to such cases. Morris v. American Nat'l

Can Corp., 952 F.2d 200, 205-07 (8th Cir. 1991). However, in

cases where the record failed to establish that the

unavailability of a risk enhancement would have caused

plaintiff substantial difficulty in locating competent counsel,

the Eighth Circuit has denied a contingency enhancement.

Hendrickson v. Branstad, 934 F.2d 158, 163 (8th Cir. 1991).

The Ninth Circuit has applied the Delaware Valley // test

correctly in a variety of cases. In Fadhi v. City of San

Francisco, 859 F.2d 649 (9th Cir. 1988), the Ninth Circuit

— a contingency enhancement based on uncontradicted

testimony that the legal marketplace, defined as Title VII

cases in the San Francisco Bay Area, required an enhance-

ment for attorneys to accept such cases on a contingent fee

basis. /d. at 650-51. Likewise, in Hasbrouck v. Texaco, Inc..

879 F.2d 632 (9th Cir. 1989), an antitrust case, the Ninth

Circuit affirmed a contingency enhancement under the Dela-

ware Valley II test, based on uncontradicted testimony from

antitrust counsel. /d. at 637. See also D’ Emanuele v. Mont-

gomery Ward & Co., 904 F.2d 1379 (9th Cir. 1990),

The Tenth Circuit, in Smith v. Freeman, 921 F.2d 1120,

1123 (10th Cir. 1990) refused to establish a per se rule

requiring an enhancement in contingent cases. The Tenth

Circuit has further directed its district courts to make specific

findings of fact, pursuant to Delaware Valley // requirements,

before they conclude that a class of contingency cases

requires upward adjustment of the lodestar. Wulf v. City of

Wichita, 883 F.2d 842, 876 (10th Cir. 1989).

The Eleventh Circuit also holds that the propriety of

contingency enhancements is governed by Justice O’Connor'’s

test and has affirmed enhancements where the evidence dem-

onstrates their necessity. Curry v. Contract Fabricators Profit

Sharing Plan, 744 F.Supp. 1061, 1073 (M.D. Ala. 1988),

aff'd, 891 F.2d 842, 850 (11th Cir. 1990); Martin v. Univ. of

South Alabama, 911 F.2d 604, 611 (11th Cir. 1990). In Nor-

man v. Housing Auth., 836 F.2d 1292 (11th Cir. 1988), the

Eleventh Circuit upheld the denial of contingency risk enhan-

cement, finding that “the record is absolutely devoid of any

evidence that would suggest that enhancement over the rates

requested is necessary to attract competent counsel into the

field.” /d., at 1302, 1306.

Thus, almost without exception, the circuits have under-

stood and followed the market test set forth by Justice O’Con-

nor in Delaware Valley I], have required specific evidence to

meet the test, and have demonstrated no more difficulty

discerning the market treatment of contingency than the

courts have in determining market-based hourly rates for

attorneys of comparable skill and experience or determining

how the relevant market compensates paralegals and law

clerks.24 Claims by the City and amici that Justice O’Con-

nor’s concurrence has proven to be “unworkable” stand with-

out empirical support.

24 Congress, of course, invested the federal courts with far morc

complicated evaluations of market conditions in antitrust and securities

cases. E. Cavanagh, Attorney's Fees in Antitrust Litigation: Making the

System Fairer, 57 Fordham L. Rev. 51, 70-71 (1988). No one is suggest-

ing that evaluating market treatment of rates, paralegals, and contingent

risk presents even a shadow of the complexity of such cases.

B. As With Other Economic Markets, the Legal Mar-

ketplace Normally Provides a Risk Premium For

Cases Taken on a Contingency-Fee Basis

1. Contingency Fee Cases Normally Command

Higher Fees than Fees for Work on Noncon-

tingency Matters

It is not surprising that most courts have determined that

the legal marketplace compensates contingency-fee cases dif-

ferently than hourly rate representation. In calculating the

initial lodestar, most courts employ an hourly rate that is

comparable to what is reasonably charged by attorneys with

similar skills and experience for noncontingent matters. See,

e.g., Lindy Bros. Builders, Inc. v. Am. Radiator, Etc., 540 F.2d

102, 117 (3d Cir. 1976); Hidle v. Geneva County Bd. of Educ.,

681 F.Supp. 752, 755 (M.D. Ala. 1988); /n re Wicat Securities

Litigation, 671 F.Supp. 726, 732-34 (D. Utah 1987). That rate

alone may not adequately compensate the attorney who

accepts a case on the condition that he or she receive no

payment for a losing effort.

