Pennsylvania v. Valley Citizens' CouncilAnnotate this Case
483 U.S. 711 (1987)
U.S. Supreme Court
Pennsylvania v. Valley Citizens' Council, 483 U.S. 711 (1987)
Pennsylvania v. Delaware Valley Citizens' Council for Clean Air
Argued March 3, 1986
Reargued October 15, 1986
Decided June 26, 1987
483 U.S. 711
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE THIRD CIRCUIT
In 1977, the Delaware Valley Citizens' Council for Clean Air (hereafter respondent) and the United States each filed suit to compel Pennsylvania to comply with certain provisions of the Clean Air Act (Act). (See 478 U.S. 478 U. S. 546, an earlier decision in this case setting forth a detailed statement of the facts.) A consent decree, approved by the Federal District Court in 1978, obligated Pennsylvania to establish a program for the inspection and maintenance of vehicle emissions systems in certain counties by August, 1980. The State failed to do so, and protracted litigation ensued. In 1983, the parties agreed to set June 1, 1984, as the date the state would commence the program. Shortly after such agreement, respondent petitioned the District Court for attorney's fees and costs, pursuant to § 304(d) of the Act, for the work performed after the issuance of the consent decree. The court divided the work into phases and determined the lodestar amount for attorney's fees (the product of reasonable hours times a reasonable rate) for each phase. For certain phases, the court adjusted the figure upward by doubling the lodestar to reflect the risk presumably faced by respondent that it would not prevail on such phases of the litigation. The Court of Appeals affirmed the District Court's enhancement of the fee award. The issue presented here is whether, under § 304(d), when a plaintiff prevails, its attorney, under a contingent fee arrangement, should or may be awarded separate compensation for the risk of losing and not being paid.
Held: The judgment is reversed.
762 F.2d 272, reversed.
JUSTICE WHITE, joined by THE CHIEF JUSTICE, JUSTICE POWELL, and JUSTlCE SCALIA, concluded that § 304(d) should be construed as not permitting enhancement of a reasonable lodestar fee to compensate for an attorney's assuming the risk of loss and of nonpayment, and that, even if § 304(d) is construed to permit such enhancement in appropriate cases, it was error to do so in this case. Pp. 483 U. S. 723-731.
JUSTICE O'CONNOR concluded that Congress did not intend to foreclose consideration of contingency in setting a reasonable fee under fee-shifting
provisions such as § 304(d), but that the District Court erred in employing a risk multiplier in the circumstances of this case. Pp. 483 U. S. 731-734.
JUSTICE BLACKMUN, joined by JUSTICE BRENNAN, JUSTICE MARSHALL, and JUSTICE STEVENS, concluded that Congress intended § 304(d) to allow an upward adjustment, in appropriate circumstances, for a case taken on a contingent basis, and that the award in this case should be vacated and the case should be remanded to the District Court for further findings. Pp. 483 U. S. 735-755.
WHITE, J., announced the judgment of the Court and delivered the opinion of the Court with respect to Parts I, II, and III-A, in which REHNQUIST, C.J., and POWELL, O'CONNOR, and SCALIA, JJ., joined, and an opinion with respect to Parts III-B, IV, and V, in which REHNQUIST, C.J., and POWELL and SCALIA, JJ., joined. O'CONNOR, J., filed an opinion concurring in part and concurring in the judgment, post, p. 483 U. S. 731. BLACKMUN, J., filed a dissenting opinion, in which BRENNAN, MARSHALL, and STEVENS, JJ., joined, post, p. 483 U. S. 735.
JUSTICE WHITE announced the judgment of the Court and delivered an opinion, Parts I, II, and III-A of which represent the views of the Court, and Parts III-B, IV, and V of which are joined by THE CHIEF JUSTICE, JUSTICE POWELL, and JUSTICE SCALIA.
