Amicus Curiae Brief — Burlington v. Dague

In THE t

Supreme Court of the United States

OCTOBER TERM, 1991

CITY OF BURLINGTON,

Petitioner,

Vv.

ERNEST DAGUE, SR., et al.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Second Circuit

BRIEF OF THE AMERICAN BAR ASSOCIATION

AS AMICUS CURIAE IN SUPPORT OF RESPONDENTS

TALBOT S. D’ALEMBERTE *

President

AMERICAN BAR ASSOCIATION

CARTER G. PHILLIPS

JOSEPH R. GUERRA

750 North Lake Shore Drive

Chicago, IL 60611

(312) 988-5215

Counsel for the

American Bar Association

April 18, 1992 * Counsel of Record

WiLson - Erase Prinrine Co., Inc. - 7869-0096 - WasHINGTON, D.C. 20001

——

BEST AVAILABLE COPY

QUESTION PRESENTED

Whether a court, in determining a reasonable attor-

ney’s fee award under Section 7002(e) of the Solid Waste

Disposal Act, 42 U.S.C. § 6972(e), or Section 505(d) of

the Federal Water Pollution Control Act (Clean Water

Act), 33 U.S.C. § 1865(d), may enhance the fee award

above the lodestar amount under circumstances where

attorneys in the private market would demand enhanced

compensation in order to assume the risk of nonpayment?

(i)

TABLE OF CONTENTS

QUESTION PRESENTED ...............2..22.2----ccceceeeeeeeees =

TABLE OF AUTHORITIES .0000o......0......--ccecceeceeeees sees

INTEREST OF AMICUS CURIAE ..00000000.....0...0000cc0c000--

SUMMARY OF ARGUMENT. ..WW02...2..0..2....::-:c:cceeeeeee

EEE EE

I. FEE-SHIFTING STATUTES ARE DESIGNED

Il.

TO PERMIT PREVAILING FEDERAL LITI-

GANTS TO RECOVER THE SAME LEVEL

OF ATTORNEY’S FEES THAT ECONOMIC

FORCES IN THE PRIVATE MARKET PRO-

VIDE, INCLUDING ENHANCEMENTS FOR

THE RISK OF NONPAYMENT WHERE AP-

CE ee

A. Through Fee-Shifting, Congress Sought To

Replicate The Economic Incentives That

Motivate Attorneys To Undertake Represen-

tation In The Private Market |...

B. Private Market Forces, And Prevailing Ethi-

cal Standards, Permit The Recovery Of En-

hanced Fees Where Attorneys Assume The

Risks Of Nonpayment ......................................

C. Congress Intended To Permit Recovery Of

Fees Sufficient To Compensate For The

Risks Inherent In Contingent Representa-

ES

THE OBJECTIONS TO RISK-BASED FEE

ENHANCEMENTS LACK MERIT ...................

A. Compensation For Assuming The Risk Of

Nonpayment Is Not Necessarily Subsumed

Within The “Lodestar” Calculation .............

B. In Appropriate Cases, Risk-Based Enhance-

ments Are Necessary To Attract Competent

NEE

Page

12

13

iv

TABLE OF CONTENTS—Continued

C. Risk-Based Enhancements Do Not Improp-

erly Compensate Persons Who Are Not “Pre-

Ce BT atiricsinlasitsininecntintaininnnniemee

D. There Are Judicially Manageable Standards

To Govern Risk-Based Fee Enhancements...

1. Whether The Fee Applicant Would Have

Faced Substantial Difficulties Attracting

Competent Counsel ........................-...---.-----

2. The Extent To Which The Relevant Mar-

ket Compensates For The Risk Of Non-

ITIIIIIIET scnsscccctnsssnrnatesipenaliatenimeneiadesiniatetidhdibeatens

CONCLUSION

Page

18

20

21

27

Vv

TABLE OF AUTHORITIES

CASES Page

Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421

a eee 9

Angoff Vv. Goldfine, 270 F.2d 185 (1st Cir. 1959)... 10

Arenson V. Board of Trade, 372 F. Supp. 1349

TRE ST ET 1h OO 10

Blanchard v. Bergeron, 489 U.S. 87 (1989) —.......... 14

Blum v. Stenson, 465 U.S. 886 (1984) —......000000.... passim

Carey V. Piphus, 4385 U.S. 247 (1978) ................... 16

Cherner V. Transitron Elec. Corp., 221 F. Supp.

55 (D. Mass. 1963), modified and aff'd sub nom.

Green V. Transitron Elec. Corp., 326 F.2d 492

ea 11

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

FEI Re ee ee ee 10

City of Riverside v. Rivera, 477 U.S. 561 (1986) .... 17

Evans V. Jeff D., 475 U.S. 717 (1986) ....................... 19

Green V. Transitron Elec. Corp., 326 F.2d 492 (1st

NS SER NER SSEy Soon or ene arene oo 10

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

Herman & MacLean v. Huddleston, 459 U.S. 375

RSE EES sare ea eee 12

Independent Fed’n of Flight Attendants Vv. Zipes,

i esssnsibiateciog 5

Johnson Vv. Georgia Highway Express, Inc., 488

ane 9

Jones Vv. Central Soya Co., 748 F.2d 586 (11th Cir.

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

petition for cert. filed, Feb. 21, 1992 ................... 23, 25

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

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

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

)_ as Si See eS a et 10

Missouri Vv. Jenkins, 491 U.S. 274 (1989) 6,18

National Treasury Employees Union Vv. Niron, 521

I CI a sepeninenenses 10

Nix Vv. Whiteside, 475 U.S. 157 (1986) —.................. 7

Northcross Vv. Board of Educ., 611 F.2d 624 (6th

Cir.), cert. denied, 447 U.S. 911 (1979)... 14

vi

TABLE OF AUTHORITIES—Continued

Page

Ohio-Sealy Mattress Mfg. Co. v. Sealy Inc., T76

ff FP 8, 21

In re Osofsky, 50 F.2d 925 (S.D.N.Y. 1931) ........... 10

Pacific Coast Agricultural Export Ass’n Vv. Sunkist

Growers, Inc., 526 F.2d 1196 (9th Cir. 1975),

cert. denied, 425 U.S. 959 (1976) -....................... 10

Pennsylvania v. Delaware Valley Citizens’ Council

for Clean Air, 478 U.S. 546 (1986) -.................... 5, 14, 17

Pennsylvania Vv. Delaware Valley Citizens’ Council

For Clean Air, 483 U.S. 711 (1987) -.................. 2, 20

Pete v. United Mine Workers Welfare & Retire-

ment Fund of 1950, 517 F.2d 1275 (D.C. Cir.

GE acu isn iseisncachnces tas cnitesicnibelcbiendelinsapeanbanmpmaiecaiesinane 10

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

EE LS SRLS SNE Rs a 9, 21

Texas State Teachers Ass’n V. Garland Indep. Sch.

