No. 92-563 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1993 

MAJORIE IHLER, VICTOR FOURWINDS, JOEL 

JOHNSON, KAREN HALLBERG, TOM BRANSTETTER, 

DANINE ROSE, SHARON GREGOR, CHARLES KIMBALL, 

DAVID MALINGO, BELINDA KITTLE, BYRON MYERS, 

and THERESA WHISENNAND, 

Plaintiffs, Respondents, 

and Cross-Appellants 

CURT CHISHOLM, DIRECTOR OF THE DEPARTMENT 

OF INSTITUTIONS FOR THE STATE OF MONTANA, 

CARROLL SOUTH, INDIVIDUALLY AND AS PAST 

DIRECTOR OF THE DEPARTMENT OF INSTITUTIONS 

FOR THE STATE OF MONTANA, JANE EDWARDS, 

SUPERINTENDENT OF MONTANA STATE HOSPITAL 

AND THE STATE OF MONTANA, 

Defendants, Appellants, 

and Respondents on Cross-Appeal. 

APPEAL FROM: District Court of the First Judicial District, 

In and for the County of Lewis and Clark, 

The Honorable Dorothy McCarter, Judge presiding. 

COUNSEL OF RECORD: 

For Appellants: 

P. Keith Keller; Keller, Reynolds, Drake, Johnson 

& Gillespie, Helena, Montana 

Hon. Joseph P. Mazurek, Attorney General, Kimberly 

A. Kradolfer, Assistant Att. General, Helena, Montana 

James B. Obie, Dept. of Institutions, Helena, Montana 

Bill Gianoulias, Tort Claims Division, Helena, Montana 
For Respondents: 

Jeffrey T. Renz, Legal Director, American Civil Liberties 

Union of Montana, Billings, Montana 

Leonard Rubenstein and Ira Burnim, Mental Health Law 

Project, Washington, D. C. 

Allen Smith, Mental Disabilities Board, Warm Springs, 

Montana 

Andrea Olsen and Mary Gallagher, Mental Health Protection 

and Advocacy, Warm Springs, Montana 

Helen Hershkoff and Victor Bolden, American Civil 

Liberties Union Foundation, New York, New York 

James H. Goetz; Goetz, Madden & Dunn, Bozeman, Montana 

r;. William Leaphart , Attorney at Law, Helena, Montana 

Submitted on Briefs: April 30, 1333 

Filed: 

Decided: June 29, 1993 
Justice Karla M. Gray delivered the Opinion of the Court. 

Appellants Cinisholm, et al., appeal from findings of fact, 

conclusions of law and order of the First Judicial District, Lewis 

and Clark County, awarding attorneys' fees. Respondents Xhler, et 

al., cross-appeal from the same judgment. We reverse and remand. 

The dispositive issue on appeal is whether the District Court 

erred in computing the award of attorneys' fees. 

The parties are before this Court appealing only the award of 

attorneys' fees which followed lengthy and complex civil rights 

litigatian, Accordingly, only a hrief recitation of the facts 

surrounding the actual litigation is necessary. 

On May 16, 1988, twelve patients (the Patients) of the Montana 

State Hospital at Warm Springs filed a class action against Curt 

Chisholm, Director of the Department of Institutions, Carroll 

South, past Director of the Department of Institutions; Jane 

Edwards, Superintendent of the Hospital and the State of Montana 

(collectively, the Hospital). The Patients sought damages and 

injunctive relief for civil rights violations under state and 

federal law. 

The District Court bifurcated the issue of damages from the 

injunctive portion of the case; the damages issue settled. A bench 

trial on the injunctive relief began on May 6, 1991, and lasted 

three weeks. During trial, the court heard thirty-five witnesses, 

toured the hospital and admitted over 100 exhibits. 

In its final order issued September 26, 1991, the District 

Court determined that the Patients primarily had challenged the 

3 
following three areas of hospital operation: 

.the use of seclusion and restraint against patients 

.the condition and treatment of patients at the 

Xanthopoulus Treatment Facility (the forensic unit) 

athe adequacy and number of professional staff. 

