Opinion ID: 184437
Heading Depth: 3
Heading Rank: 1

Heading: Market Rate or Actual Rate?

Text: ERISA provides that, in actions to collect unpaid contributions in which the plan is successful, the court shall award tothe plan ... (D) reasonable attorney's fees and costs of theaction, to be paid by the defendant. 29 U.S.C. s 1132(g)(2). The usual method of calculating reasonable attorney's fees isto multiply the hours reasonably expended in the litigation bya reasonable hourly fee, producing the lodestar amount. See Pennsylvania v. Delaware Valley Citizens' Council forClean Air, 478 U.S. 546, 564 (1986) (Delaware Valley ). This amount may then be adjusted by a multiplier in certain'rare' and 'exceptional' cases, see id. at 565 (quoting Blum v.Stenson, 465 U.S. 886, 898-901 (1984)), although there is astrong presumption that the lodestar figure ... represents a'reasonable' fee. Id. The issue we are concerned with here is what constitutes areasonable hourly fee for purposes of the lodestar calculation. This court held in Save Our Cumberland Mountains,Inc. v. Hodel, 857 F.2d 1516 (D.C. Cir. 1988) (in banc)(SOCM ), and reaffirmed in Covington, 57 F.3d at 1107, thata party whose attorney charges a discounted rate for publicspirited reasons may nevertheless receive an award of fees atmarket rates. The rationale of those cases is not, as thedistrict court concluded, limited to actions under section 1988; indeed, although SOCM drew extensively on the legislativehistory of section 1988, SOCM itself involved an award undera fee-shifting provision of the Surface Mining Control andReclamation Act. SOCM applied section 1988 jurisprudenceto the interpretation of this statute on the authority of Delaware Valley, in which the Supreme Court found that itwas appropriate to apply section 1988 caselaw in construing afee-shifting provision of the Clean Air Act because bothprovisions had as their common purpose to promote citizenenforcement of important federal policies. 478 U.S. at 560; see also SOCM, 857 F.2d at 1519 n.1 (citing the panel opinionin that case, Save Our Cumberland Mountains, Inc. v. Hodel,826 F.2d 43, 47 (D.C. Cir. 1987), which in turn cited thispassage of Delaware Valley ). Delaware Valley thus endorses the application of law developed under section 1988 to other fee-shifting provisions thathave the same citizen-enforcement purpose. Since DelawareValley, the Court has twice clarified when it is appropriate toapply caselaw developed under one fee-shifting provision toanother such provision. First, in Independent Federation ofFlight Attendants v. Zipes, 491 U.S. 754 (1989), the Courtobserved that fee-shifting statutes' similar language is astrong indication that they are to be interpreted alike, anddrew on caselaw under one fee-shifting provision of the CivilRights Act of 1964 in interpreting another fee-shifting provision of the same statute. Id. at 758 n.2. Conversely, in Fogerty v. Fantasy, Inc., 510 U.S. 517(1994), the Court found that the normal indication of Zipescould be overborne if the factors that justify a fee-shiftingrule in one context, such as the purpose or legislative historyof a statute, are absent in another. Id. at 523. Fogertyinvolved the interpretation of 17 U.S.C. s 505, a fee-shiftingstatute applicable to copyright infringement actions. Thewording of this provision is virtually identical to that of a feeshifting provision for Title VII of the Civil Rights Act of 1964,42 U.S.C. s 2000e-5(k). Under caselaw interpreting section2000e-5(k), there is a presumption that prevailing plaintiffs-- but not prevailing defendants--will receive an award of fees. See Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 418(1978). But the Fogerty Court found that it was not appropriate to apply the section 2000e-5(k) presumption to section505, despite the similarity of language between the twoprovisions, because there was no indication in section 505'slegislative history that Congress intended plaintiffs and de- fendants to be treated differently for purposes of fee awards. The Court also concluded that the purpose of the CopyrightAct--encouraging the production of creative works--is notobviously served by favoring plaintiffs over defendants incopyright infringement actions, especially given that corporate behemoths and starving artists are to be found amongboth the plaintiffs and the defendants in infringement actions. 510 U.S. at 524 (citation omitted). The inquiry prescribed by Zipes, Fogerty and DelawareValley does not differ that much from our usual processes ofstatutory interpretation. The first step, of course, is toconsult the text of the statute; thus, Zipes' s rule that feeshifting statutes' similar language is a strong indication thatthey are to be interpreted alike, 491 U.S. at 758 n.2. Thenext step is to consider the statute's purpose, structure, andlegislative history; this explains Fogerty 's rule that the normal indication of Zipes can in some circumstances be overborne on the basis of contextual evidence. 