Cases by Issue - Attorneys

Arlington Central School District Board of Education v. Murphy - Oral Argument

Fri, 09 Jan 2009 14:48:58 +0000

Case:

Arlington Central School District Board of Education v. Murphy

Media File:

05-18_20060419-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Raymond G. Kuntz

Chief Justice Roberts: We'll hear argument first in Arlington Central School District Board of Education v. Murphy.

Mr. Kuntz.

Mr. Kuntz: Thank you, Mr. Chief Justice, and may it please the Court--

The statute awarding attorneys' fees as part of the costs to the prevailing parents provides a clear rule, imposes a certain obligation.

It should not be expanded to include fees for expert witnesses.

This is a case of statutory construction.

Under longstanding rules, statutes are construed by first looking at the words of the statute.

Is the meaning plain?

If so, the inquiry stops there.

This statute is unambiguous.

Expert fees are not a part of attorneys' fees.

Expert fees are not costs.

The statute contains no reference to expert fees.

They are not shifted to the school district when the parents prevail.

It's our belief that the lack of compensation for experts is an intentional exclusion and omission from the statute.

Congress knows how to add expert fees in a cost shifting statute, and that omission is telling here.

In that context, I think it's important to draw the Court's attention to the origin of the statute.

It was in response to this Court's decision in Smith against Robinson.

At the time that Smith against Robinson was heard, the EHA was often grafted onto other causes of action as a pleading device to... in an attempt to ensure that attorneys' fees flowed to the prevailing party at the conclusion of the case.

So cases were brought not only under the... the Education for All Handicapped Children Act, but also under 504 of the Rehabilitation Act of 1973 and under 1983 as well of... on the theory that these were equal protection claims brought under the Fourteenth Amendment.

In Smith against Robinson, this Court made it clear that the avenue that had to be followed by the parents was exclusively that of... of the remedy provided under the Education for All Handicapped Children Act.

In response to that decision of the Court, as my opponent points out in his brief... I think it was 19 days later... bills were introduced into Congress to remedy what Congress at that point saw was a... a lack of coverage for fees for attorneys for the prevailing parties in cases under the... under the act.

So it's no... no great surprise that what Congress did in that instance was to take the language that appears in section 1988 and, in effect, lift it and put it into the... into the act, into what we now call the IDEA.

And it's very clear that in doing so, it limited the right of recovery to attorneys' fees, and that right does not include the expert fees advocated by the respondents here this morning.

Justice Stevens: Do you think the right includes any costs other than statutory costs, any expenses?

Mr. Kuntz: No, it does not, Your Honor.

Justice Stevens: How do you explain the reference to expenses on page 4 of the red brief which quotes from the... a section of the statute authorizing a report to be made, a report authorized under?

They shall include data about the specific amount of attorneys' fees, costs, and expenses.

Why do you suppose they put the word expenses in?

Mr. Kuntz: Well, it said attorneys' fees, costs, and expenses.

Justice Stevens: Right.

Mr. Kuntz: And it's a direction to--

Justice Stevens: So the expenses must be something other than attorneys' fees or costs.

Mr. Kuntz: --Well, they could be expenses of the attorney.

But if they were to be... be set aside separately, that's no indication that... that Congress intended that expenses of other individuals be shifted to the cost... shifted, rather, to the school district.

It's a direction to the GAO to acquire data--

Justice Stevens: Right.

Mr. Kuntz: --for future reference by... by Congress.

Justice Souter: Well, what about... may I just take the question one step further?

I think it's in a subsequent clause in that same section requiring the GAO report that it refers to the... the... I forget whether... the expenses of consultants.

Why was the word consultant in there?

Because as... as I understand it, a consultant would not be covered by the costs... the general costs statute.

Mr. Kuntz: Your Honor, I believe that's correct.

That's in... in subdivision (B).

Justice Ginsburg: Is it?

Is it?

I thought the... there was a reference to hours of consultants, but not expenses.

Mr. Kuntz: There are two subdivisions, subdivision (A) and subdivision (B).

Subdivision (A) says attorneys' fees, costs, and expenses... expenses, and in subdivision (B), it refers to consultants.

But there isn't any--

Justice Kennedy: I... I would have thought that your answer would be that the Congress was interested in finding out the cost of this act, and it's very clear that school districts hire consultants to assist them in... in these cases, and it wanted to know the amount they were paying to the consultants.

And that's also why it used the word personnel, which... which is a word usually reserved for a government agency.

Mr. Kuntz: --I... I believe Your Honor is correct in that it... it's a direction by the GAO to acquire data.

And I believe we argued that point in our brief, just as Your Honor has expressed it.

We think that that direction to the GAO, however, does not relate back particularly and... and certainly doesn't inform this Court or inform the statute that expert's fees are to be included and shifted over to the... to the school district.

Justice Breyer: But does it make it possible to read... I mean, I agree with you it doesn't say to do that, but I guess you could read it to do that, couldn't you?

I mean, you said the word cost wasn't ambiguous.

Mr. Kuntz: Under this statute.

Justice Breyer: Maybe you might be right, maybe absolutely, but might you also be wrong?

How is it not ambiguous?

It might cover... it might cover the fees of consultants.

It might be that the argument you made is right, but it also mightn't.

Mr. Kuntz: Your Honor, I think this Court has looked at that issue in... in two separate cases, and one of those cases is Crawford Fitting and the other is--

Justice Breyer: Which involved this statute?

Mr. Kuntz: --Well, it didn't involve this--

Justice Breyer: All right.

Well, I mean, we have a statute and they're using the word costs in the statute, and whatever they used in some other statute they might have meant something different in this statute.

And my question is simply how do we know they didn't by just reading the word five times, particularly since, in fact, if you look at another part of the statute, they do seem to use the word cost to include number of hours spent by personnel, including consultants, and the expenses incurred.

I mean, can you say... is there a dictionary that says the word costs couldn't include that?

Mr. Kuntz: --Your Honor, it... it could, but I--

Justice Breyer: Well, once you say it could, then possibly it's reasonable to ask what the Congress Members were actually thinking, and as soon as we look at what they were actually thinking, that's perfectly clear.

Isn't it?

Because both the conference report and the Senate report say absolutely clearly that they intended this kind of expense to be used, which is why the GAO went out and did all the studies to include it.

Mr. Kuntz: --But we come back to the historical derivation of how this statute came into... into being, and it did come in in response to Smith against Robinson.

Justice Scalia: I thought the GAO study included not just the... the hours worked and the... the costs, however you choose to define it, on the part of the parent challenging the school board action, but it also included those hours and those costs expended by the school.

Mr. Kuntz: Yes, Your Honor, it does.

Justice Scalia: In which case it could not possibly have been directed to what items are compensable.

Mr. Kuntz: We think that's a separate section.

Justice Scalia: On its face, it covers at least half of the items that are not compensable.

Mr. Kuntz: That's true, Your Honor.

Justice Breyer: It's true, but--

Justice Stevens: Isn't it true that the provision I referred to refers to the specific amount of attorneys' fees, costs, and expenses awarded to the prevailing party?

So it's definitely referring to expenses incurred by the... by the plaintiff.

Isn't that true?

Mr. Kuntz: Your Honor, I... that's correct.

Justice Stevens: Yes.

Mr. Kuntz: But I think there are expenses that... that the attorney bears in... in the routine of a... of a... of handling the client.

Those are expenses--

Justice Stevens: So you're saying the word expenses should refer only to expenses incurred by counsel, which of course would be normally reimbursable.

Mr. Kuntz: --Yes, Your Honor.

Justice Kennedy: Well, but I'm not... I'm not sure that you don't have a further answer to Justice Stevens because there's (3)(A) and (3)(B).

(3)(A) talks about costs and expenses awarded to the prevailing party.

(3)(B) says, for the same sample the number of hours spent.

Mr. Kuntz: They're talking about... the same sample refers to a... a designated number of States, a representative number of States.

So the sample refers to the States surveyed, not to those--

Justice Breyer: --That's certainly possible.

I just wonder why don't we look and see what they intended, since they told us.

In the conference report, they say the conferees intend the phrase, attorneys' fees as part of costs, to include reasonable expenses and fees of expert witnesses and the reasonable cost of any test or evaluation which is found to be necessary for the preparation of a parent or guardian's case in the action or proceeding.

So why are we metaphysically trying to guess what Congress intended when they told us what they intended?

Mr. Kuntz: --Your Honor, I don't think it's so much a question of metaphysics or philosophy... maybe perhaps of philosophy.

Justice Breyer: My question is why don't we just look and see what they intended since they wrote it down on a piece of paper and all we have to do is read it?

Justice Scalia: Did Congress say that, Mr. Kuntz?

Mr. Kuntz: No, Congress didn't say that.

Justice Breyer: I thought it did.

I thought that the conferees in Congress wrote in the conference report precisely what they intended.

Mr. Kuntz: Your Honor, if I might respond to that.

Justice Breyer: Oh, I'd like you to respond to it.

[Laughter]

Mr. Kuntz: It's... it's a longstanding rule of statutory construction that Congress' intent is best found in the language that Congress actually puts into the statute.

And as we pointed out in the brief, there were previous versions of this act which included experts' fees which did not make its way to the final version approved by both the... the Senate and the House.

Justice Stevens: There's no doubt that the best evidence is the text of the statute, but at least the people who drafted this, even if they were not the conferees themselves but were just staff members, they apparently thought the language was subject to that reading.

Mr. Kuntz: Your Honor--

Justice Stevens: Which would mean it would be ambiguous, wouldn't it?

Mr. Kuntz: --The rule that we look first to the... yes, Your Honor.

Yes.

Justice Stevens: The rule that you refer to that you cannot look at legislative history... of course, we always start with the plain language.

That's clear.

But the rule that you cannot look at legislative history didn't really get any emphasis till after 1987, and this statute was enacted in 1986.

Mr. Kuntz: But that... in... in the retrospective view that the Court looked at in... in the... the Casey decision, it went back and it traced the origin of a number of... of statutes and looked essentially to similar language, and it found that experts' fees were not a part of attorneys' fees, and it found that experts' fees were not a part of... of costs.

Justice Ginsburg: But it also found that there were dozens of statutes, I think... didn't Justice Scalia list in his opinion for... it went on for a couple of pages, including footnotes?

I think it was over 30 that did mention experts.

It mentioned attorneys' fees and expert fees.

Mr. Kuntz: Yes, Your Honor, and to us that proves that Congress knows how to distinguish between experts' fees and attorneys' fees when it wants to.

Justice Scalia: Was this language, by the way... I'm not clear.

It always cited to the House... the House conferees.

Was... was this language in the... in the Senate conference report?

Mr. Kuntz: No, Your Honor, I don't believe it was.

Justice Scalia: So we don't really know--

Mr. Kuntz: It emanates... it emanates solely from the House conference report.

Justice Scalia: --Well, that's only half of the Congress, isn't it?

Even if--

Justice Stevens: I thought it was a joint explanatory statement.

Justice Scalia: --even if everybody in the House agreed with that, which we don't really know.

What about the President?

When he signed it, did... did he indicate any interpretation?

Mr. Kuntz: His... Your Honor, the... the President hesitancy was about the retroactive effect of the statute, and he noted that in his signing memorandum, but he didn't note any other differences.

Justice Scalia: So we have a committee of one house that said... that said that, that thought it meant that or would have liked it to mean that.

Mr. Kuntz: Yes, Your Honor.

And it isn't all that unusual that the congressional history of a particular statute might point one way and the actual plain meaning point another way.

Justice Stevens: How do you explain the title, Joint Explanatory Statement of the Committee of the Conference?

Doesn't that speak for both the House and the Senate?

Mr. Kuntz: It... yes, Your Honor, it does.

Justice Breyer: So it's not correct it's just for one house.

It's... what I have is the Joint Explanatory Committee, and it says the managers, on the part of the House and the Senate.

Mr. Kuntz: It... it does say that, Your Honor.

Justice Breyer: All right.

And is there some rule... I don't know what this rule is you can't refer to legislative history.

Does it say that in the Constitution of the United States?

Mr. Kuntz: No, Your Honor, it doesn't.

Justice Breyer: No.

And so--

Chief Justice Roberts: Counsel, sometimes these joint statements are actually voted on by the Congress as a whole.

Was this one... was this one voted on?

Mr. Kuntz: There was no evidence of that, Your Honor, in our review.

Justice Breyer: --Which ones are voted on?

I've not heard of that.

I mean, they might be, but it used to be that the... they circulate the report to all the Members and the Members read it, and if a Member disagrees with it, they note their dissent.

Maybe it's changed.

But I guess--

Justice Stevens: Can you cite an example of a conference report that was voted on by the Congress?

Mr. Kuntz: I... I cannot, Your Honor, and that's why I... I responded as I did, which is that I know of no evidence.

Justice Kennedy: I think we have said that conference reports are more valuable than the reports of a single house.

I think we have said that.

Justice Scalia: They are voted on when the... when the conferees make changes, which they sometimes do.

Then... then, of course, they have to be voted on.

So it's frequent.

It's frequent that they're voted on, but this one apparently... there were no changes made and it wasn't voted on.

Mr. Kuntz: Thank you, Your Honor.

If I... if there are no further questions, I'd like--

Justice Scalia: Justice Breyer knows that.

He... he's worked there.

Mr. Kuntz: --Oh, I'm sorry.

Justice Breyer: --I didn't have an opportunity to work for a Senator who, in fact, to my experience asked me to report on a vote on such a thing.

I just wasn't aware of it.

Chief Justice Roberts: Thank you, counsel.

Mr. Kuntz: Thank you.

I'd like to reserve my time for rebuttal.

Chief Justice Roberts: Certainly.

Mr. Kuntz: Thank you.

Argument of David B. Salmons

Chief Justice Roberts: Mr. Salmons.

You have examples of conference reports being voted on, don't you?

Mr. Salmons: I do not, Your Honor.

I... I do not dispute the representations that have been made about that practice.

But let me begin by saying, thank you, Mr. Chief Justice, and may it please the Court--

This Court should give the attorneys' fee provision of IDEA the same construction it gave the nearly identical language of section 1988 in Casey and hold that an award of attorneys' fees as part of the cost does not include expert fees.

Respondent's sole argument is that expert fees are included in the statutory term costs, but as this Court made clear in both Casey and Crawford Fitting, the term costs in a fee shifting statute has a well settled meaning and is a reference and is limited to those... that modest category of costs that may be awarded under 28 U.S.C. 1920 and 1821.

Now--

Justice Souter: What... what do you say about expenses?

Isn't... isn't it a fairly common practice for a... a trial lawyer to... to hire his experts and pay them and then bill the client for... for whatever he's paid for the experts?

I mean, if that is the... this has been a long time since I've practiced law.

So maybe that isn't the way it's done anymore.

But it... it certainly has been done that way, and... and if that is still the practice, wouldn't it sense for Congress to have assumed that expenses would include those kinds of expenses?

Mr. Salmons: --No.

No, I don't think so, Your Honor.

Now, first of all, just to be clear, the... the fee provision that's at issue here is identical to the fee provision that was at issue in Casey, and it makes no reference to expenses.

It says attorneys' fees as part of the costs.

Now, in this separate section instructing the GAO to do a report--

Justice Souter: It's the GAO reference.

You're right.

Mr. Salmons: --it says to look at the... the awards in cases, the awards of attorneys' fees, costs, and expenses.

We don't think the term expenses in... in that provision can fairly be read to somehow dramatically expand the meaning of the phrase, attorneys' fees as part of the costs.

We think it's much more naturally to read that as just a reference, as this Court noted in Casey, to the common practice of including out of pocket expenses of attorneys for things like copying costs and... and necessary travel expenses and things like that as... as also being compensable.

And so we don't think that that... that term expenses does anything dramatically to the meaning of the statutory provision at issue here.

And as far as subsection (B) of that provision related to the GAO, we think it's clear that it's no longer referring to the actual awards in cases, and is instructing the GAO to do a broader study about the time that's spent by attorneys and consultants and others on both sides in these cases because Congress was very concerned about the amount of litigation and the expense of that litigation and the diversion of funds away from the core educational services of the schools.

As this Court noted in Schaffer, that's one of the primary concerns Congress has had, especially in the more recent amendments to the act.

And we think, in fact, that the... the fact that Congress instructed the GAO to study that is, if anything, more consistent with the idea that Congress decided not to legislate on the question of expert fees, but to leave it for another day after they've had the benefit of that study at a minimum.

Now--

Justice Ginsburg: Mr. Salmons, there's one difference, a marked difference, between this statute and the others, and that is, in... in many of these cases, it is the consultant that is the primary, perhaps exclusive, aide to the parent.

There's not a case where they have these determinations, a lawyer is in the front line.

Even in this very case, wasn't it true that it was the consultant who was the aide to the parent and there was no lawyer on the scene?

Mr. Salmons: --That... that is correct.

During the administrative proceeding and in the... and in the district court, there was no attorney here.

But... but I think there's one important thing to keep in mind about that is that that's... Congress expected that that would be the result.

This is not a statute where Congress didn't think about the role of experts.

Among other things, section--

Justice Souter: What do you... what do you say about the legislative history, which has been so prominent in the discussion this morning?

The conference report.

Mr. Salmons: --Sure.

Well, I think the conference report clearly represents the view of the author of the conference report with regard to the meaning of the language.

Justice Souter: Well, don't you suppose it represents the view of the House and Senate conferees?

Mr. Salmons: Well, I mean, I think... I think what that points to is the perils of... of using committee reports and statements--

Justice Souter: No.

I... I realize that, but I mean, an--

Mr. Salmons: --from the legislative history when the text is clear.

Justice Souter: --an argument, a perfectly fair argument, can be made, whether... whether you find it dispositive or not, that everything that goes into a committee report of one house cannot simply be taken as a literal reflection of the thinking... the... the actual thinking of... of everybody on that committee, let alone a whole house.

But when we're talking about a conference report that has been hammered out between two sets of conferees, I think it is reasonable to suppose that the conferees know exactly what is in that report and would take exception to it if it didn't represent their views.

Isn't... isn't that a... a fair reason for saying that whatever you may think of reports in general, the conference report probably has a... a superior authority?

Mr. Salmons: I don't think so, Your Honor, and let me try to explain why.

First of all, this Court made clear in Casey, dealing with the exact same language, it took... you know, that's at issue here--

Justice Stevens: Language in the statute but not in the conference report.

Justice Souter: Yes.

Justice Stevens: Was there a conference report in--

Mr. Salmons: --No.

That's right.

And I'm referring to the statutory language here, that this Court considered this exact--

Justice Stevens: --And would you agree, if the statute is ambiguous, you can look at the conference report?

Mr. Salmons: --Well, but my point, Your Honor, is that what this Court said--

Justice Stevens: Would you answer my question?

Mr. Salmons: --Yes.

If the Court thinks the statute is ambiguous, it's fair to look at the conference report.

Justice Stevens: And why is it not ambiguous if the author of the conference report read it that way?

Mr. Salmons: For, among other reasons, Your Honor... this is what I was trying to... trying to state because this Court in Casey, dealing with this exact same language, said the following.

It said where the statute contains a phrase that is unambiguous, attorneys' fees as part of the cost, that has a clearly accepted meaning in both legislative and judicial practices... again, this Court in Casey tracked through the... the usage, the history of the usage of this language and the way courts had responded to this over time... that when that's the case, we do not permit it to be expanded or contracted by the statements of individual legislators or committees during the course of the enactment process.

We think that holding in Casey is equally applicable here--

Justice Breyer: Well, one thing here--

Mr. Salmons: --and it be would wrong to look to that.

Now, if the Court did, I think the thing that the Court should take away from it, if you're going to look at what Congress intended here... and this is undisputably true.

Everyone agrees on this.

The primary purpose of this legislation was to respond to this Court's decision in Smith v. Robinson.

And prior to this Court's decision in Smith, section 1988 had provided the means by which courts had awarded attorneys' fees in cases under IDEA's predecessor.

Justice Kennedy: Does the gravamen--

Mr. Salmons: Smith foreclosed those fees--

Justice Kennedy: --does the gravamen... well, I'll let you finish your answer.

Mr. Salmons: --Sure.

Justice Kennedy: Does the gravamen of the argument... is it that this phrase is unambiguous?

Mr. Salmons: That... that is certainly our first argument, absolutely, Your Honor.

The point I'm making now is that if you look at the context in which this language was used, Smith foreclosed the award of section 1988 fees.

Congress responded shortly thereafter by... by adding the precise language of section 1988 to the language in IDEA's predecessor.

Now, however anomalous it would normally be to give the same language in two different fee provisions different meanings... and it would be quite anomalous... to do so here with section--

Justice Stevens: But isn't it true that at the time they did that, it was well settled in cases of this kind that the Court would look at the conference report to ascertain the meaning of the statute?

At that time, in 1986.

Mr. Salmons: --Well, I think--

Justice Stevens: Was there any case that said you can't look at the conference report at that time?

Mr. Salmons: --There are plenty of cases, Your Honor, that... that point out--

Justice Stevens: --later.

Mr. Salmons: --that the... that... that point out, even... even I think beforehand, that the language is the primary basis to look.

Justice Stevens: Is the best evidence, but not the sole evidence.

Mr. Salmons: And that even when it's unambiguous, that's the end of the matter.

Justice Scalia: Counsel, even in... in those benighted days, I don't think... I don't think we ever would use the conference report when the statute was not ambiguous.

I thought it was always a rule that... that--

Mr. Salmons: We certainly agree with that, and I would just add that I'm not aware of any decision of this Court that would suggest that the type of statutory construction tools the Court would use would depend on what was in place at the time that the statute was enacted.

Justice Breyer: --No.

Of course--

Mr. Salmons: I mean, this Court applies the rules that it thinks are appropriate at the time it issues its decision.

Now--

Justice Breyer: --You can't use red if the statute says green.

Green doesn't include red.

I understand that.

And that's why, in fact, I wondered if the presence in this bill of the GAO section suggests in the bill itself the possibility that the word cost means something special.

And if that's so, then I would think it is ambiguous enough to refer to the legislative history.

It's not like using the word red and arguing it includes green.

Mr. Salmons: --Two responses to that, Your Honor.

The first is that we don't think it's ambiguous at all, and we think when... even if you look at the GAO provision, you don't get the kind of ambiguity that would allow you to otherwise deviate from the... the clear meaning of this language when it's... when it's been consistent with statutory usage over time.

As this Court noted in Casey, more than 34 statutes use... expressly state attorneys' fees in addition to expert... expert fees in addition to attorneys' fees, and there would be no point to those.

But... but moreover, I think the important thing to keep in mind is that it's not just this fee provision.

If you want a further indication of Congress' intent, let me refer you to some other provisions of the statute itself, again, the language of the statute.

Among other things, section 1415(d)(2) expressly details the content of the notice that has to be given to the parents about the procedural safeguards in the act, and it's very specific.

It lists 13 different things that States have to explain in full to the parents.

The... the 12th and the 13th items on that list are the parents' ability to bring a civil action and their right to bring, quote, attorneys' fees, no mention whatsoever of expert fees.

Thank you, Your Honors.

Argument of David C. Vladeck

Chief Justice Roberts: Thank you, Mr. Salmons.

Mr. Vladeck.

Mr. Vladeck: Mr. Chief Justice, and may it please the Court--

The Murphys' principal submission in this case is that the text of IDEA authorizes courts to award prevailing parents the costs of the experts who assist them in IDEA hearings which are typically held before State administrative tribunals and in Federal court.

Chief Justice Roberts: Mr. Vladeck, let me just give you a purely hypothetical situation.

Let's suppose that the conferees can't agree whether expert fees should be included.

Some think they should; some think they shouldn't.

And somebody suggests a compromise.

The compromise is we won't put it in the statute, but we'll put it in the report and we'll let the courts figure it out.

What should happen in that situation?

Mr. Vladeck: Thank you so much, Your Honor.

I think... I think that if the statutory text was clear, which... and I believe this text is clear in the other direction... I think we would lose that case.

But that is not this case, Your Honor, and let me explain why.

Chief Justice Roberts: Well if that's not this case, what in the world prevented the conferees from putting something as important in this context as expert fees, as I understand it, probably more important than attorneys' fees... what prevented them from putting that in the statute if that clearly was their intent?

Mr. Vladeck: Without being flippant, Your Honor, I think that the conferees thought they had put it in the statute.

Remember, this statute was passed back in 1986 when, at least with respect to the 99th Congress that enacted this provision, the word cost did not have the term of art meaning that was later ascribed to it in this Court's opinion in Casey.

Justice Alito: As you--

Chief Justice Roberts: I was going to say it certainly had the meaning in Federal... the Federal court context set forth in section 1920 of the Judicial Code.

Mr. Vladeck: I understand that, Your Honor, but Congress thought it was adding... that use of the word cost and its breadth was a way of... of including the cost.

And... and this is important, Your Honor.

The language--

Justice Scalia: Before you get past Casey, Casey didn't invent this as a definition.

Casey said it has always meant this in innumerable Federal statutes.

Casey was relying on a longstanding practice which existed long before Casey was... was pronounced.

Mr. Vladeck: --Your Honor, at the time Casey was... at the time this case was... excuse me... at the time this statute was enacted by Congress, for example, costs were routinely read to include expert fees in title VII cases, for example.

So I don't disagree with Your Honor's point.

I am simply saying that the lens through which this statute must be judged is the understanding of the 99th Congress, and every indication in the legislative history here is that Congress used the word cost for its breadth, not as a term of art.

Justice Ginsburg: Mr. Vladeck, why... if that was what Congress had in mind, then how do you explain the multiple statutes that are listed in Casey that say, in the text of the statute, witness fees?

Mr. Vladeck: My only explanation, Your Honor, is that the... the Members of Congress who wrote this provision were unaware of the difference this Court would later ascribe to those statutes in Casey.

Justice Scalia: Not later ascribe.

I mean, Casey was relying on--

Justice Kennedy: Casey... Casey is very clear in saying the judicial background against which Congress enacted 1988, talking about 1988, mirror the statutory background, and it says the judicial background was that expert fees were quite different than attorneys' fees.

They were not a subset of attorneys' fees.

Mr. Vladeck: Even... even conceding all of that, which I... I think is... let me take a step back.

Even if you reject that submission, the next provision of the statute on which we rely is section 4 of the Handicapped Children's Protection Act, which was enacted at the same time as section 1415(i)(3)(B), and if you look at that provision, it is clear that Congress intended the word cost to have a broader meaning.

Section 4(b)(A) directs the General Accounting Office to study--

Chief Justice Roberts: Where is that set forth?

Mr. Vladeck: --I'm sorry?

That's page... excuse me.

Page 4 of the red brief, Your Honor.

Chief Justice Roberts: Thank you.

Mr. Vladeck: That directs the General Accounting Office, first, to study the amount of attorneys' fees, costs, and expenses awarded to the prevailing party.

In this statute, only the parents could be the awarding... the prevailing party because, unlike 1988, this statute is a one way street and provides only for awards to parents.

And secondly, it says that for... for the--

Justice Ginsburg: Well, what... Mr. Vladeck, may I stop you there?

Because the parents are always the plaintiff.

It's not the child.

The parents are representing the child.

Mr. Vladeck: --That's correct, Your Honor.

Justice Ginsburg: So prevailing party is identical to parents.

The parents are the ones who prevail.

Mr. Vladeck: That's exactly my point, Your Honor.

And... and--

Justice Kennedy: But... but the word consultants appears in subsection (B) of the statute.

Mr. Vladeck: --Right, Your Honor.

Justice Kennedy: And that specifically refers to the State educational agency and local educational agency.

Mr. Vladeck: Your Honor--

Justice Kennedy: And it uses personnel, which sounds to me a very odd way to talk about private experts hired by an attorney.

You don't talk about them as personnel.

Mr. Vladeck: --Well, Your Honor, this provision, up until the last part which says, and expenses incurred by the parents, the... the last clause of this provision was added in conference.

And the conference report makes that clear at page 7.

The conference report makes it clear that the House... the Senate recedes to the House bill.

The GAO study provision was only in the House bill, with an amendment expanding the data collection requirements of the GAO study to include information recording the amount of funds expended by local educational agencies and State education agencies on civil actions and administrative proceedings.

That clause was added, Your Honor, in conference.

Prior to the conference, the provision was very much the same as it is today.

So--

Justice Scalia: --Mr. Vladeck, my... my problem with the argument you're now making is... is a little more basic.

Assuming, which I think is a... is a major assumption, that expenses refers to expert fees, I don't see how it helps your case that in another part of the statute, the statute says, fees, costs, and expenses, whereas in the operative part that we're talking about here, it only refers to fees as part of costs.

How does it help your case that--

Mr. Vladeck: --Your Honor--

Justice Scalia: --that elsewhere they go out of their way to add and... and expenses?

It seems to me that hurts your case.

Mr. Vladeck: --Your Honor, I don't believe that this is an inoperative part of the statute.

