REASONABLE ATTORNEY’S FEES IN
EMPLOYMENT RIGHTS CASES
by
SANFORD JAY ROSEN
KENNETH M. WALCZAK
Rosen Bien & Galvan LLP
315 Montgomery Street, 10th Floor
San Francisco, CA 94104
Telephone: (415) 433-6830
Facsimile: (415) 433-7104
email to:
srosen@rbg-law.com
kwalczak@rbg-law.com
©
July 5, 2007
INDEX
INDEX ................................................................................................................................. i
INTRODUCTION .............................................................................................................. 1
I.
II.
III.
WHO GETS THE FEE FROM WHOM? ............................................................... 2
A.
Plaintiff’s Entitlements ................................................................................. 2
B.
Defendants’ Exposure and Entitlements ...................................................... 6
C.
Intervenors’ Exposure and Entitlements ...................................................... 8
HOW IS THE ATTORNEY’S FEE CALCULATED? .......................................... 9
A.
Ordinarily The Attorney’s Fee Is Calculated Using A Lodestar
Approach ...................................................................................................... 9
B.
Reasonable Rates ........................................................................................ 10
C.
Issues Involving Compensable Time ......................................................... 12
D.
Expenses ..................................................................................................... 14
E.
Interest ........................................................................................................ 15
F.
Upward Enhancement of Fees.................................................................... 16
G.
Reduced Fees .............................................................................................. 18
H.
Impact of Fed. R. Civ. P. 68 and Cal. Code Civ. Pro. § 998 on
Attorney’s Fees........................................................................................... 19
I.
Additional Comments About Settling Fees Claims ................................... 21
PROCEDURES TO SECURE FEES .................................................................... 21
A.
Timing and Manner of Application ............................................................ 21
B.
Proving And Litigating Attorney’s Fees .................................................... 22
i
IV.
C.
Interim Fee Applications May be Made In Some Cases ............................ 25
D.
Collection and Assignment ........................................................................ 26
WHOSE FEE IS IT? .............................................................................................. 26
A.
Federal and State Law ................................................................................ 26
B.
Retainer Agreements .................................................................................. 27
C.
Who Is Taxed On the Fee? ......................................................................... 29
ii
INTRODUCTION
This article addresses strategies and means for securing and maximizing statutory
and common fund awards of attorney’s fees in employment rights cases. It also deals
with designing ethical attorney’s fee agreements. As we are located in California and the
Ninth Circuit, precedents and practices in those jurisdictions predominate in the article.
Notably, as well, for all kinds of substantive law and forum selection reasons, most
employment cases in California are venued in state court.
Attorney’s fees are recoverable under some federal civil rights and public interest
statutes. Under Title VII, 42 U.S.C. § 2000e-5(k):
In any action or proceeding under this subchapter the court, in its discretion, may
allow the prevailing party, other than the [Equal Employment Opportunity]
Commission or the United States, a reasonable attorney’s fee (including expert
fees) as part of the costs, and the Commission and the United States shall be liable
for costs the same as a private person.
Similarly, the Civil Rights Attorney’s Fees Awards Act of 1976 provides that “the court,
in its discretion, may allow the prevailing party [in a § 1981, § 1981a or § 1983 action],
other than the United States, a reasonable attorney’s fee as part of the costs.” 42 U.S.C. §
1988(b). Numerous other employment-related federal statutes also have attorney’s fees
provisions. See, e.g., 5 U.S.C. § 1221(g) (whistleblower claims); 29 U.S.C. § 1132(g)
(Employment Retirement Income Security Act (“ERISA”) claims).
The federal law developed principally under § 1988 has produced a set of standards
governing civil rights attorney’s fees awards that applies to most other federal civil rights
and public interest fee shifting statutes, including most employment rights fee shifting
statutes.
The employment rights practitioner, however, must be very careful to identify and
analyze the particular attorney’s fee statute on which he or she is basing a fee claim.
Significant differences abound, between and among the pertinent federal and state
attorney’s fees statutes. Entitlement standards may differ from statute to statute. For
example, unlike the civil rights statutes, which greatly favor fee awards to plaintiffs over
defendants, the ERISA fee shifting provisions make fees and costs available to
defendants upon a less stringent showing. 29 U.S.C. § 1132(g) (fees and costs available
to “either party”); see also Carpenters Southern California Admin. Corp. v. Russell, 726
F.2d 1410, 1415-16 (9th Cir. 1984) (declining to impose stringent Title VII standard for
defendant’s fee awards to ERISA cases, but remarking that under a proper consideration
of factors enumerated under Hummell v. S.E. Rykoff & Co., 634 F.2d 446 (9th Cir.
1980), “very frequently . . . attorney’s fees should not be charged against ERISA
plaintiffs”). Also of note are the differences in entitlement to expert witness fees. Under
Title VII (as amended), expert witness costs are included in the attorney’s fee award.
They are not included in an award under 42 U.S.C. § 1983, but are included in awards
under 42 U.S.C. § 1981 or 1981(a). See 42 U.S.C. § 1988(c).
1
Attorney’s fees under federal attorney’s fees statutes are available for federal
claims successfully asserted in state court. See Maine v. Thiboutot, 448 U.S. 1 (1980);
Sokolow v. County of San Mateo, 213 Cal. App. 3d 231 (1989); McMahon v. Lopez, 199
Cal. App. 3d 829 (1988). Similarly, state fee statutes are enforceable in federal court.
See, e.g., Mangold v. California PUC, 67 F.3d 1470, 1473, 1478-79 (9th Cir. 1995);
Bouman v. Block, 940 F.2d 1211, 1237 (9th Cir. 1991), cert. denied, 502 U.S. 1005
(1991).
The employment rights practitioner must be familiar with applicable state
attorney’s fees statutes, which may provide greater or smaller attorney’s fee recovery or
exposure to the employment rights plaintiff. The California Fair Employment and
Housing Practices Act (“FEHA”), Cal. Govt. Code § 12965(b), provides that:
In actions brought under this section, the court, in its discretion, may award the
prevailing party attorney’s fees and costs, including expert witness fees, except
where such action is filed by a public agency or a public official, acting in an
official capacity.
California Code of Civil Procedure section 1021.5 and California Labor Code
section 218.5 are other possible sources of fees under California law. But see Weeks v.
Baker & McKenzie, 63 Cal. App. 4th 1128, 1171 (1998) (section 1021.5 fees are not
available in a FEHA action).
Courts applying California law look to federal decisions to interpret comparable
attorney’s fees shifting statutes when state authority is not settled. See, e.g., Crommie v.
State of California, 840 F. Supp. 719, 722 (N.D. Cal. 1994), aff’d sub nom. Mangold v.
California PUC, 67 F.3d 1470 (9th Cir. 1995) (interpreting California FEHA); Lealao v.
Beneficial California, Inc., 82 Cal. App. 4th 19, 37-38 (2000). Hence, federal decisions
can be a useful guide when applying comparable state laws. However, California law is
also independent of federal law. The same principles likely apply in other states.
Note: There are several major differences between California and federal law.
Most California statutes, unlike most federal statutes, may preclude recovery of litigation
expenses other than statutory costs. Compare Harris v. Marhoefer, 24 F.3d 16, 20 (9th
Cir. 1994) with Hsu v. Semiconductor Systems, Inc., 126 Cal. App. 4th 1330 (2005).
Risk multipliers are available under California but not federal law. Compare City of
Burlington v. Dague, 505 U.S. 557 (1992) with Ketchum v. Moses, 24 Cal. 4th 1122
(2001).
I.
WHO GETS THE FEE FROM WHOM?
A.
Plaintiff’s Entitlements
1.
Unless there are special circumstances, an employment rights plaintiff
(except the United States) who prevails in a Title VI or Title VII lawsuit is entitled to
2
attorney’s fees. See Maher v. Gagne, 448 U.S. 122, 128-29 (1980); Hashimoto v. Dalton,
118 F.3d 671, 677 (9th Cir. 1997).
2.
The same general rule is true under California public interest attorney’s fees
statutes, such as the fees provisions of the Fair Employment and Housing Act (“FEHA”),
Cal. Gov. Code § 12980(h), the Unruh Civil Rights Act, Cal. Civ. Code § 52, and the
California Disabled Persons Act, Cal. Civ. Code §§ 54.3 & 55. See, e.g., Weeks v. Baker
& McKenzie, 63 Cal. App. 4th 1128, 1175-76 (1998) (“[T]he attorney who takes [a
FEHA] case can anticipate receiving full compensation for every hour spent litigating a
claim against even the most polemical opponent.”).
3.
An exception to the general rule is California’s private attorney general
statute, California Code of Civil Procedure section 1021.5, which requires an additional
showing. Under section 1021.5, the party claiming attorney’s fees must demonstrate
that it acted in the public interest, secured a benefit to the general public or a large class
of persons, that the burden of private enforcement should not fall on the private attorney
general, and that the attorney’s fees ought not come out of the recovery. Accord Weeks
v. Baker & McKenzie, 63 Cal. App. 4th at 1171 (“section 1021.5 does not authorize an
award of fees when the record indicates that the primary effect of a lawsuit was to
advance or vindicate the plaintiff’s personal economic interest”). Eventual participation
by a state agency does not preclude recovery of fees under section 1021.5. Lyons v.
Chinese Hospital Association, 136 Cal. App. 4th 1331 (2006); Committee to Defend
Reproductive Rights v. A Free Pregnancy Center, 229 Cal. App. 3d 633 (1991). A
prevailing public entity (any subdivision smaller than the State of California itself) may
also recover fees upon showing that it secured a benefit for the public outweighing the
benefit to the individual entity (or its residents). See People ex rel. Brown v. Tehama
County Bd. of Sup’rs, 148 Cal. App. 4th 790 (2007).
4.
California appellate courts have reversed decisions which have awarded
fees under both FEHA and section 1021.5 in the same action, but they have done so on
the grounds that the prevailing plaintiff had too great a personal economic interest in the
outcome of the suit. See Weeks v. Baker & McKenzie, 63 Cal. App. 4th at 1171;
Flannery v. California Highway Patrol, 61 Cal. App. 4th 629, 635 (1998). As there is no
direct conflict between the two provisions, a plaintiff who secures a benefit to the general
public by means of a FEHA (or other employment law) victory might also recover fees
under 1021.5. Compare Riverside Sheriff’s Association v. County of Riverside, ___ Cal.
Rptr. 3d ____, 2007 WL 1776161 (Cal. App. 4 Dist. 2007) (fees available under both
section 1021.5 and California Government Code section 3309.5).
5.
A plaintiff who prevails on a non-fee-supporting claim may qualify for a
fees award if he or she alleged an unaddressed, fee-supporting claim that is both
substantial and arises from the same nucleus of operative fact as the non-fee-supporting
claim. Gerling Global Reinsurance Corp. v. Garamendi, 400 F.3d 803, 808 (9th Cir.
2004).
3
6.
A successful pro per attorney usually may not claim attorney’s fees. Kay v.
Ehrler, 499 U.S. 432, 437 (1991); Elwood v. Drescher, 456 F.3d 943 (9th Cir. 2006).
Counsel who assisted a pro per attorney in preparing the lawsuit is entitled to an award of
attorney’s fees. Mix v. Tumanjan Development Corporation, 102 Cal. App. 4th 1318
(2002). A law firm that represented itself is not entitled to fees. Trope v. Katz, 11 Cal.
4th 274, 292 (1995); Witte v. Kaufman, 141 Cal. App. 4th 1201 (2006). A law firm that
represented one of its attorneys may be eligible for fees, Gilbert v. Master Washer &
Stamping Co., 87 Cal. App. 4th 212, 221 (2001); see also Farmers Insurance Exchange v.
Law Offices of Conrado Joe Sayas, Jr., 250 F.3d 1234, 1238-39 (9th Cir. 2001) (two law
firms representing each other could seek fees under California law); Bond v. Blum, 317
F.3d 385, 399-400 (4th Cir. 2003) (law firm members who represented the firm could
claim fees). An organization represented by in-house counsel is eligible for fees. PLCM
Group v. Drexler, 22 Cal. 4th 1084, 1094 (2000); see also Central States, Southeast and
Southwest Areas Pension Fund v. Central Cartage Co., 76 F.3d 114, 115 (7th Cir. 1996);
United States v. Jerry M. Lewis Truck Parts & Equipment, Inc., 89 F.3d 574, 577 (9th
Cir. 1996). Attorney’s fees are available where plaintiffs are employees represented
without charge by the Labor Commissioner. Lolley v. Campbell, 28 Cal. 4th 367 (2002).
