District Judge Must Explain Cuts With Specificity, Showing Math With Transparency And Not Capping Based on Compensatory Damages Amount.
Gonzalez v. City of Maywood, Case No. 11-56594 (9th Cir. Sept. 9, 2013) (for publication) is must reading for civil rights practitioners filling fee petitions. However, it also has valuable lessons for attorneys involved in fee contests and district judge clerks as far as what the Ninth Circuit looks for in a district judge’s ruling on fee issues.
In this one, winning civil rights plaintiffs stipulated with defendants (city, police department, and several local government officials) to a $500,000 settlement and agreed that plaintiffs could apply for a $1 million fee award plus $25,000 for “fees on fees” (fee application) work. Plaintiffs put in for a lodestar of over $2 million, after having exposed arithmetic errors which understated the lodestar by over $500,000. However, plaintiffs did hold to the $1,025,000 settlement number in their request. The district judge only awarded $473,138.24 in fees, basically indicating that he thought the $500,000 damages stipulation put a ceiling on what should be granted to plaintiffs.
The Ninth Circuit vacated and remanded upon Plaintiffs’ appeal. Here are the reasons why:
1. Reasonable Number of Hours. Initially, the federal appeals court indicated that opposing counsel time was “useful” in determining reasonableness of work on plaintiff’s side, but the district judge has discretion in terms of relying on this factor. A district court can apply a percentage cut to either the number of hours claimed or lodestar figure, in its discretion. But, the flaw in the district judge’s ruling was the failure in explaining the percentage of reductions with concise, clear reasons given that the 66% lodestar cut was way above the 10% haircut which the appeals court earlier ruled could be made without explanation in Moreno v. City of Sacramento, 534 F.3d 1106, 1112 (9th Cir. 2008). Although reducing for categories (such as “ambiguous billing format,” “ridiculous billing entries,” “improper billing entries,” “travel”), the Ninth Circuit did not believe that these categories were specific enough to explain “trimming the fat” from the fee request. Also, some of the categories such as “voluminous entries” did not explain why a 20% cut was proportional to the “sin.” The appeals court also felt that the categories used were duplicative, such that there was an improper “compounding” of cuts. In a footnote, the Ninth Circuit did observe that district judges, when confronting poorly organized billings, can do one of four things: (1) cut by 10% without explanation; (2) order the fee applicant to reformat/resubmit fillings; (3) itself restructure the billings into usable format; or (4) in egregious cases where the other approaches are unsuccessful, “throw up its hands and refuse to award any fees whatsoever.”
2. Reasonable Hourly Rate. Here, the district judge purported to determine reasonable hourly rates based on his experience and knowledge of prevailing rates in the community, which is a standard most often used by California state court judges (and which is permissible under California state law). However, the Ninth Circuit demarcated that federal law is different: no Ninth Circuit case law supports a district judge’s intuit alone without relying on evidence of prevailing market rates. The district judge reduced the hourly rate for each attorney by 25%, splitting the difference between the rates claimed by each side in the fee battle. The federal appeals court did not like this arithmetic Solomonic approach, condemning it based on not taking into consideration the varied levels of skill, experience, and reputation among the various attorneys. Also, the district judge simply picked a $125 hourly rate for paralegals with no explanation at all as to why.
3. Plaintiff’s Remaining Challenges. Nonetheless, the federal appeals court did sustain some of the district judge’s methodology in this case. First, the district judge did not have to use the hourly rates Plaintiffs’ attorneys had billed or been awarded in two previous cases as an indicator of a reasonable hourly rate. Second, the district court was justified in weighing two of the attorneys’ earlier statements in declarations filed in the case about billing at a lower hourly rates–it did impact credibility. Third, the district judge could well reject the hourly rates suggested by Plaintiffs’ fee expert because a chart simply listing law firms did not help identify the skill, reputation, or experience of the attorneys in those firms who billed those rates. The Ninth Circuit, in this regard, believed the district judge could reject the fee expert conclusions based on using “confidential sources” for information and simply listing firms/rates. Fourth, the district court was justified in using overbilling and poor results as factors in fixing fees, because they indicated “weak representation.”
4. Lodestar Adjustments. Because the district judge seems to be particularly swayed by the proportionality of the fee request to the compensatory damages stipulated to by the parties, the Ninth Circuit reminded everyone that there does not have to be proportionality in the civil rights area–with fee awards exceeding the compensatory damages exponentially in many situations. In this case, Plaintiffs’ recovery was a catalyst in that the city actually shuttered its beleaguered police department. So, a remand was in order to see if any adjustments needed to be made to the lodestar.
5. Fees on Fees. Fees on fees are awardable, even when the district court does not award the applicant the full amount of requested fees. Here, the district judge awarded no fees on fees, with a remand necessary to employ the lodestar method for purposes of determining a reasonable fee for this work.
6. State Law Multiplier. The district court was silent on Plaintiffs’ request that they be awarded a multiplier under California state law. On remand, the district judge needed to analyze and explain whether such a multiplier was proper.
The Ninth Circuit did deny Plaintiffs’ request to have the re-computation made by another district judge, finding no basis to believe the lower court would not follow its directions.