I believe that... that... this direction to GAO makes no sense if all Congress sought to authorize was attorneys' fees and the costs that are historically available under section 1920 and section 1821.

This provision makes no sense.

Justice Souter: Isn't... isn't it really the point not that it makes no sense, but that it raises a question?

It creates the question, which... which we have in mind when we say the statute is ambiguous, and it is in answering that question, that you then turn to the legislative history, which has a pretty unequivocal statement in your favor.

Isn't... isn't that the... the way to analyze it?

Mr. Vladeck: I... it certainly can be read that way.

I read it as more of an affirmative statement by Congress--

Chief Justice Roberts: Well, but if you conclude that the statute is ambiguous, what do you do with the Spending Clause problem?

We've said that when you're imposing conditions in Spending Clause legislation, you have to do that unambiguously.

It's what the Court said in... in Pennhurst.

Mr. Vladeck: --That's correct.

Chief Justice Roberts: If it's ambiguous, if the availability of expert fees, which is the big ticket item in these things, not the attorneys' fees, States are not unambiguously on notice that they're accepting that liability when they take the funds.

Mr. Vladeck: With all respect, let me quarrel with one of the premises in your question, which is that the... the expenses for experts are, quote, a big ticket item.

If you look at page 28, footnote 17 of our brief, we've tried to compile all of the reported cases on the amount of expert fees that are awarded.

They tend to be exceedingly modest, Your Honor.

They run from a few hundred dollars to a few thousand dollars.

Justice Kennedy: Well, that's before the Magna Carta you're asking for in this case which would establish a whole... a whole--

Mr. Vladeck: Your Honor--

Justice Kennedy: --new profession of experts.

Mr. Vladeck: --Your Honor, that is not the case.

The... the rule that we seek to preserve has been the way courts have interpreted this provision since 1988.

That's--

Chief Justice Roberts: Well, even if it is not the big ticket item--

Mr. Vladeck: --So... so these are modest.

Chief Justice Roberts: --it still has to be... it still has to be unambiguously set forth in Spending Clause legislation.

Mr. Vladeck: Right.

And... and if the Court finds that the legislative history adds the clarity that the statute otherwise needed... is needed, I do not see why that would not comply with the Spending Clause, particularly since, Your Honor, this statute has been on the book for 20 years.

There are dozens of opinions finding that expert fees are compensable.

No Spending Clause argument has ever been raised in this kind of issue even though the statute has been on the books for 20 years.

Justice Alito: --Under your reading of 1415, may a court award to parents any costs that they incur in connection with the litigation, or... or would you just add expert fees to the attorneys' fees?

Mr. Vladeck: Your Honor, there is a body of law on that issue that already exists because courts have interpreted this provision since 1986.

By and large, the costs that have been awarded under the statute are costs that are normally associated with litigation, copying costs, computer assisted research when there's a lawyer involved.

Justice Ginsburg: What about testing?

Isn't testing--

Mr. Vladeck: The cost of testing and evaluation, which is... which is a crucial component of the statute... those costs have been awarded.

Justice Alito: But if costs is not a term... is not a legal term of art, if it really... if it means just the expenses that parents incur, why wouldn't it include things like travel expenses or lost wages to attend the court proceeding?

Mr. Vladeck: The... the way the courts have addressed that issue, Your Honor, is they... they have looked to the... the initial phrase of the statute, in an action or a proceeding, and have found those costs not sufficiently closely enough related to the action or proceeding to justify an award.

And also courts have applied the rule 54 reasonableness standard in ordering costs under this provision, and therefore, expert costs have been reduced and other costs have been reduced to meet the general requirements of rule 54.

I would like... I would like to--

Justice Breyer: Would you read the phrase from the conference report as a limitation?

That is, that... we're trying to figure out what the Congress meant by the phrase costs.

It says it means includes reasonable expense and fees of expert witnesses and reasonable costs of any test or evaluation that's necessary.

So then is that... have the courts read that as a... as a limitation?

Mr. Vladeck: --Yes, Your Honor, but they've also imposed limitations that are generally... that generally constrain the awards of costs in cases.

They have not done what... what I understood Justice Alito... his question to... to get to, was to use this as... as a broad, open door.

I'd like to talk about the legislative history, and particularly I'd like to respond to Justice Scalia's comment about the conference report in this case.

This statute was changed dramatically in conference.

It does not reflect either the House bill or the Senate bill.

If one reads the conference report in the Joint Explanatory Statement of the Committee of the Conference, which is three pages long, one will see that there were dramatic and substantial changes made because there were substantial disagreements between the House and the Senate, not on the question of reimbursement of expert costs.

That... that provision... that understanding was shared on a bipartisan basis in both houses.

But the--

Chief Justice Roberts: Why were the earlier versions that included that expressly then not... why didn't they make it through to the final version?

Mr. Vladeck: --The... the version that... that was referred to earlier, Your Honor, came out of the Senate bill.

The Senate bill contained a number of very controversial features.

It was pared down, and the word cost was substituted, as the drafter of the language made clear on the floor of the Senate before the Senate voted on its version of the bill, and Senator Weicker's explanation of what the word cost means could not be clearer, and he... he--

Chief Justice Roberts: Now, we've slid back from the joint statement to the statement of one Member on the floor now.

Mr. Vladeck: --Well, I'm happy for you to rely on the joint statement, Your Honor.

My only point is, is that the understanding in the House report is expert fees were included in the House bill, which referred to costs and expenses.

Senator Weicker explains precisely the question you asked, which is what happened to the Senate bill.

And Senator Weicker's explanation, which was made before the Senate, immediately before the Senate voted on the bill, makes clear that expert costs are included.

Then, of course, you have the bill going to conference.

There were many changes in the bill, including the language of section 1415.

Prior to the conference, it did not say attorneys' fees as part of costs.

It said attorneys' fees in addition to costs.

That language was changed in conference to accommodate this Court's decision in Marek v. Chesny, which had to do with the applicability of rule 68.

Justice Alito: Well, speaking of that... of that language, that attorneys' fees may be awarded as part of costs, does that suggest... it doesn't say directly that costs may be awarded.

Does that suggest that the attorneys' fees are simply to be regarded as another element of costs that... that may be awarded under the costs statute?

Mr. Vladeck: I don't believe that Congress, when it used the word costs, was adverting to section 1920.

If that is your question, I do not believe that that is--

Justice Scalia: Well, then where is the authorization?

I think that's what Justice Alito's question goes to.

You have to come up with some statutory authorization to pay expert fees.

Now, attorneys' fees as part of costs does not authorize any costs.

It just says whatever costs are otherwise authorized, attorneys' fees will be part of that.

Mr. Vladeck: --Well, Your Honor, it says... it's part of the cost to the parents.

And unlike section 1980, this language is not, contrary to the previous submissions to the Court, identical to the language in 1988.

It says that a court may award attorneys' fees as part of the costs to parents, and the--

Justice Scalia: What is the authorization to pay costs, to pay those costs that include expert fees?

All... all this section says is they may award attorneys' fees as part of costs, and costs are presumably elsewhere authorized.

Mr. Vladeck: --Your Honor--

Justice Scalia: But where is the authorization to pay?

Mr. Vladeck: --Under... under that reading, no statute would authorize the... the payment of costs.

Justice Souter: Under that reading, wouldn't... wouldn't you have a problem in a State court?

Because doesn't this same provision govern in a State court, so that if the State did not have a separate cost statute, it would... it would authorize nothing.

Isn't... isn't that the problem you'd run into.

Mr. Vladeck: That is correct.

Let me make one last--

Justice Scalia: Do you know any State that doesn't have a cost statute?

Mr. Vladeck: --I have not... I've not looked at them to see whether they correspond to 1920, Your Honor.

Justice Ginsburg: --Mr. Vladeck, you have... you referred to the section on GAO reporting--

Mr. Vladeck: Yes, Your Honor.

Justice Ginsburg: --as an assist to help you include consultant fees in... in costs.

But how do you explain the... the provision in this very statute that says attorneys' fees can be reduced?

Congress explicitly provided that you could reduce attorneys' fees... this is in 1415(i)(3)(F)... and not one word about reducing the costs of testing fees or consulting fees.

Mr. Vladeck: Well, Your Honor, all costs are subject to the general requirement in rule 54 of reasonableness, and--

Justice Ginsburg: Then why... then it would be unnecessary to have done that for attorneys' fees.

Mr. Vladeck: --Here's the reason, Your Honor.

At least, here's the reason that... as I understand it.

Much of the litigation in IDEA cases takes out... takes place outside the confines of Federal court.

Most of the litigation takes place in State due process hearings.

And what I believe Congress was interested in making sure were the general rules, like rule 11, the general rules that punish parties for engaging in vexatious or frivolous litigation would have some analog in these proceedings.

And therefore, what the court... what... what Congress did was to authorize a Federal court, in reviewing an application for attorneys' fees incurred before a State administered tribunal, because that's where the action takes place in these cases, to... to be able to reduce an attorneys' fee award if there was misconduct by the parent or... or the lawyer, misconduct in the sense of trying to protract litigation or multiply proceedings.

And interestingly, Your Honor, the... the conference report addresses this issue and does explain... and now I'm quoting from page 6 of the... of the conference report, the joint explanation... that the court shall accordingly reduce the amount of attorneys' fees and related expenses otherwise allowable if they determine that this misconduct had taken place.

So I think that at least in the conference report, Congress is signaling that if there were other costs that were incurred unreasonably as a result of lawyers protracting or delaying a proceeding, they too would be subject to the same reduction.

Justice Scalia: And that's effective too, as though it were written into the statute, because one committee of Congress said so.

That's effective.

Mr. Vladeck: Well, Your Honor, this is not one committee of Congress.

This was... this... the conference report was circulated to all Members of Congress before they voted on the final bill.

Justice Scalia: And... and they read it.

Mr. Vladeck: Well, Your Honor, this is the final bill they voted on, and if they turned the page--

Justice Scalia: That's the only thing we know for sure that they voted on.

Mr. Vladeck: --That is correct, Your Honor, though the vote technically, of course, is a vote to approve the conference report.

That is the final vote Congress took on this legislation.

The vote was a vote to approve the conference report, which contains four pages... three pages of text and three pages of explanation.

Justice Kennedy: Did the... did the final bill say we adopt the findings of the conference report?

Mr. Vladeck: It did not, Your Honor.

Justice Kennedy: And other bills have said that.

Mr. Vladeck: I--

Justice Kennedy: Like in... as in Nofstiker.

Mr. Vladeck: --As far as I know, Your Honor, the procedure followed here was the standard procedure when the conference report takes bills and essentially amalgamates them or redrafts them--

Justice Scalia: But was this legislation vetoed by the President?

Mr. Vladeck: --It was not, Your Honor.

Justice Scalia: Now, when the President signed it, did... did he also approve the conference report?

Did he have the conference report in front of him?

Mr. Vladeck: I do not know that.

Justice Scalia: He had the statute in front of him, didn't he?

Mr. Vladeck: I... he... my assumption, Your Honor, is he had this.

Justice Scalia: You... you think he read the conference report too.

Mr. Vladeck: I don't believe that.

[Laughter]

I'm not arguing that he did.

My assumption, though, is if he had the statute before him, he probably had this.

The President--

Justice Breyer: Was there any opposition?

Was there any... is there any history of anyone in this Senate or the House either before or after suggesting that they didn't want to allow recovery for the expert fees?

Mr. Vladeck: --Not at all, Your Honor.

And one of the points that I would like to make... and I would like to return to the language of 1415... is this statute is all... the IDEA is a statute all about protecting parents and children with disabilities.

One provision of IDEA we have not mentioned, but I think is an important one, is the general guarantee that--

Chief Justice Roberts: Counsel, if I could interrupt you.

As I understood it, this gets back to where you started.

Your position is that if this same scenario had taken place in 1988 as opposed to 1986, that your position would not be the same.

In other words, you said... your suggestion was that it was the legal context at the time in '86 that governed what Congress thought the effectiveness of its statements in committee reports would be.

Maybe I'm ascribing one of the Justice's views to you.

Mr. Vladeck: --If... if you're... and... and forgive my... my lack of knowledge of the exact history of this, but if 1988 is a date upon which the Court begins to be reluctant to look at legislative history, I would concede that my case would be different post 1988.

It is quite clear that the Congress that enacted this bill assumed, and rightly so, that this Court and reviewing courts would rely on legislative history.

Indeed, when this Court issued its opinion in Casey, footnote 5 of Casey says that this case may be different because of the conference report.

Justice Scalia: What... what date in... I mean, so we have two different modes of interpreting statutes, one, pre-1988 in which we use legislative history, and one post-1988 in which we don't use legislative history?

Mr. Vladeck: Your Honor--

Justice Scalia: I mean, that... that's what you're suggesting, isn't it?

Mr. Vladeck: --What I am suggesting is that the Court's role, as I understand it, is to the faithful agent of Congress, and if the... if the expectation of Members of Congress is that language in committee reports will... will garner respect from the Court, it is hard to then change the rules on Congress.

The operative question here is what--

Justice Scalia: The reason one does not use legislative history, if one does not use it, as I don't... as I don't, is not because Congress doesn't expect it to be used, but because Congress does not have the power to delegate to one of its committees the content of... of its statutes.

The Constitution provides that legislation will be passed by two houses and signed by the President, and the problem with legislative history, for those of us who have a problem with it, is this amounts to a delegation by Congress.

It's not a matter of what Congress expected.

I don't care what Congress expected.

It can't do it.

It can't leave it to a... to a committee to... to fill in the blanks in a statute.

That's the problem, and that has nothing to do with expectations.

Mr. Vladeck: --Your Honor, my only point is that the Congress that enacted this statute, the 99th Congress, thought... and this... this view is expressed repeatedly in the legislative history, and I believe it... it is reflected in the statutory language as well... that the word costs here would be given a broad meaning to ensure that parents were made whole when they have to fight against school boards to secure that which IDEA guarantees their child, which is a free and appropriate public education.

This Court has repeatedly in Township of Burlington, in Tatrow, in Florence County said that provisions of IDEA should not be interpreted in ways that detract from this fundamental guarantee.

There would be no more clear detraction from that guarantee than requiring parents to bear the expense, which for many of these parents is enormous, even though Chief Justice, it may amount to only a few hundred or a few thousand dollars, to retain an expert, to do battle with school boards who have experts on staff.

Earlier this term, this Court decided Schaffer v. Weast.

Post Schaffer, parents cannot hope to meet their burden of production, let alone their burden of proof in IDEA hearings without expert assistance.

To force parents to bear those expenses, even when they prevail, will detract from IDEA's core guarantee that the... that the education provided to the child is both appropriate and free.

Those provisions are in the statute to avoid having parents being compelled to make the Hobson's choice, a free education that's inappropriate or appropriate education that is not free.

This Court repeatedly instructs lower courts to interpret statutes consistent with the statutory context.

I would urge that in looking at section 1415, you take a look at... at... there are now eight sections of the statute that reinforce this guarantee.

It is hard to imagine a statutory guarantee more deeply embedded in an act than the guarantee of a free and appropriate public education than is embedded in the IDEA.

Permitting parents to recover their expert costs--

Justice Ginsburg: But it's not... if the parents make a reasonable effort, but they lose, it's not going to be free.

I mean, the... the statute gives them--

Mr. Vladeck: --But... but--

Justice Ginsburg: --a right to oppose the school board's choice, and if what you say about making it easier on parents of limited resources, they're told it's going to be a gamble if you lose, you don't get your fees.

Mr. Vladeck: --That's correct, Your Honor, but they lose only when the school board is providing, in fact, an education that is appropriate.

But where the parent prevails because the school board was not providing a free and appropriate education, the act's guarantee would be seriously eroded unless parents can recover the costs of their expert... of their experts.

If there are no further questions, thank you very much.

Rebuttal of Raymond G. Kuntz

Chief Justice Roberts: Thank you, counsel.

Mr. Kuntz, you have 4 minutes remaining.

Mr. Kuntz: Thank you, Your Honor.

Shifting the costs to the school district of experts' fees will also shift scarce public resources away from the point where it's most effective, at the stage when the parent meets with the IEP team to resolve the differences.

When Congress has revisited this statute, as it has since 1986, time and time and again, it's... it's spoken to the... to the goal of reducing litigation and... and reducing the costs associated with litigation.

If... if as the respondents claim, it's central to the fulfillment of this statute that... that Congress be seen to have shifted the costs of these so called experts to the... to the school district when... when they fail, I... I call to the Court's attention that the reality is that the school district has no staff of experts as the respondents intimate.

It has no staff of consultants.

What it has are the people who actually provide the services to the child, and when they come to testify at the hearing, typically they're... they're scared or nervous because it's the first time that they've been at such a hearing.

They're not professional experts.

They're not testimonial experts.

Those are the kinds of experts that the respondents are talking about and asking this Court to see in the statute.

One needs to ask the question if Congress really intended expert fees to be a part of this statute, what stayed Congress' hand from writing those words into the statute?

It's very clear that Congress knew how to do that when it became appropriate, in its judgment, for it to do that.

To sort of see it here lurking in the shadows in... in sort of the backwaters of... of the act and to intimate from there that the plain language of the statute has meaning that needs to be expanded and enlightened by the congressional report doesn't make a lot of... of sense.

If... if it's important, it should have been there.

The... its absence is very, very telling.

And--

Justice Kennedy: Don't the school boards have some consultants and experts in this area other than the teachers?

Mr. Kuntz: --Typically they do not, Your Honor.

The typical IEP team meeting has the school psychologist perhaps, has the... the teachers of the... of the child.

Those... some of those are required members.

It has the parent of a handicapped child.

It might have the... the service providers like the speech pathologist.

And when... when it comes to a trial, comes to a due process hearing, those are the folks who come and testify as to what they know about the child, the test results they have.

There are no typical consultants or testimonial experts that appear for the school district.

So the... the central part of this statute, its... its revolution, where it brings parents of children who are disabled into contact with the... with the school, has had a wonderful effect in fulfilling the promise of this statute.

Energizing the litigation aspect of this by transferring those costs to the school district will... will take away and will detract from the... the true meaning of the statute, which was to build a partnership between the parents and the school district, not to let it dribble off into litigation.

Thank you.

Chief Justice Roberts: Thank you, Mr. Kuntz. The case is submitted.

Attribution:

The Oyez Project

Featured:

Martin v. Franklin Capital Corp. - Oral Argument

Fri, 09 Jan 2009 14:48:57 +0000

Case:

Martin v. Franklin Capital Corp.

Media File:

04-1140_20051108-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Samuel H. Heldman

Chief Justice Roberts: We'll hear argument first this morning in Martin versus Franklin Capital Corporation.

Mr. Heldman.

Mr. Heldman: Mr. Chief Justice, and may it please the Court--

Section 1447(c) provides for fee... for a fee award... allows a fee award when a case is remanded to State Court.

There is, by contrast, no statute providing for a fee award to a defendant who removes, and successfully defends against, a motion to remand.

There is no statute providing for a fee award against a plaintiff who wrongly invokes the original jurisdiction in Federal District Courts.

This indication that there is something peculiarly troublesome and problematic about an incorrect removal is borne out in the case law of this Court and other courts and in the experience, I submit, of every practicing lawyer, that incorrect removals have detrimental effects, both private and systemic, yet Respondents would read section 1447(c) in a way that would leave it essentially without practical effect in the world of litigation.

It would give no... it would not effect litigation behavior to any perceptible degree.

But both the text of the statute, when read in context, and in light of the legal landscape, and the large objectives and equitable considerations at stake here, weigh in favor of a standard that would, as the Seventh Circuit put it, make fee awards the norm in cases of improper removal.

Turning, first, to the text of the statute, the statute is notable, in that, unlike many fee shifting statutes, it runs only in one direction.

That is to say, it allows for fees only when the case is remanded.

This is a good textual indicium of remanding, for two reasons.

First of all, it shows that the concern was with the incorrect removals, and the problems they cause in deterring them, rather than a more general concern about mitigation about questions of jurisdiction.

That is, a defendant cannot get a fee award even if the plaintiff's motion to remand was not very strong.

The second thing that the one way nature tells us is that this, the statute, would be practically meaningless if read as the Solicitor General suggests, and as Respondents suggest, in all but a little sliver, to allow fees only when the removal is unreasonable.

If that would not be a precise duplicate of Rule 11, it would at least be close enough to a precise duplicate of Rule 11.

Justice O'Connor: Well, Rule 11 is about frivolous arguments and motions, is it not?

Mr. Heldman: It is... yes, Your Honor, that's the shorthand of Rule 11.

Justice O'Connor: Yes. And Christiansburg Garment is about unreasonable arguments.

I suppose that not every unreasonable argument could be deemed to be a frivolous one.

Mr. Heldman: I would... I agree with you, Your Honor, there is that... there is a possible sliver of a distinction, but I... and, I submit, any lawyer advising a client and any lawyer advising himself or herself... would have a hard time differentiating between the two standards, in practice, so as actually--

Justice O'Connor: Don't you think you know it when you see it?

[Laughter]

Mr. Heldman: --I try to avoid all of them, Your Honor, the frivolous and the unreasonable, both.

And I think we all do.

Chief Justice Roberts: But, when Congress passed this language, the scope of Rule 11 was not as well defined and understood as it is now.

So, the overlap argument you're making may not really go to what Congress had in mind.

Mr. Heldman: The overlap may not have been perfect, at least, among other things, in the sense that some courts were still under the misimpression that there was a subjective element to Rule 11, as well.

So, the Solicitor General is correct in saying that there is that logically possible reason for the enactment of the statute, in that there is not a perfect overlay.

We submit that, in light of the other available textual indicia and the policy reasons, that logically possible hypothesis is not the most reasonable hypothesis.

We have--

Chief Justice Roberts: When you talk about the text, though... and I understand that the "may" language here has been read by the Court in very different ways, depending upon the statute... but you have a statute that literally alternates sentences between "shall/may", "shall/may", and it seems to me that if your rule is closer to "shall" than "may", it seems that it was an odd choice of words for Congress to employ.

Mr. Heldman: --I think the reason why I would disagree with that, respectfully, Your Honor, is, we are not suggesting that it means "shall" in all instances in which a case is remanded.

The rule we are... or standard we are advocating for deals with that set of cases in which a plaintiff has successfully sought remand.

Now, that may constitute most of the cases that are remanded, but there is still the... a separate category of cases, at least one... the case is remanded sua sponte.

I could well envision that those would not be governed by a "shall" rule for an award of expenses and fees.

The--

Justice Souter: But that... it could be remanded sua sponte for any number of reasons, so... so, you're saying not that there is some wiggle room to allow "may" to operate, you're simply saying it depends on the party that initiates the remand.

And I guess my question is, Could you give us an example, or examples, of a remand on a party's motion, on a plaintiff's motion, in which the fees would not be allowed?

Mr. Heldman: --Yes, Your Honor.

I think the classic example would be if a plaintiff's complaint, for whatever reasons of negligence or error, misalleges the plaintiff's State of residence; thus, making the defendant reasonably believe that there is complete diversity, defendant removes, plaintiff then submits affidavits and property records and everything showing it really was a mistake.

And--

Justice Ginsburg: What about the plaintiff who waits over a year to move for remand when it appears as though the case is going in the defendant's favor?

Doesn't "may" give a District Court discretion to say,

"I'm not going to reward a plaintiff, who wants to go back to State Court only when he was on the brink of losing in Federal Court, with fees. "

Mr. Heldman: --I think, even in that hypothetical case, which I will say, next, is not this case... even in that hypothetical case, it is still the plaintiff who has the cleanest hands of all.

The plaintiff's hands are cleaner than those of the defendant--

Justice Ginsburg: Just... you say that your presumptive fees are included would cover that case.

It, in part, is... resembles your case, because you didn't move to remand until the case was pending in the Federal District Court for over a year.

Mr. Heldman: --That's correct, Your Honor.

And if the Court would like, I could explain a little bit more about why that occurred.

When the case was removed... the plaintiffs in this case, unlike plaintiffs in many cases, did not have a preference for State Court.

There was no attempt to plead around removal.

And the case was removed, and it was an arguably correct removal.

And plaintiffs' counsel were then in the position, unfortunately, due to--

Justice O'Connor: Well, indeed, wasn't there a change in the law after the case was removed?

Mr. Heldman: --There were relevant changes in law in some Circuits, Your Honor.

There was... I don't believe any dispositive change in Tenth Circuit law--

Justice O'Connor: Well, the Tenth Circuit, I thought, held that the District Court was within its discretion to deny the award, because, at the time of the removal, the defendants had objectively reasonable grounds to believe that removal was proper.

Mr. Heldman: --Yes, Your Honor.

And we do not dispute that standard, because there were out of Circuit cases, though later overruled by those own Circuits.

We've suggested that punitive damages could be aggregated.

And that was the... that was one of the bases for removal, but not the only one.

So, when plaintiffs removed the case, plaintiffs had no incentive, by virtue of 1447(c), in the way it had been interpreted in the Tenth Circuit, to make remand their first order of business, given plaintiffs' experience that these battles can be long and hard and unrewarding.

And the removal was arguably correct.

Now, by a year later, that had changed.

That calculus of the plaintiffs' counsel had changed when defendant... one of the defendants... put in an affidavit suggesting that the named plaintiffs had no damages.

At this point, the plaintiffs' calculus changed, because there was, at this point, a very real risk that if plaintiffs ignored the problem now and proceeded to a victory in the District Court, then that victory could be vacated at the defendant's interest... instance, by claiming a lack of jurisdiction.

And this, then, was a risk that the plaintiffs could not take at that point.

Justice Kennedy: Well, you stated, at the outset... and, I think, properly so... that we're interested in what incentives--

Mr. Heldman: Yes, Your Honor.

Justice Kennedy: --are put in place by whatever rule we adopt.

I'm not sure about the incentives in... on the facts of this case, or in other cases, based on your rule.

The defendant has only 30 days to decide whether to remove.

That's a Federal right that should be given some due consideration.

You, in effect, want to make the removing defendant an insurer against improper removal.

And I just don't know why that should be the policy.

Mr. Heldman: I... my basic answer as to why that would be the policy, Your Honor, are, again, the textual reasons and the large objective reasons.

Let me go back to the... finishing up the textual reasons, if that is satisfactory.

The statute previously had said... had included the word "improvident".

Back when only costs could be awarded, and not fees, the statute had used the word "improvident".

Now, many courts... and I don't vouch for this interpretation, but I note that it was prevalent... many courts then said costs may be awarded, or should be awarded, only when the removal was improvident, in the sense of being worse than merely incorrect.

And the Congress deleted that word, "improvident"... "improvidently".

Now, this, I submit, is a good indication that the Congress did not mean for there to be a standard of "worse than incorrectness".

Had Congress meant for that to be the standard, then Congress would not have deleted the word that had gotten many courts there, or Congress would have put in some other textual reason.

Justice Ginsburg: Was it a big issue when the provision did not provide for counsel fees?

Mr. Heldman: I'm sorry--

Justice Ginsburg: When it--

Mr. Heldman: --Your Honor, I didn't--

Justice Ginsburg: --when the statute provided for costs--

Mr. Heldman: --Yes, Your Honor.

Justice Ginsburg: --which, in our system, do not include counsel fees, was it a big issue when all that was included was costs?

Mr. Heldman: It was a big enough issue to be the subject of comment among many courts over the decades.

It was a big enough issue to be covered in the treatises... the expense was not great, but it was a recurring mitigated issue.

Justice Stevens: May I ask a question?

I never had one of these problems when I was in practice, so it's all new to me.

But,

"an order remanding the case may require payment of just costs and any actual expenses, including attorneys fees, incurred as a result of the removal. "

does that mean that if, after the removal... there are substantial proceedings in the trial court, in an appeal, and so on, and then you suddenly discover that the... there was a mistake and you remand... you can get fees for all the litigation work that took place in the interim?

It could be a very large sum of money, couldn't it?

It's not just fees incident to the fight over whether removal was proper.

Mr. Heldman: I believe that's correct, Your Honor.

I believe that... to me, the most natural reading of that language is that the District Court, at least in the first instance, will have factfinding authority as to what fees and other expenses were--

Justice Stevens: And that--

Mr. Heldman: --incurred as--

Justice Stevens: --And that would--

Mr. Heldman: --a result of the removal.

Justice Stevens: --conceivably, could include all sorts of discovery and arguments on motions and so forth that might actually save time in the subsequent proceeding, if it goes back to the State Court.

Mr. Heldman: My anticipation would be that most courts would use their factfinding authority to try to figure out what work would have to be reduplicated in the State Court, to compensate that work, or the work that only arose by virtue of it being in Federal Court.

Justice Stevens: So, the judge's discretion includes both whether or not to include any fees, and he also has quite a bit of discretion on what to include in the fee award, I suppose.

Mr. Heldman: I think that's right, Your Honor.