7.
Plaintiffs are “considered to have prevailed when they vindicate rights.”
Maher v. Gagne, 448 U.S. 122, 129 (1980) quoting S. Rep. No. 94-1011, p. 5 (1976). To
“qualify as a prevailing party, a civil rights plaintiff must obtain at least some relief on
the merits of his claim.” Farrar v. Hobby, 506 U.S. 103, 111 (1992).
8.
Plaintiffs need not succeed on a “central” issue. Texas State Teachers
Ass’n v. Garland Indep. School District, 489 U.S. 782, 790 (1989); Notrica v. State
Compensation Insurance Fund, 70 Cal. App. 4th 911, 955 (1999) (no apportionment of
fees necessary under California Code of Civil Procedure section 1021.5). Plaintiffs
“prevail” if they succeed on any significant issue in litigation and achieve some benefit
sought in the suit. Hensley v. Eckerhart, 461 U.S. 424, 433 (1983); see also Hashimoto
v. Dalton, 118 F.3d 671, 677 (9th Cir. 1997); Stivers v. Pierce, 71 F.3d 732, 751 (9th Cir.
1995); Lyons v. Chinese Hospital Ass’n, 136 Cal. App. 4th 1331, 1346-48 (2006);
Sokolow v. County of San Mateo, 213 Cal. App. 3d 231, 246 (1989). Failure to prevail
on some theories of recovery is not grounds for total denial of fees under § 1988.
Thomas v. City of Tacoma, 410 F.3d 644, 649 (9th Cir. 2005).
9.
“Whatever relief the plaintiff secures must directly benefit him at the time
of the judgment or settlement.” Farrar v. Hobby, 506 U.S. 103, 111 (1992). California’s
private attorney general statute provides an exception to this principle. See, e.g., Harbor
v. Deukmejian, 43 Cal. 3d 1078, 1103 (1987) (attorney’s fees available under section
1021.5 where named plaintiffs did not personally benefit, but impact of decision was “to
vindicate the principle upon which they brought [their] action”).
10.
Under federal law, the benefit plaintiff obtained must be more than a
procedural victory. Hanrahan v. Hampton, 446 U.S. 754, 758 (1980). A favorable
4
judicial statement of law, standing alone, is not enough. Hewitt v. Helms, 482 U.S. 755,
763 (1987); Hyland v. Wonder, 117 F.3d 405, 416-417 (9th Cir. 1997).
11.
Plaintiffs who obtain preliminary injunctive relief, but then lose on the
merits, are not prevailing parties. Sole v. Wyner, __ U.S. ___, 127 S.Ct. 2188, 2196
(2007); Watson v. County of Riverside, 300 F.3d 1092, 1096 (9th Cir. 2002). The Court
in Wyner explicitly refused to decide the broader issue of “whether, in the absence of a
final decision on the merits of a claim for permanent injunctive relief, success in gaining
a preliminary injunction may sometimes warrant an award of counsel fees [under
§1988].” Sole v. Wyner, 127 S.Ct. at 2196. For the suggestion that such success may
warrant a fee award, see Friend v. Kolodzieczak, 72 F.3d 1386, 1390 (9th Cir. 1995);
cert. denied, 516 U.S. 1146 (1996) and County of Colusa v. Cal. Wildlife Conservation
Board, 145 Cal. App. 4th 637, 651 (2006) (entry of preliminary injunction and stay
“brought [defendants] to the table,” leading to agreement settling remaining issues).
12.
Plaintiffs may prevail by settlement. Maher v. Gagne, 448 U.S. 122, 129
(1980); Lyons v. Chinese Hospital Ass’n, 136 Cal. App. 4th 1331, 1335, 1345 (2006);
Folsom v. Butte County Ass’n of Governments, 32 Cal. 3d 668, 685 (1982) (“critical fact
is the impact of the action, not the manner of its resolution”).
13.
Under federal law, plaintiffs do not prevail if they demonstrate only that
their lawsuit was a catalyst causing defendants to take action that plaintiffs seek, but no
judicial order altering the parties’ status is entered. Buckhannon Bd. & Care Home, Inc.
v. W. Va. Dept. of Health & Human Res., 532 U.S. 598 (2001). Buckhannon applies to a
number of federal statutes, including the Individuals with Disabilities Education Act
(“IDEA”), the Resource Conservation and Recovery Act (“RCRA”), the Equal Access to
Justice Act (“EAJA”), and 42 U.S.C. § 1988. See P.N. v. Seattle School District, No. 1,
474 F.3d 1165 (9th Cir. 2007); Carbonell v. INS, 429 F.3d 894, 898-99 (9th Cir. 2005);
Shapiro ex rel. Shapiro v. Paradise Valley Unified School Dist. No. 69, 374 F.3d 857,
864-65 (9th Cir. 2004); Perez-Arellano v. Smith, 279 F.3d 791 (9th Cir. 2002). A
settlement agreement allowing a court to retain jurisdiction over the issue of attorney’s
fees is sufficient imprimatur to allow recovery notwithstanding Buckhannon. Compare
Kasza v. Whitman, 325 F.3d 1178 (9th Cir. 2003) (no “legally enforceable settlement
agreement”), with Barrios v. Cal. Interscholastic Fed’n, 277 F.3d 1128 (9th Cir. 2002)
(“sufficient judicial oversight” over settlement agreement). Buckhannon does not apply
to the Endangered Species Act or other statutes that permit fee-shifting “whenever . . .
appropriate.” Ass’n of California Water Agencies v. Evans, 386 F.3d 879, 885 (9th Cir.
2004).
14.
By contrast, California law permits recovery of attorney’s fees under a
catalyst theory. See Graham v. DaimlerChrysler, 34 Cal. 4th 553, 575-77 (2004); TiptonWhittingham v. City of Los Angeles, 34 Cal. 4th 604, 608 (2004). In order to claim fees
under the catalyst theory, plaintiffs must show (1) a causal connection between the
lawsuit and the relief obtained; (2) at least some merit to the lawsuit; and (3) a reasonable
pre-lawsuit attempt to settle. Graham, 34 Cal. 4th at 575-77. See also Maria P. v. Riles,
5
43 Cal. 3d 1281, 1291-92 (1987); Westside Community for Independent Living, Inc. v.
Obledo, 33 Cal. 3d 348, 352-53 (1983). But cf. Olsen v. Breeze, Inc., 48 Cal. App. 4th
608 (1996) (fees not available under catalyst theory where primary relief not obtained;
skiing not a matter of public interest); Abouab v. City and County of San Francisco, 141
Cal. App. 4th 643, 666 (2006) (no reasonable attempt to settle short of litigation).
15.
Under California law, especially in a suit against a government agency,
attorney’s fees are not available under the catalyst theory if the relief obtained is “merely
causing the acceleration of the issuance of government regulations or remedial measures,
when the process of issuing those regulations or undertaking those measures was ongoing
at the time the litigation was filed.” Tipton-Whittingham, 34 Cal. 4th at 608.
B.
Defendants’ Exposure and Entitlements
1.
Both private and public entity defendants may be obligated to pay
plaintiffs’ attorney’s fees. For example, a public entity that employs an individual § 1983
defendant can be liable for plaintiff’s fee award. See Kentucky v. Graham, 473 U.S. 159,
168-69 (1985).
2.
Defendant’s good faith in defending the underlying lawsuit generally does
not justify denying a fee award to the prevailing plaintiff. See Hutto v. Finney, 437 U.S.
678, 693 (1978); see also Supreme Court of Virginia v. Consumers Union, 446 U.S. 719,
739 (1980). However, a court may not award fees against the United States under the
Equal Access to Justice Act (EAJA) if it “finds that the position of the United States was
substantially justified.” 28 U.S.C. § 2412(d)(1)(A). “The defense of a congressional
statute from constitutional challenge will usually be substantially justified.” Gonzales v.
Free Speech Coalition, 408 F.3d 613, 618 (9th Cir. 2005) (considering first “objective
indicia of substantial justification” and then “the merits of the government’s litigating
position”). See also Pacific Fisheries, Inc. v. United States, 484 F.3d 1103 (9th Cir.
2007)(fees available under EAJA when government agency takes position that is not
substantially justified, either before or during litigation).
3.
Federal courts may require apportionment of liability for fees among
numerous defendants, especially where “the time expended by the plaintiff in pursuing
each defendant was grossly unequal.” Corder v. Gates, 947 F.2d 374 (9th Cir. 1991). In
deciding whether apportionment is necessary, the focus is on the time expended in
pursuing each defendant, rather than on relative liability. El-Hakem v. BJY, Inc., 415
F.3d 1068, 1075 (9th Cir. 2005).
4.
Under most employment rights and public interest laws, prevailing
defendants may not recover fees from the plaintiff unless plaintiff's lawsuit “was
frivolous, unreasonable, or groundless, or . . . the plaintiff continued to litigate after it
clearly became so,” Christiansburg Garment Co v. EEOC, 434 U.S. 412, 422 (1978), or
“the suit was vexatious, frivolous, or brought to harass or embarrass the defendant.”
Hensley v. Eckerhart, 461 U.S. 424, 429 n.2 (1983); Maag v. Wessler, 993 F.2d 718, 720
6
(9th Cir. 1993); Jersey v. John Muir Medical Center, 97 Cal. App. 4th 814, 831 (2002);
Cummings v. Benco Building Services, 11 Cal. App. 4th 1383, 1387 (1992). Plaintiff’s
subjective bad faith is not necessary. Parks v. Watson, 716 F.2d 646, 664 (9th Cir. 1983);
but see Corbett v. Hayward Dodge, Inc., 119 Cal. App. 4th 915 (2004) (defendant must
show plaintiff’s subjective bad faith under the Consumer Legal Remedies Act). Even if
some of the plaintiff’s claims are frivolous, the court “still retains discretion to deny or
reduce [the defendant’s] fee requests after considering all the nuances of a particular
case.” Thomas v. City of Tacoma, 410 F.3d 644, 651 (9th Cir. 2005). Where a plaintiff’s
non-frivolous and frivolous claims are sufficiently distinct, a court may award only those
fees spent defending against the frivolous claims. Tutor-Saliba Corp. v. City of Hailey,
452 F.3d 1055, 1064 (9th Cir. 2006).
5.
The “frivolous, unreasonable, or groundless” standard might apply to a
defendant’s application for costs. Compare Brown v. Lucky Stores, Inc., 246 F.3d 1182,
1190 (9th Cir. 2001) (heightened standard applies) with Mitchell v. City of Moore, 218
F.3d 1190, 1204 (10th Cir. 2000) (no heightened standard); Byers v. Dallas Morning
News, 209 F.3d 419, 430 (5th Cir. 2000) (same); and Cherry v. Champion Int’l Corp.,
186 F.3d 442, 448 (4th Cir. 1999) (same).
6.
Attorney’s fees have been awarded to defendants in a limited range of
cases. See, e.g., Margolis v. Ryan, 140 F.3d 850 (9th Cir. 1998); Marquat v. Lodge 837,
26 F.3d 842 (8th Cir. 1994); EEOC v. Elgin Teachers Ass’n, 27 F.3d 292 (7th Cir. 1994);
Hutchinson v. Staton, 994 F.2d 1076 (4th Cir. 1993); Brown v. Borough of
Chambersburg, 903 F.2d 274 (3d Cir. 1990); Glass v. Pfeffer, 657 F.2d 252 (10th Cir.
1981); Tonti v. Petropoulous, 656 F.2d 212 (6th Cir. 1981); Church of Scientology v.
Cazares, 638 F.2d 1272 (5th Cir. 1981).
7.
In assessing attorney’s fees against a plaintiff in an employment rights case,
the judge should take into account the plaintiff’s financial resources as well as his good
faith, and the matter should be disposed of on equitable principles. See Alizadeh v.