510 U.S. at 523. Delaware Valley comes into play at this stage; it defines onecategory of statutes--those intended to promote citizen enforcement of important federal policies, 478 U.S. at 560--ashaving a common purpose and therefore presumptively tobe interpreted similarly. See Lyle v. Food Lion, Inc., 954F.2d 984, 988 n.1 (4th Cir. 1992) (citing Delaware Valley inapplying section 1988 caselaw to a fee-shifting provision of theFair Labor Standards Act).6 Should our case fit securely within Delaware Valley, ouranalysis would be at an end, as SOCM would apply directly. __________ 6 Delaware Valley 's suggestion that a broad group of fee-shiftingprovisions should all be subject to the same set of legal standardsmay also have been based on the assumption that this would limitparties' incentives to litigate fee disputes. Cf. Hensley v. Eckerhart, 461 U.S. 424, 455 (1983) (Brennan, J., concurring in part anddissenting in part) (comparing appellate litigation of fee disputes toa Frankenstein's monster that meanders its well-intentioned waythrough the legal landscape leaving waste and confusion (not tomention circuit splits) in its wake). In this respect, then, theinterpretation of fee-shifting statutes may differ from the usualpractice of statutory interpretation. But, alas, it is not that easy. Section 1132(g)(2) is notintended to promote enforcement of important federal policiesby citizens, because recoveries under section 1132(g)(2) arelimited to plan fiduciaries, see 29 U.S.C. s 1132(g)(2) (In anyaction under this subchapter by a fiduciary for or on behalf ofa plan ...) (emphasis added), a group that at first glanceseems less in need of favorable fee-shifting rules than thecitizenry at large. That section 1132(g)(2) does not fit squarely within the fourcorners of Delaware Valley does not necessarily foreclose theapplication of SOCM; it does, however, require that weconsider the specific text and purposes of section 1132(g)(2) todecide whether SOCM 's market-rate standard applies. Weturn to Zipes and Fogerty for guidance. As in Zipes, the textof section 1132(g)(2) does parallel that of section 1988; bothprovide for a reasonable fee. Next, as Fogerty commands,we turn to the statute's purposes and legislative history to seewhether the presumption that section 1132(g)(2) is to beinterpreted in line with section 1988 is overborne by contrary evidence. Section 1132(g)(2) was enacted as part of the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA). Inenacting the MPPAA, Congress was responding to an increase in the financial instability of multiemployer pensionplans, a problem it believed would continue to escalate unlessaction was taken. H.R. Rep. No. 96-869, pt. 1 at 52-57 (1980)(House Report). The MPPAA put into place a number ofmeasures intended to protect retirees and workers who areparticipants in [multiemployer pension] plans against the lossof their pensions, id. at 51, including provisions that alteredthe funding requirements for multiemployer plans, requiredwithdrawing employers to contribute to a plan's unfundedobligations, and adjusted the insurance provided by the Pension Benefit Guaranty Corporation. See id. at 65-70; seealso Milwaukee Brewery Workers' Pension Plan v. Jos.Schlitz Brewing Company, 115 S. Ct. 981, 985 (1995) (reviewing Congress's goals in enacting the MPPAA). Although most of the provisions of the MPPAA as enactedtracked the bill that originated in the House of Representatives, H.R. 3094, the language of section 1132(g)(2) originatedin the Senate bill, S. 1076. The following passage explainsthe Senate's understanding of the meaning of its language: Delinquencies of employers in making required contributions are a serious problem for most multiemployer plans. Failure of employers to make promised contributions in a timely fashion imposes a variety of costs on plans. While contributions remain unpaid, the plan loses the benefit of investment income that could have been earned if the past due amounts had been received and invested on time. Moreover, additional administrative costs are incurred in detecting and collecting delinquencies. Attorneys fees and other legal costs arise in connection with collection efforts. These costs detract from the ability of plans to formulate or meet funding standards and adversely affect the financial health of plans. Participants and beneficiaries of plans as well as employers who honor their obligation to contribute in a timely fashion bear the heavy cost of delinquencies in the form of lower benefits and higher contribution rates. Moreover, in the context of this legislation, uncollected delinquencies can add to the unfunded liability of the plan and thereby increase the potential withdrawal liability for all employers. Recourse available under current law for collecting delinquent contributions is insufficient and unnecessarily cumbersome and costly. Some simple collection actions brought by plan