Whether you call it "discretion" or "factfinding authority", I think that's right.

That is a separate question from what we have here.

But I think the District Court would have the first line authority and the main--

Justice Kennedy: But--

Mr. Heldman: --authority.

Justice Kennedy: --shouldn't we know what the rule is with reference to the extensive fees Justice Stevens requires?

Shouldn't we know that, as part of the background for what we're going to do in this case?

And if you say... and you seem to indicate,

"Well, it's going to be up to the discretion of the judge. "

Well, if we know what the rule is, then it's not part of the discretion.

Mr. Heldman: Yes, Your Honor.

I proposed what I suggest would be the standard, which is, going back to the text,

"what expenses were incurred as a result of. "

and I think that naturally means

"what were in... what costs and fees were incurred that would not have been recur... incurred, or would not have been incurred again, had the case been left in State Court. "

Now I--

Justice Souter: Well, why doesn't... why doesn't that also go for counsel fees?

I mean, there are expenses in discovery, but there... there's counsel time in discovery.

So, wouldn't the same rule apply?

Mr. Heldman: --Yes, Your Honor, that is... that is what I'm suggesting, that the same rule would apply.

Now, I would add--

Justice Breyer: I want to know what it is you're arguing for.

That is, I... when I get through all these words in the attorneys fees cases, I've got it in my mind that, like the civil rights statute, they say,

"You normally get fees, unless you shouldn't. "

All right?

That means you're normally gonna to get 'em.

Mr. Heldman: --Yes.

Justice Breyer: The plaintiff, anyway.

All right?

Then we have a case with a copyright.

The copyright says it's all the way up to the District Court, really, which means a grab bag, and what the particular judge thinks is fair in the instance.

And I guess you could have a rule saying, "You hardly ever get fees".

So, in my mind, I got it, "Well, who knows"?

and,

"No, you almost always do. "

or,

"No, you almost always don't. "

Now, is that a good characterization?

And what... which one of those three are you arguing for?

Mr. Heldman: I--

Justice Breyer: I know you're not arguing for "You always don't".

[Laughter]

Mr. Heldman: --I think that is a good characterization, Your Honor.

Justice Breyer: All right. Then, which one do you want?

Do you want the thing--

Mr. Heldman: Of those three--

Justice Breyer: --Yes.

Mr. Heldman: --Your Honor, we would prefer the "almost always".

Justice Breyer: All right.

Now, if you want "you always get them", in the civil liberties cases there is a good policy reason, according to the court, underlying that judgment of how Congress wanted to give this to people to vindicate civil liberties.

I've never heard of a policy of closing the Federal Court door, because if, in fact, you were to have that rule in this case, it would simply discourage people from removing it in cases where they think they have a good claim to remove it, because they'd have to pay huge costs if they were wrong.

So, I'm not aware of any closing doors of Federal Court policy.

Mr. Heldman: First of all, Your Honor, I would suggest that it is not we who would close the doors of Federal Court.

It is, by definition in these cases, the Congress that has closed the doors of--

Justice Breyer: I--

Mr. Heldman: --Federal Court.

Justice Breyer: --unfortunately, I guess, from your position, I don't know what Congress meant here.

Mr. Heldman: No, Your Honor--

Justice Breyer: Therefore, I'm trying to figure it out in terms of the policy--

Mr. Heldman: --Yes, Your Honor.

I'm--

Justice Breyer: --as well as the language.

Okay, in terms of the policy, I'm simply saying that I don't know why you have a better claim than a copyright plaintiff, and I can think of why you don't have as good a claim as a civil rights plaintiff, the reason I said.

So, what is your response to that?

Mr. Heldman: --First of all, Your Honor, I apologize for not being clear enough.

When I say it is not we, but the Congress, that has closed the doors of the Federal Court, I mean on the substantive question of whether the case was removable.

We are dealing here, only by definition, with the cases that were incorrectly removed.

So, the real question, I think, when we get down to the policies, is, there is some concern that defendants, under the rule I propose, would have an incentive to remove somewhat fewer cases.

They would reserve the questionable removals only for the cases in which they could convince themselves and their clients that the argument was good enough, and the stakes high enough, to justify the cost.

Now, I submit to you, that's exactly the same sort of situation we have now.

It is merely that, now, when making that cost benefit analysis, the defendant is thinking only of its own fees that it will incur.

But, still, that is a cost.

And the Congress, notably, has not seen fit to alleviate that cost at all.

So, some questionable removals are already deterred by expense under the rule I propose; some, more would be.

On the same... by the same token, the rule I propose would give good incentives to the plaintiffs' lawyers to be aware of the jurisdictional issues, to mitigate them, and mitigate them well.

Now, why do I suggest to you that--

Justice Ginsburg: Why?

Under your rule, there's a presumption.

I thought that the rule you're asking us to approve is the one that's applicable in the Seventh Circuit, which is that you presume there will be counsel fees when a case is remanded to the State Court, unless there are extraordinary circumstances that would overcome the presumption.

Now, that's what you're... that's the rule you're asking for.

Mr. Heldman: --I don't know, Your Honor, whether the Seventh Circuit would follow up its presumption language by saying the presumption can only be overcome in extraordinary circumstances.

That is, I don't know whether the Seventh Circuit sees its standard as the Piggie Park standard or as something slightly towards the middle from the Piggie Park standard.

I think, in this case, we would win either way, but I would suggest that there is a systemic benefit from not having a multiplicity of standards, from having at least most attorneys fee shifting disputes be resolvable by, is it "almost always", is it "who knows", or is it "never, unless unreasonable"?

I think there's a benefit to having nessatavite litigation over--

Justice Ginsburg: But there's such a different in the context.

The Title VII plaintiff gets fees after a defendant has been found a law violator.

And, here, a defendant has a right to access to a Federal Court.

And the statute... you are emphasizing text.

If one looks at the Omnibus Act out of which this provision came, we see two removal friendly pieces in it, right?

Because, no longer do you have to verify a removal petition; you just do a simple notice.

That's one.

And there was another.

Oh, yes.

Yes, you don't have to put up a bond anymore if you want to remove.

Mr. Heldman: --That's correct, Your Honor.

Rather than characterizing those as "removal friendly", I would characterize them as "resource friendly".

I think all of this can be... can be understood as a congressional effort, overall, to reduce the amount of resources that are put into jurisdictional issues.

And the rule we're proposing would further that goal; that is, by somewhat deterring the, by definition, incorrect removal.

Now, on... every incorrect removal not only harms the plaintiff... harms the plaintiff a good bit... the delay, the expense... And there's been some concern I've heard voiced about the great expense that this might impose on defendants... it imposes a great expense on defendants only precisely in as much as the defendant has imposed a great expense on the plaintiff by its incorrect action.

Now, it is true that fees--

Chief Justice Roberts: Well, but that's a general... you're... you seem to be arguing more generally for the British rule, rather than the American rule.

And I read our decision in Fogerty to say that when we're confronted with language like this, "may", you don't assume that Congress intended to overrule the basic American rule and apply the British one.

Mr. Heldman: --In that aspect of Fogerty, Your Honor, the Court had already gotten to the point of saying,

"The standard is the same for prevailing plaintiff and prevailing defendant. "

And then, in the... in the passage we're talking about, the Court was looking at the "one size" argument.

Okay.

And that same standard for both should be "usually" or "nearly always".

And it was in that context, in which there would be a "shall" or "nearly always", running both ways, that the Court said,

"That would be a rare bird in American law. "

the "both ways" British rule that... which is my understanding of the British rule...

"That's such a rare bird, we would want to see some clearer indication of that. "

In this case, I submit, we don't have a rare bird at all.

It is not unusual to have a... to have "may" interpreted in a statute as meaning "usually should", in some class of cases.

Piggie Park did it.

Many cases in other contexts, following Piggie Park.

So, it's not such a rare bird.

Chief Justice Roberts: Those were all the, you know, private attorneys general type cases, where you're... where the view is that the plaintiff is carrying out a mission of ferreting out and enforcing the law.

But that's... this is a quite different context.

Mr. Heldman: I don't think so, Your Honor, because, first of all, it is true that usually you're awarding fees against a violator of Federal law.

But that is because most fee statutes involve Federal causes of action.

This is unusual and notable, in that it is a fee shifting statute for a procedural violation.

Therefore, to say,

"Yes, but they didn't violate Federal law. "

proves too much, I think.

And so, we shouldn't make such a distinction between the private attorney general cases and this case, because the plaintiff... every plaintiff who successfully seeks remand is furthering systemic values, as well as the plaintiff's own values, is furthering the value of comity, federalism, State sovereignty, the Federal docket load, and helping to avoid the--

Chief Justice Roberts: Every party who prevails on a motion to admit evidence or to exclude evidence is promoting the policies and the rules of evidence, but we don't think that those motions should result in a... in fee shifting.

Mr. Heldman: --That is largely because, Your Honor, the Congress does not pass statutes allowing for fee shifting.

And, second, removal is different.

Removal has federalism concerns, as this Court has noted, going back into the '40s.

Removal... jurisdiction being an unwaivable thing, these cases... wrong removal possibly leading to the disaster in which the case goes to trial in Federal Court, judgment is entered, and it has to be vacated on appeal and done all over again, because nobody recognized the jurisdictional issue.

By encouraging plaintiffs to challenge these more effectively, and by encouraging defendants to reserve their questionable efforts only for the cases that really deserve it, I think we would be... we would be serving public ends, as well as private ones.

Now, I would love to reserve the remainder of my time, unless there are further questions.

Chief Justice Roberts: Thank you, Mr. Heldman.

Mr. Heldman: Thank you, Your Honor.

Argument of Jan T. Chilton

Chief Justice Roberts: Mr. Chilton, we'll hear now from you.

Mr. Chilton: Mr. Chief Justice, and may it please the Court--

Since the first Judiciary Act of 1789, Congress has given defendants the right to remove cases to Federal Court.

Respondents did so properly in this case, and there's no dispute about that.

The... both lower courts found that we had reasonable grounds for removal, on two bases... based on the only Circuit Court decisions then extant on aggregating punitive damages and attorneys fees.

Petitioners conceded that fact here this morning and also in the trial court, District Court, before they moved to remand, a year after removal and after the District Court in the same hearing had indicated its tentative decision to rule against them on the merits of a dismissal motion.

So, the issue before the Court today is whether 1447(c) requires a District Court to impose a substantial penalty in the form of attorneys fees on Respondents for what is concededly in this case a reasonable, but ultimately unsuccessful, exercise of their statutory right to remove.

And we think the answer to that answer to that question is clearly no, for two reasons.

The first is that Section 1447(c) is not a fee shifting statute at all.

Like its predecessor, Section 5 of the Act of March 3, 1875, Section 1447(c) just confirms the District Court's power to award fees, as well as costs, when it lacks subject matter jurisdiction and, therefore, must remand the case.

There was a prior contrary common law rule, and the Act of March 3, 1875 abrogated it.

Justice Scalia: You're saying that it allows Rule 11 fees to be imposed--

Mr. Chilton: Yes, Your Honor.

Justice Scalia: --which otherwise wouldn't be imposable.

It seems to me that what cuts against that interpretation is the fact that it does try to set some standard.

It says,

"An order remanding the case may require payment of just cause... just costs and any actual expenses, including attorneys fees. "

Especially the "just costs", that's a standard.

It's not saying,

"You can use Rule 11 and apply whatever standard Rule 11 contains. "

What's your response to that?

Mr. Chilton: My response would be that, as the questioning already today in the Court has revealed, there are two questions on a fee motion.

One is entitlement, the other is amount.

"Just costs" refers to amount, not entitlement.

Justice O'Connor: But I'm... I don't... I'm not sure that I agree with you that Rule 11 applies.

It really deals with frivolous actions.

And here, we're talking about the imposition of reasonable costs, are we not?

Just costs.

Mr. Chilton: Just costs and expenses, including attorneys fees, yes.

It is--

Justice O'Connor: I think the standard is different than that, under Rule 11.

Mr. Chilton: --Well, if the Court interprets--

Justice O'Connor: I mean, why--

Mr. Chilton: --You--

Justice O'Connor: --is it in your interest to ask us to apply Rule 11?

You're hoping that, in future cases, it will be less likely that these are awarded?

Mr. Chilton: --Well, we're proposing our first argument, because we think it's textually correct and historically correct.

It leads to the same result, in our case, a point I was about to make.

Our second argument is that, even if you construe this statute as a fee shifting statute, the standard under the fee shifting statute should be the one that Your Honor just mentioned, which is, it's a multifactor test, but the primary factor is whether the ground for removal is objectively reasonable.

And under that standard, we win.

Justice O'Connor: Now, the Solicitor General, I guess, suggests that the Christiansburg Garment standard is the appropriate one.

Mr. Chilton: That is true, he does.

Justice O'Connor: And do you disagree with that?

Mr. Chilton: Well, our two standards, I believe, are relatively close.

We both focus on the objective reasonableness of the removal.

Now, the Solicitor General, I believe, is a little bit less... leaves a little bit less discretion to the District Court than we would.

We believe that Congress, in using the word "may", in using, if you wanted to look at this as a fee shifting statute, the word "just", meant to leave District Courts with considerable range of discretion to deal with cases that come up that are unusual in the way a party can "game the system", if you will, in respect to removal.

For example, in this case, waiting as long as the plaintiff did before seeking a remand.

Obviously a plaintiff--

Justice O'Connor: Well, but there had been case law changes, hadn't there?

Mr. Chilton: --There had been, but that was not the reason for their delayed motion for remand.

As they explained in the trial court, the reason they suddenly became aware, supposedly, of the right to remand was this declaration saying that they, the plaintiffs, hadn't paid any money for collateral protection insurance, a fact of which they must have been aware at the time they filed their complaint.

Furthermore, in the Tenth Circuit, you cannot look to any document, other than the complaint or notice of removal, to establish the facts for removal jurisdiction.

Therefore, the declaration could not possibly have justified a motion to remand.

But, in any case, my more general point, apart from the facts of this case, is that there are cases in which one party or the other uses remand to basically avoid a... an adverse decision on the substance, and when that party does, whether it's the defendant or the plaintiff, we feel that the District Court ought to have discretion to award fees.

Chief Justice Roberts: I thought a comparative advantage of the Solicitor General's approach, and, by the same token, of the Petitioner's contrary approach, is that it avoids a lot of litigation over a collateral issue, like which court you ought to be in.

As soon as you get into a multifactor analysis, then you get briefs on both sides arguing their factors and the other side's factors, and the judge has to decide.

If there's a presumption that applies in most cases, you don't waste time over jurisdictional squabbles like this.

Mr. Chilton: Well, first you have the jurisdictional dispute, of course, resolved.

It's only when there's a remand that you get to the fee issue.

But, your more general point is, yes, obviously a categorical rule will have less litigation than a multifactor test.

The question is, What did Congress want +/?

not, What will reduce litigation costs?

And we believe Congress would have wanted, in this situation, and did want, to allow for discretion to be exercised.

Now, it's a limited discretion under our test, because if... in general, if the removal is objectively reasonable, as ours was, we believe Congress would not have allowed an award of fees, except in those circumstances, as I've mentioned, where the system is being gamed by one party or another.

Justice Breyer: It's hard to have three different kinds of standards with attorneys fees statutes.

I mean, there are quite a few of them, and... I can understand saying some of those statutes mean you almost always should get it, because of special policies reflected in the history of the statute, et cetera.

That's Christianson.

And I can imagine Fogerty, where you say,

"As to an ordinary one, it's ordinary. "

"Ordinary" means it's up to the discretion of the District judge.

And there may be many reasons.

Do we want a third one, where--

Mr. Chilton: Well--

Justice Breyer: --let's say they pass this... and it's "unusual"?

I mean, we're going to get several categorizations and shadings of statutes.

I don't have an answer.

I'm not suggesting a point of view on this.

I'm curious what you think.

Justice Ginsburg: I--

Mr. Chilton: --No--

Justice Ginsburg: --think we do have three, if you count Fogerty, because you have the Christianson, which is the most defendant friendly.

And then you have Piggie Park, which is the most plaintiff friendly.

And then you have Fogerty, which is been... has been called the multifactor--

Mr. Chilton: --You're--

Justice Ginsburg: --test.

Mr. Chilton: --quite correct, in our view, Justice Ginsburg.

We believe Petitioners are requesting the Piggie Park standard.

We believe the Solicitor General is proposing the Christiansburg Garment standard.

And we think we're smack in the middle, with Fogerty.

Now--

Justice Scalia: You know, it would really improve the dignity of this Court if we referred to "Piggie Park" as "Newman".

[Laughter]

Mr. Chilton: --I have no response to that remark, Your Honor.

[Laughter]

To pick up the train of my argument--

[Laughter]

--we believe that discretion is not only the better part of valor, but what Congress enacted in this statute.

And that's what Fogerty said... "may" means "may", it doesn't mean "must"... it connotes discretion... and that an automatic rule for the award of fees on remand, or even the contrary rule, would pretermit that discretion, so that when, as in this case, there are not overriding public policy... public policies that are enforced by one party... for example, in the civil rights cases, where it is the plaintiff who is the private attorney general enforcing what this Court has said, or Congress's most important policies... when that's not present, as in this case, then "may" means "may".

Particularly, that's so when, as in this case, the defendant is not a violator of Federal law, has done nothing that impinges or removes rights from the defendant... or, excuse me, the plaintiff... but, in fact, serves Federal interest in seeking removal.

That--

Justice Scalia: I suppose that one could assume that to be the congressional intent, if Congress often has such an intent for such substantial imposition of financial liability.

Do you have any other examples of where Congress has essentially left it up to the District judge, with a broad, virtually nonreviewable... I guess it's reviewable, but... to some extent... but multifactor test, whatever the District judge considers important?

Mr. Chilton: --Yes, Your Honor, I do--

Justice Scalia: What are--

Mr. Chilton: --as a matter of fact.

Justice Scalia: --what are some other examples where Congress has allowed this degree of financial liability to be subjected to the discretion of a District judge?

Mr. Chilton: The Freedom of Information Act, Your Honor, which was passed in 1974, which, interestingly, I think, undermines the Petitioner's argument that, in using the word "may", Congress somehow incorporated the "Newman" standard.

[Laughter]

The... in 1974, in adopting the Freedom of Information Act, Congress specifically considered adopting... and it was in the Senate bill... a four factor test.

It was removed from the bill, and the... both conference reports on that bill explained that it was removed not to require a District Court to award fees automatically in any case, but, rather, because the existing law was following, in fact, a multifactor analysis, and Congress wished to preserve it and felt that the four factor test, which had been in the Senate bill, was too restrictive.

Now, there is another example, as well, in the... in ERISA.

The cases under ERISA... other than the special case of trust funds seeking delinquent contributions from employers; those are treated differently... but for cases simply of suits by trustees against beneficiaries, beneficiaries against employers, beneficiaries against trustees, the courts have, in fact, employed a multifactor test.

Justice Scalia: And this is liability for what?

In... for--

Mr. Chilton: Denying benefits, for example.

Justice Stevens: Why isn't Fogerty an example.

Isn't the... and what is the standard that Fogerty announces?

It rejects the British rule, and that it rejects the one favoring... one party over the other?

What is the standard you get out of Fogerty, other than pure discretion of the District Court?

Mr. Chilton: Well, Your Honor, I believe it's not pure discretion.

The footnote at the end of the opinion says that District Courts may follow the Third Circuit standard, looking first at whether the argument of the losing party was frivolous, unreasonable, et cetera, and then looking at other factors that are indicated by the particular concerns of the Copyright Act.

And, yes, I quite... you're, of course, right that the... Fogerty did adopt the multifactor test under the Copyright Act.

Justice Ginsburg: Well, as it was just mentioned, "multifactor", in a footnote, it said it would be neutral.

I think the big point in Fogerty was that it was going to apply in both directions, be neutral as between plaintiff and defendant.

Mr. Chilton: That much is true, but the footnote does say that, in applying the neutral standard, the District Courts are free to follow--

Justice Ginsburg: You've given us, in your multifactor test, you said, "objectively reasonable basis to remove".

And another factor might be that the plaintiff delayed in moving to remand.

What other factors, besides the "objectively reasonable basis to remove" and the plaintiff's delay?

Mr. Chilton: --Well, we outlined several in our brief, Your Honor, at page... let me see... page 41.

In addition, I think the case of Gardner versus Allstate Indemnity, 147 F. 2d 1257 indicates another.

There, the defendant moved successfully to remand after receiving a... an adverse decision on the merits.

It may have had an objectively reasonable ground for removal.

In that case, it actually didn't, but, I mean, you can conceive of a situation in which they would have had one.

And, obviously, after the merits decision went against it, it wanted a second chance.

Now, in that situation, I believe a District Court might, despite the objectively reasonable basis for removal, decide that the defendant should pay costs and fees.

Chief Justice Roberts: What is your position on what fees we're talking about.

Do you agree with your friend that money that's spent, that's going to have to be spent anyway in the State Court proceeding, though, is not wasted, that that's not recoverable?

Mr. Chilton: I absolutely do not agree, Your Honor.

I think that

"incurred by reason of the removal. "

refers to fees and costs that are specifically directed to the jurisdictional issue, and that only; no other fees or costs in the litigation at all.

Of course, that question isn't presented here, because we had no... or the lower courts decided that... the Petitioner is--

Justice Kennedy: Have the lower courts addressed that issue?

Mr. Chilton: --Not to my knowledge, Your Honor.

Justice Kennedy: Are there... are there instances, under your view of the statute, in... under the standard you propose, where costs would be awarded, but not fees?

Mr. Chilton: Well, if you view 1447(c) as an... a power enabling bill, not a fee shifting statute, the answer is yes.

I believe if the... if it's viewed as a fee shifting statute, the answer would be no, although, of course, the court has discretion to decide how much to award, and, in that sense, could award either no fees and all costs, or some--

Justice Kennedy: And, once--

Mr. Chilton: --combination.

Justice Kennedy: --again, can you advise us of their practice or lower court opinions addressing that issue?

Mr. Chilton: I cannot, but there certainly are lower court decisions that allow fees on remand in very small amounts that could not possibly have been sufficient to compensate for the work done.

Justice Kennedy: Because we think of costs as really a matter of course.

As Justice Scalia points out, it says "just costs", which... I take it "just" modifies just the cost and not the actual--

Mr. Chilton: Well, as the statute is written, that's true.

Justice Stevens: May I return to Fogerty for a minute?

As I read the footnote at the end of the opinion, which you say referred to the Third Circuit rule, it talks about, "nonexclusive factors are permissible".

It doesn't say the factors used by the Third Circuit are the... you know, set any particular standard.

As I read it, it leaves the discretion entirely up to the District Court to apply whatever reasonable and appropriate factors seem correct in the particular case.

Mr. Chilton: Well, that may be, Your Honor.

I read the decision, and perhaps--

Justice Stevens: But you're--

Mr. Chilton: --incorrectly--

Justice Stevens: --but you're--

Mr. Chilton: --as steer--

Justice Stevens: --the part of the decision on which you rely is the footnote at the end of the opinion, is that right?

Mr. Chilton: --Yes.

Justice Stevens: Yes.

Justice Scalia: --If the... the broader discretion we give to the District Court, the less litigation there is likely to be on this subject.

Mr. Chilton: That is certainly true.

Fewer appeals, at any rate.

And as long as we're talking about litigation expense, I think, to bring us back to one of Petitioner's arguments, they contend that their standard would reduce the amount of costs invested in jurisdictional issues.

But, in the same breath, they also say that the standard that they propose would encourage plaintiffs to move for remand.

The two cannot coexist.

If... not every remand motion is meritorious.

So, by encouraging plaintiffs to move for remands, you're, in fact, increasing the amount of jurisdictional litigation and the amount of costs incurred at... over jurisdictional issues.

I wanted, if I could, to answer one question that Justice Ginsburg asked in the beginning about the Omnibus Act.

Justice Ginsburg mentioned that it contained removal friendly provisions.

And it does.

They're not only the two that were mentioned... lack of... or abolition of the verification doctrine and deletion of the removal bond... but much more significant expansions of removal jurisdiction.

The... for us from California, in particular, the 1988 Act said that you could disregard the citizenship of "Doe", or fictitiously named, defendants in deciding whether there was diversity... complete diversity in a case.

That was huge for us in California, because virtually every State Court complaint in California contains "Doe" defendants.

And prior to that amendment, their citizen... you had to guess at their citizenship, and it prevented removal of virtually all State Court complaints, on diversity grounds.

So, to say that this 1988 Act was designed to discourage removals plainly goes against the text of the Act.

Furthermore, removal furthers not only the private interest of the defendant, but the Government's interest, the Federal interest, the interest of the people of the United States, in many cases.

And that's precisely why Congress has given us the right to remove in a whole series of areas, not only in diversity, but, of course, in Federal question.

An interesting example, because it arose for the first time in 1875, in the same Act of March 3, 1875, from which this cost provision comes, an Act that was passed by the lame duck radical Republicans at the same time they passed the Civil Rights Act of 1875, for the purpose of allowing Federal Courts to enforce the new Federal rights that Congress felt were not being adequately addressed in State Courts.

So, the State Courts, particularly the South, were thought to be hostile to the new Federal rights.

Similarly, just this year, in the Class Action Fairness Act, Congress allowed defendants to remove multi State class actions, not for the benefit of the defendants, but for the benefit of the entire Nation.

It... the Senate report, at page 9, specifically points out that it is those cases which most affect the interstate commerce of this Nation, and, for that reason, they belong in Federal Court.

Now, why would Congress choose to discourage defendants from removing those very cases by adopting a plaintiff friendly--

Chief Justice Roberts: Well, it's not those very cases.

By definition, this issue only comes up when the case should not have been removed.

Mr. Chilton: --The--

Chief Justice Roberts: So, it's not the cases that Congress wanted to be removed that we're talking about.

Mr. Chilton: --But, as this Court explained in Piggie... no, excuse me, Christiansburg Garment, Your Honor... the imposition of fees discourages activity when it's a Federal right that's being enforced, saying that fees are imposed whenever there's a near miss, a reasonable case that's brought to enforce the Federal right.

You discourage the very thing that Congress intended people to enforce.

That's my point here.

Yes, it's true, fees would only be awarded in those cases where the defendant is unsuccessful and the case is remanded.

But, for example, in the Class Action Fairness Act, that can happen even when there's a perfectly, not just reasonable, but exactly proper ground of removal, because the Class Action Fairness Act, among other things, says that when there's more than one third, and less than two thirds, the citizens in the State in which the complaint was originally filed, they're in the class, then the District Court has discretion to remand the case, even if it's properly brought in Federal Court, removed to Federal Court.

So, my general point is that Congress has enacted these removal statutes to promote Federal policy, and that it would be counter to that policy to discourage defendants from removing cases, particularly if the amount of fees that could be awarded would include all the fees incurred in Federal Court.

I mean, we're talking about very substantial fee awards, in that event.

And they would be a significant deterrent from exercising the very rights that Congress has said defendants should have for the benefit of the public.

Furthermore, as already pointed out, State Court plaintiffs never enforce congressional policy; otherwise, they'd be in Federal Court, under Federal question jurisdiction.

The defendant has not violated Federal law, so neither of the exceptional circumstances--

Justice Stevens: I wonder if that's a correct statement.

It seems to me there are a lot of cases in State Courts.

In 1983, cases are subject to State Court jurisdiction, where the plaintiffs are trying to enforce a Federal right.

Mr. Chilton: --Yes, but those can be removed, Your Honor.

Justice Stevens: Oh, I thought you said the State Court would never be enforcing a Federal... I may--

Mr. Chilton: Well--

Justice Stevens: --I may have misunderstood your point--

Mr. Chilton: --I--

Justice Stevens: --I'm sorry.

Mr. Chilton: --I, perhaps, was overgeneralizing.

What I meant to say was, in cases that are remanded because of lack of Federal jurisdiction, it is never the case that the plaintiff is enforcing a Federal right, because, if he were, there would be Federal question jurisdiction.

Justice Stevens: In other words, it was an improperly removed case.

Mr. Chilton: That's right.

In any event, if the Court has no further questions, I am through.

Rebuttal of Samuel H. Heldman

Chief Justice Roberts: Thank you, Counsel.

Mr. Heldman, you have four and a half minutes remaining.

Mr. Heldman: First, regarding the continued insinuation of some manipulative intent by the timing of the... of the removal, there was, in this case, no finding by the District Court, no suggestion by the District Court, that there was any such intent, or that that was a reason to deny fees, no suggestion by either of the lower courts to that effect.

Absent that, I think it might be that a delay in removal could, in an appropriate case, be something that went into the calculus of what expenses and fees were incurred as a result of the removal.

That may well go into the "amount" question.

But, absent a manipulative intent, it is still the case that it is the plaintiff who successfully sought remand, whenever it happened, that has the cleanest hands in the courtroom.