This case involves the award of an attorney's fee to the prevailing party pursuant to § 304(d) of the Clean Air Act, 42 U.S.C. § 7604(d). [Footnote 1]
We set forth a detailed statement of the facts underlying this litigation in Pennsylvania v. Delaware Valley Citizens'
Council for Clean Air,478 U. S. 546 (1986), and recite only an abbreviated version of those facts here. In 1977, the Delaware Valley Citizens' Council for Clean Air (hereinafter respondent) and the United States each filed suit to compel the Commonwealth of Pennsylvania to comply with certain provisions of the Clean Air Act. The parties entered into a consent decree, approved by the District Court in 1978, [Footnote 2] which obligated the Commonwealth to establish a program for the inspection and maintenance of vehicle emissions systems in 10 counties in the Philadelphia and Pittsburgh areas by August 1, 1980. The Commonwealth failed to implement the program by this date, and protracted litigation ensued. Ultimately, in May, 1983, the parties agreed to set June 1, 1984, as the date on which the Commonwealth would commence the inspection and maintenance program. Shortly after this agreement, respondent petitioned the District Court for attorney's fees and costs for the work performed after the issuance of the consent decree. In determining the amount of fees to be awarded, the District Court divided the work performed by respondent's counsel into nine phases. See 478 U.S. at 478 U. S. 549-553. After computing the lodestar for each phase, the District Court adjusted this figure upward in phases four, five, and seven by doubling the lodestar to reflect the risk presumably faced by respondent that it would not prevail on these phases of the litigation. The District Court observed:
"The contingent nature of plaintiff's success has been apparent throughout this litigation. Plaintiffs entered the litigation against the U.S. Government and the Commonwealth of Pennsylvania. The case involved new and novel issues, the resolution of which had little or no precedent. . . . [P]laintiffs have had to defend their rights under the consent decree due to numerous
attempts by defendants and others to overturn or circumvent this Court's Orders."
581 F.Supp. 1412, 1431 (1984).
The Court of Appeals for the Third Circuit affirmed the District Court's enhancement of the fee award for contingency of success, 762 F.2d 272, 282 (1985), a judgment that we now reverse. [Footnote 3]
We first focus on the nature of the issue before us. Under the typical fee-shifting statute, attorney's fees are awarded to a prevailing party and only to the extent that party prevails. See, e.g., Maher v. Gagne,448 U. S. 122, 448 U. S. 129-130 (1980); Hensley v. Eckerhart,461 U. S. 424, 461 U. S. 435 (1983). Hence, if the case is lost, the loser is awarded no fee; and unless its attorney has an agreement with the client that the attorney will be paid, win or lose, the attorney will not be paid at all. In such cases, the attorney assumes a risk of nonpayment when he takes the case. The issue before us is whether, when a plaintiff prevails, its attorney should or may be awarded separate compensation for assuming the risk of not being paid. That risk is measured by the risk of losing, rather than winning, and depends on how unsettled the applicable law is with respect to the issues posed by the
case and by how likely it is that the facts could be decided against the complainant. Looked at in this way, there are various factors that have little or no bearing on the question before us.
First is the matter of delay. When plaintiffs' entitlement to attorney's fees depends on success, their lawyers are not paid until a favorable decision finally eventuates, which may be years later, as in this case. Meanwhile, their expenses of doing business continue, and must be met. In setting fees for prevailing counsel, the courts have regularly recognized the delay factor, either by basing the award on current rates or by adjusting the fee based on historical rates to reflect its present value. See, e.g., Sierra Club v. EPA, 248 U.S.App.D.C. 107, 120-121, 769 F.2d 796, 809-810 (1985); Louisville Black Police Officers Organization, Inc. v. Louisville, 700 F.2d 268, 276, 281 (CA6 1983). Although delay and the risk of nonpayment are often mentioned in the same breath, adjusting for the former is a distinct issue that is not involved in this case. We do not suggest, however, that adjustments for delay are inconsistent with the typical fee-shifting statute.
Second, that a case involves an issue of public importance, that the plaintiff's position is unpopular in the community, or that defendant is difficult or obstreperous does not enter into assessing the risk of loss or determining whether that risk should be compensated. Neither does the chance that the court will find unnecessary, and not compensate, some of the time and effort spent on prosecuting the case.
Third, when the plaintiff has agreed to pay its attorney, win or lose, the attorney has not assumed the risk of nonpayment, and there is no occasion to adjust the lodestar fee because the case was a risky one. See, e.g., Jones v. Central Soya Co., 748 F.2d 586, 593 (CA11 1984), where the court said that
"[a] lawyer may not preserve a right of recourse against his client for fees and still expect to be compensated
as if he had sacrificed completely his right to payment in the event of an unsuccessful outcome."