Although the District Court concluded that the Hospital had made 

great strides in improving the conditions during the three years 

after the lawsuit was filed, deficiencies nonetheless remained that 

had the effect of depriving the Patients of their civil rights. 

The court concluded that the Hospital was deficient in its use of 

seclusion and restraint and in keeping patients in the forensic 

unit long after they should have been transferred to a less 

restrictive environment. It also concluded that the Hospital had 

given inadequate treatment and therapy in the forensic unit and 

employed insufficient numbers of clinical staff. The court then 

ordered the Hospital to correct the deficiencies and submit a 

report demonstrating compliance within three months of the order. 

Following entry of the District Court's decision and order, 

the Patients moved for attorneys' fees and expenses in the amount 

of $2,071,856.61 pursuant to § 42 U.S.C. 1988, the Civil Rights 

Attorney's Fees Awards Act of 1976. On April 20, 1992, the court 

entered an interim order awarding the Patients $415,950.74. The 

District Court issued findings of fact and conclusions of law to 

support the interim order on August 13, 1992. 

The District Court first determined the reasonable hourly 

rates for ten attorneys that had represented the Patients during 

the litigation; the rates ranged from $75 per hour to $110 per 

hour. In making this determination, the court concluded that the 

4 
Patients had not established that out-of-state counsel was 

necessary and based its rates on Montana standards. The court then 

found that the Patients had significantly overstaffed the case with 

counsel, and reduced each attorney's compensable hours by varying 

percentages due to duplication and excessive travel time. The 

District Court also excluded all hours of attorney Mary Gallagher 

(Gallagher) for the period she was employed by the State of 

Montana. 

By multiplying the reasonable hourly rates by the reasonable 

compensable hours, the District Court reached the "lodestar" 

attorneys' fees amount. The "lodestar" expression was adopted by 

the United States Supreme Court as the correct method for 

calculating attorneys' fees under federal fee-shifting statutes; it 

consists of the multiplication of a reasonable hourly rate by the 

number of hours reasonably expended on the litigation. See Audit 

Services, Inc. v. Frontier-West, Inc. (i992), 252 Mont. 142, 153, 

827 P.2d 1242, 1250. 

The District Court then reduced the lodestar amount by 25% 

based on its finding that the Patients did not prevail on many of 

the issues in their original complaint and had achieved limited 

success on the issues narrowed for trial. Lastly, the District 

Court declined to increase the lodestar by 150% for "risk of 

contingency," as requested by the Patients. Instead, the court 

concluded that the Patients had failed to show that no Montana 

attorneys would have taken the case, but did show that Montana 

attorneys are at least reluctant to accept civil rights cases 
without the prospect of an enhanced fee. Based on that conclusion, 

the District Court increased the lodestar amount by 50% for risk of 

contingency. The court also awarded the Patients their attorneys' 

fees incurred in preparing the motion for fees and their costs for 

the lawsuit. Entry of judgment was filed on September 1, 1992. 

The Patients then moved to amend the order on attorneys' fees, 

contending that the District Court should have allowed the hourly 

rates of the out-of-state attorneys instead of increasing the 

lodestar by 50% for contingency, In the Hospitalf s response to the 

motion, it also urged the District Court to reconsider its order 

due to the recent United States Supreme Court decision in City of 

Burlington v. Dague (19921, 505 U.S. , 112 S.Ct. 2638, 120 

L.Ed.2d 449, which held that enhancement of attorneys' fees awards 

for contingency was not permitted under federal fee-shifting 

statutes. The District Court denied the motion to amend without 

explanation on October 7, 1992. Both parties appeal. 

Did the District Court err in computing attorneys' fees? 

