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

Heading: differences in the role of the government and private

Text: PARTIES AS DEFENDANTS IN TITLE VII LITIGATION
221 The proper method for determination of attorney's fees awards is a recent and developing area of the law, in which courts are still grasping for exact standards consistent with congressional intent. Over the past half dozen years this court has addressed the attorney's fees issue in several cases, each successive case attempting to systematize and sometimes modify the previous precedents. 222 In Evans v. Sheraton Park Hotel 2 we listed twelve factors that should be included in a district court determination of appropriate attorney's fees in Title VII cases. The twelve factors were taken from the Fifth Circuit's decision in Johnson v. Georgia Highway Express, Inc. 3 which had in turn drawn the standards from guidelines recommended by the American Bar Association's Code of Professional Responsibility, Ethical Consideration 2-18 and Disciplinary Rule 2-106. 223 In Kiser v. Huge 4 we endorsed these same standards taken from the Code of Professional Responsibility as well as the Manual for Complex Litigation, section 1.47. 5 And in Pete v. United Mine Workers 6 we incorporated the attorney's fees section of the panel opinion in Kiser. 224 Our opinion in National Treasury Employees Union v. Nixon, summarizing the analysis of Pete and Huge, listed the primary factors for consideration: hourly rate multiplied by hours, adjusted upward if there is a risk of noncompensation or partial compensation, and adjusted upward or downward on the basis of the quality of work performed as judged by the district court. 7 225
226 In any developing area of the law such as this, courts setting forth general principles must attempt to design them to produce just results in various fact situations to which they will logically apply in the future. The specific situations which arise in future cases will sometimes bring to light deficiencies in the general rules laid down in the past, and will thus require greater elaboration or modification of the standards. The present case illustrates how a mechanical application of the hourly rate times hours formula, which appeared advisable as a general rule in past cases, can actually lead to unreasonable fees entirely out of line with what would happen in private litigation. 8 227 The litigation effort in this case concerned a claim of sex discrimination brought by approximately twenty-four females employed in branches of the Directorate of Data Automation in the Department of Labor. The extensive discovery and numerous pretrial motions in the case were directed at the issue whether the Department of Labor had discriminated in the past against the plaintiff class in assignments, training, performance evaluations, promotions, and working conditions. In compensation for the effects of discrimination found in this case, the Department of Labor paid a sum total of $31,345 in back pay for thirteen of the plaintiffs. In contrast, the legal fee requested by plaintiffs' attorneys was $206,000, and the amount awarded by the district court was $160,000. Plaintiffs' attorneys spent 3,602 hours on the case. 228 Whether this gross disproportion between the monetary stake of plaintiffs' claim and the cost of litigating that claim is justified by the amount of equitable relief awarded, as the majority apparently believes, does not resolve the problem presented by these facts. It is true that some of the plaintiffs received promotions and prospective future promotions, and that the Department agreed to adopt an affirmative action plan for female employees in positions requiring knowledge of data processing. But the fact remains that this Title VII suit involved only twenty-four class members in a very limited sector of a government agency, and concerned acts of discrimination whose sum total monetary value over a several year period was $31,345; yet plaintiffs managed to throw such resources into the legal battle that they could claim a legal fee of $206,000 and receive from the district court a fee of $160,000. Even if the equitable relief here was worth five times the monetary award, the total amount of relief would never make a $160,000 fee appear reasonable in private litigation. When fees of this magnitude begin to appear in suits against the Government, it is time to ask some serious questions about the reasonableness of the attorney's fees judges are awarding. 229 This case illustrates the potential result when a large private firm, with high rates customarily charged to wealthy corporate clients, brings a suit against a Government defendant with an unlimited deep pocket, and then proceeds to engage in extensive discovery and numerous pretrial motions, while being assured from the outset that all hours spent on the case will be reimbursed at the firm's customary rate so long as its efforts are relevant to issues on which it ultimately prevails. It is of little use to quibble over whether the amount of equitable relief involved in this particular case can possibly justify the high fee, because the situation in this case foreshadows and points the way toward far greater potential abuses in the future, if the hourly rate times hours formula continues to be mechanically applied. 