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Matched Legal Cases: ['§ 304', 'art, 461', '§ 621', '§ 1988', '§ 1988', 'art, 461', '§ 12', '§ 7604', '§ 1988', 'art, 461', '§ 1988', 'art, 751', '§ 1988']

Pennsylvania v. Valley Citizens' Council (full text) :: 483 U.S. 711 (1987) :: Justia U.S. Supreme Court Center Log In
› Pennsylvania v. Valley Citizens' Council
Pennsylvania v. Valley Citizens' Council 483 U.S. 711 (1987)
U.S. Supreme CourtPennsylvania v. Valley Citizens' Council, 483 U.S. 711 (1987)Pennsylvania v. Delaware Valley Citizens' Council for Clean AirNo. 85-5Argued March 3, 1986Reargued October 15, 1986Decided June 26, 1987483 U.S. 711CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
JUSTICE O'CONNOR concluded that Congress did not intend to foreclose consideration of contingency in setting a reasonable fee under fee-shifting Page 483 U. S. 712 provisions such as § 304(d), but that the District Court erred in employing a risk multiplier in the circumstances of this case. Pp. 483 U. S. 731-734.
WHITE, J., announced the judgment of the Court and delivered the opinion of the Court with respect to Parts I, II, and III-A, in which REHNQUIST, C.J., and POWELL, O'CONNOR, and SCALIA, JJ., joined, and an opinion with respect to Parts III-B, IV, and V, in which REHNQUIST, C.J., and POWELL and SCALIA, JJ., joined. O'CONNOR, J., filed an opinion concurring in part and concurring in the judgment, post, p. 483 U. S. 731. BLACKMUN, J., filed a dissenting opinion, in which BRENNAN, MARSHALL, and STEVENS, JJ., joined, post, p. 483 U. S. 735. Page 483 U. S. 713
We set forth a detailed statement of the facts underlying this litigation in Pennsylvania v. Delaware Valley Citizens' Page 483 U. S. 714 Council for Clean Air, 478 U. S. 546 (1986), and recite only an abbreviated version of those facts here. In 1977, the Delaware Valley Citizens' Council for Clean Air (hereinafter respondent) and the United States each filed suit to compel the Commonwealth of Pennsylvania to comply with certain provisions of the Clean Air Act. The parties entered into a consent decree, approved by the District Court in 1978, [Footnote 2] which obligated the Commonwealth to establish a program for the inspection and maintenance of vehicle emissions systems in 10 counties in the Philadelphia and Pittsburgh areas by August 1, 1980. The Commonwealth failed to implement the program by this date, and protracted litigation ensued. Ultimately, in May, 1983, the parties agreed to set June 1, 1984, as the date on which the Commonwealth would commence the inspection and maintenance program. Shortly after this agreement, respondent petitioned the District Court for attorney's fees and costs for the work performed after the issuance of the consent decree. In determining the amount of fees to be awarded, the District Court divided the work performed by respondent's counsel into nine phases. See 478 U.S. at 478 U. S. 549-553. After computing the lodestar for each phase, the District Court adjusted this figure upward in phases four, five, and seven by doubling the lodestar to reflect the risk presumably faced by respondent that it would not prevail on these phases of the litigation. The District Court observed:
"The contingent nature of plaintiff's success has been apparent throughout this litigation. Plaintiffs entered the litigation against the U.S. Government and the Commonwealth of Pennsylvania. The case involved new and novel issues, the resolution of which had little or no precedent. . . . [P]laintiffs have had to defend their rights under the consent decree due to numerous Page 483 U. S. 715 attempts by defendants and others to overturn or circumvent this Court's Orders."
We first focus on the nature of the issue before us. Under the typical fee-shifting statute, attorney's fees are awarded to a prevailing party and only to the extent that party prevails. See, e.g., Maher v. Gagne, 448 U. S. 122, 448 U. S. 129-130 (1980); Hensley v. Eckerhart, 461 U. S. 424, 461 U. S. 435 (1983). Hence, if the case is lost, the loser is awarded no fee; and unless its attorney has an agreement with the client that the attorney will be paid, win or lose, the attorney will not be paid at all. In such cases, the attorney assumes a risk of nonpayment when he takes the case. The issue before us is whether, when a plaintiff prevails, its attorney should or may be awarded separate compensation for assuming the risk of not being paid. That risk is measured by the risk of losing, rather than winning, and depends on how unsettled the applicable law is with respect to the issues posed by the Page 483 U. S. 716 case and by how likely it is that the facts could be decided against the complainant. Looked at in this way, there are various factors that have little or no bearing on the question before us.
"[a] lawyer may not preserve a right of recourse against his client for fees and still expect to be compensated Page 483 U. S. 717 as if he had sacrificed completely his right to payment in the event of an unsuccessful outcome."
