Opinion ID: 488034
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Heading Rank: 1

Heading: National Hourly Rates

Text: 21 Faced with a flood of fee petitions from counsel located in all regions of the country, the district court utilized national hourly rates for calculating the fee awards for each attorney. While it recognized that the general rule for fee calculation in this circuit requires the use of the hourly rate normally charged for similar work by attorneys of like skill in the area, Grinnell II, 560 F.2d at 1098, the district court noted that special problems arise in applying this general standard in a complex multidistrict litigation that is national in scope, involves counsel from all over the country and extends over many years during which the rates for particular lawyers and classes of lawyers are changing, Agent Orange, 611 F.Supp. at 1308. 22 Specifically, the court pointed out that if the general rule were interpreted to require imposition of the rates normally imposed within the district, the rule would make little sense in the context of this action, given that the vast majority of counsel involved were non-local. Alternatively, if the rule were interpreted to require imposition of varying rates depending upon the location of each counsel's practice, the district judge perceived that such a rule would minimize the court's familiarity with the rates to be awarded, require an almost unworkable case-by-case review of such rates, and consistently benefit non-local counsel at the expense of the class fund. The district judge concluded that in large multiparty litigation, where substantial numbers of specialized non-local attorneys are involved, utilization of a national hourly rate is appropriate because it recognizes the national character of the lawsuit and of class counsel while retaining a vitally important administrative simplicity together with an essential neutrality of result as between fee applicants and fund beneficiaries. Id. at 1309. 23 Relying on five separate sources, the district court developed the national rates to be applied in this action. First, the court considered data compiled in the National Law Journal Directory of the Legal Profession (B. Gerson, M. Liss & P. Cunningham eds. 1984), a periodical that provided rate information concerning law firms of fifty or more attorneys throughout the country as of March 1983. Second, the court reviewed the submissions of counsel, in particular the defendants' Memorandum Concerning Plaintiffs' Lawyers' Applications for Attorneys' Fees and for Reimbursement of Expenses, which provided further information on national rates. Third, the court reviewed various surveys of law firm economics, dated 1980 through 1984, and other periodicals relating to the manner in which firms bill their clients. Fourth, the court took notice of its own experience in setting fee awards in class actions. Finally, the district judge reviewed recent fee awards by other courts to understand more fully the manner in which other jurisdictions set appropriate rates. Agent Orange, 611 F.Supp. at 1325-28 (citing, inter alia, In re Fine Paper Antitrust Litigation, 751 F.2d 562, 590 n. 22 (3d Cir.1984); Grendel's Den, Inc. v. Larkin, 749 F.2d 945, 955-56 (1st Cir.1984)). From an analysis of this data, the district court arrived at national hourly rates of $150 for partners, $100 for associates and $125 for law professors. 24 The members of the PMC challenge the use of national rates on the ground that they do not comport with the principles governing attorneys' fee awards in equitable fund actions. They assert that the practice in this and other circuits required the court to review independently the hourly rate for each attorney in order to ensure that he was compensated at a level commensurate with that of other counsel of like skill in the area in which he practices. See, e.g., In re Fine Paper, 751 F.2d at 590-91 (classifying application of national hourly rates as legal error on the grounds that the district court presented no evidentiary basis for their establishment and such rates ignored the market rates that the attorneys would command in their respective communities). Relying on large class action cases in other circuits where courts have awarded varying rates to counsel from different localities, e.g., In re Equity Funding Corp. of America Securities Litigation, 438 F.Supp. 1303 (C.D.Cal.1977), they argue that, while the task may be a difficult one, other jurisdictions routinely undertake it. 25 In passing on the efficacy of national hourly rates, we note that fees in this action were awarded under the equitable fund doctrine, which seeks to ensure that counsel who have performed services beneficial to the class receive fair and just compensation for their respective efforts. Trustees v. Greenough, 105 U.S. (15 Otto) 527, 536, 26 L.Ed. 1157 (1882). In order to provide counsel with such compensation and, at the same time, temper these awards to prevent windfalls, we have adopted a lodestar formula for calculating fees in equitable fund and statutory fee contexts. Grinnell II, 560 F.2d at 1099; Grinnell I, 495 F.2d at 469-71. Under the formula, the district court initially multiplies the number of hours reasonably billed by the hourly rate normally charged for equivalent work by similarly-skilled attorneys in the area. Grinnell II, 560 F.2d at 1098. Once calculated, the district court then may, in its discretion, upwardly or downwardly adjust this figure by considering such factors as the quality of counsel's work, the probability of success of the litigation and the complexity of the issues. Id. 26 While at least one circuit looks to the rates employed in the area in which the attorney practices, Cunningham v. City of McKeesport, 753 F.2d 262, 267 (3d Cir.1985), we traditionally have interpreted Grinnell I and Grinnell II as requiring use of the hourly rates employed in the district in which the reviewing court sits, Polk v. New York State Department of Correctional Services, 722 F.2d 23, 25 (2d Cir.1983). We generally have adhered to this rule whether the attorney involved was local or non-local. Id.; accord Donnell v. United States, 682 F.2d 240, 251-52 (D.C.Cir.1982), cert. denied, 459 U.S. 1204, 103 S.Ct. 1190, 75 L.Ed.2d 436 (1983); Chrapliwy v. Uniroyal, Inc., 670 F.2d 760, 768-69 (7th Cir.1982), cert. denied, 461 U.S. 956, 103 S.Ct. 2428, 77 L.Ed.2d 1315 (1983); Avalon Cinema Corp. v. Thompson, 689 F.2d 137, 140-41 (8th Cir.1982) (in banc). We and other circuits have strayed from this rule only in the rare case where the special expertise of non-local counsel was essential to the case, it was clearly shown that local counsel was unwilling to take the case, or other special circumstances existed. Polk, 722 F.2d at 25; Avalon Cinema, 689 F.2d at 140-41. 