Safeway Stores, 910 F.2d 234, 238-39 (5th Cir. 1990) (plaintiffs’ financial condition is a
proper factor to consider in determining the amount of attorney’s fees to award); Durett
v. Jenkins Brickyard, Inc., 678 F.2d 911 (11th Cir. 1982); Furaci v. Hickey-Freeman Co.,
607 F.2d 1025 (2d Cir. 1979).
8.
Under fee shifting statutes that are not “private attorney general” statutes,
whoever wins may be entitled to a fee award – both defendants and plaintiffs. Fogerty v.
Fantasy, Inc., 510 U.S. 517, 524-25 (1994) (copyright fee shifting statute); Hsu v.
Abbara, 9 Cal. 4th 863 (1995) (California Civil Code section 1717(a), fee shifting where
provided for by contract); Trope v. Katz, 11 Cal. 4th 274, 285 (1995) (section 1717
creates a reciprocal right to fees in any contract that creates a right to fees for one party);
ABF Capital Corp. v. Grove Props. Co., 126 Cal. App. 4th 204, 214 (2005) (business
entities are protected under section 1717); Xuereb v. Marcus & Millichap, Inc., 3 Cal.
App. 4th 1338 (1992) (section 1717 applies to tort claims arising out of the underlying
contract). But see Wood v. Santa Monica Escrow Co., ___ Cal.Rptr.3d ____, 2007 WL
7
1636442 (Cal. App. 2 Dist., 2007) (where all causes of action arise from same
transaction, and claim brought under unilateral fee shifting provision, section 1717 does
not give prevailing defendants a right to recover fees).
9.
Many federal and California labor laws allow for such “two way” attorney
fee awards. See, e.g., 29 U.S.C. § 1132(g)(1) (Employee Retirement Income Security Act
(“ERISA”)) (court in its discretion may allow fees and costs “to either party”); Cal. Labor
Code § 218.5 (award to prevailing party in nonpayment of wages cases); Cal. Civ. Code §
1738.16 (fees and costs to prevailing party in actions pursuant to Independent Wholesale
Representatives Contractual Relations Act of 1990).
C.
Intervenors’ Exposure and Entitlements
1.
Successful plaintiff intervenors can be prevailing parties for fee purposes.
See, e.g., Wilder v. Bernstein, 965 F.2d 1196 (2d Cir. 1992); City of Santa Monica v.
Stewart, 126 Cal. App. 4th 43 (2005) (trial court abused discretion by attempting to
apportion fees for contribution of intervening plaintiff). In California, a successful
objector to a class action settlement may not be entitled to fees under California Code of
Civil Procedure § 1021.5 because the objector’s role is not equivalent to that of a private
attorney general enforcing an important public right. See Consumer Cause v. Mrs.
Gooch’s Natural Food Markets, 127 Cal. App. 4th 387, 25 Cal. Rptr. 3d 514, 526 (2005).
However, fees may be available to the objector under the equitable common fund or
substantial benefit doctrines. Id., 25 Cal. Rptr. 3d at 516, 526 n.10.
2.
Defendant intervenors are at risk for plaintiff’s fees. However, when a
party intervenes to oppose a settlement agreement, plaintiff may not secure fees from that
objector, unless the court finds that the intervention was “frivolous, unreasonable, or
without foundation.” Independent Fed’n of Flight Attendants v. Zipes, 491 U.S. 754, 761
(1989) (Title VII case); see also League of United Latin American Citizens v. Wilson,
131 F.3d 1297, 1308 (9th Cir. 1997) (denial of intervention is not dispositive of whether
intervention is frivolous). Fee awards against defendant intervenors should take into
account relative culpability and time allocation by plaintiff’s counsel. See Sable
Communications of California v. Pacific Tel. & Tel. Co., 890 F.2d 184, 194 (9th Cir.
1989); Davis v. City & County of San Francisco, 976 F.2d 1536, 1543, 1545 (9th Cir.
1992), amended in non-relevant part, 984 F.2d 345 (9th Cir. 1993). Absent a provision in
the settlement agreement, fees may not be awarded against the settling defendant for
plaintiff’s work opposing intervenors.
3.
Parties participating as amici curiae are generally not liable for attorney’s
fees, no matter how active a role they take in litigating the case. Choudhry v. Free, 17
Cal.3d 660, 662, 669 (1976). Even amici who are later designated real parties in interest
may not be considered “opposing parties” for purposes of attorney’s fees. Connerly v.
State Personnel Bd., 37 Cal. 4th 1169 (2006).
8
II.
HOW IS THE ATTORNEY’S FEE CALCULATED?
A.
Ordinarily The Attorney’s Fee Is Calculated Using A Lodestar
Approach
1.
Initially, the amount of an awarded attorney’s fee is determined by
multiplying each lawyer and legal worker’s “reasonable” hours by each person’s
“reasonable” hourly rate. That lodestar and its components largely are a function of
deciding what would be billed and paid in the private market for comparable services by
comparable attorneys in comparable cases. Blum v. Stenson, 465 U.S. 886, 888, 895
(1984); see also City of Burlington v. Dague, 505 U.S. 557, 562 (1992); Hensley v.
Eckerhart, 461 U.S. 424, 433-34 (1983); Ketchum v. Moses, 24 Cal. 4th 1122, 1132
(2001); PLCM Group, Inc. v. Drexler, 22 Cal. 4th 1084, 1096-97 (2000).
2.
The initial lodestar is subject to upward or downward adjustment.
Ultimately, the reasonable fee is determined by reference to twelve factors. See Kerr v.
Screen Extras Guild, Inc., 526 F.2d 67, 69-70 (9th Cir. 1975); Johnson v. Georgia
Highway Express, Inc., 488 F.2d 714, 717-719 (5th Cir. 1974). These factors are: “(1)
the time and labor required, (2) the novelty and difficulty of the questions involved, (3)
the skill requisite to perform the legal service properly, (4) the preclusion of other
employment by the attorney due to acceptance of the case, (5) the customary fee, (6)
whether the fee is fixed or contingent, (7) time limitations imposed by the client or the
circumstances, (8) the amount involved and the results obtained, (9) the experience,
reputation, and ability of the attorneys, (10) the ‘undesirability’ of the case, (11) the
nature and length of the professional relationship with the client, and (12) awards in
similar cases.” Kerr, 526 F.2d at 70. See points II F & G, infra; cf. Graham v.
DaimlerChrysler, 34 Cal. 4th 553, 579-80 (2004); Ketchum v. Moses, 24 Cal. 4th 1122,
1132 (2001) (providing non-exclusive list of four of the above factors to be considered
for adjustment of lodestar); PLCM Group, Inc. v. Drexler, 22 Cal. 4th 1084, 1096 (2000)
(non-exclusive list of seven, plus “other circumstances”).
3.
The Second Circuit has recently abandoned the “lodestar” terminology, in
favor of a requirement that district courts take into account “all of the case-specific
variables that we and other courts have identified as relevant” before arriving at a
“reasonable hourly rate.” This rate should then be used to calculate a “presumptively
reasonable fee.” Throughout this process, the guiding principle for courts in the Second
Circuit must be “what a reasonable, paying client would be willing to pay.” Arbor Hill
Concerned Citizens Neighborhood Ass’n v. County of Albany, 484 F.3d 162, 163 (2d
Cir. 2007) (emphasis in original).
9
B.
Reasonable Rates
1.
In the Ninth Circuit, where there is a divergence between an attorney’s
actual rate and the market rate, the market rate will be awarded. Welch v. Metropolitan
Life Ins. Co., 480 F.3d 942 (9th Cir. 2007). See also Carson v. Billings Police Dept., 470
F.3d 889 (9th Cir. 2006) (uncontroverted evidence showed market rate to be lower than
attorney’s customary rate); Maldonado v. Lehman, 811 F.2d 1341, 1342 (9th Cir. 1987),
cert. denied, 484 U.S. 990 (1987) (market rate was higher than attorney’s actual
customary rate); Davis v. City & County of San Francisco, 976 F.2d 1536, 1545-46, 1548
(9th Cir. 1992), amended in non-relevant part, 984 F.2d 345 (9th Cir. 1993). Courts
routinely disregard both the rate actually charged to the prevailing party by counsel, and
the rate actually paid to the timekeeper, as irrelevant to a determination of a reasonable
market rate. See, e.g., Mendenhall v. NTSB, 213 F.3d 464, 471 (9th Cir. 2000); Moysis
v. DTG Datanet, 278 F.3d 819, 828 (8th Cir. 2002); Flannery v. Prentice, 26 Cal. 4th 572,
585 (2001); Serrano v. Unruh, 32 Cal. 3d 621, 643 (1982); Shaffer v. Superior Court, 33
Cal. App. 4th 993, 1002 (1995).
2.
The District of Columbia Circuit often applies a rate schedule set forth in
Laffey v. Northwest Airlines Inc., 572 F. Supp. 354, 371 (D.D.C. 1983), aff’d in part,
vacated and remanded in part, 746 F.2d 4 (D.C. Cir. 1984). The “Laffey matrix” indexes
the prevailing hourly market rates for attorneys based largely on years of experience. Id.
The D.C. Circuit Court of Appeals embraced the “Laffey matrix,” and it is widely used in
the circuit as a basis for calculating attorney’s fees. Laffey, 746 F.2d 4 (D.C. Cir. 1984),
overruled in part by Save Our Cumberland Mountains, Inc, v. Hodel, 857 F.2d 1516,
1524 (D.C. Cir. 1988); see also Covington v. District of Colombia, 57 F.3d 1101, 1115
(D.C. Cir. 1995); Save Our Cumberland Mountains, 857 F.2d at 1525.
3.
In the Second Circuit, calculation of a “presumptively reasonable fee,”
rather than calculation and subsequent adjustment of a lodestar, means that any and all
case-specific factors should be considered in arriving at an estimate of the rate a
reasonable client might be able to negotiate for the effective litigation of her case. Arbor
Hill Concerned Citizens Neighborhood Ass’n v. County of Albany, 484 F.3d 162, 169
(2d Cir. 2007). The opposing party must then rebut the presumption that the fee
calculated using that rate is “in fact, the ultimate reasonable fee.” Id. at 172.
4.
In “lodestar” jurisdictions, current rather than historic rates may be
awarded, or the awarded fee may be otherwise enhanced, to make up for delay in
payment. Missouri v. Jenkins, 491 U.S. 274, 289 (1989); Welch v. Metropolitan Life Ins.
Co., 480 F.3d 942 (9th Cir. 2007). See also In re Coordinated Pretrial Proceedings
(Petroleum Prods.), 109 F.3d 602, 609 (9th Cir. 1997); Gates v. Deukmejian, 987 F.2d
1392, 1406-07 (9th Cir. 1993); Davis v. City & County of San Francisco, 976 F.2d 1536,
1548 (9th Cir. 1992), amended in non-relevant part, 984 F.2d 345 (9th Cir. 1993);
Bouman v. Block, 940 F.2d 1211, 1235 (9th Cir. 1991).
10
5.
In New York State Association for Retarded Children v. Carey, 711 F.2d
1136, 1153 (2d Cir. 1983), the Second Circuit held current rates appropriate for cases
spanning only two to three years. However, in Saulpaugh v. Monroe Community
Hospital, rather than allow current rates outright, the court affirmed the district court’s
averaging the rates for the years spanned by the litigation to “avoid awarding . . . a
windfall due to the protracted nature of the litigation.” 4 F.3d 134, 146 (2d Cir. 1993).
6.
In 42 U.S.C. § 1988 cases, the current market rate may be applied to all
hours to adjust for delay in the payment of fees. Barjon v. Dalton, 132 F.3d 496, 502 (9th
Cir. 1997); see also Missouri v. Jenkins, 491 U.S. 274, 283-84 (1989); cf. Graham v.
DaimlerChrysler Corp., 34 Cal. 4th 553, 583-84 (2004); Ketchum v. Moses, 24 Cal. 4th
1122, 1138 (2001) (market rate compensation “typically includes a premium for the risk
of nonpayment or delay in payment”); City of Oakland v. Oakland Raiders, 203 Cal.
App. 3d 78, 85 (1988). A court may not apply the lower market rate in effect two years
before the work was performed. Bell v. Clackamas County, 341 F.3d 858, 869 (9th Cir.
2003).
7.
Nonprofit counsel for plaintiffs are usually compensated at market rates.
