Perdue v. Kenny A. (08-970)
Oral argument: Oct. 14, 2009
Appealed from: United States Court of Appeals for the Eleventh Circuit (July 3, 2008)
ATTORNEY’S FEES, § 1983 LITIGATION, LODESTAR, FEE ENHANCEMENTS
In 2005, Kenny A. and eight other plaintiffs (collectively “Kenny A.”) settled a federal civil rights class action lawsuit against the Georgia Department of Human Resources and others. The settlement provided, in relevant part, that “the Plaintiff Class is entitled to recover its expenses of litigation, including reasonable attorneys fees . . . pursuant to 42 U.S.C. § 1988.” The District Court for the Northern District of Georgia approved a lodestar amount and a fee enhancement, which the court attributed to the extraordinary performance by Kenny A.’s counsel. The Court of Appeals for the Eleventh Circuit affirmed, and the U.S. Supreme Court granted certiorari to determine if, under 42 U.S.C. § 1988, courts may increase the amount they award in attorney’s fees to prevailing civil rights litigation plaintiffs in recognition of extraordinary performance by their counsel. The Court's decision will affect the economic incentives around federal civil rights litigation.
Can a reasonable attorney’s fee award under a federal fee-shifting statute ever be enhanced based solely on quality of performance and results obtained, or are these factors already included in the lodestar calculation?
Are courts ever allowed to increase the amount awarded in attorney’s fees to prevailing civil rights litigation plaintiffs in recognition of extraordinary performance by their counsel?
Kenny A. and eight other named plaintiffs (collectively "Kenny A.") are minors in the custody of the Georgia Department of Human Resources. See Kenny A. v. Perdue, 532 F.3d 1209, 1214 (11th Cir. 2006). Kenny A. filed a class action lawsuit in the District Court for the Northern District of Georgia in 2002 against the Georgia Department of Human Resources and the Governor of Georgia, among others (collectively “Georgia”), under 42 U.S.C. § 1983 for “systemic deficiencies” in Georgia’s foster care program that allegedly resulted in violations of their rights to substantive due process, liberty, privacy, and association under the First, Ninth, and Fourteenth Amendments. See id. at 1214–15. Kenny A. also brought claims under the Adoption Assistance and Child Welfare Act of 1980, the Multiethnic Placement Act of 1994, the Medicaid Act, and Georgia law. See id. at 1215.
Kenny A. ultimately resolved the claim through mediation and reached a settlement agreement with the defendants in 2005, which provided for improvements in Georgia’s foster care system and also provided that “the Plaintiff Class is entitled to recover its expenses of litigation, including reasonable attorneys’ fees . . . pursuant to 42 U.S.C. § 1988.” Kenny A., 532 F.3d at 1216. The settlement stated that if the parties could not agree upon a reasonable fee amount, the district court would determine an appropriate amount. See id. at 1216–17. The parties failed to reach an agreement, and Kenny A. moved for the District Court to approve a settlement amount for attorneys’ fees and expenses of $14,342,860. See id. at 1217. One half of this amount consisted of the proposed lodestar amount—a calculation commonly used to determine attorney’s fees, which is equal to the number of hours reasonably spent on the representation multiplied by a “reasonable hourly rate." See id. at 1217, 1219. The other half of the amount awarded was a proposed “enhancement,” attributable to what the District Court found to be the superior quality of performance and results obtained by Kenny A.’s counsel. See id. at 1217. Georgia objected to the proposed fee enhancement, arguing that because the billable hours calculation already accounted for the attorneys’ skill and effort, a performance-based enhancement would be inappropriate. See id.
In response, the District Court modestly reduced the proposed lodestar amount, finding the number of hours billed to be excessive. See Kenny A., 532 F.3d at 1217. However, the Court approved the fee enhancement, holding that the hourly rates did not reflect the $1.7 million that Kenny A.’s attorneys laid out for expenses, or the fact that the attorneys were unpaid throughout the representation and would only be compensated if they secured a favorable outcome. See id. at 1218. In addition, the court noted that the attorneys’ performance greatly surpassed what would usually be expected for the hourly rate used to calculate the lodestar. See id.
Georgia appealed to the Court of Appeals for the Eleventh Circuit. The Eleventh Circuit disagreed with the District Court, stating that the lodestar enhancement was inappropriate because the quality of performance and delay in compensation should have been accounted for in determining the appropriate hourly rate in the lodestar amount. See Kenny A., 532 F.3d at 1227–28. The Eleventh Circuit also noted that the Supreme Court’s decision in City of Burlington v. Dague, demands a “strong presumption against enhancements” from the lodestar calculation and prohibits enhancements when cases are taken on contingency. Id. at 1227–28 (citing Dague, 505 U.S. 557, 562 (1992)). However, the Eleventh Circuit follows a self-imposed “prior panel precedent rule” under which the court must adhere to its own prior rulings. See id. at 1236–37. In two previous decisions, decided after the Supreme Court’s most recent holding on enhancements, the Eleventh Circuit held that lodestar enhancements could sometimes be based on quality of performance. See id. at 1236–38. Therefore, the Eleventh Circuit affirmed the District Court's holding despite its view that the enhancements conflict with Supreme Court precedent. See id. at 1238–39. Georgia petitioned the Supreme Court for certiorari, and the Court granted the petition on April 6, 2009.
