# Amicus Curiae Brief — Gisbrecht v. Barnhart

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0489%3A08

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2002
- **Citation:** 535 U.S. 789

## Text

Supreme Tortus. |

TLED
J Jan 17 2002

No. 01-131

CLERK

IN THE
Supreme Court of the United States

GARY E. GISBRECHT, BARBARA A. MILLER,
NANCY SANDINE, AND DONALD L. ANDERSON,
PETITIONERS,
VS.

Jo ANNE B. BARNHART,
COMMISSIONER OF SOCIAL SECURITY,
Respondent.

On Writ Of Certiorari To The
United States Court Of Appeals
For The Ninth Circuit

AMICUS CURIAE BRIEF OF THE
ASSOCIATION OF TRIAL LAWYERS OF AMERICA
IN SUPPORT OF THE PETITIONER

LEO V. BOYLE JEFFREY ROBERT WHITE*
1050 31st St., N.W. 1050 31st. St., N.W.
Washington, DC 20007 Washington, DC 20007
(202) 965-3500 (202) 965-3500

President, * Counsel of Record

The Association of Attorney for Amicus Curiae

Trial Lawyers of America

TABLE OF CONTENTS

TABLE OF AUTHORITIES iii

IDENTITY AND INTEREST OF AMICUS CURIAE........ 1

SUMMARY OF THE ARGUMENT 2

ARGUMENT

ae | POR dae ce ele oot St were I. NEITHER THE TEXT OF 42 U.S.C. § 406(b) NOR

| oe eaten THIS COURT’S ENDORSEMENT OF THE
LODESTAR METHOD UNDER FEE-SHIFTING
! STATUTES SUPPORTS THE USE OF THE
LODESTAR METHOD TO DETERMINE THE
REASONABLENESS OF FEES PAID’ BY
CLAIMANTS UNDER §406(b). ‘ 4

A. The Text and Legislative History Support the
Courts’ Treatment of Contingent Fee Agreements
Between Claimant and _ Attorneys’ As
Presumptively Reasonable. 4

B. This Court’s Endorsement of the Lodestar Method

S Bie ? CRORE DMC Sar Ri Baad | ' in Fee Shifting Cases Does Not Support the Use of
Bee Ce gt ia 5 RA a FUR coe CC eee eet the Lodestar Method in Place of Contingent Fee

Ys. A CONTINGENCY FEE AGREEMENT REFLECTS
NS st—s———CS—SC*=*C*sSC*diLES§SO§STHE MARKET VALUE OF LEGAL SERVICES
AND IS PRESUMPTIVELY REASONABLE............. 11

A. Contingency Fee Agreements Play an Important

Role in the Market for Legal Services. .................. 11
B. Contingent Fee Arrangements Serve Important
Market Functions. 16

1. Increasing Access to the Marketplace. ......... ieesicaninens ae

2. Aligning of the Interests of Attorney and Client.......... 17
3. Promoting Efficient Use of Resource .............+++ ——
4. Simplifying FnfOrcement ...........ssseeereereereereereeeeeeees 18

C. The Contingent Fee Does Not Promote Wasteful
Litigation or “Windfall” Fees for Attorneys......... 19

1. Contingent fees do not encourage frivolous litigation 19

2. Contingent Fees Do Not Result in “Windfall” Attorney

FRED. crecunsesnrensenntstemmennncemnen, sieniniaantenevisemevnieneenenenes 20
Ill. THE LODESTAR METHOD OFFERS LITTLE
MARKET ASSURANCE AGAINST
UNREASONABLE FEES. 22

A. Hourly-Rate Billing Is Based on an Inherent and
Perverse Incentive to Maximize Hours Rather

than Results. 22

B. The Lodestar Method Incorporates the Perverse
Incentives of Hourly Billing. 23
CONCLUSION 25

TABLE OF AUTHORITIES
CASES
Allen v. Shalala, 48 F.3d 456 (9th Cir. 1995) .00......0.ccccccceeeees 8
Alyeska Pipeline Services. Co. v. Wilderness Soc'y, 421 U.S.
RE EE ERE eee eo ee 12
Ball v. Halsell, 161 U.S. 72 (1896)...........:ccccceecscsseserseseeeeees 13
Bates v. State Bar of Arizona, 433 U.S. 350 (1977)............ 12
Blanchard v. Bergeron, 489 U.S. 87 (1989) ............c00000+. 4,10
Brown v. Sullivan, 917 F.2d 189 (Sth Cir. 1990)................... 8
City of Burlington v. Dague, 505 U.S. 557 (1992)........... 9,10
Copeland v. Marshall, 641 F.2d 880 (D.C. Cir. 1980)........ 10
Cotter v. Bowen, 879 F.2d 359 (8th Cir. 1989).............:.ccc000. 8
Coup v. Heckler, 834 F.2d 313 (3d Cir. 1987).............:cccc0000 9
Craig v. Secretary, Dep't of Health & Human Services., 864
ne 4
Gisbrecht v. Apfel, 238 F.3d 1196 (2001).........cccccccccceeeseeeeees 5
Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975).......... 12
Hensley v. Eckerhart, 461 U.S. 424 (1983) .........:cccccccceeeeeeeee 8
Kirchoff v. Flynn:786 F.2d 320 (7th Cir. 1986).............000+ 18
Lindy Bros. Builders v. American Radiator & Standard
Sanitation Corp., 540 F.2d 102 (3d Cir. 1976)..............00. 7
McGuire v. Sullivan, 873 F.2d 974 (7th Cir. 1989). .............. 7
Mckenzie Construction Inc. v. Maynard, 758 F.2d 97 (3d Cir.
Ee 21
Peel v. Attorney Registration and Disciplinary Comm., 496
EE ee 12
Pennsylvania v. Delaware Valley Citizens’ Council for Clean
TED 4,9
Pennsylvania v. Delaware Valley Citizens’ Council for Clean
a 9
Richette v. Solomon, 187 A.2d 910 (Pa. 1963) ............cc000000 15
Riverside v. Rivera, 477 U.S. 561 (1986) ...........cccccccceeeeeeees 10
Rodriquez v. Bowen, 865 F.2d 739 (6th Cir. 1989) ............... 7
Schlesinger v. Teitelbaum, 475 F.2d 137 (3d Cir.), cert.
| ee 21

Stanton v. Embrey, 93 U.S. 548 (1876) ........cccccccceecseeeeeeeees 14

iv

Venegas v. Mitchell, 495 U.S. 82 (1990) ........-eceeseereeeeeerneeees 4
Wells v. Sullivan, 907 F.2d 367 (2d Cir. 1990)..............cceeee0e 7
STATUTES |
Pk ELT TRENTON 5 & passim
Civil Rights Attorney’s Fees Awards Act, 42 U.S.C. § 1988)4
Clean Air Act, 42 U.S.C. §7604(d)......ccccccssccsssessssssssesssessveeee 4
OTHER AUTHORITIES