Blum v. Stenson, 465 U.S. 886, 895 (1984); Serrano v. Unruh, 32 Cal. 3d 621, 643
(1982). This remains generally true. However, in 1996, Congress imposed substantial
restrictions on the recovery of attorney’s fees for lawyers funded under the federal legal
services program. See Omnibus Consolidated Rescissions and Appropriations Act of
1996, Pub. L. No. 104-134, § 504(a)(13), 110 Stat. 1321-50 (prohibiting Legal Services
Corporation funds from financing any person or entity “that claims (or whose employee
claims), or collects and retains, attorney’s fees pursuant to any Federal or state law
permitting or requiring the awarding of such fees”) (1996 spending restriction, carried
forward in successive years).
8.
Under federal law, the relevant community for determining reasonable
hourly rates is generally the United States judicial district in which the lawsuit is
prosecuted. See Davis v. Mason County, 927 F.2d 1473, 1488 (9th Cir. 1991), cert.
denied, 502 U.S. 899 (1991); Maceira v. Pagan, 698 F.2d 38 (1st Cir. 1983); Chrapliwy
v. Uniroyal, Inc., 670 F.2d 760 (7th Cir. 1982), cert. denied, 461 U.S. 956 (1983). One
exception to this rule is when local counsel with the requisite skill and expertise is
unavailable in that district. Gates v. Deukmejian, 987 F.2d 1392, 1405 (9th Cir. 1993);
see Barjon v. Dalton, 132 F.3d 496, 501-502 (9th Cir. 1997) (“In establishing
unavailability, Gates allows proof of either unwillingness or inability due to lack of
experience, expertise, or specialization. There is no requirement the plaintiffs prove
both.”); McDonald v. Armontrout, 860 F.2d 1456 (8th Cir. 1988). The California
Supreme Court has also applied the opposite approach, affirming an award to a law firm
based on prevailing rates in the firm’s home (San Francisco) market, rather than the (Los
Angeles) market in which the lawsuit was prosecuted. PLCM Group, Inc. v. Drexler, 22
Cal. 4th 1084, 1096 (2000).
11
9.
In the Second Circuit, availability of less-expensive local counsel provides
a strong indication that a “reasonable, paying client” would not be willing to pay a higher
rate for counsel from another district. Arbor Hill Concerned Citizens Neighborhood
Ass’n v. County of Albany, 484 F.3d 162, 171 (2d Cir. 2007).
10.
Except in unusual circumstances, flat hourly rates rather than rates
differentiated by task tend to be awarded in most circuits. See Henry v. Webermeier, 738
F.2d 188 (7th Cir. 1984). Different rates may be applied to non-attorney tasks performed
by attorneys. See Missouri v. Jenkins, 491 U.S. 274, 288 n.10 (1989) (citing Johnson,
488 F.2d 714, 717 (5th Cir. 1974)); Davis v. City & County of San Francisco, 976 F.2d
1536, 1543 (9th Cir. 1992), amended in non-relevant part, 984 F.2d 345 (9th Cir. 1993).
11.
Market rates (rather than cost-based rates) are to be awarded for law clerks,
paralegals and other legal workers whose rates are not included in the attorneys’ rates.
Missouri v. Jenkins, 491 U.S. 274, 287 (1989). See also Shaffer v. Superior Court
(Simms), 33 Cal. App. 4th 993, 1002 (1995) (cost base for contract attorneys not relevant
in determining amount of attorneys’ fees).
12.
Rates under the Equal Access to Justice Act (“EAJA”) are $125 per hour
adjusted in accord with the consumer price index (“CPI”) to account for cost of living
increases. 28 U.S.C. § 2412(d)(2)(A)(ii). In extraordinary circumstances, market rates
can be awarded. See Lucas v. White, 63 F. Supp. 2d 1046 (N.D. Cal. 1999). See also
Carmichael v. United States, 70 Fed. Cl. 81, 84 (Fed. Cl. 2006) (specialized skills
justifying increased rate may include “an identifiable practice specialty such as patent
law, or knowledge of foreign law or language”). The correct CPI to apply is the one for
the year in which the fees were earned, not the CPI current at the time of judgment.
Sorenson v. Mink, 239 F.3d 1140, 1149 (9th Cir. 2001).
C.
Issues Involving Compensable Time
1.
In the Ninth Circuit, all tasks for which attorneys bill in the private market
are compensable, including travel and media time where the latter “is directly and
intimately related to the successful representation of a client.” Davis v. City & County of
San Francisco, 976 F.2d 1536, 1543, 1545 (9th Cir. 1992), amended in non-relevant part,
984 F.2d 345 (9th Cir. 1993); Finkelstein v. Bergna, 804 F. Supp. 1235, 1258 (N.D. Cal.
1992). Time spent on “public relations and political lobbying efforts” designed to
advance the client’s litigation goals is compensable. Gilbrook v. City of Westminster,
177 F.3d 839, 877 (9th Cir. 1999).
2.
A number of federal courts of appeals are reluctant to award fees for media
time. The Fourth Circuit has rejected the reasoning in Davis, stating that “[t]he legitimate
goals of litigation are almost always attained in the courtroom, not the media.” Rum
Creek Coal Sales v. Caperton, 31 F.3d 169, 176 (4th Cir. 1994); see also Halderman v.
Pennhurst State Sch. & Hosp., 49 F.3d 939, 941-42 (3d Cir. 1995) (“proper forum for
litigation is the courtroom, not the media”); American Petroleum Inst. v. EPA, 72 F.3d
12
907, 913 (D.C. Cir. 1996); New Mexico Citizens for Clean Air v. Espanola Mercantile
Co., Inc., 72 F.3d 830, 835 (10th Cir. 1996).
3.
Work on collateral litigation that disposes of issues central to the main case
can be compensable. See Armstrong v. Davis, 318 F.3d 965, 971-73 (9th Cir. 2003)
(class counsel in Armstrong entitled to fees for Supreme Court work in another case that
was important to the presentation of Armstrong class rights); Gates v. Gomez, 60 F.3d
525, 535 (9th Cir. 1995) (filing amicus brief in another unsuccessful case brought by a
class member where some of the issues raised were identical to those in the class action
was compensable); Hasbrouk v. Texaco, Inc., 879 F.2d 632, 638 (9th Cir. 1989)
(unsuccessful amicus brief in support of a petition for certiorari in another case with same
issues compensable). However, fees are not available for time spent on “activities that
attorneys generally do at their own expense.” Gates, 60 F.3d at 535.
4.
Appellate time is compensable. Hutto v. Finney, 437 U.S. 678, 693 (1978).
It is not necessary to prevail on all issues in the appeal to be awarded full fees in an
appeal from an attorney’s fees award. See Bernandi v. Yeutter, 951 F.2d 971, 976 (9th
Cir. 1991); Greater Los Angeles Council on Deafness v. Community Television of
Southern California, 813 F.2d 217 (9th Cir. 1987).
5.
Post-judgment time spent on compliance or monitoring is compensable.
Keith v. Volpe, 833 F.2d 850 (9th Cir. 1987). Plaintiff need not demonstrate that it has
“prevailed” in the post judgment proceedings. See Commissioner, INS v. Jean, 496 U.S.
154, 162 (1990). Compensation is available for “post-judgment proceedings [that are]
useful and of a type ordinarily necessary to secure the litigation’s final result.” Stewart v.
Gates, 987 F.2d 1450, 1452 (9th Cir. 1993) (internal quotation marks omitted). A
quarterly payment process is preferred. Keith v. Volpe, 833 F.2d at 860 n.6.
6.
Time spent negotiating and litigating fees claims is compensable.
Commissioner, INS v. Jean, 496 U.S. 154 (1990) (under the EAJA, a second showing of
“substantial justification” is unnecessary for an award of fees on the fee litigation);
Thompson v. Gomez, 45 F.3d 1365, 1367-68 (9th Cir. 1995) (applying Jean to a § 1988
fees claim); Serrano v. Unruh, 32 Cal. 3d 621, 639 (1982) (“all hours reasonably spent”
establishing and defending a fee claim are compensable under California Code of Civil
Procedure section 1021.5); Vo v. Las Virgenes Municipal Water District, 79 Cal. App.
4th 440, 448 (2000) (time spent defending fees in FEHA action compensable).
7.
Plaintiffs may retain special fees counsel to prepare their fee applications,
and both merits and fees counsel are entitled to compensation for non-duplicative time.
Gates v. Rowland, 39 F.3d 1439 (9th Cir. 1994); Davis v. City & County of San
Francisco, 976 F.2d 1536, 1544, amended in non-relevant part, 984 F.2d 345 (9th Cir.
1993).
8.
Under federal law, time spent collecting fee awards is compensable. Spain
v. Mountanos, 690 F.2d 742, 747 (9th Cir. 1982); Balark v. Curtin, 655 F.2d 798 (7th Cir.
1981). State law may govern the filing and disposition of a post-judgment motion for
13
fees incurred in enforcing a judgment. Carnes v. Zamani, ___ F.3d ____, 2007 WL
1584579 (9th Cir. 2007) (post-judgment motion is a “proceeding[] supplementary to and
in aid of a judgment” under Fed. R. Civ. P. 69).
9.
The same is generally true under California law. See Cal. Code of Civ.
Proc. § 685.040 (attorney’s fees for collecting a judgment in a contract action are
compensable if the underlying judgment permits an award of attorney’s fees); Ketchum
v. Moses, 24 Cal. 4th 1122, 1141 n.6 (attorney’s fees available for time spent on feerelated issues so long as fees are available on the underlying judgment).
10.
However, parties entitled to attorney’s fees under California Code of Civil
Procedure section 1021.5 may have to make an additional showing under that provision
to recover fees for collection-related services. Estate of Cirone, 189 Cal. App. 3d 1280,
1292-93 (1987) (reversing trial court’s supplementary award; remarking that “no case
states that parties obtaining attorney fee awards pursuant to section 1021.5 are also
entitled to further attorney fees under that section for their efforts to collect a final fee
award;” allowing that fees may be awarded on a showing that efforts to compel payment
themselves resulted in “enforcement of an important right affecting the public interest”).
D.
Expenses
1.
Under federal law, most expenses that attorneys bill to private clients are
compensable as part of the fee award, even if not recoverable as statutory costs. See, e.g.,
Harris v. Marhoefer, 24 F.3d 16, 20 (9th Cir. 1994); Davis v. City & County of San
Francisco, 976 F.2d 1536, 1556 (9th Cir. 1992), amended in non-relevant part, 984 F.2d
345 (9th Cir. 1993); Trustees of the Construction Industry and Laborers Health and
Welfare Trust v. Redland Ins. Co., 460 F.3d 1253 (9th Cir. 2006); cf. Missouri v. Jenkins,
491 U.S. 274 (1989).
2.
Non-statutory costs and expenses are not available under most California
fee shifting statutes, largely because statutory attorney’s fees themselves are an element
of “costs” under California Code of Civil Procedure section 1033.5(a)(10). Hsu v.
Semiconductor Sys., Inc., 126 Cal. App. 4th 1330, 1340-42 (2005) (costs such as expert
witness fees and photocopying expenses are not included as attorney’s fees under a
contractual fee-shifting provision governed by California Civil Code section 1717). See
also El Dorado Meat Co. v. Yosemite Meat and Locker Service, Inc., 150 Cal. App. 4th
612 (2007) (challenge to costs for photocopying and exhibit preparation under section
1033.5). One court has held that California law permits recovery of expert witness fees,
photocopying, postage, and the like under the “private attorney general” provisions of
Section 1021.5 Beasley v. Wells Fargo Bank, 235 Cal. App. 3d 1407 (1991). Many
subsequent decisions have criticized or rejected this holding – see Carwash of AmericaPO LLC v. Windswept Ventures No. I, 97 Cal. App. 4th 540, 543-44 (2002) (listing such
decisions) – and the California Supreme Court has granted review of two recent cases on
the subject. Olson v. Automobile Club of S. Cal., 139 Cal. App. 4th 552 (2006), review
14
granted, July 26, 2006, No. S143999; Benson v. Kwikset Corp., 24 Cal. Rptr. 3d 683,
711 (2005), review granted, No. G030956, Feb. 10, 2005.
3.
If a federal attorney’s fee statute does not specifically override 28 U.S.C. §§
1821 & 1920, which specify the amount of witness fees, expert witness fees are not
awarded as actual costs. West Virginia Univ. Hosp., Inc. v. Casey, 499 U.S. 83 (1991).
