Supplemental Brief — Sprenger, Olson & Shutes, P. A. v. Burlington Northern Railroad

No. 86-1880 JUL 22 87

In Tus

Supreme Court of the Gnited States

Octoszr Tzrm, 1986

SPRENGER, OLSON & SHUTES, P.A.

and DAVIS, MINER, BARNHILL & GALLAND,

Petitioners,

Vv.

BURLINGTON NORTHERN RAILROAD COMPANY,

Respondent.

SUPPLEMENT TO

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Lee A. Freeman, Jr.*

James T. Matystak

Apert F. Evrrincer

Attorneys for Petitioners

Of Counsel:

Freeman, Freeman & Sarzmay, P.C.

401 North Michigan Avenue

Suite 2700

Chicago, Illinois 60611

(312) 222-5100

* Counsel of Record

Midwest Law Printing Co., Chicago 60611, (312) 321-0220

i

TABLE OF CONTENTS

PAGE

TABEEG GE AUTHOBIELS ceccccacccsccncs i

SUPPLEMENT TO PETITION FOR WRIT OF

CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SEVENTH

SE ROG eo aca OEE hc PETER Ree T EO Res 1

EA an ne a ane a aa ee 10

TABLE OF AUTHORITIES

Pennsylvania v. Delaware Valley Citizens’ Coun-

cil for Clean Air, 55 U.S.L.W. 5113 (June 26,

FRESE Pe eee ETE TT eeT Tere 1, 6, 7,9

In THE

Supreme Court of the United States

OctrosEer Term, 1986

SPRENGER, OLSON & SHUTES, P.A.

and DAVIS, MINER, BARNHILL & GALLAND,

Petitioners,

Vv.

BURLINGTON NORTHERN RAILROAD COMPANY,

Respondent.

SUPPLEMENT TO

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

= an

This supplement presents petitioners’ view of the im-

pact of Pennsylvania v. Delaware Valley Citizens’ Coun-

cil for Clean Air, 55 U.S.L.W. 5113 (June 26, 1987) on

the Petition for Writ of Certiorari.

This ease is the logical next step for review after Dela-

ware Valley. This case is representative of those in which

an enhancement for risk must be awarded to attract com-

petent counsel. The District Court and Court of Appeals

reached their results for different reasons. But since both

analyses are inconsistent with the standards set down in

Delaware Valley, this case must be reversed in any event.

Moreover, this is a particularly good case for considera-

tion and explication of how a risk enhancement should be

applied in a context where it ought to be applied and

where petitioners introduced the necessary evidence with

regard to relevant market considerations in the trial court.

This case is the kind of case Congress hoped would be

brought. It was the largest pretrial race discrimination

settlement in history and it secured unprecedented relief

to a large class of black employees in an industry that

historically has been tainted by segregated job opportu-

nities.

Yet, this case would never have been brought without

the incentive of a possible award of an enhanced fee for

several reasons. First, it was too risky; the evidence is

uncontradicted that the plaintiffs had less than a 50/50

chance of prevailing. Second, the case was too expensive.

Lead counsel had to advance roughly one million dollars

in costs (virtually none of which were objected to by de-

fendants during the fee proceedings) to prosecute this

case. Third, it was too time consuming. Two small firms

spent over 17,000 hours of lawyer and paralegal time pros-

ecuting this action. Fourth, because this case was brought

in large part to secure classwide equitable relief, there

~

was no possibility of a contingency agreement being de-

veloped that would be attractive to counsel.

If an enhancement for risk is not required in such a

case, no case like this will ever be brought. Petitioners

actually proved just this in the fee proceeding. In the trial

court petitioners submitted overwhelming and uncontra-

dicted proof that competent counsel could not be induced

to prosecute cases of this significance without an enhance-

ment for risk.

Professor, now Judge, Easterbrook, after reviewing the

risks and costs involved in this case, testified that a sub-

stantial enhancement was necessary here because:

(1) in order to induce competent counsel to take dif-

ficult litigation of this sort, it is necessary to offer

the prospect of fees that will make them at least as

well off as if they worked at their market rates for

clients who paid when billed. . .