ABA Formal Op. 94-389 (December 5, 1994) ............... 15, 21

Richard M. Birnholz , The Validity and Propriety of
Contingent Fee Controls, 38 UCLA Law Review 949

Carl T. Bogus, The Death Of An Honorable Profession, 71
Ba, CF, DRG Ge ceneensentincntanccinseniempminsnnnineian 22

H.H. Brackenridge, in LAW MISCELLANIES (Stanley Katz et
CB, eg Fe ccctermrctcnnininiinteaniiatiinnizliimatniiiinniets 13

Lester Brickman, ABA Regulation of Contingency Fees:

Money Talks, Ethics Walks, Fordham L. Rev. 247 (1996).17

Lester Brickman, Contingent Fees Without Contingencies:
Hamlet Without the Prince of Denmark? 37 UCLA L. Rev.
BP ae ccictainccectitiainniecciviittimansiantaminpapattiiatiinapuinetincintunmiail 20

Cobb, Competitive Pricing Along The Value Curve; or The
Folly of Hourly Rate Pricing, 14 Legal Econ. Sept. 1988 16

Philip H. Corboy, Contingency Fees: The Individual's Key to
the Courthouse Door, 2 Litigation 27 (Summer 1976).....16

Court Awarded Attorney Fees: Report of the Third Circuit
Task Force, 108 F.R.D. 237 (1985). ..........ccccccceeeeeeeeeeeeeees 24

Patricia Munch Danzon, Rand Corporation, Institute for Civil
Justice, "Contingent Fees for Personal Injury Litigation,”
hy FD FT crecnsrsetenesantentscnmagintnegminttonee 20

Stephen D. Dietz, C. Bruce Baird, and Lawrence Berul, “The
Medical Malpractice Legal System,” Report of the
Secretary's Commission on Medical Malpractice, U.S.
Department of Health, Education and Welfare (January 16,

Vv
Furlonger, Time for Business-Lawyers to Stop Billing Time?,
Beyond the Billable Hour: An Anthology of Alternative
Billing Methods (R. Reed ed. 1989) .0..........cccccsceeseeeeees 11
Marc Galanter, Anyone Can Fall Down a Manhole: The
Contingency Fee and Its Discontents, 47 DePaul L. Rev.
SF ie irianiicbaineiittanieinsnnecertntinisidinidaenatleniniomanmets 18
Neil Galatz and Stacie Hane, The Ethics Of Contingency Fee
Agreements, 5 Nevada Lawyer 22 (1997)...........ccssccesees 21
Eugene C. Gerhart, The Art of Billing Clients, 1 Law Off.
a a es A ecitiicctniidcnntniaticnrtcanennsteestenaen 22
Hertzberg & Stewart, “Contingency Legal Fee for Merger
Breaks Ground, Stirs Controversy,” Wall St. J., Oct. 24,

Peter Karsten, Enabling The Poor To Have Their Day In
Court: The Sanctioning Of Contingency Fee Contracts, A
History To 1940, 47 DePaul Law Review 231 (1998)..... 13

Elizabeth A. Kovachevich and Geri L. Waksler, The Legal
Profession: Edging Closer To Death With Each Passing

Hour, 20 Stetson L. Rev. 419 (1991). ...........cccccccceceeeeeeees 12
Herbert M. Kritzer, THE JUSTICE BROKER: LAWYERS AND
ORDINARY LITIGATION (1990).............ccccccssscceeessceeeeeeeeees 15

Herbert M. Kritzer, The Wages Of Risk: The Returns of
Contingency Fee Legal Practice, 47 DePaul L. Rev. 267

Herbert M. Kritzer, The Wages of Risk: The Returns of
Contingency Fee Legal Practice, 47 DePaul L. Rev. 267

Honestus [pseud. of Benjamin Austin], Observations on the
Pernicious Practice of the Law (Boston, 1819), reprinted
in 13 Am. J. Legal Hist. 241 (1969).................ccccccceeeeeenes 13

Lisa G. Lerman, Blue-Chip Bilking: Regulation Of Billing
And Expense Fraud By Lawyers, 12 Geo. J. of Legal

I riesttirinsecisennarnncnneesinidiuanitetnenmntdnepenenanenses 23
F. MacKinnon, CONTINGENT FEES FOR LEGAL SERVICES

re ihicitinnpeinecinsniincstanininiinedinerpepaismemissibammeamundnceneenenne 15
Sherry Matteucci, “What the Heck Is ‘Value Billing’

Anyway?" Montana Lawyer, November 1992................. 23

vi

Barry J. Nace, The "Legal Scholars" = on Contingency

I Ta Pe, Ci eiceneitccrediceetninitninccstonsineniniinepicinnens 19
Reed, Value Billing: An Update ae the ELP Section's Task
Force, 14 Legal Econ. Sept. 1988 .............ccccsscsseeeeeenees 16
William H. Rehnquist, The Legal Profession Today, 62 Ind.
en NOE NO ee 23
REPORT OF THE FEDERAL COURTS STUDY COMMITTEE (Apr.
Mi, See ncccntatesinsnatanisiantinineiiininitiniasendnainpiniiamdineaneiainasepematiii 24
Paul D. Rheingold, The Development of Litigation Groups, 6
Am. J. Trial Advocacy 1 (1982). ..............:cccccesssseessseeeneees 18
Robert L. Rossi, ATTORNEY’S FEES (2d ed. 1995)............... 21
William G. Ross, The Ethics of Hourly Billing by Attorneys,
SD Ea. TB ee eiestinnitteetncinercereeensinttonencamee 23
William G. Ross, THE HONEST HOUR (1996)................00020 23
S. Rep. No. 404, 89th Cong., Ist Sess., , reprinted in 1965
U.S. Code Cong. & Admin. News 305 (1965). .................. 6

George B. Shepherd and Morgan Cloud, Time And Money:
Discovery Leads To Hourly Billing, 1999 U. Ill. L. Rev.
iis, casscnctoseiinseninieamienntinsmpinintiapesiutilidiiiatineatinnpdbinastiiiidinilapbatiisiad 22

Charles Silver, Due Process And The Lodestar Method: You
Can't Get There From Here, 74 Tulane L. Rev. 1809

eel ninsenerincncnesniiigabianinnianssevnsnninsunitidaesamiunthiaieltbiusadahse 18
Charles Silver, Unloading The Lodestar: Toward A New Fee
Award Procedure, 70 Tex. L. Rev. 865 (1992) ................ 24
Stuart M. Speiser, Attorneys’ Fees (1973)............:ccccccseeseees 7

IN THE
Supreme Court of the United States

No. 01-131

GARY E. GISBRECHT, BARBARA A. MILLER,
NANCY SANDINE, AND DONALD L. ANDERSON,
PETITIONERS,
VS.

