Save Our Cumberland Mountains, Inc. v. Donald P. Hodel, Secretary of the Interior ( 1987 )

WALD, Chief Judge,

concurring in part, dissenting in part:

The panel today holds that if an attorney has ever billed any particular type of client by the hour, then the highest rate he has in the past charged for that type of client may be used as the measure for the attorney’s statutory fee compensation, regardless of whether the rate is established or merely ad hoc, and regardless of whether it accurately reflects the prevailing community market rate for the lawyer’s services, as prescribed by Congress. The path down which this circuit started in Laffey leads farther and farther away from Congress’ purpose in providing reasonable attorneys’ fees to prevailing parties. I dissent from the panel’s part II.B. determination regarding Galloway’s fee not only because on Laffey’s own terms, Galloway’s rate policy is distinguishable from that of Bredhoff & Kaiser, the firm involved in Laffey, but also because the application of Laffey’s reasoning to Galloway’s case places in bas relief the need for a fundamental reevaluation of Laffey itself.

I.

“To reduce the arbitrariness characteristic of court awards of attorneys fees, the Supreme Court... intervened [in 1983] and approved a version of the lodestar method of setting rates.” Laffey v. Northwest Airlines, Inc., 746 F.2d 4, 12 (D.C.Cir.1984), cert. denied, 472 U.S. 1021, 105 S.Ct. 3488, 87 L.Ed.2d 622 (1985). The Court held that “[t]he most useful starting point for determining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate.” Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 1939, 76 L.Ed.2d 40 (1983). The lodestar method was again at issue a year later in Blum v. Stenson, 465 U.S. 886, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984). In Blum, the government had argued that fee awards to nonprofit legal aid groups should be based on the cost of providing legal services, while for-profit firms should receive fees based on the prevailing market rate. The Court rejected that dichotomy, instead holding that “[i]t is ... clear from the legislative history that Congress did not intend the calculation of fee awards to vary depending on whether plaintiff was represented by private counsel or by a non-profit legal services organization.” Id. at 894, 104 S.Ct. 1547. Thus, “ ‘reasonable fees’ under § 1981¹ are to be calculated according to the prevailing market rates in the relevant community, regardless of whether plaintiff is represented by private or nonprofit counsel.” Id. at 895, 104 S.Ct. at 1547.

The Court noted that as far as legal services attorneys were concerned, “the rates charged in private representations may afford relevant comparisons” to what the “market rate” for their services would be. Id. at 896 n. 11, 104 S.Ct. at 1547 n. 11. The following paragraph refers to several ways in which an attorney may seek to prove the prevailing community rate “for similar services by lawyers of reasonably comparable skill, experience, and reputation.” Id. Viewed in context, the reference to private rates is simply an indication of one type of evidence a nonprofit attorney might use to show the prevailing community rate for his services. Yet, in Laffey, this circuit converted Blum’s reference to “the rates charged in private representations” into a virtually unrebuttable presumption that an attorney’s established hourly billing rate, whatever considerations it is based on, is an appropriate proxy for the prevailing market rate for his services in the relevant community. Thus, even if a firm could prove that the prevailing community rate for services of the kind it was providing was substantially higher than the rate it was actually charging, the actual rates would nonetheless constitute a cap on that firm’s “reasonable” attorneys’ fee.²

Much of our discussion in Laffey relied upon the practical difficulties of determining the prevailing community rate for a particular kind of legal service based on affidavits or other evidence of market value for that service. The court reasoned that a firm with an established billing practice has on its own determined the opportunity cost of its services; its established rate is, in other words, the price at which it must be compensated in order to displace other paying clients.

The problem with the Laffey established rate benchmark is that it may or may not dovetail with the “prevailing market rate[ ] in the relevant community” that the Supreme Court in Blum held to be the measure of a reasonable attorneys’ fee, for either private counsel or nonprofit legal organizations. Blum, 465 U.S. at 894-95, 104 S.Ct. at 1546-47. The rate a firm ordinarily charges for its services is not by any means the only relevant evidence of the prevailing market rate in the community for comparable services.³ Laffey itself in fact recognizes that a court must “bracket” the established hourly rate by determining that it “falls within the rates charged by other firms for similar work in the same community.” 746 F.2d at 24-25. Firms do exist that consciously eschew profit for public service and that set their rates below those they might demand based on qualifications and experience in order to serve particular needs and clienteles. Often these rates are based on a combination of what the client can pay and what the lawyers need to survive, rather than on what the lawyers’ talents alone can command in the marketplace.

In retrospect, Laffey’s attempt to reduce Blum’s “prevailing market rate” standard to a more certain measure may have set us on a course at odds with Blum itself. As applied to standard private law firms that have an established billing practice, Laffey still makes some sense. But for the myriad of unconventional hybrid firms where major efforts are devoted to serving nonpaying or lower than market rate clients, it may well be an unmitigated disaster, both for the lawyers involved and for the statutory purposes of the attorneys’ fee provisions.

