Opinion ID: 1312511
Heading Depth: 2
Heading Rank: 2

Heading: The District Court's Reliance on Arbor Hill

Text: Appellants also contend that the district court impermissibly relied on this court's decision in Arbor Hill Concerned Citizens Neighborhood Association v. County of Albany, 493 F.3d 110 (2d Cir. 2007), since that case addressed the use of the lodestar method in the context of statutorily awarded attorneys' fees, rather than a common fund. [4] They suggest, inter alia, that reliance on Arbor Hill may have improperly influenced the district court's decision to select a modified lodestar approach rather than a percentage-of-fund approach, though the court's bench decision does not, in fact, make it at all evident that the case influenced the court's selection. At the start, we note that it is unclear how any error in the district court's decision to use Arbor Hill 's modified lodestar approach, even assuming such error occurred, could compel a finding that the court should have used the percentage method instead. Given that a district court has the discretion to choose either the lodestar or percentage-of-fund approach in calculating attorneys' fees, see supra Section I, any error in a court's application of the lodestar method would not necessitate selection of the percentage method on remand. To the extent that Appellants' argument depends on the inference that, had the district court not referenced Arbor Hill, Appellants' suggested 26% fee would have seemed more reasonable, an analysis of Arbor Hill and the district court's reliance on that decision shows that Appellants' concern is unfounded. In Arbor Hill, this Court proposed the use of a modified version of the lodestar approach and recommended abandonment of the term lodestar for the alternative term presumptively reasonable fee. 522 F.3d at 183. In brief, the Court suggested that a district court's efforts to approximate the reasonable fee that a competitive market would bear  the implicit goal of the lodestar approach  would be better served by considering case-specific reasonableness factors earlier in the calculation. Instead of first determining the lodestar (multiplying an hourly rate by the number of hours worked) and then adjusting the lodestar through a multiplicative factor to account for case-specific considerations, the Arbor Hill Court suggested that a district court should assess case-specific considerations at the outset, factoring them into its determination of a reasonable hourly rate for the attorneys' work. See id. at 186, 190. This reasonable hourly rate could then be multiplied by the number of hours worked to generate a presumptively reasonable fee. [5] Id. at 190. As Arbor Hill was a statutory fee shifting case, the Court pointed towards the twelve case-specific factors outlined in Johnson, 488 F.2d at 717-19, as being among those relevant to a district court's determination of a reasonable market rate under this revised approach. See Arbor Hill, 522 F.3d at 190. Arbor Hill also indicated that the district court in that case had been unduly restrictive in its interpretation of the forum rule, though it ultimately upheld the district court's decision to deny the request of plaintiffs' counsel to calculate their hourly fees based on their home district, rather than the less expansive prevailing rates in the district where the litigation occurred. See id. at 190-94. In clarifying the forum rule, the Court held that: [A] district court may use an out-of-district hourly rate  or some rate in between the out-of-district rate sought and the rates charged by local attorneys  in calculating the presumptively reasonable fee if it is clear that a reasonable, paying client would have paid those higher rates. We presume, however, that a reasonable, paying client would in most cases hire counsel ... whose rates are consistent with those charged locally. This presumption may be rebutted  albeit only in the unusual case  if the party wishing the district court to use a higher rate demonstrates that his or her retention of an out-of-district attorney was reasonable under the circumstances as they would be reckoned by a client paying the attorney's bill. Id. at 191. The Court further indicated that the reasonableness of a prevailing party's decision to retain out-of-district counsel is best considered in setting the hourly rate  rather than deciding whether to adjust a presumptively reasonable fee, since, inter alia, this approach comported with the focus on market rates underpinning Arbor Hill 's presumptively reasonable fee approach. Id. at 191-92. In the instant case, the district court observed early in its bench decision that the Plaintiffs' suggested fee award of 26% represented, in its estimation, a multiplier of 1.98-2.24 beyond what counsel would have earned based on their hourly rates. Appellants suggest that to the extent the district court's impression of the multiplier as being too large may have been responsible for its disinclination