LARRY G. MASSANARI, ACTING
COMMISSIONER OF SOCIAL SECURITY,
Respondent.

On Writ Of Certiorari To The
United States Court Of Appeals
For The Ninth Circuit

AMICUS CURIAE BRIEF OF
THE ASSOCIATION OF TRIAL LAWYERS OF AMERICA
IN SUPPORT OF THE PETITIONER

IDENTITY AND INTEREST OF AMICUS CURIAE

The Association of Trial Lawyers of America
(“ATLA”) respectfully submits this brief as amicus curiae in
this case. Letters from Petitioner and Respondent granting
consent to the filing of amicus curiae briefs have been filed
with this Court.!

! Pursuant to Rule 37.6, Amicus discloses that no counsel
for a party authored any part of this brief, nor did any person or
entity other than Amicus Curiae, its members, or its counsel make

2

ATLA is a voluntary national bar association whose
approximately 50,000 trial lawyer members primarily
represent individual plaintiffs in civil actions, including
actions seeking damages for wrongful death and personal
injury, vindication of civil rights protected under federal and
state statutes, and in other actions seeking legal redress.

ATLA’s members are most commonly retained by
their clients on a contingent fee basis. They know first-hand
the role played by contingent fee agreements as a “key to the
courthouse,” affording access to justice for many Americans.
They also know from experience that contingent fee
financing provides a strong incentive for attorneys to accept
meritorious cases and pursue them zealously and efficiently.

In view of this experience, ATLA is confident that
this brief as amicus curiae will assist the Court in addressing
the questions presented in this case.

SUMMARY OF THE ARGUMENT

1. When a claimant seeking social security benefits prevails in
district court, 42 U.S.C. § 406(b) requires the court to
determine “‘a reasonable fee” to be paid by the claimant to his
or her attorney. Where the client has retained the attorney on a
contingent fee basis, that fee should be regarded by the court as
presumptively reasonable. .

The lower court erred in ruling that the statute requires
the district court to disregard the agreement and substitute its
own calculation of a reasonable fee using the “lodestar”
method. The text and legislative history of the statute indicate
that Congress expected that claimants would continue to obtain

a monetary contribution to the preparation or submission of this
brief.

3

representation on a contingent fee basis and added protections
for those claimants.

This Court’s strong preference for use of the lodestar
method under fee-shifting statutes should not extend to fees
paid by clients to their own attorneys. The lodestar method
provides a mvans of approximating the market value of legal
services in circumstances where market forces cannot be relied
upon to further the purposes of the statute. Where a market
actually exists, there is no reason to substitute an
approximation of a market price for the real thing.

2. Contingency fee agreements have long played an important
role in the marketplace for legal services. Their use extends far
beyond personal injury and tort law. Indeed, contingency fee
financing has become the dominant means by which
individuals and small businesses obtain legal representation
involving monetary claims.

Contingency fee arrangements have become widely

used because they serve important functions in the
marketplace. They provide access to legal services to many
individuals who could not otherwise pay for them. They assure
that the economic interests of attorneys are aligned with those
of their clients. They foster efficient use of resources by
attorneys. And they are easily enforced without the need of
secondary litigation.
3. By contrast, hourly billing, which was not widely used until
the early 1960’s, gives lawyers the incentive to maximize the
time spent on legal matters, not the results. The emphasis on
billable hours has led to scandalous defrauding of clients and
an epidemic of padded billing.

The lodestar method places the perverse incentives
inherent in hourly billing in the laps of the district courts.
Judges have expressed dissatisfaction with the results of the
lodestar method and the amount of judicial effort required to
resolve fee petitions.

ARGUMENT

I. NEITHER THE TEXT OF 42 U.S.C. § 406(b) NOR
THIS COURT’S ENDORSEMENT OF THE
LODESTAR METHOD UNDER FEE-SHIFTING
STATUTES SUPPORTS THE USE OF THE
LODESTAR METHOD TO DETERMINE THE
REASONABLENESS OF FEES PAID BY
CLAIMANTS UNDER §406(b).

A. The Text and Legislative History Support the
Courts’ Treatment of Contingent Fee Agreements
Between Claimant and Attorneys’ As
Presumptively Reasonable.

In a departure from the prevailing American rule,
certain federal statutes provide for a reasonable attorney’s fee
to be paid to the prevailing party in a civil action by the
opposing party. To determine a reasonable fee under such
fee-shifting statutes, this Court has stated that there is a
“strong presumption” in favor of the “lodestar” formula -- a
reasonable hourly rate multiplied by the number of hours
reasonably expended. Pennsylvania v. Delaware Valley
Citizens’ Council for Clean Air, 478 U.S. 546, 565 (1986)
(Clean Air Act, 42 U.S.C. §7604(d)). See also Venegas v.
Mitchell, 495 U.S. 82, 87 (1990) (Civil Rights Attorney’s
Fees Awards Act, 42 U.S.C. § 1988), and Blanchard v.
Bergeron, 489 U.S. 87, 94 (1989) (42 U.S.C. § 1988).

This case presents the question of whether that
presumption that the lodestar method results in a reasonable
fee is appropriate in cases where the court is called upon to
determine a reasonable fee to be paid by the client to his or
her own attorney. The court below disregarded the agreed-
upon contingent fee arrangements between the clients and
their attorneys. The court ruled that the district court properly
made its own calculation of the fee to be paid to the attorney

5

by his client, using the lodestar method. Gisbrecht v. Apfel,
238 F.3d 1196, 1198 (2001).

In ATLA’s view, the lodestar :nodel is useful in those
circumstances under fee-shifting statutes where market forces
cannot be relied on to set a reasonable fee. In this case, such a
private market was operating. The lower court erroneously
substituted a proxy for the market value of the attorneys’
services in place of the real thing.

The clients in these consolidated cases believed -—
correctly, as it turned out — that they were wrongfully denied
Social Security disability benefits. They retained counsel to
pursue their claims and agreed that, if successful, they would
pay the attorneys a fee equal to 25% of the back benefits
awarded. The court rejected the Petitioners’ evidence that
these agreements reflected the market rate for legal
representation of social security claimants. 238 F.3d at 1198.
Rather, the court held, to determine “a reasonable fee” under
42 U.S.C. § 406(b), “a district court must set a reasonable
lodestar rate for counsel’s services,” which is “a reasonable
hourly rate.” id. (emphasis by the court).

