You've won a case in which you are entitled to seek statutory attorney fees on behalf of your client. The hard part is over, but your victory is not complete until you succeed in another key phase of the case.
Although securing the right to seek fees overcomes an initial hurdle, obtaining approval of your fee request presents an additional one. Trial courts have broad discretion to determine the amount of reasonable attorney fees, but appellate courts may scrutinize fee requests closely based on hourly rate, manner of billing and necessity of the tasks performed. How do you get by that appellate scrutiny? What documentation is required?
No pat answers to these questions exist, but the 9th U.S. Circuit Court of Appeals has provided very useful guidance for practitioners in Welch v. Metropolitan Life Ins. Co., 480 F.3d 942 (9th Cir. 2007). There, in reviewing a statutory fee award in an action under the Employee Retirement Income Security Act, the court provided a valuable checklist for any counsel drafting an attorney fee motion.
In federal court, for a statutory fee award, "[t]he most useful starting point for determining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate." Hensley v. Eckerhart, 461 U.S. 424 (1983). Other considerations include the results obtained and the novelty and difficulty of the issues in the case, the court said. The resulting figure is called the lodestar amount, which presumptively is the reasonable amount of attorney fees. Van Gerwen v. Guarantee Mutual Life Co., 214 F.3d 1041 (9th Cir. 2000); Morales v. City of San Rafael, 96 F.3d 359 (9th Cir 1996).
The lodestar may be adjusted upward or downward by a multiplier in rare and exceptional cases when deviation is supported by "specific evidence" and "detailed findings ... that the lodestar amount is unreasonably low or unreasonably high," the Van Gerwen court added.
That court reversed an attorney fee award because the district court may have double-counted by adjusting both lodestar and multiplier to account for the attorney's poor performance. After all, the court declared, only factors not subsumed in the lodestar calculation may be used to adjust it.
The components of a fee award must be proved, not simply stated. A party seeking attorney fees must "submit evidence supporting the hours worked and rates claimed," courts have held.
The prevailing market rate for similar legal work by counsel of comparable skill guides the determination of the reasonable hourly rate: "The fee applicant has the burden of producing satisfactory evidence, in addition to the affidavits of its counsel, that the requested rates are in line with those prevailing in the community for similar services of lawyers of reasonably comparable skill and reputation." Jordan v. Multnomah County, 815 F.2d 1258 (9th Cir. 1987).
Further, as the Van Gerwen court stressed, time that is "'excessive, redundant, or otherwise unnecessary" should be excluded from the lodestar amount.
Although appellate courts review the amount of reasonable fees only for an abuse of discretion, their deference to district courts is not unlimited. The district court must provide "some indication or explanation as to how it arrived at the amount of fees awarded" to permit meaningful appellate review. Fair Housing of Marin v. Combs, 285 F.3d 899 (9th Cir. 2002).
The appellate court next considers whether the district court sufficiently articulated its "reasons for its findings regarding the propriety of the hours claimed or for any adjustments it makes either to the prevailing party's claimed hours or to the lodestar." Ferland v. Conrad Credit Corp., 244 F.3d 1145 (9th Cir. 2001).
California takes a similar approach to the determination of attorney fee awards, beginning with determining a lodestar. That amount "may then be adjusted, based on consideration of factors specific to the case, in order to fix the fee at the fair market value for the legal services provided. PLCM Group Inc. v. Drexler, 22 Cal.4th 1084 (2000). Determination of the lodestar amount requires "careful compilation of the time spent and reasonable hourly compensation of each attorney ... involved in the presentation of the case." Ketchum v. Moses, 24 Cal.4th 1122 (2001). As in the 9th Circuit, a party proves a reasonable hourly rate by setting forth the prevailing rate in the community for similar work. Shaffer v. Superior Court, 33 Cal.App.4th 993 (1995).
California's trial courts also have considerable discretion to set the amount of reasonable attorney fees. Fed-Mart Corp. v. Pell Enterprises Inc., 111 Cal.App.3d 215 (1980). But again, good documentation is key. "'[P]adding' in the form of inefficient or duplicative efforts is not subject to compensation," the Ketchum court stated.
Under federal or California law, the adequacy of the documentation supporting a fee request will be at the heart of the appellate inquiry. The reasonableness of the hourly rate used in the computation, as well as the reasonableness of the amount sought, will pivot on that support.
This brings us to the 9th Circuit's decision in Welch. In that case, Vicki Welch filed suit against Metropolitan life saying it had improperly denied her benefits under a long-term disability plan governed by ERISA. Six months later, Metlife agreed to pay Welch's claim.
She moved for an award of costs and attorney fees under 29 U.S.C. Section 1132(g) (1), requesting $39,112 based on 11.5 hours of work at $375 per hour and 87 hours of work at $400 per hour.
Welch submitted two types of documentation: declarations from four experienced ERISA attorneys, who testified they charge clients between $400 and $475 per hour, and four district-court orders in other cases awarding fees to her law firm at rates of $300 to $375 per hour. Metlife opposed the motion, arguing that the amount of fees requested was unreasonable.
Although the district court granted Welch's fee motion, it awarded her only $10,762 in fees, less than a third of the amount she had requested. The court (1) reduced the requested hourly rates to $250, (2) imposed a 20 percent across-the-board reduction in the requested hours because the firm had block-billed its time, (3) imposed an additional 20 percent across-the-board reduction because the firm had billed in quarter hour increments and (4) reduced the requested hours for tasks it deemed unnecessary.
The 9th Circuit reviewed each of these reductions.
