Court Opinion

ID: 9473494
Source: CourtListenerOpinion
Date Created: 2023-08-05 04:31:36.47454+00
Date Added: 2024-06-11T17:43:34.106185
License: Public Domain

*1111WALD, Circuit Judge,
concurring in the judgment:
I write separately because, although I agree with Judge MacKinnon that on the facts of this case, the district court’s approval of the settlement did not constitute an abuse of discretion, I share Judge Wright’s concern that simultaneous negotiation of a settlement on the merits and limitations on attorneys’ fees can in some circumstances create serious conflicts. Indeed, 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).
I.
Like Judge MacKinnon, I rely heavily on the particular facts of this case. The first concrete settlement offer, after many months of extensive discovery, came from the plaintiffs. See Moore v. National Ass’n of Sec. Dealers, Inc., 572 F.Supp. 1219, consent decree at 3-4 (D.D.C.1983), Joint Appendix (“J.A.”) at 256-57; Letter from David N. Webster to Richard T. Sampson (Apr. 4, 1983), J.A. at 76. That offer was unacceptable to the defendant, the National Association of Securities Dealers. Although the Association was apparently willing to institute the employment practices requested by the plaintiffs, and in fact claimed that it would have done so apart from this litigation, it was not willing to pay out any money, whether as damages, back pay, attorneys’ fees, or costs. During the several days of hearings and conferences Judge Parker held on the proposed settlement, counsel explained that the Association believed it had not violated Title VII and was unwilling to suggest otherwise by submitting to a financial penalty. See Hearing Transcript at 12 (May 23, 1983), J.A. at 31. Plaintiffs, who were obviously eager for a settlement, returned again and again with offers incorporating the consensus on substantive relief. Those offers first limited attorneys’ fees and costs to $100,000, later reduced the amount to $50,000 plus expenses, and finally waived fees and costs altogether. See Letter from David N. Webster to Richard T. Sampson (May 11, 1983), J.A. at 81. The district judge questioned both the plaintiffs’ attorney and the class representative herself about the waiver; they stated unequivocally that the waiver was fully voluntary and that they were satisfied with the settlement in its entirety. See Hearing Transcript at 16-17, 24-25 (May 27, 1983), J.A. at 105-06, 113-14. Neither approached the judge with any explanation that the defendant’s intransigence had coerced the settlement or that the plaintiffs were surrendering from lack of financial ability to carry on the case. After closely scrutinizing the settlement, and after a sua sponte effort to get counsel to renegotiate the waiver of costs, the district judge found that the class representative and her counsel had indeed accepted the settlement willingly and that it was fair to all parties.
Within a month, the named plaintiff had second thoughts and objected, as a class member, to the very settlement she had approved as class representative. In this court she asks for a general prophylactic rule, applied retroactively to her case, that fees and costs cannot be negotiated simultaneously with the merits of a Title VII settlement. She asks this court to enforce the benefits of the settlement to the class, but to invalidate the waiver of fees and costs and order the district court to award fees and costs as if there had been no waiver.
II.
As both Judge MacKinnon’s and Judge Wright’s opinions make abundantly clear, the merits of an all-encompassing prophylactic rule are quite uncertain. In JeffD. v. Evans, 743 F.2d 648 (9th Cir.1984), cert. granted, — U.S.-, 105 S.Ct. 2319, 85 L.Ed.2d 838 (1985), the Ninth Circuit declared that, in the absence of “unusual *1112circumstances,” district courts should not enforce any agreements on attorneys’ fees, including waiver of those fees, that were negotiated at the same time as a settlement on the merits. Id. at 652. The JeffD. approach thus frees class representatives from making the hard choice between obtaining relief for the class through settlement but forgoing attorneys’ fees, or rejecting present relief for the class in the hope of eventually recovering fees that will satisfy any personal liability the representative may have to counsel.1 On the other hand, the JeffD. approach probably means that a defendant who is willing to grant immediate prospective relief to a plaintiff case, but would rather gamble on the outcome at trial than pay attorneys’ fees and costs up front, will never settle. In short, removing' attorneys’ fees as a “bargaining chip” cuts both ways. It prevents defendants, who in Title VII cases are likely to have greater economic power than plaintiffs, from exploiting that power .in a particularly objectionable way; but it also deprives plaintiffs of the use of that chip, even when without it settlement may be impossible and the prospect of winning at trial may be very doubtful.