Id. at 465 U. S. 902 (concurring). Most Courts of Appeals are of a similar view, and have allowed upward adjustment of fee awards because of the risk of loss factor. [Footnote 4] The First Circuit, Page 483 U. S. 718 in Wildman v. Lerner Stores Corp., 771 F.2d 605 (1985), for example, takes this approach and allows an upward adjustment to the lodestar to account for the contingency factor. In that case, the District Court entered judgment on a jury verdict finding an employer liable for violating the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., and two Puerto Rican statutes. The court awarded the prevailing party a lodestar fee amount of $56,500 and then increased that figure by 50% to account for the fact that, because of the difficulties of the action and the novelty of the issue, "the plaintiffs' attorneys . . . faced a contingency of losing all their time and effort." 771 F.2d at 610. In sustaining the enhancement of fee awards based on contingency, the Court of Appeals relied on the legislative history of 42 U.S.C. § 1988, detailed several additional reasons as to why it is necessary to increase the lodestar figure for contingent fee cases, and concluded that, rather than compensating lawyers for unsuccessful claims, an adjustment of the lodestar figure may be necessary in particular cases to provide for the reasonable attorney's fee envisioned by Congress. [Footnote 5] Page 483 U. S. 719
On a more fundamental level, the court found that using the risk of loss to increase the lodestar figure compensates attorneys not only for their successful efforts in one case, but for their unsuccessful claims asserted in related cases. This not only "encourag[es] marginal litigation," but raises "the Page 483 U. S. 720 reasonable question of why the subsidy [for unsuccessful litigation] should come from the defendant in another case.'" Id. at 34, n. 138, 746 F.2d at 27, n. 138 (citations omitted).
Finally, the court held that, even if a contingency enhancement, as opposed to a contingency multiplier, could be used to reflect the party's initial chance of success, Blum made clear that such enhancements were proper only in the most exceptional of cases, and because "this case did not present an exceptional level of risk, no risk enhancement should be awarded." Id. at 36, 746 F.2d at 29. [Footnote 6] Page 483 U. S. 721
Others have been considerably more reserved in their endorsement of a contingency bonus, focusing on four major problems with the use of this factor. First, evaluation of the risk of loss creates a potential conflict of interest between an attorney and his client, for in order to increase a fee award, a plaintiff's lawyer must expose all of the weaknesses Page 483 U. S. 722 and inconsistencies in his client's case, and a defendant's attorney must either concede the strength of the plaintiff's case in order to keep down the fee award or "allo[w] the fee to be boosted by the contingency bonus [by] insisting that the plaintiff's victory was freakish." Leubsdorf, The Contingency Factor in Attorney Fee Awards, 90 Yale L.J. 473, 483 (1981) (Leubsdorf). Second, in order to determine the proper size of the contingency bonus, a court must retroactively estimate the prevailing party's chances for success from the perspective of the attorney when he first considered filing the suit. Not only is this mathematically difficult to compute, but,
There are other considerations. Fee-shifting removes the interest a paying client would have in ensuring that the lawyer is serving the client economically; the task of monitoring the attorney is shifted to the judge in separate litigation over fees if the plaintiff wins. Fee litigation occurs on a case-to-case basis, and is often protracted, complicated, and exhausting. There is little doubt that it should be simplified to the maximum extent possible. If the decided cases are any measure, assessing the initial risk of loss when the case is Page 483 U. S. 723 over is a particularly uncertain matter, especially for a judge who is confident that he has correctly decided for the plaintiff, but then must inquire how weak the plaintiff's case was and how likely it was that he, the judge, would have been mistaken. It may be absurd to ask the judge to "determine the probability that he would have decided the case incorrectly." Id. at 1094.
488 F.2d at 718. See Leubsdorf 479, n. 38. At most, therefore, Johnson suggests that the nature of the fee contract between the client and his attorney should be taken into account when determining the reasonableness of a fee award, but there is nothing in Johnson to show that this factor was meant to reflect the contingent nature of prevailing in the lawsuit as a whole. Page 483 U. S. 724
JUSTICE BRENNAN also noted that Congress cited Stanford Daily v. Zurcher, 64 F.R.D. 680 (ND Cal.1974) (subsequently aff'd, 550 F.2d 464 (CA9 1977), rev'd on other grounds, 436 U. S. 547 (1978)), as one of several cases which "correctly applied" the Johnson factors. Blum, supra, at 465 U. S. 903. The court there increased the lodestar based, in part, on contingency-of-success considerations. But Congress also cited two other cases which it found also "correctly applied" the Johnson criteria. In Davis v. County of Los Angeles, 8 EPD ¦ 9444, p. 5047 (CD Cal.1974), the District Court added a "Result Charge" to the basic fee award. This award was not intended to compensate the lawyers for assuming the risk of not prevailing on the merits; instead, as the label suggests, the court increased the award because "counsel [had] achieved excellent results," and "[t]he nature of the case made it difficult to litigate. . . ." Id. at 5048. The court in Swann v. Charlotte-Mecklenblurg Bd. of Ed., 66 F.R.D. 483 (WDNC 1975), the third illustrative case cited with approval by Congress, did not increase the basic fee award at all. Instead, after reviewing nine factors similar to those listed in Johnson, the court reduced the prevailing party's fee request by nearly 15%, choosing to "err on the conservative side in dealing with any fee question" rather than "contribute unnecessarily to the overpricing of litigation in this or any other court." 66 F.R.D. at 486. Given the divergence in both analysis and result between these three cases, the legislative history is, at best, inconclusive in determining whether Congress endorsed the concept of increasing the lodestar amount to reflect the risk of not prevailing on the merits.