A contingent fee must be higher than a fee for the

same legal services paid as they are performed. The

contingent fee compensates the lawyer not only for

the legal services he renders but for the loan of

those services. The interest rate on such a loan is

high because the risk of default (the loss of the

case, which cancels the debt of the client to the

lawyer) is so much higher than that of conventional

loans... .

R. Posner, Economic Analysis of Law 534 (3d ed. 1986). It is

this distinction between contingency rates and non-contin-

gency rates that may, where the market so demands, provide a

basis for an “upward adjustment” of, or a “risk premium”

over, the lodestar calculation. See also Affidavit of Richard

Posner (“[a)n award limited to normal time charges [in an

antitrust case] would, in my judgment, typically undercom-

pensate the lawyers for the Class”) at 00244; Affidavit of

Frank Easterbrook and Robert Sherwin (under the “market

value approach to the calculation of fees” in civil rights cases,

the value of the attorneys services may depend “on how the

client promises to compensate the lawyer”) at D-4.7

2. Contingency Enhancements in the Legal Mar-

ketplace Find Well-Established Parallels in Mod-

ern Economic Theory Regarding How Markets

Operate

The “contingency adjustment” at issue before the Court

is simply a specific example of a core economic principle

called “risk premium.” The concept of a risk premium to

provide incentives to invest in more risky enterprises has

continues io provide vitality to well-accepted principles in

modern economic theory.?’

25 These affidavits are in the materials Respondents lodged with the

Court.

26 In 1776, Smith discussed ihe relationship between the risk in

succeeding in any particular profession and the market wages paid to that

profession. Indeed, in discussing ‘he risks inherent in the legal profession,

Smith suggested that a 20-to-! enhancement over wages paid to more

secure enterprises would be appropriate.

How extravagant soever the fees of counselors at law may

. sometimes appear, their real retribution is never equal to

this. . . . The lottery of the law, therefore, is very far from

being a perfectly fair lottery; and that, as well as many other

liberal and honourable professions, are, in point of pecuniary

gain, evidently under-recompenced.

Adam Smith, The Nature and Causes of the Wealth of Nations 106

(Modern Library ed. 1937).

27 The concept of the risk premium in accepted modern economic

theory is most recently embodied in the works of economist William

Sharpe, who won the 1990 Nobel Prize for his work on the “Capital Asset

Pricing Model.” See W. Sharpe, “Capital Asset Prices With and Without

Negative Holdings” 46 Journal of Finance 489 (1991).

Today's economic literature exploring various aspects of

labor and investment markets?* regularly refer to and accept

the well-established concept of the risk premium. The market

will frequently reflect a higher rate of return for an uncertain

enterprise or investment over a safe one.

3. Court-Awarded Contingency Enhancements are

Nothing More Than the Minimum Risk Premium

Required by the Legal Marketplace to Attract

Counsel to Fee-Shifting Cases

Enhancements of fee awards by district courts under the

typical fee-shifting statute simply reflect that, in some mar-

kets, a premium over normal noncontingent hourly rates may

be required to attract competent counsel. Rather than being a

“windfall for attorneys” above and beyond what is already a

“reasonable attorney's fee,” the contingency enhancement is a

potential risk premium which the market may determine to be

part of the reasonable fee. An award that fails to include a

risk premium for a contingent case is not a reasonable fee, if

the market compensates for this risk.

Amici contend that a contingency enhancement is not

necessary because: (1) attorneys may bargain for a percentage

of plaintiffs’ damage recovery; (2) representation may be

8 See, e.g., R. Evans & R. Weinstein, Ranking Occupations as

Risky Income Prospects, 35 Indus. & Lab. Rel. Rev. 252 (1982); A.G.

King, Occupational Choice, Risk Aversion, and Wealth, 27 Indus. & Lab.