At issue in this case is whether the so-called “lodestar method,” the calculation of the number of hours reasonably expended on a case multiplied by a reasonable hourly rate, represents the reasonable attorneys’ fees to be awarded to the prevailing party in a civil rights case. Petitioners, acting in their capacities as officials in the State of Georgia, argue that it is. See Brief for Petitioners, Sonny Perdue, et al. at 13. Respondents Kenny A. et al. contend that allowing courts to grant fee enhancements for superb performance is necessary to incentivize attorneys to take such cases. See Brief for Respondents, Kenny A., et al. at 15.
The idea of introducing even more discretion into the calculation of attorney’s fees—an area that is already imprecise—is an anathema to many parties: many groups contend that this will encourage protracted fee litigation, a process already drawn out under the current lodestar method. See Brief of Amici Curiae the States of Alabama, Alaska, et al. (“States”) in support of Petitioners at 16; Brief of Amicus Curiae Washington Legal Foundation in support of Petitioners at 16. Civil rights organizations counter that discretion is needed, as the lodestar method can fail to provide an award that successful attorneys deserve. See Brief of Amici Curiae the Lawyers’ Committee for Civil Rights Under Law, et al. (“Lawyers’ Committee”) in support of Respondents at 4-5. The Lawyers’ Committee for Civil Rights Under Law, et al. (“Lawyers’ Committee”) cites to the fact that the lodestar method’s application is not applied uniformly across jurisdictions and that different methods are used to calculate an appropriate hourly rate, leading to different results. See id. at 6. The state governments, on the other hand, contend that the introduction of another subjective element into the calculation for fee enhancements would lead to even more arbitrary fee awards. See Brief of States at 18.
State governments contend that allowing for fee enhancements above the lodestar calculation goes against public policy because it would drain money from public programs, placing the burden on taxpayers. See Brief of States at 2. Schools in particular, which are involved in many state cases, would be affected by such an change in attorney fee calculations. See Brief of Amicus Curiae National School Boards Association in support of Petitioners at 2. The National School Boards Association contends that allowing fee enhancements beyond the lodestar method would divert already scarce funds from school programs and would function to prevent the very systemic change that is often the goal of civil rights litigation. See id. at 2.
However, the NAACP counters that there would be no windfall to attorneys and drastic changes in fee awards, as courts have already shown they limit fee enhancements to those “rare” cases that promote vigorous civil rights enforcement. See Brief of Amicus Curiae NAACP Legal Defense and Educational Fund in support of Respondents at 16-17. Several state bar associations also contend that there would be no “systematic” overcompensation as a consequence of allowing fee enhancements, as courts have a history of imposing rigorous standards in granting fee enhancements. See Brief of Amici Curiae of the New York State Bar Association, et al. in support of Respondents at 9.
In this same vein, the Lawyers’ Committee argues that, considering how rarely fee enhancements are granted, the supposed risk that the ability to enhance fee awards would lead to protracted litigation is virtually non-existent. See Brief of Lawyers’ Committee at 21. However, the state governments contend that fee enhancements will not create a disincentive for plaintiffs’ attorneys to settle so much as it will for the states involved. See Brief of States at 14. The prospect of post-settlement fee enhancements for plaintiffs’ lawyers who, through settlement, have achieved what some would call a superior result, would deter state attorneys from settling, especially where the state has a chance of prevailing. See id. The Lawyer’s Committee counters that past practice of fee enhancement nonetheless has demonstrated just the opposite, given that fee enhancements are awarded so rarely. See Brief of Lawyers’ Committee at 23.
The Lawyers’ Committee argues that if enhancements to the lodestar method based on attorneys’ performances in specific cases are never allowed, such a rigid limit would have the effect of creating a disincentive for attorneys to pursue federal civil rights claims. See Brief of Lawyers’ Committee at 17. The state governments, on the other hand, refute this claim: since the entire point of the lodestar method is to award fees based on an attorney’s hours worked and a court’s assessment of attorney skill-level, which is used to determine the hourly rate, this removes any disincentive and, in fact, provides an inducement for lawyers to seek out civil rights litigation. See Brief of States at 6. State governments also contend that the current lodestar method does not discourage private attorneys from taking civil rights cases either. See id. at 9. According to the state governments, the importance of pro bono work to private attorneys, both in terms of the training it provides and the recognition it gives the law firm in the community, means that private attorneys will continue taking on civil rights cases irrespective of the prospect of fee enhancements. See id.