Second, Respondents describe their proposal as a middle ground.

There is no middle ground in this case, unless it is, "Eh, who knows"?

Their proposal is not middle ground, because their proposal says,

"There shall be no award of fees, in general. "

as the most important factor, where there was a reasonable basis for removal.

That cannot be described as a middle ground.

That tilts it in one way.

We tilt it in the other way.

And, as I say, a middle ground only gets you perhaps to Fogerty.

And it... and, as we show on page 30 of our blue brief, in the footnote, the District... there has been a lot of litigation, after Fogerty, still trying to figure out what the standard is... not only District Court litigation, but appellate litigation, and the Circuits are all over the map as to even what the copyrights standard is.

I urge the Court, for the benefit of the practicing bar, as well as the bench, not to go down that road.

Now, the road made some sense in Fogerty, and multifactor tests makes some sense in the... FOIA and ERISA, because, in those instances, there are very weighty public interests on both sides of the litigation.

When an ERISA claimant sues the ERISA fund, it's not a... it's not that one is the particular favorite of the law; they are both favorites--

Justice Ginsburg: Why--

Mr. Heldman: --of the law.

Justice Ginsburg: --not, then, just say "objectively reasonable basis to remove"?

That's a one... one standard.

Mr. Heldman: That standard is appropriate, as in Christiansburg, Your Honor, where the party who is potentially subject to the award is the favorite of the law in question.

That is, where there is a special reason not to seek to over deter that person, to encourage that person to litigate creatively and aggressively the reasonable, though ultimately wrong, propositions.

And so, I think the case reduces, in a large sense, to, Does Federal law encourage the creative aggressive litigation of questionable removals?

And among the ways we know that it does not is that this Court has said, for 60-something years, that removal is strictly construed, as every Circuit has understood that to mean.

That means doubts are resolved in favor of remand.

If Congress wanted to encourage the removal of questionable cases and get it all hashed out and make the defendants... they would, first of all, abrogate that rule, and, second, they would remove the rule in Section 1447(d) precluding reviews of remand orders.

Because as we have it now, except for special cases where the Congress decides otherwise, like the recent Class Action Act, where we have, otherwise, the substantive law is bent towards remand, bent against the creative and aggressive advocacy of perfectly reasonable, but wrong, propositions.

Justice Ginsburg: If the law was so anti removal, then one would expect there would be some kind of threshold check once you get to District Court.

But the removal process is, you file your notice that you're removing.

That's it.

There it goes.

And the District Court doesn't do any kind of initial screening to let it in.

It just gets there--

Mr. Heldman: My experience--

Justice Ginsburg: --by rapid transit.

Mr. Heldman: --I'm sorry, Your Honor.

My experience in the District Courts is that they do do an initial screening, as they should, in order to limit themselves on their own motion to their own proper jurisdiction.

This court, unfortunately... the District Court... did not.

But my experience in the District Courts is that some of them do, but a lot of... at least a substantial number of cases slip through the cracks.

Chief Justice Roberts: Thank you, Counsel.

Mr. Heldman: Thank you, Your Honor.

Chief Justice Roberts: The case is submitted.

Attribution:

The Oyez Project

Featured:

Scarborough v. Principi - Oral Argument

Fri, 09 Jan 2009 14:49:10 +0000

Case:

Scarborough v. Principi

Media File:

02-1657_20040223-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Brian Wolfman

Chief Justice Rehnquist: We'll hear argument next in No. 02-1657, Randall Scarborough v. Anthony J. Principi.

Spectators are admonished do not talk until you leave the courtroom.

The court remains in session.

Mr. Wolfman.

Mr. Wolfman: Mr. Chief Justice, and may it please the Court:

In 1999, Randall Scarborough won his disability appeal before the Veterans Court on the ground that the Government's position constituted clear and unmistakable error and that that position was, quote, not reasonably debatable.

End quote.

He then immediately filed a fee application under the Equal Access to Justice Act that contained three of the elements called for by the act, but it did not initially allege that the Government's position lacked substantial justification.

The Government seized on that alleged omission and without any mention of this Court's path-marking decision in Irwin v. Veterans Affairs, both it and the Federal Circuit determined that this omission of this legal conclusion was jurisdictional, meaning in effect that Mr. Scarborough's amendment to the application could not relate back to his timely filed application.

The Federal Circuit and the Government persisted in this view even after this Court remanded in light of Edelman v. Lynchburg College, which embraced the relation-back doctrine both in a judicial and an administrative law context.

The Federal Circuit's fundamental error here, the basic mistake, is that it perceived EAJA's limitations period as jurisdictional.

As I said, that holding can't be squared with the decision in Irwin or as reiterated by this Court just two terms ago in Franconia Associates, and that principle is this.

Unless Congress has provided otherwise, limitations periods that run in favor of the Government like those involving private parties are not jurisdictional, but rather are subject to ordinary statute of limitations principles that provide exceptions under certain circumstances.

And so then the question is, what does EAJA say to this?

There's nothing in EAJA that even hints that the statute creates the absolute--

Chief Justice Rehnquist: EAJA is Equal Access to Justice.

Mr. Wolfman: --Equal Access to Justice Act.

That's the acronym, Your Honor.

There... there's nothing that even hints that the Court... that the Congress created that type of absolute time bar under EAJA.

In fact, quite the contrary.

The statute makes clear that a court entertaining an EAJA application already has jurisdiction over the action.

Simply put, EAJA can't be jurisdictional in that sense, absolute in that sense, because as this Court just reiterated in Kontrick v. Ryan, EAJA doesn't serve to place a class of cases within a court's adjudicative authority.

Justice Ginsburg: Mr. Wolfman, if you're right about that it's not jurisdictional, so there should be equitable tolling, why should there be equitable... what's equitable about allowing a lawyer to overcome his carelessness?

I mean, the... the case of a layperson not getting a verification is one thing.

A lawyer reads a statute, it says, do this, that, and the other, and he doesn't do the other, and then it says, oh, but be equitable, court.

Why should a lawyer's carelessness be an occasion for equitable tolling?

Is there anything in it for the client if this is just the lawyer's fee?

Mr. Wolfman: No.

Well, I think there are several answers to that, but let me take the last part first, Your Honor.

First is that here actually the... the client has much coming.

These are the client's fees, and the veterans statutes provide that the contingent fee, which cannot exceed 20 percent, would be reduced dollar for dollar by the EAJA recovery.

So the client here, as all veterans claims, do have money at stake.

Let me turn to the question of equitable tolling that you asked.

Unknown Speaker: Excuse me. Explain that again.

The contingence fee would be reduced dollar for dollar by the recovery on--

Mr. Wolfman: By the EAJA recovery, yes.

The... the statute... the... the veterans statutes provide that the lawyer can enter a contingency arrangement with the client, but that the fee can't... can't exceed 20 percent of the claimant's back benefits if he or she prevails.

But when--

Chief Justice Rehnquist: --That's the recovered back benefits?

Mr. Wolfman: --That is correct, Your Honor.

So there... there can be no fee taken unless there's victory.

The statute also provides that.

However, a... a statute also provides on what do we do about the interaction between EAJA and this statutory contingency fee.

And what it provides is that for the same work, if there is an EAJA recovery, the client must benefit by that.

There can't be a double recovery and that the contingent fee would be reduced dollar for dollar for the EAJA recovery.

Justice Breyer: You could easily just reduce it if it was the lawyer's negligence and stopped him getting the contingency.

Mr. Wolfman: That is correct, but the law does not provide.

Justice Breyer: So... so then we're back to where Justice Ginsburg's question was.

You say, really, the person who should suffer is the lawyer, if the lawyer is negligent, not the client.

That would be pretty easy to arrange.

And you really want a rule that says whenever the lawyer is negligent, well, the other side has to suffer the consequence rather than the lawyer.

Mr. Wolfman: Your... Your Honor, first, there could be such a rule if Congress so provided, and I suppose--

Justice Breyer: Why couldn't you do it under a rule of the court?

Why couldn't you just say... I mean, if I were sitting in that court, it wouldn't take me long to try to figure that out unless Congress thought of... unless it forbid it somewhere.

I mean, if it forbid it, you couldn't do it, but... but I don't know... what you've read me doesn't sound as if it forbids it.

Mr. Wolfman: --I think it is true that the... the statutes that I've just talked about don't forbid that.

Whether rulemaking authority enters into that kind of substantive arena, I think that would be unusual because ordinarily that would be governed by State malpractice--

Justice Scalia: I don't know what we're talking about here.

Whether... whether the... whether the client can resist the lawyer's request for the 20 percent contingent fee on the ground that it's the lawyer's own fault that I didn't get compensation that would enable me to pay that fee.

Mr. Wolfman: --I think that's... that's what the--

Justice Scalia: I don't know if that--

Mr. Wolfman: --the question--

Justice Breyer: --Well, anyway, okay, let's skip that because the question is--

Mr. Wolfman: --I would like to go back to the--

Justice Breyer: --Let's go back to the main issue.

Mr. Wolfman: --question of equitable tolling, if I might.

And... and let me answer that in two ways.

First of all, there is a category of equitable tolling that's set out in the Irwin decision and others which if... if a claimant filed... timely files a... an action, that... that is properly filed but jurisdictionally defective in some way, that equitable tolling is a... is a basis for allowing some forbearance in that circumstance--

Justice O'Connor: Mr. Wolfman, I... I don't understand why we have to first address equitable tolling.

I mean, why don't we look at the statute and see whether it is necessary that this allegation that the U.S. was not substantially justified has to be made within 30 days?

I mean, if it doesn't, why do you get into equitable tolling at all?

Why don't you start with what the statute requires?

I thought that was what the split was about.

Mr. Wolfman: --We... Your Honor, with all respect, no.

The split was not on the question of what the... this... whether the statute requires the allegation of no substantial justification in the 30 days.

The split was on the question--

Justice O'Connor: Do you take... do you take the position that under the statute, the Equal Access to Justice Act statute, subsection (B), that that allegation does not have to be made within the 30-day period?

Mr. Wolfman: --We do and we briefed that extensively both in our opening brief and our... and our reply brief.

Justice O'Connor: And do you plan to address it this morning with us?

Mr. Wolfman: I'd be happy to address it right now if... if Your Honor will allow, which is that--

Justice O'Connor: Well, it just looks like a lot easier argument to me than equitable tolling.

Mr. Wolfman: --Let me answer that.

The... the answer is the plain language of the statute, the first... the first sentence of (d)... of section (d)(1)(A)... (d)(1)(B)... excuse me... says that there shall be three things alleged and that they must be done within 30 days.

The next sentence, which is the one that is at issue here, says that the... the parties shall also allege that the position of the Government is not substantially justified, and that sentence does not include the 30-day time limit.

That is one of our arguments in this case.

Justice O'Connor: And that's similar to the kind of interpretation the Court had to face in Edelman, isn't it?

Mr. Wolfman: It is.

Justice O'Connor: I mean, you know--

Mr. Wolfman: And that... we make that argument directly in our brief.

Justice Scalia: --In Edelman, it wasn't in the... it didn't follow immediately as part of the same paragraph and the... the what leaps to mind when you read a sentence that says the parties shall also allege, is where?

Where shall the party allege this?

Is he supposed to file a separate paper later?

The logical answer to that question is found in the preceding sentence: shall within 30 days submit to the court an application which shows that the party is a prevailing party and is eligible to receive an award stating the actual time, blah, blah.

The party shall also allege.

Surely it means where?

In that application that is referred to in the preceding sentence.

It seems to me you're making a... a... just a mess of... of that paragraph to say, you know, you can file a paper, who knows, 9 months later alleging that.

That... that's just not a... that's not a reasonable reading of it, it seems to me.

Mr. Wolfman: But, Your Honor, we disagree and the reason is it's in that separate sentence and there are subsequent proceedings in the case.

There are subsequent filings made.

There are sometimes hearings where that--

Justice Scalia: It doesn't matter at all when it's alleged?

You can wait until, you know, the very end of the case?

Mr. Wolfman: --That... that is--

Justice Scalia: The Government has to go along not even knowing whether you claim that the Government's position was substantially justified?

Mr. Wolfman: --Well, on that question, the... the burden is on the Government to show that its position was substantially justified.

Justice O'Connor: That's the point.

The statute places the burden on the Government to prove that its position was not substantially justified.

Mr. Wolfman: That is correct, and that is our submission.

So the question is why might Congress have parsed it in this way.

Justice Scalia: It's the burden of proof as opposed to the burden of making the allegation of... of setting the... the point in controversy.

Mr. Wolfman: That... that is correct in the sense that... that the statute is unusual and that it... it's... it does say that the party seeking fees shall allege the position of the Government lacks substantial justification.

But there's no question... and it is conceded here that the Government has the burden of persuasion on that question.

So in... in this respect--

Justice Scalia: You mean, even if you don't allege it, the Government has to come in and show that its position was... even though it's never alleged.

Surely you don't say that.

Mr. Wolfman: --Your Honor, it--

Justice Scalia: What... what if you have a lawyer that hasn't read the statute and he doesn't realize, that he thinks if he won the case, he gets his fees?

And so he just files this without any allegation that the Government's case was not substantially justified.

Mr. Wolfman: --We--

Justice Scalia: The Government still has to come in and prove that its case was substantially justified?

Mr. Wolfman: --No.

We... we believe that at some point the statute makes clear that at some point the applicant will have to make that allegation.

Justice Scalia: What would be the logical point--

Mr. Wolfman: I think the--

Justice Scalia: --for that... for that claim to be made?

Mr. Wolfman: --In all candor, Your Honor, the most logical point is at the outset.

Justice Scalia: Of course.

Mr. Wolfman: We don't disagree with that.

But our position is that if you look at the statute, the statute doesn't contain that 30-day limit within the second sentence, and following on Justice O'Connor's question, there is potentially good reason for that which is that the burden on that question is on the Government.

We don't know why because it is not revealed entirely why the 30-day limit is not in the second sentence.

Chief Justice Rehnquist: Well, that would be a good reason for omitting the requirement entirely, but I don't think it's a very good reason for saying that the 30-day rule doesn't apply.

Mr. Wolfman: The 30-day... well, that is our position, Your Honor, and I think... I think we've exhausted the reasons why Congress might have done it.

May I go back to the initial question?

Because I want to... I want to clarify something.

I initially got a question about equitable tolling, but our principal submission here and I think the easiest way to resolve this case is that this... this provision is not jurisdictional.

Mr. Scarborough filed on time, and so it's a perfect example of where the relation-back doctrine would apply.

This is a typical relation-back situation.

The... the application was filed.

It was timely.

There was an omission and Mr. Scarborough, immediately upon the omission being brought to his attention, filed an amendment that made this 10... this 10-word legal conclusion, and that should be the end of the matter.

Justice Ginsburg: Mr. Wolfman--

Justice Stevens: --Will you just clarify one thing for me?

I want... I think I understood your answer, but... to Justice Ginsburg, but if he has a contingent fee of 20 percent, he gets a $1,000 recovery and a $200 fee, and he goes... now he gets... files an EAJA position, if he recovers precisely $200, that goes to the client?

Mr. Wolfman: That would be correct.

Justice Stevens: What if he recovered $300?

Mr. Wolfman: Then the $100... then $200 would go to the client and $100 would go to the lawyer.

Justice Stevens: But in all events, the client would get a piece of the recovery under EAJA.

Mr. Wolfman: That is correct unless, for some reason, there was not a contingency fee.

That is correct.

Justice Stevens: Not a contingency fee.

Mr. Wolfman: Right.

Justice Stevens: But you're saying--

Mr. Wolfman: And... and in almost all cases--

Justice Stevens: --they are... typically they are--

Mr. Wolfman: --there is.

Yes.

Justice Stevens: --contingent fee cases.

Mr. Wolfman: In almost all cases there are.

And as I say, the statute allows it up to but not in excess of 20 percent.

Chief Justice Rehnquist: Am I right in thinking that your client did not file the allegation about the Government's position being unjustified until after the Government moved to dismiss?

Mr. Wolfman: That is correct.

That is correct, and that was approximately 33 days after the 30-day period expired.

Justice Breyer: But there... there is an argument the other side I'd like you to deal with.

There's a... you... you look at the statute, and it looks like Congress was intending to have in front of the judge and in particular to have in front of the Government all the facts right there the first day.

There are a lot of these things.

They have to process them quickly and they want to decide whether to settle it or not settle it.

And what they have, therefore, you say right in the application within 30 days.

Did I win?

It's not so clear sometimes because, you know, they're mixed claims.

Explain it.

Show that you're eligible and also say how much it's going to be.

Right there, first from day one.

And although this next part is a formality and is in a separate sentence, that doesn't matter.

It happens to be really in the same two sentences and there's no reason to treat it differently.

All right?

So that's their argument.

And now I'd like to see what your response is.

Mr. Wolfman: My response is... and if I understand the question... is take... to take as a given that the... that the statutes contemplates that the no-substantial-justification allegation be made within the 30 days.

And then our response is that this is not a jurisdictional provision.

The statute does not create an absolute bar, and then we look to the common law exceptions to statutes of limitations.

Justice Breyer: You could do that.

You might do that.

So that... that's... in other words, you're saying... that's Irwin.

I mean, you're arguing--

Mr. Wolfman: It's Irwin.

It's... it's Edelman.

It's Becker and so forth.

Justice Breyer: --So you want to say that that would apply to every one of these four provisions.

Mr. Wolfman: It would and the courts--

Justice Breyer: All right, and... and treat them all alike and therefore the separate sentence is a kind of make-way.

Mr. Wolfman: --No.

I'm not saying that.

I'm saying that your question... I... I took your question to ask me to assume that all four allegations have to be made within the 30 days.

Justice Breyer: Okay.

So--

Mr. Wolfman: If I assume that, then yes, the answer to your question is yes, that we would apply those ordinary common law exceptions.

Now, judges--

Justice Breyer: --Aside from that, now... now take the other part of your argument and say, no, no, it's really different, this fourth one.

This fourth one is really different.

And I got it that it's in a separate sentence.

I don't know how much to make of that.

Is there... is there any other basis for saying... I mean, maybe that's conclusive.

I'm not saying it isn't, but I want to be sure I have everything in front of me that would make it different.

Mr. Wolfman: --I think the other thing that... that I would like to put in front of you... and this had to do with my colloquy with Justice O'Connor... which is that there is a different character that... to that allegation.

It is a mere allegation and it simply notifies the Government about its substantial justification defense.

Justice Scalia: Well... well, there's... there's more than that to it.

This... this is always filed by an attorney, and as an officer of the court, I assume that he cannot just come in and say the Government's position was not substantially justified when it is very clear that it was substantially justified.

I assume he'd be... he'd be liable for a sanction from the court if he did that.

Mr. Wolfman: I think that is a fair point, Your Honor, and let me answer that this way.

Justice Scalia: So to follow up, I mean, what... what this means is we... we want to be sure, when this thing is filed, that it's not just nuisance stuff.

We want a lawyer, when the thing is filed within the 30 days, to be standing on his reputation as an officer of the court that, in fact, the Government's position wasn't substantial.

Mr. Wolfman: I got that, and let... if... if I might let me answer that.

Because then I think if we conceive of the purpose of this allegation as making a lawyer think twice, then it puts the case in the realm of Edelman and Becker where in Becker you had a signature requirement, Edelman you had a verification requirement, and those... those requirements are things that are supposed to make the filing party think a little bit before he or she does the filing.

But in both of those cases, the Court said, okay, we realize the purpose of it, but we will still allow supplication... supplementation of the application, and we'll allow them to amend and to relate back unless the adverse party is prejudiced.

And it's hard to conceive of the prejudice here.

Justice Scalia: We... we may not be as tender to attorneys who should know better as we are to... to litigants who maybe had a bad attorney or didn't know better themselves.

Mr. Wolfman: Well, with... with all respect, Your Honor, I think that might in part, at least in part, explain Edelman.

But I do not believe it explains Becker.

Becker did involve a pro se applicant, but as we know, most appellants in the courts are... are parties that are represented by lawyers, and Becker held unequivocally that the failure to sign was not fatal and that, in fact, the... the amended, signed notice of appeal could relate back.

And that's all that's being requested here.

Justice Ginsburg: Mr. Wolfman, I was surprised that you didn't cite 1653 of title 28 which says defective allegations of jurisdiction may be amended upon terms.

I mean, if you say, okay, even assuming it were jurisdictional, if it were jurisdictional... even if it were jurisdictional, you could still amend with the court's permission.

Mr. Wolfman: I think you're right, Your Honor, and that is neglectful on our part and we could have... we could have cited 1653 as well.

It stands for the same principle I think as the--

Justice Scalia: Well, excuse me.

Nobody says that this is an allegation regarding jurisdiction.

Mr. Wolfman: --Well, that... that is true too.

Justice Scalia: I mean, what... what the issue is is whether the 30-day limit is a jurisdictional limit or not.

Mr. Wolfman: Right.

And... and--

Justice Scalia: But I don't think any--

Mr. Wolfman: --it's not.

And... and I think that's the key point.

It is not and the... the Irwin and Franconia Associates I think so clearly stand for that proposition.

That is the argument that we went to first and most directly, that unless Congress explicitly provides otherwise, limitations periods will be governed by the same types of limitations principles that... that govern private litigation.

Justice Scalia: --I... explain this relation-back theory.

Anything can relate back?

You can do any... is there no limit to the... to the sweep of that proposition?

Mr. Wolfman: No. I think there are limits.

For... and... and I think--

Justice Scalia: What are they?

Mr. Wolfman: --a court would look to rule 15 which codifies the relation-back doctrine and says, number one, does it... does the matter arise out of the same transaction as occurrence... as the original filing.

Does it arise out of the same thing that the adverse party was given notice of?

And then I think the other thing that's quite... that's quite apparent the courts would apply is, is the other side prejudiced by this?

How long of a time period had gone by?

How important or how new is the information?

Here, there's never been any claim of prejudice nor could there be, I don't think, because the Government responds... they point out that... that this legal allegation was not made.

The other side comes in and immediately amends or... and... and that's all there is to it.

This matter would have been resolved years ago if that had transpired.

Justice Scalia: Suppose you had a statute that... that provided a... I don't know... 3-year statute of limitations for... for negligence in a particular context, but it... it went on to say, however, all causes of action claiming intentional wrong must be filed within 1 year.

Do you think that after 2-and-a-half years you could revise a filing that did not allege intentional wrong and say it relates back?

And... and some States do have different statutes for intentional torts versus negligent torts.

Do you think you could revise your--

Mr. Wolfman: I think that would be a much more difficult claim for relation-back, and the reason is is because the court... the State apparently has said, as a matter of our substantive policy, that we want to give notice of this type of claim much earlier.

Justice Scalia: --Right.

Mr. Wolfman: But let me answer that--

Justice Scalia: So it really does come down to whether this... this allegation was... whether there was some particular reason why it had to be--

Mr. Wolfman: --But might I extend my answer a little bit?

Justice Scalia: --Sure, sure.

Mr. Wolfman: Because... because I... I think your hypothetical stands in contradistinction from the ordinary rule, that if you've alleged the... the relevant facts, you can... actually amendment is freely given to... to state the legal theory under which those facts arise.

And I cite those cases in my brief.

Chief Justice Rehnquist: Complaint... in a complaint, you don't even have to state the legal theory.

That would be in a brief opposing a motion to dismiss.

Mr. Wolfman: That... that is correct that... that you have to state jurisdiction and you have to state the facts.

And the... the forms that appear at the end of the Federal Rules of Civil Procedure do say that the... the pleader ought to state the... the type of action, whether it be negligence or otherwise.

But I think it does stand in distinction to Justice Scalia's hypothetical where the State has made very clear that there is a substantive policy that we want to follow such that we want to give more notice and quicker notice of this type of action.

That's not what we have here.

Justice Breyer: All right.

The... the problem with this... and there is a problem maybe just for me, but there's a lot of legislative history here that says that, for example, the deadline for filing the fee application is jurisdictional and cannot be waived.

And then there are a lot of other stuff.

The Administrative Conference has said you ought to make this subject to waiver for good cause, and that was rejected.

And so there is a lot of history that says you just can't do an Irwin kind of thing.

We don't mean that.

We don't mean you can waive this.

Now, what am I supposed to do with that?

Mr. Wolfman: Well--

Justice Breyer: Sort of parse the thing and say, well, this... this portion of it is... is subject to the equitable exception and the doctrine itself... the... the application itself is not subject to it?

Or how am I supposed to handle that in your view?

Mr. Wolfman: --Well, we deal with the legislative history in quite some detail in our reply brief, but let me... let me deal with it briefly here, which is that the... the one line that you quoted about the jurisdiction... the application is jurisdictional and cannot be waived was in a... a committee report that was submitted with legislation that was vetoed by the President.

The next year when the legislation was actually enacted, very similar legislative history appears, and it's... it drops that line and says as follows.

The court should avoid an overly technical construction of these terms, the terms being the 30-day rule.

This section should not be used as a trap for the unwary resulting in the unwarranted denial of fees.

Justice Scalia: Who said... who said that?

Mr. Wolfman: That's in the legislative history cited in our brief.

Justice Scalia: Yes, what is it?

I mean, just... just--

Mr. Wolfman: It's a House report No. 99-120 at... at page 6, footnote 26.

But it... what I'm... what I'm getting at is the legislative history, from which this was taken, the one line that they rely on, was... accompanied legislation that was actually vetoed.

It was then replaced by other legislative history which supports our position.

I want to be clear.

I'm not... I'm not suggesting that this legislative history, either way, bears great weight, and we don't rely on it in our opening brief.

But to respond to that question, I think the legislative history at best for... for the Government is a wash.

Unless the Court has any further questions, I'll reserve the balance of my time.

Argument of Jeffrey P. Minear

Chief Justice Rehnquist: --Very well, Mr. Wolfman.

Mr. Minear, we'll hear from you.

Mr. Minear: Mr. Chief Justice, and may it please the Court:

Section 2412(d) requires that EAJA fee applicants submit an application within 30 days of a final judgment that includes an allegation that the Government's position was not substantially justified.

Petitioner's lawyer failed to do so in this case and for that reason fails to qualify for fees.

This Court has no power to amend EAJA or to excuse lawyers from their carelessness in failing to follow its requirements.

Justice Kennedy: Are there any instances in which the Government is liable for fees even if its position was substantially justified?

Mr. Minear: Yes, under section 2412(b), EAJA subjects the United States to fees on the same basis as other parties in other legislation.

By contrast, section 2412(d) provides a special provision, distinct from those provisions that apply to private parties and the United States generally, that requires there be a showing that the Government's position was not substantially justified.

Justice Scalia: There are also some... some other statutes besides EAJA in which the Government, when it loses, whether its position was substantially justified or not, is subject to... to fees.

Isn't that... isn't that correct?

Mr. Minear: Yes, if I can clarify.

Section 2412(b) indicates the Government is waiving its sovereign immunity as to those other statutes.

Justice Scalia: Right.

Mr. Minear: So in the case of 2412(b), it puts the United States on the same par as private parties, and in that sense, it's comparable to the situation that was faced in Irwin where the United States is subject to Title VII actions on the same basis as private parties.

Justice Kennedy: Well, I... I think you know where I was going.

Was... was the Government somehow puzzled or confused when it received this document or did it naturally assume that it would have to show that this position was substantially justified?

In other words, would there have been some other theory in which the Government might have thought it would have been really liable for these fees?

Mr. Minear: Justice Kennedy, I have two answers for that.

First of all, the statute requires that these conditions be met, and these are conditions on the Government's--

Justice Kennedy: Well, that's the issue we're... we're talking about.

Mr. Minear: --And these are conditions on the Government's waiver of sovereign immunity.

So the Government has an obligation to insist that parties comply with those conditions--

Justice O'Connor: Well, that's... that's true.

The question is whether this allegation has to be made within the 30 days or whether it can be offered subsequently as an amendment.

Mr. Minear: --That's--

Justice O'Connor: Clearly it has to be made.

And the Government certainly was not in doubt about the fact that its... it wasn't going to be liable for the fees unless it was in due course made.

Mr. Minear: --I'd like to make two points with regard to this.

Justice O'Connor: Yes.

Mr. Minear: First of all, with regard to the 30-day time limit--

Justice O'Connor: Right.

Mr. Minear: --this Court indicated in INS v. Jean, 496 U.S. at 160, that the 30-day requirement does apply to the allegation of no substantial justification.

As we explain in our brief, Jean indicates it's a 30-day requirement and at page 160 they say that the fee application has to include--

Justice Stevens: Mr. Minear, can I--

Mr. Minear: --this allegation.

Justice Stevens: --Can I ask you sort of a basic question?

Sometimes these things are negotiated I think, aren't they?

After the fee application is filed, the counsel may meet and discuss whether they can settle the fee application?

Mr. Minear: That is correct.