Rel. Rev. 586 (1972); R. Posner, Economic Analysis of Law, at 405-410.

See also R. Posner, Law and the Theory of Finance: Some Intersections

54 Geo. Wash. L. Rev. 159, 161 n.5 (1986) (“The higher expected return

for riskier investments is a central empirical finding in the finance

literature”) (citations omitted). One would never expect the market to

reflect the value of a Federal Treasury Bill to be the same for volatile

common stocks. If the expected returns were the same, no investor would

purchase the stocks with their concomitant risk of loss. Thus, the risk

premium is the price that ‘he market uses to call forth an adequate supply

of investors to undertake riskier investments.

secured through voluntary or pro bono efforts; or (3) liability

is sometimes a sure thing. The last argument is simply a claim

that, in certain classes of cases, there is no risk in assuming a

contingent case. If this is so, the plaintiff will be unable to

prove that the market in that type of litigation commands a

premium for the contingent case, and no premium will be

awarded.

Contentions (1) and (2), however, simply reject the mar-

ket-based approach to determining a reasonable attorneys’

fee. The use of percentage recovery or pro bono efforts to

provide representation to plaintiffs in certain types of litiga-

tion, as well as compelling counsel to represent unpopular

clients, are alternatives to the fee-shifting statutes, alterna-

tives of which Congress was clearly aware when it passed the

fee-shifting provisions. See note 13 supra. In no way does the

availability of some limited representation through other

means diminish the fact that, in many legal marketplaces, a

risk enhancer is necessary to attract competent counsel.?”°

29 The Solicitor General also contends that a sufficient number of

unemployed or underemployed attorneys are available to prosecute fed-

eral fee-shifting cases, and that no risk enhancement is therefore neces-

sary. There is no evidence in the legislative history that Congress

intended that important federal policies be enforced primarily by unem-

ployed or underemployed attorneys. Effective enforcement requires pro-

viding plaintiffs with lawyers comparable in quality to those representing

defendants. Moreover, justifying a “public interest discount” on the

ground that some attorneys may have charitable intentions “invokes the

interests of the disadvantaged to justify a policy contrary to their inter-

ests.” S. Berger, 126 U. Pa. L. Rev. at 312.

The “public interest discount” suffers from yet another faulty

premise. Statutory fee provisions are not enacted for the

benefit of lawyers; rather, they are enacted for the benefit of

the class of persons protected by the statutes. Reducing the

fees awarded on the ground that lawyers should be inspired

by their sense of civic responsibility reduces the economic

(Continued on following page)

)

C. The City and Amici Seek a Radical Departure from

Basic Marketplace Principles

The City and amici do not dispute the marketplace basis

of this Court’s prior fees decisions. In fact, they acknowledge

it. See Wash. Legal Found.’s Brief at 8-9: “All nine justices

[in Delaware Valley 11) appear to [agree] that any contingency

enhancement should focus primarily on market-wide condi-

tions. .. . " Moreover, the City and amici do not dispute the

applicability of legal marketplace practices with regard to

reasonable hourly rates, reasonable number of hours, and

compensation for paralegals. Despite these admissions, they

turn their backs on market practices regarding contingent risk.

This selective acceptance of market treatment of reasonable-

ness is contradicted by this Court's fees jurisprudence, the

text of fee-shifting statutes, and legislative history regarding

reasonable fees. See, Sections I, I1.A and II.B, supra.

The City, with no supporting evidence, ignores market

practices regarding contingent risk and baldly asserts that the

reasonable hourly rate used in the lodestar calculation “neces-

sarily reflects contingency considerations.” Pet. Brief at 18.

Nowhere does the City explain how a market hourly rate

includes a contingency adjustment. See p. 23, supra.

The difference between an hourly rate and contingent fee

engagement can be illustrated as follows. In one case, an

attorney is hired at his or her normal hourly rate. The client

agrees to pay hourly fees and all costs, including litigation

expenses as billed on a monthly basis, win, lose or draw. The

attorney receives payment on a monthly basis for 3,000 hours

of time over a seven year period; the client also pays $80,000

in costs and expert fees.

(Continued from previous page)

attractiveness of such cases, thereby restricting the supply of

legal resources made available. . . .