230 Though past cases in this area, including those on which we ourselves have sat, have not given specific attention to these potential abuses, it is clearly time to do so now. The reason perhaps why those earlier cases did not consider the great potential for abuse is that they did not involve the Government in Title VII litigation and did not anticipate the possible effect when the resources of a large private law firm are brought to bear against the Government in an employment discrimination suit. We have that case for the first time now. It illustrates how these suits can diverge drastically from the commonly known patterns of private litigation. 231
232 When a large firm knows that eventual success will bring it compensation at its customary rate for all relevant hours of work, the firm has a tremendous incentive to expand the pretrial stages of the case to the point where it becomes overwhelmingly in the Government's interest to settle, whether the Government is in the wrong or not. In private litigation the incentive to expand the discovery and pretrial motion stages is counterbalanced by the high cost that this will inflict on the client, because victory does not normally bring a recovery of the litigant's own attorney's fees from the other side. Not so in a case of this sort against the Government, where the law deliberately encourages the litigation by holding out the carrot of attorney's fees-but only to successful plaintiffs. 233 Furthermore, in private litigation the high cost of extensive discovery serves as an incentive for both sides to settle. But in Title VII cases against the Government, the incentives become entirely lopsided, because expanded litigation costs for plaintiff not only increase his chance of winning, but also greatly increase the sum his lawyer stands to gain if he does win. At the same time, each expansion of the litigation effort will pose a risk of higher and higher liability for the Government. The end result is that the Government faces overwhelming incentives to give in to claims, however unjust, before expanded litigation doubles or triples or quadruples the size of eventual Government liability. When attorney's fee levels come to dwarf the actual monetary amount in controversy, as in the present case, the structure of these incentives is magnified further. In deciding whether to settle a case like this one, the Government is not primarily considering whether its case is strong enough that it should risk an eventual $31,345 judgment to plaintiffs; instead, if Government attorneys are rational they must primarily consider whether their case is strong enough to risk the much greater possibility of a $200,000 plus eventual attorney's fee award. 234
235 Attorney's fees are meant to serve some purpose of deterring discrimination. They doubtless do in the private sector. 9 But when attorney's fees come straight out of the United States Treasury, as in the present case, they exert no deterrent effect whatsoever against the persons responsible for the discrimination. In the private sector there is a justifiable punitive element. Attorney's fees impact on the profit picture of the corporation; the same executive management which is responsible for tolerating or encouraging discrimination are the same executives who are responsible for the profit of the corporation, so they are penalized in the pocketbook. No such deterrence applies to the Government, i. e., the Labor Department budget was never touched, will never be touched, by the award of Judge Gesell in this case. Both the back pay and the attorney's fee come out of the general taxpayer contributed funds of the U. S. Treasury. By their strict analogy to the private sector, the majority has validated deterrent or punitive action against the U. S. taxpayer. 236
237 The Government operates in a universe of attorney's fees lower than that prevailing in the world of wealthy corporate clients. If the Government were pressing the Title VII case rather than defending, its legal costs would not approximate private market value. Government legal counsel, whether on the plaintiff or defendant side, traditionally simply have never been compensated at the same scale as in private practice. The young associate makes slightly more than the young Government attorney; the margin becomes really vast when partner status in a prestigious law firm is compared even with the Attorney General of the United States. Since the Government willy-nilly is financing these Title VII suits both by plaintiffs who succeed and do not succeed (giving effect to a contingency factor), Government counsel defending and plaintiffs' counsel bringing the suits should have compensation of roughly the same amplitude. 238 There is a logical symmetry in this principle. When the Government as a defendant prevails, it has asked for and received only its actual costs, the salaries of the attorneys working on the case plus overhead costs attributable to their work-not the market value going hourly rate of the private sector. 