Justice Stevens: During... if such a meeting took place 15 days after the application was filed, do you think the Government lawyer would have an ethical duty to tell the plaintiff's lawyer... say, you goofed and forgot the no-substantial-justification allegation in your... in your request?

Mr. Minear: The Government... the Government attorney might have that obligation in the course of settlement negotiations.

Chief Justice Rehnquist: What would be the--

Mr. Minear: But in adversary litigation, the United States certainly doesn't have the obligation--

Chief Justice Rehnquist: --What would be the basis of settlement... of the obligation in settlement negotiations?

I mean, long ago the Court said that you didn't... that opponents couldn't live by their adversaries' wits.

Mr. Minear: --Yes, that's... and I agree with that, Mr. Chief Justice.

But in the course of discussing these matters, there's a possibility that there could... that the Government has to be careful not to mislead the party, and so that's where an ethical obligation could come forward.

But in this case, there were no negotiations of that type.

Rather, there's simply the Government's obligation to respond to the fee application, and we responded appropriately.

Justice Kennedy: But... but in this... in this case the application did say that it was pursuant to 2412.

So as I indicated and Justice O'Connor said, the Government was under no... no mistaken assumptions about the applicability of this section and this section only.

Mr. Minear: But the United States was not on notice whether this party was contesting that the Government's position was not substantially justified.

Justice Souter: Do you take the position that there is any point in requiring that allegation to be made other than the point that was described in the earlier half of the argument?

And that is, to put the... in effect, to... to put the lawyer on notice that there is a responsibility here to be serious before one goes forward with a... with fee litigation under this act.

Mr. Minear: There--

Justice Souter: Is... is there any other reason for it?

Mr. Minear: --There are three reasons.

First of all, it's a condition that Congress placed on sovereign immunity.

And by that alone, the courts and lawyers and the United States representing Congress' will must respect it.

Second, this obligation requires the party, as was articulated earlier, to examine the Government's position and make a determination of whether or not they wish to contest whether it is substantially justified or not.

So that does put that additional obligation on counsel.

Third, it's of use to the United States in determining how to respond to a fee application.

The United States--

Justice Souter: Yes, but all the United States has to do, in the absence of an... of the allegation, is what it does here and say, you didn't make the allegation.

We move to dismiss.

If the lawyer is really serious, the lawyer is going to come back and say, whoops, I... I do make that allegation.

At that point, the United States knows where it stands and presumably it has the... the benefit of the lawyer's sense of responsibility for going forward and you go forward.

Mr. Minear: --Except that the party did not comply with the condition that Congress imposed on its waiver of sovereign immunity.

Justice Ginsburg: Mr. Minear--

Justice Kennedy: --But other than that, the Government has not really been prejudiced in anyway.

The Government knows of the substantial justification rule and it's either ready to defend or... or acquiesce on that point.

Mr. Minear: Well, the Government and the courts are both prejudiced by this because it requires two additional filings that otherwise would not need to be made if the lawyer had not been careless.

In this situation... we face thousands of suits that potentially implicate EAJA claims, and Congress recognized that these are matters that need to be resolved quickly with minimal litigation in contradistinction to what's happened in this case.

And--

Justice Ginsburg: Mr. Minear, the... the Federal Circuit obviously doesn't agree entirely with the position you're now saying, you have to do everything up front.

And what struck me as curious is the Federal Circuit allows you to flesh out allegations.

So, for example, you say I... I want a fee of $1,000 but you don't put in the itemization.

As I understand the Federal Circuit's position, they allow you to flesh out something that... that really seems to me is a lot more substantial, to document your fee.

But this is a pro forma allegation.

So it seems to me, if you're saying... if you're taking the position you must do everything within 30 days, then you would have to say the Federal Circuit is wrong in saying you can flesh out allegations.

Mr. Minear: --Well, those issues are not before the Court at this time.

The United States does have a different view on that.

But I must disagree that is a pro forma allegation.

That... that suggests that... that we need not require the lawyers to comply with the letter of the law because we don't think they're going to comply with the spirit of the law.

Rather--

Justice Ginsburg: No.

They have to comply.

The question is can they be excused if they're a little late.

Mr. Minear: --Yes, and in that respect, the parties have... petitioner has... the petitioner has made two arguments.

One is the relation-back doctrine and the other is equitable tolling.

I'd like to turn to each of those issue specifically.

Justice Scalia: Before you do that, could you finish your answer before where you said you had two points and you raised a case with regard to point one, and then I never did hear point two because a question came up.

You don't remember it either.

Mr. Minear: This... probably... I'm not sure if it was--

Justice Scalia: Let's forget about it.

Mr. Minear: --On... on the relation-back doctrine.

Justice O'Connor: You said you'd give us some reasons why this is important to the Government.

Mr. Minear: Yes, and the reasons were, first of all, our obligation to defend those conditions that Congress places on its waiver of sovereign immunity, and second, to ensure that there is efficient processing of attorney application fees.

Justice Breyer made allusion to this in the first part of the argument, and as I said before, the Government faces thousands of these requests, and it's very important they be... be resolved promptly.

And they can only be resolved promptly if parties follow the rules that Congress has laid down.

We believe that's why Congress set these rules, because they wanted to make sure that attorney claims would be resolved efficiently, and they cannot be resolved efficiently if parties don't play by the rules.

Now, the relation-back doctrine is really an exception to the rules that Congress set forward, at least the... the relation-back doctrine, as the... as petitioners are suggesting it ought to be applied here.

As a general matter, the relation-back doctrine is a principle that's codified in rules, such as rule 15 of the Federal Rules of Civil Procedure.

And it provides an exception for, in that case, pleadings being amended after the fact.

But this isn't a case of initiating civil litigation and this is not a case where rule 15 applies.

Rather, the question is what did Congress intend.

If Congress had wanted a relation-back doctrine, it could have specified that.

Justice Ginsburg: Wasn't there a relation-back doctrine that courts were applying before it was codified in 15(c)?

Mr. Minear: The examples that petitioner points to are cases involving the Federal Employees Liability Act involving the injuries to interstate... to railmen who are working in interstate commerce.

And in several instances, the Court had applied that as a common law principle indicating, as in Kinney, that those arguments on either side for that particular rule.

But I don't think we can say that there's a general principle of relation-back.

And certainly--

Justice Scalia: You wouldn't want to generalize from FELA cases, would you?

Mr. Minear: --No, I would not.

Justice Ginsburg: But there was in States... some States also had a relation-back doctrine.

Mr. Minear: And the note in rule 15(c), the 1937 note to the Federal rules talks about codifications of this, but we're talking here about a situation where Congress has set a time limit and has not provided for relation-back, a case where we're dealing with sovereign immunity, where this is a charge against the Federal fisc.

And so we have--

Justice Stevens: Of course, the timeliness argument is somewhat strange in this case because he filed the application prematurely, as I remember the case, didn't he?

And then said, no, you got to wait until the mandate comes down, and then after the mandate came down, he refiled it, and then the 30 days went by and the Government asked for an extension.

It didn't... to get it... to get it disposed of.

So the Government's argument that you've got to get this done as fast as possible seems a little strange in this particular case.

Mr. Minear: --Well, Your Honor, in this case there were two premature applications that were filed.

The first application was filed prematurely.

The court returned it and said until the 60-day period runs.

Justice Stevens: Right.

Mr. Minear: The parties then filed another premature application.

Unknown Speaker: Which was identical to the first.

Mr. Minear: That's right.

And the court held it until the mandate issued and at that point asked the United States to file a response, a 30-day response.

So the Government acted quite appropriately.

It acted--

Justice Stevens: Well, they took more than 30 days to respond.

Mr. Minear: --Yes, it did, but it could well be because we are dealing with--

Justice Stevens: Because they wanted to wait and see whether he'd catch his goof.

Mr. Minear: --No, not at all.

At the time we filed our extension, the time had already run for that.

But the... the problem that we face in the Government is that we have numerous cases and numerous fee applications.

It could very well be--

Justice Breyer: But why doesn't all that fit within a... an equitable exceptions doctrine because that's one of the things you take into account?

My basic question is, why not read the statute of limitations... say what this Court said in Irwin and others... as they're normally read subject to equitable exceptions?

Or at least if the... if the legislative history makes that impossible... and I was just told it doesn't at all... read the filing of the paper as absolute but the contents of the paper is subject to equitable exceptions?

So you'll win 99 percent of the time.

It's just the lawyer really had a heart attack on the way to the post office, you know.

I mean, something awful came up and why not give him the advantage of that equitable exception?

Mr. Minear: --Your Honor, in this case the equitable tolling argument, I have to point out, was not raised before the court--

Justice Breyer: No, no, no, but I mean, we're trying to interpret this statute.

And would it be... is there any reason not to interpret the statute... whether they win or they lose in this particular case is a matter of lesser importance perhaps, but not to them, but to... to others.

But to get the statute right is important.

And... and therefore, do you think the correct interpretation of this statute is like other statutes, as I said, A, subject to equitable exceptions or, B, at least the content of the document is subject to equitable exceptions?

Mr. Minear: --Your Honor, we would say neither is subject to equitable exceptions.

Justice Breyer: I knew you would say that.

Mr. Minear: Yes.

Unknown Speaker: And I'm interested in why.

Mr. Minear: Yes.

First of all, the statute itself sets a strict 30-day time limit.

It does not provide for relation-back.

If Congress wanted relation-back, it could have.

And to imply a relation-back doctrine is to negate Congress' specific intent in this case.

With regard to equitable tolling, this Court said in Irwin that equitable tolling will be presumed to apply in those cases involving Government waivers of sovereign immunity where the Government is held liable on the same basis as private parties as in title VII.

But as my colloquy with Justice Stevens pointed out, this is not a situation where the United States is being held liable for attorneys fees on the same basis as other parties.

That's what section 2412(b) applies... provides, and perhaps equitable tolling should apply there, perhaps not.

That's a different question.

Here--

Justice Scalia: Mr. Minear--

Justice Stevens: --Let me ask you another question, if I may.

Supposing that a plaintiff's lawyer has trouble finishing his time sheets.

It's a long, protracted case, and just before he filed the fee application, he called the Government lawyer and said, I don't think I can get my time statement in in 30 days.

Will you agree to a 2-week extension?

Would the Government lawyer have authority to grant that... to... to stipulate to such a 2-week extension?

Mr. Minear: --No, he would not.

Under our reading, this is a 30-day time limit and the parties have to comply.

After all, this litigation, as in this case, has been going on for several years.

The attorneys have an obligation, if they want fees, if they want the Government to pay their fees, to keep good records and to avoid careless acts--

Justice Breyer: But is he... is there any other reason?

So far what I've registered in my mind is the statute says nothing about equitable exceptions one way or the other.

The difference between this statute and a lot of other Government statutes of limitations is in the other ones, they're creating an equality between Government liability and private party liability, and in this one it's only the Government that would be liable for the fees.

Mr. Minear: --That's correct.

Justice Breyer: And is there anything else?

That's quite a... it's a formal reason but an important formal reason.

Is there any other reason?

Mr. Minear: That is our principal basis--

Justice Breyer: All right.

So that's it.

Mr. Minear: --for distinguishing Irwin.

But I'd like to point out also that equitable tolling was not raised in the court--

Justice Scalia: Well, Mr. Minear, is it... could we possibly find for you in this case on the... on the issue of relation-back while leaving open the question of whether equitable tolling can apply or not?

Mr. Minear: --Yes, you can.

Justice Scalia: Because as I understand the relation-back doctrine, it doesn't matter about the equities.

Whether... whether it's his fault or not, you can always relate back.

Mr. Minear: That's correct.

Justice Scalia: Whereas, equitable tolling would generally be... be eliminated if... if fault is involved.

Mr. Minear: That's correct.

Now... now, we think that you do not need to reach the equitable tolling issue, but if you do, there's no basis for equitable tolling in this case in any event because equitable tolling is a doctrine that developed with the... based on the concept of ameliorating or preventing unfairness to litigants.

Now, there's nothing unfair in requiring an attorney to comply with Congress'--

Justice Ginsburg: Mr. Minear, can I ask you to go back?

Because I don't think you... the relation-back, if it goes by rule 15(c), it's not just that you have an absolute right.

15(c)(3) makes it very clear that if there's prejudice to one side, it doesn't relate back.

It isn't an automatic thing that, oh, you can always make up for not having--

Mr. Minear: --That's correct, Your Honor.

If I could clarify.

In answering Justice Scalia's question, I was indicating that there doesn't have to be inequitable conduct in order to qualify for relation-back.

But it doesn't mean you would get it automatically.

Justice Ginsburg: --But it isn't... it isn't... it isn't automatic.

It has to be that the other side knew or should have known that but for a mistake, that you would have put this in.

Mr. Minear: Yes.

But again, rule 15(c) by its terms does not apply to this case.

It applies to pleadings.

Justice Ginsburg: You made a distinction in your brief.

You said, well, rule 15(c) is a pleading rule.

This is not a pleading.

This is an application for a fee.

So I say, yes, it is an application for a fee, not a pleading, but why should that make any difference to the concept of relation-back?

Mr. Minear: Because rule 15(c) applies to litigation generally.

In this case, we're dealing with a specific time requirement that only applies to Government applications... to applications for fees against the Government when the Government's position is not substantially justified.

There's simply no basis for applying rule 15(c) to this situation.

Justice Ginsburg: But that... well, that answer does... has nothing to do with whether it's labeled a pleading or an application.

Mr. Minear: That's correct.

That... that may be correct.

Ultimately 15(c) simply doesn't apply here is my point, and if we're going to look at the time limits, we have to look to what did Congress intend what it... when it enacted 2412(d)(1)(B).

It set a 30-day time limit.

It didn't create any exceptions.

It didn't provide for any relation-back.

And imputing relation-back would destroy that 30-day time limit that Congress specified.

Justice Breyer: You're in the... I mean, you've raised a number of... of very good points that make this quite complicated, and I'm looking to try to simplify it in my own mind.

Could we say... and you'll... could we say that in respect to the 30-day filing requirement, we don't have to decide whether it is absolute or not absolute, subject to equitable defenses of different kinds or not.

In respect to the content parts of this, at least the fourth part, it's treated like any statute of limitations, any ordinary statute of limitations, and whatever they're subject to, Judge, you make this one subject to.

Now, there you'd meet me with the argument but this is the Government and... the one we went through.

Is there any other reason for not doing it?

Mr. Minear: Well, this is as... as you point out, this is a content limitation.

It's like Torres and other cases where content does need to be included within the specified time limit.

It's not simply a formality like a verification or a signature.

Rather, we're talking about the threshold allegation that triggers the right for attorneys fees and triggers the obligation of the Government to respond and show that its position was substantially justified.

Without that, you really don't have a fee application as Congress conceived of it.

When we look at what do we mean by a fee application, we have to look at 2412(d)(1)(B), and Congress indicated what it felt was essential in the fee application.

You have to show that you prevailed.

You have to show that you're a qualifying party under EAJA.

You have to provide your costs, including an itemized list of costs, and you have to make the threshold allegation the Government's position was not substantially justified.

Those terms define what a fee application is.

And this Court's decision in Jean indicates it all has to be done in that 30-day period.

Now, to apply any sort of relation-back doctrine simply negates the very careful, strict rules that Congress imposed on this charge against the treasury.

Justice Kennedy: Can you... can you give me any indication of how... how many of these applications there are, how many times the Government contests the substantial justification, how many times the Government concedes that?

Does the Government ever concede no substantial justification?

Mr. Minear: Well, in many cases the Government will settle it because the costs of litigating aren't worth fighting over the matter.

But in terms of statistics, I was able to find this in a... a quick review.

And... and this outside the record, so I am stepping outside the record and looking at Government files.

But in the case of the Social Security Administration, between August 2001 and August 2002, the Government paid 5,500, roughly, EAJA applications in a total amount of $18 million.

Now, Social Security is only one small part.

I shouldn't say small, but it's a significant part of the EAJA... qualifying EAJA cases.

But as that indicates there, at least in 5,000 cases the Government made a payment either by settlement or on the basis of a... of a--

Justice Kennedy: Any indication of what percentage that is out of the total?

Mr. Minear: --No, I do not have an indication of the total number of cases that are available.

But what we do know is that we face thousands of these cases, and efficiency is paramount unless fee litigation is going to become a second major litigation, which is something--

Justice Ginsburg: That second major litigation I don't see.

I see you have to make the motion to dismiss, but beyond that... and once the allegation is made, it, as Justice O'Connor pointed out, is the Government's burden to show that its position was substantially justified.

So what is the satellite litigation beyond your filing the motion to dismiss because they didn't make the allegation?

Mr. Minear: --Your Honor, it's satellite litigation like this: over whether or not relation-back should apply, under what situations it should apply, should equitable tolling apply, have the conditions for equitable tolling been met, all of that.

Justice Ginsburg: But if this... but once the Court decides this case and suppose it should say that relation-back applies, well, that's... that would be it and there wouldn't be any satellite litigation.

Mr. Minear: Well, Your Honor, as... as you pointed out, relation-back is not automatic.

So there would be these questions of whether or not whatever criteria the Court decides to create for relation-back were satisfied.

And I have to point out the Court is going to be creating all of these rules.

As it stands right now, we have a simple 30-day rule.

Once we inject relation-back and equitable considerations, then we're at sea in terms of what's necessary to satisfy this requirement.

Justice Souter: Well, that's... that's true of the doctrine in the first place, isn't it?

I mean, we don't get into relation-back because Congress originally passed a statute saying there's going to be relation-back.

In every one of these instances I suppose in which there is a relaxation of... of a stated rule, we got into it because a court recognized it.

And... and it seems to me your argument about the satellite litigation at most means maybe we'll have a half a dozen cases deciding exactly what exceptions to the... to the literal statement in the statute book there may be, but as... as against EAJA litigation in which there are at least 500 a year on... in the courts around the country on Social Security alone, that seems to be rather a... a minuscule percentage of... of extra cases.

Mr. Minear: Well, Your Honor, with respect to how the Court got involved in these matters, in many cases Congress simply deferred to... to the courts to establish the appropriate procedural rules.

It didn't set time limits.

Justice Souter: Did it say we are deferring to the courts to... to set procedural rules?

I doubt it.

Mr. Minear: Well--

Justice Souter: Didn't Congress simply pass a statute and somebody says, well, gee, does... does the 30 days... is the 30 days absolute or not?

Mr. Minear: --Your Honor, the rule's enabling act I think is a... a direct delegation to the courts to create rules to govern practice and procedure where Congress has not otherwise specified the controlling rules.

In this case, we have a rule that Congress has set, a 30-day rule that makes a great amount of sense in these circumstances, where the object is to determine fee litigation quickly and efficiently.

And if parties abide by the rules and follow those rules, then we can be assured that these cases will progress and that we will... the courts and the United States will be not burdened with this type of additional litigation.

These are, after all, charges against the treasury, the area where the Congress' sovereign immunity is paramount, and when Congress--

Justice Ginsburg: You... Mr. Minear, I know you've said it's not before us, but would you make a distinction, the one that this Federal Circuit makes between you don't account for... for the fees and so you want later to document what... what supports your... your requests for--

Mr. Minear: --Your Honor, our feeling is that these showings can be made very easily.

You can show that you're a prevailing party by attaching a copy of your... your judgment.

You can show that you qualify for fees by attaching an affidavit showing you have a net worth of less than $2 million.

Itemization is not all that difficult.

Attorneys keep these records.

Justice Ginsburg: --But the itemization is... is what the Federal Circuit allows leeway on.

Mr. Minear: Yes.

Justice Ginsburg: And I... I wanted to see your fix on the statute.

I suppose you would say the Federal Circuit is wrong to allow any leeway on... on that.

Mr. Minear: We think that... that the better rule is that itemization should be... be complete at the time the application is... is filed.

However we deal with that issue, certainly the threshold allegation that's at issue here does need to be made, and this is the trigger that... that determines whether or not the Government needs to respond to the fee application at all.

And if the party has not made that basic determination--

Justice Stevens: You characterize it as a trigger.

Do you defend the court of appeals' characterization of the requirement as a jurisdictional requirement?

Mr. Minear: --Your Honor, I think it can be described as jurisdictional in the sense that term is used in Sherwood v. United States, that sovereign immunity is a condition... the conditions of... that waive sovereign immunity are limitations defining the scope of the Court's jurisdiction.

I think that's how that terminology has become applied.

Justice Stevens: So your answer is yes.

Mr. Minear: Yes.

I think it might be more accurate to say it's a sovereign immunity-based limitation, but that carries with it the very same point.

Namely, it needs to be strictly construed.

Courts have no power to expand it beyond what its normal confines would be.

So the term jurisdictional is just a label.

What's important is the substance of conditions on sovereign immunity, and that is they need to be strictly construed and cannot be enlarged beyond what Congress has provided.

Justice Kennedy: What... what's your best case in support of your position of a strict interpretation of a requirement like this, other than cases about sovereign immunity being... it can't be expanded?

Mr. Minear: Cases such as... some of these cases are not cited in the brief, but Brokamp, Locke, a number of these cases involving statutes of limitation where Congress has... where this Court has ruled that the emphatic statute of limitation that Congress has set is determinative.

I'd also point out to Justice Frankfurter's statement in Holmberg v. Armbrecht where he said that when Congress sets a statute of limitation, there is the end of the matter.

The statute of limitation that Congress set is definitive.

Justice Kennedy: Of course, Locke was a case involving a total failure to file on time, not omitting an allegation in the filing.

Mr. Minear: That's true, but again, I'm not sure a real distinction can be made there because, as I said before, when we look at what is a fee application, we define a fee application by those things that Congress said are defined as content.

Ultimately I think the important point here is that strict adherence to these types of statutory rules is the best guarantee of fairness in these cases.

This is a case where the burden that is placed on the attorneys is minimal and we believe that this Court should follow what Congress--

Justice Kennedy: But the burden of the real result is placed on the client.

I mean, the burden... the... the real loser here is not the lawyer.

It's the client.

Mr. Minear: --Well, in the case where--

Justice Kennedy: The lawyer gets the same amount in any event in many, many cases.

Mr. Minear: --Yes, and an attorney who is careless, I would say, might well have some obligation not to charge his... his client for his carelessness.

If there are no further--

Justice Ginsburg: Why would he have that obligation?

Because the statute is absolute.

It says you can get 20 percent of the recovery.

Mr. Minear: --The statute is not so absolute actually.

I believe the provision that we're talking about here, which is 38 U.S.C. 5904, does allow the Court of Veterans Claims to adjust fee applications in the event that they're not fair, if there are some inequities that are involved in them.

Now, I'm not sure to what's... what extent the court has... has exercised that authority, but it certainly has... does have that authority under the statutory provisions that are at issue here.

Rebuttal of Brian Wolfman

Chief Justice Rehnquist: Thank you, Mr. Minear.

Mr. Wolfman, you have 4 minutes remaining.

Mr. Wolfman: I'd like to go immediately to Justice Kennedy's question.

He asked about the best case.

Well, the case that the Government relies on principally in its brief is Soriano v. the United States.

The problem with that case is it was overruled by Irwin, and the problem here is that the principle we're now operating on, the problem with the Government, is that when we talk about statutes of limitations principles, you apply the same principles that apply among private parties unless Congress explicitly provides otherwise.

Now, I did want to, if I might, turn to the relation-back doctrine just briefly.

And the... the question arose in Mr. Minear's presentation, well, this case doesn't involve rule 15(c).

But either did Edelman v. Lynchburg College.

Edelman is best read as a case that applied the common law doctrine of relation-back.

The Court held, regardless of the EEOC's regulation, even if we were interpreting the statute from scratch, we would apply the relation doctrine back here because it has a common law pedigree.

And that's all we're asking for here.

The other principal submission by Mr. Minear is the efficiency argument, that these matters have to be done promptly and efficiently and there's thousands of suits.

I have two basic answers to that, the general and the specific.

The general is that the... until the Federal Circuit ruled, this was the rule, the rule that we're asking for, in all of the circuits that had ruled on it.

And the Government does not present an iota of evidence there were any problems in applying the relation-back principle in those circuits.

It's the Third, the Sixth, and the Eleventh Circuit.

The specific answer is I think we know what would have happened in this case if my client's amendment had related back.

The matter would have been resolved 3 or 4 years ago.

There is no serious efficiency concern here.

The reason we're here much later is both because the Government interposed this jurisdictional defense and it asked for seven or eight extensions of time during the course of this litigation.

The final thing I would like to say is that the Government's arguments presuppose that there's no good reason for relaxing rules.

But there is.

We realize that litigants and lawyers make mistakes and rules such as relation-back serve important purposes so that litigants and lawyers don't get tripped up by technical rules such as the one the court... the court below and the Government is trying to impose here.

If the Court has no questions.

Chief Justice Rehnquist: Thank you, Mr. Wolfman.

The case is submitted.

Unknown Speaker: The honorable court is now adjourned until tomorrow at 10 o'clock.

Attribution:

The Oyez Project

Featured:

Lamie v. United States Trustee - Oral Argument

Fri, 09 Jan 2009 14:49:05 +0000

Case:

Lamie v. United States Trustee

Media File:

02-693_20031110-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Thomas C. Goldstein

Chief Justice Rehnquist: We'll hear argument first this morning in No. 02-693, John Lamie v. the United States Trustee.

Mr. Goldstein.

Mr. Goldstein: Mr. Chief Justice, and may it please the Court:

The parties to this case agree on one thing, and that is that section 330(a) of the Bankruptcy Code contains a mistake of some kind.

Now, we disagree about what the mistake is, but there clearly is one.

The United States Trustee, for all of its rhetoric about the statute's plain text, actually says that the statute contains two errors in two different places, but the list of compensable providers inadvertently includes a reference to the attorney and that the statute's so-called payees' list inadvertently omits the necessary conjunction or.

We say there was a different mistake, that the payees' list inadvertently omits the reference to the debtor's attorney, and our reading of the two is the superior one.

It is the one that's most consistent with the... the structure of the statute as a whole, with the past bankruptcy practice, with the legislative history, and frankly, with common sense.

Justice O'Connor: Mr. Goldstein, who's covered by fees available for a professional person employed under section 327 or 1103?

Mr. Goldstein: That would be an attorney who's retained by a trustee, and according to the U.S. Trustee, it would also be an attorney retained by a debtor in possession in a chapter 11 case.

The...

Justice O'Connor: But not chapter 7.

Mr. Goldstein: That's correct.

The reason... and let me take you through the statutory scheme, and I should take you... everyone to the text, and it's in the blue brief at page 2a of the appendix.

Justice Kennedy: That's, obviously, of critical importance.

One piece of background information please.

Could the chapter 11 court have authorized the debtor's attorney to do this work?

I mean, how does that work?

I... and I... I do agree that the chapter 7... the... the debtor's attorney really is often required to do some very important things to get the chapter 7 filed.

But if the... if it's an 11 first, as this one was, could the chapter 11 court have authorized the work to be done?

Mr. Goldstein: According to the U.S. Trustee, no.

Let me, if I could, just step back and put this in context.

This is a converted case, just like, for example, the Hartford Underwriters case this Court had a few terms ago.

And so I take it the question might be, look, if they were a debtor's attorney at one point... and we all agree that for the chapter 11 proceedings, they clearly were authorized to be paid under 330(a)... could that authorization have continued?

And I think the answer is no because at some point there will be a fee application and the fee application will be under 330(a), and what will happen is exactly what happened in this case.

The U.S. Trustee or the objector will say, look, for the period that it was a chapter 7, there's a... a gap in the statute.

Justice Kennedy: Even if you tell the court in the chapter 11 proceeding, we're going to go to 7 and we need the debtor to do some work, the... the court just has no power to authorize that work I guess is your position.

Mr. Goldstein: Oh, no, no, no.

Our position is to the contrary.

The U.S. Trustee's position is that it... they're without power.

I think it's an important point.

We view the structure of the statute to operate just as it has for... the Bankruptcy Code has for 100 years, and that is, that the bankruptcy court is a gatekeeper.

It has to decide, in what are now the literal terms of the statute, whether the services of the debtor's attorney are both necessary and beneficial to the estate.

The position of the U.S. Trustee is that even when the services are both necessary and beneficial to the estate... that is to say, even when they produce more money for the creditors, which is the whole point, after all... you still can't perform the services and be compensable...

Justice Souter: Well, why can't the... I mean, their argument is the trustee can do it.

The trustee's object is the maximize the... the value for the estate and so on, and... and therefore there's no built-in conflict there.

Why isn't that a way out of this drafting mess?

Mr. Goldstein: Because there are things that the Bankruptcy Code assigns as responsibility to the debtor, not the trustee.

And second, the provision that... and so let me... let me separate...

Justice Souter: No, but is there any conflict in the trustee saying, look, you can do these things for the debtor and I'll pay you?

Mr. Goldstein: Yes.

Let me take you to the relevant statutory provision.

This one is in the gray brief in the appendix.

That's 327(e).

