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Analysis: The lodestar as gold standard


Attorneys who take on civil rights cases may need to do some creative re-thinking of how they calculate the basic fees they seek to recover if they win, because the chances that they can get a “bonus” on top of that now seem less likely, even if they do a superb job in winning.  That is the message the Supreme Court appeared to be sending Wednesday when it decided the most important attorneys’ fees case in years: Perdue v. Kenny A. (08-970). While the Court did not rule out a “performance enhancement” for fee recovery under federal fee-shifting laws, the language and the mood of the controlling opinion could be captured in two words: “almost never.”

Because the Court put such heavy emphasis upon the usually-controlling calculations that go into the so-called “lodestar” amount, attorneys who are confident that they can and will provide a better-than-normal performance will no doubt seek to find ways to quantify performance as a “lodestar” entry, rather than an above-lodestar bonus.  It might be done by enhancing the hourly rate, or perhaps clever minds may be able to devise some way to put the quality of lawyering into numbers.  What is most clear is that they cannot expect the mere impression that they did well to lead to a fee enhancement.

In one sense, the bottom line of the Perdue ruling may seem unremarkable.  The Court ruled that a strong performance by a civil rights lawyer who wins a case can lead to a fee enhancement, but only in “extraordinary circumstances.”  But the Court had said exactly that much in prior fee rulings, especially in 1984, 1986 and 1992.  But that is only what the decision stands for on the surface.  Between the lines of the spare 15-page opinion for the Court by Justice Samuel A. Alito, Jr., lurks a strong devotion to the “lodestar” calculation as the gold standard on fee calculation, and a deep-seated skepticism about superior performance — unless it can be measured by hard, objective, measurable and perhaps even provable factors.

The Alito opinion for five Justices used words like “rare” and “exceptional” to describe a potential case in which a bonus fee might be justifiable.  Justice Anthony M. Kennedy, one of the five, said in a separate opinion that such a fee should be awarded “only in the rarest circumstance.”  And Justice Clarence Thomas, another one of those five, urged readers to pay close attention to those parts of the Alito opinion that put “precise limitations” on such awards.  (The vote on the case was 5-4, with the split keyed to the specific outcome.)

The overall thrust of the main opinion can be seen in a simple fact: the Court overturned a fee enhancement which appeared to be based upon the trial judge’s conclusion that the lawyers who won the case had done the best job of lawyering that the judge had seen “in any other case” over 27 years on the bench.  The Court treated that conclusion as having only “an impressionistic basis.”  What any judge must do, in setting a fee award, is to lay down “a reasonably specific explanation for all aspects” of the award, in a form that allows “meaningful appellate review,” the Court stressed.

In this particular case, Justice Alito expressed what almost seemed like astonishment that the enhanced fee awarded would work out to a top rate for the attorneys involved of “more than $866 per hour.”  With some sarcasm, the Justice suggested that the award would give the attorneys involved in a case in Georgia earnings as high as those paid to attorneys “at some of the richest law firms in the country.”  He added: “Unjustified enhancements that serve only to enrich attorneys are not consistent” with the aims of the civil rights fee-shifting laws, which are to “ensure that civil rights plaintiffs are adequately represented, not to provide…a windfall.”

The Court’s ruling came in a case in which the challenging lawyers brought about a wide-ranging reform of the state of Georgia’s foster-care system, which was plagued by heart-wrenching stories of abuse of children, leading to escapes and attempted suicides.  When the case resulted in a sweeping consent decree, after prolonged and hard-fought court and mediation proceedings, the judge awarded the winning attorneys a lodestar award of $6.1 million, then tacked on a performance enhancement of another $4.5 million.

That award, upheld by the Eleventh Circuit Court, was overturned by Wednesday’s ruling, and the case was returned to the Circuit Court for further review, to apply the new standards the Alito opinion spelled out.  It thus appeared that the winning lawyers might yet have some chance to obtain a bonus fee, provided they come up with “an objective and reviewable basis” for such an add-on.

The Alito opinion was supported by Chief Justice John G. Roberts, Jr., Justices Kennedy, Thomas, and Antonin Scalia.   Justice Stephen G. Breyer, arguing in dissent that the award at issue was proper, was joined by Justices Ruth Bader Ginsburg, Sonia Sotomayor, and John Paul Stevens.   The dissenters, recounting the breadth of the reform that the lawsuit had produced, also noted  that state officials had worked energetically to thwart the challenge, and in doing so, hired outside lawyers at an expense of $2.4 million to spearhead the resistance.  The dissenters calculated that the bonus actually worked out to only $249 an hour for the winning counsel, not the $866 cited by the majority.

While agreeing that enhanced fees should be reserved for unusual cases of high performance, the dissenters asked: “If this is not an exceptional case, what is?”

The majority opinion, so far as it left open the possibility in some cases of a performance bonus fee even while praising the essential value of relying on lodestar amounts, offered three scenarios.  First, if the hourly rate in the lodestar is based on too narrow an assessment of market value, an adjustment upward of the hourly rate may pass muster; second, if the case requires the attorney to pay “extraordinary” expenses as the case moves along, or the case runs on for a “protracted” period, a bonus fee that can be defended on appeal may be added; the Court suggested that this might be done by adding interest to the expense calculation; and, third, if the lawyer has to wait an unusually long time to actually get paid fees for winning, again perhaps with the bonus based on an interest add-on.

While that did not appear to be all of the possibilities, one notable thing about those three circumstances is that only the first — a recalculated hourly rate to reflect “the attorney’s ability” — seemed tied in any way to the quality of the performance.  The other two had to do with the progress or timing of the litigation.  The mere articulation of these three tended, therefore, to enhance the impression that quality-based enhancements are, for the most part, virtually out of reach.