Although the issue of compensating for assuming the risk of nonpayment was left open in Blum v. Stenson,465 U. S. 886 (1984), JUSTICE BRENNAN wrote that
"the risk of not prevailing, and therefore the risk of not recovering any attorney's fees, is a proper basis on which a district court may award an upward adjustment to an otherwise compensatory fee."
in Wildman v. Lerner Stores Corp., 771 F.2d 605 (1985), for example, takes this approach and allows an upward adjustment to the lodestar to account for the contingency factor. In that case, the District Court entered judgment on a jury verdict finding an employer liable for violating the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., and two Puerto Rican statutes. The court awarded the prevailing party a lodestar fee amount of $56,500 and then increased that figure by 50% to account for the fact that, because of the difficulties of the action and the novelty of the issue, "the plaintiffs' attorneys . . . faced a contingency of losing all their time and effort." 771 F.2d at 610. In sustaining the enhancement of fee awards based on contingency, the Court of Appeals relied on the legislative history of 42 U.S.C. § 1988, detailed several additional reasons as to why it is necessary to increase the lodestar figure for contingent fee cases, and concluded that, rather than compensating lawyers for unsuccessful claims, an adjustment of the lodestar figure may be necessary in particular cases to provide for the reasonable attorney's fee envisioned by Congress. [Footnote 5]
This construction of the fee-shifting statutes has not been universal. The District of Columbia Circuit is particularly skeptical of the purpose served by enhancing the lodestar amount to account for the risk of not prevailing. In Laffey v. Northwest Airlines, Inc., 241 U.S.App.D.C. 11, 746 F.2d 4 (1984), cert. denied, 472 U.S. 1021 (1985), the court reversed the trial court's decision to double the lodestar based on the risk factor, citing a wide variety of problems with such an approach. The court found that, in theory, there should be no limit on the size of the fee if risk enhancement is permitted, for the less likely the chances of success in a particular case, the more "entitled" the prevailing party should be to have the fee award reflect acceptance of this risk. In a similar vein, the contingency factor penalizes the losing parties with the strongest and most reasonable defenses, thus "creating a perverse penalty for those least culpable." 241 U.S.App.D.C. at 33, 746 F.2d at 26. Moreover, even if the risk of loss should be taken into account,
"the chances of winning could not be set with anything approaching mathematical precision, and so vast increases in attorneys [fees] would derive from a spurious mathematical base."
Id. at 33-34, 746 F.2d at 26-27 (footnote omitted).
On a more fundamental level, the court found that using the risk of loss to increase the lodestar figure compensates attorneys not only for their successful efforts in one case, but for their unsuccessful claims asserted in related cases. This not only "encourag[es] marginal litigation," but raises "the
reasonable question of why the subsidy [for unsuccessful litigation] should come from the defendant in another case.'" Id. at 34, n. 138, 746 F.2d at 27, n. 138 (citations omitted).
Such a scheme was deemed to be manifestly inconsistent with Congress' intent to award attorney's fees only to prevailing parties. Relying on this Court's holding in Hensley that attorney's fees could not be awarded for claims unrelated to those on which the party ultimately prevailed, the court reasoned:
"The same logic which restricts compensation to those portions of a lawsuit directly related to the relief procured also forbids multiplying attorneys fees so as effectively to compensate counsel for other, losing claims which may be brought. The prevailing party may expect full compensation for prevailing claims; there is no provision for compensating losing, unrelated claims in the same case, or other losing cases which might or might not involve the same parties. Any crude multiplier derived simply from the plaintiff's chance of success must be rejected as contrary to the congressional scheme."
Id. at 34-35, 746 F.2d at 27-28.
Finally, the court held that, even if a contingency enhancement, as opposed to a contingency multiplier, could be used to reflect the party's initial chance of success, Blum made clear that such enhancements were proper only in the most exceptional of cases, and because "this case did not present an exceptional level of risk, no risk enhancement should be awarded." Id. at 36, 746 F.2d at 29. [Footnote 6]
The bar and legal commentators have been much interested in the issue. [Footnote 7] Some writers unqualifiedly have endorsed the concept of increasing the fee award to insure that lawyers will be adequately compensated for taking the risk of not prevailing.
"The experience of the marketplace indicates that lawyers generally will not provide legal representation on a contingent basis unless they receive a premium for taking that risk."
Berger, Court Awarded Attorneys' Fees: What is "Reasonable"?, 126 U.PaL.Rev. 281, 324-325 (1977). [Footnote 8] See also Developments in the Law -- Class Actions, 89 Harv.L.Rev. 1318, 1615 (1976); Comment, 122 U.Pa.L.Rev. 636, 708-711 (1974).