We are impressed with the view of the Court of Appeals for the District of Columbia Circuit that enhancing fees for Page 483 U. S. 725 risk of loss forces losing defendants to compensate plaintiff's lawyers for not prevailing against defendants in other cases. This result is not consistent with Congress' decision to adopt the rule that only prevailing parties are entitled to fees. If risk multipliers or enhancement are viewed as no more than compensating attorneys for their willingness to take the risk of loss and of nonpayment, we are nevertheless not at all sure that Congress intended that fees be denied when a plaintiff loses, but authorized payment for assuming the risk of an uncompensated loss. Such enhancement also penalizes the defendants who have the strongest case, and in theory, at least, would authorize the highest fees in cases least likely to be won, and hence encourage the bringing of more risky cases, especially by lawyers whose time is not fully occupied with other work. Because it is difficult ever to be completely sure that a case will be won, enhancing fees for the assumption of the risk of nonpayment would justify some degree of enhancement in almost every case.
The contrary argument is that, without the promise of multipliers or enhancement for risk-taking, attorneys will not take cases for clients who cannot pay, and the fee-shifting statutes will therefore not serve their purpose. We agree that a fundamental aim of such statutes is to make it possible for those who cannot pay a lawyer for his time and effort to obtain competent counsel, this by providing lawyers with reasonable fees to be paid by the the losing defendants. But it does not follow that fee enhancement for risk is necessary Page 483 U. S. 726 or allowable. Surely that is not the case where plaintiffs can afford to pay and have agreed to pay, win or lose. The same is true where any plaintiff, impecunious or otherwise, has a damages case that competent lawyers would take in the absence of fee-shifting statutes. Nor is it true in those cases where plaintiffs secure help from organizations whose very purpose is to provide legal help through salaried counsel to those who themselves cannot afford to pay a lawyer. It is also unlikely to be true in any market where there are competent lawyers whose time is not fully occupied by other matters.
We are not persuaded that this will be the case. Indeed, it may well be that using a contingency enhancement is superfluous and unnecessary under the lodestar approach to setting a fee. The reasons a particular lawsuit are considered to be "risky" for an attorney are because of the novelty and difficulty of the issues presented, and because of the potential for protracted litigation. Moreover, when an attorney ultimately prevails in such a lawsuit, this success will be primarily attributable to his legal skills and experience, and to the hours of hard work he devoted to the case. These factors, however, are considered by the court in determining the reasonable number of hours expended and the reasonable hourly Page 483 U. S. 727 rate for the lodestar, and any further increase in this sum based on the risk of not prevailing would result not in a "reasonable" attorney's fee, but in a windfall for an attorney who prevailed in a difficult case. [Footnote 9]
It may be that. without the promise of risk enhancement, some lawyers will decline to take cases; but we doubt that the bar in general will so often be unable to respond that the goal of the fee-shifting statutes will not be achieved. In any event, risk enhancement involves difficulties in administration and possible inequities to those who must pay attorney's fees; and, in the absence of further legislative guidance, we conclude that multipliers or other enhancement of a reasonable lodestar fee to compensate for assuming the risk of loss is impermissible under the usual fee-shifting statutes. Page 483 U. S. 728
Section 304(d), like § 1988, does not indicate that adjustment for risk should be the rule, rather than the exception; neither does it require such an adjustment in any case. At most, it leaves the matter of risk enhancement to the informed discretion of the courts. There are, however, severe difficulties and possible inequities involved in making upward adjustments for assuming the risk of nonpayment, and we deem it appropriate, in order to guide the exercise of the trial courts' discretion in awarding fees, to adopt here the approach followed in Blum in dealing with other multipliers. As in that case, payment for the time and effort involved -- the lodestar -- is presumed to be the reasonable fee authorized by the statute, and enhancement for the risk of nonpayment should be reserved for exceptional cases where the need and justification for such enhancement are readily apparent and are supported by evidence in the record and specific findings by the courts. [Footnote 10] Blum, 465 U.S. at 465 U. S. 898-901. Page 483 U. S. 729 For several reasons, the circumstances of this case do not justify the risk multiplier employed by the District Court.