See also Arlington Central School Dist. v. Murphy, __ U.S. ___, 126 S.Ct. 2455 (2006)
(expert witness fees not recoverable by prevailing parents under IDEA). Congress
amended Title VII, other employment rights statutes, and § 1988 to allow reimbursement
of actual fees of experts in § 1981 and other employment discrimination cases but not in
§ 1983 cases. Thus, only statutory witness fees can be recovered in §1983 cases.
4.
The general rule for recovery of expert witness fees is the same under
California law. See Davis v. KGO-T.V., Inc., 17 Cal. 4th 436 (1998) (proscribing an
award of expert witness fees under FEHA, and, by implication, other statutes). Currently,
the main exceptions to the rule are cases involving employment rights under FEHA and
fees claims under California Code of Civil Procedure section 1021.5. See Cal. Gov.
Code § 12965(b) (amended to permit recovery of expert witness fees by 1999 Cal. Stat.
591 in response to Davis); Davis, 17 Cal. 4th at 446 n.5 (explicitly excepting section
1021.5 from its holding).
5.
Fees paid to the opponent’s experts for deposition time are recoverable in §
1983 cases as part of the reasonable attorney’s fees award. Harris v. Marhoefer, 24 F.3d
16, 20 (9th Cir. 1994).
E.
Interest
1.
Post judgment interest accrues on a fee award just as on any other monetary
judgment or final monetary order. Spain v. Mountanos, 690 F.2d 742, 747-48 (9th Cir.
1982). Interest accrues against states. Missouri v. Jenkins, 491 U.S. 274, 283-84 (1989).
It will not accrue against the United States unless sovereign immunity is expressly
waived. Library of Congress v. Shaw, 478 U.S. 310 (1986). Interest is available if the
United States appeals a costs or fees award under the Equal Access to Justice Act and the
award is affirmed in whole or part. 28 U.S.C. § 2412(f).
2.
Under federal law, interest may commence accruing with entry of the
underlying judgment or order, rather than when the quantifying fees order issues, where
entitlement to fees is established by the court’s prior judgment or order. Friend v.
Kolodzieczak, 72 F.2d 1386, 1391-92 (9th Cir. 1995), cert. denied, 516 U.S. 1146 (1996);
Finkelstein v. Bergna, 804 F. Supp. 1235, 1239-40 (N.D. Cal. 1992); Golden State
Transit Corp. v. City of Los Angeles, 773 F. Supp. 204, 219-20 (C.D. Cal. 1991); see
also Jenkins v. Missouri, 931 F.2d 1273, 1275-77 (8th Cir. 1991); Mathis v. Spears, 857
F.2d 749, 760 (Fed. Cir. 1988); Copper Liquor, Inc. v. Adolph Coors Co., 701 F.2d 542,
545 (5th Cir. 1983).
15
3.
Under California law, interest on attorney’s fees may accrue from the date
of the underlying judgment or from the date of a contractually-enforceable arbitration
award. Britz, Inc. v. Alfa-Laval Food & Dairy Co., 34 Cal. App. 4th 1085, 1107 (1995);
City of Oakland v. Oakland Raiders, 203 Cal. App. 3d 78, 83, 85 (1988).
4.
Potential fee claimants should include fees and costs entitlement in any
forms of judgment they propose to courts in order to maximize the likelihood of having
interest on the attorney’s fees relate back to the judgment date. See Stockton Theatres,
Inc. v. Palermo, 55 Cal. 2d 439, 443 (1961); Ehret v. Congoleum Corp., 87 Cal. App. 4th
202, 209 (2001). Additionally, under California law, unless an award of fees and/or costs
is included in the judgment amount, the award is automatically stayed on appeal and no
appeal bond must be filed. Nazemi v. Tseng, 5 Cal. App. 4th 1633, 1638 (1992); Nielsen
v. Stumbos, 226 Cal. App. 3d 301, 303-304 (1990).
F.
Upward Enhancement of Fees
1.
Upward and downward adjustments to the lodestar may be made, especially
in consideration of the results obtained. Blum v. Stenson, 465 U.S. 886, 888 (1984);
Hensley v. Eckerhart, 461 U.S. 424, 433-34 (1983); see also Lealao v. Beneficial
California, Inc., 82 Cal. App. 4th 19, 49-50 (2000) (approving adjustment to lodestar by
“cross-check” with the percentage of the common fund in order to ensure that fee
awarded is within the range of market value); Krumme v. Mercury Insurance Co., 123
Cal. App. 4th 924, 947 (2004) (“no hard-and-fast rule” setting out factors to be
considered by California courts in exercise of their discretion to increase or decrease
lodestar calculation).
2.
Separate risk enhancers of a federal statutory fee award are not allowed.
City of Burlington v. Dague, 505 U.S. 557, 562 (1992). In Dague, the Supreme Court
adopted almost in toto the lodestar approach. It held that risk could be compensated by a
higher hourly rate, and the difficulty of establishing the merits of the case may be
reflected in higher hourly rates or a higher number of hours expended to overcome the
difficulty. Id.; cf. Kientzy v. McDonnell Douglas Corp., 990 F.2d 1051, 1063 (8th Cir.
1993) (difficulty a basis for enhancement if not considered in setting lodestar).
3.
Contingent risk multipliers can be awarded under California law. See
Ketchum v. Moses, 24 Cal. 4th 1122, 1136-37 (2001); Greene v. Dillingham
Construction N.A., Inc., 101 Cal. App. 4th 418, 426-29 (2002); Weeks v. Baker &
McKenzie, 63 Cal. App. 4th 1128, 1169-77 (1998); Flannery v. California Highway
Patrol, 61 Cal. App. 4th 629 (1998); see also Mangold v. Cal. Pub. Util. Comm’n, 67
F.3d 1470, 1478 (9th Cir. 1995). “The contingency adjustment may be made at the
lodestar phase of the court’s calculation or by applying a multiplier to the
noncontingency lodestar calculation (but not both).” Horsford v. Board of Trustees of
California State University, 132 Cal. App. 4th 359, 395 (2005).
16
4.
Risk enhancement for post judgment work would be unusual. See
Ketchum, 24 Cal. 4th at 1141-1142. Enhancement for fees on fees litigation is available
but should usually be less than the enhancement applied to the fees on the merits of the
litigation. Graham v. DaimlerChrysler Corp., 34 Cal. 4th 553, 579 (2004).
5.
Enhancers are available for undesirability.
See Guam Society of
Obstetricians & Gynecologists v. Ada, 100 F.3d 691, 697 (9th Cir. 1996) (2.0 enhancer
where fee applicant shows multiplier is “necessary to the determination of a reasonable
fee”); see also Gomez v. Gates, 804 F. Supp. 69, 79 (C.D. Cal. 1992) (1.75 enhancer).
Enhancers may be available if local counsel is unavailable. See Guam, 100 F.3d at 697.
6.
Enhancement is available for exceptional quality of representation and
results. Pennsylvania v. Delaware Valley Citizens’ Council, 478 U.S. 546 (1986); Wing
v. Asarco, Inc., 114 F.3d 986, 989 (9th Cir. 1997) (upholding 2.0 multiplier awarded for
quality of representation and exceptional results, or alternatively because of counsel’s
continuing obligations to the class); Shipes v. Trinity Indus., 987 F.2d 311 (5th Cir.
1993); Lipsett v. Blanco, 975 F.2d 934 (1st Cir. 1992); Carrero v. New York Housing
Authority, 890 F.2d 569 (2d Cir. 1989); cf. Odima v. Westin Tucson Hotel, 53 F.3d 1484
(9th Cir. 1995) (remand for district court to provide sufficient information to justify 50%
enhancement for limited preparation time and skill of representation).
7.
Risk enhancers are available in the Ninth Circuit in common fund cases.
See, e.g., In re Washington Public Power Supply System Securities Litigation, 19 F.3d
1291 (9th Cir. 1994). Fees in common fund cases may be determined under a
percentage-of-the-benefit, lodestar, or hybrid approach. See generally Lealao v.
Beneficial California, Inc., 82 Cal. App. 4th 19, 26-37 (2000) (surveying California and
federal law).
8.
In Ninth Circuit common fund cases, district courts may apply the
percentage method or the enhanced lodestar method in calculating attorney fees, with
enhancement coming out of the common fund. Reasonableness remains the goal. See
Fischel v. Equitable Life Assurance Society of America, 307 F.3d 997 (9th Cir. 2002);
Florida v. Dunn, 915 F.2d 542 (9th Cir. 1990). The “benchmark” percentage of a
common fund attorney’s fees award is 25 percent of the fund. E.g., In re Coordinated
Pretrial Proceedings in Petroleum Prods. Antitrust Litigation, 109 F.3d 602, 607 (9th Cir.
1997).
9.
The Eleventh Circuit and District of Columbia Circuits require the use of
the percentage method. See Camden I Condominium Ass’n v. Dunkle, 946 F.2d 768,
774 (11th Cir. 1991); Swedish Hosp. Corp. v. Shalala, 1 F.3d 1261, 1271 (D.C. Cir.
1993).
10.
In California, even percentage fee awards generally should be in some way
“anchored” to the lodestar. Lealao, 82 Cal. App. 4th at 39, citing Serrano v. Priest, 20
Cal. 3d 25, 49 n.23 (1977).) Common fund fees may also be available to plaintiffs in
17
shareholder derivative actions, even if the corporation is closely held. See Cziraki v.
Thunder Cats, Inc., 111 Cal. App. 4th 552 (2003).
11.
Under federal law, percentage contingent fee contracts with civil rights
plaintiffs are allowed, even though the fee under the contract exceeds the statutory fee
award. Venegas v. Mitchell, 495 U.S. 82, 90 (1990). An attorney’s contingency fee
agreement does not influence the amount of fees the court may award. Blanchard v.
Bergeron 489 U.S. 87, 94 (1989); Flannery v. Prentice, 26 Cal. 4th 572, 587 (2001). See
also Ketchum v. Moses, 24 Cal. 4th 1122 (2001) (discussing market practices); Fergus v.
Songer, 150 Cal. App. 4th 552 (2007); Lindelli v. Town of San Anselmo 139 Cal. App.
4th 1499 (2006). Thus, a fee may be enhanced for risk by contract, and/or by the fee
award.
G.
Reduced Fees
1.
Under federal law, fees may be adjusted down for lack of success. “[1]
Where the plaintiff has failed to prevail on a claim that is distinct in all respects from his
successful claims, the hours spent on the unsuccessful claim should be excluded in
considering the amount of a reasonable fee. [2] Where a lawsuit consists of related
claims, a plaintiff who has won substantial relief should not have his attorney’s fee
reduced simply because the district court did not adopt each contention raised. [3] But
where the plaintiff achieved only limited success, the district court should award only that
amount of fees that is reasonable in relation to the results obtained.” Hensley v.
Eckerhart, 461 U.S. 424, 440 (1983); see also Schwarz v. Secretary of Health & Human
Services, 73 F.3d 895, 901-02 (9th Cir. 1995); O’Neal v. City of Seattle, 66 F.3d 1064,
1068 (9th Cir. 1995); LeMaire v. Maass, 12 F.3d 1444 (9th Cir. 1993).
2.
Plaintiffs “need not prevail on every claim in order to receive a full fee.”
Gates v. Deukmejian, 987 F.2d 1392, 1404 (9th Cir. 1993); Dang v. Cross, 422 F.3d 800,
813 (9th Cir. 2005). Courts often consider whether claims and facts are interrelated and
whether a reasonably prudent lawyer would have to have performed the work to prevail
on the successful claims. E.g., Thomas v. City of Tacoma, 410 F.3d 644, 649 (9th Cir.
2005). Winning or losing particular motions is not necessarily pertinent. Further, the
trial court should not “reduce the lodestar merely because the prevailing party did not
receive the type” or amount of relief requested. Id.; Quesada v. Thomason, 850 F.2d 537,
539 (9th Cir. 1988). But see McGinnis v. Kentucky Fried Chicken of California, 51 F.3d
805, 809-10 (9th Cir. 1994) (fees must be reconsidered in light of partial reversal on
appeal).
3.
California law is similar. See Bowman v. City of Berkeley, 131 Cal. App.
