VENEGAS v. MITCHELL
Legal provision: Civil Rights Attorney's Fees Awards
Argument of Richard M. Mosk
Chief Justice Rehnquist: We'll hear argument now in No. 88-1725, Juan Francisco Venegas v. Michael Mitchell.
Mr. Mosk, ready.
Mr. Mosk: Thank you, Mr. Chief Justice, and may it please the Court:
The issue in this civil rights case is whether Respondent Mitchell, an attorney, can by enforcing a contingent fee contract require Petitioner Juan Francisco Venegas, who is the client and the prevailing party in the civil right action, to pay over $800,000 in attorney's fees when the court awarded, pursuant to Section 1988, fees in the amount to the then-attorneys of $102,000, which was almost twice the amount of the lodestar and twice the amount requested and which included a contingency enhancement factor.
In short, the issue is whether 1988 is to operate as a fee-sharing statute or a fee-shifting statute.
Now, prior to Mitchell the case had been pending some eight years.
All of the discovery had been completed.
All of the law and motion materials, including summary judgment motions, appeals and pre-trials had been completed.
Unknown Speaker: Well, Mr.... there's no issue in this case about what the defendant would have to pay?
Mr. Mosk: There is no issue... that's correct, Your Honor.
Unknown Speaker: The... the lodestar amount is all that he has to pay?
Mr. Mosk: That's correct.
Unknown Speaker: All right.
Mr. Mosk: It was a projected short trial.
Indeed the... in Volume I of the transcript Mr. Mitchell himself anticipated a four-day trial.
There was a high probability of a large recovery, in that in the state court a jury had awarded a million dollars, which was reversed on the basis of sovereign immunity, which, of course, was a defense not available in a civil rights action.
Mr. Mitchell had Mr. Venegas pay him a $10,000 non-refundable retainer.
That meant he kept it win, lose or draw.
And had him sign his standard contingent fee contract, which provided for 40 percent of the recovery for one trial only, plus he would keep any civil rights award which exceeded that amount.
Unknown Speaker: Do we know that that was his standard form contract?
Mr. Mosk: Well, it was a printed form contract, Your Honor.
Unknown Speaker: Including the one trial limitation?
Mr. Mosk: That would be the assumption, yes.
Unknown Speaker: That... it... it's a--
Mr. Mosk: There's no evidence to that effect other than it appears to be a printed form contract.
Unknown Speaker: --It... it has been asserted that that's unusual, that that particular feature is unusual in contingent fee contracts.
Mr. Mosk: Well, it is our position that it is... it is unusual.
And indeed, the court of appeals when it said that Mr. Venegas had the burden of showing that 40 percent contingency was unusual in a civil rights action, never drew that distinction, that this was 40 percent for one trial only.
And as a matter of fact, the way Petitioner Venegas construed it, which was not unreasonable, was that if he lost, Mr. Mitchell would not have to do the trial... do the appeal without extra consideration.
But that in order to effect the recovery, he had to do the appeal and undertake the recovery.
Unknown Speaker: Now, is... is that the right way to interpret?
I wondered the same.
I would interpret one trial to mean, you know, if it's a hung jury, I don't do a second trial.
But if I win, I'll... you know, I'll defend the verdict.
Mr. Mosk: That would be the reasonable way of interpreting it, not the way Mr. Mitchell interpreted it, however.
Unknown Speaker: Mr. Mosk, does the Central District... that's where this case was tried, wasn't it?
Mr. Mosk: Yes, sir.
Unknown Speaker: Have any policy of regulating contingent fees?
Mr. Mosk: Well, Your Honor, the answer is no, not by rule.
It is our... the Ninth Circuit has indicated, and all courts have indicated that courts are supposed to supervise... there is no specific regulation.
And indeed, the district court in this case simply said that as a matter of law a... in a civil rights case a contingent fee agreement is enforceable even if it exceeds the amount of the court-awarded fee.
And the only other thing that the district court said was... and I quote...
"Plaintiff does not claim that he did not read the agreement before signing it. "
And that was the sum total of the district court's findings and consideration of... of this fact.
Unknown Speaker: But you haven't made any independent claim here that the contingent fee should have been reviewed the way all contingent fees would be, regardless of a civil rights case?
Mr. Mosk: No, Your Honor, other than to say that all contingent fee agreements, and especially in civil rights cases, when called to the attention of the court, the court has a duty to exercise supervisory power over them, as they have done in... in every court throughout the nation.
Unknown Speaker: Have we held that?
Have we confirmed that authority in the district court?
Mr. Mosk: No, Your Honor, you have not.
Although, as I said, all of the cases seem to say... and including the one in the Ninth Circuit in this case... has said that contingent fee contracts are subject to the supervision of the court.
Unknown Speaker: And... and does that supervision go to all aspects of the contract?
Its... its validity, its execution?
Mr. Mosk: It goes to its fairness and to the circumstances surrounding it.
Just as an example, in the Ninth Circuit in this case in Footnote 7 said that a... when there's a civil rights action the plaintiff's attorney may not get both the court award... the statutory fee and the contingent fee.
Now, there's nothing anywhere that says he can't.
Freedom of contract under respondent's theory, but that was a rule which they laid down themselves.
They also, in Hamner v. Rios, established certain criteria and guidelines which we submit were not followed at all because in this particular case the court placed the burden upon Mr. Venegas to show that the contract was unreasonable.
And secondly, it completely ignored the factors related to the execution of the agreement and the great disparity between the amount asked for and the amount that was deemed to be reasonable.
And finally, didn't consider the... how... considered a contract reasonable which is manifestly unenforceable both under state and Federal law by virtue of the fact that the client... that the attorney had withdrawn prior to the advent of the contingency.
Unknown Speaker: Did he have... did Venegas have his own counsel at that point, or was he... in these hearings in the district court?
That is to say, a counsel other than Mitchell to represent him on this contingency fee inquiry?
Mr. Mosk: At a... at a point in time after Mr. Mitchell, who was counsel of record, filed his lien, at some point at the hearing itself another counsel had to be hired and was hired and did present written argument, yes.
Unknown Speaker: But apparently none of the parties make any objection to the authority of the district court to make this determination and whatever the determination is with respect to the contingency fee contract that is going to be binding on all the parties for state law purposes.
Mr. Mosk: The answer is nobody objected to the... to the determination as such.
Whether it's binding or not is another question.