There is a passing suggestion in the Government's brief... and, Mr. Chief Justice, that is at 1a of the gray brief.

It's at the bottom.

There is a suggestion by the U.S. Trustee that if the debtor's attorney really needs to do something, the trustee's lawyer will hire the debtor's lawyer, and so it all will work out in the end, and I take it that's a point you're picking up.

The statute is much more limited than that.

It says the trustee, with the court's approval, may employ for a specified special purpose, other than to represent the trustee, and it goes on to say, an attorney that has represented the debtor.

The way this works... and we have tried very hard to find out how often this happens.

Mr. Lamie's firm, for example, has been doing bankruptcy for 23 years and has represented the debtor in more than 4,000 cases.

In that entire time, the trustee has hired the debtor's counsel two times.

Justice Souter: Maybe... not to... not to be cute about it, but maybe those are the only times he should have.

Mr. Goldstein: Well, we know that that's not the case, Justice Souter, because the Bankruptcy Code does, as Justice Kennedy has suggested, give important responsibilities to the debtor qua debtor, not that are distinct from the duties of the trustee.

And let me give you an example of that.

And so those are jobs that can't be handled by the trustee.

They're the responsibility of the debtor.

Justice Souter: But is there any conflict... any conflict of... of... you know, ethical or quasi-ethical conflict if the... if the trustee says, look, these responsibility... you've got to shoulder these responsibilities.

It's very difficult for somebody who's not a lawyer to do it.

Okay, I... I will employ a lawyer to help you.

Is there... is there any conflict between the trustee and the lawyer there?

Mr. Goldstein: Yes, actually there is.

The... the problem is that the debtor and the trustee sometimes have divergent interests.

That's why the legislative history to 327(e) says we want to limit the times that the trustee will hire the debtor's lawyer.

But...

Justice Souter: Would you give me... just give me an example, a garden variety example...

Mr. Goldstein: An exemption fight.

Justice Souter: of a conflict situation?

Mr. Goldstein: An exemption fight.

Justice Souter: Yes, okay.

Mr. Goldstein: When you're trying to... to decide whether or not the debtor gets to claim an exemption.

And so let me give you a couple more examples just about how this operates.

Justice Ginsburg: Before you do, Mr. Goldstein, is it true that in most chapter 7's, this is an academic question because there's not any money to pay even the... any... the administrative creditors?

Mr. Goldstein: Yes, but the fact that in relative terms, in terms of the percentage of chapter 7's, it's not that big a deal does not mean in absolute terms it's not.

We know, for example, that there are at least 40,000 asset cases.

In particular, we have complicated business cases.

Hartford Underwriters, which you all had as a case, is an example.

Chief Justice Rehnquist: These end up as chapter 7 cases?

Mr. Goldstein: Yes, Mr. Chief Justice.

There are a lot of converted business cases.

Generally when we believe there's going to be an asset, they are pursued as a 11's, but lots of times the ability to keep up with the creditors breaks down and they can get converted to 7's.

And...

Justice O'Connor: Mr. Goldstein, you know, Congress had this problem brought to its attention a number of times and... and has chosen not to enact something, putting that language back in.

That I find somewhat persuasive.

Mr. Goldstein: In all candor, Justice O'Connor, I think that's a point in their favor.

It's just not one that's going to overcome the other indications of Congress' intent.

So let me speak to that and then what the other...

Justice Breyer: Before you get to the intent of Congress, I'm rather stuck with the language.

I mean, what we'd have to do, in order to come out your way, is to read the words, the court may award to a trustee, an examiner, a professional person employed under 327 or 1103, and the lawyer.

Is there one case that you've found... I'm sure you've looked because you're very thorough... in the history of the world...

Unidentified Justice: [Laughter]

Justice Breyer: where... I couldn't find any, but I don't know all the cases in the history of the world... where... where, in fact, a court, when faced with a definite list like this and unable to say, and other such persons or... fool with the language.

Maybe you'll think of some way of doing it... where a court is simply stuck in words of insignificance that weren't there because they thought the legislature had made a mistake.

Can you give me a list of the most relevant such cases, if there are such?

Mr. Goldstein: Yes, and then I will come back to Justice O'Connor.

The point here is that there are a number of cases... and we cite these in our brief... that the expressio unius canon, on which you're... to which you're adverting...

Justice Breyer: No.

I'm not adverting to any canon.

Mr. Goldstein: Well...

Justice Breyer: I am adverting to the fact that the words aren't there.

Mr. Goldstein: Justice Breyer, let me explain to why I think you are, and then you can tell me why I'm misguided, I'm sure.

[Laughter]

Justice Breyer: No.

All I want is the name of a case where a court...

Mr. Goldstein: United States v. Wilson.

Justice Breyer: All right.

Mr. Goldstein: United States v. Wilson, and then I'll come back to why I think their argument is an expressio unius one, and then I'll explain to you U.S. v. Wilson.

It's on page 10 of the yellow brief that we discuss it.

The statute says that the court may award to a trustee, an examiner, or professional person employed under section 327.

I'm back on 2a of the blue brief.

It has a list.

It doesn't say only, and there are many cases.

There are legions of cases in which a list is not regarded as exclusive when... I think there's a presumption of exclusivity, but when the contrary indications in the text or the history of the drafting or something else tells you that Congress didn't intend the list to be exclusive, and this is such a case.

The reason I cite U.S. v. Wilson to you is that's a case in which the statute referred specifically to the Attorney General.

The Attorney General, before the statute was revised, was supposed to compute the amount of time that is given as credit from pretrial detention.

Congress, as it did with section 330, rewrote the statute entirely, and this Court said, look, we admit that the reference to the Attorney General is gone, but it looks like it just got lost in the shuffle if we look at the other indications of Congress' intent.

Now, let me just make one other important...

Justice O'Connor: Well, you think this just got lost in the shuffle?

Mr. Goldstein: Yes.

Justice O'Connor: That's why I'm asking you a question that I hope...

Mr. Goldstein: Yes.

Justice O'Connor: you'll be allowed to answer...

Unidentified Justice: [Laughter]

Justice O'Connor: about what about Congress' opportunity to correct it...

Mr. Goldstein: Yes.

Chief Justice Rehnquist: which they didn't...

Mr. Goldstein: Well, this Court has never really taken that view of subsequent legislative history, Justice O'Connor, but let me turn to the events.

In 1997, there were two bills that were proposed in the Congress that were a part of general correction legislation that had a variety of different provisions, including one fix for this one.

I think the important point is that at that time, the only case in the circuits interpreting the statute as it then stood went our way.

It was the 1996 decision of the Second Circuit in Ames.

And so I don't think you can infer from the fact that Congress didn't change the statute to confirm the rule in the circuits means that they intended to reject it.

Justice Ginsburg: Isn't there a current... isn't there a current correction... bankruptcy technical correction bill pending, and isn't this absent from it?

Mr. Goldstein: It is, but Justice Ginsburg... so now we have not just the failure to enact legislation exists, but the U.S. Trustee is relying on the failure to enact legislation that doesn't even exist.

The point, I think, is that, look, if you read the statute, if you look at it right now, it's simply ambiguous.

There's a reference to the attorney that's in there, and a reference to the attorney that's missing.

This is not a case... and this is absolutely critical... in which there was a reference to the attorney, there was only one, and it disappeared, and we're asking you to read it back in.

Our position is that the statute, as written, stands essentially in equipoise.

The two references to the attorney in the 1978 version of the statute were inextricably intertwined, and so if you look at the text right now, the fact that Congress hasn't changed it doesn't tell you anything about whether or not they intend it to be in there or not to be in there because the split is almost even.

There's one...

Justice Ginsburg: But now it has been called to their attention and it isn't in the bill making other technical corrections.

Mr. Goldstein: Justice Ginsburg, I agree, and I... I'm obviously not making this point well enough.

What I'm saying is that the inference that would be normally drawn from the failure to fix a statutory error doesn't cut in either direction here because, as I began in the introduction, both sides believes there... believes that there's an error.

But we both think there's a mistake in the statute.

The fact that Congress hasn't corrected the mistake doesn't tell us anything about what the mistake was.

Justice Stevens: But, Mr. Goldstein, you're overlooking one... one other argument I think.

Before this statute was enacted, the Association of Bankruptcy... whatever the name of it is... called their attention to this drafting error and said we think it's a drafting error.

Mr. Goldstein: We... yes.

Justice Stevens: And nothing was done.

Mr. Goldstein: Justice Stevens, let me put that series of events in slightly more context, and that is that in the House, when the bill was not pending there, there was a hearing, and this is one line in a 718-page record of just written materials submitted that says there is an inadvertent omission.

The... the one canon of construction that runs through this Court's bankruptcy cases...

Justice Stevens: Let me just add one thought.

They said this appears to have been some minor drafting errors, including the apparently inadvertent removal of debtors' attorneys from the list of professionals whose compensation awards are covered by 330(a).

NACBA does not oppose this provision since it contains language and so forth and so on.

So they... it's... one can read that as saying even with the error, we don't... we don't oppose the provision.

Justice Breyer: Right.

We actually... that reference, we do not oppose this provision, we believe, in the context of those remarks, could be referring to the addition of section (a)(4)(B).

Congress in 1994 added a provision that's much debated in the briefs about chapter 12 and 13 bankruptcies.

Remember, this is the National Association of Consumer Bankruptcy Attorneys, and what they were not objecting to is the addition of a provision that relates to consumer bankruptcies.

But let's be perfectly clear.

The... the United States has scoured the legislative record of this change and has found one sentence in one House hearing, and it says that it was a mistake.

The principle in bankruptcy is if there's a statutory change and it's not clear on the text or at least in the legislative history, it's presumed not to change...

Justice Stevens: But isn't... isn't it possible also to read this as saying, yes, you made a mistake, but even so, it's still a good bill and we think even with the mistake, we're in favor of it, and then... and then Congress looks at it and says, yes, we did make a mistake, but... but the... our... we'll stick to that decision because the United States' position now is that that's a wise... the provision is a wise one?

Mr. Goldstein: It is important to note, of course, that when the Department of Justice and the U.S. Trustee commented on the bill at the time, they did not say that this would be the result of the statute or that they proposed it.

But I don't... Justice Stevens, I don't think that when someone says there's a mistaken omission... and remember, it's of course at the time when the U.S. Trustee says language is mistakenly included at the same time.

When someone says there's a mistake, that's a very different thing from Congress... let's engage in all of the false assumptions that people actually read this thing in the Senate and people paid attention... that Congress actually acknowledged, yes, we're changing bankruptcy policy.

The standards for changing bankruptcy policy, particularly a policy as settled as this one, are much higher...

Chief Justice Rehnquist: Well, are the standards for changing bankruptcy policy in Congress different from the standards of changing other kinds of policy?

Mr. Goldstein: Mr. Chief Justice, the indications in this Court's precedents... the answer to that question is yes.

Chief Justice Rehnquist: And what... what precedents are those?

Mr. Goldstein: Those would be principally the line of cases that begin with Midatlantic.

We cite several of them, Hartford Underwriters, Ron Pair, that sort of thing.

The Court has recognized, going back to well before the '78 code and subsequent to the '78...

Chief Justice Rehnquist: Well, but some of the... the Midatlantic, for example, was shortly after the Bankruptcy Code was adopted succeeding the 1898 act, and there, there was probably a good reason for saying when you have that sort of a comprehensive revision, the presumption is that if something... it's not clear where something was changed, we meant to retain the old.

But this wasn't that sort of thing.

Mr. Goldstein: That's correct, Mr. Chief Justice, but I think that the relevant answer would be that Cohen v. de la Cruz, which deals with a much more minor revision of the Bankruptcy Code than even this one, the 1984 revision applies the same principle and that is this Court has recognized that the provisions of the Bankruptcy Code are incredibly interrelated.

There's a longstanding practice that has built up over time, and that Congress doesn't lightly change it.

And let me talk about why this would have to be the...

Justice Breyer: At some point, will you go back to my first question?

Mr. Goldstein: Yes.

Justice Breyer: I just... you have just a few...

Mr. Goldstein: Yes.

Justice Breyer: I mean, why... because I looked at United States v. Wilson.

It doesn't seem like this at all.

The statute said there said a defendant shall be given credit towards his sentence for time previously spent in prison.

It's in the passive voice.

It doesn't say whether it shall be given credit by the AG or also by a district court.

Well, obviously, you could read the language either way.

What I'm having problems here with is that I don't see any way to read this language so that it comes out with your favor without putting in three words that aren't there.

And I haven't heard from Justinian... the time of Justinian, a court ever having done that, and if there is a court that did it, it wasn't Wilson.

Mr. Goldstein: Okay.

I think I'm responding to...

Justice Scalia: You can have...

Mr. Goldstein: I... I think... I think we have a new thread.

Perhaps the best answer to your point is Green v. the Bach Laundry, which is not a case that's discussed in the... in the briefs, but I will explain how this arises.

And that is, Federal Rule of Evidence 609 said, look, if there's going to be... if you're going to impeach a defendant, you get to use prior convictions, and the Court looked at it and said, really, it says defendants, and we acknowledge it means all... you know, that the plain language of that is all defendants, and the Court inserted the word criminal and said from the...

Justice O'Connor: Inserted the word what?

Mr. Goldstein: Inserted the word criminal.

It said that rule 609 would only apply to criminal defendants.

Justice Breyer: But that's... you're not missing... you're missing my point.

There are millions of ways...

Mr. Goldstein: Yes.

Justice Breyer: to read language in a statute...

Mr. Goldstein: Yes.

Justice Breyer: so that it has a limited scope or a scope over here or only applies there.

That's so common every day of the week, and very often I look at the policy and I see if the statute is possibly construed in that way through that kind of limitation.

What I've never seen is a statute which you just can't word by... read by limiting the scope or saying other things like this, et cetera.

Mr. Goldstein: Right.

Justice Breyer: I've never seen a court just take three words out of the blue and insert them in that way in a statute.

Mr. Goldstein: All right.

Justice Breyer, I think that I probably am not going to have a case that satisfies you, but I think that I can dispute successfully the premise, and that is, I do believe that your premise is that expressio unius applies.

I promised I would come back to that point.

And the text says, the court may award to a trustee, an examiner, or professional person.

It doesn't say to only those people.

What I'm telling you is that the other... the remaining indications of Congress' intent indicate that Congress did not intend to limit the payment to go to those people.

And second, this is not a case in which only we have a textual problem.

Remember that the U.S. Trustee, just as you say we have to read in a... a word, they have to read out a word.

Justice Scalia: Well, they don't have to read it out.

They just say the word is superfluous.

There's... there's no explanation for why it's there.

But, you know, there are a lot of statutes that have superfluous words, and that does a lot less violence certainly to the statute to leave in a word that doesn't have to be there than... than to insert a phrase, which is what you're asking us to do.

Mr. Goldstein: I think you and Justice Breyer may be making a similar point here, and that is, look, if we had the text and all we had was the text, it would do less violence you say, and I think I can conceded it would do less violence to read in the... the word rather than to render the other one superfluous or read it out.

But I don't think that's the question before you because you don't just have the text.

If you... this was all that there was, you could apply a canon like that one.

It would do less harm, you know, the principle of sort of do no harm.

But what I'm telling you is that there is an ambiguity in the statute, that the provisions of the payees' and the providers' lists are inextricably intertwined, that the trustee can be paid for the services of the trustee, the examiner for services of the examiner, the professional person for services of the professional person.

And then there's this gap for services of the attorney.

There's an ambiguity.

And so just like any other case in which you have to resolve a statutory ambiguity, you look to other things.

Justice Ginsburg: Why don't you just say the first correction, which is... or the first, in... in your view, slip is the elimination of four words?

That's really what they wanted to do because that's the lead provision, and then in the subsidiary provision, there's only one word that they left in.

So if you... just looking at the statute, I assume you would say the lead provision is the main one and the other, the subsidiary provision, four words in one case, one word in the other.

Mr. Goldstein: I don't think that we have to get down to the number of words or syllables or anything like that.

I think perhaps a more fair... if we're... again, in the world of tie-breakers looking only at the text, it's that the U.S. Trustee's position requires you to conclude that there are mistakes in two different places, in both the payees' list, the missing conjunction or, and the providers' list, the inadvertent...

Justice Ginsburg: But there were umpteen illustrations of missing or's.

I mean, we really can't put much weight on that.

Mr. Goldstein: Well, Justice Ginsburg, I don't think there's any greater canon that says we find errors presumptively in second provisions rather than first ones.

There are much greater indications of Congress' intent than that.

We have a lot more to work with.

I do think I need to make two points.

The first is Justice O'Connor has, to some extent, focused on what happened here, you know, what did Congress know.

I think it's important to recognize, as I started to say, this would be a change without any consideration by Congress at all.

This statute started...

Justice Stevens: But how can you say that if this material I called to your attention was called to the attention at least of the staff of the committee?

Surely the staff would have recognized that because I presume they read it, and presumably they would have discussed it with the Congressmen and said, do you think we ought to make a change, and somebody said no.

Mr. Goldstein: Right, Justice Stevens, let me distinguish two different periods of time.

I was about to talk about... and we'll come back to when this... the words got dropped out.

You're focusing later, and so let me answer your question with... try and answer it in a somewhat different way, and that is, the only thing that was pointed out to them was that there was a mistake.

And if you look at the text, you don't know what Congress' intent was.

Was it to leave the language in or to delete it?

Because there are two parallel, intertwined references to the attorney.

I had said that I would come back to the '84... to the '94 change.

This is what the Fourth Circuit thought was so important.

That is, it mistakenly thought...

Justice Stevens: May I just get one other thought out?

What is the parallel provision that you say remains in?

Mr. Goldstein: That is the reference in... I'm on 2a of the blue brief, 11 U.S.C. 330(a), subsection (1)(A), what we've called the providers' list.

And this providers' list parallels the one in section 331.

Justice Stevens: Right.

Mr. Goldstein: Reasonable compensation for actual, necessary services rendered by the trustee, examiner, professional person, or attorney.

So what happened is that...

Justice Stevens: Why... why couldn't that refer to an attorney appointed by the trustee?

Mr. Goldstein: Well, it... as has been suggested, literally it could.

You could render it surplusage or you could say it's the attorney of the trustee.

But a few things about that.

We know it really is surplusage because there's already a reference to the attorney of the trustee.

That's the professional person.

This was one of the first questions...

Justice Souter: No, but it... not... the... the... there's another possibility: any attorney employed by the trustee

And that's not surplusage.

You have given me a reason why there may be a conflict involved if the trustee does employ an attorney for the debtor, but whatever it is, it's not surplusage.

Mr. Goldstein: It is, Justice Souter.

The reference in this line to a professional person is the professional person employed under section 327.

That's the trustee's attorney.

The... and the United States doesn't dispute this.

It acknowledges that it is surplusage.

Justice Souter: No, but if the trustee appoints an attorney not for himself, but for the debtor...

Mr. Goldstein: Ah.

Justice Souter: then it's not surplusage.

Mr. Goldstein: I apologize.

The trustee is not empowered to... I... I think I may have confused you back at the beginning of this.

The trustee is not empowered to hire a person to represent the debtor.

Justice Souter: I... let me... let's assume I misspoke.

The trustee may very well be empowered to pay the person employed by the debtor.

Mr. Goldstein: No.

Justice Souter: That's a way of reading these two sections together.

Mr. Goldstein: Okay.

If so, we win.

[Laughter]

And there will be an explanation to follow.

Justice Breyer: I did not expect that answer.

Mr. Goldstein: Yes.

[Laughter]

Justice O'Connor: Why?

Mr. Goldstein: We all should assume that all... the answer to all the questions, if so, we win, because what would happen is that, remember, literally the debtor's attorney may be... provides compensable services, and then the ambiguity that Justice Breyer has focused on and then you have is that we have the question of, okay, who... who gets the money.

Does it go to the trustee, the examiner, or the professional person?

So if the trustee gets paid for the services of the debtor's attorney... remember, this is a case in which Mr. Lamie acted at the request of the trustee... then the trustee has to turn the money over.

The money actually belongs to Mr. Lamie.

He provided the services.

That's how it would all work together.

And that is, in a case like this one, where the debtor's attorney acts at the request of the trustee... this case is your hypothetical.

The money goes to the trustee who then obviously has to turn it over the attorney.

That's who would have the equitable interest in it.

If I could retain the balance of my time.

Argument of Lisa S. Blatt

Chief Justice Rehnquist: Very well, Mr. Goldstein.

Ms. Blatt, we'll hear from you.

Mr. Blatt: Mr. Chief Justice, and may it please the Court:

The Bankruptcy Code contains no authority to use estate funds that are held for the benefit of creditors to compensate the chapter 7 debtor's attorney.

Before 1994, the code authorized estate funds to be used to compensate all debtors' attorneys, but the 1994 amendments unambiguously deleted the chapter 7 debtors' attorneys from the class of persons eligible to receive compensation under the statute.

Justice Souter: It eliminated them unambiguously I guess from the class of persons entitled to be paid directly, but did it eliminate them from the class of persons who might ultimately be compensated, i.e., the class in... in... what is it?

Subsection (a).

Mr. Blatt: Yes.

Only the... if... an attorney, including the debtor's attorney, can still be compensated, but he has to be appointed by the court under section 327 and then he stands as a professional person that's retained under 327, but that has to be retained under 327.

Justice Souter: So... so the... so the reference is surplusage in (a).

Mr. Blatt: It's superfluous in this sense.

Our reading of the statute is the same regardless because the attorney is nothing more than a subset of professional persons.

Justice Souter: Yes.

Mr. Blatt: But Congress may... it may have failed to make a conforming change, but it's also possible that Congress specifically left the word in because Congress often uses overlapping terms to accomplish its objectives.

And it was doing no harm there, and it would at least remove any doubt that even the debtor's attorney could be paid as long as he qualified as a professional person that was retained under 327.

Justice Stevens: But the word attorney in 330 would then have a different meaning after the amendment than it had before because before the amendment, it clearly referred to the debtor's attorney, did it not?

Mr. Blatt: That's correct, but there's no question that the... the code, as it now stands, has... omits the debtor's attorney from one of the authorized people.

And what petitioner is basically seeking, Justice Stevens, is a substantive enlargement of the code because he wants to do something, that is, receive a...

Justice Stevens: Well, he's arguing the word attorney means the same thing it always meant.

In other words, in 330.

Mr. Blatt: That's fine.

The debtor's...

Justice Stevens: And you're saying it means something different.

Mr. Blatt: It could still mean the debtor's attorney, but there's no question in this case petitioner was not authorized to be retained by the trustee under section 327.

The debtor's attorney is unambiguously not one of the list of people in 330(a) who is authorized to receive compensation, just like a creditor's attorney is not on that list or a debtor's spouse is not on that list.

Justice Ginsburg: Why does it make any sense, considering that the code does give obligations, duties that must be done by the chapter 7 debtor?

And some of them are pretty complex.

Mr. Blatt: Well, I think it reflects the fundamental distinction between chapter 7 and all other codes.

That's chapters 11, 12, and 13.

In a chapter 7 case, the bulk of the work is done pre-petition.

It's advising the debtor about which chapter to file, filling out the schedules, telling the debtor what property is exempt, and so forth.

And in chapters 11, 12, and 13, the whole game is in doing a plan which is all post-petition, and the trustee and the debtor, the... excuse me... the debtor and the creditors work together to figure out a plan.

Justice Kennedy: But... but why doesn't that help the petitioner?

As Justice Ginsburg is indicating, before the petition is filed, a chapter 7 debtor has to comply with some rather complex forms, plus be advised of... of his duties and liabilities.

Don't take assets out the back door and so forth.

So there's a chronological problem here that... the... the trustee can't appoint the attorney until the proceeding is filed, but the attorney is really required to do some advance work.

Mr. Blatt: Justice Kennedy, there's no question that both before and after the 1994 amendments, chapter 7 debtors retained counsel, but they do so in the overwhelming majority of cases with a pre-petition flat fee, usually 750 to $850.

They pay their lawyer pre-petition.

Justice O'Connor: And that can be paid.

Mr. Blatt: Absolutely.

Justice O'Connor: That is paid the lawyer...

Chief Justice Rehnquist: Is it established that's not avoidable preference?

Mr. Blatt: Absolutely.

It's in the ordinary course of...

Chief Justice Rehnquist: For current services?

Mr. Blatt: Yes.

This is done day in and day out.

United States Trustees have supervised the liquidation of a million cases each year.

Justice Ginsburg: It would be avoidable preference if it's too high, wouldn't it?

Mr. Blatt: If it's too high, but I'm talking about the standard, routine fee of under $1,000 if somebody walks in because they've been overwhelmed by credit card debts or gambling debts or had a divorce, they need representation on how to fill out the schedules, what types of property are exempt, and they retain counsel, the counsel takes that money, gets the standard flat fee, that... and all the services are earned pre-petition with one exception.

Justice Souter: What if the... what if the check bounced and there's now been a conversion to 7 and the... and the lawyer says, I ought to be paid for my 11 work?

On your theory, does he get paid?

Mr. Blatt: Not out of estate funds.

He should probably clear... have the check cleared before he performs the services.

Justice Kennedy: He clears the check.

Justice Souter: Yes.

Mr. Blatt: Bankruptcy counsel do this...

Justice Souter: So you're saying at this point, regardless of chapter 11 work, chapter 7 work, no payment out of the... the estate funds.

Mr. Blatt: Not out of estate funds, but it's... it's critical to understand that in chapter 7, unlike all other chapters, the... the estate is frozen at the time of petition.

98 percent of all chapter 7 debtors are individuals.

If they have a job or any post-petition income or there are exempt assets, they can use that money to pay the... pay counsel to assist them in completing bankruptcy.

And I want to... do want to address one very... one class of very important services that came up that I think, Justice Souter, you raised, and that is when the debtor and the trustee or creditors are fighting over objections to exemption.

They could also be fighting over objections to discharge.

These are serious matters where often the debtor is accused of misconduct and the debtor will need a lawyer.

There's no question that even before the 1994 amendments, the overwhelming majority of courts would have held that those are services that benefit the personal... that go to the personal benefit of the debtor and not the estate.

And they would not have been compensable even before 1994, and if this... if this Court is going to take the extraordinary step of writing it back in, it will not affect those cases.

And so...

Justice Stevens: Let me ask you about...

Mr. Blatt: Sure.

Justice Stevens: a provision of the statute you didn't include in your brief, or at least in the appendix.

Section 329...

Mr. Blatt: Yes.

Justice Stevens: specifically authorizes the debtor's attorney to receive a retainer, as I understand it.

Mr. Blatt: That's for the code as it... what... this is a... a pro-creditor provision that recognizes that debtors will often go to counsel before they file bankruptcy, and anyone, whether or not you seek compensation under the statute, any lawyer for any debtor who ultimately files for bankruptcy has to disclose their fee arrangement, and the court can order the cancellation of it or return of the fee if it's excessive or unreasonable.

Justice Stevens: But... but if the court does not order a cancellation of it, it seems to me that provision contemplates a payment to the debtor's attorney for his services to the debtor.

Mr. Blatt: Pre-petition.

This is for a... any type of fee arrangement that's pre-petition whether or not you apply for compensation.

There are many cases where the chapter... excuse me... the debtor's counsel will, in fact, be paid under 12, under 13, under 11, and those...

Justice Stevens: This refers to 7.

I think 329 applies to chapter 7 cases.

Mr. Blatt: Right.

Any... any debtor.

Even if there was an express prohibition for money for the estate to be paid, section 329 would still independently operate to require the counsel to disclose his fee agreement.

It applies whether or not compensation is ever sought under 330.

Justice Stevens: Well, in section (b), it authorizes the court to cancel it... cancel the agreement if it's unreasonable compensation.

So it seems to me it applies that if the compensation was reasonable, they could approve it.

Mr. Blatt: Right, but that's... that's pre-petition.

Justice Stevens: Well, I understand, but the money has to be paid pre-petition.

Here, of course, it was, but he kept it in escrow instead of putting it in his pocket.

Mr. Blatt: That's right.

So it remained the funds of the estate and it had to be paid under 330 and it was... it was not a question of 329.

But the other... other point I want to get back on why this serves reasonable policy objectives, not only does the individual debtor have the ability to pay counsel with either his exempt assets, his post-petition income, or a pre-petition flat fee, but chapter 7, unlike all other cases, it is the trustee and not the debtor who manages, represents, and liquidates the estate.

And the code gives the trustee the explicit authority under section 327 of the code to retain counsel, including the debtor's counsel, to take actions that further the benefit... the best interests of the estate.

Justice Ginsburg: But not that would assist the debtor in the exemption example.

Mr. Blatt: No.

That's exactly right.

If the... if for some reason the trustee could not read an accounting form and the debtor's counsel couldn't answer it, the trustee can go retain a professional person like an accountant, and if the trustee needs a lawyer to take actions to further the best interests of the estate, it is true that that lawyer represent the... represents the estate, but there's no reason he can't meet with the debtor and help him explain something.

