National Treasury Emp. Union v. U.S. Dept. of Treasury

• Citation: 656 F.2d 848,211 App.D.C. 259
• Decision Date: 19 June 1981
• Docket Number: No. 78-1085,78-1085
• Parties: NATIONAL TREASURY EMPLOYEES UNION, Appellant, v. UNITED STATES DEPARTMENT OF the TREASURY, Internal Revenue Service, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 848

656 F.2d 848

211 U.S.App.D.C. 259

NATIONAL TREASURY EMPLOYEES UNION, Appellant, v. UNITED STATES DEPARTMENT OF the TREASURY, Internal Revenue Service, et al.

No. 78-1085.

United States Court of Appeals, District of Columbia Circuit.

June 19, 1981.

Before ROBINSON, Chief Judge, TAMM, Circuit Judge, and GESELL, District Judge. ^*

Opinion for the Court filed by Chief Judge SPOTTSWOOD W. ROBINSON, III.

Opinion concurring in the result filed by Circuit Judge TAMM.

SPOTTSWOOD W. ROBINSON, III, Chief Judge:

John H. Anderson prosecuted a suit in the District Court against the Internal Revenue Service under the Privacy Act of 1974. ¹ After prevailing on the merits, he moved for an award of attorney's fees. ² The amount he sought was reached by placing a market value on the services his two lawyers had rendered. ³ That far, Anderson's motion gave the appearance of a matter comparatively routine in nature.

What made it something else was the nature of the relationship preexisting between Anderson's counsel and a labor organization, particularly with respect to court-awarded attorney's fees. As salaried employees of the National Treasury Employees Union, they had represented Anderson pursuant to the union's prepaid legal services plan, ⁴ and had been compensated by the union at rates well below those utilized in the computation of the fees requested. ⁵ The union claims that the fees belong to it rather than counsel, ⁶ and the fee award was sought, not for counsel, but for the union. The District Court, resolving to limit the recovery to the union's financial outlay on Anderson's behalf, allowed only $2,000 in fees, observing that more would "result in a windfall profit to the union at the expense of the public fisc." ⁷

When we addressed this appeal earlier, we deemed pivotal the frank reaffirmation of union counsel at oral argument that all fees realized in consequence of Anderson's motion would go into the union's treasury. ⁸ We held that "(s)ince the objective in this case is essentially a fee award for the union and not for counsel themselves ... no fee exceeding the expenses incurred by the union in terms of attorney's salaries and other out-of-pocket expenses should be allowed." ⁹ A higher award, we reasoned, would permit the union to reap a profit on the services its attorneys had furnished Anderson, and thereby involve the union in the unauthorized practice of law. ¹⁰ Thus we concurred in the District Court's analysis, though we directed remand of the case for recalculation of the amount proper. ¹¹

Shortly after our opinion issued, however, the court elected to accord en banc reconsideration to Copeland v. Marshall, ¹² a case involving a superficially related problem. The question in Copeland was whether awards of attorney's fees in Title VII suits against federal agencies ¹³ are to be measured by the market value of the attorney's services or instead by his costs plus a reasonable profit. ¹⁴ With the appearance, at least superficially, of a possible relationship between the problems there and here, we deferred action on Anderson's suggestion for rehearing en banc and stayed our mandate pending resolution of Copeland. ¹⁵

Our Copeland decision has now been announced, ¹⁶ and we find nothing in it or in the vigorous arguments of appellant and amici curiae for rehearing en banc in this case to lead us to believe that our original ruling was in error. Nonetheless, because we may not have been fully understood, we deem it appropriate to issue, sua sponte, a supplemental opinion elaborating on the principles underlying our earlier adjudication, and on the limited nature of our holding.

I. THE BASIS OF OUR HOLDING

Were this a case wherein attorney's fees were requested for the attorneys themselves, our approach would be completely conventional. The Privacy Act authorizes assessment against the United States of reasonable fees in favor of a complainant who has substantially prevailed. ¹⁷ Congress has made plain that fee determinations in such instances are to be reached by consideration of "the criteria as delineated in the existing body of law governing the award of fees," ¹⁸ and Copeland points the way to market value of services as the general standard. ¹⁹ The mere fact that Anderson's counsel were salaried employees of the union would not affect the size of the fees to which they would be entitled, ²⁰ nor would the governmental character of the agency required to pay them. ²¹ In sum, the allowance would emerge as the product of the same methodology applicable to any other legal practitioner requesting an attorney's fee for himself in a Privacy Act case.