Unknown Speaker: Well, I thought the district... I thought the district court really only made... it made some remarks about it that really left it to the state law.
Mr. Mosk: --No.
The district court blessed the contract as reasonable, as did the Ninth Circuit.
Unknown Speaker: But said it was really a matter of... for state law to take care of, didn't he?
Mr. Mosk: --Well, except for what we consider is that the first bastion, the first guard, is the court itself in which the attorney appears, in which all the facts are demonstrated.
At that point, it is up to the court, it seems to us, to--
Unknown Speaker: You think the validity of every contract... contingent fee contract in a case that's tried in Federal court... the validity of that contract is a matter of Federal law?
Mr. Mosk: --No, Your Honor.
But if a contract--
Unknown Speaker: Well, what is it a matter of?
Mr. Mosk: --It is a matter of the Federal court determining at that stage, as they have in many, many cases--
Unknown Speaker: With reference to what law?
Mr. Mosk: --In reference to Federal law.
Unknown Speaker: So, it is a--
Mr. Mosk: Yes, it's a--
Unknown Speaker: --Federal law issue, the validity of that contract?
Mr. Mosk: --In a Federal... well, it's not the question so much as the validity; it's the question of the regulation of the attorney and the reasonableness of it.
It is true that if this... if this Court determines, for example, that the... that the contract is Mr. Venegas will still have the opportunity in state court to litigate questions such as fraud.
But in state court the issue will not necessarily arise.
It may in some context as to the "reasonableness".
It is for the court itself to determine whether or not the contract before it is legal.
Unknown Speaker: Well, let's... let's assume that this contract is completely valid and enforceable in state court.
Mr. Mosk: Yeah.
Unknown Speaker: And if this case had been tried in state court, the contingency fee contract would have been enforceable and valid.
No questions about it.
Mr. Mosk: Except for the... the... except for the Fracasse v. Brent withdrawal aspect.
Unknown Speaker: Well, that may... that may be so.
But let's just assume that it would be enforceable in state court.
Why should the... what basis does the Federal court have, other than the policy of the civil rights statute, to... not to enforce it?
Mr. Mosk: Because... it's not a question of not enforcing it, Your Honor.
It's a question of the court basically determining whether under these circumstances it is reasonable or unreasonable to--
Unknown Speaker: Well, I know, but if it determines it's unreasonable, it won't enforce it.
So it is a question of enforceability.
Mr. Mosk: --Well, it is a question of enforceability, yes.
But by... the flip side of that is that in these Section 1988 cases the courts have in effect enforced the agreements.
For example, in several of the cases cited by the respondent, the court has said... has required the client to pay his attorney the difference between the court award and the contingent fee.
Therefore, part of the court's function is not... is to protect the attorney and also to protect the client.
Unknown Speaker: Well, I can understand the court... maybe a Federal court saying, well, we've got this matter before us, we might as well deal with this contingent fee contract, but then saying it's a... it's a matter of state law and we'll just... we'll find out what the state law is and then... and apply state law to it.
Not some independent Federal standard.
Mr. Mosk: Well, all we're suggesting, Your Honor, is that it's the first line of defense because an attorney, as an officer of the court before whom he or she appeared, is to determine whether or not that attorney, for example, is... is... is taking undue advantage of his client.
For example, if the... if the contract had been--
Unknown Speaker: Well, Mr. Mosk, I thought you argued, with reference to the third question raised in your petition, that a Federal court in a civil rights case should not uphold a contingent fee agreement which is unenforceable under state law.
Mr. Mosk: --Right.
Unknown Speaker: So I thought your argument was to the effect that the Federal court had to look to state law for enforceability.
Your responses to Justice White's questions indicate quite the reverse this morning.
Mr. Mosk: Our position, Your Honor, is that, number one, as a matter of Federal law, the court should not enforce a contract... contingent fee contract where the lawyer has withdrawn prior to the advent of the contingency because that is a matter of general law.
Our next argument is that a Federal court should not bless or deem a contract to be reasonable if it violates state law, which it did here also.
Unknown Speaker: But the first of those arguments isn't... isn't raised in your petition for certiorari.
Mr. Mosk: Yes, it is, Your Honor.
In the... in the second item where we deal with the question of the enforceability of the agreement basically under the circumstances of this case.
We did not highlight each and every fact situation, but in our brief certainly we raised that issue.
Unknown Speaker: Well, I hope you will devote some of your time... and, of course, your ability to do that depends on questions from the bench as well as your own schedule, I realize... to the question of... the first question presented.
Mr. Mosk: Yes.
Yes, Your Honor.
The first question presented really goes to the Court's ability to... which it has done in each and every case... to basically take what's a skeletal statute and carry out its purposes and intent by a number of rules, which has been referred to by Judge Posner in his book on Federal courts as a type of Federal common law.
For instance, let me give one example.
There is nothing in Section 1988 that provides a different statutory guideline as between prevailing plaintiffs and prevailing defendants.
Not a word.
And indeed, there are a number of statutes which statutorily provide for such a distinction between the standard for defendants and for plaintiffs.
The... the... one of them is the Hart-Scott-Rodino Antitrust Act, the Petroleum Marketing Act.
A number of acts have that specific distinction.
Nevertheless, this Court in Hughes v. Roe in 1980 judicially enacted that... different standards on the grounds that it carries out the purposes and the intent of the statute.
Now, respondent has simply said, well, what about all these other fee limitation statutes?
Congress knows how to say it or do it and, therefore, they didn't do it in this case.
And the answer to that is that those fee limitation statutes are basically dedicated toward protecting a particular group of people, coal miners, for example.
They also... the purpose is to protect the Federal fisc because they are normally Federal statutes, and in some instances to make the process less adversarial.
Here we have a fee shifting contract which is not a fee limitation at all.
There is no limitation on what the attorney can obtain.
Basically, the only limitation is what the court deems to be reasonable.
Now, the... the other argument... two other arguments that defendant... respondent has made, and that is, this just involves the relationship between the plaintiff and the defendant and it doesn't involve his attorney.
That's not true.
The statute deals with attorney's fees.
It doesn't provide that the defendant shall pay plaintiff monies which he can then use to pay his attorney.
It deals with a reasonable attorney's fees.
It also... it's clear that Congress intended that the recovery not be reduced by what the plaintiff must pay his... his attorney.
And that's stated in Blanchard v. Bergeron.
