Raney v. Federal Bureau of Prisons

• Decision Date: 11 August 2000
• Parties: (Fed. Cir. 2000) LARRY RANEY, Petitioner, v. FEDERAL BUREAU OF PRISONS, Respondent. 97-3469, 98-3043 DECIDED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 927

222 F.3d 927 (Fed. Cir. 2000)

LARRY RANEY, Petitioner, v. FEDERAL BUREAU OF PRISONS, Respondent.

97-3469, 98-3043

United States Court of Appeals for the Federal Circuit

DECIDED: August 11, 2000

Appealed from: Arbitrator's Decision in FMCS 97-06693, Charles B. Blackmar, Arbitrator Michael J. Schrier, Staff Counsel, American Federation of Government Employees, AFL-CIO, of Washington, DC, argued for petitioner. On the brief wasMartin R. Cohen, Assistant General Counsel, AFGE, of Bala Cynwyd, Pennsylvania, for petitioner and Mark D. Roth, General Counsel.

Harold D. Lester, Jr., Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for respondent. On the brief wereDavid M. Cohen, Director; and Joseph A. Kijewski, Assistant Director; and Kenneth M. Dintzer, Attorney. Of counsel were Salomon Gomez, Trial Attorney, Department of Justice; and Steven R. Simon, Supervisory Attorney Advisor, Federal Bureau of Prisons, Labor Law Branch-West, of Phoenix, Arizona.

Peter B. Broida, of Arlington, Virginia, amicus curiae.

Gregory O'Duden, General Counsel, National Treasury Employees Union, of Washington, DC, for amicus curiae, National Treasury Employees Union. With him on the brief was Barbara A. Atkin, Deputy General Counsel.

Before MAYER, Chief Judge, NEWMAN, Circuit Judge, ARCHER, Senior Circuit Judge, and MICHEL, PLAGER, LOURIE, CLEVENGER, RADER, SCHALL, BRYSON, GAJARSA, and DYK, Circuit Judges.*

Opinion for the court filed by Circuit Judge GAJARSA, in which Circuit Judges MICHEL, PLAGER, CLEVENGER, SCHALL, BRYSON, and DYK join. Opinion concurring-in-part and dissenting-in-part filed by Circuit Judge RADER, in which Chief Judge MAYER,Circuit Judge NEWMAN, Senior Judge ARCHER, and Circuit Judge LOURIE join.

GAJARSA, Circuit Judge.

DECISION

Larry Raney appeals from arbitrator Charles B. Blackmar's July 25 and September 24, 1997 decisions denying him market-rate attorney fees as well as overtime pay. Concluding that the outcome of this appeal with respect to attorney fees turns on our precedent in Devine v. National Treasury Employees Union, 805 F.2d 384 (Fed. Cir. 1986), and Goodrich v. Department of the Navy, 733 F.2d 1578 (Fed. Cir. 1984), we decided to rehear the appeal en banc so that we could consider the following question: Are litigants who employ union staff counsel barred from receiving market-rate attorney fees when such fees are deposited into a separate fund controlled exclusively by lawyers and the fund is used solely to support litigation on behalf of employees' rights? We believe that the Back Pay Act, 5 U.S.C. § 5596(b) (1994), permits, and ethical considerations do not bar, the award of market-rate fees for work by union attorneys under such circumstances. With regard to the decisions on attorney fees, we therefore vacate the arbitrator's denial of market-rate fees and remand for entry of such market-rate fees. We affirm, however, the arbitrator's denial of overtime pay.

BACKGROUND

On November 1, 1996, the United States Bureau of Prison's Regional Director sustained certain charges against Mr. Raney and ordered his removal from federal employment. The American Federation of Government Employees ("AFGE"), a non-profit labor union that represents federal sector employees, filed a timely grievance and invoked arbitration on Mr. Raney's behalf. On behalf of Mr. Raney the AFGE attorneys sought reinstatement with back pay and overtime pay. They also sought attorney fees.

The AFGE attorneys were salaried employees of that union. They represented to the arbitrator that any fees received would be deposited in the union's Legal Representation Fund ("LRF"), which is separate from other union funds, administered only by the AFGE General Counsel, and used solely to support litigation brought on behalf of union members or other federal employees to enforce their individual rights. The LRF is not used to support litigation when the union is a defendant. ¹ The LRF is financed by recovered attorney fees and costs, as well as donations, and is not supported by any union funds.

After a two-day trial, the arbitrator issued a decision sustaining Mr. Raney's grievance with respect to all charges and ordered the Bureau of Prisons to reinstate him with back pay from his termination date. This decision, however, denied his request for attorney fees and overtime pay.