581 F.Supp. at 1431. This case, however, concerns only the reasonable fee for work done after the consent decree was entered, and fees have already been awarded for work done before that time. The risk of nonpayment should be determined at the beginning of the litigation. Lewis v. Coughlin, 801 F.2d 570, 576 (CA2 1986); Ramos v. Lamm, 713 F.2d 546, 558 (CA10 1983). [Footnote 11] Whatever counsel thought the risk of losing was at Page 483 U. S. 730 the outset, it is doubtful that counsel anticipated a similar risk in enforcing a decree if plaintiff was successful in having one entered. In any event, the District Court did not specifically identify any new and novel issues, and we fail to discern any, that emerged in the long process of enforcing the court decree in accordance with its terms. And whether the Commonwealth of Pennsylvania was a substantial opponent or whether it tried to circumvent the decree has little or nothing to do with whether the there was a real risk of not persuading the District Court to enforce its own decree. The matter may have been difficult, wearing, and time-consuming, but that kind of effort has been recognized in the lodestar award.
Third, whatever the risk of winning or losing in a specific case might be, a fee award should be informed by the statutory purpose of making it possible for poor clients with good Page 483 U. S. 731 claims to secure competent help. Before adjusting for risk assumption, there should be evidence in the record, and the trial court should so find, that, without risk enhancement, plaintiff would have faced substantial difficulties in finding counsel in the local or other relevant market. [Footnote 12] Here, there were no such findings.
"* * * *" "We think it clear that Congress did not intend that the enforcement of civil rights be limited primarily to those able to pay an attorney a full retainer or attract one of the few pro bono legal service organizations to their cause . . . [to] deny all considerations of the added burden and additional risks an attorney under a contingent fee agreement may have to bear does not strike us as 'reasonable.'"
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. See Riverside v. Rivera, 477 U. S. 561, 477 U. S. 573-576 (1986). Thus, it is unsurprising that, when courts have enhanced fee awards to Page 483 U. S. 732 compensate for risk,
2 M. Derfner & A. Wolf, Court Awarded Attorney Fees, ¦ 16.04[c][i], p. 1688 (1986). Although the dissent suggests a method of calculating compensation for contingency that is theoretically more satisfying than the practice of speculating on the riskiness of each case, the dissent does not explain how the theory should be put into practice. For example, how should a court translate the extra economic risk endured by smaller firms, see post at 483 U. S. 750-751, or by firms that take unpopular cases, see post at 483 U. S. 751, n. 15, into a percentage enhancement?
To be "reasonable," the method for calculating a fee award must be not merely justifiable in theory, but also objective and nonarbitrary in practice. Moreover, if the concept of treating contingency cases as a class is to be more than symbolic, a court's determination of how the market in a community compensates for contingency should not vary significantly from one case to the next. I agree with the plurality Page 483 U. S. 733 that, without guidance as to the trial court's exercise of discretion, adjustment for risk could result in "severe difficulties and possible inequities." Ante at 483 U. S. 728. In my view, certain constraints on a court's discretion in setting attorney's fees are appropriate.
Second, at all times the fee applicant bears the burden of proving the degree to which the relevant market compensates for contingency. See Blum v. Stenson, 465 U. S. 886, 465 U. S. 898 (1984) ("The burden of proving that such an adjustment is necessary to the determination of a reasonable fee is on the fee applicant"); Hensley v. Eckerhart, 461 U. S. 424, 461 U. S. 437 (1983) ("Where settlement is not possible, the fee applicant bears the burden of establishing entitlement to an award and documenting the appropriate hours expended and hourly rates"). I would also hold that a court may not enhance a fee award any more than necessary to bring the fee within the range that would attract competent counsel. I agree with the plurality that no enhancement for risk is appropriate unless the applicant can establish that, without an adjustment for risk, the prevailing party "would have faced substantial difficulties in finding counsel in the local or other relevant market." Ante at 483 U. S. 731. Page 483 U. S. 734
Accordingly, I concur in Parts I, II, and III-A of the plurality, and concur in the judgment reversing the judgment of the Court of Appeals Page 483 U. S. 735
Canons of Ethics § 12, 33 A. B. A. Rep. 575, 578 (1908). The ABA Model Code of Professional Responsibility, originally promulgated in 1969 and subsequently adopted by nearly every State, see Nix v. Whiteside, 475 U. S. 157, 475 U. S. 167, n. 4 (1986), likewise provides that one of the "[f]actors to be considered" Page 483 U. S. 736 in determining a reasonable fee is "[w]hether the fee is fixed or contingent." Model Code of Professional Responsibility, DR 2-106(B)(8) (1980). The ABA's most recently formulated ethical standards, the ABA Model Rules of Professional Conduct, adopted in 1983, continue to reflect a consensus among lawyers that "whether the fee is fixed or contingent" is one of "[t]he factors to be considered in determining the reasonableness of a fee." Model Rule 1.5(a) and 1.5(a)(8).
