Opinion ID: 568491
Heading Depth: 1
Heading Rank: 4

Heading: computation of the fees

Text: 47 We turn now to the question whether cost-based fees, to which in two instances FLRA confined its award, rather than the market-rate fees sought by the union were the appropriate response to the statutory call for reasonable attorney fees. 48 In the recent past, we have dealt occasionally with attorneys' fee claims by counsel for lay organizations which, like the union here, provide legal services and engage in other activities as well. 116 We have observed that 49 [r]easonableness, in terms of market value of the services rendered, is the sole limit on fee awards to organizationally-hired lawyers when the fees are to be paid to the lawyers alone. The organization, whatever its character, may recoup in full the expense it incurred in supplying the services to the client. Lawyers may, if they wish, voluntarily donate some or all of their fees to charity, or even to their employers, just as they may spend their other monies as they please. 117 50 We also have held that market-rate fees may be paid to legal aid offices and other public interest organizations, 118 a position later vindicated by the Supreme Court. 119 51 When, however, the fees sought are to be paid directly to an organization not only furnishing legal services but also conducting other activities, ethical considerations come to the fore. To grant a market-rate fee request is to open the door to fee-splitting, unauthorized law practice and organizational profiteering on the professional services of attorneys. 120 On this account, we have ruled that the measure of the organization's recovery is its financial outlay in the legal-service venture 121 unless there is some guarantee that the amount above the organization's actual cost will ultimately be spent in the provision of legal assistance--as, for example, by placement into a fund maintained exclusively for legal representation. 122 This assurance puts the organization's legal-service project on a par with legal aid societies and other private nonprofit law offices, and no ethical concern arises. 123 52 If this were all, it would follow that market-rate attorneys' fees should be awarded to the union lawyers litigating here. Fees they recover are placed in the union's legal representation fund, an account totally separate from its general treasury. The fund is under the sole control of the union's general counsel, and is used solely for legal work. 124 This arrangement is of the very sort we have approved as a bulwark against unethical practice. 125 53 However, both MSPB 126 and the Federal Circuit, 127 which alone exercises jurisdiction over MSPB, 128 have held that attorneys' fees paid to multipurpose organizations must be limited in amount to the organization's costs even though the excess would be deposited in a fund dedicated to legal assistance. In Wells v. Schweiker, 129 the union involved here prevailed in litigation before MSPB, which determined that payment of attorneys' fees to the union was warranted in the interest of justice. The union had set up its legal representation fund and asked for attorneys' fees computed at the market rate, but MSPB demurred: 54 Regardless of whether or not [the union] elects to expend its attorney fee awards solely for litigation-related purposes, the fact remains that the application of the market-value formula to the fee award here would allow [the union] to profit from the underlying activities of its attorneys in this matter. The extent of such a profit ... would be commensurate with the extent to which such an award would relieve [the union] of the burden of financing its litigation activities through its general revenue funds.... [W]ell-established ethical principles ... prohibit this result. 130 55 On appeal, the Federal Circuit affirmed on the same basis, 131 and more lately has clung to the same rationale. 132 In deciding the cases at bar, 133 FLRA simply adhered to a precedent of its own, 134 which adopted the Federal Circuit's rule without further explanation. 135 In Curran v. Department of Treasury, 136 the Ninth Circuit disagreed with the course of reasoning in those tribunals, 137 and so do we. 56 In the first place, the notion that market-rate fee allowances to unions invariably result in above-cost benefits is dangerous. As the Ninth Circuit said in Curran, 57 [t]he Board's assumption that an above-cost fee award will always provide an indirect economic benefit to the non-legal activities of a lay organization is incorrect. Whether or not a particular lay organization will in fact receive an indirect economic benefit for its lay activities as a result of the freeing up of monies it otherwise would have spent for litigation turns on many factors. Although an organization may choose to divert its original contribution of general revenues for litigation to support an expansion of its lay activity, it may choose to instead maintain its original contribution and simply add this amount to any fees awarded to the litigation fund as a means of financing greater legal activity. 138 58 Here, the record does not indicate what the union's policy or attitude would be if its legal representation fund were depleted. Furthermore, the effect of any fee award, large or small, is to confer a benefit; even if, as hypothesized, the union does gain indirectly from market-rate fees, so it also does from fees that are cost-limited, and the ethical considerations are precisely the same. 139 The size of the benefit varies, of course, but its character not one whit, and it defies logic to say that in the one instance the benefit is ethically permissible but in the other it is not. And no one would argue that, in order to avoid any benefit to the union, no attorneys' fee award in its favor should ever be made, for a clearer frustration of congressional intent could hardly be imagined. 59 We are mindful, of course, that MSPB's interpretations of its organic statute are entitled to substantial deference, 140 but that canon is inapplicable here. MSPB's stance on cost-based attorneys' fees for union counsel is bottomed squarely and totally on ethical grounds, not statutory text, and the same may be said about the Federal Circuit's decisions. As Curran put it, 60 this case does not involve statutory interpretation of the Back Pay Act. Rather, it involves a question of ethical considerations which would apply to fee awards without regard to the particular statute involved. The statutory standard of reasonable attorney fees in the Back Pay Act is identical to that in other statutes.. We see no reason to place different ethical obligations upon lawyers seeking fees under the Back Pay Act, ... from those seeking fees under [other named statutory schemes].... A congressional decision to concentrate administrative or judicial decision making in specialized agencies or courts should not result in the atomization of the law with respect to attorneys' obligations toward their clients. 141 61 As the Supreme Court has noted, [t]here are over 100 separate statutes providing for the award of attorney's fees; and although these provisions cover a wide variety of contexts and causes of action, the benchmark for the awards under nearly all of these statutes is that the attorney's fee be 'reasonable.'  142 We are constrained to follow our earlier decisions equating reasonable with market-rate fees. 143 Like the Ninth Circuit in Curran, [w]e see no reason to place different ethical obligations upon lawyers seeking fees under the Back Pay Act ... from those seeking fees under other statutory regimes. 144 62 MSPB recognizes fully that statutory specifications of reasonable attorney fees normally mean market-rate fees, and awards them to litigants other than unions. 145 But, from the very beginning, both MSPB and the Federal Circuit have read our NTEU decision 146 as an unqualified declaration that unions can never recoup more than their costs. 147 On the contrary, NTEU signaled the exorability of its holding when it predicted that market-rate fee awards to unions perhaps [might] withstand criticism when the monies are directed into a fund for maintenance of a legal services program, 148 and slightly more than a year later we made explicit in Jordan 149 that indeed they do. 150 We do no more than honor Jordan when today we express our wholehearted agreement with Curran that a separate operating account for legal services provides sufficient protection against the unauthorized practice of law by a lay organization, 151 and that [w]hen fees are paid to a separate account used solely by lawyers for litigation purposes, there simply is no fee splitting with a lay entity and no encouragement of the unauthorized practice of law, 152 and therefore no ethical barrier to compensation at market rate. 153 63 The order under review is accordingly reversed, and these cases are remanded to FLRA for further proceedings consistent with this opinion. 64 So ordered.