Congress enacted the Social Security Act in 1935 to
provide a safety net to protect wage earners and their families
from impoverishment due to old age, death, and disability.
The Act also created the Social Security Administration to
administer these programs. Congress made no provision at
that time regarding the costs of legal representation of
claimants disputing the Administrator’s denial of benefits in
district court. Typically, attorneys typically represent
claimants on the basis of contingent fee agreements.

- In 1965, Congress acted to address a specific problem
relating to those agreements. The Senate Finance Committee
explained:

kt has come to the attention of the committee that

attorneys have upon occasion charged what appear to be
inordinately large fees for representing claimants in

6

Federal district court actions arising under the social
security program. Usually, these large fees result from a
contingent-fee arrangement under which the attorney is
entitled to a percentage (frequently one-third to one-hai:)
of the accrued benefits. Since litigation necessarily
involves a considerable lapse of time, in many cases
large amounts of accrued benefits, and consequently
large legal fees, are payable if the claimant wins the
case.

S. Rep. No. 404, 89th Cong., Ist Sess., Pt. 1 at 122, reprinted
in 1965 U.S. Code Cong. & Admin. News 305, 2062 (1965).

The lawmakers’ response was not to prohibit
contingent fees. Instead, Congress added § 406(b) to Title I
of the Act to protect claimants against abuses. That section
provides:

Whenever a court renders a judgment favorable to a
claimant under this subchapter who was represented before
the court by an attorney, the court may determine and allow
as part of its judgment a reasonable fee for such
representation, not in excess of 25 percent of the total of the
past-due benefits to which the claimant is entitled by reason
of such judgment, and the Commissioner of Social Security
may... certify the amount of such fee for payment to such
attorney out of, and not in addition to, the amount of such
past-due benefits.

42 U.S.C. § 406(b).

The statutory text is framed in terms of contingent
fees, making the attorney’s fee conditional on a judgment
favorable to the claimant and imposing a ceiling on the
percentage of past-due benefits that the attorney may charge.
Congress clearly expected that claimants would continue to
obtain the services of attorneys on a contingent fee basis. By
requiring federal courts to determine that such fees are
reasonable, Congress simply adopted the familiar approach
universally employed by state courts. State courts have long

7

exercised their authority to invalidate contingent fee
agreements which were obtained improperly or which result
in an excessive fee. See 1 Stuart M. Speiser, Attorneys’ Fees
2.9 & 2.10 (1973).

Nothing suggests that Congress intended courts to
determine “a reasonable fee” based on the number of hours
devoted by the attorney to the case. The lodestar method
itself was not devised until the Third Circuit’s decision in
Lindy Bros. Builders v. American Radiator & Standard
Sanitation Corp., 540 F.2d 102, 117 (3d Cir. 1976). Indeed,
billing clients by the hour was still a very new innovation in
1965, used by only a few large law firms engaged in
corporate work. See Part III, below. It is quite unlikely that
Congress would have intended, without any comment, such a
drastic departure from prevailing practice based on this novel
method of charging clients.

The Courts of Appeals of the Second, Sixth and
Seventh Circuits have concluded that the statute permits
courts to treat a contingent fee agreement between a claimant
and counsel as presumptively reasonable. Wells v. Sullivan,
907 F.2d 367, 371 (2d Cir. 1990); Rodriquez v. Bowen, 865
F.2d 739, 746 (6th Cir. 1989); McGuire v. Sullivan, 873 F.2d
974, 981 (7th Cir. 1989). Those courts take the amount of the
fee due under the contract as a starting point. See Wells, 907
F.2d at 371 (“the best indicator of the ‘reasonableness’ of a
contingency fee in a social security case is the contingency
percentage actually negotiated between the attorney and
client”); Rodriquez, 865 F.2d at 746 (stating that the
agreement between the client and attorney “should be given
the weight ordinarily accorded a rebuttable presumption.”’).

Under this approach, the courts are not bound to
accept the agreed upon fee as reasonable per se. The courts
review the circumstances surrounding the contingency
agreement carefully to determine whether there are any
factors which would render the agreement unreasonable.
Rodriguez at 746; Wells, 907 F.2d at 372; McGuire, 873 F.2d

at 980-81. The court will reduce a fee that is the product of
the attorney’s own misconduct or incompetence, such as
where the attorney’s improper conduct has resulted in undue
delay. In addition, reduction is appropriate where counsel
would otherwise receive a “windfall” because the benefit
award turns out to be unusually large or the amount of work
required turns out to be minimal. Rodriquez, 865 F.2d at 746-
47.

ATLA submits that this approach is most consistent
with the language and intent of 42 U.S.C. § 406(b). It gives
effect to contracts for legal services shaped by market forces,
while affording clients the same degree of protection they
have traditionally enjoyed under state law against abusive or
excessive contingent fees.

B. This Court’s Endorsement of the Lodestar Method
in Fee Shifting Cases Does Not Support the Use of
the Lodestar Method in Place of Contingent Fee
Agreement.

The Ninth Circuit, in its short opinion in this case and
in its earlier decisions specifically rejected this approach. 238
F.3d at 1198 n.2. In those prior decisions, the court relied
heavily on this Court’s approval of the lodestar method in
Hensley v. Eckerhart, 461 U.S. 424 (1983). See Allen v.
Shalala, 48 F.3d 456, 458-59 (9th Cir. 1995). Other courts of
appeals have reached similar conclusions, also in reliance on
this Court’s endorsement of the lodestar model. See Craig v.
Secretary, Dep't of Health & Human Services., 864 F.2d 324,
327 (4th Cir. 1989); Brown v. Sullivan, 917 F.2d 189, 192
(Sth Cir. 1990); and Cotter v. Bowen, 879 F.2d 359, 363 (8th
Cir. 1989).

This reliance, ATLA submits, is misplaced.

In Hensley, this Court addressed the problem of
evaluating fee petitions under the Civil Rights Attorney’s

9

Fees Awards Act, 42 U.S.C. § 1988. In such cases, “(t]he
most useful starting point for determining the amount of a
reasonable fee is the number of hours reasonably expended
on the litigation multiplied by a reasonable hourly rate.” 461
U.S. at 433. Indeed, this Court has stated that there is a
“strong presumption that the lodestar figure--the product of
reasonable hours times a reasonable rate--represents a
‘reasonable fee’ is wholly consistent with the rationale
behind the usual fee-shifting statute.” Pennsylvania v.
Delaware Valley Citizens’ Council for Clean Air, 478 U.S.
546, 565 (1986). See also City of Burlington v. Dague, 505
U.S. 557, 563 (1992) (“The ‘lodestar’ figure has, as its name
suggests, become the guiding light of our fee-shifting
jurisprudence. We have established a ‘strong presumption’
that the lodestar represents the ‘reasonable’ fee.’’)