Galloway, as the panel concedes, has no customary billing rate, but merely charges his clients based on their ability to pay.⁴ The $75-$100 per hour that Galloway in his affidavit said he charges national environmental groups serves merely as an example of how his general pay-what-you-can policy applies in the case of certain clients.⁵

If we are to meet Congress’ mandate of awarding attorneys’ fees based on the prevailing community market rate for a lawyer’s services, the Laffey presumption that an “established” hourly rate can serve as a proxy for that community market rate cannot be allowed to become disconnected from its own analytical underpinnings. A firm’s established hourly rate for its general range of clients serves the triple purposes of being easily ascertainable (so a court can avoid having to examine extrinsic evidence about the various rates charged by other lawyers with comparable qualifications and experience, see Laffey, 746 F.2d at 18-19), predictable (so the parties can more easily calculate what the fee award is likely to be, and reach settlement based on that prediction, see id. at 21-22), and, at base, fairly representative of the community’s market rate, albeit discounted by the firm’s desire to serve particular kinds of clients rather than all comers. On the other hand, a firm that does not even try to accommodate profitability or a particular clientele, and that refuses to price any potential clients out of its services, is a different animal altogether. Such a policy results, as in Galloway’s case, in an amalgam of different rates charged to different types of clients. Arbitrarily selecting one of these rates fails to fulfill any of the three purposes for the proxy relationship between individual firm rates and prevailing market rates set out in Laffey. First, it is not easy to ascertain which of Galloway’s many rates is the appropriate one at which to compensate him for work done in this case (the client served here would normally be in the “no-pay-at-all” category, see note 5, supra). Second, because of this inherent difficulty of determining which rate to apply, the parties could not easily predict a fee award, an uncertainty that would complicate settlement. Third, an ad hoc rate policy based purely on client ability to pay is no evidence at all of the prevailing community rate that the attorney would draw for his services in an open market.⁶ In sum, a rigid application of the Laffey presumption to Galloway’s situation serves none of Laffey’s asserted purposes.

Furthermore, to accommodate Laffey with Blum — the latter, of course, being the most authoritative interpretation of Congress’ intent — we must award statutory fees based on a particular rate of an attorney only if that rate serves as a valid proxy for the prevailing market rate for his services in the relevant community. The panel, by arbitrarily taking one of the many different hourly rates that Galloway charges, based on clients’ ability to pay, and designating it as an appropriate measure of his market worth, has deserted not only Laffey, but more importantly the hallmark of Blum, i.e., the prevailing market value of an attorney’s legal services, were he to go out on the open market. Because Galloway does not have an established hourly rate that could serve as any kind of approximation of his market rate, we must look to other and different kinds of evidence to determine what his services are worth.⁷ See part II, infra.

True, the firm in Laffey determined its established rate based on its clients’ ability to pay. Indeed, Laffey includes a long footnote discussing Bredhoff & Kaiser’s argument that it charged a lower customary rate because it wanted to represent clients who could only pay a lower rate. 746 F.2d at 14-15 n. 69. Laffey concludes, however, that an established rate is, nevertheless, an established rate, regardless of the motives of the firm in setting it. Now, the panel extends that reasoning: Galloway’s rates (albeit ad hoc and not established) are still his rates, regardless of his motives in setting them. Since he does charge some of his clients rates, we may look to those rates to determine his statutory fee.

Using a pure opportunity cost theory, this argument concludes that Galloway has chosen to practice law for clients who can pay little or no money, and that the cost of his taking a statutory fees case to displace a regular client is no more than his highest fee-paying client. But opportunity or displacement cost is not the test; Congress’ command, as interpreted in Blum, is that all attorneys are to be compensated in statutory fees cases at the prevailing market rate in the relevant community. Indeed, under the panel’s theory, there would have been no reason to exempt legal service organizations from the opportunity cost test, as Blum certainly did.

Most disturbingly, the panel’s theory produces strong disincentives to young lawyers trying to make public interest-type practice work. Large, wealthy private firms will receive top dollar in statutory fees compensation for the occasional pro bono case they take. Nonprofit legal services organizations with salaried employees will also receive fees based on the top market rate for lawyers of similar qualifications and experience. But struggling private-public interest attorneys who purposefully charge their poorer clients for services at cut-rates but who must yet depend upon those rates for their livelihood will receive those same cut-rates as statutory fees. Clearly, Congress did not intend such an arbitrary disparity when it enacted provisions allowing reasonable attorneys’ fees in order to induce high quality representation from the private bar. Yet, Laffey and this panel have brought us to this point of jurisprudential absurdity.

