Pennsylvania Environmental Defense Foundation (p.e.d.f.) v. Canon-Mcmillan School District ( 1998 )

OPINION OF THE COURT

SLOVITER, Circuit Judge.

The factors that should be considered in a court’s determination of a counsel fee award and the procedure to be used in that connection, issues that occupied all levels of the federal judiciary for numerous years, have finally been resolved through a series of decisions of the United States Supreme Court. The question before us is whether, after all the effort that went into that resolution, we will allow the courts of this circuit to bypass the Supreme Court’s explicit directions merely because counsel failed to interpose an objection to the procedure.

I.

Before us is an appeal by the Pennsylvania Environmental Defense Foundation (“PEDF”), a non-profit environmental action group, from an order of the district court awarding it attorneys’ fees following the entry of a consent decree in its suit against Canon-MeMillan School District under the Clean Water Act, 33 U.S.C. § 1365.

PEDF, which had sent the School District its detailed statutorily required Notice of Intent to Sue on August 20, 1993, brought suit on March 30, 1994, alleging that there were “repeated violations” of the terms of the School District’s National Pollution Discharge Elimination System permit because of discharges from the Wylandville Elementary School sewage system into a tributary of Little Chartiers Creek in North Strabane Township, Pennsylvania. PEDF alleged that the violations were damaging the creek in violation of 33 U.S.C. §§ 1311(a) and 1342 and sought injunctive relief, civil penalties and costs. PEDF was not the only entity concerned about this pollution. The Pennsylvania Department of Environmental Resources (“DER”) had renewed the School District’s NPDES permit on March 17, 1994. DER also informed the School District of measures it needed to take to come into compliance with its permit limits. The Environmental Protection Agency, which had been conducting a contemporaneous investigation, submitted a Notice of Proposed Assessment of a Civil Penalty against the School District on August 30, 1994 and also directed it to come into compliance.

After the School District made what it referred to as several “minor process adjustments,” it was apparently in full compliance with all of its permit limits by January 1995. On February 16, 1995, the School District filed both a Motion for Stay and a Motion for a Protective Order, arguing that the litigation should be stayed and discovery halted because it was in complete compliance with its permit. The district court denied those motions on February 22, 1995, and PEDF continued with its preparation. In March of 1995, the district court granted PEDF’s motion to file a reply brief to the School District’s memorandum in opposition to PEDF’s motion for partial summary judgment. PEDF filed that reply brief on March 23, 1995.

Thereafter, the parties reached a settlement and submitted to the district court a Consent Decree, which it signed on June 23, 1995. The settlement reserved the issue of the award of attorneys’ fees, and shortly thereafter PEDF filed a motion for attorneys’ fees and submitted a statement of fees and expenses. The district court held oral argument on the fees and then issued an order on December 2, 1996 that directed the parties to submit proposed findings of fact and conclusions of law. The court’s order stated, inter alia:

[Ejach party shall submit a proposed order which shall set forth, in specific detail, its proposal for completely resolving this issue. The court will adopt as its own the proposed findings and sign, without modification, the one proposed order which, in the judgment of the court, is most reasonable under the circumstances.

App. at 94 (emphasis in original). Neither party objected to this order, and both filed the required proposed findings and conclusions.

PEDF’s proposed findings of fact and conclusions of law requested a total of $70,-282.09. It arrived at that figure by the formula set out in Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983), through calculating a “lodestar” based on a proposed “reasonable hourly rate” of $160 per hour for attorney John E. Childe and $60 per hour for Paralegal Cindy Smith, multiplied by “hours reasonably expended.” App. at 95, 118. PEDF submitted a detailed account of these charges and accompanying time slips. The School District’s proposed findings of fact and conclusions of law suggested the much lower fee of $20,414.62. The district court adopted verbatim the School District’s proposed findings of -fact and conclusions of law, except that it submitted its own short introduction. It follows that although we will refer to the court’s order, it must be remembered -that the “order” is in fact in the language prepared by the School District.

Although the order was highly critical of certain aspects of PEDF’s fee request, including the proposed rates and the expenditure of time on certain issues, it did not explicitly reduce the hours that PEDF billed for these services. Instead, it was keyed to the determination that PEDF was entitled to no fee for the period after which the School District was in “full compliance.” It stated, “By January of 1995, it is thus undisputed that no further violations were occurring at the Wylandville Elementary School system, and the expenditure of $18,000 for structural modifications assured that the problems would not recur.... By its own calculations, PEDF had expended $8,963 in attorney’s fees as of the date when the Wylandville Elementary School system was in full compliance-” D.C. Opinion at 7. On the basis that PEDF had needlessly pursued the litigation after January 1995, after the violations had been abated, the order adopted by the district court granted PEDF all of the attorneys’ fees it had requested for the time period through January 1995, but no fees for time spent after that date, except for $1,910 in connection with the consent decree. It also awarded PEDF $3,000 for fees in connection with the fee litigation and $6,541.62 in costs. D.C. Opinion at 21-22.

