Student Public Interest Research Group of New Jersey, Inc. v. AT&T Bell Laboratories

Decision Date24 March 1988
Docket Number86-5927,Nos. 86-5895,s. 86-5895
Citation842 F.2d 1436
Parties, 56 USLW 2558, 18 Envtl. L. Rep. 20,758 STUDENT PUBLIC INTEREST RESEARCH GROUP OF NEW JERSEY, INC. and Friends of the Earth, Appellants in 86-5927, v. AT & T BELL LABORATORIES, Appellants in 86-5895.
CourtU.S. Court of Appeals — Third Circuit

Bruce J. Terris (argued), Karen H. Edgecombe, Terris, Edgecombe, Hecker & Wayne, Washington, D.C., Michael Gordon, Gordon & Gordon, P.A., West Orange, N.J., for appellants in 86-5927.

Joseph A. Hoffman (argued), Asst. Gen. Counsel, American Tel. & Tel. Co., Berkely

Heights, N.J., Steven A. Tasher, John P. Dean, Donovan Leisure Newton & Irvine, Washington, D.C., for appellants in 86-5895.

Before BECKER and SCIRICA, Circuit Judges, and FARNAN, District Judge *.

OPINION OF THE COURT

BECKER, Circuit Judge.

This case, which involves an appeal and cross appeal from an order of the district court awarding counsel fees to prevailing parties (two public interest groups) pursuant to the fee shifting provisions of the Clean Water Act, 33 U.S.C. Secs. 1251 et seq., 1365(d) (1982), raises the interesting and difficult question (on which the circuits are sharply divided) of how to calculate the counsel fees for attorneys who operate a for-profit law firm that handles only public interest cases and therefore bills significantly less than a traditional law firm. In litigating this case the firm had no traditional fee arrangement with its clients but pinned all hope of repayment on the fee shifting statute. The firm has a billing rate ($60-$80 per hour) which it applies in certain cases, but did not apply in this one. In cases where the firm has a fee arrangement with its client, it concedes that it receives the $60-$80 rate, but only if it does not prevail and hence is not eligible for a court-awarded fee. Where, as in this case, the firm has no fee arrangement it receives no compensation whatsoever if it loses. In either case, when it does prevail, it receives a fee from the court. The question here is: what should that fee be?

The district court calculated the firm's lodestar by multiplying the number of hours times the prevailing rate for equivalent legal services in Washington, D.C., where the firm's offices are located. It found as fact that conventional firms performing work of equivalent complexity in the city bill at $85-$185 per hour rather than the firm's $60-$80 billing rate. In reviewing the district court's order, we must determine whether the factual findings were clearly erroneous, and also evaluate the legal standard the district court applied.

For the reasons discussed below, we will affirm the district court's decision, 643 F.Supp. 961, as to calculation of the lodestar. We hold that its calculation of the market rate was not clearly erroneous and that it did not apply the wrong legal standard by employing the prevailing "market rate" for equivalent legal services rather than the plaintiff's normal billing rate. We find the determination of the legal standard to be a difficult one with no clear solution. However, after reviewing various approaches employed by other courts of appeals, we reach the conclusion that the method for calculating fees for this unique genre of attorneys, who operate for profit but essentially rely on fee shifting statutes, must depend on local rates for similar work. In coming to this conclusion we rely both on the Supreme Court's holding in Blum v. Stenson, 465 U.S. 886, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984) (non-profit legal aid society is entitled to market rates even though it possessed no conventional hourly billing rate and would have received no fee from its clients), and on our assessment that this rule is the fairest, least burdensome way to calculate a reasonable fee.

The appeal and cross appeal raise five additional fee-related questions. First, we must determine whether the district court abused its discretion in failing to award plaintiffs an enhancement for contingency. This inquiry requires us to interpret the Supreme Court's recent opinion in Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, --- U.S. ----, 107 S.Ct. 3078, 97 L.Ed.2d 585 (1987) (Delaware Valley II ), which was decided after the district court issued its opinion in this case. We are doubtful, in light of Delaware Valley II, that this case could qualify as "risky." Although the firm relied exclusively on fee shifting statutes, which indicates the existence of risk of non-payment, their chances of losing were small. Even if this case could be labelled as risky, we would decline to grant a contingency multiplier. Not only would computing the appropriate contingency multiplier in light of Delaware Valley II be a most burdensome task for the district court and an expensive one for the parties under these circumstances, but we are also convinced that the hourly rate used by the district court in this case will be sufficient to attract competent counsel, thus satisfying the raison d'etre of the fee shifting statute as explicated by Delaware Valley II. Therefore, any further enhancement is unnecessary.