4th 173, 177 (2005); Greene v. Dillingham Construction N.A., Inc., 101 Cal. App. 4th
418, 422-24 (2002) (discussing earlier cases). California courts also discourage
application of a negative multiplier to the lodestar, as a method of adjusting for the lack
of success on all claims. Beaty v. BET Holdings, Inc., 222 F.3d 607 (9th Cir. 2000)
18
(California FEHA law permits lodestar reduction for results obtained “[o]nly in the
unusual case”). See also Graciano v. Robinson Ford Sales, Inc., 144 Cal. App. 4th 140,
153 (2006) (reversing trial court which “commingled its prevailing party analysis with its
inquiry into the amount” the prevailing party is entitled to recover). However, a negative
mutlplier may be applied by the court “if it cannot ascertain and omit those specific hours
spent on the unrelated causes of action.” Id. at 161.
4.
The size of the monetary recovery by itself does not limit the amount of
fees. City of Riverside v. Rivera, 477 U.S. 561 (1986) ($33,350 damages award;
$245,456 fees award); Graciano v. Robinson Ford Sales, Inc., 144 Cal. App. 4th 140, 153
(2006); Beaty v. BET Holdings, Inc., 222 F.3d 607, 612 (9th Cir. 2000). See also Dang
v. Cross, 422 F.3d 800, 813 (9th Cir. 2005); Quesada v. Thomason, 850 F.2d 537, 539-40
(9th Cir. 1988).
5.
However, “[i]n some circumstances even a plaintiff who formally ‘prevails’
under § 1988 should receive no attorney’s fees at all. A plaintiff who seeks
compensatory damages but receives no more than nominal damages is often such a
prevailing party [because] the awarding of nominal damages . . . highlights the plaintiff’s
failure to prove actual, compensable injury.” Farrar v. Hobby, 506 U.S. 103, 115 (1992).
6.
“If the lawsuit achieved other tangible results – such as sparking change in
policy . . . – such results will, in combination with an enforceable judgment for a nominal
sum, support an award of fees.” Wilcox v. City of Reno, 42 F.3d 550, 555 (9th Cir.
1994); see also Richardson v. Continental Grain Co., 336 F.3d 1103, 1106 (9th Cir.
2003). The amount of damages does not warrant departure from the lodestar approach to
fee awards when the judgment serves important public purposes. Morales v. City of San
Rafael, 96 F.3d 359, 364-65 (9th Cir. 1996); accord Hashimoto v. Dalton, 118 F.3d 671,
678 (9th Cir. 1997); see also Carlo v. City of Chino, 105 F.3d 493, 502 (9th Cir. 1997);
Harman v. City and County of San Francisco, 136 Cal. App. 4th 1279, 1316 (2006)
(reviewing cases on public benefit). But see Romberg v. Nichols, 48 F.3d 453 (9th Cir.
1995) (no fees where only nominal damages awarded and no other tangible results).
H.
Impact of Fed. R. Civ. P. 68 and Cal. Code Civ. Pro. § 998 on
Attorney’s Fees
1.
A lump sum offer of damages and costs (including attorney’s fees) may be
made under Rule 68 of the Federal Rules of Civil Procedure, which provides for
resolution of lawsuits through a plaintiff’s acceptance of defendant’s “Offer of
“Judgment.” Marek v. Chesny, 473 U.S. 1 (1985). If the plaintiff does not accept a valid
Rule 68 offer, the pertinent fee shifting statute, such as 42 U.S.C. § 1988, provides for an
award of attorney’s fees as costs, and plaintiff’s recovery by judgment at trial does not
exceed the offer, then plaintiff cannot collect fees for post-offer work. Fed. R. Civ. P. 68.
However, to cut off plaintiff’s claim for fees incurred after the date of the offer, the offer
must state that it includes all attorney’s fees. See, e.g., Nusom v. Comh Woodburn, Inc.,
19
122 F.3d 830, 834 (9th Cir. 1997); Guerrero v. Cummings, 70 F.3d 1111, 1113 (9th Cir.
1995); Holland v. Roeser, 37 F.3d 501, 503-04 (9th Cir. 1994).
2.
A Rule 68 offer does not bar subsequently incurred attorney’s fees in a Fair
Labor Standards Act (“FLSA”) case, as FLSA defines attorney’s fees separately from
costs. Haworth v. State of Nevada, 56 F.3d 1048, 1052 (9th Cir. 1995); see also 29
U.S.C. § 1132(g) (ERISA). However, “when a plaintiff rejects [an otherwise valid] Rule
68 offer, the reasonableness of the attorney fee award under the FLSA will depend, at
least in part, on the district court’s consideration of the results obtained by going to trial
compared to the Rule 68 offer.” Haworth, 56 F.3d at 1052. Cf. Greene, supra, 101 Cal.
App. 4th at 426. Pre-offer costs are still available to a plaintiff who obtains a lesser
judgment after rejecting a Rule 68 Offer. Champion Produce, Inc. v. Ruby Robinson Co.,
342 F.3d 1016, 1023 (9th Cir. 2003).
3.
Some defendants seek discovery of plaintiff’s attorney fees to date in order
to include fees into Rule 68 offers. Some courts compel such discovery.
4.
Post-offer attorney’s fees are not available to non-prevailing defendants
who are entitled to costs under Rule 68, even if the underlying statute permits the
recovery of attorney’s fees as costs. Champion Produce, Inc. v. Ruby Robinson Co., 342
F.3d 1016, 1030-31 (9th Cir. 2003).
5.
Four Courts of Appeals have held, given the availability of Rule 68 offers
to cut off fees, that trial courts may not use informal settlement offers and negotiations to
cut off plaintiffs’ attorney’s fees. Berkla v. Corel Corp., 302 F.3d 909, 920-22 (9th Cir.
2002); Clark v. Sims, 28 F.3d 420 (4th Cir. 1994); Ortiz v. Regan, 980 F.2d 138, 140-41
(2d Cir. 1992); Cooper v. State of Utah, 894 F.2d 1169 (10th Cir. 1990). Contra Moriarty
v. Svec, 233 F.3d 955, 967 (7th Cir. 2000) (a “substantial settlement offer,” even if it
does not comply with Rule 68, can cut off fees incurred after the date of the offer).
6.
Offers made in proper form and with proper content under California Code
of Civil Procedure § 998 also cut off attorneys’ fees if the offer exceeds the judgment.
See, e.g., Poster v. Southern Cal. Rapid Transit Dist., 52 Cal. 3d 266, 272 (1990) (bright
line rule). See also Mesa Forst Products, Inc. v. St. Paul Mercury Ins. Co., 73 Cal. App.
4th 324, 330 (1999); Steele v. Jensen Instrument Co., 59 Cal. App. 4th 326, 330-331
(1997); Stell v. Jay Hales Development Co., 11 Cal. App. 4th 1214, 1232 (1992);
Hutchins v. Waters, 51 Cal. App. 3d 69, 72-74 (1975).
7.
California courts are split as to whether, given the availability of section
998, rejection of an informal settlement offer is grounds for fee reduction. Compare
Greene v. Dillingham Construction N.A., Inc., 101 Cal. App. 4th 418, 425-26 (2002)
(plaintiff’s fees request should not be reduced for rejecting informal settlement offer)
with Meister v. Regents of University of California, 67 Cal. App. 4th 437, 449-450
(1998) (plaintiffs should be penalized for rejecting reasonable settlement offers).
20
I.
Additional Comments About Settling Fees Claims
1.
At least where the offer to settle the merits of a case exceeds the relief
plaintiffs can reasonably expect at trial, defendants may demand a waiver of fees. See
generally Evans v. Jeff D., 475 U.S. 717 (1986).
2.
Simultaneous negotiation of the plaintiff or plaintiff class’s recovery and
counsel’s attorney’s fees is risky if the fee is not being waived. Staton v. Boeing Co.,
327 F.3d 938 (9th Cir. 2003); Ramirez v. Sturdevant, 21 Cal. App. 4th 904 (1994).
3.
If a settlement agreement is silent about attorney’s fees, there is a
presumption against finding that fees have been waived. Muckleshoot Tribe v. Puget
Sound Power & Light Co., 875 F.2d 695, 698-99 (9th Cir. 1989); On-Line Power, Inc. v.
Mazur, 149 Cal. App. 4th 1079 (2007) (section 998 offer silent about attorney’s fees).
See also Erdman v. Cochise County, Ariz., 926 F.2d 877, 880 (9th Cir. 1991) (“We see
no reason why the logic of Muckleshoot should not apply to all civil rights settlements,
whether settled by negotiated consent decrees or Rule 68 offers”). The burden of proof
of waiver is on defendants, including with respect to a Rule 68 offer of judgment
“settlement.” Holland v. Roeser, 37 F.3d 501 (9th Cir. 1994).
4.
If a settlement agreement that is silent on fees vacates a trial court judgment
which included a fee award, the attorney/client fee agreement will dictate the attorney’s
entitlement to any fee. The attorney is not entitled to recover the fees awarded by the
vacated trial court judgment. Beard v. Goodrich, 110 Cal. App. 4th 1031, 1036 (2003).
5.
Settlement agreements should take into account tax consequences to the
client. Consultation with a tax attorney is highly advisable. See section IV C, infra.
III.
PROCEDURES TO SECURE FEES
A.
Timing and Manner of Application
1.
Rule 54(d) of the Federal Rules of Civil Procedure requires that an initial
fee application be filed and served within 14 days after judgment or order “unless
otherwise provided by statute or order of the court.” The initial application, which may
be later supplemented, must include a fair estimate of the amount claimed. If you need
more time, which is likely, get a Stipulation and Order extending time so that you can
properly present the application (and possibly pursue settlement). If defendant will not
stipulate, get an order entered by application. Do not rely on a general Local Rule to
extend time under Rule 54(d) of the Federal Rules of Civil Procedure; get an actual order
entered before the 14 days have expired.
2.
Under the EAJA, the fees application must be actually filed, not just sent
for filing, within the statutory 30-day period. Arulampalam v. Gonzales, 399 F.3d 1087,
1090 (9th Cir. 2005).
21
3.
In federal court, an application for fees generally must be made by Rule 54
motion. A fees application under a contractual provision may not be made by filing a
pleading in a new action. Port of Stockton v. Western Butte Carriers, Inc., 371 F.3d
1119, 1121-22 (9th Cir. 2004). Rule 54 also permits the district court to appoint a
Special Master or referee to rule on the issue of attorney fees.
4.
Fee applications must be filed in a timely manner pursuant to the court’s
local rules. See White v. New Hampshire Dep’t of Employment Security, 455 U.S. 445,
454 & n.16 (1982). It may be possible to amend a deficient but timely-filed fees
application. See United States v. Hristov, 396 F.3d 1044 (9th Cir. 2005) (an amendment
to a fees application under the Hyde Amendment to include required information “relates
back” to the date of filing of the original fees claim).
5.
For good cause, relief from default of the local rule may be available.
Compare Martinez v. Idaho First Nat’l Bank, 755 F.2d 1376, 1378-79 (9th Cir. 1985)
with Kyle v. Campbell Soup Company, 28 F.3d 928, 931-32 (9th Cir. 1994) (counsel’s
mistake in interpreting time limits in Local Rule on timing of motion for attorney’s fees
not excusable neglect). Misinterpretation of an unambiguous rule may sometimes qualify
as excusable neglect. Pincay v. Andrews, 389 F.3d 853, 859 (9th Cir. 2004) (en banc).
6.
Take care to file the application for fees incurred during appeal with the
correct court. See, e.g., Cummings v. Connell, 402 F.3d 936, 947-48 (9th Cir. 2005)
(fees and expenses awarded for work on appeal reversed because plaintiffs filed request
with district court instead of with circuit court as required by Ninth Circuit Rule 39-1.6).
7.
An arbitration award of, or refusal to award, fees under California Civil
Code section 1717 may be immune from judicial review. See Moshonov v. Walsh, 22
Cal. 4th 771, 775-79 (2000) (affirming arbitrator’s denial of fees to prevailing
defendants).
8.
The timing of and forum for fee applications under California law are
controlled by California Rules of Court 3.1702. Read it and the cross-referenced rules
with care as to timing and correct court of filing.
B.
Proving And Litigating Attorney’s Fees
1.