Dist., 489 U.S. 782 (1989) ............................--...-- 18

United States Dep’t of Labor v. Triplett, 494 U.S.

i al line dleesirneionbictedions 26

Venegas V. Mitchell, 495 U.S. 82 (1990) 0.0... 19, 22

Yates v. Mobile County Personnel Bd., 719 F.2d

FF. | 4 ae 8,18

STATUTES

Civil Rights Act of 1964, Pub. L. No. 88-352, 78

Stat. 241 (1964) (codified as amended at scat-

tered sections of 42 U.S.C.) .........-............---0-----00+- 9

ER ES aera 9

I a clare sia eereponmnenenn 9

Civil Rights Attorney’s Fees Awards Act of 1976,

Pub. L. No. 94-599, 90 Stat. 2641 (1976) (codi-

PP 0 LK) 5

Comprehensive Older Americans Act Amendments

of 1978, Pub. L. No. 95-478, 92 Stat. 1513 (1978)

(codified at scattered sections of 42 U.S.C.) ........ 11

6104(e) (1) . assdandienepiadieaiasitadedniasints 11

vii

TABLE OF AUTHORITIES—Continued

Page

Equal Access to Justice Act, Pub. L. No. 96-481,

94 Stat. 2325 (1980) (codified at scattered sec-

I i I ici cccccsntcctstecctincececcccnece 11

28 U.S.C. § 2412 (d) (2) (A) ........---0- ee. 11

Fair Labor Standards Act of 1938, ch. 676, 52

Stat. 1060 (1938) (codified as amended at scat-

tered sections of 29 U.S.C.) 20.00.00... 16

EL RR A i Alc ta ke 16

Federal Water Pollution Control Act (Clean Water

Act), ch. 758, 86 Stat. 888 (1948) (codified as

amended at 33 U.S.C. §§ 1251 et seq.) —.............. 4

SERIE TEASE See ane eee naan ee eR 4

National Cooperative Research Act of 1984, Pub.

L. No. 98-462, 98 Stat. 1815 (1984) (codified at

I re i sisibiindivbants 11

EEE SEE SOc aS RT 11

Privacy Act of 1974, Pub. L. No. 93-579, 88 Stat.

1896 (1974) (codified at 5 U.S.C. § 552a) —........ 16

Solid Waste Disposal Act, Pub. L. No. 89-272, 79

Stat. 997 (1965) (codified as amended at scat-

tered sections of 42 U.S.C.) ................................... 4

RRR TAL hs eC 4

Sunshine Act of 1976, Pub. L. No. 94-409, 90 Stat.

1241 (1976) (codified at 5 U.S.C. § 552b)_....... as

Surface Mining Control and Reclamation Act of

1977, Pub. L. 95-87, 91 Stat. 445 (1977) (codi-

fied at scattered sections of 30 U.S.C.) —.............. 11

EE Ee Ae ee A 11

LEGISLATIVE MATERIALS

H.R. Rep. No. 1558, 94th Cong., 2d Sess. (1976) ...... 5, 17

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

1976 U.S. Code Cong. & Admin. News 5908 ........ passim

OTHER AUTHORITIES

ABA Model Code of Professional Responsibility

PREM IS LA aE oe 7

ABA Model Rules of Professional Conduct (1991) .. 7

viii

TABLE OF AUTHORITIES—Continued

ABA, Summary of Action of the House of Dele-

gates (Midyear Meeting, Feb. 13-15, 1978) .........

ABA, Summary of Action of the House of Dele-

gates (Annual Meeting, Aug. 5-6, 1980) .............

33 ABA, Reports of the American Bar Association

(1908) ......... Se ES eS

Canons of Professional Ethics, reprinted in ABA,

Opinions of the Committee with the Canons of

Professional Ethics Annotated and Canons of

Judicial Ethics Annotated (1967) ........................

1 M. Derfner & A. Wolf, Court Awarded Attorney

a 8 i AREER TE TT TET

2 hs. Derfner & A. Wolf, Court Awarded Attorney

ie ee IRS TEN Soe es we oO

F. B. MacKinnon, Contingent Fees for Legal

I I cs crtrseieshiiccleli net sthieciiadimemiitialitbebings

Page

16

11

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

No. 91-810

CITY OF BURLINGTON,

. Petitioner,

ERNEST DAGUE, SR., et al.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Second Circuit

BRIEF OF THE AMERICAN BAR ASSOCIATION

AS AMICUS CURIAE IN SUPPORT OF RESPONDENTS

INTEREST OF AMICUS CURIAE

The American Bar Association (“ABA”) is the na-

tion’s leading professional organization of lawyers, num-

bering more than 365,000 members throughout the

United States. As the national organization of the bar,

the ABA has long promu!gated standards of professional

responsibility, including standards governing the fees

that attorneys may permissibly charge for their services.

The ABA’s membership includes lawyers who represent

plaintiffs on a fee-shifting basis, lawyers who represent

plaintiffs on a contingency basis, and lawyers who repre-

sent defendants. Although the perspectives of these mem-

bers differ, it is generally recognized that, where a

2

lawyer’s compensation depends upon a client’s success,

the lawyer may permissibly charge a larger fee than

where his or her compensation is not contingent on suc-

cess. In fee-shifting cases, this means that a reasonable

fee may include a contingency premium.

Although the ABA takes no position on the propriety

of the specific enhancement awarded in this case, it has

encouraged the development of federal fee-shifting stat-

utes,' and believes its ethical standards should help guide

judicial determinations concerning the reasonableness of

fees awarded under those statutes. For this reason, the

ABA participated as an amicus curiae in Pennsylvania v.

Delaware Valley Citizens’ Council For Clean Air, 483

U.S. 711 (1987) (“Delaware Valley II’’), the last case in

which this Court addressed whether statutory fee awards

may be enhanced to reflect the risk of nonpayment.”

SUMMARY OF ARGUMENT

Through fee-shifting provisions, Congress has sought

to ensure “effective access to the judicial process” for

selected federal claims. Hensley v. Eckerhart, 461 U.S.

424, 429 (1983) (internal quotation marks and citation

1 See, e.g., ABA, Summary of Action of the House of Delegates

19 (Annual Meeting, Aug. 5-6, 1980) (recommending legislation

establishing uniform principles for regulation of attorney’s fees in

proceedings conducted before federal administrative agencies) ;

ABA, Summary of Action of the House of Delegates 7 (Midyear

Meeting, Feb. 13-15, 1978) (recommending legislation providing

for recovery of reasonable attorney’s fees in certain cases where

private parties substantially prevail against the federal govern-

ment); see also S. Rep. No. 1011, 94th Cong., 2d Sess. 2 (1976),

reprinted in 1976 U.S. Code Cong. & Admin. News 5908, 5909

(noting ABA’s participation in hearings on Civil Rights Attorney’s

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

2 Pursuant to Rule 37.3 of the Rules of this Court, the parties

have consented to the ABA’s filing as amicus curiae in support of

respondents. Letters of consent have been filed with the Clerk of

the Court.

3

omitted). Fee-shifting provisions serve this goal by repli-

cating for federal claims the economic incentives that

motivate attorneys to undertake representation in the pri-

vate market. By assuring attorneys that, if their clients

prevail, they will receive fees reflecting the prevailing

market rates for the hours they have worked, fee-shifting

eliminates the most immediate disincentive to represent-

ing federal claimants.

Nevertheless, compensation under such provisions re-

mains contingent upon success, a fact that, in the private

market, has long permitted attorneys to demand payment

of a premium over standard billing rates to compensate

for the economic risks of nonpayment. Thus, to replicate

the compensation available in the private market, an

award of “reasonable” attorney’s fees must provide for

enhancement in those circumstances where attorneys in

the private market would charge a premium. Such en-

hancements further the statutory objective of attracting

competent counsel to federal claims, and are fully con-

sistent with Congress’ express endorsement of, and long-

standing acquiescence in, judicial awards of risk-based

enhancements.