to base attorneys' fees on a percentage of the fund, the court's reliance upon Arbor Hill worked to their detriment. In clarifying its understanding of that case, however, the court indicated that if [the traditional lodestar method] were to be applied ... it would be irrelevant where an attorney was from, [and the appropriate rate] would be what the prevailing rate is for attorneys in this area. Oral Decision at 26. The court then stated that some of the fees as calculated in the fee schedule submitted by class counsel ... would have exceeded [the] traditional rate in the Northern District of New York. I've not discounted them as a result of that. Id. at 26-27. In other words, had the district court not referenced Arbor Hill, and instead relied on its understanding of the forum rule as traditionally applied, Appellants' suggested 26% fee would have represented an even higher multiplier of the lodestar. If Appellants are correct that the court's assessment of the multiplier contributed to its decision not to use a percentage-based approach, the court's reliance on Arbor Hill cannot have hurt them. [6] In any event, we find no error in the district court's reliance on Arbor Hill in this case. At bottom, Appellants' arguments regarding Arbor Hill are founded upon the assumption that the lodestar method applied in the common fund context is distinct from that employed in the statutory fee-shifting context. While it is true some district courts in this Circuit have expressed uncertainty as to the relevance of Arbor Hill in common fund cases, see In re Ramp Corp. Sec. Litig., No. 05 Civ. 6521, 2008 WL 58938, at  n. 3 (S.D.N.Y. Jan. 3, 2008); In re AOL Time Warner ERISA Litig., No. 02 Cv. 8853, 2007 WL 3145111, at  n. 3 (S.D.N.Y. Oct. 26, 2007), this Court's case law does not suggest that there are two different lodestar methods, see, e.g., In re Agent Orange Product Litig., 818 F.2d 226, 232 (2d Cir.1987) ([W]e have adopted a lodestar formula for calculating fees in equitable fund and statutory fee contexts.). To the contrary, in discussing the lodestar method, our common fund and statutory fee shifting cases have employed the same definition and referenced the same foundational cases. [7] See, e.g. Arbor Hill, 522 F.3d at 186 (citing Lindy Bros. Builders, Inc. v. Am. Radiator & Standard Sanitary Corp., 487 F.2d 161 (3d Cir.1973) as foundational case for lodestar approach in statutory fee case); Goldberger, 209 F.3d at 48 (citing Lindy Bros. in common fund case); Grinnell I, 495 F.2d at 470-74 (citing Lindy Bros. in justifying adoption of lodestar approach in common fund case). It is therefore not surprising that several district courts within this Circuit have referred to Arbor Hill 's presumptively reasonable fee approach in common fund cases. See Silberblatt v. Morgan Stanley, 524 F.Supp.2d 425, 434 (S.D.N.Y.2007) (referencing Arbor Hill in use of lodestar as cross-check on reasonableness of percentage award); In re Assicurazioni Generali S.p.A. Holocaust Ins. Litig., Nos. 97 Civ. 2262, 98 Civ. 9186, 00 Civ. 9413, 2009 WL 762438, at  (S.D.N.Y. Mar. 24, 2009) (relying upon Arbor Hill to explain application of lodestar method); AOL Time Warner, 2007 WL 3145111, at  n. 3 (concurring with conclusions of Arbor Hill -based cross-check of percentage award). From a mathematical perspective, of course, it makes little difference whether a court, following Arbor Hill, considers case-specific factors to estimate a reasonable rate for an attorney's services, which is then multiplied by the number of hours worked, or whether the court takes the traditional approach and considers these same factors in calculating a multiplier to the lodestar. The benefit of Arbor Hill 's methodology is that by considering case-specific factors at the outset, the district court's focus on mimicking a market is maintained. See Arbor Hill, 522 F.3d at 192. To the extent that the specific factors considered by courts in the common fund and statutory fee-shifting contexts are somewhat different, compare Wal-Mart, 396 F.3d at 121, with Johnson, 488 F.2d at 717-19, we note that the district court's reliance on Arbor Hill in this case was limited. While the court referenced Johnson in its initial discussion of Arbor Hill, it later clarified that it was relying on the latter for its presumptive reasonable fee approach and its more flexible application of the forum rule. And in considering case-specific factors, the district court clearly followed Goldberger, addressing each of the six factors outlined in that case. The one Johnson factor separately considered by the court, the preclusion of employment by the attorney due to acceptance of the case, Oral Decision at 15, weighed in favor of a higher fee award, and its consideration did not prejudice the Appellants. We are therefore unconvinced the court modified the Goldberger factors in any meaningful way by referencing Arbor Hill, and accordingly, we find no error in the district court's reliance on that case.