The premium added for contingency compensates for the risk of nonpayment if the suit does not succeed and for the delay in payment until the end of the litigation -- factors not faced by a lawyer paid promptly as litigation progresses. See Clermont & Currivan, Improving on the Contingent Fee, 63 Cornell L.Rev. 529, 556-557, 561-566 (1978); Schwartz & Mitchell, An Economic Analysis of the Contingent Fee in Personal-Injury Litigation, 22 Stan.L.Rev. 1125, 1150-1154 (1970); F. MacKinnon, Contingent Fees for Legal Services 28, 62 (1964). All else being equal, attorneys naturally will prefer cases where they will be paid regardless of the outcome, rather than cases where they will be paid only if they win. Cases of the latter type are inherently riskier, and an attorney properly may expect greater compensation for their successful prosecution. See Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 487 F.2d 161, 168 (CA3 1973) ("'No one expects a lawyer whose compensation is contingent upon his success to charge, when successful, as little as he would charge a client who in advance had agreed to pay for his services, regardless of success"'), quoting Cherner v, Trasitron Electronic Corp., 221 F.Supp. 55, 61 (Mass.1963); Wildman v. Lerner Stores Corp., 771 F.2d 605, 612 (CA1 1985) (significant difference between a "case taken on a full retainer and a case in which an attorney spends many hours over a period of months or years with no assurance of any pay if the suit is unsuccessful"). See also E. Larson, Federal Court Awards of Attorney's Fees 224-225 (1981). Page 483 U. S. 737
In directing courts to award a "reasonable" attorney's fee to a litigant who vindicates various statutory rights, e.g., 42 U.S.C. § 7604(d) (Clean Air Act), Congress made clear that the winning lawyer should be paid at a rate that is basically competitive with what the lawyer is able to earn in other cases. Congress' purpose -- extensively described in the legislative history of the Civil Rights Attorney's Fees Awards Act, 42 U.S.C. § 1988, but fully applicable to statutes that protect the environment, see Ruckelshaus v. Sierra Club, 463 U. S. 680, 463 U. S. 691-692 (1983) -- was to encourage the enforcement of federal law through lawsuits filed by private persons. Congress found that the market itself would not provide an adequate supply of interested lawyers because many potential plaintiffs lacked sufficient funds to hire such lawyers. See H.R.Rep. No. 94-1558, p. 1 (1976); S.Rep. No. 941011, at 2. Thus, fee awards were considered to be "an essential remedy" in order to encourage enforcement of the law. Ibid. And unless the fee reimbursement was "full and complete," the statutory rights would be meaningless, because they would remain largely unenforced. H.R.Rep. No. 94-1558, at 1. See also Note, Promoting The Vindication Page 483 U. S. 738 of Civil Rights Through the Attorney's Fees Awards Act, 80 Colum.L.Rev. 346, 350-351, 372 (1980); Berger, Court Awarded Attorney's Fees: What Is "Reasonable"?, 126 U.Pa.L.Rev. 281, 306-310 (1977).