The objections to risk-based enhancements are not wel!

founded. Compensation for the risk of nonpayment is

neither subsumed within nor inconsistent with the lode-

star calculus. Where a fee applicant can demonstrate

that one of the determinations that governs attorney com-

pensation in the private market—an unmitigatable risk

of nonpayment—is not reflected in the lodestar, an up-

ward adjustment is appropriate. Nor do such adjust-

ments violate the statutory requirement that fees be

awarded only to “prevailing” parties. Only a successful

claimant can ever recover an award of enhanced fees; to

the extent such awards are passed on to attorneys, they

constitute compensation for assuming the economic risks

of nonpayment, not a subsidy for losses the attorneys

may or may not have suffered in other federal litigation.

4

The supposed difficulties of determining fee enhance-

ments under the two-part test announced in Justice

O’Connor’s concurrence in Delaware Valley II do not

justify a categorical refusal to consider whether market

forces permit compensation for the risk of nonpayment.

There are a number of objectively-verifiable factors

courts can and do look to in order to determine whether

the risks of nonpayment in an individual case could have

been mitigated, and hence whether the fee applicant

would have faced substantial difficulties retaining coun-

sel. Nor are there insurmountable conceptual difficulties in

determining whether a given relevant market compen-

sates for the risk of nonpayment. To the contrary, such

determinations are no more inherently difficult than those

courts make in establishing the lodestar.

ARGUMENT

I. FEE-SHIFTING STATUTES ARE DESIGNED TO

PERMIT PREVAILING FEDERAL LITIGANTS TO

RECOVER THE SAME LEVEL OF ATTORNEY'S

FEES THAT ECONOMIC FORCES IN THE PRI-

VATE MARKET PROVIDE, INCLUDING EN-

HANCEMENTS FOR THE RISK OF NONPAYMENT

WHERE APPROPRIATE.

A. Through Fee-Shifting, Congress Sought to Replicate

the Economic Incentives That Motivate Attorneys

to Undertake Representation in the Private Market.

In a wide variety of statutes, including the Solid Waste

Disposal Act and the Clean Water Act at issue in this

litigation, Congress has authorized courts to award “rea-

sonable”’ attorney’s fees to a “prevailing” or “substan-

tially prevailing” party.’ Fee-shifting provisions rest on

8 See Solid Waste Disposal Act § 7002(e), 42 U.S.C. § 6972(e)

(court “may award costs of litigation (including reasonable attorney

and expert witness fees) to any prevailing or substantially prevail-

ing party”): Federal Water Pollution Control Act (Clean Water

5

the congressional recognition that prospective litigants

seeking to vindicate interests created or protected by fed-

eral statutes often are unable to retain attorneys to rep-

resent them, and that the underlying federal interests

these litigants seek to vindicate often do not give rise to

damage recoveries that might induce attorneys to under-

take contingent representation. Explaining the need for

the Civil Rights Attorney’s Fees Awards Act of 1976, 42

U.S.C. § 1988, Congress noted that, “[b]ecause 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. No. 1558, 94th Cong., 2d

Sess. 1 (1976).° Moreover, “while damages are theoreti-

cally available . . . immunity doctrines and special de-

fenses, available only to public officials, preclude or se-

verely limit the damage recovery.” Jd. at 9.°

Seeking to provide the economic incentives necessary to

attract competent counsel to these federal claims, Con-

Act) §505(d), 33 U.S.C. §1365(d) fsame). Examples of other

statutes employing comparable language are set forth in the Brief

for the United States as Amicus Curiae (“U.S. Br.) at 5 n.3.

* This Court has recognized that the standards for determining

“reasonable” fees under Section 1988 apply equally to other federal

fee-shifting provisions (Hensley v. Eckerhart, 461 U.S. 424, 433 n.7

(1983) ), and has looked to this statute and its legislative history

to guide its interpretation of other fee-shifting enactments. See,

e.g., Independent Fed'n of Flight Attendants Vv. Zipes, 491 U.S. 754,

758 n.2 (1989) (fee-shifting provisions of Title VII) ; Pennsylvania

v. Delaware Valley Citizens’ Council for Clean Air, 478 U.S. 546,

559-60 (1986) (“Delaware Valley I”) (fee-shifting provisions of

the Clean Water Act).

5 See also S. Rep. No. 1011, 94th Cong., 2d Sess. 2 (“Senate Re-

port”), reprinted in 1976 U.S. Code Cong. & Admin. News at 5910

(“In 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’).

*In addition, as the United States notes, “many statutes with

fee-shifting provisions—including [those at issue in this litiga-

tion |—do not allow plaintiffs to recover monetary damage awards

from defendants.” U.S. Br. at 20 n.19.

6

gress directed that attorney’s fees awarded under fee-

shifting provisions must be based on the standards gov-

erning attorney compensation ir the private market.

Thus, Congress explained that the reasonable fee awarded

to a prevailing plaintiff should be computed in the same

manner as fees for “attorneys compensated by a fee-pay-

ing client.” Senate Report at 6, reprinted in 1976 U.S.

Code Cong. & Admin. News at 5913. Statutory fees,

moreover, should “not be reduced because the rights in-

volved may be nonpecuniary in nature.” Jd. Computing

fees in this manner, Congress observed, will result in

awards that “are adequate to attract competent counsel,

but which do not produce windfalls to attorneys.” Jd.

Accordingly, this Court has “consistently looked to the

marketplace as [its] guide to what is ‘reasonable’”’

(Missouri v. Jenkins, 491 U.S. 274, 285 (1989)), and

has thus concluded that statutory fee awards must “be

calculated according to the prevailing market rates in the

relevant community” (Blum v. Stenson, 465 U.S. 886,

895 (1984)) in order to “yield the same level of com-

pensation that would be available from the market.”

Jenkins, 491 U.S. at 286.

By assuring attorneys that they will be paid in accord-

ance with the prevailing market rates if their clients pre-

vail, statutory fee awards eliminate the most immediate

disincentive to representation of federal litigants. Such

awards, however, remain contingent upon success, and

thus expose counsel to a number of significant risks.

These include not only the possibility of loss, and thus of

no recovery at all, but also the possibility that the case

will require additional personnel whose salaries must be

advanced pending an ultimate award, or that the case

will crowd out other work that would be compensated

fully. To achieve their goal of replicating the economic

incentives that impel attorneys in the private market to

undertake representation, statutory fee awards must com-

pensate for these risks in a manner approximating the

operation of the private market.

7

B. Private Market Forces, And Prevailing Ethical

Standards, Permit The Recovery Of Enhanced Fees

Where Attorneys Assume The Risks Of Nonpayment.

In the private market, attorneys often demand a pre-

mium, or enhancement, over standard billing rates to

compensate for the risks they assume in undertaking con-

tingent representation. Indeed, throughout this century,

the legal profession has recognized that when attorneys

accept representation on the understanding that they will

be compensated only if their client prevails, they may

reasonably charge a premium if their clients in fact do

prevail. As early as 1908, the ABA Canons of Profes-

sional Ethics recognized that “[iJn determining the

amount of the fee, it is proper to consider . . . the contin-

gency of the compensation.” * Both the ABA Model Code

of Professional Responsibility, which was promulgated in

1969 and subsequently adopted in virtually every Ameri-

can jurisdiction (see Nix v. Whiteside, 475 U.S. 157, 167

n.4 (1986)), and the more recently promulgated ABA

Model Rules of Professional Conduct, demonstrate the

continuing consensus among the nation’s lawyers that one

of the “|{f]actors to be considered” in determining a rea-

sonable fee is “|w]hether the fee is fixed or contingent.” *

The long-standing ethical precept reflected in these

various codifications is founded on the unremarkable eco-

nomic principle that, all other things being equal, certain

payment is preferable to payment that is contingent on

success. Like other economic actors, attorneys expect to

be compensated for assuming the risk of nonpayment; if

7 Canons of Professional] Ethics, Canon 12(5), reprinted in ABA,

Opinions of the Committee with the Canons of Professional Ethics

Annotated and Canons of Judicial Ethics Annotated 48-49 (1967).

