Blum v. Stenson

Decision Date21 March 1984
Docket NumberNo. 81-1374,81-1374
Citation104 S.Ct. 1541,465 U.S. 886,79 L.Ed.2d 891
PartiesBarbara BLUM, Individually and in Her Capacity as Commissioner of New York State Department of Social Services, Petitioner v. Ellen STENSON etc
CourtU.S. Supreme Court
Syllabus

The named respondent—who was represented by attorneys from the Legal Aid Society of New York, a private nonprofit law office filed a civil rights action in Federal District Court on behalf of a statewide class of Medicaid recipients. The complaint challenged certain procedures utilized for termination of Medicaid benefits. The District Court certified the class and entered summary judgment for it. After the Court of Appeals affirmed, respondent filed in the District Court a request for an award of attorney's fees under the Civil Rights Attorney's Fees Awards Act of 1976, which provides that in federal civil rights actions "the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee as part of the costs." The total requested fee amounted to $118,968, consisting of $79,312 based on some 809 hours of work at rates varying from $95 to $105 per hour, plus a 50% "bonus" of $39,656 to compensate for the complexity of the case, the novelty of the issues, and the "great benefit" achieved. The District Court awarded the full amount requested, holding that the hours expended and the rates charged, in view of prevailing market rates, were reasonable, and that the 50% bonus was proper because of the quality of representation, the complexity of the issues, the riskiness of success, and the "great benefit to the large class" that was achieved. The Court of Appeals affirmed.

Held:

1. The statute and its legislative history establish that "reasonable fees" are to be calculated according to the prevailing market rates in the relevant community, not according to the cost of providing legal services, regardless of whether the prevailing party is represented by private profit-making attorneys or nonprofit legal aid organizations. Policy arguments in favor of a cost-based standard should be addressed to Congress rather than to this Court. Pp. 892-896.

2. The District Court abused its discretion in awarding the 50% upward adjustment in the fee in this case. Pp. 896-902.

(a) There is no merit to the argument that an "upward adjustment" of a reasonable fee—calculated by multiplying the reasonable number of hours expended times a reasonable hourly fee is never permissible. The statute and its legislative history establish that the "product of rea- sonable hours times a reasonable rate" normally provides a "reasonable" attorney's fee, but "in some cases of exceptional success an enhanced award may be justified." Hensley v. Eckerhart, 461 U.S. ----, ----, 103 S.Ct. 1933, 1940, 76 L.Ed.2d 40. Pp. 896-897.

(b) However, respondent failed to carry her burden of proving that an upward adjustment was necessary to the determination of a reasonable fee in this case. The record contains no evidence supporting the District Court's conclusions that the upward adjustment was proper because of the complexity of the litigation, the novelty of the issues, the high quality of representation, and the "great benefit" to the class. These factors generally are reflected in the reasonableness of the number of billable hours or the hourly rates. Moreover, the record does not justify the District Court's upward adjustment on the basis of the "riskiness" of the law suit. Respondent established only that the hourly rates and the hours billed were reasonable. Pp. 898-902.

671 F.2d 493 (CA2 1981), affirmed in part and reversed in part.

Melvyn R. Leventhal, New York City, for petitioner.

Leon Silverman, New York City, for respondent.

Justice POWELL announced the opinion for the court.

Title 42 U.S.C. § 1988 provides that in federal civil rights actions "the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee as part of the costs." The initial estimate of a reasonable attorney's fee is properly calculated by multiplying the number of hours reasonably expended on the litigation times a reasonable hourly rate. Hensley v. Eckerhart, --- U.S. ----, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983). Adjustments to that fee then may be made as necessary in the particular case. The two issues in this case are whether Congress intended fee awards to nonprofit legal service organizations to be calculated according to cost or to prevailing market rates, and whether, and under what circumstances, an upward adjustment of an award based on prevailing market rates is appropriate under § 1988.