10 It is undeniably the same litigation, vindicating the rights of employees discriminated against, whether the Government wins or loses. The work on the facts and the legal issues is of the same complexity on both sides. Indeed, if the Government were not the defendant employer, the private attorneys would not be bringing a pro bono publico lawsuit as private attorneys general. What the private attorneys are doing is essentially Government legal work. Recognizing this, why should the private attorneys be compensated on a scale other than actual costs (salary and overhead) plus a reasonable profit to encourage them to continue accepting employment in this type of litigation? The purpose of Title VII attorney's fees would be fully vindicated by such a policy. 239
240 With reference to attorney's fees in Title VII litigation against the Government, the fundamental verities overlooked by our colleagues are these: first, there is no market in which fees are set by market value forces; second, whatever fee-paying mechanism there is exists as the total creation of the Government itself. 241 To the latter point, we must remember that the Government need not consent to be sued by its own employees or anyone else. No lawsuit, no lawyer's fee. In almost any other country in the world government employee complaints are adjudicated through the administrative process, as indeed was thought perfectly proper in the United States until 1972, when Congress decided it was more just to give government employees the same rights in court as private employees. Our role is not to choose between administrative or judicial relief; it is to give effect to that selected by Congress. And so we point out that if the majority's pathway to the stars formula for attorney's fees is applied often enough, there may be a popular demand to take government employee Title VII litigation out of the court system altogether and limit employees to administrative relief as previously. 242 As matters stand now, the Government as defendant pays the cost of its own lawyers in court, the Government pays attorney's fees for those plaintiffs who prevail, and the Government-because it pays not only the true cost of the specific suit but also a contingent factor for attorney's costs in other suits in which the plaintiff does not prevail-pays attorney's fees indirectly for plaintiff lawyers who lose. The Government-the American taxpayer-is financing BOTH sides of ALL Title VII litigation against the Government. This is the chosen mechanism; the court's role is to determine how the fees are to be calculated. 243 So we now return to the first point above: the Government is financing this litigation under circumstances in which there are no market value forces to restrict or to set reasonable attorney's fees ; fundamentally, because there is no market. We all recognize that the government employees who become plaintiffs in Title VII cases do not have the financial resources to bid in the marketplace for attorney's services. Copeland and fellow plaintiffs could never have contemplated this litigation, resulting in a suggested fee of $206,000, and an award of $160,000 plus $12,000 expenses. To vindicate the rights of persons discriminated against, Congress has realistically appraised the situation and recognized that attorney's fees must be taxed to the losing defendant, if there is to be any Title VII litigation brought by the injured persons. We in dissent obviously have no quarrel with this whatsoever; we realistically recognize, however, as our colleagues do not, that here there is no market, and that necessarily there must be a different method of setting a reasonable attorney's fee if there are no market forces to determine a market value fee. 244 Whatever the usual merit of market value, it is anomalous where Congress has specifically sought to complement the market for legal services in Title VII cases with an alternative mechanism for allocating attorney's fees. Rather than relying on the parties in privity-the client and his or her lawyer-to agree among themselves to the value of the services to be rendered, Congress has provided that a trial court, in its discretion, may assign the burden of legal expenses incurred by the winner to the loser. 245 The emphasized points in this last sentence should underscore the substantial incongruity between market and judicial determinations of the cost of legal services. Furthermore, the market works so well because it works invisibly, almost effortlessly; even the most astute of judges can only mock the market concept when the judge seeks to replicate market results where none exist. Emulating the market, effective as it is, is worthless to the extent that market factors-supply and demand, agreement among market-makers, prospective not retrospective assessments of marginal utility-are more conjectural then real. 246 So it is plain, then, that attorney's fees in the Title VII context cannot be assigned according to market values because there are quite simply no buyers for the services rendered. Without clients who agree to pay at