The order, in language stemming from the School District, concluded that “the total of $20,414.62 is generous under the circumstances, and, although the facts and law relating to duplicative billing, hourly rates and degree of difficulty would justify a reduction of this amount, the Court will award this amount at this time.” D.C. Opinion at 22. We' have jurisdiction over PEDF’s appeal pursuant to 28 U.S.C. § 1291.

II.

The award of attorneys’ fees in this case is authorized under the citizens’ suit provision of the Clean Water Act, which provides that a court “may award costs of litigation (including reasonable attorney and expert witness fees) to any prevailing or substantially prevailing party, whenever the court determines such award is appropriate.” 33 U.S.C. § 1365(d). The statute places no restriction on the award other than that the party entitled to the award be “prevailing or substantially prevailing.”

In Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983), and Pennsylvania v. Delaware Valley Citizens’ Council for Clean Air, 478 U.S. 546, 106 S.Ct. 3088, 92 L.Ed.2d 439 (1986), the Supreme Court adopted the approach first set forth in this court’s opinions in Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 487 F.2d 161 (3d Cir.1973), and Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 540 F.2d 102 (3d Cir.1976), with respect to the appropriate procedure and considerations for a district court to follow in awarding attorneys’ fees. Central to the Supreme Court’s decisions has been its adoption of the “lodestar” formula, which requires multiplying the number of hours reasonably expended by the reasonable hourly rate. See Blanchard v. Bergeron, 489 U.S. 87, 94, 109 S.Ct. 939, 103 L.Ed.2d 67 (1989); Delaware Valley Citizens’ Council, 478 U.S. at 564, 106 S.Ct. 3088; Blum v. Stenson, 465 U.S. 886, 888, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984); Hensley, 461 U.S. at 433, 103 S.Ct. 1933.

The “starting point” in determining the appropriate hourly rate is the attorneys’ usual billing rate. Public Interest Research Group of N.J., Inc. v. Windall, 51 F.3d 1179, 1185 (3d Cir.1995). The Supreme Court has directed that the district court should then consider the “prevailing market rates” in the relevant community. Blum, 465 U.S. at 895, 104 S.Ct. 1541 (1984); see also Missouri v. Jenkins, 491 U.S. 274, 285, 109 S.Ct. 2463, 105 L.Ed.2d 229 (1989). In calculating the second part of the lodestar determination, the time reasonably expended, “[t]he district court should review the time charged, decide whether the hours set out were reasonably expended for each of the particular purposes described and then exclude those that are ‘excessive, redundant, or otherwise unnecessary.’ ” Windall, 51 F.3d at 1188 (quoting Hensley, 461 U.S. at 433-34, 103 S.Ct. 1933). Once the court has calculated the lodestar it may adjust that amount, primarily based on the degree of success that the plaintiff obtained. See Hensley, 461 U.S. at 435, 103 S.Ct. 1933. However, the cases make clear that before any adjustments are made, the district court must calculate a lodestar. See Windall, 51 F.3d at 1190.

In Windall, this court considered a district court’s award of attorneys’ fees under § 1365(d) of the Clean Water Act, which presented a situation where the public interest group plaintiffs had been awarded injunc-tive relief but no monetary damages. The district court had applied a 50 percent negative multiplier to the lodestar because of the failure to obtain monetary relief. Id. at 1189. On appeal, we held that the use of the negative multiplier was error, ■ rejecting the “rough mathematical” approach applied by the district court. Id. at 1189-90.

Throughout the opinion we emphasized the importance of adherence to the formulaic approach set out by the Supreme Court. At the outset, we stated that the amount of a fee award is within the district court’s discretion “so long as it ‘employs correct standards and procedures and makes findings of fact not clearly erroneous.’ ” Id. at 1184 (emphasis added) (quoting Northeast Women’s Ctr. v. McMonagle, 889 F.2d 466, 475 (3d Cir.1989)). Thus, we held that rather than apply the across-the-board percentage reduction reflecting its view of the result achieved, the district court should have considered the relationship between the degree of success and the amount of the award. That step could only be taken after the court had calculated the lodestar. “It is, however, essential to calculate the lodestar before considering adjustments. Only after the lodestar is determined does the district court have discretion to consider results obtained and, in doing so, to exclude some or all of the time spent on unsuccessful claims.” Id. at 1190.