The public interest amici are apparently willing to take the risks of a Jeff D. rule, and indeed the ruling of the local bar ethics committee practically settles the question of whether local defendants in Title VII actions may make affirmative offers that include a waiver or stipulated amount of attorneys’ fees. It is not clear, however, how that ruling should affect a defendant’s responses to an offer from the plaintiff that includes restrictions on attorneys’ fees. Nor is it clear in what circumstances, if any, a defendant may properly reject an offer from the plaintiff with remarks hinting that fee restrictions are the- crucial missing element in the proposed settlement. But as Judge MacKinnon points out, no plaintiff and, for that matter, no district judge can force an unwilling defendant to settle. Moreover, it seems quite unrealistic to cabin the bargaining by forbidding the defendant, regardless of the circumstances, to tell the plaintiff why the defendant is refusing overtures, if the reason is an unwillingness to pay fees.2 The ruling of the local bar ethics committee appears targeted primarily not to this special situation, but rather to a broader problem: a defendant which, as its opening gambit in negotiations, demands a fee restriction routinely or without regard either to the strength of the plaintiff’s case or to the merits relief the defendant may be willing to offer.3 I agree that such a policy *1113is not only unfair to opposing counsel, but over the long haul would deter attorneys from bringing meritorious Title VII claims and thereby frustrate an entitlement that Congress deemed vital for the success of the statute.
This case, however, is not that one. This ease instead presents a vigorous effort by plaintiffs’ counsel to settle a case for modest and entirely prospective relief. Perhaps, as Judge Wright argues, the line between “voluntary” settlement offers from plaintiffs that include fee waivers and “coercive” insistence on waivers by defendants will, in many instances, be an uncertain one. I nonetheless believe that just such specific details of the negotiation determine the ultimate reasonableness of the waiver. Each negotiation, like each litigant, is unique; reasonableness can only be determined by looking at the strength of the plaintiff’s case, the stage at which the settlement is effective, the substantiality of the relief obtained on the merits, and the explanations of the parties as to why they did what they did. I am satisfied that the terms of the settlement under review, including the waiver of costs and fees, were reasonable.4
III.
A rule forbidding enforcement of limits on attorneys’ fees that are negotiated simultaneously with settlements on the merits may ultimately be required in some categories of cases — for example, settlements in which the defendant pays significant money damages or settlements in which a defendant, contrary to the ruling of local bar ethics committee, affirmatively demands a waiver as a precondition to negotiations. But I believe that in cases such as this, other guards against an unfair result can be successful. First, it bears emphasis that class representatives and class counsel are under absolutely no legal or ethical obligation to accept a settlement that unfairly saddles them with the expenses of a controversy that has produced benefits for the plaintiff class. The representatives are entitled to insist on a settlement that is fair to them as well as to the class. Second, class representatives or counsel may seek assistance from the district judge if a Title VII defendant attempts to exploit potential conflicts. The trial judge has tools at hand during the negotiations that an appellate court, faced with only the result, entirely lacks. The court might, in particular cases, advise separate negotiation of fees and costs; it might, in its discretion, refuse to approve a settlement that contained simultaneously negotiated fees and costs; or it might even refuse to enforce a waiver provision in a settlement agreement, while approving the balance of the agreement. Cf. Diss.Op. at 1118-1119. I note, however, that where *1114one party has agreed to give the other party some benefit, such as relief on the merits, in exchange for a benefit to itself, such as a waiver of fees, a court should be reluctant to enforce the defendant’s promise while depriving it of the agreed consideration.5
At least in cases such as this one — cases that are not, in my view, appropriate candidates for inclusion in a broad prophylactic rule — we should grant very substantial deference to the district court on these difficult judgment calls. See Webb v. Board of Education, — U.S. -, -, 105 S.Ct. 1923, 1928, 85 L.Ed.2d 233 (1985); Hensley v. Eckerhart, 461 U.S. 424, 437, 103 S.Ct. 1933, 1941, 76 L.Ed.2d 40 (1983). We face here a waiver that the district court fairly viewed as agreed, not extorted; a settlement agreement that provided no monetary relief, and indeed provided limited relief of any kind; a class representative fully apprised of her liability under the agreement before she approved it; experienced counsel who approved a compromise that was, from all that appears, a reasonable one; and a district judge who was fully aware of the special dangers involved in a fee waiver, explored the relevant facts in detail, and concluded that the settlement, including the waiver, was fair. In my view, that decision was not an abuse of discretion, and I therefore agree that the judgment of the district court should be affirmed.

