Court Opinion

ID: 9480491
Source: CourtListenerOpinion
Date Created: 2023-08-05 07:49:22.891674+00
Date Added: 2024-06-11T17:47:43.267600
License: Public Domain

STEPHEN F. WILLIAMS, Circuit Judge,
concurring:
I concur in the opinion of the court except for the passage at 766-67 that rests approval of the 100% enhancement on affidavits as to market conditions. I write separately to explain why I regard the selection of a risk enhancement figure as in reality a policy choice, one which we as courts are not qualified to make but are required to by controlling precedent. I conclude with a few thoughts on the implications of contingency enhancements with one-way fee-shifting.
I
The opinion’s sifting of evidence as to the local market for work on a contingent fee in my view veils a policy judgment: a decision on what the minimum chances of victory must be for a case to be financed by the combination of fee-shifting with contingency enhancements. The answer is, in effect, to allow such financing for any case where *770the plaintiffs prospects of success are 50% or better.
Unless we impute irrationality to lawyers as a class, we must assume that they are ready to work on contingency at a whole range of premium levels that will, adjusting for the riskiness of the case and for their own risk aversion, make the contingent work the equivalent of noncontingent. Thus, momentarily putting aside risk aversion, if they can get double the basic fee, they will be ready to handle cases with a 50-50 chance of victory or better (the fee in half the cases, doubled, equals noncon-tingent reimbursement in 100% of cases); if they can recover triple the basic fee, they will be ready to take cases with a 33% chance of victory or better (the fee in one third of the cases, tripled, equals noncontin-gent reimbursement in all); and so on.
Risk aversion — the conventional preference for an assured $1000 over a 50-50 chance of $2000, or for a bird in the hand over two in the bush — may change the numbers slightly, but probably not a great deal; a large law office, at least, can diversify the risks over a large range of cases. Of course to keep the risks satisfactory, lawyers must make sure to take pools of somewhat homogeneous cases; winning three $1000 cases will not balance losing three $100,000 ones.
We have here a slew of affidavits from local lawyers, many asserting an unwillingness to take contingent work on a basis of less than 100% enhancement, others a vaguer insistence on “reasonable” enhancement. I have some skepticism about the alleged insistence on 100% enhancement; if a lawyer can identify a class of eases with a two-out-of-three chance of success, he will need only a 50% enhancement to attain the equivalent of noncontingent pay. Justice White plainly recognized the point in his opinion in Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 483 U.S. 711, 107 S.Ct. 3078, 97 L.Ed.2d 585 (1987), when he suggested a percentage limit to deter lawyers from bringing suits “in which the attorney believes there is less than a 50-50 chance of prevailing.” Id. at 730, 107 S.Ct. at 3089. (Justice White set that percentage at 33V3%. In fact, this would require lawyers to insist on cases with a three-out-of-four prospect of success.)
If I am right as to the relation between riskiness and premium, the assertion of many lawyers that they will take a contingent fee case only at a 100% enhancement or better is puzzling. One possibility is simply that plaintiff has been much more assiduous than defendant at ferreting out supporting statements. Another is that fine-tuning the risk level in terms of a line between 50-50 and two-out-of-three is very difficult — clients do not tell the whole story, juries are a bit of a gamble, judges perhaps no better. Nonetheless, lawyers and clients do make judgments of this sort when they evaluate settlement proposals, so I suspect that if Congress set 50% as the maximum enhancement for a shifted contingent fee, a very considerable bar would develop to handle such business. In sum, I view causation as running in the opposite direction from that supposed by the controlling precedents; I see the judicial judgment as defining the market, not vice ver-sa.
Thus the decision seems to me properly Congress’s. For when we look beneath the veneer of market analysis, the allowance of a 100% enhancement is clearly legislative— making the policy judgment that it is suitable to allow use of enhanced contingent fee-shifting for cases with a 50-50 chance of success or better. I know of no basis on which a court would be competent to select that level — or any other. But given the various precedents aptly summarized in Judge Buckley’s opinion, I believe we have no choice but to make the judgment. The only guidance that we have on the subject is section V of Justice White’s opinion in Delaware Valley, a section joined by three other Justices. As I’ve already noted, that discussion points in two directions: the proposed 33V3% enhancement implies a minimum-prospect case with a .75 chance of success, but the proposed 50-50 minimum-prospect case implies a 100% enhancement. As my colleagues have chosen the 100% (and thus 50-50), and the entire legislative judgment is one on which I have no claim *771to authority at all, I certainly have no basis for dissent.