II.

Under my analysis, we would remand to the District Court to determine the prevailing community market rate for Galloway based on his qualifications and experience in this kind of case. The District Court relied upon the Laffey District Court’s schedule of prevailing community rates. Save Our Cumberland Mountains, Inc. v. Hodel, 622 F.Supp. 1160, 1165 (D.D.C.1985) (“For an attorney with 11 to 19 years of experience, the reasonable rate has been found to be $150.”). There are two problems with using this schedule. First, it was compiled under the then-prevailing notion that current rather than historical rates could be used to compensate attorneys who won lawsuits against the government. It has become clear since that absent an explicit waiver of sovereign immunity, attorneys’ fees awarded against the federal government must be based on historical rates. See Library of Congress v. Shaw, — U.S. -, 106 S.Ct. 2957, 92 L.Ed.2d 250 (1986); Thompson v. Kennickell, 797 F.2d 1015 (D.C.Cir.1986), cert. denied, — U.S. -, 107 S.Ct. 1347, 94 L.Ed.2d 518 (1987). Thus, while the Laffey schedule may be appropriate for hours billed during 1983 (the date of the schedule), it would (at least theoretically) overvalue Galloway’s 1981 and 1982 hours and undervalue his 1984 and 1985 hours. Second, Galloway graduated from law school in 1972, J.A. at 174; accordingly, in 1981 and 1982 he was in the Laffey 8-10 years out of law school bracket ($125 per hour at 1983 rates), while only in 1983, 1984, and 1985 was he in the Laffey 11-19 years out of law school bracket ($150 per hour at 1983 rates).

Petitioners did submit a detailed fee request, including not only the Laffey schedule but also affidavits from Washington, D.C. attorneys and a table of rates charged in 1983 by leading area law firms. J.A. at 211-49. It is not clear, however, whether the District Court relied upon any of these other submissions, and it must be noted that most do not contain historical rates.

In the other Save Our Cumberland Mountains fee case, see note 6, supra, the District Court, after finding that Galloway did not have an established hourly rate, determined his prevailing market rate by comparing him with Nancy Crisman, a public interest attorney who also had graduated from law school in 1972 and achieved significant reputation and success in her field. The court had compensated Crisman at $150 per hour for 1983, 1984, and 1985, based on affidavits and (what appears to be) the same table of rates charged in 1983 by leading area law firms as submitted in the case at bar. The court then reduced these rates to $115 per hour for work done in 1981 and $125 per hour for work done in 1982 (although it did not explain how it arrived at the reduced figures). 651 F.Supp. at 1541. Except for the unexplained reduction formula, the District Court’s approach in the other Save Our Cumberland Mountains fees case appears to be a reasonable one.

I would thus remand the issue of the prevailing market rate for compensation of Galloway for further factual findings. Specifically, I would instruct the District Court to determine the prevailing market rate in Washington, D.C. for lawyers of Galloway’s experience and specialized expertise for the years 1981-85. In making its findings, the District Court should examine the affidavits and tables already submitted, and require further documentation if necessary to provide evidence of historical rates.

III.

The prevailing community market rate that Blum mandates is not just any ad hoc rate that an attorney charges to any paying client, no matter how it is calculated, even if it is his top ad hoc rate.⁸ Blum explicitly holds that Congress did not intend statutory fees to vary depending upon the clients a lawyer serves. Thus, someone who typically represents environmentalists is entitled to the same fees as one who represents industry in the same cases, other qualifications being equal. Yet, today this court, harking to the siren song of Laffey, distances itself even further from that congressional intent, establishing a level of statutory compensation that depends solely upon the level of pay the attorney asks from his clients. The highest paid law firm in town whose pro bono work amounts to less than 5% of its billable hours will henceforth receive five times the fee for the same case as the idealistic lawyer who devotes 95% of his practice to nonpaying or low paying clients. If this is what Laffey has wrought, it is time that we or Congress took a harder look.

I dissent from part II.B.

1 . As the panel points out, the jurisprudence addressing 42 U.S.C. § 1988 is appropriately applied to a fees statute such as 30 U.S.C. § 1270(d), which is at issue in this case.

2 . Although in most cases the rate an attorney charges will indeed serve as a cap on his statutory award, Laffey requires the court to " ‘bracket’ this rate by establishing that it falls within the rates charged by other firms for similar work in the same community.” 746 F.2d at 24-25. Galloway "has been practicing for almost twelve years in a very specialized field in which he has become a noted authority and leading national expert.” Save Our Cumberland Mountains, Inc. v. Hodel, 622 F.Supp. 1160, 1165 (D.D.C.1985). Since Laffey only permits an attorney's established hourly rate to serve as the proxy of the prevailing community market rate for his services if that rate falls within the bracket for similar work in the community, I am surprised that the panel, supposedly following Laffey so closely, undertakes only the most cursory evaluation of whether $100 per hour is an "abnormally high or low rate” in the overall market for generally similar cases, see Maj. Op. at n. 3, and undertakes no evaluation at all of whether $100 per hour is within the particularized rate bracket for a lawyer of Galloway’s experience and credentials.

