Opinion ID: 184437
Heading Depth: 3
Heading Rank: 2

Heading: Detecting Public-Spirited Discounts

Text: Having decided that the policies underlying section1132(g)(2) support an allowance to the Trustees of fees atmarket rates, assuming the fees actually paid were discounted for public-spirited reasons, the task remains of decidingwhether the fees paid did in fact reflect a public-spiriteddiscount by the counsel. We leave this task initially for thedistrict court, with a brief discussion of the guiding principlesof law. We explained in Covington that the fee applicant bears theburden of demonstrating that a fee incorporates a publicspirited discount: [T]he attorney must show that his or her custom of charging reduced rates is in fact attributable to public spiritedness. Implicit in this line of inquiry is the assumption that the law was not written to subsidize attorneys who charge below-market rates because they cannot command anything more. And a defendant is free to rebut a fee claim on these terms in cases in which this issue is posed. We recognize that, in some cases, this may be a difficult line of inquiry, for an attorney who cannot command market rates invariably will have a custom of charging rates below the market. This problem is diminished with respect to attorneys who charge variable rates (both at and below the market, with the latter attributable to public-spirited goals). Covington, 57 F.3d at 1108. We concluded that it was withinthe district court's sound discretion to determine whetheran attorney had public-spirited reasons for charging reducedrates. Id. Deciding whether an attorney has a public-spirited reasonfor a representation should not be all that difficult. Animportant part of this inquiry will focus on whether the feecharged in fact differs significantly from the market value ofthe attorney's services. We discuss the process of decidingthe correct market rate for an attorney's services in the nextsection of this opinion; because the district court may find iteasier to decide the market value of an attorney's work thanto analyze her motivations, it may be appropriate to performthis analysis first. Turning to the question of the attorney's motivations, weemphasize that it is only necessary for the attorney to showthat public-spiritedness was a principal reason for the discount, and not that it was the only reason. It is rare to find aperson who has only one reason for the things she does, andthe presence of other motivations need not vitiate an attorney's public-spiritedness. Client development and attorneytraining, for instance, are accepted corollaries of pro bonorepresentation. See Esther F. Lardent, Structuring LawFirm Pro Bono Programs, The Law Firm and the PublicGood 59, 72 (Robert A. Katzmann ed., 1995). Nor does thepossibility of a fee award necessarily taint an attorney'smotives. Such an award will only be forthcoming if theattorney wins, and will be no more than the amount theattorney could have obtained for her time on the free market. An attorney who was principally motivated by the desire tomake money would not rely on such awards, but would seekout clients who were able to pay the full market rate, so that she could be assured of being paid at that rate whether shewon or lost. As officers of the court, attorneys will presumably not beinclined to misrepresent their reasons for granting a discount,and we assume that it will only rarely be necessary to secondguess those reasons. An affidavit from the client may alsohelp to establish that the client understood that the fee it wasbeing charged reflected a public-spirited discount, even if itmay not have been expressly stated that this was the case. In some circumstances, however, there may be a clear explanation for a discount other than a desire to serve the publicgood (or market forces, which are taken into account in themarket-rate inquiry). For instance, an attorney who gives adiscount to a relative would need to make a strong showingthat the discount was actually motivated by the public interest, and not by familial ties. We leave to the district court, inthe first instance, the task of deciding the motivations of theFunds' attorneys.