A fee application is not supposed to initiate major case litigation, so keep it
as simple as possible. Blum v. Stenson, 465 U.S. 886, 902 n.19 (1984); Hensley v.
Eckerhart, 461 U.S. 424, 437 (1983). A sizeable fee, of course, can justify substantial
activity on both sides. See, e.g., Sanabria v. Embrey 92 Cal. App. 4th 422, 428 (2001);
Serrano v. Unruhu, 32 Cal.3d 621, 639 (1982) (“In cases where entitlement is vigorously
contested, as here, the hours demanded could dwarf those spent to establish the claim on
the merits”).
2.
The availability of discovery and evidentiary proceedings is limited by
good cause considerations. Formal discovery is rare; evidentiary proceedings are even
22
more rare. The opponent to the fee application is able to get discovery more easily than
the proponent. However, discovery can be two-way, as the rates paid the opposing
parties’ attorneys and the time and expense they committed can be material to the
reasonableness of the fee claimed.
3.
The fee application must include detailed time (and expense records, where
expenses are claimed). “The fee applicant bears the burden of documenting the
appropriate hours expended in the litigation and must submit evidence in support of those
hours worked. The party opposing the fee application has a burden of rebuttal that
requires submission of evidence to the district court challenging the accuracy and
reasonableness of the hours charged or the facts asserted by the prevailing party in its
submitted affidavits.” Gates v. Deukmejian, 987 F.2d 1392, 1397-98 (9th Cir. 1993)
(internal citation omitted).
4.
Substantially greater detail may be required in support of an application for
EAJA fees against the United States. See Baldridge v. Nicholson, 19 Vet. App. 227, 23441 (2005).
5.
A federal court may permit plaintiffs to reconstruct or supplement their
time records, by reference to litigation files and other relevant documents. Davis v. City
& County of San Francisco, 976 F.2d 1536, 1542 (9th Cir. 1992), amended in nonrelevant part, 984 F.2d 345 (9th Cir. 1993); United States v. $12,248 United States
Currency, 957 F.2d 1513, 1516-17, 1521 (9th Cir. 1991).
6.
California courts generally permit reconstruction. See PLCM Group, Inc.
v. Drexler, 22 Cal. 4th 1084, 1095 n. 4 (2000) (claim based on detailed reconstructed
records upheld); Wershba v. Apple Computer, Inc., 91 Cal. App. 4th 224, 255 (2001)
(“California case law permits fee awards in the absence of detailed time sheets”); Weber
v. Lanholz, 39 Cal. App. 4th 1578, 1587 (1995) (upholding fee award based on counsel’s
declaration, even though time records and billing statements not provided); Sommers v.
Erb, 2 Cal. App. 4th 1644, 1651 (1992) (fee claim based on estimate of number of hours);
Martino v. Denevi, 182 Cal. App. 3d 553, 559 (1986) (“Testimony of an attorney as to
the number of hours worked on a particular case is sufficient evidence to support an
award of attorney fees, even in the absence of detailed time records.”). However, if
counsel does not maintain adequate contemporaneous time records, the lodestar may be
reduced.
7.
The fee applicant must make the kinds of billing judgment reductions that
would be provided to a private client billed by the hour, and must waive or withdraw
unproductive time. If plaintiff’s counsel does not exercise billing judgment comparable
to that exercised in the private market, the courts will reduce the award. Hensley v.
Eckerhart, 461 U.S. 424, 434 (1983).
8.
When submitting large fee claims, consider giving a modest across-theboard percentage reduction to account for any possible inefficiency or unnecessary
duplication not eliminated by discrete reductions. E.g., Hensley v. Eckerhart, 461 U.S.
23
424, 434 (1983); Davis v. City & County of San Francisco, 976 F.2d 1536, 1543 (9th Cir.
1992), amended in non-relevant part, 984 F.2d 345 (9th Cir. 1993) (plaintiffs made 5%
reduction for billing judgment); see also Gates v. Deukmejian, 987 F.2d 1392, 1399 (9th
Cir. 1993) (faced with a massive fee application the district court can make across-theboard percentage cuts in the number of hours or the final lodestar); Cabrales v. County of
Los Angeles, 875 F.2d 740 (9th Cir. 1989) (reduction by court); Ohio-Sealy Mattress
Mfg. Co. v. Sealy Inc., 776 F.2d 646, 656-57 (7th Cir. 1985) (reduction by court); New
York Ass’n for Retarded Children v. Carey, 711 F.2d 1136, 1146 (2d Cir. 1983)
(reduction by court); Northcross v. Board of Educ. of Memphis City Schools, 611 F.2d
624, 636-37 (6th Cir. 1979) (court has discretion to reduce hours but must state reason).
9.
Review all time records with care to redact attorney-client, work product,
and other privileged data and to correct errors. Expect the opposing party and the court
to review your records with care. The opposing party may even hire a fee auditor to do
so.
10.
The fee application should be supported by affidavits or declarations
substantiating the background, experience, skill and expertise of the attorneys and other
timekeepers for whom compensation is sought and sponsoring time and disbursement
records.
11.
The fee application should be supported by affidavits or declarations
substantiating relevant market rates and the lawyer’s rates. The unjustified failure to
consider such declarations constitutes an abuse of discretion. Welch v. Metropolitan Life
Ins. Co., 480 F.3d 942 (9th Cir. 2007); Graciano v. Robinson Ford Sales, Inc., 144 Cal.
App. 4th 140, 155 (2006). Include affidavits or declarations of attorneys not involved in
the case. Use survey material. Submit evidence of fee awards in similar cases, and prior
awards to counsel. See United Steelworkers v. Phelps Dodge Corp., 896 F.2d 403, 407
(9th Cir. 1990); Dennis v. Chang, 611 F.2d 1302, 1309 (9th Cir. 1980); Semar v. Platte
Valley Fed. S & L Assn., 791 F.2d 699 (9th Cir. 1986) (abuse of discretion to ignore
evidence of prior awards to plaintiffs’ counsel).
12.
As noted, the opposing party may put in evidence opposing the claimed
rates and impeaching the applicant’s time records. The opposing party has the burden of
doing so through admissible, probative evidence. See Gates v. Deukmejian, 987 F.2d
1392, 1397-98 (9th Cir. 1993); Toussaint v. McCarthy, 826 F.2d 901, 904 (9th Cir.
1987); Ketchum v. Moses, 24 Cal. 4th 1122 (2001); PLCM Group, Inc. v. Drexler, 22
Cal. 4th 1084 (2000).
13.
Anyone submitting a fee application, particularly a large fee application,
should review all time records and other materials with great care; correct any errors prior
to filing. In recent years, a cottage industry of “fee auditors” has grown. A defendant
who must oppose a fee application may well hire one to fly speck the application. On
occasion, courts rely on such audits to reduce fee awards. Do not hesitate to take an
auditor’s deposition, and to hire experts to audit the audit.
24
C.
Interim Fee Applications May be Made In Some Cases
1.
Consider applying for fees whenever you achieve a substantive benefit for
the client, even if trial has not occurred or final judgment has not been entered. See
Gates v. Deukmejian, 987 F.2d 1392, 1408 (9th Cir. 1993) (interim fee possibly subject
to recoupment). Fee awards may be available during the course of litigation if a party has
prevailed on an important matter. Hanrahan v. Hampton, 446 U.S. 754, 757 (1980). See
also Herrington v. County of Sonoma, 883 F.2d 739 (9th Cir. 1989); Rosenfeld v. United
States, 859 F.2d 717 (9th Cir. 1988); Smallwood v. National Can Co., 583 F.2d 419, 421
(9th Cir. 1978) (affirming interim fee award for trial work in Title VII case). See also
Bradley v. Richmond School Board, 416 U.S. 696, 721-24 (1974) (awarding interim fees
where delaying award “would work substantial hardship on plaintiffs and their counsel”).
Interim fee claims should be fairly routine in federal court bifurcated civil cases where
lengthy phase II proceedings follow a liability determination.
2.
Interim fees are less available in California state court proceedings. See,
e.g., Denney v. Universal Studios, Inc., 10 Cal. App. 4th 1226 (1992) (denying interim
fee request as premature pending final disposition). Cf. Acosta v. Kerrigan, 150 Cal.
App. 4th 1124 (2007) (party entitled to recover fees under Cal. Code Civ. Pro. §
2023.030 for “making a successful discovery motion need not wait until the end of the
case before filing the claim for fees”).
3.
Unresolved fees issues do not affect the finality of a judgment on the
merits. Budinich v. Becton Dickinson & Co., 486 U.S. 196 (1988). Thus, the filing of a
notice of appeal from a final judgment on the merits does not affect a trial court's
ancillary jurisdiction over a later filed fee application. The same is true under California
law. See California Rules of Court Rule 3.1702; Bankes v. Lucas, 9 Cal. App. 4th 365,
368 (1992). In California, a separate post-judgment award of attorney’s fees must also be
expressly appealed in order to confer jurisdiction upon an appellate court. Colony Hill v.
Ghamaty, 143 Cal. App. 4th 1156, 1171 (2006).
4.
In the Ninth Circuit, a fee award is not appealable until the final amount is
awarded. Neither is a decision on an application for an interim award a final appealable
order. Hillery v. Rushen, 702 F.2d 848 (9th Cir. 1983); see also Rosenfeld v. United
States, 859 F.2d 717, 720 (9th Cir. 1988) (surveying cases). However, it may be
appealable if it is awarded against counsel and not the client. Compare Reygo Pacific
Corp. v. Johnston Pump Co., 680 F.2d 647, 648 (9th Cir. 1982) (allowing interlocutory
appeal of sanctions against counsel), with Algeran, Inc. v. Advance Ross Corp., 759 F.2d
1421 (9th Cir. 1985) (disallowing interlocutory appeal of sanctions against client and
counsel).
5.
In Palmer v. Chicago, the Seventh Circuit held that under the “collateral
order doctrine” a district court order directing defendant to pay an interim award was
appealable, as it would not interfere with the litigation in the district court and that
25
postponement of the appeal would cause irreparable harm to the defendant. 806 F.2d
1316 (7th Cir. 1986); see also Richardson v. Penfold, 900 F.2d 116, 117-18 (7th Cir.
1990). The result in Palmer may be limited to circumstances where interim awards are
paid directly to plaintiffs rather than to counsel, and the risk that plaintiffs might
disappear or become insolvent jeopardizes the ability of the defendant to recover on
appeal. See In re Diet Drugs Litigation (Phen-Fen), 401 F.3d 143, 159-60 (3d Cir. 2005)
(citing Rosenfeld v. United States, 859 F.2d 717 (9th Cir. 1988)).
D.
Collection and Assignment
1.
An attorney’s fees award can be collected against a party, including a state,
under either Rule 69 of the Federal Rules of Civil Procedure (writ of execution) or Rule
70 (direct order to pay). See Gates v. Deukmejian, 987 F.2d 1392, 1408 (9th Cir. 1993)
(appeals court lacks jurisdiction over defendants’ challenge to District Court’s issuance
of writ of execution permitting plaintiffs to collect $1,000,000 interim fee award; issue
both moot and unripe); Spain v. Mountanos, 690 F.2d 742, 745 (9th Cir. 1982) (Rule 70
order appropriate).
2.
In California, the law governing the collection of judgments generally
applies to the collection of attorney’s fees judgments. Stockton Theatres, Inc. v. Palermo,
55 Cal. 2d 439, 443 (1961). Refer to Title 9 of the California Code of Civil Procedure,
sections 680.010 et seq.
3.
Fees awarded against state entities under federal statutes may be enforced
in California state court. Green v. Obledo, 161 Cal. App. 3d 678 (1984). A court order
directing payment of a fee award from state budget items does not violate the separation
of powers doctrine so long as it does not compel the legislature to appropriate funds.
Mandel v. Myers, 29 Cal. 3d 531, 539-42 (1981). The state legislature may not restrict
otherwise available state funds in an attempt to circumvent a court order awarding
attorney’s fees in a specific case. Id. at 545-51.
IV.
WHOSE FEE IS IT?
A.
Federal and State Law
1.
Federal courts have held that the right to seek, recover, and waive statutory
attorney’s fees resides with the client rather than with the attorney. See Evans v. Jeff D.,
475 U.S. 717 (1986); Venegas v. Mitchell, 495 U.S. 82, 87 (1990).
2.