The ABA adopted Canon 12 in 1908 as part of its first comprehen-

sive code of professional ethics for attorneys. 33 ABA, Reports of

the American Bar Association 578 (1908).

8 See ABA Model Code of Professional Responsibility DR 2-106

(B) (1980); ABA Model Rules of Professional Conduct Rule 1.5

(a) (8) (1991).

8

they are not, few, if any, will agree to accept employment

on a contingent basis.°

Thus, to replicate the economic incentives that operate

in the private market—which are fully consistent with

and supported by ethical standards—stattitory fee awards

must allow enhancement where attorneys assume risks

that, in the private market, would justify recovery of a

premium. It is difficult to imagine that Congress, in en-

acting a “reasonable attorney’s fees” requirement, was

not aware of the prevailing practice of charging a pre-

mium for the risk of nonpayment. See infra pp. 9-12.

But in any event, to the extent statutory fee awards do

not provide full compensation for such risks, attorneys

will lack sufficient incentives to take such cases.”” This

disincentive will defeat the basic goal of fee-shifting leg-

islation—ensuring “ ‘effective access to the judicial proc-

ess’”’ for selected federal claims, Hensley, 461 U.S. at

429 (quoting H.R. Rep. No. 1558, 94th Cong., 2d Sess. 1

(1976) )—and ultimately will impair the substantive fed-

eral interests furthered by the procedural device of fee-

shifting.

C. Congress Intended To Permit Recovery Of Fees

Sufficient To Compensate For The Risks Inherent

In Contingent Representation.

Not only are fee enhancements for risk of nonpayment

fully consistent with the purposes of fee-shifting statutes,

but it is clear that Congress intended to permit the re-

* F. B. MacKinnon, Contingent Fees for Legal Services 3-6 (1964)

(enhancement for risk of nonpayment ensures that contingent em-

ployment is an economically attractive and feasible enterprise).

1 See Lewis Vv. Coughlin, 801 F.2d 570 (2d Cir. 1986) ; Ohio-Sealy

Mattress Mfg. Co. Vv. Sealy Inc., 776 F.2d 646, 662 (7th Cir. 1985)

(risk adjustment “provides an inducement for lawyers to accept

meritorious cases that might otherwise go unheard”); Yates v.

Mobile County Personnel Bd., 719 F.2d 1530, 1534 (11th Cir. 1983)

(if compensation is limited to the hourly rate charged in noncon-

tingent employment, competent attorneys “could not afford to accept

contingent employment”).

9

covery of such enhancements. As this Court has observed,

“Congress was legislating in light of experience when it

enacted the 1976 fee statute.” Blum, 465 U.S. at 894

n.10. Prior to the enactment of § 1988, courts looked to

ABA guidelines in determining the amount of reasonable

statutory fee awards" and, consistent with DR 2-106

(B)(8) and Model Rule 1.5(a) (8), held that contin-

gency of payment could justify an enhanced award.

The most notable example is Johnson v. Georgia High-

way Express, Inc., 488 F.2d 714 (5th Cir. 1974), in

which the Fifth Circuit adopted the factors set forth in

DR 2-106 as guidelines for determining the size of attor-

ney’s fee awards under Title VII of the Civil Rights Act

of 1964, including, specifically, “|w]hether the fee is

fixed or contingent.” Jd. at 718 (emphasis omitted).

The Senate Report accompanying § 1988 expressly iden-

tifies the Johnson factors as “appropriate standards” for

determining “reasonable” attorney’s fees. Senate Report

at 6, reprinted in 1976 U.S. Code Cong. & Admin. News

at 5913. In addition, as an example of a decision that

“correctly applied” these factors, Congress cited (see id.)

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

1974), a case in which the district court concluded that it

“must increase the [lodestar amount] .. . to reflect the

1! Such fee awards were expressly authorized by statutes, such as

Titles Il and VII of the Civil Rights Act of 1964 (see 42 U.S.C.

§§ 2000a-3(b) and 2000e-5(k)), the provisions upon which § 1988

was patterned. See Hensley v. Eckerhart, 461 U.S. 424, 433 n.7

(1983). In addition, courts had awarded fees under the Recon-

struction-era civil rights laws pursuant to their traditional equity

powers prior to this Court’s decision in Alyeska Pipeline Serv. Co.

Vv. Wilderness Soc'y, 421 U.S. 240 (1975).

12 The twelve factors identified in Johnson simply restated the

eight factors in DR 2-106 and Model Rule 1.5, with one additional

factor: the “undesirability” of the case. Compare Johnson with

DR 2-106(B).

10

fact that the attorney’s compensation, at least in part,

was contingent in nature.” Jd. at 686."

Congressional acceptance of risk adjustment in statu-

tory fee awards is further underscored by its admonition

that fees awarded under § 1988 should be equivalent to

those awarded “in other types of equally complex Federal

litigation, such as antitrust cases.” Senate Report at 6,

reprinted in 1976 U.S. Code Cong. & Admin. News at

5913. Prior to enactment of § 1988, federal courts

awarding attorney’s fees in antitrust cases often per-

mitted an upward adjustment in the fee to compensate

for the contingency of payment.” Similarly, in other

types of “complex Federal litigation” where fee-shifting

was then permitted, courts often took account of the con-

tingency of payment in determining a reasonable fee.’

18 Petitioner and its amici take great pains to parse these cases

in the hopes of distinguishing them away, yet none can deny that,

in endorsing Stanford Daily, Congress expressly approved an en-

hancement of fees based in part on the risk of nonpayment. See

U.S. Br. at 25 (“The citation to Stanford Daily . . . does not require

that the ‘contingency’ factor is to be treated any differently” than

other Johnsun factors subsumed within the “lodestar” calculation)

(emphasis added). Moreover, neither petitioner nor its amici have

identified anything in the legislative history that affirmatively sup-

ports their contention that Congress never intended to permit risk-

based enhancements.

14 See, e.g., Lindy Bros. Builders, Inc. Vv. American Radiator &

Standard Sanitary Corp., 487 F.2d 161, 168 (3d Cir. 1973); City

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

Pacific Coast Agricultural Export Ass'n Vv. Sunkist Growers, Inc.,

526 F.2d 1196, 1210 (9th Cir. 1975), cert. denied, 425 U.S. 959

(1976) ; Arenson Vv. Board of Trade, 372 F. Supp. 1349 (N.D. IIL.

1974).

1% National Treasury Employees Union v. Nixon, 521 F.2d 317,

$22 (D.C. Cir. 1975) (labor law class action); Pete v. United Mine

Workers Welfare & Retirement Fund of 1950, 517 F.2d 1275, 1290

(D.C, Cir. 1975) (en banc) (similar); Green v. Transitron Elec.

Corp., 326 F.2d 492, 496 (list Cir. 1964) (securities class action) ;

Angoff v. Goldfine, 270 F.2d 185, 189 (ist Cir. 1959) (similar) ;

In re Osofsky, 50 F.2d 925, 927 (S.D.N.Y. 1981) (bankruptcy).

ll

In one such case, decided under the federal securities

laws nearly 30 years ago, Judge Wyzanski noted that

such enhancement is permissible because:

{njo one expects a lawyer whose compensation is

contingent upon his success to charge, when success-

ful, as little as he would charge a client who in ad-

vance had agreed to pay for his services, regardless

of success.