I might add that if we assume that Congress is rational and that they act on the basis of... of case law as it exists, back in 1948 and the Fair Labor Standards case the Second Circuit, the Judges Hand and Jerome Frank enunciated a proposition which was then picked up by the Third Circuit.
I think they said it better than I can say it.
And it said, it seems to us too clear for argument that Congress did not intend the court to fix a fee sufficient to compensate the plaintiff's attorney for all his services and to permit him to collect an additional fee from his client under a private agreement.
Such an agreement... such an arrangement would require the cooperation of the court in the frustration of congressional purposes.
Moreover, in this case the fee, by contract, belongs to the attorney.
He said so.
And finally, it seems to me that if the attorney is to be a co-venturer in this project, he should have the same risks, and the risk is what does the judge determine as his reasonable fee.
He should also have the risk, parenthetically, of having to undergo the obligation which the plaintiff has of paying the defendant in the event that the defendant is the prevailing party.
Unknown Speaker: Mr. Mosk, is... this argument you're making assume... it seems to me it assumes that... that a reasonable attorney's fee is one single number and that there couldn't be a whole bunch of reasonable attorney's fees that vary enormously in amount.
So, one might say that the fee awarded by the court here was a reasonable fee, and one might also say that the... that the 40 percent contract agreement provided for a reasonable fee.
I mean, there's a vast range of reasonableness.
Why couldn't Congress have intended that it's up to the court, the court will pick a reasonable fee that will be awarded to... to counsel so that plaintiff doesn't have to pay it.
But if... if plaintiff has contractually obligated himself to pay more, that's something Congress didn't... didn't address.
Mr. Mosk: Well, several reasons.
First of all, if you look at the fee between the plaintiff and his attorney and the fee between... and the reasonable fee between plaintiff and defendant, there's no rational distinction between the two.
They are both contingent.
They both have the delay factor.
They're both based on the loadstar or the amount of time, and basically the--
Unknown Speaker: No, that's not quite right.
The... the contingent fee agreement with the client is not based on time at all.
Mr. Mosk: --Well, except that... that's true, Your Honor.
It's not based on time except for the fact that I think that there has to be some... all courts, since the days of Blackstone, have regulated attorney/client contracts, and they have to be reasonable.
Unknown Speaker: Well, there's just no relationship whatsoever in this case between the time and the amount of the fee.
Mr. Mosk: That's correct.
Unknown Speaker: You've got $2,000 or $3,000 an hour, I think.
Mr. Mosk: I missed... that... I did misspeak on that... that--
Unknown Speaker: Yeah.
Mr. Mosk: --one element.
But as far as the... as far as the contingency element, which... which some have said distinguishes the two, there is still a contingency factor in the 1988 fee, and there is a--
Unknown Speaker: Yeah, but it's a difference between being in a factor and being the standard.
Mr. Mosk: --Well--
Unknown Speaker: I mean, if contingency is one factor in the reasonable fee determination by the court, but it's the whole ball game in this... in the contract.
Mr. Mosk: --Well, it's the whole ball game either way.
I mean, unless he wins, he's... he doesn't have any--
Unknown Speaker: Well, he has to win, but in... in determining the amount of the fee, contingency is the entire standard under the contract.
It's merely one of the factors in the... in the course determination.
Mr. Mosk: --But he's... but... yes, Your Honor, but he's better off with the 1988 between plaintiff and defendant because if it's a low amount, he gets his time anyway.
He is better off normal tort--
Unknown Speaker: Well, in some cases yes, some cases no.
He's not better off in this case.
Mr. Mosk: --The only... the... in this case he gets a windfall, a windfall which--
Unknown Speaker: Well, he gets what he bargained for.
Mr. Mosk: --Well, as far as the contract aspect... and the respondent has said that, a contract's a contract.
But the fact is... is between an attorney and a client a contract is not a normal commercial contract.
A contract is between a fiduciary, between a fiduciary.
Unknown Speaker: Well, sure.
Mr. Mosk: It's a highly regulated contract.
In this very case, as I've pointed out in footnote 7, the case itself in the Ninth Circuit says, a contract where he bargains for both is unenforceable.
And as I said, since the days of Blackstone, contracts which were deemed to be champertous or barratry, or whatever, have all been deemed to be unenforceable by the courts.
Unknown Speaker: Yes, but if that's true... I mean, this... if this contract is unenforceable for the reasons that it's... it's really excessive, one... one could say, that has... that would be true whether or not there was a 1988 out there.
I mean, that's... that's an argument that's really independent of your statutory argument, it seems to me.
Mr. Mosk: --Well, except for the fact that the... the contract is contrary to the legislative purpose.
It basically violates that which Congress intended, which was that the plaintiff remain whole.
For example, in this particular--
Unknown Speaker: Well, but it also intended that the plaintiff be able to get lawyers who might not otherwise take the cases.
Mr. Mosk: --Yes, and by... and the way they did that was to say that in the vast majority of cases where there are simply injunctive relief or declaratory relief, or low recoveries, such as Mr. Blanchard in Blanchard v. Bergeron, the attorney will get his full recovery.
But if you look at the distinction between Mr. Blanchard and... and our case, Mr. Blanchard suffers a little bit of damages at the hands of a sheriff, and as a result, he... after paying his attorney, he's made whole.
Mr. Venegas spends two and a half years wrongfully in prison and he gets... he'll be lucky to get 60 percent of what he gets.
In other words, it's the same thing as if you had a $1,000 hospital bill.
The $1,000 hospital bill is fully paid after paying your attorney.
If it's a $100,000 hospital bill, you only keep 40... 60 percent of it.
It doesn't make any sense.
Unknown Speaker: Well, of course, that... that... that assumes... and you know what opposing counsel's going to say... that that assumes that he would have gotten the amount regardless of hiring this attorney.
But he made a different judgment.
He hired this attorney because he thought he'd increase the amount, and he may well have been right.
Mr. Mosk: Well, he hired an attorney and he got this amount, and the fact is that the other attorney... you know, when we talk about the marketplace, and I know Justice O'Connor in an opinion written for the Court... actually, her own opinion in the Pennsylvania and Delaware, referred to the marketplace.
The market... marketplace, with all due respect, is a fiction.
The marketplace is based upon a monopoly of attorneys.
And contingent fee agreements are basically standard form contracts of adhesion.
There is no broker out there that directs you to the appropriate lawyer at the cheapest fee.
There is no real competition.