trustees have been converted into lengthy, costly and complex litigation concerning claims and defenses unrelated to the employer's promise and the plans' entitlement to the contributions. This should not be the case. Federal pension law must permit trustees of plans to recover delinquent contributions efficaciously. Sound national pension policy demands that employers who enter into agreements providing for pension contributions not be permitted to repudiate their pension promises. The public policy of this legislation to foster the preservation of the private multiemployer plan system mandates that provision be made to discourage delinquencies and simplify delinquency collection. The bill imposes a Federal statutory duty to contribute on employers that are already contractually obligated to make contributions to multiemployer plans. A plan sponsor that prevails in any action to collect delinquent contributions will be entitled to recover the delinquent contributions, court costs, attorney's fees, and double interest on the contributions owed. The intent of this section is to promote the prompt payment of contributions and assist plans in recovering the costs incurred in connection with delinquencies. Staff of Senate Committee on Labor and Human Resources,96th Cong., 2d Sess., S. 1076: The Multiemployer PensionPlan Amendments Act of 1980: Summary and Analysis ofConsideration, at 43-44 (Comm. Print 1980) (hereinafterSenate Committee Print).7 In the debates surrounding theenactment of the final version of the MPPAA, RepresentativeThompson, one of the sponsors of H.R. 3094, repeated thispassage essentially verbatim on the floor of the House. 125Cong. Rec. 23,038, 23,039 (1980). We draw three lessons from section 1132(g)(2)'s text, purposes, and legislative history.8 First, in enacting section __________ 7 The district court in Central States, Southeast and SouthwestAreas Pension Fund v. Alco Express Co., 522 F. Supp. 919, 927-28(E.D. Mich. 1981) (Central States), in the course of a detailedreview of the legislative history of section 1132(g)(2), explained that[b]ecause S. 1076 was also referred to the Senate Committee onFinance there was no formal committee report, since Senate RuleXXVII requires a joint report under such circumstances. 522F. Supp. at 928 n.11. 8 The above-quoted legislative history of section 1132(g)(2) refersin places to pension plans, presumably because most of theMPPAA related only to pension plans, not to welfare benefit plans,the other type of employee benefit plan covered by ERISA. See29 U.S.C. s 1002(3). The Funds are both welfare benefit plans. 1132(g)(2), Congress had a strong goal of discourag[ing]delinquencies and rendering delinquency collection lesscumbersome and costly. Senate Committee Print, at 44. Deterring parties from prolonging litigation is an importantgoal of most fee-shifting provisions. Here, however, Congress's desire to achieve this goal was especially strong. Section 1132(g)(2) provides that the courts shall award feesto fiduciaries when judgments are awarded in their favor indelinquent-contribution actions. It makes no provision forprevailing defendants.9 In statutes protecting economic interests, mandatory feeshifting is uncommon, and the same standards are usuallyapplied to fee awards to both plaintiffs and defendants. See,e.g., Fogerty, 510 U.S. at 534 (concluding that fee-shiftingunder the Copyright Act is discretionary, and that the samestandard should be applied in considering fee awards to bothparties); id. at 525 n.12 (indicating that courts have generally awarded attorney's fees in an evenhanded manner based onthe same criteria under the trademark and patent laws); Eddy v. Colonial Life Ins. Co. of America, 59 F.3d 201, 205(D.C. Cir. 1995) (In general, statutes protecting economicinterests that contain fee-shifting provisions vesting discretion in the district court do not create a presumption that aprevailing party will be awarded fees.). Congress's expressrequirement that the courts award fees to fiduciaries who windelinquent-contribution actions demonstrates an unusuallypowerful intent to deter excessive litigation by defendants. Arule that requires employers to pay the market rate in casesin which an attorney has discounted her fees for publicspirited reasons surely serves this goal better than does one __________ Congress clearly signalled, however, that section 1132(g)(2) beinterpreted in the same way whether welfare or pension plans wereinvolved. The text of section 1132(g)(2) as enacted is equallyapplicable to both types of plans, as was the draft provision thatwas before the committee; much of the above-quoted legislativehistory is likewise equally applicable to both types of plans. 