The Hospital contends that the District Court erred in its 

computation of attorneys' fees by refusing to reconsider its order 

in light of m. Neither party disputes the applicability of 

Qg.ggg to the present case, and we agree that a change in the law 

between the trial court decision and the appellate decision 

requires the appellate court to apply the new law. Haines Pipeline 

Constr., Inc. v. Montana Power Co. (1991), 251 Mont. 422, 433, 830 

P.2d 1230, 1238. Further, the Patients cross-appeal several issues 

regarding the District Court's computation of the attorneysr fees 

6 
award. As the majority of the Patients' concerns will be resolved 

based on our discussion of Daque, we initially examine Daque's 

effect on the award of attorneys' fees in this case. 

In m, the plaintiff prevailed in a suit under the Solid 

Waste Disposal Act, which allows the substantially prevailing party 

to recover attorneysi fees under 42 U. S. C. 5 6972 (e) . In computing 

the award of attorneys' fees, the federal district court determined 

the lodestar amount by multiplying the reasonable hours expended by 

the reasonable hourly rate. It then concluded that a 25% 

contingency enhancement of the lodestar amount was appropriate, 

stating: 

[the plaintiff's: risk of not prevailing was substantial 

and that absent an opportunity for enhancement, [the 

plaintiff: would have faced substantial difficulty in 

obtaining counsel of reasonable skill and competence in 

this complicated field of law. 

m, 505 U.S. at , 112 S.Ct. at 2640, 120 L.Ed.2d at 455. The 

Second Circuit Court of Appeals affirmed. 

The United States Supreme Court first explained that there is 

a "strong presumption" that an award of attorneys' fees figured 

using the lodestar approach, without any adjustments, is a 

reasonable fee. w, 505 U.S. at , 112 S.Ct. at 2641, 120 

L.Ed.2d at 456. The Supreme Court then concluded that contingency 

enhancement would likely duplicate, in substantial part, factors 

already subsumed in the lodestar. 

The Supreme Court reasoned that the risk of contingency in a 

particular case depends on (1) the legal and factual merits of the 

claim and (2) the difficulty in establishing those merits. DaqUe, 
505 U.S. at, 112 S.Ct. at 2641, 120 L.Ed.2d at 456. According 

to the Supreme Court, the first factor is not reflected in the 

lodestar and should play no part in the calculation of attorneys' 

fees. The second factor, however, is ordinarily reflected in the 

lodestar--either in the higher number of hours expendedto overcome 

the difficulty or in the higher hourly rate of the attorney skilled 

and experienced enough to do so. Daque, 505 U.S. at , 112 S.Ct. 

at 2641, 120 L.Ed.2d at 456. The Court concluded that taking into 

account the difficulty of the case again through contingency 

enhancement resulted in double-counting. Daque, 505 U.S. at -, 

112 S.Ct. at 2641, 120 L.Ed.2d at 457. On that basis, the United 

States Supreme Court held that enhancement for contingency was not 

permitted under the fee-shifting statute of the Solid Waste 

Disposal Act. m, 505 U.S. at , 112 S.Ct. at 2643-4, 120 

L.Ed.2d at 459. 

Although m1s analysis involved 42 U.S.C. 5 6972(e), the 

Supreme Court specifically referred to 42 U.S.C. 5 1988, the feeshifting statute at issue here. Daque, 5C5 U.S. at ____I 112 S.Ct. 

at 2641, 120 L.Ed.2d at 456. Furthermore, the Ninth Circuit Court 

of Appeals has since applied Daqug in a civil rights context, and 

concluded that the typical federal fee-shifting statutes do not 

allow for upward adjustments of a lodestar amount for contingency. 

Davis v. City and County of San Francisco (9th Cir. 1992), 976 F.2d 

1536, 1549. Therefore, we apply the Supreme Court's Daaue analysis 

to the present case. 