Unknown Speaker: These lawyers are just... that... that you see advertised on television and in the newspapers, they're just throwing their money away?
Mr. Mosk: --Well, they're trying to--
Unknown Speaker: Is that right?
Mr. Mosk: --to get clients.
But the fact that--
Unknown Speaker: Oh.
Which suggests that there is a market, doesn't it?
Mr. Mosk: --There's a lot of lawyers out there.
But the fact is that, as the respondent has pointed out, you look at all the cases and they all say 40 percent.
And the fact is that in this case what is so egregious is it was 40 percent after everything had been completed.
And the trial... you know, it was not at the beginning when he walks in the door.
It's 40 percent after all the discovery, after all law and motion, after--
Unknown Speaker: If that's true, it's true for everybody, I mean, and I... and I suppose we shouldn't allow any contingent fees and should award all reasonable fees.
Why should we think that Congress believes that somehow 1988 plaintiffs are some particularly dull-witted class that they alone among all litigants have to be protected from hiring what they think is a better lawyer and agreeing to give him more than the statute would otherwise provide?
Mr. Mosk: --They don't have to do that, Your Honor.
What they've... what they've provided and what they've said in the legislative history is the purpose of it is that a plaintiff in a... in a civil rights act is a private attorney general; he's enforcing the law.
As Senator Kennedy, the sponsor of the bill says,
"You don't make a policeman pay to enforce the law. "
We view Mr. Venegas as a private attorney general.
Sure, he's trying to be made whole.
But the fact is it's different than a tort case, as you've... as was said in Rivera... Riverside v. Rivera.
And, as a result, the whole object was that he didn't have to pay for it.
It was the defendant that had to pay for it.
And what the court has done is saying, all right, we're not going to make the defendant pay anything that a plaintiff's attorney asks for.
We're not going to shift whatever he says.
Now, there's only other... one other way of making sure that Plaintiff Venegas is made whole, and that is to say that the attorney can only charge a reasonable fee.
I might add that--
Unknown Speaker: Well, then you're saying that Congress virtually forbad contingent fees if you're saying that the plaintiff must always be made whole.
Mr. Mosk: --What we've... that's a possibility, but I would like to--
Unknown Speaker: Well, but where... where on earth do you find that in the... in Section 1988, or in anything that Congress said at that time?
Mr. Mosk: --Because... well, many of the quotes which we've said... which we've laid out in our brief and which... and in this Court.
This Court itself specifically said that the purpose of the statute... in Blanchard v. Bergeron... the purpose of the statute was to ensure that the plaintiff was made whole and did not have to disgorge a portion of his earnings to his... to his counsel.
And that's what Jerome Frank and the Third Circuit said with the FS... F... Fair Labor Standard Act legislation and--
Unknown Speaker: Are... are you referring to the language where we said,
"Thus it is that a plaintiff's recovery will not be reduced by what he must pay his counsel? "
Mr. Mosk: --Yes.
Unknown Speaker: But the word there is "must".
You... it is not required that you must have a contingency fee contract.
You must pay him a reasonable fee.
Mr. Mosk: Well, presumably it's an enforceable... must, it seemed to me, to be an enforceable contract.
In other words, I don't know that a contract--
Unknown Speaker: Well, the word must means you must hire an attorney, but you... it's not... it doesn't follow from that that you must execute a contingency fee contract.
Mr. Mosk: --Well, I think--
Unknown Speaker: That's the whole point.
Mr. Mosk: --I think respondent's position is that... that Venegas must pay him.
I mean, that's what... that's what he's asking.
And what we are suggesting is that whatever he must pay him, it shouldn't... his... his amount should not be reduced by that amount.
Unknown Speaker: Well, we've never... we've never held that contingency... recognition of the contingent nature of the... of the recovery is not a legitimate factor in calculating a reasonable fee.
We've said a lot of things about it, but we've never said that 1988 forbids in all cases the recognition of the contingence nature of the--
Mr. Mosk: We don't have--
Unknown Speaker: --And in this very case, I understand the reasonable fee that was calculated included a contingency factor.
Mr. Mosk: --That's correct, Your Honor.
And it seems to me... it seems to us that... that that... once having determined that that's reasonable, a plaintiff's attorney should not be able to ask for what is unreasonable.
Now, it's true there are other... there's a whole range.
I mean, for example, it could have been one-seventeen or one... by the way, the extra $15,000 went to a prior attorney who is now suing for six times that amount in state court.
So that the attorneys, unfortunately, are not satisfied with whatever the judges are pronouncing.
And what happens is... is that, unless this Court sets down some standard, it seems to me that we are going to have more of this collateral litigation between unfortunate civil rights plaintiffs and their attorneys.
And finally, in connection with what the court did below, they placed the burden on Venegas, which is wrong; they ignored the circumstances at the time, which was an inadequate disclosure of the availability of Section 1988; they ignored the disparity; and they deemed reasonable a contract with is manifestly unenforceable under state and Federal law.
So, for all these reasons we believe that, number one, the Court should adopt the rule that Section 1988 precludes the attorney from receiving more than the court-awarded fee, and if it doesn't emanate from Section 1988, it emanates from what this Court... or at least the dissent said in the Mallard case, and the... and the majority opinion did not indicate to the contrary... that the Court has an inherent power to regulate the attorney, a special relationship regardless of whatever a statute says.
Unknown Speaker: Didn't the Ninth Circuit send back to the district court the question of whether this fee was valid under California law?
Mr. Mosk: No, Your Honor.
The only thing that they sent back was to determine whether or not they could have a lien basically.
In other words, whether or not there was an intention to have a statutory lien.
Unknown Speaker: They didn't leave open the validity of the fee under California law?
Mr. Mosk: Well, that is probably... could be litigated in state court.
But we believe that the court... the first step should be question of reasonableness, and that is for the Court.
If the Court decides that it is... it can't decide that, or it doesn't decide that it's unreasonable, then Mr. Venegas has all of his other options.
Unknown Speaker: Thank you, Mr. Mosk.
Mr. Miller, we'll hear from you.
Argument of Charles A. Miller
Mr. Miller: Mr. Chief Justice, and may it please the Court:
As the questions from the Court indicate, the central question in this case is whether Congress, in passing Section 1988, intended to restrict or limit in any way the amount that an attorney could charge his client in a civil rights case and specifically whether Congress intended that the reasonable fee awarded to the prevailing party is the limit on what an attorney can charge that prevailing party pursuant to its own fee agreement.