9 They must therefore invoke 29 U.S.C. s 1132(g)(1), which allowsthe court to make a fee award in its discretion. Id. under which only fees actually paid out are recoverable. If aplan receives legal services from its attorneys for free, thenthe actual-cost rule would require the delinquent employer topay nothing--a result clearly inconsistent both with Congress's desire to deter employers from late payment and withthe statute's requirement that the court shall award reasonable attorney's fees. Likewise, the fact that a planreceives its legal services at a deep discount should not justifya similar discount of section 1132(g)(2)'s deterrent effect.10 A second important goal of fee-shifting provisions is toenable parties to hire competent counsel to pursue theircases. SOCM, 857 F.2d at 1521 (emphasis omitted) (citingsection 1988's legislative history); see also Kay v. Ehrler, 499U.S. 432, 436 & n.8 (1991). Although this goal is not explicitly stated in the legislative history of section 1132(g)(2), Congress did express a strong desire to simplify delinquencycollection and assist plans in recovering the costs incurredin connection with delinquencies, Senate Committee Print, at44, goals that are best served if plan fiduciaries are able tohire competent counsel. Again, a fee-shifting rule that requires delinquent employers to pay market rates serves thispurpose better than does one under which they pay only thebilled rate.11 In this case, the plan has agreed to pass on theentire amount of any fee award to its attorneys. Such anarrangement obviously improves the ability of plans to obtain __________ 10 Indeed, the plans that are closest to insolvency, and thereforeneed the deterrent effect of section 1132(g)(2) the most, would bemost harmed by an actual-cost rule, as they are also the group thatis likeliest to seek, and obtain, discounted legal services. 11 Our dissenting colleague says that we assume mistakenly thatexpensive counsel necessarily equals competent counsel. Diss.op. at 2. We do not deny that there exist expensive, incompetentcounsel; but there is ordinarily a correlation between an attorney'srates and her competence. The lodestar approach to setting legalfees is premised on the idea that there is a market for legalservices, in which an attorney's hourly rate is correlated with herabilities. SOCM similarly assumed that market rate fees areneeded to attract competent attorneys in complex cases. See 857F.2d at 1521. high-quality legal representation in the first instance. Indeed, a plan that is near insolvency--as one of the plans atissue in this case, the Legal Services Plan, apparently was inearly 199512--might otherwise find it quite difficult to securethe assistance of competent legal counsel in returning it tostability. On this point, we note that Congress enacted theMPPAA in order to stabilize financially ailing ERISA plans,see House Report, at 52-57; Senate Committee Print, at 1,and intended section 1132(g)(2) to further that objective, seeSenate Committee Print, at 44 (referring to the public policyof this legislation to foster the preservation of the privatemultiemployer plan system). Congress's preeminent purpose, in enacting section1132(g)(2), to keep ERISA plans solvent also points us in thedirection of reading section 1132(g)(2) in a way that facilitates, rather than impedes, private charitable donations toplans. If an attorney has made a public-spirited decision tocharge a plan a discounted rate, a delinquent employer shouldnot receive the benefit of this decision. Judge Easterbrook inthe Seventh Circuit has endorsed this point: Some lawyers dedicate their professional lives to causes they find admirable and worthy of support--to legal services for the poor, to the representation of unions. These lawyers are making contributions to their favored causes, not in money, but in time.... Using opportunity cost as the measure of legal services means that the value of the lawyer's gift inures to the favored cause, and not to the adversary in litigation. Barrow v. Falck, 977 F.2d 1100, 1105 (7th Cir. 1992). In thiscase, of course, the Trustees' attorney would receive any feesin excess of the amount billed; but the Trustees would benefitindirectly from such an award (as the award would presumably make it easier for them to obtain competent counsel in __________ 12 In January, 1995, the Legal Services Fund's assets stood at$1,218. The Fund's present attorneys responded by adjusting theirbilling; they charged only when collection efforts were successful,and asked only their regular hourly rate or a percentage of theamount actually collected, whichever was less. the future), and JPR would not benefit at all.13 This approach also accords with the Supreme Court's consistent rulethat under fee-shifting statutes legal services are to be giventheir market value, irrespective of the contractual arrangements between attorney and client. See Blanchard v. Bergeron, 489 U.S. 87, 93 (1989) (Should a fee agreement provideless than a reasonable fee ..., the defendant should nevertheless be required to pay the higher [market-based]amount.); Blum, 465 U.S. at 893-96; see also Central States,Southeast and Southwest Areas Pension Fund