Cherner V. Transitron Elec. Corp., 221 F. Supp. 55, 61

(D. Mass. 1963), modified and aff'd sub nom. Green V.

Transitron Elec. Corp., 326 F.2d 492 (1st Cir. 1964).

Finally, in the years since the enactment of § 1988,

risk-based enhancement of the “lodestar” in fee awards

has been widely available. See generally 2 M. Derfner &

A. Wolf, Court Awarded Attorney Fees % 16.04[2|

(1985) (collecting cases). During this period Congress

has enacted a number of fee-shifting statutes, yet in

none of them did it prohibit risk-based enhancement."*

Had Congress wished to eliminate the possibility of such

enhancements, it plainly could have and presumably

would have done so,"’ but it did not. This acquiescence in

16 See, e.g., National Cooperative Research Act of 1984, 15 U.S.C.

§ 4304(a) (1); Surface Mining Control and Reclamation Act of 1977,

30 U.S.C. § 1270(d) ; Comprehensive Older Americans Act Amend-

ments of 1978, 42 U.S.C. § 6104(e)(1).

'TCf. Equal Access to Justice Act (“EAJA"), 28 U.S.C. § 2412

(d) (2) (A) (in suits against the United States, “attorney fees shal!

not be awarded in excess of $75 per hour”). Pointing to the EAJA

as evidence that “the public fisec is one of the interests Congress

normally considers in enacting fee-shifting statutes” Brief of Amici

Curiae, The District of Columbia and Several of the States (“State’s

Br.”) at 10, the State amici argue that this interest counsels

against recognition of risk enhancements. Even assuming that fee-

shifting provisions applied only to governmental defendants—and

plainly they do not—the State amici draw precisely the wrong con-

clusion from this evidence: because Congress knows how to protect

the public fisc from fee awards and yet did not do so in the fee-

12

judicial recognition of risk-based fee enhancements is

strong evidence of a congressional intent to permit such

awards. Cf. Herman & MacLean v. Huddleston, 459 U.S.

375, 385-86 (1983) (Congress can be assumed to have

endorsed—by failing to overturn—judicial interpretation

that is “well-established” ).

In short, because fee-shifting statutes are designed to

eliminate the disincentives to contingent federal repre-

sentation and to place such representation on the same

economic footing as representation in the private market,

the reasonableness of statutory fee awards must be de-

cided by the same determinants that govern attorney

compensation in the private market. Accordingly, statu-

tory fee awards must compensate for the risks of non-

payment in circumstances comparable to those which,

in the private market for legal services, justify enhanced

fees. Fee enhancements for such risks help to ensure that

competent counsel will be attracted to federal claims, and

thereby further the central objective of fee-shifting stat-

utes. The various reasons advanced against such enhance-

ments by petitioner and its amici do not justify the

crabbed interpretation of the statute that they propose.

Il. THE OBJECTIONS TO RISK-BASED FEE EN-

HANCEMENTS LACK MERIT.

Disregarding Congress’ desire to permit fee awards

for successful contingent federal claims to reflect the

same economic incentives that establish attorney com-

pensation in the private market, petitioner and its amici

offer a number of policy reasons in support of their con-

tention that risk-based enhancement should never be per-

mitted. Thus, they argue that the “lodestar” methodol-

ogy fully compensates successful litigants and that any

shifting provisions at issue here, it must have intended to allow

courts to establish fee awards under these provisions in a manner

that approximates the compensation that normal market forces would

provide.

13

enhancement necessarily constitutes an impermissible

windfall; that risk-based fee enhancements are not neces-

Sary to attract competent counsel to federal claims; that

enhancements impermissibly subsidize unsuccessful fed-

eral litigation; and that there are no manageable judicia!

standards to govern enhancement awards. As shown be-

low, none of these objections has merit.

A. Compensation For Assuming The Risk Of Non-

payment Is Not Necessarily Subsumed Within The

“Lodestar” Calculation.

Petitioner contends that the “lodestar” methodology of

multiplying the reasonable number of hours by a reason-

able hourly rate “necessarily reflects contingency consid-

erations.” Pet. Br. at 18. This is so, petitioner argues,

because the selection of a reasonable hourly rate is made

in light of the known fact that compensation under fee-

shifting statutes is always contingent upon success. /d.

at 17. Thus, petitioner concludes, “{a]ny enhancement of

the lodestar based on contingent risk of loss . . . is inher-

ently duplicative.” Jd. at 18.

This argument incorrectly assumes that the reasonable

hourly rate used to calculate the lodestar is one that an

attorney agrees to accept prior to undertaking represen-

tation of a federal litigant. Congress made clear, how-

ever, that attorneys representing federal litigants should

be compensated in roughly the same manner “as .. .

attorneys compensated by a fee-paying client.” Senate

Report at 6, reprinted in 1976 U.S. Code Cong. & Admin.

News at 5913. The hourly rate used in the lodestar calcu-

lation, therefore, is not one to which the prevailing party

and his or her attorney agreed, but the rate that prevails

in the relevant market for attorneys of comparable skill

and experience. Blum, 465 U.S. at 895 & n.11."

' Indeed, this Court has held that the particular contractual ar-

rangements between prevailing parties and their counsel do not

establish what a reasonable fee should be under the statute. Blan-

14

Although a prevailing party could recover fees reflect-

ing compensation for the risk of nonpayment by proving

the prevailing hourly rate charged by the market when

payment is contingent on success,” typically the only

ascertainable prevailing market rates—and thus those

used in calculating the lodestar—are those charged to

clients who pay for services regardless of outcome. Con-

trary to petitioner’s assumption, these rates do not re-

flect contingency factors; rather, they reflect the level of

compensation attorneys in the market expect to receive

when payment is certain. Thus, adjusting a lodestar

based on these rates does not entail any duplication.

Nor are risk-based enhancements inconsistent with the

presumption that the lodestar establishes a reasonable

fee. This presumption of reasonableness attaches to the

lodestar because the latter typically reflects all the deter-

minants that govern attorney compensation in the private

market.*”” The presumption is not conclusive, however,

and properly yields when a successful litigant is able to

demonstrate that prevailing market rates do not include

compensation for the risk of nonpayment and that the

prevailing practice in the relevant market is to charge a

premium over standard billing rates to reflect the eco-

chard Vv. Bergeron, 489 U.S. 87, 94-96 (1989). As the ABA demon-

strates below, the particular fee arrangement may be relevant in

determining whether the prevailing party would have faced difficul-

ties obtaining counsel, and thus may be relevant to determining

whether a risk-based enhancement is appropriate.

1” See, e.g., Northeross Vv. Board of Educ., 611 F.2d 624, 638-39

(6th Cir.), cert. denied, 447 U.S. 911 (1979).

20 See Blum, 465 U.S. at 898-900 (“novelty and complexity of the

issues,” “the special skill and experience of counsel,” the “quality of

representation,” and the “results obtained” are presumably fully

reflected in the lodestar) ; Delaware Valley 1, 478 U.S. at 566 (“con-

siderations concerning the quality of a prevailing party’s counsel's

representation normally are reflected in the reasonable hourly rate’).

15

nomic yield necessary to induce attorneys to accept such

risks.”

Indeed, to treat the lodestar as a complete restriction

upon contingent attorney’s fees places plaintiffs in a

hopelessly disadvantageous position vis-a-vis defendants.

In many cases, defendants have a battery of attorneys

working at standard hourly rates who are compensated

monthly for the reasonable hours they expend. By con-

trast, plaintiffs’ counsel, who often are solo practitioners

or work in small offices, are required to assume the en-

tire risk of success plus the financial burden of delay in

being compensated, yet at the end of the process will be

compensated at a rate that is never greater than that

received by the defense counsel who assume? no risk.

