Court Opinion

ID: 9473495
Source: CourtListenerOpinion
Date Created: 2023-08-05 04:31:36.478457+00
Date Added: 2024-06-11T17:43:34.111015
License: Public Domain

J. SKELLY WRIGHT, Circuit Judge,
dissenting:
In my view, this case presents an increasingly important issue in Title VII settlements; can employers insist on a waiver of fees and costs as a condition for granting class-wide relief?
In the principal opinion,1 this case does not quite present that question. Rather, the principal opinion rests on a distinction between cases in which plaintiffs voluntarily waive any possible right to fees and costs and cases in which defendants coerce the waiver. Unfortunately, I find this distinction untenable, both generally and in this case. Because I believe that permitting fees and costs to become a bargaining chip in Title VII negotiations undermines the important purposes of statutory fee-shifting, I dissent.
I.
This case vividly illustrates the illusory nature of the principal opinion’s distinction between plaintiff-suggested waiver and defendant-coerced waiver. It is necessary to. review the settlement negotiations to understand precisely why this is the case.
The written record of the settlement negotiations consists of two letters from Moore’s counsel to NASD’s counsel. Since *1115the question of who initiated what seems to bear heavily in the principal opinion’s disposition, it is perhaps significant that, in the first letter, Moore’s counsel noted that the letter was in response to “preliminary discussions between [the] lawyers” and “the feeling that [NASD] favors some disposition of this action short of trial.” Letter from David Webster to Richard Sampson, April 4, 1983, at 1, reproduced in Joint Appendix (JA) at 76-80. Moore’s counsel outlined 16 points regarding the merits of a proposed settlement. The points principally addressed recruiting and hiring goals. On the subject of fees and costs Moore’s counsel was quite explicit that, in his view, fees and costs should be addressed separately from the merits:
You will note that I have made no reference to attorneys’ fees and expenses as a term of this settlement proposal. I prefer to attempt to resolve the claims of the class and Sharon Moore without reference to such issues. I intend, instead, to submit separately a petition to the Court that will seek fees and costs. * * *
Id. at 4, JA 79. As NASD’s counsel had requested, Moore’s counsel did submit a “ballpark figure on current expenses,” id.; these expenses (not including attorneys’ fees or paralegal costs) amounted to $20,-500. Thus, in the first letter Moore’s counsel outlined a settlement on the merits and sought to treat the question of fees and costs separately.
The second letter is also from Moore’s counsel to NASD’s counsel, this time on May 11. Moore’s counsel began by recounting NASD’s reaction to the first letter: “Yesterday you told me that the relief requested in our settlement letter of April 4, 1983 was acceptable to your client, but that fees and expenses created a problem.” Letter from David Webster to Richard Sampson, May 11, 1983, at 1, reproduced in JA 81-82 (emphasis added). Moore’s counsel then described three proposals he had made for “dealing with the fees and expenses problem[.]” Id. First, he had reiterated the suggestion that they submit the question to the court after the merits agreement was reached. NASD rejected this suggestion. Second, he had suggested an agreement to cap fees and expenses at $100,000. NASD also rejected this suggestion. And third, he had suggested either limiting fees to $50,000 above expenses, with a total possible exposure of $75,000-$80,000, or splitting the fees NASD’s counsel received for the litigation. As with the other two suggestions on fees and expenses, NASD simply rejected the proposal and made no counter-offer.
At this point, Moore’s counsel was in a position where NASD’s counsel had made absolutely clear that the merits proposal was perfectly acceptable, but that NASD would not agree to that merits proposal unless the question of fees and costs were resolved. And, given NASD’s flat rejection of all suggestions limiting fees and costs, Moore’s counsel quite reasonably concluded that only a waiver of fees and costs would satisfy NASD and permit the merits settlement to go forward. He explained his dilemma in plain language: he did “not wish[] to deprive [his] clients of the relief [NASD is] willing to give by considering the question of fees and ex-pensesf.]” Id. Moore’s counsel thus stated that he would “take in full discharge of any claim for fees and expenses anything that [NASD] is willing to give, and that would include nothing, if that is [NASD’s] position.” Id. at 2, JA 82. NASD soon made clear that “nothing” was indeed its unalterable position.
For the principal opinion this settlement negotiation represents, not a defendant’s coercion of a waiver, but a plaintiff’s entirely voluntary decision to forego any fees or costs. In my judgment, when a defendant explicitly agrees with a plaintiff’s merits proposals but refuses to settle until fees and costs are entirely waived, the distinction between defendant coercion and plaintiff volition is meaningless.