The position that the petitioner argues in this case would prevent an attorney from enforcing any type of contract... a contingency fee contract, as in this case, a fixed-fee contract and a contract based on an hourly rate basis... any kind of contract that would yield a fee higher than the amount set by the court under Section 1988.
Did Congress intend that result by this statute?
I think the answer to that has to be no.
Nothing on the face of the statute indicates that Congress intended any such intention or that it even addressed the question, for Section 1988 does not address the question of what a prevailing party may voluntarily pay to his lawyer in a civil rights case.
Section 1988 deals with what a losing party must pay by order of the court to the prevailing party as a reasonable attorney's fee in a civil rights case, not... it is not what may... what parties voluntarily contract before a case is decided to pay for legal services.
Rather, it is how much a losing party involuntarily may be taxed by the court as an additional recovery to the prevailing party, in this case the plaintiff, to assist in covering the attorney's fee or costs of the case to the prevailing party.
Unknown Speaker: Mr. Miller, could you help me on the facts here.
I am a little fuzzy on them.
Did the amount of the reasonable fee that was charged against the defendant... I guess $75,000 on account of your client's services... did that enhance the total amount against which the 40 percent contingency was computed?
Mr. Miller: It did not, Your Honor.
I would like--
Unknown Speaker: Why not?
Mr. Miller: --I would like to clarify--
Unknown Speaker: Yeah.
Mr. Miller: --three things about that.
Unknown Speaker: Yeah.
Mr. Miller: First of all, contrary to what petitioner says... and I don't know why he says it... Mr. Mitchell, the attorney here, did ask the court for an enhancement of his fee.
He set forth his hours.
The lodestar figure was $37,000, and he asked the court for a multiplier of two.
And the court gave him a multiplier of two.
So he got $75,000.
Unknown Speaker: And did he disclose the contingent arrangement at that time?
Mr. Miller: He did.
His... his fee application disclosed that he had taken the case on a contingency.
It stated that he had received a small retainer.
He did not indicate the percentage in this contingency agreement.
But the... the lawyer for the City of Long Beach indicated in his response that typically contingency fee contracts of this kind provided for a contingency of 25 to 40 percent.
He happened to say that to the court.
The court, if... he thought it was interested, could well have asked Mr. Mitchell and I'm sure he would have told them.
But he told them it was a contingent arrangement.
The... the contract that Mr. Mitchell had with his client specifically stated that any recovery under Section 1988 that Mitchell got would be offset the amount of the contingency fee.
So that in no event, under this agreement, could Mr. Mitchell receive more than 40 percent.
And the $10,000 retainer was also credited against the 40 percent.
So, that's the most he could have received and would receive if this contract is enforced.
Unknown Speaker: But 40 percent of what?
40 percent of--
Mr. Miller: Of the gross amount of the--
Unknown Speaker: --the amount including the attorney's fees that were awarded?
Mr. Miller: --That question hasn't been litigated in this case, but I believe Mr. Mitchell's understanding would be yes, it would be 40 percent of the gross amount recovered by the plaintiff in this case.
Unknown Speaker: I just want to make sure I heard it right.
Including the reasonable attorney's fee?
Mr. Miller: --That would be correct, Your Honor.
It would be 40 percent of the gross amount recovered by the plaintiff.
It would also include, had it not been waived by the--
Unknown Speaker: Who do you think is entitled to the statutory attorney's fee?
The client or the lawyer?
Mr. Miller: --Your Honor, I think the answer is that the client is entitled to the attorney's fees and I think that's what this Court held in Evans v. Jeff D..
That holding has... is very pertinent to this case because it makes the... the need for an enforceable fee contract all that much more important to lawyers who are going to represent civil rights plaintiffs.
Unknown Speaker: Yes, but it also shows that your contract, to the extent that it seeks to shave away 40 percent of that, as you've just said it does, contravenes the policy of the statute, which is to give the client the full amount of reasonable attorney's fees.
And you're saying he won't get that; he'll lose 40 percent of it through my fee agreement.
Mr. Miller: I don't think that.
I don't think the policy of the statute is that the lawyer wouldn't share in the attorney's fee payment.
I think the understanding of the statute and the contemplation is that in the normal case the attorney will get the attorney's fee awarded by the court, depending on what his agreement is with the... his client.
Unknown Speaker: Wow.
Well, your position certainly prevents the plaintiff from being fully compensated, which has to be one of the goals of the Civil Rights Act.
Mr. Miller: Well, Your Honor, I'd like to answer that in two parts.
First of all, the goal of the Civil Rights Act, as stated by this Court in the Blanchard case, was to make... Section 1988... was to make sure that competent counsel are available to handle civil rights plaintiffs' cases.
And that's been said by this Court repeatedly.
Unknown Speaker: To what end?
Mr. Miller: Pardon me?
Unknown Speaker: To what end?
Mr. Miller: To the end that these clients--
Unknown Speaker: To compensate a plaintiff who has been injured.
Mr. Miller: --Correct.
And to allow these people, most of whom, according to legislative history, have cases that are not high-money cases, to obtain the kind of counsel that plaintiffs in other situations are able to get.
It was an effort to equate the civil rights plaintiffs and to give then the wherewithal to pursue their cases in court, even though those cases didn't... normally didn't have large monetary prospects.
Unknown Speaker: Mr. Miller, supposing that we had the kind of contingent fee contract that your client had here and there had been an award of $20,000 damages and a hundred... and the court says, we'll give you $100,000 attorney's fees under Section 1988.
Now, how would that amount... you're getting a total of $120,000 from the defendant.
How would that be divided between the attorney and the client under this contract?
Mr. Miller: I... I believe under this contract that the attorney would have been entitled to 40 percent.
Unknown Speaker: 40 percent of $120,000?
Mr. Miller: Yeah... 48... four times... $48,000 in that case.
Unknown Speaker: And so--
Mr. Miller: He would not be entitled to the entire amount of the attorney's fees--
Unknown Speaker: --So that the... the attorney would not have been entitled to keep the $100,000?
Mr. Miller: --That's absolutely correct, Your Honor.
Now, I... and I'm saying... I'm catching myself here because I can imagine the next question.
You could have a contract, I suppose, in which an attorney provided that I'll get 40 percent or the court-awarded fee, whichever is greater.
Unknown Speaker: Yeah.
Mr. Miller: I could imagine such a contract.