With respect to the reduction in hourly rates, the 9th Circuit held that the district court had abused its discretion by relying on the fact that the firm did not collect $375 and $400 per hour from its paying clients, emphasizing "the determination of a reasonable hourly rate 'is not made by reference to the rates actually charged the prevailing party.'"
In addition, although a reduction in the hourly rate may be appropriate if a firm uses a multiplier based on the contingent nature of its practice, the evidence was insufficient to support a finding that Welch's law firm had inflated its hourly rates above the prevailing market rate based on the rationale that representing policyholders in ERISA litigation generally involves a contingency fee. (The California Supreme Court has allowed enhancements in contingency-fee cases. See, e.g., Ketchum.)
The 9th Circuit held, however, that the law firm could consider the risk of delayed payment as a factor in figuring a reasonable hourly rate.
Finally, the court found no evidence supporting the district court's determination that $250 was a reasonable hourly rate. In fact, the evidence submitted by both Welch and MetLife suggested that $250 was well below the prevailing market rate for ERISA plaintiffs' lawyers of comparable skill.
Based on those considerations, the 9th Circuit found "the requested fees of $375 and $400 per hour were established as being in line with prevailing community rates, and on remand the district court must presume those rates are reasonable." The district court could override that presumption of reasonableness, moreover, only if it determined Welch's attorneys performed below the level of expertise that would command those rates, cited evidence undermining the reasonableness of the rates or found the law firm indeed had included a contingency factor in requesting hourly rates.
Addressing the practice of block billing, the 9th Circuit had no "quarrel with the district court's authority to reduce hours that are billed in block format."
"The fee applicant bears the burden of documenting the appropriate hours expended in the litigation and must submit evidence in support of those hours worked," it said. Displaying a distaste for the practice, the 9th Circuit explained that "[I]t was reasonable for the district court to conclude that Welch failed to carry her burden, because block billing makes it more difficult to determine how much time was spent on particular activities."
Nevertheless, the court held that the across-the-board 20 percent reduction was an abuse of discretion because only slightly more than half of the hours submitted had been block-billed. On remand, the 9th Circuit directed the district court to '"explain how or why ... the reduction ... fairly balance[s]' those hours that were actually billed in block format."
"The fee applicant bears the burden of documenting the appropriate hours expended in the litigation and must submit evidence in support of those hours worked," it said. Displaying a distaste for the practice, the 9th Circuit explained that “[i]t was reasonable for the district court to conclude that Welch failed to carry her burden, because block billing makes it more difficult to determine how much time was spent on particular activities.”
Nevertheless, the court held that the across-the-board 20 percent reduction was an abuse of discretion because only slightly more than half of the hours submitted had been block-billed. On remand, the 9th Circuit directed the district court to “explain how or why … the reduction … fairly balance[s]’ those hours that were actually billed in block format.”
A California appellate court came to a similar conclusion in Bell v. Vista Unified School District, 82 Cal.App.4th 672 (2000). It held that a trial court had abused its discretion by failing to apportion fees between a statutory claim, for which attorney fees were recoverable, and tort claims, for which they were not when counsel had block-billed time.
"If counsel cannot further define his billing entries so as to meaningfully enlighten the court of those related to the [statutory] violation, then the trial court should exercise its discretion in assigning a reasonable percentage to the entries, or simply cast them aside," the court said.
The 9th Circuit expressed similar displeasure with the practice of billing in quarter-hour increments, noting that the district court expressly had correlated its reduction for quarter-hour billing to Welch's law firm's actual overbilling. The firm's summary time sheet indicated it was "replete with quarter-hour or half-hour charges for the drafting of letters, telephone calls and intra-office conferences" - tasks that should have taken much less time to complete. The court, therefore, affirmed the across-the-board 20 percent reduction for billing in quarter-hour increments.
As to the reduction for certain tasks, such as holding intra-office conferences, preparing a case analysis memorandum, propounding discovery and drafting a motion for attorney fees with boilerplate language, the court deferred to the district court's determination that the amounts requested for those tasks were unreasonable, given the level of experience of the attorneys.
What’s the moral of this story? Nothing in Welch suggests its standards for attorney fee awards are limited to the ERISA context. Trial and appellate courts have the power, and indeed the responsibility, to scrutinize carefully not only requested hourly rates but also the tasks performed and the manner in which they are billed.
Proper documentation supporting an attorney fee request is crucial. And it should be considered not just when a case is substantively over and the fee request is made but also when litigation starts and attorneys begin tracking their time. In working on a case in which the recovery of attorney fees is a possibility, counsel should contemplate the potential fee award at the onset and consider documentation as the matter progresses.
What about "best practices" in providing support for a fee award? Welch gives very useful guidance.
To demonstrate the reasonableness of the requested hourly rates, practitioners should prepare a declaration describing the experience level of each attorney who worked on the case and present evidence that the claimed rates are in line with the prevailing market rate for similar work. Descriptions of the tasks performed should be specific and indicate how the work was necessary to the achieved results. Because practices such as block-billing and billing in quarter-hour increments can suggest that excessive hours are being requested, counsel should avoid these practices when possible by billing for specific tasks and, at a minimum, billing for smaller tasks, including brief telephone calls, writing short letters and memoranda, in six-minute increments.
Implementing these practices will go a long way to proving the amount of fees requested is reasonable and avoid some of the pitfalls that cause courts to make significant reductions in fee awards.
James Martin is a certified appellate specialist, a member of the California Academy of Appellate Lawyers and a partner in Reed Smith’s Los Angeles and Pittsburgh offices.
Judith Posner is also a certified appellate specialist, is counsel in the firm’s Los Angeles appellate group.