Opinion ID: 387362
Heading Depth: 1
Heading Rank: 2

Heading: the majority opinion formula-faulty analysis produces

Text: SKEWED RESULTS 262 In its rigid interpretation of the statute as calling for precisely the same method of calculating attorney's fees in both the public and private sectors the majority errs, and then compounds that error by applying its own formula in a way which precludes ascertaining the congressionally directed reasonable attorney's fee. Both errors stem from the majority's failure to appreciate the inapplicability of fee setting, as done by the market in private practice, to fixing a reasonable fee in the very different situation when the Government is the defendant. We now turn to specific examples of the extraordinary skewed results which will be the inevitable consequences of the majority's faulty fundamental analysis.
263 We ourselves in our previous panel opinions recognized the desirability, and indeed necessity where public interest law firms were concerned, of applying a contingency factor to the basic fee awarded. However, (1) we did this to a basic fee calculated on actual cost, and (2) the contingency factor was to be part of the reasonable profit, varied and controlled by the trial judge on his appraisal of several factors, including the contingency nature of the firm's practice and the particular lawsuit. When the contingency factor is applied to the market hourly rate, as the majority would do, the results are confusing and can lead to excessive awards. 264 Per Calculos, the majority's method, if allowed to stand, will take these and other Title VII attorney's fees Ad Astra. As applied to the total of 3,602 hours of work in this case, the weighted hourly rate of $57.17 results in a calculation of $205,916.50, close to the $206,000 fee suggested by the law firm to the court. This is designated by the majority opinion as the lodestar or market value 25 from which all other adjustments are to be made. 26 It is absolutely vital to see what this $57.17 hourly fee already includes. The regular hourly rates of the law firm, for each lawyer, are necessarily designed to cover the lawyer's individual salary or equivalent partnership pay, his appropriate share of the firm's overhead in every respect, a profit above the actual cost to the firm of his work (which makes up the total firm profit for the partners), and -this must be recognized and kept clearly in mind-an amount necessary for each hour which is billed to cover the numerous hours which for one reason or another cannot be billed, or must be billed at a more modest rate. The firm can never calculate its hourly charge for an attorney on the fallacious theory that every hour of work is going to be productive. There are hours which simply cannot be billed regular paying clients because the are redundant, or too numerous for the character of the task to which they are devoted; and in those instances in which the representation in litigation is on a contingent basis (i. e., as defined by the majority opinion, compensation only if the firm's side prevails), hours may not be compensable at all. 265 It is basic common sense that the bill for legal services in successful litigation may have a more comfortable margin than that for a losing effort. That margin, a sort of bonus for winning, acknowledges that litigators adjust their fees in accordance with each fluctuation in their win-loss record. Even in purely private suits, where law firms recover their fees from their own clients, fees and the underlying hourly rates on which they are computed are adapted to the particular circumstances. In the market, a request for fees or hourly rates not conforming to the results of litigation would be outrageous. 266 The fatal flaw is that our colleagues have taken a standard of values from the marketplace, indeed have referred to their lodestar fee at times as a market value fee, which it is, and have applied it in the Government sector where there is no real market. What our colleagues fail to realize is that the market value fee they have taken as a lodestar, the starting point to be adjusted for contingencies, already has a substantial contingency factor built into the fee. 267 This is what a market is for. A market is to place value on commodities or services considering all of the contingencies. 27 As we pointed out above, it is absolutely necessary for every private law firm to fix an hourly rate that takes care of the salary of the attorney and overhead attributable to him, provides a profit for the partnership, and also takes care of the contingency of those many hours for which there is no monetary compensation at all (one of the reasons for which is the contingency of not winning the case and not collecting a fee), or for which the firm must make a pragmatic, prudential decision to charge the client at a lower rate because the firm was not successful in litigation and could not rationally expect to recover as large a profit from the case as it might have had it won. 268 While in the practice of law the fixing of fees and establishment of customary rates is not as volatile as the New York Stock Exchange, the distinguished private firm involved in this litigation is, as our colleagues have rightfully recognized, in a marketplace of sorts. The regular hourly rates fixed by this and other firms reflect in every possible way the contingencies of the marketplace, including the contingency of failure in a litigated case (or the failure of its client in the marketplace, i. e., bankruptcy) and of the receipt of no fee at all, as could have occurred in this Title VII litigation. And so their fee in the marketplace is truly a fee calculated on the market value of their services. The majority opinion has thus pointed in numerous places to market value as the fairest and most useful starting part for the calculation of the plaintiff's fees in this successful Title VII suit against the Government. Our colleagues have then erroneously specified that this fee be adjusted upward in every case to take care of contingencies, the primary contingency being that of failure to prevail in some lawsuits and thus the contingency of failure to receive any fee at all. 28 Since the market value fee in commercial private practice already includes the contingency of failure and receipt of a lower fee than otherwise obtainable, our colleagues create a danger of duplication when they add this contingency factor to the already generous market value regular hourly rate. 269 The majority appears to recognize that market rates already include a substantial contingency factor, when it acknowledges the possibility that an hourly rate underlying the 'lodestar fee' itself comprehends an allowance for the contingent nature of the availability of fees in Title VII litigation against the Government .... 