We also stressed the importance of the court’s articulation of the basis for the award. We stated that the district court must “provide a concise but clear explanation of' its reasons for [a] fee award.’ ” Id. at 1188 (quoting Hensley, 461 U.S. at 437, 103 S.Ct. 1933). The defendant in Windall had contended in its cross-appeal that the district court had failed to consider some of its specific objections regarding the hours expended. In response, we stated,

[t]he magistrate judge did not consider the Air Force’s objections to particular time charges. The magistrate judge was reluctant to second guess counsel’s judgments about what time and attention particular legal problems should be given. Hensley, however, directs district courts to consider a party’s objections to particular- time charges and make their findings on the hours that should be included in calculating the lodestar. The district court failed to make any such findings here.

Id. at 1189. Our view of the necessary procedure was made-- explicit in the passage in which we stated, “[t]he district court seems to have thought that its negative multiplier made attention to the Air Force’s specific objections unnecessary. Hensley does not permit such a short cut.” Id. at 1189 n. 14 (emphasis added).

The Supreme Court continued to follow the lodestar approach after Hensley, but emphasized that the district court was permitted to adjust the fee depending on the situation. See Delaware Valley Citizens’ Council, 478 U.S. at 565, 106 S.Ct. 3088. However, in the case before us, the district court decided to dispense with that process, which may be arduous and is often adversarial, and determined in advance to adopt the findings and conclusions of one party or the other “without modification.” App. at 94. That procedure forced each party to adjust its submission because of the knowledge that the district court would only choose one of the two options. In effect, the district court conducted a variation of a “silent auction,” with the parties bidding against themselves and each other. While there is nothing wrong with encouraging a party who seeks a fee to compromise its request, there is no justification for the use of the “silent auction” procedure in setting a statutory fee and no party has cited any authority which would allow it. The instances in which courts may not have followed the lodestar approach have been, as far as we know, instances where the parties have reached an agreement as to the amount of fee. Regrettably, such a resolution was not reached in this ease.

In support of the procedure used by the district court, the Sehool District refers us to our opinion in Lansford-Coaldale Joint Water Auth. v. Tonolli Corp., 4 F.3d 1209 (3d Cir.1993), where we stated that “a district court’s findings, when adopted verbatim from a party’s proposed findings, do not demand more stringent scrutiny on appeal.” Id. at 1215. We adhere to our own precedent, notwithstanding other views, on this issue. See, e.g., Sierra Club v. Cedar Point Oil Co., 73 F.3d 546, 574 (5th Cir.1996) (stating on review of an order assessing a penalty, that “the court adopted Sierra Club’s proposed findings and conclusions with minimal revision. Under such circumstances, we review the court’s findings of fact with caution”); In re Colony Square Co., 819 F.2d 272, 274-75 (11th Cir.1987) (citing cases admonishing trial courts for verbatim adoption of proposed order drafted by litigants).

Our concern here goes beyond the verbatim adoption of a party’s proposed findings of fact and conclusions of law. We agree with the court in Odeco, Inc. v. Avondale Shipyards, Inc., 663 F.2d 650 (5th Cir.1981), that the “mere fact” that a district court adopts a party’s factual findings verbatim “does not itself indict them.” What is key is whether those findings are in fact reflective of the district court’s views. Thus, such a verbatim adoption was acceptable to the appellate court in Odeco because “[t]he record reflects that the trial court fully comprehended the factual and legal issues and adequately performed the decision reaching process.” Id. at 652-53 (citation omitted). The central issue is whether the district court has made an independent judgment. See In re Colony Square, 819 F.2d at 275-76.

In this case, because the circumstances underlying the entry of the order are clear from the record, we cannot presume that the district court made an independent judgment about the law and then decided that one party’s proposed findings of fact and conclusions of law precisely expressed its judgment. Instead, because the court announced in advance it would use this procedure, we cannot discount the possibility that the district court may not have agreed in totality with the findings of fact or legal conclusions in either of the proposals, but chose one simply because it came closest to its own view. While this course of action may have facilitated the decision for the district court, it is not only contrary to the established procedure for awarding attorneys’ fees bút also offends our belief that a judge’s findings and conclusions should represent that judge’s view, no more and no less.¹

III.

The School District concedes that the procedure used by the district court did not adhere to the steps directed by the Supreme Court for fixing of a contested counsel fee. Instead, the School District argues that PEDF waived its objection to any defects in the procedure by failing to object when it was announced by the district court. It is an argument that is not without some merit. In the usual circumstance, a party’s fáilure to object will result in waiver of an issue on appeal. See Fleck v. KDI Sylvan Pools, Inc., 981 F.2d 107, 116 (3d Cir.1992). Here, PEDF did not interpose any objection to the district court’s announcement that it would set the fee by accepting one party’s submission or the other. Notwithstanding PEDF’s attempt at justification and rationalization, the fact remains that it did not object.

