Rejecting fee enhancements without rejecting them

Below, Akin Gump’s Scott Street discusses last week’s opinion in Perdue v. Kenny A. (08-970).  For earlier coverage of the case, see Scott’s preview and oral argument recap.  For briefs and other documents, see the Perdue SCOTUSwiki page.

Although it split the Court into the typical 5-4 split, on its face, there is little that is controversial about the Supreme Court’s decision in Perdue v. Kenny A.

After all, every member of the Court agreed that the lodestar should be used to determine what fees an attorney should be able to recover under 42 U.S.C. § 1988.  They also agreed that the fee yielded by the lodestar should be the presumptive fee and should only be enhanced in extraordinary circumstances.  The justices simply disagreed about whether the district court properly enhanced the fee that the lodestar yielded in this case.

Despite those agreements, Justice Alito’s majority decision reflects a hostility toward district judges that could produce a new wave of fee litigation in the circuit courts.  And I base that opinion not just on the result (finding an abuse of discretion in the district court’s decision) or on the fact that, in reversing, the Court decided a question on which it had not granted cert. (although nothing precludes the Court from doing that), but on the standard that the majority requires district judges to apply when considering fee enhancements in the future.

Specifically, the majority stated that a fee enhancement is only justified when “specific evidence” shows “that the lodestar fee would not have been ‘adequate to attract competent counsel.’”  Although the Court did not define the term “competent,” it is difficult to imagine a situation where the lodestar would not hypothetically be sufficient to attract some attorney.  So long as a defendant can produce evidence that some attorney would have taken the case for the lodetstar-produced fee, it seems a court would have to reject an enhancement.

True, the Court offers some situations that might meet its standard—such as cases in which the attorney’s performance “includes an extraordinary outlay of expenses and the litigation is exceptionally protracted” and in which the “attorney’s performance involves exceptional delay in the payment of fees”—but it limits even those situations by saying that an enhancement should be calculated by an objective formula, “such as by applying a standard rate of interest.”

Indeed, what seemed to trouble the majority most in Perdue was not the fact that the district court enhanced the plaintiffs’ attorneys’ fees, but the fact that it enhanced the fees by seventy-five percent, a seemingly arbitrary number.  “Why,” Justice Alito wondered, “did the court grant a 75% enhancement instead of the 100% increase that respondents sought?  And why 75% rather than 50% or 25% or 10%?”  The Court worried that the district court “did not employ a methodology that permitted meaningful appellate review.”  And it rejected the idea that a trial judge should be able to enhance fees “on an impressionistic basis,” something that did not concern Justice Breyer’s dissent.

Therefore, after Perdue, district judges should remember this: the Supreme Court does not trust you.  It is concerned that you get caught up in the heat of litigation, ascribe too much importance to attorney performance, and are too generous in diverting public funds to those lawyers.  So if you are going to enhance an award of attorneys’ fees, you better tie it to specific evidence and explain why the lodestar-produced award was not sufficient to attract “competent” counsel.  And bear in mind that, because the term “competent” is so undefined, your decision will almost certainly get challenged on appeal.

How will the district judges respond?  I suspect that, rather than trying to meet the Supreme Court’s enhancement standard, they will simply adjust their lodestar calculations to give attorneys an amount that the judges think they deserve.  After all, district judges are attorneys too, and they understand that some decisions, including this one, are best based on impression rather than a rigid formula.  That will force the Court to reassess the question it dodged this time: whether enhancements are ever necessary to fulfill the statutory objectives of Section 1988.