Congress found that a broad variety of factors go into the computation of a "reasonable" attorney's fee. One such consideration is the contingency that the attorney will be paid only if he wins the case. Three of the four major cases cited as examples of "the appropriate standards . . . correctly applied," S.Rep. No. 94-1011, at 6 -- and noted by this Court in Blum v. Stenson, 465 U.S. at 465 U. S. 895, 465 U. S. 897, n. 13 -- mentioned this risk as a factor for a court to weigh. See Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 718 (CA5 1974); [Footnote 2/2] Stanford Daily v. Zurcher, 64 F.R.D. 680, 685-686 Page 483 U. S. 739 (ND Cal.1974), aff'd, 550 F.2d 464 (CA9 1977), rev'd on other grounds, 436 U. S. 547 (1978); Swann v. Charlotte-Mecklenburg Board of Education, 66 F.R.D. 483, 486 (WDNC 1975). In the Stanford case, the court expressly increased the fee award for the contingent nature of the attorneys' work, noting that such an increase "parallel[s] the American Bar Association's determination that attorneys deserve higher compensation for contingent than for fixed-fee work." 64 F.R.D. at 685. The court explained:
As courts have gained more experience with fee calculations, many have begun to utilize as a "lodestar" the reasonable hours worked multiplied by a reasonable hourly rate. See Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 487 F.2d at 167-168; Hensley v. Eckerhart, 461 U. S. 424, 461 U. S. 433 (1983) (approving use of the lodestar approach). The lodestar, however, was designed Page 483 U. S. 740 to simplify, not to circumvent, application of the Johnson factors where appropriate. See Copeland v. Marshall, 205 U.S.App.D.C. 390, 400, 641 F.2d 880, 890 (1980) (en banc); Berger, 126 U. Pa.L.Rev. at 286-287. Thus, a statutory fee cannot be computed solely by reference to rates charged by corporate firms, which obtain many payments from their clients through monthly billings. [Footnote 2/4] Rather, in order to arrive at a "reasonable" attorney's fee, a court must incorporate a premium for the risk of nonrecovery, for the delay in payment, and for any economic risks aggravated by the contingency of payment, at a level similar to the premium incorporated in market rates. The risk premium can be reflected in the hourly rate that goes into the lodestar calculation, or, if the hourly rate does not include consideration of risk, in an enhancement of the lodestar. See Blum v. Stenson, 465 U.S. at 465 U. S. 903 (concurring opinion). Under either approach, adding a premium simply brings the fee up to the "reasonable" level contemplated by Congress. See 2 M. Derfner & A. Wolf, Court Awarded Attorney Fees, ¦ 16.04, p. 1684 (1986) ("The increase in the fee to account for contingency . . . is part of the fine tuning which courts must do to make a fee reflect the true market value of an attorney's efforts"). [Footnote 2/5]
An adjustment for contingency is necessary if statutory fees are to be competitive with the private market and if competent lawyers are to be attracted in their private practice to prosecute statutory violations. See The Committee on Legal Assistance Committee Report on Counsel Fees in Public Interest Litigation, 39 Record of N.Y. C. B. A. 300, 317 Page 483 U. S. 741 (1984). This is simply the law of supply and demand. If lawyers can earn substantially higher pay from other cases in the private sector, they will tend either to reject statutory enforcement cases or they effectively will be penalized for taking such cases. See Brief for Twelve Small Private Civil Rights Law Firms as Amici Curiae 6-29 (describing financial difficulties in depending on contingency cases with statutory attorney's fees); see also Darden v. Illinois Bell Tel. Co., 797 F.2d 497, 505 (CA7 1986) (concurring opinion) ("Unless fees under § 1988 are enhanced to take account of the risk of losing -- whether through a multiplier or by the contingent fee device when the stakes are high -- fees will be systematically too small"). Allowing adjustments for contingency similar to that given to attorneys in the private market thus appropriately "enable[s] counsel to accept apparently just causes without awaiting sure winners.'" Yates v. Mobile County Personnel Bd., 719 F.2d 1530, 1533 (CA11 1983), quoting Jones v. Diamond, 636 F.2d 1364, 1382 (CA5 1981).
Not surprisingly, the Courts of Appeals are in agreement that adjustments for the risk of nonrecovery are appropriate in most circumstances. [Footnote 2/6] And while this Court, in Blum v. Page 483 U. S. 742 Stenson, 465 U.S. at 465 U. S. 901, n. 17, left open the question of contingency adjustments, the Court also made clear that Congress intended statutory fees to be competitive with the private market for lawyers' services. Id. at 895. Thus, competitive awards, rather than being "the kind of windfall profits' [Congress] expressly intended to prohibit," ibid., are, instead, the way to implement congressional intent.
If it were the law of the land, the plurality's decision, in 483 U. S. to foreclose any compensation for the risk of nonrecovery would reduce statutory fees below the market rate and inevitably would obstruct the vindication of federal rights. [Footnote 2/7] Because fewer lawyers would be attracted to the work, some persons who now are able to bring valid claims would be unable to find a lawyer. They likely would be persons of modest means who could not afford to augment their lawyer's fee to what the market would charge -- precisely the persons Congress sought to assist. Even plaintiffs who somehow could manage to attract lawyers at below the Page 483 U. S. 743 market rate usually would get what they pay for: lawyers who are less than fully employed or who are less capable. Without compensation for contingency,
Significantly, the plurality's opinion would validate payment of public interest lawyers at substantially less than what would be competitive with the private market. In Blum, however, this Court made clear that nonprofit legal aid organizations should receive no less in fee awards than the hourly rate set by the private market for an attorney's services. 465 U.S. at 465 U. S. 895. [Footnote 2/8] See also New York Gaslight Club, Inc. v. Page 483 U. S. 744 Carey, 447 U. S. 54, 447 U. S. 70, n. 9 (1980). The plurality today attempts to accomplish indirectly what the Court refused to do directly in Blum.
"[t]hat risk is measured by the risk of losing, rather than winning, and depends on how unsettled the applicable law is with respect to the issues posed by the case and by how likely it is that the facts could be decided against Page 483 U. S. 745 the complainant."