And then the answer to your question, under the contract would be different.
Unknown Speaker: And if there was no arrangement for attorney's fees at all and you have the same recover... recovery, $20,000 damages, $100,000 attorney's fees, then the attorney gets the $100,000?
Mr. Miller: Well, I... I don't think that's clear at all, Your Honor.
To me this Court's holding in the Blanchard case, together with the holding in the Jeff D. case, indicates that the award of attorney's fees goes to the client, it's his entitlement under the statute.
Now, it's normally anticipated that that award is for the purpose of compensating an attorney.
But, if, for example, the attorney has a fee contract with his client that would yield him less than the amount established by the court, I don't think it follows that the attorney is entitled to that amount.
Unknown Speaker: Well, but then... but then our whole... we... we have held under... under this statute that even though the... the attorney's agreement provides for less than what the court determines to be a reasonable fee, a reasonable fee will still be awarded... more than what the contract says.
Mr. Miller: That is correct, Your Honor.
Unknown Speaker: And you're saying that... that what happens to that excess over the contract amount does not go to the lawyer?
Mr. Miller: --Absolutely if the contract doesn't provide for it.
And I don't know why it should.
And this Court has made very clear--
Unknown Speaker: A very strange holding we made then.
I... I thought... I thought when we said that, that the money was going to go to the lawyer.
Mr. Miller: --Not necessarily.
I don't think the Court said that and I don't think--
Unknown Speaker: Well--
Mr. Miller: --it necessarily follows in there--
--But, gee, it was the lawyer that was suing in the case as I--
You've... you've held that the court may award attorney's fees to the prevailing plaintiff in the situation where there is no obligation by the prevailing party to pay anything to his lawyer.
That's the Blum case, where the public interest firm brought the case.
Unknown Speaker: --But with no understanding whatever between a private plaintiff and a private lawyer, an award of $100,000 attorney's fees does not presumptively or automatically go to the lawyer?
Mr. Miller: Well, now... I mean, you say presumptively.
I think that most courts presume or anticipate that the amount will be paid to a lawyer.
Unknown Speaker: Well, I would think so when they call it attorney's fees.
Mr. Miller: Well, the statute uses the word attorney's fees, but it says--
Unknown Speaker: Just out of good will... they assume out of good will it's going to be paid over, you mean.
Mr. Miller: --Judge Kelleher spoke to this in fact in his own opinion in this case and said how... this is a vexing issue.
He was about to attend a seminar at that time being given by some Second Circuit judges to discuss this issue: what happens to attorney's fees when they're awarded; do they go to the lawyers?
But I think that the position that we've advocated here is, and consistent with this Court's holdings, is that the statute provides attorney's fees to the plaintiff.
If the plaintiff has a fee arrangement with his lawyer under which the lawyer will be compensated in some different manner than provided for through the award from the court... higher or lower... that's what the attorney gets.
And that doesn't seem to me to be unreasonable or unfair to either party.
Unknown Speaker: Counsel, did the Petitioner argue in the courts below that the contingent fee agreement was unenforceable as a matter of state law?
Mr. Miller: He did, Your Honor.
He presented a state law ground for not enforcing this agreement and it was dealt with in Judge Kelleher's opinion, and Judge Kelleher considered it and rejected it.
And it's in his opinion that's in the... attached as the appendix to the cert. petition.
Unknown Speaker: But what... what was left open with respect to the lien?
Mr. Miller: That... Your Honor, in fact, it was those questions that were left open.
The questions as to whether the attorney in this case, Mr. Mitchell, was entitled to a lien for his claim.
That issue has since become moot, and it's become moot because subsequent to the decision of the court of appeals on the merits of the case the plaintiff, Mr. Venegas, entered into a settlement agreement and that settlement agreement established an escrow account for the amount of fee in dispute here and it sits in escrow awaiting the final judgment as to who's entitled to the attorney's fees.
So, it made the issue of lien moot, and all parties have agreed to that.
So those... there will be no need to remand those issues to the state court for consideration.
Unknown Speaker: --Did the settlement agreement also contemplate that there will be no further state law issues raised in any state proceeding?
Mr. Miller: I don't think the settlement agreement spoke to that, Your Honor.
But we have serious doubts as to whether there are any state law issues that can appropriately be raised at this point if this Court affirms the decision below.
In the district court the plaintiff, Mr. Venegas, represented by Mr. Bromberg as his counsel... and I should say how he got to Mr. Bromberg by the way.
He got to Mr. Bromberg because Mr. Mitchell, when he proposed to take the appeal, said to his client,
"You should seek independent counsel on my proposal for handling your appeal. "
Mr. Venegas did so.
He consulted Mr. Bromberg.
They concluded that they should not accept Mr. Mitchell's proposal for handling the appeal and instead Mr. Bromberg agreed to handle it himself.
And he, thereafter, represented Mr. Venegas and he represented Mr. Venegas in the trial court on the question of the enforceability of the contingent fee contract.
And he made... advanced a number of arguments why it shouldn't be enforced.
It's unreasonable, it's excessive, it violates state law.
They were all considered by Judge Kelleher pursuant to the Ninth Circuit's decision in a case called Hamner v. Rios.
And that court sets forth a rather broad standard for lower courts to follow in assessing the reasonableness of attorney's private fee arrangements in civil rights cases.
And Judge Kelleher cited that case, referred to the standards, indicated that he had a broad discretion to apply, then considered the arguments that had been advanced by the... Mr. Venegas, including the claim that it was a windfall.
And Judge Kelleher, who had seen the trial... he saw the job that the attorney, Mr. Mitchell, had done and knew the facts of the case... concluded that this was a reasonable agreement and ought to be enforced.
And the Ninth Circuit sustained that.
So we don't see that there's anything left to be decided on the issue of the enforceability of the contract if this Court affirms the decision below.
If that occurs, Mr. Mitchell is entitled to the sum that his contract provides him.
Unknown Speaker: Would you mind... just so I understand it... I'm really kind of dense, I think.
Would you go through the arithmetic of how the fee was computed in this case?
First, tell me what the gross amount recovered was in dollars.
Mr. Miller: I think it was $2,080,000, Your Honor.
Unknown Speaker: And is that exclusive of the attorney's fees?
Mr. Miller: That was exclusive of the attorney's fees.
Unknown Speaker: And then how much is added to that for the attorney's fee?
Mr. Miller: Well, the attorney fee award was $117,000.