v. CentralCartage Co., 76 F.3d 114, 116 (7th Cir.), cert. denied, 117 S.Ct. 56 (1996) (citing this principle in reading section1132(g)(2) to permit an award of attorney's fees at marketrates to an organization represented by salaried staff counsel); Louisiana Power & Light Co. v. Kellstrom, 50 F.3d 319,328 (5th Cir. 1995). JPR argues that the singular purpose of section 1132(g)(2)is to make plans whole, and that a fee award that exceeds theamount actually charged by a plan's attorneys is inconsistentwith this purpose. Making plans whole is indeed one important purpose of section 1132(g)(2). See Senate CommitteePrint, at 44 (stating that the section's intent is to assist plansin recovering the costs incurred in connection with delinquencies). But, as we have established, section 1132(g)(2) hasother, equally important goals, which are best served by a __________ 13 Under the collateral-source rule, [p]ayments made to or benefits conferred on the injured party from other sources are notcredited against the tortfeasor's liability, although they cover all ora part of the harm for which the tortfeasor is liable. Restatement(Second) of Torts s 920A (1979). This rule would seem to apply byanalogy to in-kind donations of an attorney's services. Charitablecontributions are ordinarily treated as a collateral source like anyother, for precisely the reason identified by Judge Easterbrook, thedesire to ensure that the benefit of the gift accrues to the donee,not to the tortfeasor. See 4 Fowler V. Harper et al, The Law ofTorts s 25.22 at 661-63 (2d ed. 1986); see also Hudson v. Lazarus,217 F.2d 344, 346-47 (D.C. Cir. 1954) (in a case under D.C. law,applying the collateral-source rule to free care received at a veter- ans' hospital). market-rate award. Furthermore, there is a real sense inwhich a market-rate award may be a peculiarly appropriateinstrument by which to make the Funds whole. An ERISAplan may have only a finite pool of discounted or free legalassistance available to it; once this pool is used up, the planwill then be required to pay higher rates for legal services. Compelling a plan to draw on its limited stock of discountedlegal help thus has meaningful costs to the plan, and shouldbe compensable.14 We also reject JPR's argument that this case is governedby Eddy v. Colonial Life Ins. Co. of America, 59 F.3d 201(D.C. Cir. 1995). In Eddy, we interpreted a different ERISAfee-shifting provision, section 1132(g)(1). Under that provision, in any action under subchapter I of ERISA by aparticipant, beneficiary, or fiduciary, a court may, in itsdiscretion, make an award of a reasonable attorney's feeand costs of action to either party. 29 U.S.C. s 1132(g)(1)(1994). Subchapter I of ERISA can support a wide range ofactions, including actions to enforce Plan terms or to recoverbenefits, suits for breach of fiduciary duty, actions to obtaininformation from plans, and equitable proceedings. See 29U.S.C. ss 1132(a), 1132(c). Eddy concluded that the presumption applied under civil-rights fee-shifting statutes thatsuccessful plaintiffs should receive an attorney's fee awardshould not apply to section 1132(g)(1). JPR points to Eddy'sobservation that ERISA protects economic interests, whilethe civil rights statutes protect dignitary as well as economicinterests, 59 F.3d at 204, and claims that the same logicargues against applying SOCM to this case. Eddy was a straightforward application of Fogerty's command to consider the purposes of a fee-shifting statute in __________ 14 For this reason, the dissent is mistaken in suggesting that weare offering a windfall to those plans that decide to keep theexcess of a fee award over the amount billed. Diss. op. at 2. Ifonly a limited amount of discounted legal help is available to a plan,then drawing on that pool of legal help has an opportunity cost tothe plan. When the pool runs out, the plan will need the supposedwindfall to pay its lawyers. deciding whether to apply caselaw developed under anotherfee-shifting provision. See Eddy, 59 F.3d at 205 (citingFogerty ). ERISA's legislative history contained no evidencethat Congress's goals in enacting section 1132(g)(1) wouldhave been furthered by establishing a presumption in favor ofawards to successful plaintiffs. See id. (This is no surprise,given the smorgasbord of proceedings in which section1132(g)(1) may be invoked.) In the absence of legislativehistory, Eddy considered the broad purposes of ERISA; itcited the civil rights laws as an example of a category ofstatute that would justify a presumption in favor of an awardof fees, and contrasted the dignitary interests protected bythe civil rights statutes with the economic interests furtheredby ERISA. In this case, by contrast, the legislative historyand specific purposes of section 1132(g)(2) both point towardsallowing market-rate fee awards. We therefore need not, aswe did in Eddy, resort to considering the general nature ofERISA as a statute protecting economic interests.