42 U.S.C. § 1988 is a fee-shifting statute that provides for the award of a “reasonable attorney’s fee” to the prevailing party in certain civil rights actions, such as those filed under 42 U.S.C. § 1983. See 42 U.S.C. § 1988. Courts typically determine a reasonable fee by calculating the “lodestar”—a figure determined by multiplying the reasonable number of hours worked on the case by rates that reflect the skill and experience of the prevailing attorneys. See Brief for Petitioners, Sonny Perdue, et al. at 13. In this case Petitioners, Sonny Perdue, and others acting in their official capacities for the State of Georgia (collectively “Georgia”), argue that it is never appropriate for a court to enhance the fees awarded under the lodestar in recognition of superior results obtained or quality of representation. See id. The Respondents, Kenny A., and a group of eight other foster children who were represented in a class action §1983 lawsuit against the state (collectively, “Kenny A.”), argue enhancements to the lodestar should be made available in exceptional circumstances, such as in their case, where the district court recognized their counsel’s outstanding performance. See Brief for Respondents, Kenny A., et al. at 13, 16.
Conflicting Interpretations of Congressional Intent
Both parties agree that the statutory text of §1988 does not provide any guidance on how a “reasonable attorney’s fee” should be calculated. See Brief for Petitioners at 19; Brief for Respondents at 17. However, Kenny A. argues that a statutory authorization for “reasonable” fees should not be interpreted as a categorical bar on enhancements, but rather a determination that, by its terms, reflects considerations of relevant facts and circumstances. See Brief for Respondents at 17-18. Kenny A. also points out that when Congress included a fee shifting provision in the Individuals with Disabilities Education Act (IDEA), it also included an explicit provision barring enhancement of attorney’s fees. See id. at 18. Kenny A. maintains that if Congress sought to place a similar bar on enhancements in §1988, they would have done so explicitly, as it did in the IDEA. See id.
Georgia argues the absence of any mention of fee enhancements in §1988 is an indication that Congress did not envisage that additional fee awards would be considered for prevailing counsel. See Brief for Petitioners at 19. Georgia directs attention to the legislative history of §1988, where several congressmen and senators remarked that the fee shifting provision was included to ensure the availability of competent counsel for private enforcement of civil rights actions, “while avoiding windfalls to attorneys.” See id. at 20 (citing H. Rep. 94-1558 at 9 (1976)). Georgia points out that public attorneys general do not receive windfalls for protecting the public interest. See id. at 43. Georgia argues that commentary of congressmen involved in the passage of §1988, indicating that it “is not a bill that we could term a food-stamp bill for lawyers,” demonstrates that “private attorneys general” advancing civil rights claims should not benefit from windfalls either. Id. at 20, 43 (citing 122 Cong. Rec. 35127 (1976)).
However, Kenny A. counters that committee reports demonstrate that Congress intended to continue the tradition of granting enhancements under fee shifting statutes for outstanding quality of representation. See Brief for Respondents at 20. Kenny A. references House and Senate Reports that provided a list of twelve factors (“Johnson factors”) that were provided to serve as guidance for courts in how to determine reasonable fees. See id. at 21-22 (citing Johnson v. Georgia Highway Express, Inc.,488 F.2d 714 (5th Cir. 1974)). Kenny A. notes that two of these Johnson factors included consideration of “the results obtained” and the “ability of attorneys.” See id. at 21. Kenny A. directs additional attention to the fact that the Senate Report included three cases that provided examples of “correctly applied” Johnson factors—two of which included enhancements to the award of reasonable attorney’s fees. See id. at 22 (citing Stanford Daily v. Zurcher, 64 F.R.D. 680 (N.D. Cal. 1974); Davis v. County of Los Angeles, 8 E.P.D. ¶ 9444 (C.D. Cal. 1974); Swann v. Charlotte-Mecklenburg Bd. of Educ., 66 F.R.D. 483 (W.D.N.C. 1975)). Although none of these cases employed a lodestar calculation to determine the fees, Kenny A. maintains that the lodestar had been used by other courts of appeals and was not unknown to Congress at the time it enacted §1988. See id. at 25. Kenny A. also takes issue with the degree of emphasis Georgia places on Congressional interests in avoiding a “windfall” for attorneys. See id. at 32. According to Kenny A., enhancements are not windfalls when they are awarded appropriately within the courts discretion, but rather take into account real costs and hardships undertaken by the attorneys in their representation. See id. at 32.