II.
Since I do not find the principal opinion’s distinction tenable, I see the question posed *1116by this case somewhat differently. For, in my view, it is necessary to consider the use of attorneys’ fees as a bargaining chip in Title VII negotiations without the benefit of that distinction.
Simultaneous negotiation of fees and merits in a Title VII case poses a fundamental problem. It pits success on the merits against recovery of fees. The clear policy of Title VII, in contrast, is that the award of attorneys’ fees to prevailing parties is an essential element of the statute’s important anti-discrimination mission.
A.
Under Title VII’s provision for the award of attorneys’ fees to “the prevailing party,” 42 U.S.C. § 2000e-5(k) (1982), prevailing plaintiffs “should ordinarily recover an attorney’s fee unless special circumstances would render such an award unjust.” Newman v. Piggie Park Enterprises, 390 U.S. 400, 402, 88 S.Ct. 964, 966, 19 L.Ed.2d 1263 (1968).2 The reason for this strong presumption in favor of attorneys’ fees is clear: “[i]f successful plaintiffs were routinely forced to bear their own attorneys’ fees, few aggrieved parties would be in a position to advance the public interest by invoking the injunctive powers of the federal courts.” Id. In Copeland v. Marshall, 641 F.2d 880 (D.C.Cir.1980) (en banc), this court similarly stressed the importance of Title VII’s attorneys’ fees policy. “The availability of an attorney’s fee encourages individuals injured by discrimination to seek judicial redress,” id. at 889; “[a]n award of fees provides an incentive to competent lawyers to undertake Title VII work only if the award adequately compensates attorneys for the amount of work performed.” Id. at 890.
Congress has emphasized that the fee-shifting provisions in civil rights statutes are central to its vision of a vigorous anti-discrimination policy. “The effective enforcement of Federal civil rights statutes depends largely on the efforts of private citizens,”. H.R.Rep. No. 94-1558, 94th Cong., 2d Sess. 1 (1976); “fee awards have proved an essential remedy if private citizens are to have a meaningful opportunity to vindicate the important Congressional policies which [civil rights statutes] contain.” S.Rep. No. 94-1011, 94th Cong., 2d Sess. 2 (1976).
Significantly for this appeal, this strong policy favoring attorneys’ fees extends to parties who prevail in settlement as well as to those who prevail in litigation. “The fact that respondent prevailed through a settlement rather than through litigation does not weaken her claim to fees.” Maher v. Gagne, 448 U.S. 122, 129, 100 S.Ct. 2570, 2574, 65 L.Ed.2d 653 (1980). As the Supreme Court noted in Maher, the Senate Report accompanying the Civil Rights Attorneys’ Fees Awards Act of 1976, 42 U.S.C. § 1988, also stressed that the presumption in favor of attorneys’ fees extends to settlements: “for purposes of the award of counsel fees, parties may be considered to have prevailed when they vindicate rights through a consent judgment or without formally obtaining relief.” S.Rep. No. 94-1011, supra, at 5.
Furthermore, this presumption in favor of attorneys’ fees extends to a party whose suit acts as a “catalyst” in leading the defendant to anti-discrimination measures. See, e.g., Foster v. Boorstin, 561 F.2d 340, 342-343 (D.C.Cir.1977); Parham v. Southwestern Bell Tel. Co., 433 F.2d 421, 429-430 (8th Cir.1970). Indeed, both the Senate and House Reports to the Civil Rights Attorneys’ Fees Awards Act of 1976 cite Par-ham’ s analysis of a prevailing party’s entitlement to attorneys’ fees. See H.R.Rep. No. 94-1558, 94th Cong., 2d Sess. 7 (1976); S.Rep. No. 94-1011, 94th Cong., 2d Sess. 5 (1976).
Finally, the Supreme Court has emphasized that the extent of a plaintiff’s success should determine the amount of attorneys’ fees to which he is entitled. “[T]he extent of a plaintiff's success is a crucial factor in *1117determining the proper amount of an award of attorney’s fees.” Hensley v. Eckerhart, 461 U.S. 424, 440, 103 S.Ct. 1933, 1943, 76 L.Ed.2d 40 (1983). Under this view, success on the merits is not in competition with attorneys’ fees; rather, increased success on the merits leads to increased recovery of attorneys’ fees as well.