The panel does cite to the District of Columbia Bar’s 1984 Lawyer Directory, Maj. op. at n. 3, which reveals a variety of lawyers practicing in the administrative law and civil practice areas for $75 to $100 per hour. However, even a cursory glance at the Directory reveals that a substantial portion of area lawyers is not listed at all, and most of those that are listed do not include any hourly fee information in their listing; it is entirely optional whether to list fees, and no attempt is made in the Directory to correlate fees with experience, reputation, or expertise in specific areas. The avowed purpose of the Directory is not to compile an accurate representation of prevailing market rates; rather, the Directory itself proclaims that it “has been compiled by the District of Columbia Bar to help people find lawyers.” Directory at v. The Directory ought not be used as evidence of community rates, and certainly not of the prevailing community market rate for a lawyer of Galloway's credentials.

3 . Lest one think that an award based on the prevailing rate in a community is somehow a windfall to a firm that ordinarily charges less, Blum clearly holds that "[w]e cannot assume that Congress would endorse the standards used in [cases relying upon community rates], if fee awards based on market rates were viewed as the kind of ‘windfall profits’ it expressly intended to prohibit.” Id. at 895, 104 S.Ct. at 1547.

4 . The panel’s conclusion that Galloway's "maximum hourly rate is $100," Maj. op., text at 48 n. 2, is unfounded. The $75-$ 100 range mentioned in Galloway’s affidavit is used merely as an example of a rate charged to a particular group. Furthermore, Galloway characterizes it as a "reduced rate." See infra n. 5.

5 . Galloways affidavit contains only one paragraph that is relevant to determining whether or not he has an established hourly rate:

Because the organizations and individuals I represent do not have sufficient resources to retain experienced counsel at commercial rates, it is my practice to represent them better at no cost or at rates significantly below the commercial rate for work done in the field of coal regulation, whether in health and safety or environmental matters. I determine the level of the reduced rate based on the groups’ ability to pay. In many cases, because the group or individual has practically no resources, such as when miners are fired because of alleged safety protests, or the groups have no financial resources and most members are very poor, as is the case with the Council of Southern Mountains, Inc. and Save Our Cumberland Mountains, Inc., I will represent the individual and/or group without fee. For national environmental and conservation groups, my reduced rate currently ranges from $75-$100 per hour.

J.A. at 179-80.

6 . Consider the following scenario: A merchant is selling rugs in an outdoor market. He posts a sign that advertises his rugs at $100 a piece. He then sells his rugs at that price. Next to him is a merchant selling rugs, but with no sign. Instead, when a prospective purchaser arrives, the merchant asks the customer about his financial wherewithal, and then determines a price calibrated to the customer’s means. His rugs, similar to the first merchant’s, end up selling for a range of prices, between $0 (to the poor sympathetic beggar) and $500 (to the rich oil baron). I think it plain that the first merchant’s established price can be said to be the market value of his rugs — at least as a threshold matter, if we are not to permit the first merchant to introduce other evidence — while it would be impossible to value the second merchant’s rugs based on the prices at which they are sold.

7 . Indeed, another District Court has ruled on the identical issue before us involving the same attorneys and another aspect of the same litigation. Save Our Cumberland Mountains, Inc. v. Hodel, 651 F.Supp. 1528, 1540-41 (D.D.C.1986). The court there held that Galloway should not be compensated at the "rate he charges his occasional paying clients," id. at 1540, for two reasons. First, "Galloway’s rates are well below the market rate charged by his contemporaries in experience and expertise,” and thus are “outside the reasonable rate “bracket’ for similar work in the community,” id., the grid against which Laffey validated established hourly rates. See 746 F.2d at 24-25; note 2, supra. Second, "Galloway ... runs a two man firm, and does not have a rate schedule. His rate, when he charges one at all, varies based on his client's ability to pay. His is not an ‘established’ rate within the meaning of Laffey.” 651 F.Supp. at 1540.

8 . I fear the concurrence totally misses the point of my analysis in suggesting it “end run[s]“ Laffey. Cone. op. at 55. Laffey applies only to an established rate and Galloway has none. See, supra, at 5. He charges only what each client can pay. In the case of national environmental organizations the "pay what you can” range runs from $75 to $100. That is still, according to his affidavit, a “reduced” rate based on the client’s ability to pay and is not an “established" rate at all.