And he concluded that this principle had special applica-

tion in cases of this type:

Often lawyers who work in risky cases can hedge

their bets. The members of the plaintiffs’ bars in anti-

trust and securities have found it possible to “‘syn-

dicate’ their cases. Each lawyer works on many

cases at once; each case is staffed by teams of law-

yers. This spreads risk. But the lawyers who work

in the civil rights bars have not found the syndica-

tion of risk possible. For many reasons—and we are

not sure we fully appreciate them, but they must in-

clude difiwulties of conflicts of interest—the civil

rights bar is organized into very small firms. The

firms of lead counsel in this case are tiny compared

with the 200-lawyer firms representing defendant.

Worse for the risk problem, each lead counsel has

sunk the bulk of his professional life for several years

into this case. His fortune stands or falls on this ap-

plication for fees. That is not a comfortable position.

~

Nonetheless it seems to be a necessary one in civil

rights litigation. When risk is not spread across many

cases—when, as here, a litigator must put all his eggs

ee eee a

to offset the losses is at its greatest. Thus we have

no doubt about the propriety of a substantial multi-

plier in this case. (App. D-1-2, 16)!

Professor Easterbrook’s testimony was supported by

testimony placed before the District Court of witnesses

who actively labor in the civil rights arena. Julius Cham-

bers, Director-Counsel of the NAACP Legal Defense and

Education Fund, testified:

[I]t is my experience that cases such as this will not

continue to be brought unless a substantial fee en-

hancement in the form of a multiplier is given in

cases where the plaintiff is successful.

(I}t is already difficult to staff Title VII cases with

experienced and competent lawyers in private prac-

tice. Indeed, I am aware of the existence of only a

handful of firms nationwide who spend more than

50% of their time prosecuting contingent Title VII

litigation.

[I]t is imperative if Title VII is to be enforced as

Congress intended that substantial fee enhancements

for risk and results be made in cases such as this

to attract competent legal counsel. (Chambers Aff.

pp. 2,4)

John E. Jacob, Chief Executive Officer of The National

Urban League, stated:

It is The League’s experience that as a general mat-

ter there are not an adequate number of qualified

and experienced plaintiff's civil rights lawyers in this

country to meet the legitimate demand for these ser-

vices.

1 All citations to Appendix are to the Appendix to the Petition

for Certiorari. :

when

One reason for the paucity of lawyers handling civil |

rights matters is that these cases must be prosecuted |

on a contingent fee basis as opposed to an hourly fee

basis because most of the plaintiffs do not have the

money to fund a major lawsuit.

A second discouraging factor is that proving such

cases is difficult because one must prove the “‘state

of mind” of the defendant.

Further, it is the general perception of the legal com-

munity with whom The League works that courts are

reluctant to award substantial fees in Title VII cases.

Thus, these attorneys believe these cases are too

risky and, even if successful, likely to be unre-

warding.

The League’s experience is that this vacuum is not

being filled by the EEOC to any substantial extent.

To adequately increase the availability of knowledge-

able practitioners in this area, it is necessary to en-

sure that attorneys who take complicated Title VII

cases are compensated not simply for the hours they

put in, but also for the risks they have had to bear

during the lawsuit. (Jacob Aff. pp. 4-5)

Bruce Elfvin, then Assistant General Counsel of the

Equal Employment Opportunity Commission, attested to

the same facts:

My experience is that less than vigorous prosecution

of Title VII cases by private counsel is commonplace.

I believe that this is true for two factors, among

others. First, the fee awards have generally not been

sufficient to compensate private counsel for the risk

of these cases. Hence, many knowledgeable counsel

have left the field. Second, because so few attorneys

have been able to make a living on the plaintiff's side

of Title VII cases, few really knowledgeable and ex-

perienced lawyers are attracted to or remain in the

field.

The reluctance of knowledgeable and experienced law-

yers to routinely represent plaintiffs in Title VII

=

cases causes enforcement problems for the EEOC.

The EEOC has been consistently understaffed in rela-

tion to the complexity of tasks and workload it has

been charged by Congress to accomplish. Additional-

ly, because of its federal salary structure, it does not

retain as many knowledgeable and experienced liti-

gators as it would wish. Thus, the EEOC needs the

enforcement assistance of knowledgeable and experi-

enced members of the private bar.

It is my opinion that compensation adequate to at-

tract knowledgeable and experienced attorneys into

the employment discrimination field is necessary.

Because of the risky nature of Title VII cases, such

compensation should include enhanced fee awards to

compensate for the risk of losing a particular Jawsuit.