Unknown Speaker: Is that all done or just a share that's attributable to--
Mr. Miller: That's the total amount awarded.
And I will say to you, Your Honor, at this point that, although I answered your questions to the best of my ability, Mr. Mitchell has not in fact claimed more than 40 percent of $2,080,000.
But I answered your questions as to his entitlement of the contract.
But he's only claimed at this point, and only will claim, 40 percent of $2,080,000 for himself and his colleague, Mr. Cochran.
Unknown Speaker: --In other words, he's getting 40 percent of half of that because his client got--
Mr. Miller: Yes--
Unknown Speaker: --his other lawyer got another... the other half.
Mr. Miller: --That's right.
Mr. Mitchell would receive... I can't do this... it's slightly over $400,000, minus the retainer he's already received.
Then the balance is what he would... he's entitled to under this contract.
Unknown Speaker: Would you agree... I don't know whether it's open in this case or not... that it would be within the power of a district judge to look at these facts and say, I think this fee is so far above what the reasonable fee computed was that I will hold it at least partially unenforceable?
Mr. Miller: Yes, Your Honor.
I think he had that power and I think that power was invoked and Judge Kelleher thought about that issue and decided that it shouldn't be reduced.
But he did have the power to do it.
I think that is more or less inherent in the power of a Federal court and any... I agree with Mr. Mosk on that point.
That's an inherent power of a court in a supervisory role over attorneys.
Unknown Speaker: What if... and in... in exercising it that's purely a Federal power?
Does... does the district judge have to say, well, a state court would allow it, and therefore I must.
Mr. Miller: I think--
Unknown Speaker: Or, could he say--
Mr. Miller: --I think, Your Honor, that's a tricky question.
I think the answer is basically it should be the enforcement of state law.
He should apply the state ethical standards applicable, in this case, in California.
Unknown Speaker: --Because otherwise you're going to have to write in the contract whether you're proposing to sue in Federal court or state court.
Mr. Miller: Agreed.
Unknown Speaker: Right?
Mr. Miller: The only qualification I'll make to this is that in the Ninth Circuit decision Hamner v. Rios which told the district courts to make this broad inquiry, one of the factors to be taken into account was whether enforcement of the lawyer's contract would be consistent with the policies of the Federal civil rights laws.
That strikes me as a kind of a Federal question over and above the normal state law ethical questions.
Perhaps it's embodied in California state law, but I say it's... that's why it's a tricky question.
To that extent, in a civil rights case the determination by the district judge may be more than a purely state law ethics question.
Unknown Speaker: Well, the state... the state would have to take that into account as well.
Mr. Miller: As I said, I think you would read the state law as to embrace such a concept--
Unknown Speaker: To embrace--
Mr. Miller: --in the appropriate case.
And if so, then I think you can say in all aspects he is applying the same approach that would be applied by a superior court judge in a state law proceeding.
Unknown Speaker: --And that would be true in a Federal Fair Labor Standards Act attorney's fee, every other kind of statutory attorney's fee, too?
Mr. Miller: Absolutely.
There's no question about that.
But may I say, Mr. Chief Justice, on that issue, because the issue of the Fair Labor Standards Act cases was raised for the first time in the reply brief, and I hadn't had occasion to consider those before.
We did some research on those because it didn't sound right, what I saw in the brief.
And sure enough, what we found is... and I won't belabor this... that those cases themselves, and the later cases that have discussed them, stand for the proposition which we advance.
And that is that it's inappropriate in a case... in that instance, the Fair Labor Standards situation... for an attorney to recover both the statutory fee and his contingent fee under his contract and that an attorney should be satisfied with a single fee.
And I'll just cite to the Court the two cases that the Court may wish to review on this issue.
Houser v. Matson, 447 F. 2nd 860, and Hayden v. Bowen, a Fifth Circuit case, 404 F. 2nd 682, and cert. was denied in that case.
Unknown Speaker: You could apply the statutory fee against the contingent fee if it were... if the statutory fee were smaller, I suppose?
Mr. Miller: That's correct, Your Honor.
And I think what these cases stand for is that an attorney must apply the statutory fee against his contractual arrangement.
That is what Mr. Mitchell's contract provides, by the way.
I think Mr. Mitchell felt that California ethics law would require that.
Most of the appellate court cases that have dealt with this subject have said this, that ought to be the rule.
The lawyer can't get both.
And we're not seeking both in this case, and don't advocate that anyone is entitled to both.
But we are advocating that the lawyer is entitled to the benefit of his contract if he carries out his bargain and wins the case and secures the result sought by the plaintiff when he entered into a--
Unknown Speaker: Well, do you accept the notion that the... that in setting the fee in this case that the defendant had to pay that the district court was... was indicating that this is the kind of... if I award this kind of a fee, it is the kind of a fee that would enable the plaintiff in this kind of a case to get decent counsel?
Mr. Miller: --I'm not... I... I'm not sure how to answer the question, Your Honor, because I'm not sure I followed the gist of it.
Unknown Speaker: Well, I suppose a reasonable fee that district courts are supposed to award are fees that respond to the marketplace and that would enable civil rights plaintiffs to get decent counsel.
Now, I suppose that this fee that the district court awarded was that kind of a fee in his mind.
Mr. Miller: --I think that's right.
Unknown Speaker: And he nevertheless went ahead and said the... but nevertheless even though... even though a fee of this kind would have been plenty enough... good enough to get a... get counsel, this contract means that the lawyer is entitled to something more.
Mr. Miller: Correct, Your Honor.
And if a civil rights lawyer felt confident and knew that in taking one of these cases... not necessarily one that would have this much damages, but any civil rights case... that he... that if his client prevailed, he would receive a statutory fee from the court, that he would... might be satisfied.
But unfortunately that's not the situation today.
Because of this Court's decision in Evans v. Jeff D. most civil rights plaintiffs' lawyers in most cases are at grave risk of receiving no fee whatsoever, despite their efforts on the clients' behalf and successful efforts.
And that's because the vast majority of civil rights cases settle, as the vast majority of all cases do.
And cities and municipalities who are usually the defendants, have caught on to the way... the fact that the way you settle these cases is to get the plaintiff to waive attorney's fees under the statute, particularly a case that's been complex and long-standing and where the fees promise to be fairly substantial.