But 96 percent of all chapter 7 cases, there are no assets in the estate to begin with.

These are the kind of cases I was talking about, where they are covered by a routine flat fee that covers...

Justice Stevens: I really don't understand that argument because this case just involves the other 4 percent, and there are a lot of cases in the 4 percent, aren't there?

Several thousand.

Mr. Blatt: That's true, and in those cases...

Justice Stevens: So what difference does it make that 96 percent... it doesn't make any difference.

I don't understand that argument.

Mr. Blatt: I think it goes to the idea that given that there's a plain absence of any statutory authority to do this, the question is, is this some sort of absurd result that Congress could not have plausibly intended?

And in the 4 percent of categories where there are assets, Justice Stevens, the trustee represents the estate.

He manages it and he liquidates it.

And if there's money to be paid to... for counsel and the counsel's services are needed, the trustee can use that money and retain counsel.

At the same time, the chapter 7 debtor...

Justice Stevens: Has retained counsel to do work to benefit the estate, not retained counsel to represent the debtor.

Mr. Blatt: That's right.

And at the same time, there is...

Justice Stevens: Which he could have done before 1996.

Mr. Blatt: Right.

And there's nothing in the 1994 amendments that prevents the debtor from taking his post-petition salary, his exempt assets...

Justice Ginsburg: Not if he's a company, as in this case.

Mr. Blatt: Right.

In a... in a company, Your Honor, it's important, Justice Ginsburg, to keep in mind everything like objections to discharge, exempt assets... none of that applies to corporations.

Corporations, unlike individuals, do not survive bankruptcy, and so they don't have issues like exempt assets and objections to discharge.

You have a defunct corporation that's liquidating.

And we think this case is a perfect illustration of what happens when you have a case with marginal assets in chapter 7, and that's usually where the... the businesses with no assets or marginal assets go, is chapter 7.

The trustee had ample authority to retain petitioner's counsel, and in fact, what happened ultimately in this case is what... the bulk of what petitioner's counsel was doing was representing the estate in a fight with a creditor and...

Justice Kennedy: Well, he didn't have ample authority to do it before the chapter 7 was filed, did he?

Mr. Blatt: No.

When the case is in chapter 11, the debtor is the debtor in possession with all the powers and duties of the trustee, and it's solely the debtor.

There is no trustee.

The debtor has to take actions to represent the estate.

All that changes when it converts to a 7.

Then it's the trustee.

The keys have to be turned over to the trustee and the trustee runs the show.

Justice Kennedy: But... but I thought you indicated that the trustee had ample authority to hire the debtor's attorney, and I... in the chapter 7 proceeding, and I said, true, but does he have the authority to hire the debtor's attorney before the chapter 7 is filed?

That's what we're talking about.

He doesn't have that authority.

Mr. Blatt: This... I mean, I'll try to take you chronologically.

The case started out an 11, and then the petitioner was... was retained under section 327, had a specific order, and therefore was entitled to be paid from the estate.

Once the case...

Justice Kennedy: For work done from that time forward.

Mr. Blatt: Work done just while it was an 11.

Once it's in a 7, all those duties ceased.

There was nothing for the corporation to do except liquidate and cooperate with the trustee, who had the statutory responsibility to represent and manage and liquidate the estate.

Chief Justice Rehnquist: Well, there's no trustee until chapter 7, is there?

Mr. Blatt: That's right.

Right.

Once... once it converts to chapter 7, then it's the trustee's job to take over.

And the trustee eventually did take over the adversary proceeding and bring the... continue the case against the creditor.

Justice Kennedy: And he can hire the... and he can hire the debtor's attorney to do work in the chapter 7, but that doesn't compensate for what... the work that was done before chapter 7.

Mr. Blatt: That's right.

Justice Ginsburg: The work that was done before chapter 7 was compensated in this case.

Mr. Blatt: Yes, it was paid.

There was $2,000 of fees in this case and $3 in expenses, and $1,000 has been paid for all the work in 11.

And what will happen, if the Court affirms the Fourth Circuit, is when cases convert, the debtor's counsel will cease performing work unless the trustee actually gets a court order approving their retention.

The trustee can hire its own lawyer to assist with its... with... with his or her duties and can hire the debtor's counsel for a special purpose.

And that would have been like this case where there's an adversary proceeding either by or against the debtor.

United States Trustees have supervised and overseen the liquidation of millions of chapter 7 cases in the 9 years since the 1994 amendments, and it has been their experience that the statute, as written, has not interfered with the smooth functioning of chapter 7 cases.

Chief Justice Rehnquist: Are all trustees in chapter 7 cases United States Trustees?

They're not, are they?

Mr. Blatt: None of them are.

The United States Trustees supervise and oversee the administration of all cases under 7, 11, 12, and 13, and one of their specific duties is to supervise trustees, private trustees, who... who perform their... their jobs and duties as trustees.

Chief Justice Rehnquist: Even if the Government isn't involved in the case.

Mr. Blatt: Right.

There's always a... there's always a private trustee appointed except in 11 cases, but the United States Trustees supervises and oversees, serves as a watch dog, looks at things to make sure there's no waste, fraud, or abuse, reviews all fee applications for the... by the trustee, the examiner, the debtor's counsel in chapter 11 cases, and...

Justice Ginsburg: The bankruptcy judge appoints the trustee.

Mr. Blatt: I don't know if... Justice Ginsburg, I'm not sure whether it's the... the bankruptcy court does appoint the trustee.

That's right.

But the United States Trustees within the Department of Justice manages a pool of available trustees who can serve to be appointed by bankruptcy courts.

And so we oversee trustees and make sure they're fulfilling their duties.

Chief Justice Rehnquist: Does the bankruptcy court appoint a U.S. Trustee in every single case?

Mr. Blatt: No, no.

There are... no.

There are 21 United States Trustees that oversee all the regions of this country, with the exception of North Carolina and Alabama, and they just overview and supervise the administration of the cases in the sense of make sure that the cases are actually proceeding through the court, make sure that cases that need to be converted...

Chief Justice Rehnquist: They... they do that without any appointment by the bankruptcy court then I take it.

Mr. Blatt: That's right.

Under 28 U.S.C. 586, it's... it's a laundry list of specific statutory duties that the United States Trustees have to comply with.

Under the Bankruptcy Code itself, in 11 U.S.C. 307, it says that the United States Trustees may be... may raise or be heard on any matter in any bankruptcy case, and that's why they've been in all of these cases involving fee applications because in their view, given the... that there's just complete absence of any statutory authority to pay chapter 7 debtor's counsel, they've been objecting to fee requests.

The one thing I just want to get back to on the statute is petitioner says that the statute is ambiguous, and we could not disagree more.

There is no language in the code that authorizes the chapter 7 to be paid.

What petitioner has relied on is a missing or and this overlapping or redundant reference to attorney.

But it's critical to understand that nothing about the missing or or the reference to attorney in (a)(1)(A) affects the substantive meaning of the statute or in any way prohibits the Court from applying the literal language of the code or requires the code to do... requires the Court to do something the code prohibits.

By contrast, what petitioner is seeking is a substantive enlargement, and as far as we can tell, there is no case of this Court's jurisprudence where the Court has added back language in a statute and where... in a substantive way that Congress has specifically taken out when there's no language that will bear that interpretation.

If there...

Justice Stevens: If you're through, let me just...

Mr. Blatt: Sure.

Justice Stevens: Maybe this is a little repetitious, but I want to read you two sentences from Collier on Bankruptcy, the treatise that most of us rely on perhaps too much in this area.

After describing the Government's position in this, it would represent a fundamental change in the law.

The treatise goes on.

Section 329 of the code permits the debtor's attorney to receive a reasonable retainer for services rendered in contemplation of or to be rendered in connection with a case under the Bankruptcy Code.

Such a provision would be superfluous if the deletion in section 330(a) is construed as excepting debtor's counsel from compensation under section 330.

What's your response to that again?

You've partly responded, but I want to be sure you cover it all.

Mr. Blatt: This is the reference to attorney, the reference to attorney in (a)(1)(A).

Justice O'Connor: Yes.

Mr. Blatt: Your Honor, it's... the... the short answer it's... it's in the wrong place.

The critical operative list that provides the type of people who can receive compensation is in (a)(1), and the reference to attorney just describes the type of compensable services, which also includes paralegals, para-professionals.

Justice Stevens: No.

They... they rely on section 329, which talks about...

Mr. Blatt: Oh, I'm... 329.

Justice Stevens: that that's... they say section 329 permits all this, and they say that provision would be superfluous if your reading of 330(a) is correct.

Mr. Blatt: Collier is just wrong.

The provision is...

[Laughter]

on this point... is that it operates independently and requires a disclosure of all fee agreements whether or not there's compensation, and maybe another way of putting it is is whether or not the Court rewrites the code, 329 is going to apply as... as it always has and require a disclosure of... of pre-petition fees.

Justice Ginsburg: What was the... the fees that were attributed to the chapter 11 phase, when approval was sought, wasn't that under 329 when... there... there was the... the lump sum $6,000, and something over $1,000 was attributed to the pre-petition chapter 11 time.

Wasn't the approval of that under this section 329?

Mr. Blatt: Yes, Justice Ginsburg, by both the bankruptcy court and the district court because they proceeded on the erroneous assumption, as found by the Fourth Circuit, that this was money that belonged to the lawyer instead of the estate.

And if it had been... and this was an 11 case.

You don't see in chapter 7 large pre-petition retainers like this because the chapter 11 usually contemplates ongoing work after bankruptcy.

But in this case, they did what most lawyers do, is put the money in the trust account, and it wasn't earned... it wasn't earned by the lawyer until the services were performed.

But the bankruptcy court and the trial court proceeded on the assumption the money belonged to the lawyer, and so if the... if the pre-petition money is money of the lawyers, then it's reviewed under 329.

But then the Fourth Circuit said, well, no, this is actually money of the estate and it has to be... it's estate funds.

Those are held for the benefit of creditors and there's no statutory authority to use estate funds to pay the chapter 7 debtor's attorney.

If there are no questions, we'd ask the Court to affirm the Fourth Circuit's...

Rebuttal of Thomas C. Goldstein

Chief Justice Rehnquist: Very well, Ms. Blatt.

Mr. Goldstein, you have 3 minutes remaining.

Mr. Goldstein: Mr. Chief Justice, the reason that the U.S. Trustees are not finding that this ambiguity creates a problem is that there has been a shift in practice in those courts like the Fourth Circuit that hold that you can't be compensated as a chapter 7 debtor's attorney under 330, and that is people in bigger cases are getting bigger and bigger retainers.

What's happening is the scenario that Justice Stevens described, and that is, people are saying I'm not going to be paid on an ongoing basis, so I've got to get more money up front.

That can't be a result that Congress contemplated under the U.S. Trustees' vision of what Congress was up to...

Justice Ginsburg: But can't that be checked by the court under 329 and say that's too much?

Mr. Goldstein: Precisely, precisely.

But that's my point.

What results is the 329 fees are subject to a Lessing standard.

They just have to be reasonable.

They aren't subjected to all the laundry list of 330.

So the result of this change, if there was a change, would only have been to decrease judicial oversight.

Retainers are subject to less to judicial scrutiny.

The second point I should make is that don't come away from the argument that this... believing that this case is limited to chapter 7.

It applies equally to chapter 11 debtor out of possession cases and chapter 12 and 13 cases for services that are beneficial to the estate, but not the debtor.

The U.S. Trustee has always pitched this as somehow a case limited to chapter 7, but that's not accurate.

And the Pro-Snax case from the Fifth Circuit, for example, is a chapter 11 debtor out of possession case.

Third, Justice Souter, I still don't understand what the answer is to your reading of the statute.

Justice Breyer, Justice Souter said, okay, there are a list of three people who can get the check: the trustee, the examiner, the professional person

Fine.

But we also know, as Justice Stevens has said, that the statute's reference to the attorney has always been to the attorney, the same reference to the attorney in 331 is a reference to the attorney.

321 says a chapter 7 attorney can get a retainer.

Justice Souter has said isn't the literal language, if we're going to follow the literal language, that the money can go to the trustee, to which I said, and that's... you know, the trustee directed Mr. Lamie to do these things, and therefore the trustee just owes the money back to the debtor's attorney.

That rationalizes all of the text.

The important thing then in deciding whether to follow the literal text is, is there anything to support?

Is there a whit... a whit... of indication in the history of the statute that Congress intended to do what the U.S. Trustee has hypothesized?

Is there a word that from 1898 to 1994 Congress decided to make this choice to eliminate fees that are both necessary and beneficial?

Those are the only fees we're talking about, those that benefit the creditors.

Did Congress intend to eliminate them?

Is there any indication of that?

And the answer to that question is no.

And that's important because the U.S. Trustee is not correct to say that when a chapter 7 is initiated or if the case is converted, that the debtor and the debtor's attorney leaves the field.

There are ongoing duties.

There's the 341 hearing, the meeting with the creditors.

There is the duty of the debtor's attorney to transfer the materials to the trustee, to cooperate with the trustee.

Here, there was an adversary proceeding.

The trustee wasn't substituted as counsel for 8 months, and somebody had to tell the trustee about that.

There are real responsibilities.

And we're not talking about, in any particular case, a ton of money, but it is important.

Chief Justice Rehnquist: Thank you, Mr. Goldstein.

The case is submitted.

Attribution:

The Oyez Project

Featured:

Gisbrecht v. Barnhart - Oral Argument

Fri, 09 Jan 2009 14:50:25 +0000

Case:

Gisbrecht v. Barnhart

Media File:

01-131_20020320-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Eric Schnaufer

Chief Justice Rehnquist: We'll hear argument next in case number 01-131, Gary Gisbrecht vs. Jo Anne Barnhart.

Spectators are admonished, do not talk until you get out of the courtroom.

The Court remains in session.

Mr. Schnaufer?

Mr. Schnaufer: Mr. Chief Justice, and may it please the Court: We are asking this Court to recognize a simple principle that a federal statute requires that an attorney fee be contingent on success in litigation, that when the court determines an attorney fee pursuant to that statute, an attorney fee should reflect the contingent nature of the fee, thus because 406(b) requires a contingent fee in Social Security cases, when the district court determined the reasonable fee pursuant to 406(b) that attorney fee must reflect the contingent nature of the fee.

Chief Justice Rehnquist: Let me ask you a question about the limits of the extent of the prohibition, whatever is in 406(b).

I think that can be read to deal only with the question where the attorney is seeking a recovery out of the plaintiff's recovery.

Mr. Schnaufer: Yes, Mr. Chief Justice, it's possible to interpret the statute in a way that would not criminalize charging a claimant a noncontingent fee, however the existing practice in the bar is to take it as prohibiting charging a noncontingent fee?

Chief Justice Rehnquist: Well, there anything more authoritative as the existing practice of the bar that would lead to that conclusion?

Mr. Schnaufer: I would direct the Court's attention to the 406(b)(2) where it sets forth the criminal penalties for violation of the statute.

There is only one appellate court to address whether or not a noncontingent fee may be charged as the third circuit in Coup, but it doesn't reach the issue.

Also one district court in Hutchinson cited in the amicus brief from the claimants representatives addresses that.

No. I think even if the statute did not require a contingent fee when there was no judgment favorable to the plaintiff, I believe that the vast majority of claimants would voluntarily choose to enter into contingent fee agreements.

Chief Justice Rehnquist: Because that's how they get counsel?

Mr. Schnaufer: Absolutely.

So even if the statute didn't criminalize charging a noncontingent fee, this would be the voluntary selection of the vast majority of--

Justice O'Connor: Well, if the statute, 406(b) reads as though when there is a judgment favorable to the claimant, the court may allow a reasonable fee.

And could apparently determine that fee any way it saw fit?

Mr. Schnaufer: --I believe this Court's decision in Christenberg Garments is relevant.

That case also addresses whether the term, whether the court may award attorney fees interpreting that the court did, the attorney matter wasn't up to the court, that the court would generally award the attorney fee in that fee shifting context.

So yes, there are situations in which a different--

Justice O'Connor: Well, it suggests perhaps that the court would allow a fee, but it seems open-ended that it will allow the court to determine the fee any way it wants on the lodestar method or via, by some other method.

Mr. Schnaufer: --Justice O'Connor, I believe the statute should be interpreted relative to the legal context in which it was enacted in 1965, which additional role of state courts rule on contingent fee agreements was to decide where the agreed upon amount between the parties was excessive or abusive.

Chief Justice Rehnquist: That wasn't personal to any statutory mandate, was it?

Wasn't that that just the supervisory power of the courts over fees?

Mr. Schnaufer: Yes, the federal courts in the early '60s, in 1965, doubted whether they even had the authority to rule on the appropriateness of a contingent fee.

Congress clarified that by specifically providing 406(b) so the court, the district court would determine the reasonableness of a 406(b) fee.

I believe that the--

Justice O'Connor: Well, you think the language of the statute requires a contingent fee?

At only reasonable fee can be a contingent fee?

Mr. Schnaufer: --That any attorney fee has to be contingent on success in the litigation that could be different fee agreements.

For example, a plaintiff may agree to charge or to pay his or her attorney a flat fee contingent on success in litigation or a specific hourly fee contingent on success in the litigation or for example, a complex formula based on the success in litigation.

But the attorney fee in our view--

Justice O'Connor: But you think that the implication of this statute is that the court has to base it on the agreement of the attorney and the attorney's client?

Mr. Schnaufer: --Yes.

I believe the relevant inquiry--

Justice O'Connor: Because it done say that.

I think you are reading something in that isn't there.

And you are basing that on practice of lawyers at the time or something?

Mr. Schnaufer: --But, Justice O'Connor.

I believe that clearly in 1965, Congress could not have intended to adopt for this statute the lodestar method given that the lodestar method had not been invented until a decade or so later and not really adopted by this Court until its decision in--

Justice Kennedy: Well, before lodestar, there were other descriptions for reasonable fees that depended on hours, degree of difficulty, etcetera etcetera.

I mean, lawyers did that for decades.

Mr. Schnaufer: --Yes.

Yes, Justice Kennedy, and when a court was involved, the question would be whether the agreed upon fee is reasonable or unreasonable, the court would not itself in the context when there was an existing fee, fee agreement determine what it felt was the most appropriate fee, so the primary question when there is a fee agreement and a fee request is whether the fee request, the agreed upon fee is reasonable.

Justice Kennedy: I think this is a very difficult case because either way, we are going to be, I mean on which circuits involved, we are going to be upsetting standard arrangements, contingent fees in some cases.

In this case, in the Ninth Circuit, are you saying that the fee, the fee the Ninth Circuit set was not reasonable?

Mr. Schnaufer: Yes, Justice Kennedy.

For several reasons the attorney fee that the district courts in Ninth Circuit set was not reasonable.

First and foremost, the district courts did not address the primary question whether the agreed upon fee was a reasonable fee.

Second, the district court who decided, who ordered the fees in Gisbrecht, Miller and Sandine, did not take into account, did not have the attorney fees reflect the contingent nature of the fee.

The district courts awarded in all three cases noncontingent hourly rates, noncontingent fees when by law, the attorney fee must be contingent on success.

Justice Kennedy: Well, but, of course, that assumes that you are correct here.

But based on a standard of fair compensation, was this unfair compensation?

Mr. Schnaufer: Yes.

Justice Kennedy: Quite without reference to your statutory argument?

Mr. Schnaufer: Yes.

Because when an attorney fee is contingent on success in the litigation, the attorney fee should reflect the contingent nature of the fee.

In this case, even if there were not a prohibition on charging noncontingent fee, the parties had freely contracted that the attorney would be paid more taking into account the risk of loss.

Chief Justice Rehnquist: But it seems to me you have got to get back to the statute and say why the statute should be read the way you want it to.

This isn't an ordinary situation event or of a contingent fee say in a personal injury case which the court may have supervision over in the general sense.

Here the court doesn't say that the attorney shall enter into an agreement and the court shall enforce it.

It says the court may determine and allow as part of its judgment a reasonable fee for such representation.

I think you have got to build from that and say why you think that the amount of the contingencies specified in your contract is the one that the court has to follow.

Mr. Schnaufer: Mr. Chief Justice, I believe that the practice before 1965 is relevant.

Attorneys were entering into contingent fee agreements with their clients to represent full representation in civil actions.

Congress in an act in 406(b), did not void those agreements, did not say that attorneys should not charge a contingent fee, but instead, chose to regulate the contingent fee agreements.

If Congress had, if Congress had intended to prohibit attorneys from engaging, from making contingent fee agreements with their clients, force representation in federal court, Congress really could have said so.

I think we have cited.

Chief Justice Rehnquist: But it doesn't say anything in (b)(1)(a) about contingent fees, does it?

Mr. Schnaufer: No.

(B)(1)(a) reflects that the attorney be must be contingent upon a favorable judgment.

Chief Justice Rehnquist: Well, if you get a favorable judgment--

Mr. Schnaufer: Right.

Chief Justice Rehnquist: --You can get a fee.

Mr. Schnaufer: Yes.

Chief Justice Rehnquist: Which isn't quite the same thing.

Mr. Schnaufer: We believe that the purpose of the statute expressed by Congress is fully implemented by our view.

Justice Breyer: Let me... I'm having trouble following your argument.

And one reason is because I am using the words differently than apparently you are.

I understand we are in a universe where you are only going to get paid under this statute if you win.

Am I right about that.

Mr. Schnaufer: Yes.

Justice Breyer: All right, so we all assume in that sense every fee is contingent.

Mr. Schnaufer: Yes.

Justice Breyer: But then I thought we were trying to distinguish within that universe between some circuits that say the way we should calculate that is by looking to what they call the lodestar, and other circuits that say the way we calculate it is we look to the agreement and if the agreement is for 25 percent of the recovery, that's where we start.

Am I right?

Mr. Schnaufer: Yes, justice--

Justice Breyer: All right.

Now what is it that we are trying to decide?

Are we trying to decide whether... what is it that you see us trying to decide within that universe?

Mr. Schnaufer: --Well, there are significant variations of the lodestar method.

The government now proposes that the lodestar method be the lodestar method from the fee shifting context, not taking into account the contingent nature.

Justice Breyer: All right.

As far as I can see, the Ninth Circuit says we start with the lodestar, but then it can be adjusted for 12 factors.

Number six of which is what I would call the contingent fee, namely, the one 25 percent of the judgment written into the contract which is what I will use the word contingent to refer to, and so you have the Ninth Circuit says first the lodestar adjusted for that, and then some other circuits say first start with 25 percent contingency, but adjust it if that isn't reasonable.

Now, that's how I was seeing it.

Now, am I right?

Correct me if I'm not.

Mr. Schnaufer: Justice, I believe there are variations.

Justice Breyer: And there are some variations, but those are the two basic things.

All right.

As between those two basic things, what is it you want us to say.

Mr. Schnaufer: We ask the court to, to specify that when a district court determines a reasonable fee under 406(b) it should start by asking first the question what is the agreed upon amount and is the agreed upon amount--

Justice Breyer: Okay.

You said circuits start with the 25 percent contract and adjust, rather than the circuits that say start with the lodestar and adjust.

Okay.

And the statute says may.

And now why should we do what you want rather than letting the Ninth Circuit free to do it the way it wants?

Mr. Schnaufer: --I believe, Justice Breyer, that there could be possible, you could allow different circuits to do things in different ways, but the interest is in uniform federal law.

I believe that the method, the traditional method of determining contingent fee is best served, best serves the purpose of the act.

Hence the lodestar calculation is generally an expensive, time-consuming endeavor best suited to complex litigation.

Social Security cases only take generally 30, 40 or 50 hours to accomplish.

If attorney fee litigation using, trying to proof up the Hensley hourly rate is required, then attorneys will have to spend five, maybe 10, in this case much more hours trying to collect a compensatory fee.

Justice Scalia: Mr. Schnaufer, can I ask you this question?

As I understand it, 406(a) provides that for representation before the agency, the agency shall prescribe a maximum fee.

Is... is... am I correct in that.

Mr. Schnaufer: Yes.

Justice Scalia.

Justice Scalia: So the agency sets a fee and it doesn't matter what the parties have agreed to before the agency.

They can agree to whatever they like.

The agency says this is the maximum fee.

Why would Congress in B adopt a totally different regime for representation before the courts?

As a, you know, before the agency, your agreement with your lawyer doesn't make any difference, but before the courts basically what governs is your agreement with the lawyer.

I don't know why they would do that?

Mr. Schnaufer: Justice Scalia, I believe that the statute does not say.

That the statute does not require the agency to ignore an agreement between a plaintiff or a claimant and his or her attorney when determining a fee for administrative work.

In fact, if you take a look at the regulations--

Justice Scalia: Well, it requires them to ignore it if it goes beyond what the agency determines is the maximum amount that ought to be charged.

Mr. Schnaufer: --Yes, Justice Scalia.

In that way 406(b) and 406(a) are the same.

To the extent that any agreement between an attorney and the Social Security claimant is inconsistent with the statute provision that agreement is void.

The long-standing provision--

Justice Ginsburg: What about the provision at the administrative level that does refer to an agreement?

This is, what is it, (a)(2), an agreement--

Mr. Schnaufer: --Yes.

Justice Ginsburg: --It controls with a cap of $4,000 at the agency level.

Mr. Schnaufer: Yes, Justice Ginsburg.

The statute there is elucidative of Congress' acknowledgment and lass the agency's acknowledgment of the capacity of Social Security claimants to contract with their attorneys for representation in federal court.

We are not asking specifically for the court to adopt the presumption, the conclusive presumption in 406(a)(2), instead, we maintain that the attorney has the ability, has the burden as the fee applicant to establish the reasonableness of the fee.

That is somewhat different than the more lenient rules of 406(a)(2).

Justice Ginsburg: May I ask, just a question of what this fee is composed of.

Say the claimant loses at all three levels of the administrator, the administrative level, then wins in court.

Do the hours before the agency count and then would they be computed differently because the 406(a)--

Mr. Schnaufer: Justice Ginsburg, it depends on whether or not the claimant was represented during the administrative proceedings.

If the claimant was represented during the administrative proceedings, then the claimant's attorney can apply to the agency for compensation for their services after the--

Justice Ginsburg: --After winning in court, so they would be completely different.

Mr. Schnaufer: --Yes.

They are dual entitlement.

The attorney with seek both 406(b) fees from the court, for the court work, and 406(a) fees from the agency for the agency work.

Justice Ginsburg: I believe there is another scheme I think that's more adhered than this Social Security scheme.

For veterans' benefits purposes, you are probably familiar with the provision that provides for filing an agreement and then if there is, when they reach such an agreement, the total fee payable to the attorney may not exceed 20 percent of the total amount of any past due benefits awarded.

That's an express scheme for filing of an agreement and the agreement enforceable.

Mr. Schnaufer: Yes, Justice Ginsburg.

I believe that Congress does, has addressed specifically on occasion when a court, when the court should look to an agreement or the agency should look to the agreement to determine a reasonable fee.

However, I believe that in the context of the legal context in 1965, Congress would have understood that a district court determining a reasonable fee for representation in court for the... would look first to whether or not there was a contract between the attorney and the claimant and whether or not the agreement upon amount was reasonable.

That would be the method by which the judge would be expected to proceed.

The judge would not be expected to determine independently a lodestar amount or try to determine a reasonable fee.

If the fee agreed to between the attorney and the client was reasonable, then that fee would be approved.

Justice Ginsburg: So you are saying this is a more... this same statute came later, but that essentially, that they operate the same way?

Mr. Schnaufer: Yes, but with important differences.

The 406(a)(2) administrative fees creates a presumption in favor of the reasonableness of the fee.

We are saying that the attorney has the burden under 406(b) to prove the reasonableness of the fee.

We are not suggesting that there is any presumption that the fee requested or that 25 percent is a reasonable fee.

The attorney has to prove that the reasonable fee is the agreed upon fee.

Of course, it's important in many cases the attorney will not request the full agreed upon fee but oftentimes will request much less.

For example, in the case of Anderson that this court denied cert on, the request was not for the full amount of the contract, but for significantly less.

I believe the attorneys have a strong interest in not making, requesting inordinately large fees from the court because one, it would be improper, unreasonable, two, the government would be likely to object, and three, the court would be unlikely to award it and so attorneys generally are going to make a fee request to the court under 406(b), they are going to be within the raping of reasonableness.

Justice Ginsburg: If you place an objection to the lodestar method, you said this becomes a litigation that is embarrassingly longer than the litigation over the client itself.

Mr. Schnaufer: Justice Ginsburg, our objection to the lodestar method depends on how you, what you mean by the lodestar method.

There is a lodestar method using the fee shifting context that is a noncontingent fee.

There is also a lodestar method that may allow enhancement for contingency and that would be a fee-shifting context.