However, this Court has made it clear that its use of
the lodestar method in fee-shifting cases is necessary because
the usual market forces that determine the value of legal
services cannot be relied upon. As Justice O’Connor noted,
“The private market commonly compensates for contingency
through arrangements in which the attorney receives a
percentage of the damages awarded to the plaintiff. In most
fee-shifting cases, however, the private market model of
contingency compensation will provide very little guidance.”
Pennsylvania v. Delaware Valley Citizens’ Council for Clean
Air, 483 U.S. 711, 731 (1987) (O’Connor, J., concurring).
See also Coup v. Heckler, 834 F.2d 313, 324 (3d Cir. 1987)
(because the fees sought under § 406 are paid by the client,
rather than by the defendant, “the concerns which motivated
the plurality in Delaware Valley are not implicated at all.”’).

This is true for several reasons. Most importantly,
when federal statute shifts the fee obligation from the client
to the opposing party, the customer is not bargaining with his
or her own money and lacks the incentive to keep costs
reasonable. In the absence of market forces, the district court
must provide those curbs.

10

In addition, “(uJnlike most private tort litigants, a
civil rights plaintiff seeks to vindicate important civil and
constitutional rights that cannot be valued solely in monetary
terms.” Riverside v. Rivera, 477 U.S. 561, 574 (1986). As
Justice Scalia observed in City of Burlington v. Dague, 505
U.S. 557, 564 (1992), “for a very large proportion of
contingency-fee cases--those seeking not monetary damages
but injunctive or other equitable relief--there is no ‘market
treatment.’ Such cases scarcely exist, except to the extent
Congress has created an artificial ‘market’ for them by fee
shifting.” Nevertheless, Congress intended “to encourage
successful civil rights litigation, not to create a special
incentive to prove damages and shortchange efforts to seek
effective injunctive or declaratory relief.” Blanchard vy.
Bergeron, 489 U.S. 87 (1989). The lodestar method serves
this special purpose.

Finally, as Congress has also recognized, particularly
in civil rights cases, the benefits obtained by counsel are not
limited to the particular litigant but extend to society at-large.
Blanchard v. Bergeron, 489 U.S. 87, 96 (1989). For this
reason, courts may under a fee-shifting statute approve a fee
that the market place would reject. See, e.g., Copeland v.
Marshall, 641 F.2d 880 (D.C. Cir. 1980) (approving
$160,000 fee for attorney services in a gender discrimination
suit resulting in an award of $33,000 in damages and
injunctive relief).

In sum, this Court has endorsed the use of the lodestar
method as a proxy for market forces in those situations where
no real market exists which serves the statutory purpose. As
other circuits have recognized, this does not preclude the use
of a contingent fee agreement as presumptively reasonable in
social security benefits cases, where a private market for legal
services actually exists. Rodriquez v. Bowen, 865 F.2d 739,
745-46 (6th Cir. 1989) (en banc); Wells v. Bowen, 855 F.2d
37, 44-46 (2d Cir. 1988); Coup v. Heckler, 834 . 2d 313, 324
(3d Cir. 1987)

11

Il, ACONTINGENCY FEE AGREEMENT REFLECTS
THE MARKET VALUE OF LEGAL SERVICES
AND IS PRESUMPTIVELY REASONABLE

A. Contingency Fee Agreements Play an Important
Role in the Market for Legal Services.

ATLA has long championed the use of contingency
fee arrangements to purchase legal services. However, ATLA
also recognizes that such agreements have been highly
controversial and that this controversy may affect the
decision whether such agreements should serve as the starting
point for determining “a reasonable fee” under 42 U.S.C.
§406. It is worthwhile, therefore, to examine the role
contingency fees play in the marketplace for legal services in
America.

At other times and in other places, lawyers
(ostensibly) did not charge for their services. An English
barrister, William Forsythe, wrote in 1849:

From the very earliest times, and in every country
where advocacy has been known, it has been the custom
to look upon the exertions of the advocate as given
gratuitously, and the reward which the client bestows as
purely honorary, in discharge not of legal obligation, but
a mere debt of gratitude.

Quoted in Furlonger, Time for Business-Lawyers to Stop
Billing Time?, Beyond the Billable Hour: An Anthology of
Alternative Billing Methods 93 (R. Reed ed. 1989).

At one time, the Roman Republic banned legal fees:
the honor of being a successful advocate was deemed its own
reward. However, as Roman law developed in complexity,
lawyers were able to obtain a customary gratuity,
unenforceable against the client. There was a time when
English barristers would meet their clients at the pillars in St.
Paul's and around Doctors’ Commons where the client

12

customarily placed an honorarium in a purse that hung at the
back of the advocate’s gown as the barrister looked away.
Elizabeth A. Kovachevich and Geri L. Waksler, The Legal
Profession: Edging Closer To Death With Each Passing
Hour, 20 Stetson L. Rev. 419, 420 (1991).

The American civil justice system recognizes that
access to justice depends upon the broad availability of legal
representation. The compensation of attorneys is part of the
price of liberty under the rule of law. Generally, the clients of
attorneys pay that price. The American rule is that, unless a
statute provides otherwise, parties in civil litigation are
responsible for their own legal costs. Alyeska Pipeline
Services. Co. v. Wilderness Soc'y, 421 U.S. 240, 247-50
(1975). The result is a marketplace in which clients as
customers purchase legal services. This Court has
consistently encouraged the free operation of that
marketplace. See Goldfarb v. Virginia State Bar, 421 U.S.
773 (1975)(striking down minimum fee schedules); Bates v.
State Bar of Arizona, 433 U.S. 350 (1977) (attorney
advertising); Peel v. Attorney Registration and Disciplinary
Comm., 496 U.S. 91 (1990) (attorney commercial speech
regarding specialization).

For most of our history, Americans have purchased
the services of attorneys in one of two ways. An attorney and
client might agree upon a fixed fee for a specified service.
Such arrangements remain in common "se for relatively
simple and predictable legal services, such as preparing a will
or handling a real estate settlement.

From very early in our country’s history, Americans
seeking monetary damages have also retained lawyers on a
contingency basis, agreeing to pay the attorney only if the
claim is successful in an amount measured by a percentage of
the recovery. Pennsylvania’s Justice Brackenridge observed
in 1814 the practice of attorneys “taking what are called
contingent fees.” Despite some prohibitions against this

13

practice, “at an early period, it was tolerated, and has become
common.” H.H. Brackenridge, in LAW MISCELLANIES xx
(Stanley Katz et al. eds., 1972) (1814). As early as 1786, a
Massachusetts pamphleteer railed against this “pernicious
practice,” by which people “give one quarter part of their
property to secure the remainder, when they appeal to the
laws of their country.” Honestus jpseud. of Benjamin
Austin], Observations on the Pernicious Practice of the Law
(Boston, 1819), reprinted in 13 Am. J. Legal Hist. 241, 256
(1969).