. Appellant also makes much of the dilemma that may arise when plaintiff’s counsel receive a settlement offer conditioned on a fee waiver, and plaintiff's counsel have already agreed not to look to their client for fees. Because counsel cannot reject a settlement if their client instructs counsel to accept, in such cases ”[d]efense counsel ... are in a uniquely favorable position when they condition settlement on the waiver of the statutory fee: They make a demand for a benefit that the plaintiff’s lawyer cannot resist as a matter of ethics and one in which the plaintiff has no interest and therefore will not resist.” District of Columbia Bar Legal Ethics Committee, Opinion No. 147, reprinted in 113 Daily Washington L.Rep. 389, 394 (1985).
In some litigations, this concern might be a real one. However, my belief is that most public interest counsel explain the financial details of the litigation well in advance to their clients, and that few clients will against the advice of counsel leap to accept a settlement that deprives counsel of fair compensation and themselves of any provision for costs. In my experience, respected counsel do not and should not undertake public interest representation until an understanding is had with clients as to the range of appropriate settlements. On balance, I do not believe the likelihood that irresolvable problems between counsel and clients may occur is high enough to justify so broad-ranging a rule as would cover the present case.

. Cf. Diss.Op. at 1115 ("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").

. The limited scope of the committee’s prohibition is borne out by another ruling in the same opinion: an attorney may ethically "offer a single sum in settlement of the claims against [a Title VII ] defendant for both damages and attorneys’ fees.” District of Columbia Bar Legal Ethics Committee, Opinion No. 147, reprinted in 113 Daily Washington L.Rep. 389, 389 (1985). Such a single-sum offer is, in effect, the simultaneous negotiation of the merits settlement and attorneys’ fees. However, a single-sum offer allows the plaintiff and plaintiff’s counsel, rath*1113er than the defendant, to divide the available fund between the plaintiff and counsel. A defendant's demand for a fee waiver may be particularly suspect when the defendant offers financial relief on the merits, since the defendant cannot then claim that it is blameless and therefore will not pay out any money.

. See Fed.R.Civ.P. 23(e). Under rule 23(e), compromises of class actions must be submitted to the court for approval. Among the purposes of a "fairness hearing” under rule 23(e) is an effort to ascertain whether the settlement negotiated by class representatives is fair to all class members. Thus, detection of a "sweetheart” settlement — one in which class counsel or class representatives or both have taken too much of the pic for themselves — is squarely within the traditional ambit of the hearing.
"Sacrifice" situations are different. Admittedly, they raise special problems in class actions for a class representative. See infra at 1117. However, a settlement proposal that includes a waiver of statutory attorneys’ fees can create a conflict in any case, whether or not it is a class action, if the plaintiff is not liable to his or her attorney for attorneys' fees. See supra note 1.
A fairness hearing under rule 23(e), of course, occurs only in class actions. A rule 23(e) hearing may help air the “sacrifice” problems when it happens to come up in class actions, but the rule obviously does nothing to solve the problem in other cases. In cases that are not class actions, plaintiff's counsel should be ready to seek voluntary judicial supervision if settlement demands containing fee waivers create conflicts between counsel and clients. Cf. Fed.R.Civ.P. 16(a)(5), (c)(7) (use of pretrial conferences to encourage settlement).

. In Lazar v. Pierce, 757 F.2d 435 (1st Cir.1985), the plaintiff agreed to a settlement waiving attorneys’ fees in her civil rights action against her landlord and the United States Department of Housing and Urban Development. The plaintiff subsequently sought to recover fees against the defendant housing authority under 42 U.S.C. § 1988 and against the United States under the Equal Access to Justice Act, 28 U.S.C. § 2412. The court was quite critical of the housing authority, which had insisted upon a fee waiver despite clear liability to the plaintiff, for “playing on counsel's difficult dilemma.” Id. at 437; see also id. at n. 1. Nonetheless, the court refused to award attorneys’ fees, in part because of its concern over the “secret plan to rescind” the waiver agreement by plaintiff’s counsel. Id. at 438; see also id. at 437, 439. The court emphasized that rather than surrendering to the housing authority’s unfair position, plaintiff’s counsel should have resisted settlement or requested help from the court. See id. at 438-39.