What makes for the difference here is the simple fact that the fees are not sought for the lawyers who had handled Anderson's case, but for the union in whose hire they did so. Of that there can be no doubt. At oral argument, union counsel told us that the entire fee recovery would be turned over to their employer; moreover, the union itself asserts the claim that whatever fees are forthcoming will belong, not to the lawyers, but to it. ²² So patent it is that the union is the real party in interest that we have granted its motion for substitution as the appellant herein in Anderson's stead. ²³ No less now than earlier, we must treat the matter for what it really is a quest by the union to recover attorney's fees aggregating more than the cost to it of supplying the legal services Anderson utilized in his Privacy Act suit.

The obstacle the union faces is rooted in canons prescribed by the American Bar Association's Code of Professional Responsibility. ²⁴ While technically not binding on the court and, of course, in any event subordinate to any contrary dictate of federal law, ²⁵ the Code enshrines the collective wisdom of the legal profession on what is acceptable behavior within its ranks. Beyond that, the ethical considerations and rules comprising the Code derive their considerable force from the power of the bench and bar to discipline errant attorneys, ²⁶ and they afford the public its best assurance of competent and responsible legal service. ²⁷ We believe, then, that the principles the Code effectuates are due great deference in the absence of any countervailing reason of law or policy. ²⁸ And, as we indicated in our original opinion, ²⁹ we think the Code stands squarely athwart the road that the union hopes to travel.

Quite conspicuously, the Code's strictures on the attorney's professional alliances strongly exert their influence here. ³⁰ Lawyers are free to accept employment by an organization offering a prepaid legal services plan to its members, ³¹ but only if "(s)uch organization, including any affiliate, is so organized and operated that no profit is derived by it from the rendition of legal services by lawyers...." ³² This restriction is closely related to two more of the Code's most fundamental prohibitions. Attorneys may not split fees with laymen or lay organizations, ³³ or enable them to engage in the unauthorized practice of law. ³⁴ Courts ³⁵ and bar groups ³⁶ alike have repeatedly endorsed these ethical maxims. We, too, recognize their inestimable value as safeguards against the imposition of incompetent and irresponsible law practice on the public. ³⁷

To honor these wholesome principles here is hardly the radical step that the union charges. Indeed, as our earlier opinion noted, ³⁸ obedience is expressly required by an en banc decision of this court:

It is our view that the award (of attorney's fees) must go to counsel rather than to the organizations which pay their salaries.... This procedure avoids all problems of whether the organization might, by receiving an award directly, be involved in the unauthorized practice of law. On the other hand, ... counsel (must) reimburse their respective organizations for the kinds of expenses they incurred which would normally be included in an attorney's fee.... But any amount in excess of such reimbursement belongs to counsel themselves. ³⁹

The admitted fact here is that the employing organization the union compensated the lawyers who represented Anderson at rates well below the going value of their services on the open market. ⁴⁰ Manifestly, then, the union would profit perhaps handsomely on the legal activities of those lawyers under any arrangement whereby market-value fees wend their way into the union's general treasury.

Drawn as we are into the area of the attorney's professional relationships, we remain sensitive to the danger of inadvertently treading on associational or other constitutionally-grounded rights. ⁴¹ We therefore take pains to identify certain activities with respect to which we perceive no legal objection. Reasonableness, in terms of market value of the services rendered, is the sole limit on fee awards to organizationally-hired lawyers when the fees are to be paid to the lawyers alone. ⁴² The organization, whatever its character, may recoup in full the expense it incurred in supplying the services to the client. ⁴³ Lawyers may, if they wish, voluntarily donate some or all of their fees to charity, ⁴⁴ or even to their employers, ⁴⁵ just as they may spend their other monies as they please.

None of these situations is before us, however. Rather, the settled expectation of the union employer and the employed attorneys that all fees recovered belong to the union means that the employing lay organization would capitalize on the attorney's services, reap a profit therefrom, and put the monies thus made to any use it chooses. In the absence of any compelling reason to disregard the ethical considerations implicated and we discern none here we believe that an allowance of above-cost fees to the union is inappropriate. ⁴⁶

II. THE LIMITS ON OUR HOLDING

The union and amici curiae advance two principal arguments for an award of market-value fees in this instance. To do otherwise, the union suggests, will bring us inevitably into conflict with our recent holding...