In sum, Congress and the Supreme Court have stressed the important role of fee-shifting in furthering the mission of anti-discrimination statutes. The statutory presumption in granting fees to the prevailing plaintiff includes plaintiffs who prevail in settlement and plaintiffs whose litigation is the catalyst for changes by the defendant. When a plaintiff has achieved partial success, moreover, his recovery should bear a direct relation to the extent of his success.
B.
Simultaneous negotiation of fees and merits leads to grave problems in two situations: “sacrifice” situations, like the case before us, in which defendants condition settlement on the merits on plaintiff’s waiver of fees and costs, and “sweetheart” situations in which class counsel is tempted to agree to reduced class-wide relief in return for generous fee settlements. Both situations are fraught with the potential to undermine the cardinal principle of fee-shifting in civil rights statutes. For, in both situations, rather than reflecting success on the merits, fees are pitted against success on the merits.
Recognizing the problems of simultaneous negotiations, at least four circuits have expressed strong disapproval of simultaneous negotiation of fees and merits. The Third Circuit requires that discussion of fees be undertaken only after settlement of the merits. Prandini v. National Tea Co., 557 F.2d 1015 (3d Cir.1977). The Ninth Circuit has established a strong presumption against the propriety of simultaneous negotiations, subject to a showing of “unusual circumstances” that might defeat the presumption. Jeff D. v. Evans, 743 F.2d 648 (9th Cir.1984), petition for cert. granted, — U.S.-, 105 S.Ct. 2319, 85 L.Ed.2d 838 (1985); Mendoza v. United States, 623 F.2d 1338 (9th Cir.1980), cert. denied, 450 U.S. 912, 101 S.Ct. 1351, 67 L.Ed.2d 336 (1981). The Fifth Circuit has noted that simultaneous negotiation "weigh[s] heavily against the district court’s decision to accept the settlement.” Pettway v. American Cast Iron Pipe Co., 576 F.2d 1157, 1216 n. 71 (5th Cir.1978), cert. denied, 439 U.S. 1115, 99 S.Ct. 1020, 59 L.Ed.2d 74 (1979). And the Eighth Circuit has observed that simultaneous negotiation “may raise a serious ethical concern * * * because ■ counsel [is] placed in the position of negotiating a fee ultimately destined for his pocket at the same time that all thoughts ought to be singlemindedly focused on the client’s interests.” Obin v. Disk No. 9 of Int’l Ass’n of Mach. & Aerospace Wkrs, 651 F.2d 574, 582 (8th Cir.1981).
Although many of these cases emerged in a “sweetheart” context, they are equally applicable to a “sacrifice” context. Indeed, the conflict of interest in a sacrifice situation may well be even more troublesome. For the conflict is not between the attorney’s duty to his class and his desire for personal gain, but between the attorney’s duty to his class and the congressional policy in favor of attorneys’ fees for plaintiffs who obtain classwide relief from discrimination. Waiver of fees in a sacrifice situation occurs “at the expense of the goals which Congress sought to achieve when it adopted” the fee-shifting statutes. Calhoun, Attorney-Client Conflicts of Interest and the Concept of Non-Negotiable Fee Awards under 1^2 U.S. C. § 1988, 55 U. Colo.L.Rev. 341, 381 (1984). Similarly, the “long term effect of persistent demands for the waiver of statutory fees is to prejudice a vital aspect of the administration of justice and undermine efforts to make counsel available to those who cannot afford it.” Opinion No. 80-94, Committee on Professional Ethics of the N.Y. Bar Ass’n, Settlement Offers in Public Interest Litigation Conditioned on Waiver of Statutory Fees 510 (Sept. 18, 1981). See also *1118Jeff D. v. Evans, supra, 743 F.2d at 651-652; Lisa F. v. Snider, 561 F.Supp. 724, 726 (N.D.Ind.1983).
Thus, in my view, simultaneous negotiation of fees and merits threatens to undermine the important statutory purposes of fee-shifting. Instead of reflecting success on the merits, the statutory entitlement to fees becomes a bargaining chip in competition with the merits. The chip may be used either to enlarge fees and diminish class-wide relief (the sweetheart situation) or to diminish fees and enlarge class-wide relief (the sacrifice situation). In both cases the congressional purpose in providing the entitlement to fees is warped and distorted.
C.