The underlying flaw in all of these objections is that the appropriate enhancement for risk does not depend, in the first instance, on the degree of risk presented by a particular case. Enhancement for risk is not designed to equalize the prospective returns among contingent cases with different degrees of merit. [Footnote 2/9] Rather, it is designed simply to place Page 483 U. S. 746 contingent employment as a whole on roughly the same economic footing as noncontingent practice, in order that such cases receive the equal representation intended by Congress. Enhancement compensates attorneys for the risk of nonpayment associated with contingent employment, a risk that does not exist in noncontingent cases. As discussed above, without the possibility of enhancement for contingency, an attorney, from a simple economic point of view, would prefer noncontingent employment to contingent employment. This is because even contingent cases with the best merit may sometimes fail, because delay in payment is inherent in any contingent arrangement, and because other economic risks may be aggravated by the contingency in payment. [Footnote 2/10] Thus, contrary to the plurality's vision of an enhancement that radically increases as a case's chance of success decreases, an enhancement for contingency in ordinary cases will not be based on the relative likelihood of success of a particular case. [Footnote 2/11] Page 483 U. S. 747
Once it is recognized that it is the fact of contingency, not the likelihood of success in any particular case, that mandates an increase in an attorney's fee, the frightening difficulties envisioned by the plurality disappear. There is no reason to assume that, in most cases, a court will have to delve into the strengths and weaknesses of a particular case, that potential conflict of interests will arise between attorneys and clients, or that large enhancements disproportionate to the success of a case will be granted. Rather, a court's job simply will be to determine whether a case was taken on a contingent basis, whether the attorney was able to mitigate the risk of nonpayment in any way, and whether other economic risks were aggravated by the contingency of payment. The Court of Appeals for the First Circuit correctly points out that "it is the actual risks or burdens that are borne by the lawyer or lawyers that determine whether an upward adjustment is called for." Wildman v. Lerner Stores Corp., 771 F.2d at 613. [Footnote 2/12] Page 483 U. S. 748
The American Bar Association sets forth a reasonable approach for determining when, and to what degree, enhancement is appropriate in calculating a statutory attorney's fee. Brief for American Bar Association as Amicus Curiae 18-22. A court first must determine whether an attorney has taken a case on a contingent basis. If a client has contracted to pay the "lodestar" fee (i.e., reasonable hours times a reasonable hourly rate), regardless of the outcome of the case, and has paid the attorney on a continuing basis, then the attorney has clearly avoided the risk of nonpayment, and enhancement is not appropriate. See, e.g., Ohio-Sealy Mattress Mfg. Co. v. Sealy Inc., 776 F.2d 646, 660 (CA7 1985) (plaintiff paid lawyers on a regular hourly basis, and therefore "lawyers neither risked noncompensation nor endured a delay before payment"); Jones v. Central Soya Co., 748 F.2d 586, 592 (CA11 1984) (no indication that case was taken on a contingent basis, and therefore upward adjustment not appropriate). The court also must determine if an attorney has been able to mitigate the risk of nonpayment in any way. For example, if a client has agreed to pay some portion of the lodestar amount, regardless of the outcome of the case, the attorney has mitigated the risk of loss to some extent, although. the percentage of total expenses paid by the client will indicate how much of a mitigating factor this contribution should be considered to be. See, e.g., Stanford Daily v. Zurcher, Page 483 U. S. 749 64 F.R.D. at 686 (client agreed to pay $5,000 retainer and to undertake fundraising effort, but attorneys clearly not guaranteed payment for most of the hours expended). Or, for example, if the attorney has entered into a contingent fee contract in a suit seeking substantial damages, the attorney again has mitigated the risk to some extent by exchanging the risk of nonpayment for the prospect of compensation greater than the prospective lodestar amount. Even in such cases, of course, a court must still calculate a reasonable attorney's fee to be assessed against the defendant. There is no reason to grant a defendant a "windfall" by excusing payment of attorney's fees simply because a plaintiff has entered into a contingent fee contract. See, e.g., Hanmer v. Rios, 769 F.2d 1404, 1408-1410 (CA9 1985); Sargeant v. Sharp, 579 F.2d 645, 649 (CA1 1978).
As the American Bar Association points out, a court must not only determine whether an attorney has been able to mitigate the economic risk of nonpayment, it must also determine whether specific aspects of the case have aggravated that economic risk. Brief for American Bar Association as Amicus Curiae 21-22. The enhancement for contingency compensates the attorney primarily for the risk of spending Page 483 U. S. 750 numerous hours, indeed often years, on a case with the knowledge that no payment may ever be recovered. Other aspects of a case, however, can aggravate the economic risk inherent in contingency payments.