Nonetheless, we have recognized that the concept of plain error may be applied in the civil context despite the lack of objection when a district court has committed a serious and flagrant error that jeopardized the integrity of the proceeding. See generally Walden v. Georgia-Pacific Corp., 126 F.3d 506, 520-21 (3d Cir.1997), cert. denied, — U.S. -, 118 S.Ct. 1516, 140 L.Ed.2d 669 (1998). The clear deviation from an established legal rule can qualify as plain error. Of course, this is a power we exercise only “sparingly.” See Chemical Leaman Tank Lines, Inc. v. Aetna Cas. & Sur. Co., 89 F.3d 976, 993-94 (3d Cir.1996). In this instance, because the manner in which the order was entered goes to the heart of the judicial process, we will address the procedure, notwithstanding PEDF’s lack of objection. In doing so, we do not condone PEDF’s failure to bring before the district court its lack of approval of the course on which the court was embarking, and its silence may have, and probably did, mislead the district court.

Once we review the court’s ruling, the error is plain. There can be no serious dispute that PEDF qualified as the “prevailing party.” It follows that the district court should have first decided the reasonable hourly rate based on the “prevailing market rate” rule and multiplied that rate by the time reasonably expended to obtain the “lodestar.” The court should have then made adjustments, if any, based at least in part on the degree of success of the litigation.

Regarding the hourly rate, the district court’s order stated that “PEDF’s proposed hourly rate is high even by Pittsburgh standards. Plaintiffs counsel, whose office is in Hummelstown, a small community near Harrisburg, has not offered any evidence that the typical hourly rate for legal services to public non-profit organizations in his community exceeds $80.00 per hour.” D.C. Opinion at 14-15. Despite this comment, the court allowed the hourly rate requested through January of 1995. Similarly, although the order questions the propriety of time claimed in the PEDF fee petition in several respects, such as failing to apportion time for preparation of the complaint in this ease with that spent in drafting a similar complaint filed by PEDF, the court never found what was a reasonable time for each task. Instead the court apparently made the adjustments it may have believed desirable by accepting the School District’s proposed “cut-off’ date for the entire action. PEDF points out that this is inconsistent with the court’s rulings after that date which rejected the School District’s request for a stay and which authorized, even if it did not necessarily encourage, further action by PEDF.

The School District argues that the district court order does implicitly calculate a “lodestar” by adopting the rate of $160 and $60 per hour from PEDF’s original fee petition, and multiplying that by the amount of hours expended before January of 1995. We find this assertion unpersuasive because it requires us to make assumptions that have no support in the order which, contrary to adopting the lodestar, contains statements questioning the components of a calculated lodestar.

Nor is there any indication that the district court made a separate calculation for fees in connection with the fee petition, as required by Windall. 51 F.3d at 1190. PEDF had sought $12,802 for preparing its original fee petition and $8,560 for preparation of the proposed findings of fact and conclusions of law. The order awarded PEDF $3,000. This figure is never explained in terms of the required separate calculation of a lodestar for the fees in connection with the fee petition and a subsequent adjustment to that figure based on the allowed criteria. The order merely states that the fees requested were unreasonable and notes that the request for fees in preparing the fee request is nearly 25 percent of the total fee request and may be duplicative of requests in other litigation. That explanation is not sufficient to constitute compliance with the direction of Windall.

The School District contends that even if the district court failed to employ the correct legal principles, it was “harmless.” It argues that if the district court had calculated a lodestar, and then made an adjustment, PEDF would have received a lesser amount than it did, and thus PEDF did not suffer from the district court’s possible error. We reject this contention because it is speculative. We simply cannot know from this record what the court would have done.

Both parties have addressed the merits of the amount ultimately awarded. We do not reach that issue. Instead, we will await such time as we have a district court order that follows the accepted protocol. Were it not for the importance of the issue raised in this ease we would be most reluctant to visit this satellite litigation again on the district court. It would be preferable were the parties to resolve the remaining issue by negotiation or mediation, a course we can only suggest and not direct.

IV.

For the above reasons, we will reverse the order of the district court awarding attorneys’ fees to PEDF, and remand for further proceedings consistent with this opinion.

1 . Our dissenting colleague notes that we cite no authority that disapproves the district court's "either/or” protocol. As far as we know, in no other case has a district court applied that procedure, and certainly not in connection with fixing a disputed attorney's fee subject to a Supreme Court’s instruction on the procedure to be followed. What may be appropriate for baseball salary arbitration is not necessarily appropriate for the law courts. ■