Henry v. Webermeier

• Decision Date: 19 June 1984
• Docket Number: Nos. 83-2228,83-2349,s. 83-2228
• Citation: 738 F.2d 188
• Parties: Julius C. HENRY, et al., Plaintiffs-Appellants, Cross-Appellees, v. Glenn D. WEBERMEIER and Garden Village, Inc., Defendants-Appellees, Cross-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 188

738 F.2d 188

Julius C. HENRY, et al., Plaintiffs-Appellants, Cross-Appellees, v. Glenn D. WEBERMEIER and Garden Village, Inc. Defendants-Appellees, Cross-Appellants.

Nos. 83-2228, 83-2349.

United States Court of Appeals Seventh Circuit.

Argued Feb. 23, 1984.

Decided June 19, 1984.

Percy L. Julian, Jr., Julian & Olson, Madison, Wis., for plaintiffs-appellants.

Roger D. O'Neal, O'Neal, Noll, Elliott, Forbeck & Iglesias, Beloit, Wis., for defendants-appellees.

Before ESCHBACH and POSNER, Circuit Judges, and MARSHALL, District Judge. ^*

POSNER, Circuit Judge.

These appeals bring up to us a number of interesting questions relating to the calculation of attorneys' fees under the Civil Rights Attorney's Fees Awards Act of 1976, 42 U.S.C. Sec. 1988. The underlying case is a class action on behalf of people harmed as a result of housing discrimination in an area of Beloit, Wisconsin known as Garden Village. Defendant Webermeier (the corporate defendant is his alter ego) is a builder and real estate broker in Garden Village who, according to the complaint, tried with considerable success to prevent black people from moving into the Village. The case was settled before trial by the entry of a consent decree which provides very stringent injunctive relief, requires the defendants to pay the class a total of $45,000 in damages, and also provides (in paragraph 35) that "Defendants shall pay plaintiffs' attorneys' fees, disbursements and costs in an amount to be determined by" the district court. The plaintiffs moved the district judge for an award of $96,301.29 in attorneys' fees, consisting of $67,184.50 for lawyers' time (538.17 hours of lawyer Julian's time, at $100 an hour; three hours of lawyer Olson's time, at $80 an hour; and 262.55 hours of lawyer Aronson's time, at $50 an hour), and $29,116.79 in out-of-pocket expenses incurred for investigation, travel, and other activities related to case preparation, of which $5,378.87 represented costs taxable under 28 U.S.C. Sec. 1920. The district judge held that the plaintiffs were not entitled to reimbursement of any out-of-pocket expenses other than statutory costs. The judge also cut down Julian to $75 an hour, Olson to $50, and Aronson to $40. This plus the disallowance of most expenses resulted in an award of attorneys' fees of $51,014.75, compared to the $90,922.42 that the plaintiffs had sought besides statutory costs. The plaintiffs have appealed. Webermeier has filed a cross-appeal, asking us, should we reverse the district court's award, to remand with directions that the district court reconsider whether the plaintiffs should be awarded any attorneys' fees at all.

The plaintiffs argue that, quite independently of the Civil Rights Attorney's Fees Awards Act, the reference in paragraph 35 of the consent decree to "disbursements and costs" gave them a contractual right to reimbursement of their out-of-pocket expenses. This is a plausible and maybe even correct view, especially given the amount of disbursements in this case; but against it must be set the subsequent words of paragraph 35, "in an amount to be determined by" the district court. This could be read to allow the court to disallow an entire category--such as "disbursements" --of claimed legal expenses. On this reading the purpose of paragraph 35 is purely procedural: to make clear that the award of attorneys' fees and related expenses is not part of the consent decree but is reserved for a separate, adversary proceeding.

If instead paragraph 35 is read to substitute a contractual for a statutory obligation, the knotty question arises, what standard is the district judge to apply in determining how much to award in each category? The plaintiffs themselves, when they argue for higher hourly rates, treat the issue as one under the Civil Rights Attorney's Fees Awards Act rather than paragraph 35; but if this is right, it would seem that their entitlement to out-of-pocket expenses should equally be determined by the Act rather than by the decree. To read paragraph 35 as meaning that the plaintiffs' entitlement to attorneys' fees (narrowly defined) should be determined by the standards of the Civil Rights Attorney's Fees Awards Act, but that in addition they should be entitled to their disbursements irrespective of the Act, seems strained. Probably, therefore, paragraph 35 should be treated as incorporating the statutory standard rather than as giving the district court an uncanalized discretion. This is the usual approach taken, though without discussion of the question. See Johnson v. University College, 706 F.2d 1205, 1206 (11th Cir.1983); Ross v. Saltmarsh, 521 F.Supp. 753, 756 and n. 7 (S.D.N.Y.1981), aff'd without opinion, 688 F.2d 816 (2d Cir.1982).