Second, we must determine whether the district court abused its discretion in denying the plaintiffs an enhancement for quality. The district court did not award a quality multiplier because it found that plaintiffs' attorneys' performance, though excellent, was not so extraordinary as to deserve such enhancement. Given that quality multipliers are appropriate only in rare cases, and that we agree with the district court that this is not one of them, we conclude that the district court did not abuse its discretion in denying a quality multiplier.

Third, we must determine whether the district court abused its discretion in failing to award plaintiffs an enhancement for delay. We will affirm the district court's denial of an enhancement for delay because plaintiffs waived the point by failing to develop a record on the issue in the district court.

Fourth, we must decide whether the district court abused its discretion by failing to require plaintiffs' attorneys to allocate some of the time spent litigating the attorneys' fees issues to the firm's other cases raising the same issues. The district court did not make factual findings on this issue, hence we will remand for findings as to whether any of the firm's other cases presented sufficiently similar factual issues and arose at such a juncture that the firm should have allocated part of the costs of litigating the fees issues to other cases.

Finally, we must consider whether the district court abused its discretion in refusing to apply a negative multiplier to the lodestar claimed for the attorneys' fees litigation because plaintiffs' attorneys did not meet with complete success in litigating the attorneys' fees issues. Because the district court did not consider this question at all in its disposition of the fees issue, we will remand it to the district court. Hence we will affirm in part and reverse in part and remand for further proceedings.

I. PROCEDURAL HISTORY

Plaintiffs, Student Public Interest Research Group of New Jersey and Friends of the Earth, Inc. (hereinafter referred to collectively as SPIRG), sued defendant AT & T Bell Laboratories (Bell) alleging that Bell violated the Clean Water Act by dumping pollutants into the Whippany River in New Jersey in excess of amounts allowed by law. After the district court granted plaintiffs' motion for summary judgment on the question of liability, the parties settled, agreeing that plaintiffs would drop all their claims in exchange for Bell's paying $75,000 to the United States Treasury.

Plaintiffs' attorneys moved for attorneys' fees pursuant to the Clean Water Act. 1 The chief recipient of the fees, the Washington, D.C. law firm of Terris, Edgecombe, Hecker & Wayne (Terris), acted as lead counsel in the original litigation and in the litigation over the fee award. Terris is a private, for-profit law firm which specializes in public interest law. It serves as counsel in employment discrimination, civil rights, consumer, and environmental suits. When it charges clients anything at all, its billing rate varies between $60 and $80 per hour for partners' time and between $60 and $70 per hour for associates' time. 2 It is uncontested that in this litigation that the Terris firm had no fee arrangement, and would have received no remuneration from SPIRG. Instead, the firm relied entirely on the attorneys' fees provision of the Clean Water Act.

In calculating its requested lodestar (reasonable hourly rate multiplied by number of hours billed), the Terris firm did not use its own billing rate, but rather calculated what a reasonable market rate would have been for legal services of the caliber Terris provided. The firm apportioned part of its time for its work on the merits to twenty-five other cases that the firm was litigating that raised similar Clean Water Act legal issues. Terris subsequently supplemented its fee applications to include time spent on litigating the attorneys' fees issue. In addition, Terris requested a 50% multiplier to the merits lodestar for quality, the contingent nature of the case, and delay in payment.

Bell objected to the hourly rate employed to calculate the lodestar, arguing that Terris was bound by its own billing rate. In addition, Bell complained that Terris did not apportion its hours among the many cases in which it litigated the issue of attorneys fees as it had done with the merits calculation. Finally, Bell opposed requests for enhancement of the merits lodestar for quality, contingency, and delay. Finally, Bell requested that if the district court did not fully grant Terris such multipliers, it reduce the lodestar for the time spent in seeking attorneys' fees on the ground that Terris achieved only partial success in pursuit of its fees.

The district court adopted Terris' lodestar calculation...

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