Otherwise knowledgeable and experienced litigators

will look elsewhere for the economic rewards in their

profession. (Elfvin Aff. pp. 5-6)

The need for an enhancement for risk if cases such as

the instant case are to be brought was further confirmed

by testimony provided to the District Court of distin-

guished attorneys practicing in large and small firms in

the relevant market. Thomas Sullivan, former United

States Attorney for the Northern District of Illinois, who

is now a senior partner in the firm of Jenner & Block,

a large Chicago law firm with a substantial reputation for

doing pro bono work, stated:

In my opinion and experience, large law firms will

not normally make the financial sacrifice to prosecute

this kind of racial discrimination suit. Accordingly, if

attorneys the caliber of lead counsel are to be at-

tracted to this kind of law enforcement litigation, the

compensation they receive should adequately reflect

the risk undertaken. Therefore, a substantial multi-

plier or premium should be added to the hourly rates

customarily charged by plaintiff's counsel. (Sullivan

Aff. p. 11)

wales

Barrington D. Parker, Jr., of the small New York firm

of Parker Ausprite Neesemant & Delhanty, described that

although Mr. Parker was on the board of the NAACP

Legal Defense and Education Fund, his firm had made

a policy decision not to become involved in cases such as

this one because they are too risky.

Indeed, the testimony of the witnesses was unanimous

that risk multipliers were essential to attract competent

counsel into the field of large, multi-party civil rights cases

such as this. Burlington Northern offered no contrary

testimony.

Thus, this case surely was one which “without an ad

justment for risk the prevailing party ‘would have faced

substantial difficulties in finding counsel in the local or

999

other relevant market.’ ”’ 55 U.S.L.W. at 5120 (concurring

opinion of Justice O’Connor)

Although abundant evidence on the subject was offered,

neither the District Court nor the Court of Appeals anal

yzed this case to determine whether a risk multiplier was

necessary to enable plaintiffs to find competent counsel}

for this case. Indeed, the trial court refused even to enter

tain evidence that an enhancement was necessary to at-

tract competent counsel to this case and others like it,

announcing that any such notion was demeaning to the

bar:

You mean to tell me lawyers—are you telling me the

legal profession has gotten to the point that unless

there is a multiplier in fee rates, competent conscien

tious lawyers will not undertake cases?

2 Even Burlington Northern’s expert, Professor Steven Shavell,

admitted in his deposition that enhanced compensation must be

paid for undertaking risk if enforcement of the civil mghts laws

is not to be left in large part to charity. (Lead Counsel’s Ex. 4,

Shavell Dep. Tr. 54-55, 113-15, 136)

ee -

I won't sit here and hear the profession demeaned

in this way!* (Transcript of Proceedings, Tr. 322-23)

Based upon this feeling, and in complete disregard of

the uncontroverted evidence in the record on this issue,

the trial court expressed its personal opinion as a judicial

finding:

It is unpleasant, even painful, for it to disagree with

(plaintiffs’] witnesses but the court must. It must say

it is just not true that unless lead counsel are given

the 2.5 multiplier they request in this case, compe-

tent lawyers in Title VII cases will be discouraged

from undertaking representation of persons with such

civil rights grievances. Those who think so either do

not know or remember the history of the struggle

for equality under law in this country or they have

no faith in the stamina and potential of American

lawyers to come forward and vindicate, in the courts,

the claims of those whose civil rights have been vio-

lated.* (App. C-30)

The Seventh Circuit chose not to endorse the District

Court’s feelings that petitioners’ request for an enhance-

ment demeaned the bar. Instead it first noted that it was

uncertain about where to go with respect to a multiplier:

Until [the Supreme Court] issues an opinion on that

question, therefore, we are left with some uncertainty

regarding the wisdom of risk multipliers. (App. A-11)

’ Paradoxically, the District Court stated during the hearing that

it would assume that it was difficult to find competent counsel

to represent plaintiffs in the field of employment discrimination.

Transcript of Proceedings, Tr. 321-22) The District Court, how-

ever, gave no weight to this assumption. As Delaware Valley

makes clear, the difficulty of finding counsel for this type of case

was one of the central questions before the trial court in making

its determination of whether a risk enhancement was needed, and

petitioners fully met their burden on this question.