So an attorney, in a civil rights context, is at great risk now, as Mitch... and Mr. Mitchell has been the victim of this on several occasions, as our brief shows, doing a lot of work, achieving the essential results sought by the plaintiff, or his client, and then having a settlement made in which a condition of settlement is that his fee is waived.
Of course, in that situation, particularly where the defendant offers the client essentially the relief sought, subject only to fee-waiver, an ethical lawyer like Mr. Mitchell is in a tough bind.
He can't tell his lawyer not to accept the settlement just because he's not being paid his fee.
So he counsels acceptance of a settlement that achieves the law... the client's basic objectives and in the process talks himself out of his statutory based fee.
Now, unless he's got some protection under a lawyer's fee contract, he's going to be out in the cold, and that's why civil rights plaintiffs' lawyers are going to be discouraged from taking these cases unless the right to contract, as in this case, is sustained.
Unknown Speaker: Well, should the Court in reviewing... suppose we think the statute doesn't set a cap but that the district court does have an obligation to review the reasonableness of the fee agreement, should the Court not take into consideration the fact that this case didn't settle, that a reasonable fee was paid, and that a 40 percent contingency above that on these circumstances seems unwarranted because it reduces the recovery of the plaintiff to such an extent?
Now, does anything prevent the district court from considering those things and reducing the so-called contingent fee?
Mr. Miller: Well, I'd like to answer the question this way, Justice O'Connor.
Nothing prevents the district court from considering that.
That's an appropriate consideration.
In this case, consideration of that would be as follows, I think, because fortunately as... unlike other cases, we have sort of a benchmark here as to what the client's loss was.
And the petitioner himself has said he had a state court antecedent proceeding in which he was awarded damages of a million dollars, which was reversed on state law grounds.
And says the petitioner, this case was easy.
He already knew he had a million dollar suit here, and all Mr. Mitchell had to do was try it and collect a millon dollars.
In this case... it wasn't that easy, by the way, for reasons I'll come to.
But in this case Mr. Mitchell secured a judgment of $2 million.
Venegas went out and got the best he could find, and it produced a result twice what the so-called benchmark was.
So, even after you deduct the 40 percent Mr. Mitchell and his colleague are entitled under... to under their contract, the client here has been made more than whole by any sort of generalized benchmark standard one can look at.
So, on the facts of this case, which is what the plaintiff has tendered here, certainly it's not unreasonable to enforce the contract.
He got the benefit of his bargain.
Unknown Speaker: Did the district court here even talk about anything with regard to the reasonableness of the fees, or did the district court just say, well, that was the agreement the plaintiff signed?
Mr. Miller: No.
The district court addressed the issue presented to them as to whether the recovery to the lawyers would constitute a windfall... he used that term in his opinion... and he said it would not be.
Now, he didn't write a 12-page opinion on the subject, but he saw the trial, he knew the background, he's an experienced judge.
And he concluded that it was a fair... he knew about the state court judgment, I'm sure, before.
Obviously he knew about that.
Unknown Speaker: It seems to me your--
Mr. Miller: --Not a windfall.
Unknown Speaker: --answer to Justice O'Connor suggests that the damages really should have only been a million dollars.
Here we... he recovered $2 million.
I think we have to assume that was the correct measure of his injury.
Mr. Miller: Well, I think, Your Honor, what... what this tells you is that in cases like this where the special damages were very small and the entire... virtually the entire judgment was general damages... is that there is a wide range of what's appropriate recovery in cases like this.
And how much a plaintiff is going to recover in a case of this kind is highly dependent on the skill of his lawyer.
In this case, Mr. Venegas went for the best.
He got the best.
He got the... he got the result that one hopes... no guarantee, but he hopes for when he goes for the best.
And now that he got the result he wanted and he got the full benefit of that bargain, he wants to renege on it as far as paying the fellow who did it for him.
Unknown Speaker: Well, of course, that's often true.
That in a bargain... contingent fee cases there's not exactly precise equality of bargaining power when the contract is made.
There's no doubt about that.
Let me ask you another question.
You argued earlier about the FLSA cases that say you can't have both the statutory award and the contractual award.
But here your contract in effect gave you the... the statutory award... I mean, the contractual award plus 40 percent of the statutory award.
So you did get... you didn't get just one.
You got one and... one and four-tenths.
Mr. Miller: Up to now Mr. Mitchell has never sought that.
Unknown Speaker: I know you've never sought it, but that's what the contract says.
Mr. Miller: You asked about that and I tried to answer it fairly as to what how I thought the contract could be interpreted.
The contract says the gross amount recovered.
Unknown Speaker: Yeah.
But I'm just suggesting there is some tension between the contract in this case and that principle that you could get one or the other.
Mr. Miller: To a... to that slight degree, yes.
Unknown Speaker: Yes.
To a slight degree.
Mr. Miller: The... my time is about up, but I'd just like to come back to the basic point that started this dispute and which is the principal issue presented in the cert. petition.
And that is did Congress provide, as it could have, that there should be limitations on the enforceability of fee contracts when they exceed the amount awarded under the 1988 provision?
Congress has shown its ability to do that in a variety of situations when it has wanted to do so.
But I would like to leave with the sort of the fountainhead case in this area that started all of this to begin with, the Alyeska case, which is the case that led the Congress to enact Section 1988.
And there, in rejecting the notion that the court should on its own conclude to award plaintiff's attorney's fees in successful civil rights cases, Justice White's opinion for the Court said that that approach would make... I'm quoting now... would make major inroads on a policy matter that Congress has reserved for itself.
And in rejecting the rule in that case that had been adopted by the court below, this Court said that the law concerning attorney's fees,
"is deeply rooted in our history and in congressional policy. "
"That it is not for us to invade the legislature's province by redistributing litigation costs in the manner suggested by respondents. "
I submit to the Court that that's what's being asked in this case.
That the petitioners here are asking this Court to invade the legislative province and to redistribute litigation costs in the manner in this case quite favorable to the prevailing plaintiff who has secured the benefit of his bargain.
This plaintiff actually concedes a role for these private contracts.
In his brief he says, well, when they settle, then maybe... and part of the settlement is waiver of the attorney's fees under Section 1988... then perhaps an attorney can enforce his private contract.
Well, if you can enforce--
Chief Justice Rehnquist: Thank you, Mr. Miller.
The case is submitted.
Argument of Justice White
Mr. White: Secondly, we affirm unanimously the judgment of the Court of Appeals for the Ninth Circuit in 88-1725, Venegas against Mitchell.