Id. at 312-315 (emphasis added).

In another case, an attorney receives no payment for

seven years, during which time 3,000 hours and $80,000 in

costs and expert fees are expended. The attorney has a right to

be paid only if he or she prevails in the case. A losing case

will cost the attorney the value of the time and expenses,

because the client is incapable of paying costs. The case is

successful; the client prevails. The client, however, does not

meekly pay the attorney’s bill after seven years of work.

Instead, the client disputes nearly all parts of the attorney's

fee and cost bill, and the attorney is forced to file a motion

with the court, and defend an appeal, in order to be paid for

the work and the underiying costs. The attorney earns no

interest on the $80,000 advanced for costs.

The same fee would not be reasonable in both cases, nor

would the legal marketplace treat these two types of represen-

tation the same. The City and amici would, however, treat

them the same and would prohibit the courts from considering

any evidence from the legal market. They fail to explain,

however, why evidence of relevant market practices should be

ignored or why market practices properly can be relied on to

calculate a “reasonable” lodestar fee, but not a contingency

adjustment.

D. The Objections Made by The City and Amici Regard-

ing the Need for and Operation of the Contingency

Risk Factor Are Addressed by Justice O’Connor’s

Two-Prong Test

Many of the City and amici’s objections to Justice

O’Connor’s test have been addressed. The remainder,

addressed here, misunderstand her test, exaggerate the con-

cerns or are otherwise without merit.

First, the Solicitor General contends that the class-based

market test fails to identify the “relevant market.” This

alleged “difficulty,” however, is no different than the inquiry

undertaken in connection with lodestar hourly rates, which

requires courts to determine the market rate for the particular

type of case and geographic area. That relevant market anal-

ysis is properly left open for district courts. See H. Newberg,

Attorney Fee Awards §4.14, at 142 (198€) (“Blum deliberately

adopted a flexible, undefined relevant community standard

that leaves room for courts to adopt different geographical

and litigation specialty approaches that best suit the particular

circumstances involved”). See also Section III.E infra.

The Solicitor General next argues that Justice O'’Con-

nor’s test is “unworkable” because (1) there is no incentive to

control the size of the fee, and (2) if enhancements are

“routinely” awarded, attorneys would decline to accept cases

on a guaranteed, hourly rate basis. Again, Justice O'Connor's

test addresses these concerns. If the attorney declined repre-

sentation on a guaranteed, hourly rate basis, that attorney

would not satisfy the test and obtain an enhancement.* If the

attorney billed more than a reasonable number of hours, this

would be reduced as part of the lodestar calculation. Like-

wise, whether any particular hourly rate is discounted for

“billing judgment” or poor results is again a market-based

lodestar determination.?!

30 The American Bar Association's Standing Committee on Ethics

and Professional Responsibility considers an attorney's failure to offer a

client an hourly rate contract before accepting a case on a contingent-fee

basis to be a violation of professional ethics. ABA Standing Commitice

on Ethics and Professional Responsibility informal Opinion, 86-1521

“Offering Alternatives to Contingent Fees” (1986).

*' The notion that the contingent fee attomey has an incentive to

unnecessarily increase hours defies common sense. The risk of receiving

no Compensation is enough incentive to expend only those hours reason-

ably necessary to win the case. See Stanford Daily v. Zurcher, 64 F.R.D.

680, 683 (N.D. Cal. 1974) (“plaintiffs’ attorneys, who had no assurance

that attorneys’ fees would eventually be granted, had incentive to mini-

mize rather than maximize the amount of time spent on the case”).

Moreover, an increased expenditure of time will not decrease the risk

inherent in a class of litigation. By analogy, if an investor is offered an

investment stock that has a 50% chance of an attractive return and a 50%

(Continued on following page)

The Solicitor General also argues that Justice O'Connor's

test requires a “particularized” factual inquiry into the indi-

vidual plaintiff's “actual difficulties” in retaining counsel

rather than the general shortage of attorneys for types of

cases. In the next breath, he acknowledges that the O'Connor

concurrence expressly prohibits the particularized assessment

of risk. In fact, the courts correctly have focused on the

general dearth of counsel for certain types of cases, not the

difficulty any particular plaintiff had in finding counsel. See,

e.g., Morris v. American Can Corp., 952 F.2d 200, 205

(1991); Spell v. McDaniel, 824 F.2d at 1405; Hidle v. Geneva

County Bd. of Educ., 681 F.Supp. 752, 751-58 (M.D. Ala.