Congress’ purpose to create a more level playing field for

plaintiffs pursuing important federal statutory objectives

can only be served effectively by providing the prospect

of a fee enhancement as an incentive for plaintiffs’

lawyers to undertake representation at the outset.

B. In Appropriate Cases, Risk-Based Enhancements

Are Necessary To Attract Competent Counsel.

Petitioner’s supporting amici assert that contingency

enhancements are unnecessary to ensure prosecution of

meritorious claims under federal fee-shifting provisions.

The United States, for example, points out that some

plaintiffs will be affluent enough to hire lawyers on an

21 The argument that recognition of risk-based enhancements is a

policy judgment that Congress alone can make (States Br. at 24-26)

is entirely misplaced. Congress has already made the policy judg-

ment that attorneys representing successful federal litigants should

be compensated in the same manner as attorneys who work for fee-

paying clients. Whether a given fee award should include an en-

hancement for risk, therefore, turns not on any of the policy quee-

tions the State amici proffer (see id.), but on factual determinations

concerning whether, and to what extent, the relevant legal market

compensates for the risk of nonpayment. Cf. U.S. Br. at 13 n.13

(establishing relevant market rate is a “basic factual determi-

nation[}”).

16

hourly basis and that some plaintiffs will have cases in

which the likely damage recovery is large enough to at-

tract counsel on an ordinary contingent-fee basis without

regard to fee-shifting. See U.S. Br. at 16-17. Thus, the

United States concludes, contingency enhancements are

arguably necessary only in that “limited class of cases”

where plaintiffs cannot afford to hire lawyers on a fee-

paying basis and where they seek to bring cases in which

liability is neither certain nor likely to result in a sizable

damage award. /d. at 17.

As an initial matter, the United States offers no sup-

port for its assertion that the class of cases for which

enhancement might be appropriate is “limited.” In-

deed, the United States itself acknowledges that “many

statutes with fee-shifting provisions—including the

SWDA and the Clean Water Act—do not allow plaintiffs

to recover monetary damage awards from defendants.”

Id. at 20 n.19 (emphasis added).” In addition, as the

United States concedes, there are many actions in which

any damages recovered are likely to be relatively small.”

Thus, far from being de minimis, the number of cases in

the class the United States identifies is substantial.

22In fact, within the environmental protection area, “there are

only two... fee shifting measures that are appended to causes of

action which allow the recovery of damages.” 1 M. Derfner & A.

Wolf, Court Awarded Attorney Fees § 5.03 (6) (Oct. 1991).

23 For example, “many Title VII cases produce little or no mone-

tary recovery, and therefore do not provide a basis for percentage-

based contingency fees.” U.S. Br. at 20 n.19. Other examples in-

clude 5 U.S.C. §552a (permitting award of attorney’s fees in action

brought under the Privacy Act); 5 U.S.C. § 552b (same; Sunshine

Act); and 29 U.S.C. §216(b) (permitting award of attorney's

fees in suit brought by employee under Fair Labor Standards Act

to recover unpaid minimum wages or unpaid overtime compensa-

tion). This Court has recognized an entire class of cases alleging

the deprivation of constitutional rights the prosecution of which is

“importan[t] to organized society,” but for which successful plain-

tiffs may be awarded only nominal damages. Carey v. Piphus, 435

U.S. 247, 266 (1978).

17

More important, the argument misses the point of

statutory fee-shifting provisions. Congress enacted fee-

shifting provisions precisely in order to make counsel

available to prosecute meritorious federal cases for which

the prospect of a large damage recovery was insufficient

to attract counsel on the open market. In enacting § 1988,

for example, Congress was very much aware that “the

contingent fee arrangements that make legal services

available to many victims of persona! injuries would

often not encourage lawyers to accept civil rights cases,

which frequently involve substantial expenditures of time

and effort but produce only small monetary recoveries.”

City of Riverside v. Rivera, 477 U.S. 561, 577 (1986)

(plurality opinion). Thus, “Congress enacted § 1988

specifically to enable plaintiffs to enforce the civil rights

laws even where the amount of damages at stake would

not otherwise make it feasible for them to do so.” Jd.

Nor does it matter that some plaintiffs will be affluent

enough to hire lawyers without resorting to contingency

arrangements. It could not be more plain that Congress’

intent in enacting the fee-shifting provisions was not to

protect those who already had access to the courthouse,

but to protect those plaintiffs who did not. See Hensley v.

Eckerhart, 461 U.S. 424, 429 (1983) (Congress enacted

§ 1988 to provide “ ‘effective access to the judicial proc-

ess’”’ to persons who otherwise would not have their day

in court) (quoting H.R. Rep. No. 1558, 94th Cong., 2d

Sess. 1 (1976)); see also H.R. Rep. No. 1558, 94th

Cong., 2d Sess. 1 (1976) (“Because a vast majority of

the victims of civil rights violations cannot afford legal

counsel, they are unable to present their cases to the

courts”). Similarly, the existence of both “not-for-profit

legal services organizations” and for-profit lawyers who

*4 These same concerns animate other federal fee-shifting provi-

sions as well. Cf. Delaware Valley 1, 478 U.S. at 559 (the purposes

underlying $1988 and fee-shifting provision found in Clean Air

Act “are nearly identical”).

18

are underemployed do not demonstrate that risk-based

enhancements are unnecessary. See State Br. at 16-17.

Congress long ago rejected the idea that the less-affluent

should be relegated under fee-shifting statutes to lawyers

who might be willing to take their case on a pro bono

basis or whose skills are such that they remain under-

employed and available for cut-rate work. See Blum,

465 U.S. at 894-95 (fee awards must mirror “prevailing

market rates”); Missouri v. Jenkins, 491 U.S. 274, 283,

286 (1989) (same); Yates v. Mobile County Personnel

Bd., 719 F.2d 1530, 1534 (11th Cir. 1983) (enforcement

of civil rights acts should not be “entrusted largely to

less capable and less successful lawyers who lack sufficient

employment”).

In short, it is no answer to point out that contingency

enhancements are needed only in cases where the market

itself will not attract competent counsel. It is precisely

those cases that motivated Congress to enact fee-shifting

statutes.

C. Risk-Based Enhancements Do Not Improperly Com-

pensate Persons Who Are Not “Prevailing Parties.”

Petitioner’s supporting amici contend that risk-based

enhancements violate the requirement, common to all fee-

shifting statutes, that fees be awarded only to a “pre-

vailing” or “substantially prevailing” party. This argu-

ment, however, conflates and thereby confuses two sepa-

rate statutory requirements: 1) a showing that the fee

applicant “prevailed” and 2) a showing that the fees

he or she seeks are “reasonable.”

The “prevailing party” requirement is merely a statu-

tory “threshold to a fee award of some kind.” Texas

State Teachers Ass’n v. Garland Indep. Sch. Dist., 489

U.S. 782, 791-92 (1989). Once applicants cross this

threshold, the fees they seek must be established in accord-

ance with the statutory requirement of reasonableness,

which depends analytically on the economic determinants

19

that govern attorney compensation in the relevant legal

market. Whatever the amount of the fees established

under this reasonableness standard, however, “it is the

[prevailing] party, rather than the lawyer, who is...

eligible” to receive them. Venegas v. Mitchell, 495 U.S.