Despite that, contingency fee arrangements became
increasingly popular with clients in early America. They
included merchants and creditors, the heirs of millionaires
and Revolutionary War veterans, American diplomats and
Indian tribes. Their lawyers included such accomplished
litigators as Henry Clay and Daniel Webster. Contingency fee
contracts also provided representation to settlers and
claimants with conflicting land grants and titles in newly-
settled states. See Peter Karsten, Enabling The Poor To Have
Their Day In Court: The Sanctioning Of Contingency Fee
Contracts, A History To 1940, 47 DePaul Law Review 231,
237-38 (1998) (citing cases).

Following the Civil War, Americans retained counsel
on a contingency fee basis to represent them in a wide variety
of legal disputes, including minority stockholder suits against
corporations, depositor suits against banks, creditors and
merchants pressing claims against railroads, other companies
or the government. Even government entities suing other
government entities over tax revenues retained contingent fee
lawyers. Those lawyers included some of the most respected
members of the bar. Karsten, supra at 248. “Moreover, when
challenged in court, virtually all of these contracts were
indeed deemed to be valid and binding.” Jd. at 249.

This Court added its approval, even for claims against
the federal government. Bail v. Halsell, 161 U.S. 72 (1896),
involved a statute allowing the Court of Claims to adjudicate

14

claims arising out of Indian depredations. Congress permitted
a contingent fee of up to 20% to be paid out of the sum
collected. The Court stated:

By several decisions of this court,--indeed, beginning at
December term, 1853,--contracts for contingent fees, by
which attorneys, employed to prosecute claims against
the United States, were to be allowed a proportion of the
amount recovered in case of success, and nothing in case
of failure, were held to be lawful and valid.

Id. at 80. In Stanton v. Embrey, 93 U.S. 548 (1876),
the Court upheld claims for attorney fees for prosecuting
claims against the U.S. following the Civil War. The Court
noted that attorneys “usually charged contingent fees of from
twenty to twenty-five per cent, which the plaintiff's witnesses
regarded as a reasonable charge.” The Court rejected the
argument that such fees are improper, stating it was “beyond
legitimate controversy” that such contracts are to be enforced
“if they are free from any taint of fraud, misrepresentation, or
unfairness.” Jd. at 556-57.

Contingent fees are perhaps most closely identified
with personal injury lawsuits. As tort law developed to deal
with the carnage of negligently inflicted injuries and deaths
that accompanied the Industrial Revolution, the contingent
fee offered workers and their families their only means of

obtaining compensation.
As Pennsylvania Justice Michael A. Musmanno
famously declared:

If it were not for contingent fees, indigent victims of
tortious accidents would be subject to the unbridled,
self-willed partisanship of their tortfeasors. The person
who has, without fault on his part, been injured and who,
because of his injury, is unable to work, and has a large
family to support, and has no money to engage a lawyer,
would be at the mercy of the person who disabled him
because, being in a superior economic position, the
injuring person could force on his victim, desperately in

15

need of money to keep the candle of life burning in
himself and his dependent ones, a _ wholly
unconscionable meager sum in settlement or even refuse
to pay him anything at all. Any society, and especially a
democratic one, worthy of respect in the spectrum of
civilization, should never tolerate such a victimization of
the weak by the mighty.

Richette v. Solomon, 187 A.2d 910, 919 (Pa. 1963).

Today, contingent fee financing is not only the near-
universal choice of plaintiffs in personal injury and other tort
actions, but is commonly used “in collection suits,
shareholder derivative suits, antitrust suits for damages, tax
cases, will contests, and condemnation proceedings,” Richard
M. Birnholz , The Validity and Propriety of Contingent Fee
Controls, 38 UCLA Law Review 949, 952-53 (1990), in
contract cases, see Herbert M. Kritzer, The Wages Of Risk:
The Returns of Contingency Fee Legal Practice, 47 DePaul
L. Rev. 267, 267 n.1 (1998) (“Civil Litigation Research
Project data showed that 62% of individual plaintiffs in
contract cases had paid their lawyers on a contingency
basis.”), and in tax cases and patent litigation. ABA Formal
Op. 94-389 (December 5, 1994).

In short, the contingent fee is “the dominant system in
the United States by which legal services are financed by
those seeking to assert a claim.” F. MacKinnon, CONTINGENT
FEES FOR LEGAL SERVICES 4 (1964). See also Herbert M.
Kritzer, THE JUSTICE BROKER: LAWYERS AND ORDINARY _
LITIGATION 58-59 (1990). It makes little sense to demand that
the reasonableness of fees paid by individuals pursuing
damage claims be measured against the yardstick of the
“prevailing” hourly rate for similar services. The contingent
fee is the prevailing rate for such services in the marketplace.

Corporate clients are also demanding — and receiving
— contracts for legal work that incorporate aspects of
contingency agreements. See ABA Formal Op. 94-389,
supra, noting the trend toward making attorney compensation

16

in mergers and acquisitions, public stock offerings, and loan
transactions contingent in whole or in part on the successful
completion of the transaction. Much of this trend is driven by
intense dissatisfaction with hourly billing. See Cobb,
Competitive Pricing Along The Value Curve; or The Folly of
Hourly Rate Pricing, 14 Legal Econ. Sept. 1988, at 28
(discussing “value added billing” as a replacement for hourly
billing); Hertzberg & Stewart, “Contingency Legal Fee for
Merger Breaks Ground, Stirs Controversy,” Wall St. J., Oct.
24, 1986, at 31, col. 4 (discussing contingent fees in
corporate mergers and acquisitions); Reed, Value Billing: An
Update from the ELP Section's Task Force, 14 heanes Econ.

Sept. 1988, at 20.

Even defendants are making increasing use of
“reverse contingent fees,” in which defendants hire lawyers

who will be compensated by an agreed upon percentage of
the amount the client saves. See ABA Formal Op. 94-389,

supra.
The reason contingent fee arrangements have become
so widely used in such a broad array of circumstances is that

they serve important market functions that promote the
availability of legal services at reasonable prices.

B. Contingent Fee Arrangements Serve Important
Market Functions.

1. Increasing Access to the Marketplace.

The contingent fee provides legal representation for
many people who could not otherwise afford to secure their
rights. See Philip H. Corboy, Contingency Fees: The
Individual's Key to the Courthouse Door, 2 Litigation 27
(Summer 1976). Even the harshest critics of contingent fees
agree that they are essential to providing access to justice:

Contingency fees are vital to the vindication of
important legal rights in that they enable accident

17

victims and other injured persons to have access to both
counsel and the courts which would not be otherwise
feasible. Under the contingency fee system, clients who
cannot afford the risk of liability for attorney's fees if
they fail to recover damages can proceed fully with their
cases; their attorneys can be paid only from money that
the clients actually recover.

