Assessing Attorney Fees When Biglaw Works Pro Bono: Part II
Two weeks ago, I posted about a fee award of nearly $1 million to Skadden for work performed pro bono on behalf of a group of restaurant workers under the Fair Labor Standards Act to recover tips unlawfully withheld by their employer. Though the court discounted Skadden's ordinary market fees and the firm voluntarily wrote off 4,000 hours of time, I still questioned the size of the fee because the rates allowed exceeded those prescribed by the Laffey Matrix, the tool commonly applied by federal courts in reimbursable fee cases. And I also pondered what's appropriate reimbursement in pro bono cases, where clients have no financial incentive to settle because they're not paying the bill.
Well, apparently, I'm in good company, because the 2nd Circuit is grappling with these questions also. Several weeks ago, in Arbor Hill v. County of Albany, the 2nd Circuit affirmed a lower court decision, awarding Gibson Dunn fees at a rate of $210 per hour, the maximum permitted in the Northern District of New York, even though Gibson's New York office is located in the pricier Southern District. The 2nd Circuit explained that a higher rate, i.e., above $210 an hour, was not justified under applicable factors, including the rate that a reasonable client would pay. The court held that a reasonable client would not pay top dollar for services in this type of case, knowing that it could obtain the service pro bono where lawyers might be willing to use the case to promote their "reputational or social goals." And as I construed the court's decision, it reasoned that the lower rate would not necessarily penalize the firm attorneys, who are motivated to take pro bono cases, not only for fees but also for "considerable non-monetary returns — in experience, reputation, or achievement of the attorneys’ own interests and agendas."
To me, the 2nd Circuit's ruling is eminently reasonable. It strikes a balance between properly compensating a law firm for attorneys fees associated with pro bono work while not unduly penalizing the defendants who happened to be on the receiving end of a plaintiff with a Biglaw firm working gratis. But many others in the blogosphere are critical of the decision, arguing that it will deter firms from handling pro bono cases or prevent civil rights lawyers from recovering fees in these cases.
For example, the Brennan Center (which is challenging the 2nd Circuit decision) argues that the ruling places pro bono work in jeopardy in this press release. But given that large law firms don't keep legal fees from pro bono cases and routinely donate fees to legal aid groups, how would a lower fee deter firms from taking these cases? Given that large law firms donate fees, the 2nd Circuit's decision could reduce the amount of money donated to legal aid groups -- but that's not the concern that they expressed in the press release. Moreover, why should a captive defendant be forced to pay top dollar simply because it had the misfortune of winding up against a large firm with unlimited resources?
Other lawyers are concerned about the potential consequences to solo and small firms. For example, over at the Defending People Blog, Mark Bennett argues that doing the right thing could cost you in the 2nd Circuit. Bennett argues that an attorney's motives in taking a case should not be relevant to determining whether fees are reasonable and potentially penalizes lawyers who take cases because they believe in them. He asserts:
Whether the attorney had an interest in achieving the ends of the litigation should certainly be considered by a court determining what a reasonable paying client would pay. Whether the lawyer is in accord with the client, such that the lawyer's societal goals match the client's goals, also should be considered. So should the fact that the lawyer is willing to bet her own money on the case, so that she doesn't get paid if the client doesn't recover. But the Second Circuit has it backwards: all of these are reasons that reasonable clients, spending their own money, rationally decide to pay lawyers more rather than less. Every day rational clients choose lawyers who are true believers over lawyers who are cynics; every day rational clients with no money sign contracts promising to pay lawyers huge fees if and only if the lawyers can recover money for the clients' injuries.
Solo champion Susan Cartier Liebel takes the argument a step farther, with the post Second Circuit Strikes a Blow to the Good Hearted Solo or Small Firm. She writes:
In this terrible decision we learn that if you take on a pro bono matter and are victorious, meaning the loser pays your fees, it doesn't matter the fees you submit based upon the work you've done. It becomes a question of what is the fair market value of your fees.
Though Bennett and Cartier Liebel are right to be concerned, because the court's decision is not expressly limited to large firms, at the same time, the court's ruling is also beneficial to solos and small firms who represent small clients. First, imagine if a small firm were defending a client who's represented by a pro bono, large firm. Your client might not be able to afford to pay you enough to go up against a large firm working for free and could potentially be on the hook for legal fees typically charged to large clients. And I don't see a court penalizing a solo or small-firm attorney with a properly executed fee agreement with a client that provides either for a portion of the proceeds received or statutory attorneys fees (indeed, that's what my civil rights retainer agreements cover). The problem here was that Gibson Dunn took the case pro bono, and as such, its fee agreement may not have provided for compensation by the plaintiff -- which is why the court alluded to nonmonetary benefits.
In addition, a solo's fee likely would have been more reasonable (at least under the rates of the particular district) and, thus, would not have been subject to challenge. According to Bennett's post, Gibson charged $107,000 for an appeal with six pages of substantive argument. In my own practice, I've charged between $20,000 and $30,000 for full 50-page appeals at the D.C. Circuit and come out way ahead. In short, this case would never have come up had a solo represented the firm, because the fees would have been more reasonable from the get-go.
I know that we lawyers are offended when courts question our fees. And I'll be the first to admit that it galls me when courts quibble with fees of this size and for this type of case while routinely granting fee requests to large firms in bankruptcy cases of $50 or $90 million without batting an eye. But at the same time, when you get right down to it, we return to the question that I posed in my post of several weeks ago: Should a defendant be forced to pay for a Cadillac, Biglaw defense because a plaintiff was lucky enough to find pro bono representation?
Posted by Carolyn Elefant on May 31, 2007 at 05:13 PM | Permalink
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