Others have been considerably more reserved in their endorsement of a contingency bonus, focusing on four major problems with the use of this factor. First, evaluation of the risk of loss creates a potential conflict of interest between an attorney and his client, for in order to increase a fee award, a plaintiff's lawyer must expose all of the weaknesses
and inconsistencies in his client's case, and a defendant's attorney must either concede the strength of the plaintiff's case in order to keep down the fee award or "allo[w] the fee to be boosted by the contingency bonus [by] insisting that the plaintiff's victory was freakish." Leubsdorf, The Contingency Factor in Attorney Fee Awards, 90 Yale L.J. 473, 483 (1981) (Leubsdorf). Second, in order to determine the proper size of the contingency bonus, a court must retroactively estimate the prevailing party's chances for success from the perspective of the attorney when he first considered filing the suit. Not only is this mathematically difficult to compute, but,
"once the result is known, it is hard for judges and lawyers to regain a perspective of ignorance and to treat the result as only one of several that were initially possible."
Id. at 486.
The third problem with increasing the fee award to account for the risk of not prevailing is the same one identified by the courts which have questioned this practice: it penalizes the defendant with the strongest defense, and forces him to subsidize the plaintiff's attorney for bringing other unsuccessful actions against other defendants. Id. at 488-491. See Note, 80 Colum.L.Rev. 346, 375 (1980). Finally, because the contingency bonus cannot be determined with either certainty or accuracy, it "cannot be justified on the ground that it provides an appropriate incentive for litigation." Leubsdorf 496. Cf. Note, 96 Harv.L.Rev. 677, 686, n. 51 (1983); Comment, 53 U.Chi.L.Rev. 1074 (1986).
There are other considerations. Fee-shifting removes the interest a paying client would have in ensuring that the lawyer is serving the client economically; the task of monitoring the attorney is shifted to the judge in separate litigation over fees if the plaintiff wins. Fee litigation occurs on a case-to-case basis, and is often protracted, complicated, and exhausting. There is little doubt that it should be simplified to the maximum extent possible. If the decided cases are any measure, assessing the initial risk of loss when the case is
over is a particularly uncertain matter, especially for a judge who is confident that he has correctly decided for the plaintiff, but then must inquire how weak the plaintiff's case was and how likely it was that he, the judge, would have been mistaken. It may be absurd to ask the judge to "determine the probability that he would have decided the case incorrectly." Id. at 1094.
The disagreement among the Circuits and commentators indicates that Congress has not clearly directed or authorized multipliers or enhancements for assuming the risk of loss. Neither the Clean Air Act nor § 1988 expressly provides for using the risk of loss as an independent basis for increasing an otherwise reasonable fee, and it is doubtful that the legislative history supports the use of this factor. In concluding that risk enhancement is authorized, JUSTICE BRENNAN in Blum, 465 U.S. at 465 U. S. 902, relied on the fact that one of the items to be relied on in setting a fee and enumerated in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (CA5 1974), is whether the fee is fixed or contingent, and that Congress endorsed consideration of this factor. See S.Rep. No. 94-1011, p. 6 (1976) (S.Rep). But a careful reading of Johnson shows that the contingency factor was meant to focus judicial scrutiny solely on the existence of any contract for attorney's fees which may have been executed between the party and his attorney.
"The fee quoted to the client or the percentage of the recovery agreed to is helpful in demonstrating the attorney's fee expectations when he accepted the case."
488 F.2d at 718. See Leubsdorf 479, n. 38. At most, therefore, Johnson suggests that the nature of the fee contract between the client and his attorney should be taken into account when determining the reasonableness of a fee award, but there is nothing in Johnson to show that this factor was meant to reflect the contingent nature of prevailing in the lawsuit as a whole.
JUSTICE BRENNAN also noted that Congress cited Stanford Daily v. Zurcher, 64 F.R.D. 680 (ND Cal.1974) (subsequently aff'd, 550 F.2d 464 (CA9 1977), rev'd on other grounds,436 U. S. 547 (1978)), as one of several cases which "correctly applied" the Johnson factors. Blum, supra, at 465 U. S. 903. The court there increased the lodestar based, in part, on contingency-of-success considerations. But Congress also cited two other cases which it found also "correctly applied" the Johnson criteria. In Davis v. County of Los Angeles, 8 EPD
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