But the question can be avoided here by noting that the Act itself entitles the plaintiffs to their lawyers' reasonable out-of-pocket expenses, and that nothing in the decree suggests that paragraph 35 was intended to give them less than their statutory rights. Although (so far as relevant here) the Act provides only that "the court, in its discretion, may allow the prevailing party ... a reasonable attorney's fee as part of the costs," the case law overwhelmingly supports the proposition that "attorney's fee" includes out-of-pocket expenses in preparation for trial. See, e.g., Ramos v. Lamm, 713 F.2d 546, 559 (10th Cir.1983); Palmigiano v. Garrahy, 707 F.2d 636 (1st Cir.1983) (per curiam); Dowdell v. City of Apopka, 698 F.2d 1181, 1188-92 (11th Cir.1983). We so held, though without extended discussion, in Lenard v. Argento, 699 F.2d 874, 900 (7th Cir.1983). The Act seeks to shift the cost of the winning party's lawyer (in cases within the intended scope of the Act) to the losing party; and that cost includes the out-of-pocket expenses for which lawyers normally bill their clients separately, as well as fees for lawyer effort. The Act would therefore fall short of its goal if it excluded those expenses. What is more, the line between fees and expenses is arbitrary. A lawyer's hourly billing rate includes many overhead expenses such as local telephone calls. It is impossible to believe that Congress would have wanted prevailing parties to get back their lawyers' local telephone expenses (invariably included in the hourly fee) but not their long-distance expenses (invariably billed separately); or to get back their secretarial expenses--which are included in overhead and therefore billed as part of the lawyer's hourly rate rather than separately--but not the expenses of word processing, often billed separately to the client.

The defendants argue that the district judge's action can nevertheless be upheld as a proper exercise of the judicial discretion to which the Civil Rights Attorney's Fees Awards Act refers. Although that discretion is less than the words of the statute suggest--when the prevailing party is the plaintiff he is entitled to an award of attorney's fees almost as a matter of course, see, e.g., Hensley v. Eckerhart, --- U.S. ----, 103 S.Ct. 1933, 1937, 76 L.Ed.2d 40 (1983)--the district judge can, of course, and should, disallow particular expenses that are unreasonable whether because excessive in amount or because they should not have been incurred at all. But it is apparent that the district judge made no such judgment here. Not only would it have been unreasonable to regard as unnecessary all of the plaintiffs' expenses that did not happen to be taxable costs, but the judge made clear that his refusal to award these expenses was based on his interpretation of the statute. He said, "This Court does not permit recovery of those out-of-pocket expenses and disbursements where not so provided. 28 U.S.C. Sec. 1920 sets forth those items which the Clerk may tax as costs. Title VII and Sec. 1988 provides only for 'reasonable attorney's fees,' which has been previously provided [a reference to the court's award of the $51,014.75]. The Court is aware of those other decisions which permit recovery outside the parameters established by Congress. This Court is not inclined to so permit and restricts its discretion to expand upon legislative pronouncements." Thus, mistakenly believing that he had no power to award the out-of-pocket expenses requested by the plaintiffs, the district judge failed to evaluate the reasonableness of the request. The case must be remanded to enable him to make that evaluation.

The other question is whether the district court acted properly in cutting down the hourly billing rates of the plaintiffs' three lawyers. The defendants do not argue, and the judge did not find, that the number of hours put in by the lawyers, either singly or together, was excessive. The judge based his action on three other factors. The time for whic the lawyers wanted payment included 54 hours of travel; and, "Rather than resort to unnecessarily complex computation, this Court has considered the relatively large amount of travel as a factor in determining the appropriate base rate." Also, since the case had been settled prior to trial, the lawyers had been spared "the stress and exertion of trial," as well as the greater challenge to their skills that a trial would have posed compared to settlement negotiations. And "the legal and factual issues in this case were not complex," since the defendants' violations had been conspicuous.

Our problem with the court's approach is that it lacked a starting point. The court did not say, "The market rate for each of these lawyers is $______, and I will adjust it upward or downward by so much." Now a district judge need not always proceed by first determining the market rate for the services the lawyers rendered (i.e., the rate that lawyers of similar ability and experience in the community normally charge their paying clients for the type of work in...