29 This is more than just a vague possibility. As we have seen, adjustments for contingency can be expected to be commonplace, given the general nature of law firm billing practices. Consequently, allowances for contingency will generally be comprehended in the hourly rate, and the amount of contingency allowance may well be substantial. 270 To alleviate this problem, the majority suggests that (t)he district judge has ample powers of inquiry into the makeup of hourly rates to assure that the Government will not suffer from any such duplication .... 30 If the majority is serious about weeding out redundant contingency allowances, these judicial powers of inquiry will always have to come into play. 31 Given the serious possibility that any hourly rate may contain a contingency factor, the district judge will always have to inquire whether in fact it does contain such a factor. And if it does, he must inquire into its magnitude. 271 Determining the existence and amount of the contingency factor in any hourly rate is a difficult task, and the majority does not suggest how it is to be done. Although there may be several possible ways to do this, the most obvious one is to break down the putative hourly rate into its constituent parts in order to identify that component which reflects the contingency factor. The contingency factor would be that component of the fee in addition to the amount needed to cover costs and to provide the firm with its normally expected overall profit rate. In other words, it would be the amount needed to ensure that in the long run the firm earns its desired profit, after taking account of the proportion of hours spent on a case that must be billed at a lower rate if at all due to lack of success in litigation. It may very well be that a law firm's desired profit is an unreasonable one. In the marketplace this is no problem: reasonable is whatever the market will bear. Here, with hourly rates applied artificially in a nonmarket context, the potential for unreasonably high desired profits compounds the difficulty of isolating the contingency component. 272 But the most striking aspect of any technique employed, pursuant to the majority's approach, to identify the contingency factor, is that the elimination of built-in contingency allowances could be achieved more simply from the outset by employing the cost-plus method. Cost-plus provides a base figure that is free of any contingency factor; from that base figure the appropriate adjustments could then be made to reflect contingency of nonsuccess in the case at hand, as well as exceptional quality of work, without duplicating any built-in contingency factor already included in the fee. 273 Starting from actual cost of services is a far more direct approach than starting with an hourly fee and trying to weed out any built-in contingency allowances. Starting from the hourly rate simply invites confusion and duplication of contingency allowances. Unless district judges are especially diligent in weeding out any built-in contingency allowances, there is no way in which the market value regular hourly rate, the lodestar fee, can be taken as the starting point, and a contingency factor for failure applied to that market value fee without totally distorting and exaggerating the compensation awarded to successful plaintiffs' attorneys. We think that an evaluation of the contingency factor is necessary in Title VII cases, in all fairness to the attorneys who bring these suits-sometimes successfully, sometimes unsuccessfully. But the contingency factor can only be applied if the actual cost of services -salary and overhead-is taken as the starting point. 274 Actual cost of services has no contingency factor built in, as does the regular commercial hourly rate, which is fixed by the customary market, and which is truly a market value fee. Where the Government is the purchaser of services, actual cost plus is a fair and reasonable basis on which to compensate anyone, lawyer or layman. Actual cost of service is a true starting base, to which the factors relevant to Government litigation (and not necessarily relevant in private litigation) can be properly applied. What our colleagues have done here is a horrendous example of miscalculation and inflation of fees chargeable to the Government and to the taxpayer, without even realizing the economics of the marketplace on which they purport to rely. 275
276 Aside from the extraordinary financial results from the majority's theory, we have a fundamental disagreement with our colleagues as to the philosophy underlying the award of attorney's fees to prevailing litigants. 277 It is plain that our nation's policy-both legislative and judicial-is to promote the efforts of so-called private attorneys general who vindicate our civil rights laws by seeking legal redress for Title VII plaintiffs' injuries. It is necessary, then, that litigation expenses constitute no barrier that discourages these private plaintiffs from bringing their grievances before the courts. Eliminating the barrier of attorney's fees encourages plaintiffs to assert their legal and civil rights. 278 But encouraging injured plaintiffs is a goal distinct from that of encouraging lawyers with the lure of attorney's fees bonanzas. 32 The majority's philosophy appears to be solicitous of the sellers of legal services beyond the needs of the buyers of these services. The majority appears to believe that its market value formula must award attorney's fees which match the petitioning lawyers' highest opportunity costs. Neither lawyers nor other purveyors of products and services operate on the basis of achieving highest opportunity costs most of the time; by definition, the usual-and entirely satisfactory-reward is less. It seems clear that the mandated encouragement to plaintiffs is achieved by granting the lawyers a sum reflecting their actual cost plus a reasonable profit, as opposed to an award which reflects the highest rates of return that alternative applications of legal manpower and resources could command. 279 It is simply not invidious to conclude that the fee schedule acceptable to General Motors when confronting a possible billion dollar liability is not necessarily applicable in Title VII attorney's fees determinations. Our cost-plus method brooks no disservice to Title VII private attorneys general. On the other hand, overcoming the legal expense barrier for these private plaintiffs requires no windfall for lawyers-only that it be worth their lawyers' while. 33 This is what our view of attorney's fees awards accomplishes: service for the plaintiffs without the need for lawyers to sacrifice. 34 The inevitable existence of some other opportunities for lawyers to gain relatively higher remuneration does not mean that all legal services-including purported pro bono work-must be compensated at the very highest figure discoverable.