82, 87 (1990); see also Evans v. Jeff D., 475 U.S. 717,

731-32 (1986) (Congress did not “bestow[] fee awards

upon attorneys”). Thus, only prevailing parties may re-

cover fee awards, whether those awards are enhanced for

risk of nonpayment or not. No non-prevailing party may

recover them, and nothing in amici’s analysis demon-

strates that this basic requirement of the statute would

be violated.

: Nevertheless, the amici supporting petitioner claim that

risk-based enhancements violate the “prevailing party”

requirement because such enhancements “[i]n effect .. .

compensate attorneys for their unsuccessful efforts.” U.S.

Br. at 14 (emphasis added). This “effective cross-sub-

sidy” argument is misconceived. First, because, as just

noted, fees are awarded to prevailing parties and not their

attorneys, the cross-subsidy argument depends on the

assumption that fee awards are passed on to attorneys

who in turn devote themselves to representing other

claimants under fee-shifting statutes. Prevailing parties,

however, may often be represented by lawyers who other-

wise represent fee-paying clients. In these not uncom-

mon cases, there is no basis whatever to the claim that

enhancements subsidize losing efforts brought on behalf

of other federal litigants.

Second, even where enhanced fees are passed on to at-

torneys who represent other federal claimants, such fees

compensate attorneys for assuming the risk of losing, not

for actual losses. Enhancements reflect the additional

yield that attorneys, like-all other economic actors, re-

quire in order to devote profit-making resources to en-

deavors that may generate no return at all. Thus, a risk-

based enhancement no more subsidizes an attorney’s losing

20

efforts in other fee-shifting litigation than the premium

that attorneys charge in non-federal contingent cases

subsidizes the rates they charge fee-for-services clients.

Because enhancements represent the direct economic Te-

ward for assuming the risk of nonpayment in the particu-

lar case, they remain “reasonable” within the meaning

of the statute.

Third, even if the “cross-subsidy” characterization were

otherwise accurate, this Court has already rejected the

contention that, in calculating attorney’s fees, courts may

disregard prevailing market practices in order to prevent

subsidization of other federal litigation. In Blum v. Sten-

son, the United States argued as amicus curiae that, be-

cause prevailing market rates incorporate operating ex-

penses that may exceed the expenses of nonprofit legal

services organizations, and because such rates include an

element of profit unnecessary to attract nonprofit counsel,

“fee awards based on market rates ‘confer an unjustified

.. . subsidy upon legal services organizations.’ " 465 US.

at 893 (quoting Brief for United States as Amicus Curiae

at 6). This Court held unanimously that prevailing

market practices nevertheless govern the determination

of reasonable fees, and that “(t]he policy arguments ad-

vanced in favor of a cost-based standard [that would

eliminate the risk of subsidization] should be addressed

to Congress.” Jd. at 895-96.

D. There Are Judicially Manageable Standards To

Govern Risk-Based Fee Enhancements.

The Delaware Valley I] concurrence set forth a two-step

inquiry to guide judicial determinations as to the avail-

ability and amount of risk-based fee enhancements. First,

the fee applicant must demonstrate how the relevant

market compensates for the risk of nonpayment. Second,

the applicant must demonstrate that he or she would have

faced substantial difficulties attracting counsel without

the prospect of a fee enhancement. Delaware Valley Il,

483 U.S. at 733.

21

Petitioner and its supporting amici argue that, because

awarding risk-based enhancements under this two-step

analysis entails asserted practical difficulties, such awards

should never be permitted. The difficulties postulated,

however, are neither so great nor so unique that they

justify a complete refusal to consider whether prevailing

market forces permit compensation for the risk of non-

payment. The Delaware Valley I] concurrence’s two-part

test, slightly modified in the respects noted below, pro-

vides an entirely workable framework within which

courts may properly adjust the lodestar to reflect the risk

of nonpayment. In any event, to the extent that deter-

minations of the “reasonableness” of fees necessary to

ensure competent counsel for federal claimants entail

difficulties, these concerns are unquestionably more prop-

erly addressed by Congress.

1. Whether The Fee Applicant Would Have Faced

Substantial Difficulties Attracting Competent

Counsel.

As an initial matter, of course, no risk-based enhance-

ment can be awarded unless the fee applicant demon-

strates that his or her attorney undertook representation

on a contingent basis. Clearly, where the applicant pays

for legal services regardless of outcome, the attorney has

assumed no risk of nonpayment and the applicant can

claim no entitlement to enhancement.” Beyond this obvi-

ous situation, there are a number of other, objectively-

verifiable factors that courts can consider in determining

whether the applicant would have faced substantial diffi-

culties obtaining counsel (or, to put the matter differ-

*8 See, e.g., Ohio-Sealy Mattress Mfg. Co. v. Sealy Inc., 776 F.2d

646, 660 (7th Cir. 1985); Jones v. Central Soya Co., 748 F.2d 586,

592 (11th Cir. 1984). In addition, if the applicant agreed to pay

some portion of the lodestar amount, regardless of outcome, the

attorney has undertaken the case on a partially contingent basis,

and the applicant cannot seek enhancement of any portion of the

attorney’s work that was not at risk. See, e.g., Stanford Daily v.

Zurcher, 64 F.R.D. 680, 686 (N.D. Cal. 1974).

22

ently, whether the attorney was capable of mitigating

the risk of nonpayment) .*

Thus, applicants who had the financial wherewithal to

pay for the services rendered, whether or not they in

fact agreed to pay for them, will generally be unable to

demonstrate that they could not have obtained legal coun-

sel.27 Similarly, applicants whose claims carried the

potential for damage recoveries large enough to induce

attorneys to take their cases on a percentage of recovery

basis should have been able to attract competent counsel.”

And in cases where the standard of liability is or ap-

proaches that of strict liability” so that, as a generic

matter, the risk of failure—and thus of nonpayment—is

insubstantial, applicants will not be able to demonstrate

an inability to obtain competent counsel. In each of these

situations, economic forces operating in the private mar-

ket for legal services could be expected to ensure that the

claimants secured representation. While such applicants

remain eligible to recover attorney’s fees in the amount

of the lodestar (see Venegas v. Mitchell, 495 U.S. at 88),

they ordinarily would not receive any enhancement of

that figure.

Conversely, however, where applicants demonstrate

that the factors outlined above are absent, they normally

should be eligible for an award of enhanced fees if the

26 If counsel can take reasonable steps to limit or mitigate the

risk of nonpayment, the counsel presumably will be likely to accept

the representation. Accordingly, Congress’ fundamental purpose in

enacting fee-shifting provisions will be served.

27 A court’s inquiry into this factor would be comparable to that

which an attorney, faced with a client of modest but limited means,

might undertake. Of course, the bar would be able effectively to

assist the court in making such a determination.

28 See, e.g., Venegas V. Mitchell, 495 U.S. 82 (1990).

2? An example of such cases would be those brought to enforce

effluent discharge limitations under the Clean Water Act. See US.

Br. at 17 n.16.

relevant legal market generally would compensate for the

risk of nonpayment. Such applicants have demonstrated

that neither the generic nature of the case (e.g., a strict

liability claim), common economic arrangements (e.9.,

a percentage-of-recovery contract), nor their own re-

sources permitted the attorney to mitigate the risk of

nonpayment. Because economic forces in the legal mar-

ket would not normally attract counsel to the claims of

these applicants based solely on the availability of a

lodestar award, no further particularized inquiry into the

plaintiff’s actual difficulties in retaining counsel shouid

be necessary.” Accordingly, the supposed evils of an

actual difficulties test (see U.S. Br. at 18-23) need not

arise.”

* The fact that the fee applicant, “by definition, . . . stands before

the court with counsel” (King v. Palmer, 950 F.2d 771, 780 (D.C.