Georgia acknowledges the Johnson factors, but indicates that Johnson and the cases listed in the Senate report are, “at best,” inconclusive indicators of Congressional intent regarding enhancements, because they date from a time when the lodestar was not the standard method of determining a reasonable fee. See Brief for Petitioners at 25. Georgia argues the goal in Johnson was to recoup a fair market rate for the attorney’s services; but today, this fair market rate is now assessed by the lodestar calculation. See id. at 20, n. 12. Georgia argues that in the event of a discrepancy between cited cases and floor remarks, the U.S. Supreme court has recognized that “an explicit statement of congressional intent” deserves more weight, and therefore, statements regarding the intent to avoid windfalls during floor debate should be controlling. See id. at 24 (citing United States v. Seeger, 380 U.S. 163, 177 (1965)).
Evolution of the Supreme Court’s Approach towards Fee Enhancements
Georgia argues that the Supreme Court’s jurisprudence has evolved “in a decisional arc that bends decidedly against enhancements,” beginning with Hensley v. Eckerhart, where the Court adopted the lodestar calculation as the most useful starting point for determining a reasonable fee. See Brief for Petitioners at 29 (citing Kenny A. v. Perdue, 532 F.3d 1209, 1221 (11th Cir. 2008)(Carnes, J., concurring)); see also Hensley, 461 U.S. 424 (1983). Georgia points first to Blum v. Stenson, where the court determined that although enhancements were available in exceptional cases, the lodestar amount is presumed to be the reasonable award of attorney’s fees, and enhancement for special skills of the lawyer or complexity of the issues were inappropriate bases for enhancement because these factors are usually taken into account in the lodestar. See id. at 33 (citing Blum, 465 U.S. at 897-899 (1984)). According to Georgia, the Court built upon this reasoning in Pennsylvania v. Delaware Valley, where it held that “most, if not all, of the relevant factors” constituting a reasonable attorney’s fee are included in the lodestar calculation. Id. at 36 (citing Delaware Valley, 478 U.S. 546 (1986)). Georgia argues the primacy of the lodestar calculation was then firmly established by the Court’s decision in City of Burlington v. Dague. See id. at 40 (citing Dague, 505 U.S. 557 (1992)). In Dague, the Court found it improper to award a fee enhancement where counsel took a case on contingency and, thus, assumed the risk of not receiving payment for their services. See id. at 39-40. In Dague, the Court reasoned that (1) the complexity of a case and the skill of the attorneys involved is usually taken into account by the lodestar, and, therefore, any enhancement would amount to “double counting” the fee, and (2) since variables and risks are inherent in every case, making a special exception for a contingency case would create such a large exception that the lodestar would never provide a definitive and final calculation. See id. Georgia argues that this line of cases proves that a fee enhancement for quality of representation or superior results is never appropriate. See id. at 41-42. Not only are these factors already taken into consideration by the lodestar, but they also involve considerations of complexities and variables that would similarly undercut the value of the lodestar’s finality. See id.
However, Kenny A. argues that the Supreme Court’s decisions reinforce Blums’ holding that enhancements are permissible in exceptional circumstances. Brief for Respondents at 20. Kenny A. points out that far from articulating a strong preference for the lodestar in Delaware Valley, the Court merely indicated that enhancement was not appropriate in that particular case where the district court made no “detailed findings as to why the lodestar was unreasonable.” Id. at 47-48 (quoting Delaware Valley, 478 U.S. at 567-68). Kenny A. also takes issue with Georgia’s reading of Dague, pointing out that in that case the Court still preserved the right of counsel to recover more than the lodestar in appropriate instances. See id. at 49-51 (citing Dague, 505 U.S. at 562). Kenny A. also maintains there is a major distinction between enhancements for exceptional results and enhancements for contingency, as was at issue in Dague. See id. at 50. Since no claim has a 100% chance of success, contingency is a factor that always exists in a §1988 case. See id. Much to the contrary, enhancements for exceptional results would by definition only arise in special circumstances, and would therefore not undercut the finality of the lodestar. See id. at 51.
In Sonny Perdue v. Kenny A., the Supreme Court will decide if, under 42 U.S.C. § 1988, courts may increase the amount they award in attorney’s fees to prevailing civil rights litigation plaintiffs in recognition of extraordinary performance by their counsel. An affirmative decision would create an incentive for plaintiffs’ attorneys to undertake federal civil rights cases, while potentially creating a disincentive for defendants’ attorneys to settle and diverting funds from other public programs. A negative decision would potentially deter plaintiffs’ attorneys from undertaking federal civil rights cases.
Edited by: Katie Worthington
· Law.com: Civil Rights Defendants Going After Attorneys’ Fees (Aug. 24, 2009)
· The ’Lectric Law Library: Attorney’s Fees
· Litigation Management Blog, Barger & Wolen LLP: Lodestar Adjustment (Feb. 6, 2009)