Under federal fees law, the right to recover attorney’s fees may be assigned.
However, “while a plaintiff can transfer the right to collect attorney’s fees, she may not
transfer the right to seek or waive them.” Pony v. County of Los Angeles, 433 F.3d 1138,
1145 (9th Cir. 2006) (emphasis in original). The right to seek attorney’s fees under 42
U.S.C. § 1988 is a non-transferable, substantive cause of action, which may be waived as
a condition of settlement. Id. at 1142. “Unless and until the party exercises this power
26
… the attorney has no right to collect fees from the non-prevailing party, and the nonprevailing party has no duty to pay them.” Id.
3.
Under California law, by contrast, statutory attorney’s fees “belong to the
attorneys who labored to earn them.” Flannery v. Prentice, 26 Cal. 4th 572, 575
(2001)(addressing Government Code section 12965, FEHA context). Unless prohibited
from doing so by the attorney/client contract, counsel for the prevailing party may
intervene to seek recovery of fees from the non-prevailing party. Lindelli v. Town of San
Anselmo, 139 Cal. App. 4th 1499 (2006) (permitting intervention to seek fees under
private attorney general statute, Code of Civil Procedure section 1021.5).
4.
However, where fees are an element of damages, rather than recoverable by
post-judgment application, clients possess and may transfer the right to seek them under
California law. Essex Ins. Co. v. Five Star Dye House, Inc., 38 Cal. 4th 1252, 1255
(2006) (cause of action for attorney’s fees recoverable under Brandt v. Superior Court, 37
Cal. 3d 813 (1985) assignable).
B.
Retainer Agreements
1.
Under federal law, an attorney may not obtain standing to seek attorney’s
fees otherwise waived by the client by providing for assignment of the right to seek fees
within the retainer agreement. Pony v. County of Los Angeles, 433 F.3d 1138 (9th Cir.
2006) (putative assignment to attorney did not confer standing to intervene; right to seek
attorney's fees under 42 U.S.C. § 1988 is substantive cause of action which cannot be
transferred contractually); id. at 1141, n.1 (listing unsuccessful prior attempts by same
attorney to obtain different result); Venegas v. Skaggs, 867 F.2d 527 (9th Cir.1989)
(denying intervention under Federal Rules of Civil Procedure, but affirming validity of
contingency fees in excess of statutory fees), aff'd sub nom. Venegas v. Mitchell, 495
U.S. 82 (1990).
2.
In an action under California state law, the lawyer’s ownership of the fee
should be established or confirmed by contract with the client. Thus, the retainer
agreement should expressly convey any interest that the client may have in the attorney’s
fee to the lawyer. Retainer agreements also may include provisions expressly allowing
the attorney to intervene in any proceeding in which his fees may be at issue. See
Lindelli v. Town of San Anselmo, 139 Cal. App. 4th 1499 (2006) (permitting
intervention to seek fees under section 1021.5).
3.
Some retainer agreements now condition representation on non-waiver of
statutory attorney’s fees and/or assignment of the client’s interest in such fees to counsel.
Such a provision would be difficult to enforce. See Evans v. Jeff D., 475 U.S. 717
(1986).
4.
Where a client has discharged her attorney prior to the filing of a fee
motion, California courts may nonetheless imply client consent to filing such a motion,
particularly where the fee recovery would be in the client’s interest (e.g., where the client
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would otherwise be obligated by the retainer agreement to pay out of the proceeds of a
judgment). See In re Marriage of Borson, 37 Cal. App. 3d 632 (1974). But see Meadow
v. Superior Court, 59 Cal. 2d 610 (1963) (where client expressly opposes fee application,
attorney must seek compensation for handling dissolution proceedings in independent
action against client); Brown v. Superior Court, 116 Cal. App. 4th 320, 329-30 (2004)
(same result for fees arising out of contractual lien in licensing dispute); In re Marriage of
Read, 97 Cal. App. 4th 476, (2002) (law firm not authorized to file fee application
contrary to client’s express wishes, over objection of new, substituted counsel).
5.
In California, an attorney’s charging lien on the judgment may be properly
created only through obtaining the client’s informed written consent. Fletcher v. Davis,
33 Cal. 4th 61, 69 (2004). Consider including in the agreement stock language patterned
after the sample below:
All amounts recovered and received on Client’s behalf are to be
placed by the Attorneys in a trust account for collection. A lien is hereby
granted to the Attorneys and it is expressly agreed that this contract creates a
lien to the extent of the respective percentages set out above and/or
attorney’s fees awarded. Client further agrees that this contract creates a
lien for all costs, expenses and unpaid bills against: the claim, case and
cause of action and the proceeds thereof; any settlement or judgment
secured by the Attorneys and all proceeds thereof; and all moneys or other
compensation that may be due for injuries or damages. It is further agreed
that the Attorneys shall have all general, possessory, or retaining liens, and
all special or charging liens known to the common law. Client hereby
expressly assigns to the Attorneys any and all court-awarded or statutory
attorney’s fess and/or the respective percentages of any such moneys that
may become due and payable in settlement of the claim or other
compensation or through judgment or otherwise. Client also directs that
opposing parties pay any fees, costs and expenses directly to the Attorneys.
6.
The inclusion of a charging lien in an initial contingency fee agreement
does not create an “adverse interest” to the client within the meaning of Cal. R. Prof.
Conduct 3-300. State Bar Standing Comm. on Prof’l Responsibility and Conduct,
Formal Op. 170 (2006).
7.
Contingency fee agreements may provide for a share of damages as fees.
Venegas v. Mitchell, 495 U.S. 82 (1990). The contingent fee does not cap the statutory
fee award. Blanchard v. Bergeron, 489 U.S. 87, 96 (1989).
8.
Customarily in California, contingent fee agreements provide that the
lawyer gets a percent of the aggregate of damages and court awarded attorney’s fees.
Expenses come out of the client’s share. The percent for fees increases if there is an
appeal. Typically, the contract provides that the lawyer may waive the percent of
recovery and just keep the awarded fees. The agreement should state that the fees might
exceed the damages awarded. For possible tax liability protection of the client, where the
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lawyers do not waive the contingent fee, the contract should reduce the payment to the
lawyer of his or her contingent share of the recovery by the amount of any awarded or
statutory attorney’s fees. See section IV C, infra.
9.
The retainer agreement should provide that the fees for work in securing a
fee award are not included in the aggregate of fees and damages but belong to the lawyer
who performs the work regardless of whether he or she takes a contingent percentage of
the total of damages and merits fees.
10.
The size of the contingent fee cannot be such a large percentage as to
violate legal unconscionability restrictions on contingent fees. Courts have inherent
power to override fee contracts, at least in extraordinary circumstances. See, e.g., Krause
v. Rhodes, 640 F.2d 214 (6th Cir. 1981). Rule 1.5 of the ABA Model Rules of
Professional Conduct also regulates fees, including contingent fees. See also Cal. R.
Prof. Conduct §§ 4-200 & 4-210; Cal. Bus. & Prof. Code §§ 6146-6149.
11.
When the representation of a client is likely to involve the defense against
the opposing party’s counterclaims for damages, the retainer agreement should carefully
explain the calculation of fees in the event that the parties settle by walking away with no
net payoff to either party. Courts are likely to frown upon “reverse contingency”
arrangements that grant the attorney the right to seek from the client a percentage of
unspecified potential liability that the client was successfully defended against. See
Beard v. Goodrich, 110 Cal. App. 4th 1031, 1039 (2003) (clause creating contingency
right to percentage of “forgiveness or discharge of debt” did not include unrecovered
unliquidated claims).
12.
Any fee sharing agreement among lawyers should be approved in writing
by the client. See Cal. R. Prof. § Conduct 2-200; Chambers v. Kay, 29 Cal. 4th 142
(2002).
13.
Fee sharing agreements between attorneys and non-attorneys are illegal and
unenforceable by all parties. McIntosh v. Mills, 121 Cal. App. 4th 333 (2004).
C.
Who Is Taxed On the Fee?
1.
If you are not a tax specialist, consider advising the client to retain one.
2.
The tax liability of fee “ownership” is an issue of diminishing consequence
in civil rights matters. A recent amendment to the Internal Revenue Code eliminated the
federal tax consequences to the client of fee ownership in claims under many fee-shifting
statutes. Under the American Jobs Creation Act (“AJCA”), attorney’s fees and court
costs arising from discrimination suits can be deducted from gross income. See
American Jobs Creation Act § 703, Pub. L. No. 108-357 (enacted Oct. 22, 2004)
(amending 26 U.S.C. § 62); see also Commissioner v. Banks, 543 U.S. 426, 433 125
S.Ct. 826, 830-31 (2005) (explaining the application of the amendment).
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3.
The AJCA deduction applies to fees and costs paid on claims under: Title
VII of the Civil Rights Act of 1964; 42 U.S.C. §§ 1981, 1983, & 1985; the Americans
with Disabilities Act; the Rehabilitation Act; the Age Discrimination in Employment Act;
the Fair Labor Standards Act of 1938; the National Labor Relations Act; Section 510 of
the Employee Retirement Income Security Act of 1974; Title IX of the Education
Amendments of 1972; the Family and Medical Leave Act; the Fair Housing Act; the
Employee Polygraph Protection Act of 1988; the Worker Adjustment and Retraining
Notification Act; the Government Employee Rights Act of 1991; the Uniformed Services
Employment and Reemployment Rights Act; Sections 201 to 207 of the Congressional
Accountability Act of 1995; any federal whistleblower protection provision; and any
federal, state, local, and common law provisions related to civil rights or employment.
See 26 U.S.C. § 62(e).
4.
However, the AJCA provision is not retroactive and pre-enactment awards
could result in significant tax liability to the client. See Banks, 543 U.S. at 433, 126 S.Ct.
at 831. That risk, of course, is waning, due to the passage of time since the AJCA’s
enactment. Clients may also face exposure under state tax law.
5.
If the fee was awarded pursuant to a percentage contingent fee agreement,
the client apparently “owns” the fee award for tax purposes. Commissioner v. Banks, 543
U.S. 426, 430, 125 S.Ct. 826, 829 (2005).
6.
If the fee was awarded pursuant to a federal statutory fees provision, it is
not entirely clear who “owns” the fee. See Commissioner v. Banks, 543 U.S. 426, 439,
125 S. Ct. 826, 834 (2005) (leaving the issue undecided). The Seventh Circuit has held
that “statutory attorneys’ fees belong to the client, not the lawyer.” United States Ex Rel.
Fallon v. Accudyne Corp., 97 F.3d 937, 941 (7th Cir. 1996); see also Central States v.
Central Cartage Co., 76 F.3d 114, 116 (7th Cir. 1996) (“Most fee shifting statutes,
including ERISA, direct the award to the litigant rather than the lawyer.”). Within the
Ninth Circuit, the presumption also is that a federal statutory fee is owned by the client.
See, e.g., Sinyard v. Comm’r, 268 F.3d 756 (9th Cir. 2001). But compare United States
v. Jerry M. Lewis Truck Parts & Equip., 89 F.3d 574, 579-80 (9th Cir. 1996), cert.
denied, 519 U.S. 1109 (1997) (statutory attorney’s fees should be paid to the plaintiff’s
attorney as compensation for his or her services, not the plaintiff); with Image Technical
Service, Inc. v. Eastman Kodak Co., 136 F.3d 1354, 1357 (9th Cir. 1998) (“Any fee
award in an antitrust case goes to the successful plaintiff, not to plaintiff’s counsel”; no
fee awarded in that case to avoid a windfall to the client).
7.
In the absence of a contract provision to the contrary, a California statutory
attorney’s fee belongs to the lawyer. Flannery v. Prentice, 26 Cal. 4th 572 (2001). Thus,
it is at least arguable in California that the fee awarded under a California statute is not
taxable to the client as it is defined by state law to be the attorney’s property. Cf. BenciWoodward v. Comm’r, 219 F.3d 941 (9th Cir. 2000); Coady v. Comm’r, 213 F.3d 1187
(9th Cir. 2000). But see Commissioner v. Banks, 543 U.S.at 436, 126 S.Ct. at 833 (client
owns the contingency fee award even if state law confers ownership on the attorney).
30