Opinion ID: 772794
Heading Depth: 2
Heading Rank: 2

Heading: Relevance of the Actual Billing Arrangement to the Amount of Fees Awarded

Text: 24 Crescent argues that the District Court could not award fees without evidence as to PEI's actual billing arrangement with its counsel. Without such evidence, there exists the possibility of providing an economic windfall to the prevailing party (presumably because the actual billing arrangement would require a lower payment than that which a court would find is the reasonable rate for attorneys of similar skill in the relevant community), contrary to the goals of section 505. Because we have not previously addressed this issue under the Copyright Act, we believe it would be useful to provide guidance for the District Court on remand if it chooses to award fees. See, e.g., Albert v. Loksen, 239 F.3d 256, 266 (2d Cir. 2001) (providing guidance for district court on remand); New York State Ass'n for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1139, 1154 (2d Cir. 1983) (providing guidance for calculation of attorneys' fee award). 25 Because section 505 establishes the court's ability to shift fees in copyright actions, it is useful to begin with the text of the statute. Southeastern Cmty. Coll. v. Davis, 442 U.S. 397, 405 (1979) (It is elementary that '[t]he starting point in every case involving construction of a statute is the language itself.') (citation omitted). Section 505 permits a court in its discretion to allow the recovery of full costs by or against any party.... Except as otherwise provided..., the court may also award a reasonable attorney's fee to the prevailing party as part of the costs. 17 U.S.C. § 505 (emphasis added). This section clearly provides for a fee award to be made to a prevailing party, not directly to its counsel. Cf. Healy v. Chelsea Res., Ltd., 947 F.2d 611, 624 (2d Cir. 1991) (When a fee-shifting statute that authorizes the courts to award attorneys' fees to prevailing parties does not mention an award against the losing party's attorney, the appropriate inference is that an award against attorneys is not authorized.); Neft v. Vidmark, Inc., 923 F.2d 746, 747 (9th Cir. 1991) (finding no indication in the language or legislative history that Congress intended section 505 to be a means of imposing sanctions on attorneys). The emphasis on compensating a party for its full costs and including a reasonable attorney's fee as part of that cost lends arguable credence to Crescent's argument that the actual billing arrangement should provide a cap on the amount it could be required to pay. 26 The text of the statute, however, does not address what should qualify as reasonable in the first instance. 6 Although the Supreme Court has not specifically held that courts should apply the lodestar method in calculating fees under section 505, it has indicated that the lodestar method (emphasizing a comparison to rates of lawyers of similar skill and experience in the community) is appropriate in calculating the reasonable fee permitted under other fee shifting statutes. See, e.g., Hensley v. Eckerhart, 461 U.S. 424, 433-34 (1983) (Civil Rights Attorney's Fees Awards Act, 42 U.S.C. § 1988); Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 478 U.S. 546, 563-68 (1986) (Clean Air Act, 42 U.S.C. § 7604(d)). Because copyright actions may not always result in high damage awards, for instance if the commercial value of the work is minimal, and may not always involve parties with substantial financial resources, an objective measure such as the lodestar seems the most effective method in enabling parties to retain competent counsel. 27 Choosing the lodestar method does not end our inquiry. The lodestar method suggests that the prevailing market rate in the community should trump any agreement for a lower rate made between a client and its private counsel. 7 Cf. Blanchard v. Bergeron, 489 U.S. 87, 96 (1989) (civil rights); Getty Petroleum Corp. v. Bartco Petroleum Corp., 858 F.2d 103, 114 (2d Cir. 1988) (Lanham Act). But the emphasis on ascertaining a reasonable fee also suggests the absence of a penalty beyond the punitive or deterrent policies taken into consideration in the decision to award fees in the first instance. See 4 MELVILLE B. NIMMER &AMP; DAVID NIMMER, NIMMER ON COPYRIGHT § 14.10[C], at 14-145 to 14-146 & n.15 (2000) ([T]he amount of such fee (as distinguished from the reason for its award...) should be based upon the reasonable value of the services rendered without adding any additional amount by way of penalty.). The actual billing arrangement certainly provides a strong indication of what private parties believe is the reasonable fee to be awarded. 28 We are not prepared to declare a per se rule that the actual billing arrangement places a ceiling on the amount the prevailing party can recover through a fee award under section 505, especially in light of the district courts' broad discretion in awarding fees. See, e.g., Matthew Bender & Co. v. West Publ'g Co., 240 F.3d 116, 120-21 (2d Cir. 2001). In some instances the actual billing arrangement may not be reasonable. Because we wish to give effect to the statutory language of the Copyright Act while applying the lodestar method, we conclude that, for prevailing parties with private counsel, the actual billing arrangement is a significant, though not necessarily controlling, factor in determining what fee is reasonable. 8 In weighing this factor, we remind the District Court that in no event should the fees awarded amount to a windfall for the prevailing party.