* In support of this conclusion the trial court cited no evidence—

Burlington had provided none—but instead ostensibly relied upon

Footnote continued on following page)

on

Nevertheless, the Court of Appeals decided an enhance-

ment should not be granted in this case on the basis of

the following analysis:

Even in the absence of questions concerning the pro-

priety of risk multipliers, we would consider disposi-

tive the district court’s finding that this case involved

factual complexities and difficulties of trial prepara-

tion, but not the kind of significant risk engendered

by having to rely on new legal theories of recovery

or new remedies. (App. A-12)

Petitioners sought a rehearing, pointing out that risk

multipliers had generally not been limited to only those

situations where a plaintiff had to rely on new legal theo-

ries for recovery or new remedies.

In response, the panel issued an opinion that failed to

clarify whether it had given any consideration to the issue

whether a risk multiplier was appropriate:

In this case, the district court did not find that the

plaintiffs’ success was exceptional within the meaning

4 continued

the fact that other counsel had filed individual Title VII cases at

various times in different sections of the country, which Burling:

ton had moved to have consolidated by the multi-district panel.

In making this observation, however, the trial court simply ignored

the fact that none of these consolidated cases were class actions

and, with isolated exceptions here and there, none of the plain-

tiffs’ counsel played any role in the class action proceedings, but

simply rode lead counsel's coattails. Indeed the dearth of lawyers

jumping on lead counsel's bandwagon shows how different the civil

ights “market” is from the securities or antitrust “market”

where, after indictments, huge numbers of plaintiffs’ firms will

volunteer for positions of leadership in the subsequent class action.

Moreover, the District Court clearly could not properly rely upon

the fact tha’ some attorneys were willing to file related individual

Title VII cases at the time this class action was initiated. Given

the law regarding risk enhancement at that time, attorneys

naturally acted in the belief that they would be compensated for

amtahing risk if they prevailed.

ae

of Blum, and in the absence of evidence to demon-

strate that this finding was an abuse of discretion,

we were constrained to follow Blum and affirm the

district court’s judgment. In so deciding, we did not

address whether the lodestar amount should ever be _

adjusted upward to compensate for the risk of loss.

Neither did we address whether, assuming this type

of adjustment is legitimate, the use of a multiplier

is an appropriate means to achieve this purpose.

These questions remain open in our circuit. See Kir-

choff v. Flynn, 786 F.2d 320, 326 (7th Cir. 1986). We

look to the decision in Delaware Valley to shed more

light on this area. (App. B-3)

This passage suggests that the Seventh Circuit made

no decision on the issues raised by petitioners’ request

for a risk multiplier and their supporting evidence that

was framed precisely in the terms of the standards an-

nounced in Delaware Valley. It is clear that the only stan-

dard applied by the District Court to deny a risk multi-

plier was its conclusion that plaintiffs had not utilized new

or novel legal theories and it appears that the Seventh

Circuit only decided that petitioners’ exceptional success

did not warrant a multiplier.

The plurality opinion in Delaware Valley, and Justice

O’Connor’s concurrence, now make clear that such an

analysis was wrong with regard to the question whether

petitioners were entitled to a risk multiplier. Moreover,

the dissenting opinion would only utilize such an analysis

to determine if an additional multiplier was warranted.

The lower courts, thus, never addressed the proper issues.

CONCLUSION

Certiorari should be granted. This is a particularly good

case for review. It presents the risk enhancement issue

in its most pristine form. Here plaintiffs’ counsel under-

took a seven year struggle at great personal risk, and

persisted in prosecuting the class action to a successful

conclusion despite increasing risk. Since there was no

means of mitigating the risk by, for example, signing a

contingency agreement with the plaintiffs, their fees were

wholly in the hands of the court. This is especially true

because such a large part of the relief that petitioners

achieved in this case flowed from the provisions of the

Consent Decree that required reinstatement, hiring, pro-

motion and training of black employees. At the conclusion

of this proceeding, the District Court awarded plaintiffs’

counsel less per hour than they would have made had

they taken a risk-free case and been paid on a regular,

monthly basis. No one but a saint will take a case like

this in the future if that is the best they can expect and,

however one reads the legislative history, it is clear that

Congress wanted cases like this one brought.

Respectfully submitted,

LEE A. FREEMAN, JR.*

JAMES T. MALYSIAK

ALBERT F. ETTINGER

Attorneys for Petitioners

Of Counsel:

FREEMAN, FREEMAN & SALZMAN, P.C.

Dated: July 20, 1987 * Counsel of Record