Second, a case may present greater economic risks because of a particular attorney's circumstances. For example, contingent litigation may pose greater risks to a small firm or a solo practitioner because the risk of nonpayment may not be offset so easily by the presence of paying work, and because such paying work may have to be turned away once a contingent case is accepted. [Footnote 2/14] Conversely, where responsibility for Page 483 U. S. 751 a case is shared among several firms, the relative economic risk borne by each firm may be diminished. See, e.g., In re Fine Paper Antitrust Litigation, 98 F.R.D. 48, 84 (ED Pa.1983), aff'd in part and rev'd in part, 751 F.2d 562 (CA3 1984). [Footnote 2/15]
In most cases in which an enhancement for contingency is sought, therefore, a court will not need to inquire into the relative likelihood of success of the particular case before it. It is possible, however, that in a few, unusual cases, the likelihood of success may appropriately be taken into account. Sometimes, the "legal" risks facing a case may be so apparent and significant that they will constitute an economic disincentive independent of that created by the basic contingency in payment. When the result achieved in such a case is significant and of broad public interest, an additional enhancement is justified in order to attract attorneys to take such cases, which otherwise might suffer from lack of representation. Extra enhancement for such cases, however, should be awarded in exceptional cases only. In most cases where the "legal" risks are high and the case therefore novel and difficult, attorneys may be expected to spend a greater number of hours preparing and litigating the case. Courts should consider this seriously in determining the number of "reasonable" hours to be incorporated in the lodestar, and should be careful not to reduce unduly the number of hours in a novel and difficult case. If a court finds, however, that an attorney Page 483 U. S. 752 has taken a significant legal risk in a case of important public interest, and that this risk has not been compensated adequately by the court in the number of hours represented in the lodestar, the court may then grant an enhancement above that awarded for the basic contingency risk. In such a case, the court must make detailed findings regarding the particular legal risks that were apparent at the outset of the litigation and the importance of the result obtained -- findings that would justify the additional enhancement.
Almost all of the plurality's objections to enhancements for contingency become irrelevant once such enhancement is seen, as a general matter, to be completely independent from the likelihood of success in particular cases. Under the approach outlined above, there is no reason for a court to assess the success of a case retroactively, no cause for a conflict of interest to arise between attorney and client, and no possibility of a grant of huge multipliers simply because the odds against a case were significant. [Footnote 2/16] The only remaining objection is that awarding higher fees to lawyers who accept contingent cases gives such lawyers the economic stability with which to bring other, possibly unsuccessful, lawsuits. In the plurality's view, this contravenes Congress' intent to award attorney's fees only to prevailing parties. Ante at 483 U. S. 725. But this objection must ultimately fail. The fact is that an attorney still recovers fees only when that attorney's client prevails in a lawsuit. If the attorney represents a client in an unsuccessful contingent litigation, no fees are recovered. That the attorney may use the fees obtained in the successful contingency lawsuit to bring other lawsuits -- some of which will not be successful -- does not contravene in any way Congress' mandate that fees be awarded solely to prevailing Page 483 U. S. 753 parties. [Footnote 2/17] There is certainly no indication in the legislative history of § 1988 that Congress' restriction of attorney's fees to prevailing parties was intended to deny reasonable fees to attorneys who would use their income to subsidize unsuccessful litigation. Indeed, that would be contrary to Congress' intent that attorneys bringing statutory violation cases be compensated in a manner similar to that by which attorneys in the private market are compensated. As in the private market, what a successful attorney does with earned fees is the attorney's own business.
The basic objective for courts to keep in mind in awarding enhancements for risk is that a "reasonable attorney's fee" should aim to be competitive with the private market, even if it is not possible to reflect that market perfectly. Thus, an enhancement for contingency, whether calculated as an increase in the reasonable hourly rate used to arrive at the lodestar or added to the lodestar as a bonus or a multiplier, is not designed to be a "windfall" for the attorney of the prevailing party. Rather, it is designed to ensure that lawyers who take cases on contingent bases are properly compensated for the risks inherent in such cases. Vindication of the statutory rights passed by Congress depends on the continued availability and willingness of highly skilled lawyers to take cases for which they will receive a statutory attorney's fee. In setting such fees, courts must ensure that the fees are "reasonable" -- i.e., that the fees properly compensate an attorney for the risks assumed. Page 483 U. S. 754
I conclude that we should vacate the award and remand the case to the District Court for further findings. First, as I have explained, the District Court should determine whether respondent's attorneys took this case on a contingent basis, whether they were able to mitigate the risks of nonpayment in any way, and whether other economic risks were aggravated by the contingency of payment. The court then should arrive at an enhancement for risk that parallels, as closely as possible, the premium for contingency that exists in prevailing market rates. The court should thereby arrive at an enhancement that appropriately compensates the attorneys for the risks assumed. Page 483 U. S. 755