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Supreme Court Sets Limits for Enhanced Fee Awards

By Sherry L. Talton, Litigation News Associate Editor – June 15, 2010

Attorneys who take civil rights and other types of public interest cases will have to work harder to obtain “enhanced” attorney fees under federal fee-shifting laws after the U.S. Supreme Court’s decision in Perdue v. Kenny A. [PDF].


Reasonable attorney fees may be awarded to prevailing parties in civil rights actions under 42 U.S.C. § 1988. In Perdue, the Court held that the typical “lodestar” calculation—the number of hours the attorneys worked multiplied by the hourly rates prevailing in the community—is the dominant and preferable method of determining reasonable fees. The Court stressed that enhancements or additions to the lodestar amount may only be made in “extraordinary” and “rare” circumstances.


The District Court’s Award
The prevailing attorneys in Perdue prosecuted a class action on behalf of 3,000 children in foster care against the State of Georgia, alleging that the state’s faulty system endangered the children. The lawsuit resulted in a consent decree [PDF] in which Georgia agreed to implement broad-sweeping reforms of its foster care system.


The U.S. District Court for the North District of Georgia awarded a lodestar amount of approximately $6 million, then tacked on a performance enhancement of another $4.5 million, amounting to a 75 percent increase, after pointing out that the attorneys had incurred expenses and costs during the duration of the case, took the case on a contingency basis, and achieved comprehensive relief for the class.


The district court ruled the attorneys demonstrated “a higher degree of skill, commitment, dedication, and professionalism . . . than the Court has seen displayed by the attorneys in any other case during its 27 years on the bench.”


An Enhancement Without Proper Justification
The Supreme Court, however, ruled that the district court failed to properly justify enhancing the lodestar amount by 75 percent. The Court held that “superior attorney performance” can justify enhancement, but only in “rare” and “exceptional” circumstances that are not already “adequately taken into account in the lodestar calculation.”


The Court described such exceptional circumstances as when the hourly rate in the lodestar calculation does not adequately measure the attorney’s true market value, when the attorney’s performance includes an extraordinary outlay of expenses and the litigation is exceptionally protracted, or when an attorney’s performance involves exceptional delay in payment of fees “unjustifiably caused” by the opposing party.


These circumstances require “specific evidence” that a lodestar fee would not have been adequate to attract competent counsel.


Notably, the Court concluded that the district court in Perdue improperly ruled on an “impressionistic basis” and that the 75 percent increase was “essentially arbitrary.”


By comparing the performance of counsel in the case to the performance of counsel in “unnamed prior cases,” the district court simply did not use a methodology that “permitted meaningful appellate review.” This “undermined” the major purpose of the lodestar method—“providing an objective and reviewable basis for fees,” the Supreme Court opined.


Lessons from Perdue
After Perdue, “it is now crystal clear that an attorney should not expect to get more than his or her hourly fee, except in exceptional or rare cases,” says David A. Soley, Portland, ME, cochair of the ABA Section of Litigation’s Trial Practice Committee. Soley still believes that the Perdue decision might miss the “reality of litigation.”


“It’s a disincentive for lawyers to take civil rights cases when there is no ability to get more than just the lodestar amount,” Soley says. “If you lose the case, you get nothing, just like in a contingency fee case,” he notes. “But, unlike a contingency case, if you win a civil rights case under the fee-shifting statute, you can’t recover more than your hourly fee.”


Nevertheless, Perdue is the Court’s signal that “it is aware of and concerned about limited state and local budgets across the nation,” according to Professor Roberta K. Flowers, Gulfport, FL, chair of the Professionalism Subcommittee of the Section’s Ethics and Professionalism Committee.


“The Supreme Court recognized that fees paid under these fee-shifting statutes are usually paid by state and local governments,” Flowers notes. “The Supreme Court in Perdue sought to curtail those limited resources being used to enrich attorneys at the expense of other essential public services,” she says.


Flowers advises civil rights advocates to take away three messages from Perdue.


First, it is important to “be especially meticulous to document any extraordinary expenses or actions taken on behalf of the client,” Flowers says.


Second, a civil rights advocate “should clearly prepare to argue that his market value in this case was outside the typical lodestar hourly rate,” she suggests.


Third, “an attorney taking on a civil rights case should be aware from the very start that ‘getting rich quick’ is probably not in the stars, not in the current climate of the fiscal concerns across America,” she says.


Keywords: Litigation, Perdue v. Kenny A., fee shifting, attoney fees, public interest cases


 
Related Resources


  • » Kenny A. ex. rel. Winn v. Perdue, 454 F. Supp. 2d 1260, 1289–90 (N.D. Ga. 2006).
  • » Kenny A. ex. rel. Winn v. Perdue, 532 F.3d 1209 (11th Cir. 2008).
  • » Perdue v. Kenny A. ex rel. Winn, 130 S. Ct. 1662 (2010).

 

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