Cir. 1991) (en bane), petition for cert. filed, Feb. 21, 1992, is neither

fatal to, nor inconsistent with, a claim for a fee enhancement. In

this case, counsel for respondents reasonably could have expected an

enhancement given the law at the time the decision to represent

respondents was made. If so, the availability of an enhancement

would become the reason for eliminating enhancements generally, an

obviously perverse result.

In addition, many applicants will be represented by attorneys

whose motivations are non-economic. See, e.g., Blum, 465 U.S. at

892-96. Moreover, because fee-shifting provisions were designed to

place contingent federal representation as a whole on the same eco-

nomic footing as private fee-for-services representation, the relevant

inquiry for fee .»ancement purposes is not the individual attor-

ney’s assessment of the strength or weakness of a particular case,

but the presence or absence of factors that, as a general rule, will

induce or deter representation in the private market.

31 These evils are thought to include penalizing defendants with

the strongest cases, asking judges to decide whether they would

have decided cases differently, and creating conflicts of interest

between attorneys (who presumably will highlight the weaknesses

of their cases for enhancement purposes) and clients. These con-

cerns are exaggerated. The concern for “penalizing” defendants

with strong cases rests on the unexamined assumption that a plain-

tiff’s chances of prevailing are inversely proportional to the defend-

ant’s culpability. In fact, as most practitioners recognize, a host of

2. The Extent To Which The Relevant Market Com-

pensates For The Risk Of Nonpayment.

Fee applicants who clear the substantial difficulties

hurdle must then prove 1) that the relevant market com-

pensates attorneys for assuming the risk of nonpayment

and 2) the amount of such compensation. Contrary to

the arguments advanced by petitioner’s supporting amici,

this inquiry does not pose insurmountable conceptual dif-

ficulties. In fact, determining the extent to which the

relevant market compensates for the risk of nonpayment

is conceptually no different than the “basic factual de-

terminations” that underlie the calculation of the lode-

star.

The United States argues that courts cannot determine

whether the market compensates for risk of nonpayment

by looking to the relevant market for the underlying

claim (such as attorneys who handle Title VII or Clean

Water Act cases), because these markets are almost en-

tirely dependent on fee-shifting provisions for compensa-

tion. U.S. Br. at 20. Yet, courts routinely look to pre-

cisely these markets to establish the prevailing market

rate for lodestar purposes. There is no logical basis for

concluding that the hourly rates quoted by such attorneys

reflect market forces but that the amount of enhancement

factors such as burdens of proof, the availability of evidence, dis-

parities in resources, and the complexity of underlying issues can

all have a greater impact on the outcome of a case than the defend-

ant’s culpability ; indeed, willful violations in which defendants seek

to disguise their wrongdoing may be the most difficult to prove.

Judges, moreover, can be trusted to recognize these practical diffi-

culties and attorneys, who will receive nothing if they lose, can be

trusted to try to overcome them.

In the ABA’s view, an actual difficulties test, which requires an

examination of the merits of the applicant’s case, is improper be-

cause the purpose of enhancement is not to equalize prospective

returns among different contingent cases with different degrees of

merit, but to place federal contingent practice as a whole on the

same economic footing as fee-for-services representation.

25

these attorneys require for assuming the risk of nonpay-

ment does not. Moreover, courts can assess the propriety

of enhancement claims by checking them against the

prevailing practices of practitioners of comparable skill,

reputation and experience in other private markets.

Nor is there any merit to the concern that, because fee

applicants lack incentives to control costs, they will rou-

tinely agree to enhancements, thereby saddling defendants

with unfair fees. The lack of cost controls is no more

an attribute of enhancements than it is of any other

aspect of attorney compensation under fee-shifting stat-

utes. In calculating the lodestar, courts can and do

routinely adjust both hourly rates and total hours to

ensure that the fees losing defendants pay reflect the

same degree of “billing judgment” that attorneys repre-

senting fee-paying clients would exercise. See Hensley v.

Eckerhart, 461 U.S. 424, 434 (1983).

Moreover, a fee applicant’s failure to oppose fee agree-

ments that include contingency enhancements (see U-S.

Br. at 20-21) does not determine whether an enhance-

ment should be awarded; rather, it is the absence or

presence of objectively-verifiable factors that, in the

private market, would govern a prospective litigant’s

ability to retain competent counsel that controls the avail-

ability of enhancement. Accordingly, there is no inherent

danger that enhancements will become a “self-fulfilling

prophecy” (id. at 21); courts are fully capable of pre-

venting this problem.

Ultimately, the objections to market-based fee enhance-

ments rest not on any theoretical or conceptual difficulties,

but on an inherent distrust of the evidence used to prove

such enhancements. Opponents of enhancements categori-

cally dismiss affidavits proffered by attorneys in the rele-

vant markets as “anecdotal in content and self-interested

in motivation.” States Br. at 17; see also U.S. Br. at 21

n.20 (“self-serving, post hoc affidavits”); King v. Palmer,

950 F.2d 771, 779 (D.C. Cir. 1991) (en bane) (affidavits

“obviously self-interested”). Whatever may be said about

the economic motivations of the successful counsel in a

particular fee application, sweeping disparagements of

entire sub-markets of the local bar simply cannot provide

a proper basis for refusing to undertake the economic

inquiry that fee-shifting provisions entail.” Defendants

can proffer contrary evidence, in the form of affidavits or

otherwise, or mount other challenges to the validity of a

fee applicant’s evidence. If such efforts fail, however,

they should not be able to rebut an applicant’s evidentiary

showing on the theory that other officers of the court can-

not be trusted to tell the truth in sworn statements.

Finally, this Court’s ability to evaluate the judiciary’s

capacity to make fee enhancement determinations on the

basis of reported cases is distorted because of the lack of

clarity in the law concerning the availability of fee en-

hancements. Only by adopting standards akin to those

proposed herein and allowing courts to apply them over a

period of time can the Court meaningfully evaluate the

ability of the judiciary to make fee enhancement judg-

ments. But even if the practical problems asserted by

petitioner and its amici were more plainly demonstrable,

they would not provide a basis for this Court to interpret

the term “reasonable” in a manner that guarantees that

a form of compensation available to attorneys in the

private market is categorically foreclosed to those who

represent federal claimants. Instead, if the process is

unmanageable, it is Congress, not this Court, that should

%2 This Court’s decision in United States Dep't of Labor v. Triplett,

494 U.S. 715 (1990), lends no support to blanket condemnations of

attorney affidavits. In Triplett, this Court observed that an appellate

court’s reliance on the statements of three attorneys provided an

insufficient basis upon which to declare a presumptively permissible

federal regulatory scheme unconstitutional. See id. at 723-24. More-

over, in Triplett, there was considerable evidence, including state-

ments by other attorneys, rebutting the substance of the three

affidavits. Jd. at 724.

27

modify the “reasonableness” standard. Absent congres-

rey — this Court should permit fee enhancement

or contingent recovery to ensure that Congress’ purpose

of ensuring plaintiffs access to the courts for claims aris-

ne under statutes subject to fee-shifting provisions is

CONCLUSION

The holding of the court of appeals that fee-shifting

statutes authorize a fee enhancement in appropriate cir-

cumstances should be affirmed.

Respectfully submitted,

TALBOT S. D’ ALEMBERTE *

President

AMERICAN BAR ASSOCIATION

CARTER G. PHILLIPS

JOSEPH R. GUERRA

750 North Lake Shore Drive

Chicago, IL 60611

(312) 988-5215

Counsel for the

American Bar Association

April 13, 1992 * Counsel of Record