Lester Brickman, ABA Regulation of Contingency Fees:
Money Talks, Ethics Walks, Fordham L. Rev. 247, 270
(1996).

This key to the courthouse is not limited to the
indigent. The.cost of competent representation for even
moderately complicated claims can be well out of reach for
middle class families. Even the well-off, who might be able
to afford to pay tens of thousands of dollars to pursue a
substantial claim are likely to forego their rights in the face of
a significant probability that their investment may be lost.
The contingent fee lawyer essentially assumes the risk of
loss.”

2. Aligning of the Interests of Attorney and Client

The contingent fee arrangement assures that the
lawyer’s economic interest coincides with the client’s. If the
‘awyer gets paid only when the client prevails, he or she has a
powerful incentive to evaluate the case honestly at the outset
and devote the effort required to win. As Judge Easterbrook
explains:

The contingent fee uses private incentives rather than
careful monitoring to align the interests of lawyer and
client. The lawyer gains only to the extent his client
gains. This interest-alignment device is not perfect. . . .

2 It is not accurate to state that those clients who win subsidize the
losers — any more than a company whose stock rises is subsidizing those
companies in an investor’s portfolio whose shares lose value. The
attorney who takes a contingent fee case assumes the risk of loss for that
case. If it were the attorney’s only case, he or she would charge the same

18

But [an] imperfect alignment of interests is better than a
conflict of interests, which hourly fees may create.

Kirchoff v. Flynn:786 F.2d 320, 325 (7th Cir. 1986). See also
Charles Silver, Due Process And The Lodestar Method: You
Can't Get There From Here, 74 Tulane L. Rev. 1809 (2000)
(citing authorities that show a “broad consensus that
percentage-based formulas harmonize the interests of agents
and principals better than time-based formulas like the
lodestar approach.”’).

3. Promoting Efficient Use of Resources

It is in the contingent fee attorney’s interest to obtain .

the maximum result for the client while making the most
efficient use of resources. Attorneys have strong incentives to
avoid duplication and reinventing the wheel by sharing
information and resources. Marc Galanter, Anyone Can Fall
Down a Manhole: The Contingency Fee and Its Discontents,
“47 DePaul L. Rev. 457, 472 (1998).

ATLA was founded to promote such efforts by the
plaintiff's bar and continues to do so through its education
programs, publications and document exchange service. In
addition, ATLA has encouraged the activities of litigation
groups, which enable attorneys with similar cases to share the
expense of discovery and pretrial proceedings. See Paul D.
Rheingold, The Development of Litigation Groups, 6 Am. J.
Trial Advocacy 1 (1982).

4. Simplifying Enforcement

The contingent fee arrangement is_ relatively
transparent and simple to administer. The amount of the fee
may be unknown when the agreement is signed, but after the
counsel and client prevail, the determination is a simple
matter of arithmetic. Most clients are ill equipped to oversee

19

their lawyers to determine whether the number of depositions
is excessive or whether a 50-page motion is overkill. Nor
does the attorney relish the prospect, after prevailing on the
merits, of undertaking a secondary litigation to establish the
amount of the fee. Nor, it may be ventured, do judges view
such fee litigation as a worthwhile use of their time.

C. The Contingent Fee Does Not Promote Wasteful
Litigation or “Windfall” Fees for Attorneys.

Contingency fees have also been sharply criticized. It
should be noted, however, that much of the criticism comes
from those who are less interested in protecting the clients
than in placing obstacles in their way to their day in court.
See Barry J. Nace, The "Legal Scholars" Speak on
Contingency Fees, Trial, Apr. 1994, at 7. The most frequently
heard complaints are that they encourage plaintiffs to file
frivolous lawsuits and allow attorneys to reap very large fees
based on very little work. ATLA submits that both objections
are factually incorrect.

1. Contingent fees do not encourage frivolous litigation.

The contingent fee provides access to justice for many
individuals and businesses who could not otherwise seek
legal redress. There is simply no evidence, however, that
contingent fee encourages groundless claims. Indeed, the
attorney’s financial incentive presses in the opposite
direction, in favor of selecting meritorious cases. As a study
prepared by the Rand Corporation observed,

The common allegation that the contingent fee induces
attorneys to bring claims with little legal merit has no
basis in logic. The fact that the fee depends on winning
provides an incentive to screen out cases with little legal
merit -- an incentive that is lacking with an hourly fee.

20

Patricia Munch Danzon, Rand Corporation, Institute for Civil
Justice, "Contingent Fees for Personal Injury Litigation,"
Summary at viii (R-2458-HCA, June 1980).

An earlier study conducted by the federal government
similarly concluded that “The contingent fee arrangement
does not encourage lawyers to accept nonmeritorious cases
with a low probability of winning just because the possible
recovery is large.” Stephen D. Dietz, C. Bruce Baird, and
Lawrence Berul, “The Medical Malpractice Legal System,”
Report of the Secretary's Commission on Medical
Malpractice, U.S. Department of Health, Education and
Welfare 87, 154 (January 16, 1973).

2. Contingent Fees Do Not Result in “Windfall” Attorney
Fees.

The second major objection to contingent fee
agreements is that in some circumstances they result in a
large fee for very little work by the attorney. Critics point to
specific instances, generally involving early settlements of
claims that had very little risk of nonrecovery, where the
attorney was able to obtain compensation for the client by
filling out some routine paperwork. See e.g. Lester
Brickman, Contingent Fees Without Contingencies: Hamlet
Without the Prince of Denmark? 37 UCLA L. Rev. 29, 79-84

(1989).

ATLA submits that such windfalls are not as common
as critics suggest. Empirical studies over the years have
consistently found that, overall, contingency fee attorneys do
not earn substantially more per hour than their counterparts
who bill on an hourly basis. See Herbert M. Kritzer, The
Wages of Risk: The Returns of Contingency Fee Legal
Practice, 47 DePaul L. Rev. 267, 304 (1998) (data indicates
that “returns from contingency fee practice are at best
‘somewhat’ better than what lawyers earn from hourly fee

21

practices.”); Patricia Munch Danzon, Rand Corporation,
supra at viii (“What little empirical evidence is available
confirms that, averaging over cases won and lost, the
effective hourly earnings of attorneys paid on a contingent
basis are similar to the hourly earning of defense attorneys
paid by the hour.”).