certain (bargained for) rates, there can be no market. There is missing an a priori pecuniary relation between the legal services undertaken and the willingness of any beneficiary to pay for them. Therefore, charging a losing defendant for the prevailing party's legal expenses at market rates which no one would ever have voluntarily assumed is to destroy the market concept by purporting to respect it. 247 Another inconsistency of the majority's market value approach when compared with bona fide markets is with regard to risk. In a market, i. e., a real market, risk is a negative factor which diminishes the expected value of the beneficiary's lawsuit to the client. A rational client, the beneficiary of legal services, would pay less to pursue relatively riskier litigation because his anticipated recovery must be discounted for that risk. Naturally, lawyers who will be paid only upon the contingency of success would appreciate and demand a risk premium for their services. Only a true market, of course, could allocate the burden of risk accurately between lawyer and client. This the private sector does every day. In Title VII litigation against the Government we have placed this burden on the judge. 248 This is indeed a situation which, if recognized in its true proportions, is so completely different from private litigation that it is obvious that the same concepts of market value fees cannot be employed. Instead of the free play of the market of private clients we have the Government consenting to be sued, financing all successful litigation against itself, and also financing all unsuccessful litigation against itself by enlarged fees on a contingent basis. If this is what is to be done, and it is what is to be done by both the majority's concept and ours, then the Government is entitled to put down some rules and regulations on the cost of the legal services, which by the system designed by statute the Government is going to finance in totality. If the Government is going to finance the whole mechanism in totality, then the concept of actual cost plus a reasonable profit to the attorneys is about the only concept that can hold attorney's fees down to a reasonable level. 249 The tendency toward abusively high fees in this sort of case is real, yet the majority opinion offers absolutely nothing to cope with this problem. We believe there are indeed ways by which we can try to solve this problem, rather than throw up our hands and permit attorney's fees in Title VII cases to continue up to the stars. Two of these factors can be found listed in the Evans case: (1) limiting fees to a level commensurate with awards in similar cases, and (2) limiting fees to a level commensurate with the amount in controversy and results obtained. 11 Significantly, the majority opinion makes no mention of these limiting factors from our precedents; apparently the majority actually prefers to encourage legal fees upward toward the stars. We submit that lodestar fees were far from the Congressional gaze when Congress specified a reasonable attorney's fee, 12 so we now turn briefly to what is available in the legislative history.
250 The majority asserts that the cost-plus formula is fundamentally inconsistent with Congress's purpose in providing for statutory fee-shifting. 13 The majority further contends that Congress intended that a fee should be based on the market value of the services rendered. 14 Neither the language of the statute nor the legislative history underlying the attorney's fee provision evinces a congressional mandate to use the market value approach in calculating a reasonable attorney's fee award. 251 The purpose underlying the attorney's fee provision is to encourage deserving litigants to seek judicial relief. To effectuate this purpose, Congress intended that the attorney's fee awards be sufficient to attract competent counsel, but not so unreasonably high as to produce a windfall for the attorney. It is our position, quite simply, that the market value approach is inappropriate at least in cases in which the Government is the losing defendant because, as will be demonstrated in our analysis of the practical flaws in the majority theory in Part II below, it presents the likelihood that the attorney indeed will reap a bonanza. The cost-plus formula, on the other hand, will provide adequate compensation to enable litigants to obtain competent counsel without providing a windfall to the attorney. 252 We begin by looking to the language of the statute. The attorney's fee section provides that the court, in its discretion, may allow the prevailing party ... a reasonable attorney's fee as part of the costs, and the ... United States shall be liable for costs the same as the private person. 15 The language of the statute surely does not mandate a market value approach; it specifies not at all the method of computing the fee, but instead only generally directs that the attorney's fee should be reasonable. 