In my judgment, this court should join the four circuits that have condemned simultaneous negotiation of fees and merits. We have a responsibility to see that the clear statutory purpose — that fees correspond to success — is realized. In addition, as the other circuits have emphasized, we have a duty to prevent even the appearance of impropriety in the administration of justice. See, e.g., Obin, supra, 651 F.2d at 582 n. 10; Mendoza, supra, 623 F.2d at 1353 n. 20; Prandini, supra, 557 F.2d at 1021.
In particular, this court should hold that simultaneous negotiation of fees and merits is unacceptable, unless unusual circumstances justify such negotiation. The Ninth Circuit has described one such unusual circumstance: the Department of Justice’s participation, as an intervenor representing the public interest, in the negotiations. See Mendoza, supra; Jeff D., supra. The unusual circumstances that will defeat the presumption should be those that establish a clear reason why the usual problems associated with simultaneous negotiations would not be present. These unusual circumstances should be, of course, the exception, rather than the rule, in Title VII settlements.
This approach addresses the major problems of simultaneous negotiation. It strikes directly at the use of attorneys’ fees as a bargaining chip and at the problems of a tradeoff between merits and fees. At the same time, the approach retains some flexibility for those exceptional circumstances in which the ordinary problems associated with simultaneous negotiation are not implicated.3 Most importantly, it effectuates the statutory purposes of the fee-shifting statutes and responds to the serious ethical concerns identified by four other circuits.
D.
Under this approach, a court confronted with a simultaneously negotiated settlement that does not reflect unusual circumstances should preserve the settlement on the merits, reject the fees arrangement, and make an entirely independent assessment of fees and costs. In this case, then, I would remand to the District Court, first, to determine whether unusual circumstances justified the simultaneous negotiations, and second, if not, to determine the proper fees and costs, if any, under established principles of fee-shifting.
III.
This case presents a critical issue for Title VII litigation: whether the statute’s important fee-shifting purposes may be undermined by simultaneous negotiation of *1119fees and merits. In my judgment, simultaneous negotiation undermines a primary purpose of Title VII by creating conflicts between the workers, whom the statute seeks to protect, and their lawyers, for whom the statute provides payment by the employer if the lawsuit is successful. I thus believe that this court should join the four other circuits that have expressed strong disapproval of such negotiation.
Finding plaintiff volition, however, the principal opinion limits its analysis to plaintiff-volunteered waivers. Since I find the distinction between plaintiff-volunteered and defendant-coerced waiver untenable, and since I cannot agree with the result that the distinction produces in this case, I respectfully dissent.

. "Principal opinion" refers to Judge MacKinnon's opinion. In view of the three opinions in this case, there is, of course, no panel opinion. One thing is clear from these opinions, however. This court has a serious "concern that simultaneous negotiation of a settlement on the merits and limitations on attorneys’ fees can in some circumstances create serious conflicts.” Opinion of Wald, J. at 1111. Indeed, as Judge Wald emphasizes, "the local bar ethics committee has recently ruled that in Title VII actions, a defendant 'may not condition an offer of settlement upon an agreement by plaintiff's counsel to waive or limit the plaintiff's potential statutory [attorneys'] fees.’ District of Columbia Bar Legal Ethics Committee, Opinion No. 147, reprinted in 113 Daily Washington L.Rep. 389, 389 (1985).’’ Id. Thus it is at least clear that defendant-conditioned waiver of, or limits on, statutory attorneys’ fees will not be tolerated.

. Piggie Park was a Title II case, but the Supreme Court has made clear that it applies with equal force to Title VII. See Albemarle Paper Co. V. Moody, 422 U.S. 405, 415, 95 S.Ct. 2362, 2370, 45 L.Ed.2d 280 (1975).

. I agree with the principal opinion, at 1103— 1104, that the footnote in White v. New Hampshire Dep't of Employment Security, 455 U.S. 445, 453-454 n. 15, 102 S.Ct. 1162, 1167-68 n. 15, 71 L.Ed.2d 325 (1982), is inapplicable to sacrifice situations. I also conclude that the Supreme Court’s brief rejection of a party’s alternative argument, id., does not in any way settle the issue for sweetheart situations. Indeed, in White itself the Court emphasized that, at least in the absence of settlement, "the court’s decision of entitlement to fees will * * * require an inquiry separate from the decision on the merits — an inquiry that cannot even commence until one party has 'prevailed.' ’’ Id. at 451-452, 102 S.Ct. at 1166. Furthermore, Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983), decided a year after White, establishes a principle for measuring attorneys’ fees based on the extent to which plaintiff has prevailed. Hensley thus helps a defendant to gauge its total liability.