II
The implications of contingency enhancements with one-way fee-shifting are curious. In the normal contingency fee arrangement (i.e., without fee-shifting), the plaintiffs possible gain sets a limit on the investment of legal effort; it usually represents the sole source of any return on that investment. There will of course be cases of principle, but they will not feed or clothe much of the bar much of the time. To introduce one-way fee-shifting, as Congress has for Title VII of the 1964 Civil Rights Act; see Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 422, 98 S.Ct. 694, 701, 54 L.Ed.2d 648 (1978) (construing fee-shifting section, which allows fees for the “prevailing party,” as allowing awards to prevailing defendants only when plaintiffs claim was “frivolous, unreasonable, or groundless”), weakens but does not eliminate that barrier. It survives to a degree, because without enhancements for contingency, counsel must contract for enough of plaintiffs’ possible recoveries to compensate themselves for the time spent on unsuccessful suits. The enhancement for contingency lowers the barrier still further; where it is set at 100%, as here, all cases with a 50-50 chance or better become promising spots for investment of legal effort. (Plaintiffs potential recovery has a residual relevance even here, as agreements entitling the lawyer to part of the recovery provide an additional source of compensation for time spent on losers.)
But this does not mean that all 50-50 cases will be litigated to the hilt; a defendant can just give up. If one assumed that the stakes were symmetrical (a dollar gain for plaintiff being matched by a dollar loss for defendant), the same forces _ that in conventional contingent-fee litigation limit the plaintiffs lawyer’s investment would operate indirectly, through the defendant (though with the terms of the likely settlement affected by the one-way characteristic of the fee-shifting, a matter addressed below). Often, however, they will not be. For example, in a case by an employee claiming wrongful dismissal, there may be only a modest gain to the plaintiff from securing reinstatement; the next-best employment opportunity may be quite similar. But the employer may have come to the view that plaintiff’s presence imposes substantial costs — salary (less the employee’s positive contribution), plus negative effects on output. The present discounted value of these costs will represent a potential downside risk of the litigation for defendant.
In considering settlement, defendant will look at the following (at least) as the costs of persisting: (1) his additional legal fees; and (2) the costs of losing, including (a) monetary judgments, (b) the sort of costs suggested in the paragraph above, and (c) the costs of plaintiff’s fee (adjusted for the risk enhancement), all adjusted for the likelihood of losing. Cf. George L. Priest, Selective Characteristics of Litigation, 9 J. of Leg.Stud. 399, 401 (1980). The rule we here adopt makes 2(c) a hefty item.
Two consequences emerge, then: First, adding contingent-fee enhancement to one-way fee-shifting enlarges the class of cases that will be brought free of a conventional limit on the investment of legal resources in litigation, namely, the value of the litigation to the plaintiff. It thus implies an increase in the portion of the country’s wealth to be devoted to litigation (mainly to lawyers). Second, adding enhancement for contingency greatly improves the plaintiff’s bargaining power in settlement negotiations. As several opinions in Delaware Valley observed, enhancement of a shifted fee has the effect of making losing defendants pay not only their own litigation costs, and those of the plaintiffs to whom they lose, but also, indirectly, the fees of losing plaintiffs. See 483 U.S. at 719-20, 722, 107 S.Ct. at 3083-84, 3085 (section III-A of Justice White’s opinion and thus the opinion of the Court); see also id. at 732, 107 S.Ct. at 3090 (O’Connor, J., concurring in part, and concurring in the judgment). But cf. id. at 752-53, 107 S.Ct. at 3100-101 (Blackmun, J., dissenting). As the fee-shifting is one-way only, this is not offset by any possibility of defendants’ recovering their own legal expenses in the event of victory. The resulting enfeeblement of defendants’ bargaining position alters the character of the settlements that will emerge, shifting the real-world impact of the substantive law toward plaintiffs. While one might argue that this shift merely counterbalances factors artificially impeding plaintiff recoveries and thus makes the net impact of the statute correspond to its language, it may in fact carry the balance far beyond that point.
*772ORDER
Sept. 12, 1990.
Upon consideration of the Suggestion For Rehearing En Banc filed by the District of Columbia on July 26, 1990, and based upon the understanding that the suggestion also seeks reconsideration of this court’s holding on contingency enhancements found in Parts II.A.2. and 3. in McKenzie v. Kennickell, 875 F.2d 330 (D.C.Cir.1989), it is
ORDERED by the Court en banc, that the suggestion for rehearing en banc is granted and this case will be reheard by the court sitting en banc. It is
FURTHER ORDERED, by the Court en banc, that the judgment filed herein on June 26, 1990 is vacated. It is
FURTHER ORDERED, by the Court en banc, that, in addition to any other arguments the parties may wish to make in their briefs, they specifically address the following question:
Whether, under the fee-shifting provisions of Title VII, appellant is entitled to receive a risk enhancement in the absence of a specific showing that such an enhancement was necessary in order to enable her to secure competent counsel; and if so, what the level of that enhancement should be.
This case is scheduled for argument before the en banc court on Wednesday, February 27, 1991. The following schedule for the filing of briefs shall apply:
(1) Brief of Mabel A. King October 30,1990
(2) Brief of District of Columbia Parties December 20, 1990
(3) Reply brief of Mabel A. King January 15,1991
(4) Joint Appendix January 22,1991
(5) Briefs in final form January 29,1991
Thirty copies of each brief and of the joint appendix shall be filed. Should the parties agree that an appendix is unnecessary, they may jointly so advise the court, by letter, and disregard items 4 and 5 of the briefing schedule.
Time at oral argument will be governed by a future order.