253 The majority asserts, however, that the language the United States shall be liable for costs the same as a private person plainly indicates that the method of calculation of the attorney's fee should not vary with the identity of the losing defendant. To prove that this is wrong we need not advocate a clear dichotomy between the method of calculating fees in the case in which the losing defendant is a private company and in the case in which the losing defendant is the Government. The case before us is one in which the losing defendant is the Government, and we think that it well illustrates how the market value approach leads to an unreasonable result in this type of case. It may be, however, that the market value approach would not be inappropriate in cases in which a private concern is the losing defendant, another case which we do not have before us. 254 Apart from that caveat, our response to the majority's contention is that we take the language of the statute to mean only that the United States shall also bear the burden of a reasonable attorney's fee when it is the losing defendant. The statutory language does not indicate that the identical method of calculation shall be used in computing this fee-what may be a reasonable method of calculating an attorney's fee award in the situation in which a private entity is the defendant may be a totally unreasonable method when the Government is the losing defendant. 255 We also note that the attorney's fee provision quoted above has been a part of Title VII since the enactment of the statute in 1964. At that time, as the majority indicates in a footnote, Title VII did not permit employment discrimination suits against the United States. Thus attorney's fees were awarded against the Government only when the Government was a losing plaintiff. It was not until 1972 that a new provision was added to Title VII to allow suits against the Government. The language of the attorney's fee section was not changed; rather, the new section providing for suits against the federal government indicated that the attorney's fee provision would also be applicable to claims made by federal employees. 16 A fair reading of this sequence of events is that Congress did not contemplate at all whether the method of calculating a reasonable fee should be the same as the case in which the losing defendant was a private entity; instead, it appears that Congress only intended to make clear that the United States also would be assessed for costs when it was a losing defendant. 256 Turning to the policies and purposes of the attorney's fee provision set forth in Title VII, we find nothing which would dictate a market value approach. As the Supreme Court indicated in Newman v. Piggie Park Enterprises, Inc., 17 the provision for counsel fees in intended to encourage individuals injured by ... discrimination to seek judicial relief, by enabling these individuals to obtain adequate counsel. 18 Nothing in the legislative history of the provision indicates that Congress intended the attorney's fee to be computed according to the market value of the services rendered by the attorney: indeed, nothing in the legislative history indicates that Congress even addressed itself to the details of the method of calculating an award. 257 In regard to the Civil Rights Attorney's Fee Award Act of 1976, 19 an Act similar in design and principle to the attorney's fee provisions set forth in Title VII, the policy underlying the attorney's fee provisions in civil rights cases is elucidated more fully: (A)warding counsel fees to prevailing plaintiffs in (civil rights) litigation is particularly important and necessary if Federal civil and constitutional rights are to be adequately protected. 20 To accomplish this goal, reasonable fees must be awarded to attract competent counsel ... while avoiding windfalls to attorneys. 21 The majority correctly asserts that both the House and Senate Reports to the 1976 Civil Rights Attorney's Fee Award Act cite with approval Title VII cases in which the attorney's fee was calculated according to a market value formula. But Congress found that in those cases cited the fees (were) adequate to attract competent counsel, but (did) not produce windfalls to (the) attorneys. 22 258 We do not think therefore that Congress intended the market value of the services rendered to be the basis for an award of attorney's fees when that technique would produce a windfall or unreasonable fee. As the court explained in Johnson v. Georgia Highway Express, Inc., 23 one of the cases Congress cited with approval: 259 The statute was not passed for the benefit of attorneys but to enable litigants to obtain competent counsel worthy of a contest with the caliber of counsel available to their opposition and to fairly place the economical burden of Title VII litigation. 24 260 We think applying the market value approach in cases in which the Government is a defendant, as will be shown below, likely will lead to the award of clearly un reasonable fees, in direct contradiction to congressional intent. To the contrary, the cost-plus formula will best promote the congressional policy of encouraging deserving litigants to bring Title VII suits, without making the attorney's position so lucrative as to ridicule the whole notion of a reasonable attorney's fee. 261