For those abuses that do occur, the authority of courts
to alter or set aside a contingent fee contract is “well
established.” Schlesinger v. Teitelbaum, 475 F.2d 137, 141
(3d Cir.), cert. denied, 414 U.S. 1111 (1973). Nor have courts
been reluctant to use that authority. See, e.g., In re Gerard,
548 N.E.2d 1051 (Ill. 1989) (contingency fee agreement
struck down where the case merely required the completion
of forms to secure client funds not at a risk of loss and where
mo litigation was required); Brickman, supra at 79-84 (citing
cases); Neil Galatz and Stacie Hane, The Ethics Of
Contingency Fee Agreements, 5 Nevada Lawyer 22 (1997);
See generally, Robert L. Rossi, ATTORNEY’S FEES § 2.8 -
2.10 (2d ed. 1995).

Even where the contingent fee agreement was
appropriate when signed, “changes in circumstances
occurring after negotiation of the fee agreement may lead a
reviewing court to decide, ex post facto, that payment of the
fee is unreasonable.” ABA Formal Op. 94-389 (December 5,
1994). See, e.g., Mckenzie Construction Inc. v. Maynard, 758
F.2d 97 (3d Cir. 1985).

Similar examples are likely to be rare in Sovial
Security benefit litigation before the district courts. However,
those courts of appeals that favor using the agreed-upon
contingent fee as the starting point in determining a
reasonable fee under 42 U.S.C. § 406 make clear that the
district judge is to review the award for possible abuses.
Rodriguez at 746; Wells, 907 F.2d at 372; McGuire, 873 F.2d
at 980-81.

22

Ill. THE LODESTAR METHOD OFFERS LITTLE
MARKET ASSURANCE AGAINST
UNREASONABLE FEES.

A. Hourly-Rate Billing Is Based on an Inherent and
Perverse Incentive to Maximize Hours Rather

Than Results.

The lodestar method is simply a special application of
hourly-rate billing. The notion of charging the client based on
the hours spent by the attorney is relatively new, coming into
its own in the early 1960’s. Its adoption has been traced to
the confluence of several factors. These include the
increasing complexity of litigation and discovery and the
decline in lawyers’ incomes during the 1950’s. See George B.
Shepherd and Morgan Cloud, Time And Money: Discovery
Leads To Hourly Billing, 1999 U. Ill. L. Rev. 91, 92-93,
along with the dramatic growth in the size of major law firms
and the advent of computerized time management. Carl T.
Bogus, The Death Of An Honorable Profession, 71 Ind. L.J.
911, 923-24 (1996).

Billing by the hour was promoted by experts in law
office management entirely as a means of increasing large
law firm revenue, specifically by leveraging the work of the
growing cadre of associates. Eugene C. Gerhart, The Art of
Billing Clients, 1 Law Off. Econ. & Mgmt. 29, 30 (1960).
There may be nothing wrong with that. However, it was
never designed to result in a more reasonable fee to the client.
“{I)ndeed, an incentive emerged to be inefficient and run up
billable hours.” Bogus, supra, at 924.

Predictably, this built-in incentive resulted in a
dramatic increase in the number of hours billed, especially by
associates. Some boasted as many as 3000 hours a year. Jd.
Some clients rebelled. For example, Zoe Baird, general
counsel for Aetna Life & Casualty company, told the 1992
annual meeting of the American Bar Association:

23

There is no credible economic theory underlying the
hourly billing method, and for that reason, we no longer
accept it as the sole, or even predominant, method of
pricing legal services. In fact, hourly billing pushes
economic incentives in the wrong direction -- weakening
rather that strengthening the bonds between performance
and pay. . . . Productivity is better measured by results.”

Sherry Matteucci, “What the Heck Is ‘Value Billing’
Anyway?" Montana Lawyer, November 1992, at 2. See
generally William G. Ross, THE HONEST Hour 1-8 (1996)
(listing the voluminous literature condemning hourly billing).

Worse yet, this perverse incentive to bill more hours
tempts many to inflate their time. William H. Rehnquist, The
Legal Profession Today, 62 Ind. L.J. 151, 153 (1987).

In the 1980’s the profession was rocked by the
number of leading lawyers at prestigious firms who were
indicted or disciplined for. defrauding clients. Those clients
were presented with legal bills that contained hundreds of
thousands of dollars in padded billing, double billing, and
outright fictitious billing. See Lisa G. Lerman, Blue-Chip
Bilking: Regulation Of Billing And Expense F raud By
Lawyers, 12 Geo. J. of Legal Ethics 205 (1999).

The problem is not limited to a few unethical
attorneys. In a confidential survey, two-thirds of questioned
practitioners said they knew of specific instances of padding.
William G. Ross, The Ethics of Hourly Billing by Attorneys,
44 Rutgers L. Rev. 1, 93 (1991). Professor Bogus laments
that “a significant segment of the bar routinely and patently
pads bills and defrauds clients.” It is a “silent epidemic.”
Bogus, supra at 914 & 922.

B. The Lodestar Method Incorporates the Perverse
Incentives of Hourly Billing.

The lodestar method simply takes the perverse
incentives of the hourly rate system and dumps them in the

24 25

laps of the district courts. A Task Force Report to the Third

Circuit stated: CONCLUSION
[The lodestar approach] encourages lawyers to expend For the above reasons, Amicus urges this Court to
excessive hours, and,-in the case of attorneys presenting reverse the decision of the court of appeals.

fee petitions, engage in duplicative and unjustified work,

inflate their "normal" billing rate, and include fictitious

hours or hours already billed on other matters, perhaps in

the hope of offsetting any hours the court may disallow. Respectfully submitted,

Court Awarded Attorney Fees: Report of the Third Circuit
Task Force, 108 F.R.D. 237, 247-48 (1985).

The Federal Courts Study Committee followed with Jeffrey Robert White
its finding that the lodestar method “may unduly burden 1050 31st St., N.W.
judges and give lawyers incentives to run up hours Washington, DC 20007
unnecessarily, ... lead[ing] to overcompensation or later (202) 965-3500
litigation over fee padding. REPORT OF THE FEDERAL COURTS Attorney for Amicus Curiae

STUDY COMMITTEE 104 (Apr. 2, 1990)

One scholar asserts that these views reflect a “widespread
belief’ among judges and commentators. Charles Silver,
Unloading The Lodestar: Toward A New Fee Award
Procedure, 70 Tex. L. Rev. 865, 868 (1992) (citing
supporting authorities).

ATLA submits that where the parties are necessarily
seeking money damages in the form of social security
benefits and there exists a market to supply representation on
a contingent fee basis, there is good reason to view the
agreed-upon contingent fee as presumptively reasonable and
no basis for presuming the reasonability of a lodestar fee.

January 17, 2002

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0489%3A08. Public record. Not legal advice.