I And

This suit was brought in 1978 by respondents on behalf of a statewide class of Medicaid 1 recipients pursuant to 42 U.S.C. § 1983 in the District Court for the Southern District of New York. Under New York law, one who is eligible to receive benefits under the Supplemental Security Income [SSI] program, 42 U.S.C. § 1381, et seq. (1976), automatically is eligible to receive Medicaid benefits. N.Y.Social Services Law § 363, et seq. (McKinney's 1976). Prior to this suit, persons who qualified for Medicaid in this fashion automatically lost their benefits if they thereafter became ineligible for SSI payments. The case was decided on cross motions for summary judgment after only one set of plaintiff's interrogatories had been served and answered. On these motions, the District Court certified the class 2 and rendered final judgment in favor of respondents.

The court enjoined the prior practice of automatic termination of benefits, and prescribed procedural rights for the certified class that included "(a) an ex parte determination of continued eligibility for Medicaid, independent of eligibility for SSI; (b) timely and adequate notice of such termination; (c) an opportunity for a hearing." Stenson v. Blum, 476 F.Supp. 1331 (S.D.N.Y.1979). The Court of Appeals for the Second Circuit affirmed in an unpublished oral opinion from the bench. Stenson v. Blum, 628 F.2d 1345 (CA2),cert. denied, 449 U.S. 885, 101 S.Ct. 239, 66 L.Ed.2d 111 (1980). Respondents' subsequent request for an award of reasonable attorney's fees under § 1988 is the subject of the present case.

B

Throughout this litigation, respondents were represented by attorneys from The Legal Aid Society of New York, a private nonprofit law office.3 In November 1980, respondents filed a request for attorney's fees for the period December 1978 through the end of the litigation. Their three attorneys sought payment for some 809 hours of work at rates varying from $95 to $105 per hour.4 This amounted to approxi- mately $79,312. Respondents' total fee request, however, reflected a 50% increase in that fee. In their brief to the District Court, respondents explained that such an increase was necessary to compensate for the complexity of the case, the novelty of the issues, and the "great benefit" achieved. The total requested fee amounted to approximately $118,968. Petitioner opposed the fee award on the grounds that the rates were exorbitant, the number of hours charged were unreasonable and duplicative, and the 50% "bonus" was improper.

Petitioner submitted no evidence to support its claim that the hours and rates charged by respondents were unreasonable. Instead, it rested its claim that the hours were duplicative and excessive and the rates exorbitant on arguments contained in its brief to the District Court and on that court's discretion. Petitioner requested an evidentiary hearing on the issue of reasonable billable hours only if the District Court found that the discussion in its brief did not justify reductions in the number of hours charged. Finally, petitioner argued that the 50% "bonus" requested by respondents was improper because it would be paid by the public.

The District Court held that both the hours expended and the rates charged were reasonable. It also held that the fee calculated by multiplying the number of hours times the hourly rates should be increased by the requested 50% because of the quality of representation, the complexity of the issues, the riskiness of success, and the "great benefit to the large class" that was achieved. Stenson v. Blum, 512 F.Supp. 680, 685 (S.D.N.Y.1981). The District Court awarded respondents the requested fee of $118,968.

The Court of Appeals affirmed in an unpublished opinion. Blum v. Stenson, 671 F.2d 493 (CA2 1981). We granted certiorari to consider whether it was proper for the District Court to use prevailing market rates in awarding attorney's fees to nonprofit legal services organizations and whether the District Court abused its discretion in increasing the fee award above that based on market rates. --- U.S. ----, 103 S.Ct. 2426, 77 L.Ed.2d 1314 (1983).5

II

Petitioner argues that the use of prevailing market rates to calculate attorneys fees under § 1988 leads to exorbitant fee awards and provides windfalls to civil rights counsel contrary to the express intent of Congress. To avoid this result, petitioner urges this Court to require that all fee awards under § 1988 be calculated according to the cost of providing legal services rather than according to the prevailing market rate.6 The Solicitor General, as amicus curiae, urges the Court to adopt a cost-related standard only for fee awards made to nonprofit legal aid organizations. He argues that market rates reflect the level of compensation necessary to attract profit making attorneys, but that such rates provide excessive fees to nonprofit counsel. Because market rates incorporate operating expenses that may exceed the expenses of nonprofit legal services organizations, and include an element of profit unnecessary to attract nonprofit counsel, the Solicitor General argues that fee awards based on market rates "confer an unjustified windfall or subsidy upon legal services organizations." Solicitor General's Brief, at 6.

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