Given the Supreme Court's mandate in Daque, we conclude that 
the District Court erred in enhancing the Patients' award of 

attorneys' fees by 50% for contingency and remand with instructions 

to delete this increase from the lodestar amount. Further, as 

stated in a, some accounting for the risk of contingency is 

normally figured into the computation of the lodestar, by either 

greater hours claimed or higher hourly wages. In this case, we 

cannot determine if the District Court would have reached the same 

reasonable hourly rates and reasonable compensable hours if it had 

not subsequently increased the lodestar amount by 50% for 

contingency. On remand, therefore, the District Court should 

recompute the lodestar amount--the reasonable hourly rates 

multiplied by the reasonable compensable hours--in light of the 

principles set forth in w. 

Because of our remand, we need not discuss the issues raised 

by the Patients regarding hourly rates and compensable hours. 

However, the Patients raise two additional concerns which are not 

affected by our remand for recalculation of the lodestar. First, 

the Patients argue that the District Court erred in subsequently 

reducing the lodestar by 25% due to lack of success at trial. They 

assert that the District Court improperly "counted claims" instead 

of looking at the overall results obtained by the Patients. 

We will not reverse a district court's computation of 

attorneyst fees under the lodestar approach absent an abuse of 

discretion. Audit Services, 827 P.2d at 1250-1, citing Hensley v. 

Eckerhart (1983)' 461 U.S. 424, 437, 103 S.Ct. 1933, 1941, 76 

L.Ed.2d 40, 52. The "results obtained" by the prevailing party is 
an important factor to consider when determining whether a full 

compensatory fee is warranted. See Audit Services, 827 P.2d at 

1250. For example, if a party has obtained excellent results, 

counsel should recover a full compensatory fee. On the other hand, 

if a party has achieved limited success, a full compensatory fee 

may be excessive even where the claims were interrelated. Audit 

Services, 827 P.2d at 1250, citing Henslev, 461U.S. at 435-6, 103 

S.Ct. at 1940-1, 76 L.Ed.2d at 52. In its discretion, the district 

court may attempt to identify specific hours that should be 

eliminated or may simply reduce the lodestar to account for limited 

success. Henslev, 461 U.S. at 436-7, 103 S.Ct. at 1941, 76 L.Ed.2d 

at 52, 

Here, the District Court determined that the Patients achieved 

limited success at trial due in part to the improvements made by 

the Hospital subsequent to the filing of the complaint. While the 

court recognized the Patients' assertion that the lawsuit served as 

a catalyst for the changes, it also determined that the Patients 

were unsuccessful in two significant areas: their assertion of a 

constitutional right to treatment in the community and claims 

relating to the physical environment of both the old and new 

forensic units. The court concluded, therefore, that a fully 

compensatory fee would be excessive and reduced the lodestar by 

25%. As Hensley specifically allows for a downward adjustment of 

the lodestar for limited success, we find no abuse of discretion in 

the District Court's analysis and subsequent 25% reduction of the 

lodestar. 
Second, the Patients argue that the District Court erred in 

denying recovery for Gallagher's attorney's fees while she was 

employed by the State of Montana. In its findings and conclusions, 

the District Court concluded that because Gallagher was a State 

employee from 1987 through April of 1991, the Patients could not 

recover attorney's fees for her work during that period from the 

State. The Patients assert that the court's conclusion and 

resulting reduction in the attorneys1 fees award was an abuse of 

discretion. We agree. 

The District Court's initial assertion that Gallagher was 

"employed by the State" for the specified period is not at all 

clear-cut. The Montana Advocacy Program (MAP) received a federally 

funded grant from the National Institute of Mental Health, which 

was administered through the Montana Mental Disabilities Board of 

Visitors (the Board), a state agency. Under the agreement between 

MAP and the Board, the Board agreed to maintain an attorney at the 

Hospital; this position was filled by Gallagher. Therefore, 

although the State of Montana disbursed Gallagher's wages, funding 

was provided by MAP, through its federal grant. We conclude, 

however, that as a matter of law, the source of Gallagher's wages 

is irrelevant in determining recoverable attorney's fees. 