1988). Moreover, all nine justices in Delaware Valley //

rejected a particularized inquiry. See pp. 12-13, above.

The Solicitor General then claims that Justice O'Con-

nor’s test is “unworkable” because it relies on “self-serving”

affidavits. Affidavits in support of — or in opposition to -

contingency adjustments are no more “self-serving” than affi-

davits regarding reasonable hourly rates, the reasonable

number of hours, the quality of legal representation, or the

“exceptional success” of the results achieved. If any particu-

lar testimony is biased, or without proper foundation, defen-

dants can point that out and/or submit counter-evidence. The

trial courts can be relied upon to separate the real from the

imagined. Indeed, as this Court has stated, the district courts

(Continued from previous page)

chance of total loss, he or she may be willing to purchase SO or 100

shares, but will hardly be willing tw risk all of his or her assets in that

same stock. And, regardless of the size of the investment, the 50-50 risk

always remains the same. Thus, while the attorney who is paid for all

hours worked, win or lose, may have an incentive to increase the hours

billed, an attorney paid on a contingent basis (and who will have to run

the gauntlet of a federal court fee application) will have every incentive to

moderate the time/cost investment, due to the uncertainty of payment.

S ae ie

have “superior understanding” of such factual matters.>2

Hensley, 461 U.S. at 437.

The Washington Legal Foundation claims that Justice

O'Connor's test would defeat the “rare and exceptional cir-

cumstances” rule. No Supreme Court case, including Dela-

ware Valley II, has applied the “rare and exceptional” test to

contingency adjustments. Were contingency adjustments

available only in “rare and exceptional” cases, it would be

contrary to legal marketplace treatment of risk, and would

require a particularized, post-hoc analysis to determine if the

es undertaken in that case greatly exceeded normal risk

evels.

This amicus argues that accounting for contingent risk

will result in “nonmeritorious civil rights and environmental

law complaints.” Wash. Legal Found.'s Brief at 18. Congress

responded to this concern by providing fees for prevailing

defendants where the case was “frivolous, unreasonable, or

without foundation,” Christiansburg Garment Co. v. EEOC,

434 U.S. 412, 421 (1978), not by limiting the calculation of

an otherwise reasonable fee as it has done in numerous other

Statutes. See Section II.A.

The amicus further contends that if contingency can be

reflected in a fee, “[t)here is no limiting principle” on contin-

gency adjustments. That obviously has not happened under

Delaware Valley 11. See Section U1.A. Moreover, it could not

*2 The level of proof of unavailability of counsel required in

Department of Labor v. Triplett, 494 U.S. 715 (1990), is not applicable

here. In Triplett, the anecdotal evidence submitted sought to attack the

consututionality of the implementation of the Black Lung Benefit Act, 30

U.S.C. §§901 et. seq. This Court noted “the heavy presumption of

constitutionality” and held, as it had in Walters v. National Assn. of

Radiation Survivors, 473 U.S. 305 (1985), that anyone challenging the

law on constitutional grounds had to make “an extraordinarily strong

due process of law.” Triplett, 494 U.S. at 722.

happen. The “limiting principle” of the O'Connor concur-

rence is the class-based assessment of risk and the directive

that any contingency enhancement be no “more than neces-

sary to bring the fee within the range that would attract

competent counsel.” Delaware Valley //, at 733.

E. Determination of the Appropriate Market-Based Con-

tingency Adjustment is a Judicial, Not Legislative,

Task

The Solicitor General and the District of Columbia sug-

gest that Congress should sit as a legislative price control

board that directs the appropriate payment for legal services

on a nationwide basis. Solicitor General's Brief at 25-26;

District of Columbia's Brief at 24-26. These amici assert that

Congress is better able to direct a fair payment for legal work

involving compensation for risk than the courts are able to

evaluate how the free market compensates such work, despite

this Court's emphasis that the district court has “superior

understanding” of such factual matters. Hensley, 461 U.S. at

437.