27 Accordingly, the issue for review here is whether the district court erred in deviating from this established precedent. While we concede that such conduct in the ordinary case would constitute legal error and require recalculation of the lodestar, we conclude that, in an exceptional multiparty case such as this, where dozens of non-local counsel from all parts of the country are involved, public policy and administrative concerns call for the district court to be given the necessary flexibility to impose a national hourly rate when an adequate factual basis for calculating the rate exists. 28 An examination of the alternatives to the use of national rates in large multiparty class actions of this sort readily establishes the necessity for affording district courts this discretion. Use of our forum rule would distort dramatically the purposes of the lodestar calculation itself--to ensure fair and just compensation to counsel and to prevent the award of windfall fees. This distortion would occur because, in cases in which the vast majority of attorneys involved are non-local, the forum rule necessarily will either overcompensate or undercompensate a substantial number of non-local attorneys. Undercompensation could deny counsel their right to fair and just fees; overcompensation would not be consistent with the need to prevent windfalls. Adherence to the forum rule in cases in which the inherent limitations of the rule are magnified, i.e., where few local counsel and vast numbers of non-local counsel are involved, therefore, makes little sense. 29 Resort to a varying approach, depending upon the area in which the individual practices, fares no better. In an action of the magnitude of Agent Orange, in which well over one hundred fee petitions were filed by counsel throughout the country, such an approach would pose an administrative nightmare for the district court. As the district judge here noted, [s]implicity becomes an especially important goal in a complex case involving a hundred or more fee applications and tens of thousands of pages of supporting documentation and requiring a number of years for prosecution during which rates for particular attorneys and geographic locations change in different ways. Agent Orange, 611 F.Supp. at 1308. While administrative interests normally should not be the primary concern of a court in formulating substantive rules of review, we observe that the attorney-by-attorney approach recommended by the PMC simply would over-tax the capacity of a district court to review fee petitions adequately. Cf. New York Association for Retarded Children v. Carey, 711 F.2d 1136, 1146 (2d Cir.1983) (burden-saving measures may be taken by district court in light of voluminous fee petitions). 30 Although not a panacea, the use of national hourly rates in exceptional multiparty cases of national scope, where dozens of non-local counsel are involved, appears to be the best available method of ensuring adherence to the principles of the lodestar analysis. The risk of overcompensation or undercompensation on a large scale, apparent under the forum rule, is somewhat neutralized, while, at the same time, the administrative burden on the district court, apparent under the varying rate rule, is reduced to a manageable level. In granting the district court this discretion, however, we caution that such rates should be employed only in the exceptional case presenting problems similar to those presented here. We further caution that, even in similar cases, national hourly rates should be employed only when the district court is presented with an adequate evidentiary basis on which to fix such rates. Once the court is satisfied with the evidence, it should make clear, factual findings that support its determination. 31 We are aware that at least one circuit has rejected the imposition of national hourly rates on the ground that they do not comport with the lodestar principle. In re Fine Paper, 751 F.2d at 591. To the extent, however, that the Third Circuit's decision was based upon the fact that the national rates employed did not comport with that circuit's rule requiring the hourly rate to reflect the rate normally charged in the locale in which counsel practices, we already have rejected its analysis by following a forum rate rule. See Polk, 722 F.2d at 25. In addition, In re Fine Paper, though not entirely clear on this point, may be read to condemn only national hourly rates not based on an adequate evidentiary record. The Third Circuit, in reversing the district court's adoption of such rates, indicated that the district court there had not referred to any evidence supporting the existence of such rates, 751 F.2d at 590, and noted that the subject is not one on which judicial notice is appropriate, id. If read in that context, our decision is in accord with that of the Third Circuit, since we limit the utilization of national rates to those instances in which an adequate evidentiary basis exists. Finally, even assuming that In re Fine Paper stands for an absolute prohibition on the imposition of national hourly rates, we note that, subsequent to that decision, the Third Circuit Task Force on Court Awarded Attorney Fees, organized at the behest of the Chief Judge of that Circuit, recommended that the court permit the utilization of such rates in exceptional cases. Court Awarded Attorney Fees, Third Circuit Task Force, 108 F.R.D. 237, 260-62 (Oct. 8, 1985). 1 32 Given our determination that the utilization of national hourly rates in limited circumstances is proper, we further conclude that the district court did not abuse its discretion in calculating the specific hourly rates in the present case. In its decision, the court set forth the five bases upon which it computed these rates. The PMC does not challenge specifically those bases and we find little reason to question them. Hourly rates for counsel in this action were difficult to calculate because the majority of attorneys involved normally would have been compensated through contingency fee arrangements rather than on an hourly basis. Difficulties aside, however, the district judge, in our view, took adequate steps to ensure a fair and just hourly rate of compensation. We therefore hold that the national hourly rates of $150 for partners, $100 for associates and $125 for law professors constituted an element of fair and just compensation for counsel in the context of this case.