It is well settled that Congress intended legal service 

programs to receive fees under 42 U.S.C. 1 1988. Shadis v. Beal 

(3d. Cir. 1982), 685 F.2d 824, 830. It is also clear that Congress 

contemplated that states and state officials would often be the 

targets of civil rights actions and intended that attorneys' fees 
be collected from the funds of the state agency. Shadis, 685 F.2d 

at 830. In Shadis, the state argued that because it funded the 

legal services program that represented the prevailing party, it 

would be unfair to make the state "pay twice." The Third Circuit 

Court of Appeals characterized that argument as a rhetorical ploy, 

and stated: 

The Commonwealth does not pay Wwice" when it violates 

someone's civil rights and is then forced to pay 

attorneys' fees. It pays only once--as a violator of 

civil rights. Its role as a provider of public services 

is distinct from its role as a defendant in a civil 

rights case and has no bearing on the question of 

reimbursing individual citizens for individual wrong 

brought against them, 

Shadis, 685 F.2d at 833. Addressing an identical argument, the 

Ninth Circuit Court of Appeals concluded that the issue of 

"fairness" had been resolved by Congress, because awards of 

attorneys' fees to state-funded legal services organizations were 

contemplated by Congress and serve the purpose for which the Act 

was adopted. Dennis v. Chang (9th Cir. 1980), 611 F.2d 1302, 1307. 

In the present case, the District Court concluded that 

Gallagher was a state employee and, therefore, was not entitled to 

an award of attorney's fees from the State. The fact that 

Gallagher's wages were disbursed through the State or paid by 

public funds is irrelevant in determining whether an award for 

attorneys' fees is proper. Leeds v. Watson (9th Cir. 1980), 630 

F.2d 674, 677. Because the District Court inappropriately relied 

on the source of Gallagher's wages in its decision to deny 

attorney's fees for the period she worked for the State, we reverse 

that conclusion and on remand, direct the court's attention to the 
cases cited herein. 

In sum, we remand for redetermination of the lodestar amount 

in light of the United States Supreme Court's decision in m. 

Although we conclude that the District Court did not err in 

reducing the lodestar by 25% for the Patientst limited success, we 

conclude that the District Court abused its discretion in denying 

recovery of Gallagher's attorney's fees for the period she was 

employed by the State. 

Reversed and remanded for further proceedings consistent with 

this opinion. 

We concur: 
June 29, 1993 

CERTIFICATE OF SERVICE 

I hereby certify that the following order was sent by United States mail, prepaid, to the following 

named: 

P. Keith Keller 

Keller, Reynolds, Drake, Johnson & Gillespie 

38 South Last Chance Gulch 

Helena, MT 59601 

Hon. Joseph P. Mazurek, Attorney General 

Kimberly A. Kradolfer, Assistant 

215 N. Sanders, Justice Building 

Helena, MT 59620 

James B. Obie 

Department of Institutions 

1539 1 lth Avenue 

Helena, MT 59620 

Bill Gianoulias 

Tort Claims Division 

Room 11 1, Mitchell Building 

Helena, MT 59620 

Leonard Rubenstein and Ira Bud 

Mental Health Law Project 

1101 15th Street, N.W., Suite 1212 

Washington, D.C. 20005 

Allen Smith 

Mental Disabilities Board 

P. 0. Box 177 

Wm Springs, MT 59756 

Ms. Helen Hershkoff and Mr. Victor Bolden 

American Civil Liberties Union Fd. 

132 West 43rd Street 

New York, New York 10036 
Jeffrey T. Renz, Legal Director 

Aterican Civil Liberties Union of MT 

724 Grand Avenue 

Billings, MT 59101 

Ms. Andrea Olsen and Ms. Mary Gallagher 

Mental Health Protection and Advocacy 

P. 0. Box 177 

Warm Springs, MT 59756 

W. William Leaphart 

Attorney at Law 

i No. Last Chance Gulch #6 

Helena, MT 59601 

James Goetz, Esq. 

Goetz, Madden & Durn 

35 N. Grand 

Bozeman, MT 59715 

ED SMITH 

CLERK OF THE SUPREME COURT 

STATELOF MONTANA