The short answer is that when Congress decides to inter-

vene wits the market and set the level of attorney compensa-

tion, it says so in the statute. See supra at pp. 17-19.

However, where Congress does not impose such restrictions,

it relies upon the courts to evaluate the operation of the legal

marketplace. The market for legal services is not monolithic:

it is not a uniform, national market that applies in the same

manner to all the various types of cases brought pursuant to

statutes that contain fees provisions. Nor is the free market

static. District courts are well suited to making specific fact-

finding decisions about the operation of the legal market at

specific locations and at particular times with respect to a

certain type of case, just as courts are relied upon to make

other complex decisions regarding the market. See note 24,

supra.

The courts make these kinds of findings regarding hourly

rates and other matters related to the determination of the

lodestar. The City and amici do not, and cannot, contest this.

There is no basis for concluding that courts are able to

determine some aspects of the market, but not the market for

risk compensation.

IV.

THE DISTRICT COURT PROPERLY EXERCISED ITS

DISCRETION WHEN IT AWARDED AN ENHANCE-

MENT OF THE LODESTAR FEE BASED UPON CON-

TINGENT RISK

The district court properly held that a “reasonable attor-

ney’s fee” under the applicable federal fee-shifting statutes

may include an enhancement of the lodestar fee to compen-

sate for contingent risk. App. I at 130-33. Based on the

evidence submitted, the district court found that the Dagucs

were entitled to a 25% contingent risk enhancement. App. I at

133. The Second Circuit agreed with the district court's deter-

mination that contingent risk may be taken into account in

calculating a reasonable attorney's fee. App. I at 35-37. It

concluded that the district court’s award of a 25% enhance-

ment was supported by its findings and affirmed it. App. I at

34-37. Because it was within the authority of the lower court

to adjust the lodestar fee to compensate for contingent risk,

the district court's ruling should be affirmed.

The City criticizes the adequacy of the affidavits the

Dagues submitted to support their enhancement request. How-

ever, the City did not raise the sufficiency of the evidence

supporting the fee enhancement in its appeal to the Second

Circuit nor in its petition for certiorari. Moreover, this

Court’s grant of certiorari does not encompass this inquiry.

The Court's order granting certiorari is limited to the issue of

whether a court may, in determining a reasonable attorney's

fee under the environmental statutes, enhance the lodestar fee

to account for contingent risk.33

%8 The City urges this Court to remand the fee award to the district

court not only to vacate the risk enhancement but also to reduce the

(Conunued on following page)

Vv oo” ———

———— -_ =-—_ =

Even if the issue were properly before this Court, this

Court need not, and indeed should not, address it. Instead, the

case should be remanded to the district court for reconsidera-

tion of the risk enhancement calculation, consistent with

Justice O’Connor’s test. As discussed in Section III.E, supra,

the district court is keenly familiar with the facts relevant to

the inquiry. It is in the best position to evaluate the unique

evidence of the local Burlington legal market's treatment of

contingent risk and the availability of counsel to take complex

cases such as this one.

CONCLUSION

Respondents request that this Court affirm the fee enhan-

cement for contingent risk awarded by the district court.

Guy T. Saperrein Wituam W. Pearson*

Mari Mayvepa Mo..oy, Jones & Donanue, P.C.

Barry GOLDSTEIN 33 North Stone Avenue,

Jocetyn D. Larkin Suite 2100

Donna Ryu Tucson, Arizona 85701

JeREMY FRIEDMAN (602) 620-5520

Linpa M. DarpDarian

SAPERSTEIN, Mayepa,

Larkin & GoLpsTEIN

1300 Clay Street,

lith Floor

Oakland, CA 94612

(510) 763-9800

*Counsel of Record for

Respondents

(Continued from previous page)

lodestar figure. Pet. Brief at 24-26. The City argues that the results

obtained in the litigation were limited and do not justify the lodestar

amount, citing Hensley, 461 U.S. at 429. The district court rejected this

same argument below, as did the Second Circuit. As stated above,

certiorari was granted only on the issue of the availability of contingent

risk enhancements. Accordingly, the issue of the propriety of the lodestar

figure under Hensley is not before this Court.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.