280 Under the majority's approach, in calculating an award of attorney's fees, the court should first multiply a reasonable hourly rate by the number of hours reasonably expended on the lawsuit, the so-called lodestar fee. Adjustments to this figure then may be appropriate, the majority asserts, to account for the quality of representation in the particular case and the contingent nature of success. Another logical flaw in the majority's formula is that a consideration of the quality of representation in the particular case, like that of contingency, see Part II.A. supra, already inheres in the reasonable hourly rate, one of the two elements used in fixing the lodestar fee. The majority reveals this logical gap plainly, yet it does not seem to recognize it. 281 The majority states that a reasonable hourly rate is the product of a multiplicity of factors. Evans itself listed several of the relevant considerations (including, inter alia) the level of skill necessary (and) the attorney's reputation. 35 The attorney's reputation corresponds to a consideration of the quality of an attorney's work in general. As the court stated in Johnson v. Georgia Highway Express, Inc., 36 (from which the factors in Evans are drawn): Most fee scales reflect an experience differential with the more experienced attorneys receiving larger compensation. An attorney specializing in civil rights cases may enjoy a higher rate for his expertise than others, providing his ability corresponds with his experience. The level of skill necessary to perform the legal service properly also corresponds to a consideration of the quality of an attorney's representation in the particular case before the court. In Johnson the court explained that this factor required the trial judge to observe the attorney's work product, his preparation, and general ability before the court. 37 So, both the lawyer's skill in general (reputation) and that necessary in the particular case are already accounted for in the reasonable hourly rate. 282 Although the skill of the lawyer in the particular case thus is already included in the calculation of the reasonable hourly rate, the majority states that the 'lodestar' may be adjusted up or down to reflect 'the quality of representation.'  38 Under the majority's approach, then, the attorney presumable will be compensated for the quality of his representation twice: once when the court calculates the lodestar fee and a second time when an adjustment to the lodestar is made. 283 We might add that we do not find logically persuasive the majority's notion that a decrease in the lodestar may result if the quality of the representation was unusually poor. To be entitled to an award of attorney's fees, the attorney must prevail in the lawsuit. It stands to reason that the level of proficiency displayed will always be at least adequate (indicating no adjustment to the lodestar) if not exceptional (indicating an upward adjustment to the lodestar) in cases in which the plaintiff prevails. It is thus difficult to conceive how a downward adjustment would ever be justified. 284
285 An additional flaw of major proportions in our colleagues' opinion is the faulty application of their new theory and model to the case at bar. They say, avowedly because of the age of the case and the position taken by the parties on appeal, that they will not send this case back to the trial court for an examination on the basis of the revised formula they have devised, 39 even though (i)t is readily apparent that the District Court's fee-setting calculations do not precisely conform to the procedures identified in earlier cases and elaborated upon earlier in this opinion. 40 This is really ducking the issue, the only issue on which this case was brought to this court. 286 In effect, the majority, perhaps influenced by this court's vast administrative law experience, has drifted into rulemaking like an administrative agency; the majority has made a rule for future cases, but declined to perform its primary function as a court-to adjudicate, to apply the rule to the very case at bar. 41 We have never been aware that a court may decline to adjudicate simply because a case is long on the docket; what a convenient way of clearing crowded dockets that would be. Nor may a court announce prospective rules but decline to apply them to the litigation before it on the speculation that the district court might have reached a result compatible with the new rule. 287 The lodestar approach would be better understood and supervised if the district judge here had a chance to run through the lodestar and exercise his ample powers of inquiry. 42 In order for an accurate fee to be set, the district court should have a chance to apply the majority's formula, looking into the contingency factors in this case and the possibility of a built-in contingency allowance in the hourly rate, regardless of the procedural posture of the parties. A remand is in order so that we may have an indication of how the formula works in practice. 43 288