In a supplemental decision responding to Mr. Raney's request for reconsideration, the arbitrator found that Mr. Raney was "substantially innocent" and that attorney fees were in fact justified under the Back Pay Act. This Act authorizes "reasonable attorney fees" when an agency employee has prevailed and the fees are warranted in the interest of justice. See 5 U.S.C. §§ 5596(b)(1)(A)(ii), 7701(g)(1). The arbitrator determined that Mr. Raney had met these statutory requirements. The arbitrator also determined that the number of attorney hours claimed to have been spent in Mr. Raney's proceedings and the proposed hourly market rates for the fees were reasonable.

However, instead of granting the prevailing market rate for the award of reasonable attorney fees, the arbitrator determined that, because Mr. Raney was represented by AFGE staff attorneys, the award should be based only on the cost of providing the legal services. Essentially, the arbitrator granted attorney fees based on the percentage of each attorney's salary that was attributable to the total number of hours worked on Mr. Raney's case. In reaching this conclusion, the arbitrator began by noting that the regional federal circuits were split regarding whether such market-rate fees could be made to a union's legal representation fund. The arbitrator decided to follow the precedent of our circuit, which precludes an award of market-rate fees for representation by union attorneys in the absence of a separate fund from which no benefit directly or indirectly accrues to the union and such fund is fully and completely supportive of the union's litigation activities. This in essence requires that a "hermetic seal" be established for the fund, even if the fund is separated and controlled exclusively by lawyers and is used solely to support litigation for employee rights. With regard to Mr. Raney's request for overtime pay, the arbitrator affirmed his earlier decision denying overtime pay on the basis that Mr. Raney did not adequately prove that he would have worked overtime hours.

DISCUSSION

A. Standard of Review

We review an arbitrator's decision regarding a back pay award under the same standard as a decision of the Merit Systems Protection Board. See 5 U.S.C. § 7121(f);Dunn v. Department of Veterans Affairs, 98 F.3d 1308, 1311 (Fed. Cir. 1996). Thus, we must affirm an arbitrator's decision unless it is found to be (1) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; (2) obtained without procedures required by law, rule or regulation having been followed; or (3) unsupported by substantial evidence. See 5 U.S.C. § 7703(c); Cheeseman v. OPM, 791 F.2d 138, 140 (Fed. Cir. 1986). Because the question regarding attorney fees in this case turns on whether the arbitrator applied the correct legal standard, our review is plenary. SeeKing v. Department of the Navy, 130 F.3d 1031, 1032 (Fed. Cir. 1997) ("We review the Board's determinations of law for correctness without deference to the Board's decision.").

B. Arguments by the Parties

On appeal to this court, Mr. Raney argues that the phrase "reasonable attorney fees" in the Back Pay Act appears in numerous federal fee-shifting statutes and has been uniformly interpreted in those contexts to mean "market-rate fees." Mr. Raney asserts that there is nothing in the plain language of the Back Pay Act or its legislative history that provides for a deviation from this accepted interpretation of the phrase "reasonable attorney fees." The only limitation, argues Mr. Raney, is counsel's ability to accept such fees under ethical considerations set forth in applicable rules of professional conduct. The AFGE attorneys were D.C. Bar members practicing in Washington D.C. As a result, Mr. Raney contends that they should be entitled to market-rate fees, because the D.C. Bar Legal Ethics Committee as well as three of our sister circuits have found that union counsel are not barred by ethical considerations from receiving full market-rate fees when such awards are deposited in a separate fund controlled by attorneys and used only for employee litigation-related expenses. In short, neither the ethics rules in the District of Columbia nor any other circuit law demands the "hermetically sealed" requirement for entitlement to market-rate fees that exists in our precedent. In addition, Mr. Raney submits that the arbitrator erred in denying his request for overtime pay.

The government does not dispute that Mr. Raney is the prevailing party and entitled to attorney fees under the Back Pay Act. Nor does the government dispute that the phrase "reasonable attorney fees" typically means "market-rate fees." The main thrust of the government's position is that payment of market-rate fees into a legal representation fund, such as the LRF, does not cure the ethical prohibitions against fee splitting with non-lawyers and the unauthorized practice of law. The government does not even make the statutory interpretation argument proposed in the dissenting opinion. On the ethical point, according to the government, if "market-rate fees flowed into the litigation fund, this arrangement would -- dollar for dollar -- relieve the union from costs that the union otherwise would have incurred." In essence, the government is arguing that receipt of market-rate fees into the LRF would relieve the union of otherwise financing the LRF, thereby freeing union funds for other purposes, which is tantamount to fee splitting between the union attorneys and the union. The government argues that such a...