Chief Justice Rehnquist: The district court here relied on the bar fees in the Portland area, didn't it, for lawyers that have been practicing a certain amount of time?

Mr. Schnaufer: Yes, Mr. Chief Justice.

The hourly rates used were established as noncontingent hourly rates however since the attorney services were contingent on success, an attorney fee awarded at that rate would not be fully compensatory.

That when an attorney fee is contingent on success, the attorney fee, a reasonable attorney fee should reflect the contingent nature.

Chief Justice Rehnquist: Well, every fee is in a sense contingent on success.

I mean, if you lose the lawsuit, you don't charge the same amount as if you win the lawsuit, whether or not the fee agreement is contingent?

Mr. Schnaufer: Yes.

Mr. Chief Justice.

In this case, the government maintained that $125 for one attorney was the appropriate reasonable noncontingent hourly rate, however, the government also concedes that the class-based risk of loss in these cases is two out of three.

We have set forth agency's own statistics showing that 1/3 of Social Security plaintiffs end up receiving past due benefits and so on average, an attorney will receive 1/3 of that noncontingent hourly rate if that noncontingent hourly rate is all the compensation that the attorney can obtain.

Justice Scalia: Mr. Schnaufer, here's my problem with, with your basic argument, which is look at the parties who negotiated a fee in another context, that negotiated fees with what the court begins with.

This is not other contexts.

All three of the contracts involved in this case provided for a fee of 25 percent of the back benefits, right?

Mr. Schnaufer: Yes, Justice Scalia.

Justice Scalia: And there is testimony in this case that that is the universal practice, the universal practice of all the lawyers that represent these kind of, these kinds of clients.

Mr. Schnaufer: Yes, Justice Scalia.

Justice Scalia: And that, that 25 percent of back benefits is the maximum allowed by law?

Mr. Schnaufer: Yes, Justice Scalia.

Justice Scalia: Now, what, what reason is there to believe that this is a, you know, an honest evaluation by the two parties of what the, of what the lawyers' services are worth?

The lawyers are simply going for the absolute maximum that the laws allow.

I don't know why we should "approach this" or why Congress would have approached it as cases in which well, you know, after all, the parties struck a deal at the beginning at arm's length and that should be the starting point.

This is not that kind of a situation.

It is a closed market in which these, these plaintiffs take what the bar gives them.

That's about it.

Mr. Schnaufer: Justice Scalia, I believe that if the statute specified a 5 percent maximum fee or 10 percent maximum fee, the attorneys would also generally charge, almost universally charge that same five or 10 percent.

It's important to take a look at the 25 percent cap on past due benefits in relative context.

This is 25 percent of past due benefits.

It's not 25 percent of the whole value of the case.

In normal civil litigation an attorney recovers not 25 percent of a small part of the judgment but the lifetime benefit.

Justice Scalia: Sometimes it would be a larger part of the benefit.

It depends entirely on how long the case goes on.

It's entirely fluky, and in all of the cases, the lawyers come in and say 25 percent.

That's the max I can get, and that's what I'm going to ask for.

Mr. Schnaufer: I think that, Justice Scalia, I think in this case it's useful to look at an example and see what that 25 percent cap actually does.

The government in this case maintained that the noncontingent hourly rate was $125 per attorney.

Also the government does not dispute that the risk of loss is one in three and so a fully compensatory hourly rate would multiply that hourly rate times a three multiplier for $375 an hour.

However, in these cases, the actual, the 25 percent cap came in, would have been met at $280, $190 and roughly $270.

Justice Kennedy: But your multiplication assumes a fictitious market.

If I'm an attorney and I'm practicing in this area and I know I'm going to win only one out of every three cases, I'm going to tell the judge my hourly rate in order to make a decent level in this part of the law and this special is X dollars an hour, $150 an hour.

I have to get that.

And I take it the trial judge would say yes, that's right, $150 an hour is the prevailing rate.

That's what you get.

Mr. Schnaufer: Justice Kennedy, I believe the hourly--

Justice Kennedy: You, you, you made the assumption of a, of a fictitious market.

Mr. Schnaufer: --Justice Kennedy, I believe that the government concedes that there is a preloss in a typical Title II case and also the government's position was that the appropriate noncontingent win, lose or draw hourly rate was $125 for one of these attorneys.

Therefore, under the government scheme, paying $125 an hour to an attorney for services will only mean that the only grosses only $44, roughly, roughly a third of that amount.

And so the way the government is counting, the establishing of the hourly rate at $125, admitting to the class based risk of loss as one of not contesting that, can you see that the attorney's recovery is actually much lower than that noncontingent hourly rate, given the--

Justice Souter: Well, it will be--

Justice Stevens: --Let me ask you a question I have been trying to get in for a while here.

What would you, what would your reaction be to a rule that says the district judges shall require the applicant for a fee to one, file any contract he has, two, file a statement of his hours, three, file his normal rate that he normally charges and based on the district judge's knowledge of the proceedings, he shall set a reasonable fee?

Mr. Schnaufer: --Justice Stevens, I believe that that would accomplish the goal readily, a local district court could adopt such a rule which would be consistent in 406(b).

I think that the court should also at the same time consider whether or not there is any offsetting award under the Equal Access Justice Act.

Also, whether or not there is any fee, fee liability under 406(a).

Chief Justice Rehnquist: Well, the district court here expressed, perhaps it was a magistrate judge, expressed some skepticism as to the number of hours, I think, put in on one of these cases.

Mr. Schnaufer: Mr. Chief Justice, I believe that the district court judge disputed whether there was any special expertise involved.

The government did not contest that all the hours in these cases were reasonably spent, the 25 hours, the 39 and the 52 hours.

Chief Justice Rehnquist: Well, the fact the government didn't contest it doesn't mean that perhaps we shouldn't pay some attention to the view of the district judge.

Mr. Schnaufer: The district court judge did award the number of hours requested.

The district court judge did not reduce the hours at all in terms of the hours.

I'd like to take the rest--

Justice Souter: Why should we consider the separate fee under the equal access to justice act?

A reasonable fee is a reasonable fee.

Why does it matter that some money may be forthcoming from a different source to pay for it?

Mr. Schnaufer: --The statute concerns how much the client will actually end up paying his or her attorneys that the Equal Access Justice Act--

Justice Souter: And it says that they should pay a reasonable amount.

Mr. Schnaufer: --All right.

Yes.

A reasonable amount.

And for example, the out-of-pocket attorneys fees in this case with the EAJA offset was 29,675 for all three claimants who received $114,000 in back benefits.

And so in that context I believe that the attorney fees, the judge should consider the equal access to justice act because how much the claimant pays is very important.

Justice Ginsburg: How does it work under the fee-shifting--

Justice Stevens: --What you're saying in that view is that the equal access to justice fee is for the benefit of the lawyer, rather than the client.

Mr. Schnaufer: The EAJA itself, the offset provision states that the attorney should keep the larger of the 406(b) and the EAJA fee so the statute itself contemplates that the attorney is entitled to the larger fee.

Justice Ginsburg: In the context of a fee-shifting statute where EAJA applies, the lawyer gets the fees from the Defendant under EAJA.

Can the lawyer have an agreement with the client that the client is going to pay an override above, above what the lawyer gets from the Defendant?

Mr. Schnaufer: Yes.

We rely quite heavily, Justice Ginsburg, on this Court's decision on Venegas vs. Mitchell, recognizing that an attorney fee paid by a client to his or her own attorney can be in addition to the amount of a fee-shifting statute.

A fee-shifting statute such as the EAJA will not provide a fully against tore fee in almost all cases.

This is particularly true since the EAJA's hourly rate has an artificial cap.

It is not the prevailing market rate based upon the attorney's services in the legal community.

If I may, I take the--

Argument of David B. Salmons

Chief Justice Rehnquist: Very well, Mr. Schnaufer.

Mr. Salmons, we will hear from you.

Mr. Salmons: Mr. Chief Justice, may it please the Court: For three reasons the Court should use the lodestar method to determine and award a reasonable attorney's fee under the Social Security Act.

First, the lodestar method best reflects the plain language and purposes of Section 406(b).

Second, it is consistent with the strong presumption in favor of the lodestar approach announced in this Court, attorneys' fees cases and third it best furthers the statute's directive that the fees awarded in each case must be reasonable.

Chief Justice Rehnquist: Does the lodestar method take into account the contingent nature of the recovery?

Mr. Salmons: Your Honor, the lodestar method permits district courts to take a number of factors into account in determining the reasonable hourly rate and the reasonable fee under this Court's decision in Dague, however, courts are not permitted to increase what would otherwise be a reasonable fee based on the mere fact that it was contingent.

Justice Kennedy: Would it be a reasonable fee if it included in the hourly rate reference to the fact that there is only a 1/3 success rate?

As a judge, I want to practice in this area.

I know the area very well.

I win only a third of the time, therefore my hourly rate takes into account the fact that I'm going to win only a third of the time and my hourly rate is $200 an hour.

Can the district judge accept that?

Mr. Salmons: No, Your Honor.

I think under Dague that would not be permissible.

This court in Dague--

Justice Kennedy: Then that's a false market the district judge is using in order to award the fee.

I don't understand that.

And, of course, I see the consistency of your position because if you said yes well then I would say well doesn't the contingency fee do the same thing.

So I'm... but... I'm concerned about how the district judge can award in effect just $40 an hour.

Mr. Salmons: --Your Honor, I think there are at least the three responses to that.

First, this Court in Dague rejected the notion that contingency enhancements were necessary in order to determine a reasonable fee in the context of fee-shifting statutes.

Justice O'Connor: What in that case, what statute were we interpreting?

Mr. Salmons: That involved Section 1988, Your Honor.

Justice O'Connor: Yes.

Not this one.

Mr. Salmons: That's correct.

Justice O'Connor: Not cases like this where there is a low success rate, and where the language of the statute says a reasonable fee.

Mr. Salmons: Your Honor--

Justice O'Connor: I mean, why isn't the court, why can't the court determine it as it wishes, so long as it finds at the end of the day it's reasonable?

An hourly rate that it enhances somewhat or the risk factor, or even a contingent fee could be reasonable, as long as it doesn't exceed 25 percent.

Doesn't this statutory language leave that open?

Mr. Salmons: --Your Honor, I think the statutory language is open to this Court and to courts generally to construe a standard that best furthers the purposes of the act.

This Court has long held--

Justice O'Connor: Do you think the statute requires that one particular method be selected or does it leave it up to the judge?

Mr. Salmons: --Your Honor, it certainly leaves it up to courts.

That's true in fee-shifting statutes as well as with this statute.

Chief Justice Rehnquist: Well I'm not, I'm not sure that fee-shifting statutes are necessarily an appropriate analogy here because perhaps there is no reason for requiring a Defendant to pay a lot of money because of an arrangement between the plaintiff and his attorney was contingent, and the attorney doesn't win many cases.

But I think if you are talking about an agreement between the plaintiff and the client in the actual case, there may be more of a case for it.

Mr. Salmons: Your Honor, I think actually to the contrary in the contempt of fee-shifting statutes this Court has long recognized that the purpose of those statutes is merely to encourage lawyers to undertake that litigation, and nevertheless, this Court has said that a contingent enhancement is not necessary to provide that extra inducement that a lodestar calculation is adequate and appropriate in striking the balance that Congress intended when Congress only intends to encourage litigation.

In this context, by contrast, Section 406(b) is not merely a statute designed to encourage litigation, but is designed to protect Social Security claimants and their awards of back--

Justice Kennedy: I can't understand your position that a reasonable fee must be determined without regards to the realities of the special practice.

I just don't understand that.

Mr. Salmons: --Your Honor, that, that is simply not our position.

It is not our position the courts must be blind to the realities of this practice.

Justice Kennedy: Is one of the realities that you can win only a third of the time?

Mr. Salmons: Well, those numbers obviously vary.

Lawyers in this kind of environment are prevailing all of the time.

Justice Kennedy: Let's assume that that is a given in the particular community and in the particular practice.

Mr. Salmons: Yes, Your Honor.

I think that one thing that's important to keep in mind is that Congress struck the balance in this statute between protecting claims and encouraging lawyers.

Justice Kennedy: In the case that I put, can the judge or cannot the judge take into account the fact that the attorney is going to win only a third of the time?

This is his only practice.

This is all he does.

He is a specialist.

Mr. Salmons: Your Honor, if what you mean by take into account--

Justice Kennedy: That the hourly rate--

Mr. Salmons: --That the court can increase the hourly rate in order to provide a subsidy from prevailing Social Security claimants to losing Social Security claimants, I think that would be inappropriate under this statute and under this Court's decisions in Dague, which although it is a different context, I think the difference is quite strongly in favor of applying the same rule here.

Justice Breyer: --It's not a subsidy.

What's a subsidy?

I mean the obvious, everybody has the same point.

If you say they can only learn $40 an hour, the Social Security people won't be represented or they will pad their hours.

Now, I can't believe Congress wanted that.

So, so there doesn't seem to be an answer to that, and Congress used the word may, so may means may.

I mean, that's the simple argument.

Mr. Salmons: That is correct, Your Honor.

Justice Breyer: And it sounds to me so far there is no answer.

Mr. Salmons: The point I was making is that it certainly is available to this Court to set a standard for courts to apply.

Justice Breyer: If it's available, why wouldn't we do it?

Mr. Salmons: That's what I was trying to address, Your Honor.

Justice Breyer: All right.

Mr. Salmons: I think the reason why this Court should not adopt a rule that would require the shifting of benefits in effect from successful Social Security--

Justice Breyer: That's what I asked.

What do you mean shifting of benefits?

It's not a... a subsidy is where you take some money and you pay for somebody to do something.

I don't see why you call this a subsidy.

That's a conclusion.

What they are doing here is they are charging what it costs them to provide service to Smith, and it is what it costs because in the absence of this, Smith won't get the service.

Nor will Jones and Brown, they are apt to lose.

But particularly Smith won't.

Mr. Salmons: --But Your Honor, that's not necessarily true.

I mean, individual cases, the riskiness of individual cases is going to vary widely.

Justice Scalia: Smith is paying, Smith is paying for the work done for the two guys who lost.

Mr. Salmons: That's correct.

That's exactly right.

And that's the way this Court--

Justice Breyer: One way to word that.

Mr. Salmons: --That's the way this Court addressed it.

Justice Breyer: Okay.

Well, why shouldn't we look at it that way?

Mr. Salmons: That same analysis--

Justice Breyer: But why should we look at it that way since Smith is also paying for what it costs to serve Smith?

Mr. Salmons: --Your Honor, I think that the reason this Court should view contingency enhancements in this context as inappropriate is because of the purpose of the statute primarily designed to protect the benefits of successful Social Security claims.

Justice O'Connor: Well but the statute itself speaks, sets a kept, a contingent fee of no more than 25 percent.

I mean the statute itself refers to that as a cap.

Mr. Salmons: The statute has... that's correct, Your Honor.

And the statute has two provisions.

One is that it sets an upper bound of a reasonable fee which is 25 percent but more precisely--

Justice O'Connor: That does not suggest that there can never be a contingency factor, does it?

Mr. Salmons: --It does not necessarily suggest that, no.

What we are talking... what I think the question as Justice Breyer posed was more an a policy level, why should this Court adopt a rule that would allow those kinds of enhancements and I think one of the reasons why that's inappropriate in this context is because the purpose here is not just to encourage lawyers to take these cases, which was the case in the fee-shifting statutes where this Court said enhancements aren't necessary.

The purpose here is to protect claimants and it would be particularly inappropriate--

Justice Kennedy: Well, is the purpose to give fair compensation to members of the bar?

Mr. Salmons: --That is, that is a purpose, but I would submit, Your Honor, that in regards to the language we are focusing on of the reasonable fee, that is not the primary purpose.

There is a separate provision in 406(b) where Congress addressed the question of the problem of encouraging lawyers to take these lawsuits.

Justice Kennedy: Suppose you had a good friend and he said I'm going to go into Social Security work.

I, I know the area very well.

It's going to be my specialty.

I'm going to win a third of the time.

I'm going to in effect get $40 an hour.

Would you advice him to go into that part of the practice?

Mr. Salmons: Your Honor, that would probably depend on what some of his alternatives were.

I don't mean that in any sort of derogatory way, but it is not the case that lawyers cannot make a sufficient wage under the lodestar method.

It's important to remember that there are at least six circuits who have been applying the lodestar method.

Justice Stevens: May I ask you in a way what you mean by the lodestar method.

I know we have talked about it in a lot of cases, but would it be a satisfactory compliance with the lodestar method in your view of the case if every judge said to every lawyer, file your time sheet with me, I want to know your hours, I want to know your regular charge, and I want to see the contract you have got, and I know a lot about the case, I'll fix the fee.

Would that satisfy your view?

Mr. Salmons: Your Honor, that would certainly be a one way to interpret a statute that I think on the text of the statute there is nothing that would prohibit it.

I think there are strong reasons why this Court may want to provide some guidance.

Justice Stevens: Well, the guidance is--

Mr. Salmons: For federal rules.

Justice Stevens: --You should take into account the hours, the general charge that he makes and the success in the case and whatever contract he has made and then you would know the case, you decide the reasonable fee.

And we don't want to have a 10-month argument under lodestar method about what the, you know, one of the things we want to avoid is protracted litigation in these cases, so we want to simplify it.

I think you would agree that's desirable?

Mr. Salmons: I do agree that's desirable, but I think the lodestar method is the best way to do that.

Justice Stevens: And I'm just wondering if what I propose to be a sufficient compliance with the lodestar method to satisfy the government?

Mr. Salmons: Your Honor, I think it would largely be in compliance with lodestar method, although not under this Court's decision in Dague which has prohibited the consideration of contingency enhancements.

Justice Scalia: Did that, did that prohibition of contingency enhancements apply in the context such as this where it was only legally possible to charge when you win?

Mr. Salmons: No, Your Honor, that was not the context of 1988.

Justice Scalia: Might not that make a difference?

It's one thing to say well, if you don't, if you don't charge anything for your losing cases, that's your problem.

You ought to charge.

And we are not going to allow you to conduct that practice and make, make this plaintiff pay for the, for the two who you lost.

But when you are in a different context where the only time you can get fees by law is where you win, would we have to pay, would we have to adopt the same rule?

Mr. Salmons: Your Honor, I think this Court should adopt the same rule and it's because the reasons this Court adopted the rule that it did in the context of fee-shifting statutes was not because there was still some possibility that lawyers could negotiate fees even that won on a contingent basis.

Chief Justice Rehnquist: What's the government's position, supposing one of the Social Security lawyers has a very wealthy client who feels he is entitled to Social Security as a course he is just like everybody else.

He hasn't been paid it, and says to the lawyer, I'll pay you $300 an hour if, for all the work you put on this case because I am determined to get that Social Security.

Do you think 406(b) prohibits that?

Mr. Salmons: Um--

Chief Justice Rehnquist: He doesn't want to get it out of the judgment at all.

He says I'll bill you for it afterwards.

Mr. Salmons: --Your Honor, the commissioner does interpret 406(b) to require only contingent fees, that it prohibits a lawyer from charging fees when there is no award of back benefits.

Justice Scalia: A maximum wouldn't make any sense otherwise.

I mean, the maximum is 25 percent of the back pay award.

If there is no back pay award, you can charge as much as you like.

I mean, that's strange.

Mr. Salmons: We think that in light of, of the terms of 406(b), its purpose is in the structure with, with the provision that would make it in fact a crime to charge more.

But the best way to read that is to require that only fees that have been authorized by a court can be charged.

Chief Justice Rehnquist: Has the commission ever issued an opinion to that effect?

Mr. Salmons: No, Your Honor.

There is no regulation that simply addresses that.

To be honest with you, it is not an issue that has really come up because lawyers as the record here again reflects, have a universal practice of entering into fee agreements that say 25 percent contingency at the statutory maximum and their contingent fees so it's just not an issue that comes up.

Justice Kennedy: So the statute says all fees are contingent and the government says there can be no contingent fees?

That's where we are in this case?

Mr. Salmons: No, Your Honor.

The statute says the relevant language of the statute says the courts will determine a reasonable fee, and we--

Justice Ginsburg: But all fees are contingent on success.

In other words, there is some confusion, I think, of what the term contingent fee means.

Nobody gets a fee if they lose.

At least the secretaries interpreted the statute as long as I know to say that the only time that the lawyer is going to recover is if the plaintiff guess benefits, is that right?

Mr. Salmons: --That is correct.

Justice Ginsburg: Okay.

And then the question is what's, what this provision requires.

One just reaction that I had to this picture is well, in tort litigation, the standard is a third of the recovery.

And why isn't here, why isn't a quarter of the recovery eminently reasonable considering as was pointed out that the recovery comes only out of the past benefits.

No... nothing out of the future benefits the person is going to get.

So what is it about the 25 percent of past benefits?

It doesn't just make a whole lot of sense instead of engaging in what we know from this very case, we'll take as much time as the calculation, as the dispute over the benefits themselves.

The litigation here over the fees took as long as the litigation over the claimant's right to benefits.

Mr. Salmons: Your Honor, let me if I may address your last point first.

That is to say that the commissioner's experience with the lodestar method in the numerous circuits that apply it is not that it is difficult to apply, but keep in mind, Your Honors, that in most of these cases, the lawyers are also seeking EAJA fees and so the very same court that's going to consider the 406(b) fee claim has already undertaken a lodestar analysis to determine a reasonable number of hours and then the rate is determined by EAJA, but the commissioner's experience is that the lodestar method is not difficult to apply and in the vast majority of cases, certainly in most circuits, the commissioner doesn't object to most of the fee claims because they are reasonable.

The courts have determined standards for what reasonable rates are in the relevant prevailing markets.

Justice Ginsburg: You mentioned EAJA.

One of the problems that I have with that analogy is it works out here that you get EAJA is just about it.

These three lawyers got what, what EAJA permitted.

And then fee-shifting statutes generally you get from the Defendant what EAJA allows you, but then you can have, you can recover more from your own client.

Here it works out that EAJA is it and it seems to me something unfair about that.

Mr. Salmons: Your Honor, I think the only thing unfair in that sense is that Congress here has determined that the market for legal services in the Social Security context was failing to carry out the purposes of the Social Security Act, and that lawyers had unequal bargaining power and were charging inordinately large contingency fees--

Justice Ginsburg: But those were the days you were talking about 50 percent contingent fees so Congress cut it back to 25, so why... what--

Mr. Salmons: --That's correct.

Justice Ginsburg: --What... you just said well, 25 not in every case, maybe only work two hours, it would be unreasonable, but instead of having the judge and the lawyers go through this whole thing, I mean, EAJA is available only if the government's position was not substantially justified, right?

It's not automatic.

Mr. Salmons: That's correct.

That's correct.

It's a standard that course seem to find on a regular basis in these cases, but that is the standard.

Justice Ginsburg: Does the government... I don't know how it works, but when someone is seeking benefits from the government, government has prevailed all through the agency, loses in court, does the government just sort of concede that the government's position was not substantially justified?

Mr. Salmons: Not necessarily, Your Honor.

I think the government lawyers in each case would look at the prevailing circuit law or, of the jurisdiction, would look at the facts of the case and make the determination.

In most of these cases, EAJA fees seem to be awarded and the resolution of those fees doesn't take a lot of time.

Justice Ginsburg: Well, shouldn't there about, you say you look at the law of the particular circuit.

I would think that a concept like was the government's position substantially justified shouldn't be whatever it means in, in 12 different appellate courts.

Mr. Salmons: My point, Your Honor, is just one of the things I think that's keeping, is important to keep in mind in these cases is that they, by their nature, tend to be very routine and so both in terms of awarding EAJA fees and in terms of awarding 406(b) fees, it is not very difficult for courts to develop practices in these cases that, that result in a very expedited process, and that in fact, that is, that is the way the lodestar method is applied and I, and it seems to me, Your Honors, that the alternative that's being proposed would largely frustrate the purpose that Justice Stevens was identifying of the need for some sort of expedited procedures here.

They point to four additional factors that aren't lodestar factors that they think courts should take into account.

Some of the contingency circuits who have adopted some modified contingency rule have added additional factors, including requiring courts to ask whether the claimants had been notified that there were other options other than the 25 percent contingent fee which under the facts of this case we were told the lawyers would never do.

Chief Justice Rehnquist: Does the government have any statistics as to how often an award of attorneys fees by a district judge is appealed to the Court of Appeals?

Mr. Salmons: Your Honor, that is, in the context of 406(b) cases?

Chief Justice Rehnquist: Yes.

Mr. Salmons: There are no... the agency does not specifically keep statistics on that, although I did discuss that with the relevant agency personnel and was informed that in fact the agency very rarely seeks an appeal unless the case involves some broader legal principle that the agency determines is important to litigation.

Chief Justice Rehnquist: How about the attorney?

Mr. Salmons: I do not have any figures on that, Your Honor.

Justice Souter: Mr. Salmons, another question of statistics.

We have had the statistic that only one out of three cases is successful.

And I take it you have not challenged that.

That's one of the arguments that there is something that is really outrageous practice going on and there is a need to enhance for that contingency.

What I want to ask is are there any, is there any evidence, statistical or otherwise, to explain why the rate is only one win out of three cases?

One reason might be that, or one description might be that virtually all lawyers who take these cases in fact have the experience of losing two for every one.

But another explanation might be that lawyers who can tell the difference between a good case and a bad case win at a very high rate, and that a lot of young lawyers who don't have access to many clients are willing to take long shots and that when you average those two together, you bet the one win out of three cases.

Do we know, do we know which possible description is correct or whether there is some third description that explains the one in three?

Mr. Salmons: Your Honor, I'm not aware of any statistical or other information that's directly on point, although I could think it is important to keep in mind that the standards of review among other things have a lot to do with the outcome of these cases, and that, and that the general statistics that the courts provide through, for example, the federal judiciary home page that tracks different types of cases in different circuits, for example, shows that there has been dramatic increases in the number of Title II disability lawsuits that are filed initially in district courts between the period of 1990 to 2000.

In fact, that they have tripled.

Justice Ginsburg: Does that have anything to do with what the rate is because these are all cases that lost at the administrative level, right?

Mr. Salmons: That's correct.

Justice Ginsburg: Is there any, any showing that maybe in the prior period, there were more cases winning at the administrative level, therefore fewer getting into the court?

Mr. Salmons: Not that I have seen.

In fact, Your Honor, the numbers that I have seen suggest that the percentage of cases that win before the agency has been relatively consistent.

Justice Scalia: I don't understand the point were you driving at.

So what, so they tripled in 10 years, you know, and the ice cap melted.

Mr. Salmons: I surely don't want to overstate it.

Justice Scalia: I don't understand what you were driving at.

What was the point that you were making?

Mr. Salmons: The point I was attempting to make, Your Honor--

Justice Scalia: Is this the result of those, of those jurisdictions that have allowed contingency to be considered?

Mr. Salmons: --No.

Not at all.

Your Honor.

The point I was trying to make is that there aren't any hard statistics that show how the different legal rules have having an effect on litigants in this context, but the general--

Justice Souter: And likewise, I take it there are no statistics on how the different compensation approaches are having an effect?

Mr. Salmons: --That's correct.

And that's, that's the point I was trying to make, Your Honor.

That all that we can tell is that one, the commissioner has not been flooded with complaints in the circuits that applied the lodestar, which is the dominant method and has been for over 10 years.

Justice Scalia: Do you have any flooded in the other jurisdictions?

Mr. Salmons: No.

My point is that there are, there are, there is no reason to think that the rules are having that dramatic of an effect on the availability of counsel.

Justice O'Connor: Then why don't we leave it alone?

Let the judge do it?

Mr. Salmons: That is certainly an option that is before this Court.

The government's position is that if the Court is going to address the issue of what standards should be applied, that the best way for this Court to do it is to specify that the lodestar method is the best method, and that includes--

Justice Ginsburg: But that is a pretty big swing if you say if the judge can go up to 25 percent if that's reasonable, here what was the percent, the lodestar percent, the lodestar yielded what percent of the past two benefits in these cases?

Mr. Salmons: --Your Honor, I don't have that figure.

I can tell you that in terms of hourly rates, for example, I--

Justice Kennedy: Wasn't it about half of what the contingency would have been?

Justice Ginsburg: Even less, I think.

Mr. Salmons: --It varied in the, in the cases.

Justice Ginsburg: I think it was under 10 percent.

Mr. Salmons: I think one way to sort of try and track that is that what the claimants lawyers in these cases did was because they recognized they were in a lodestar circuit, they had, they kept the same number of reasonable hours they would use for their EAJA fees which the government did not contest and then they just divided that by the 25 percent figure and came up with an hourly rate.

So the hourly rates they sought in these cases ranged from around $180 an hour to nearly $300 an hour.

Justice Ginsburg: But those were chopped down by the judge.

Mr. Salmons: That's correct.

Justice Ginsburg: Because they were not supposed to, at least this Court, the Court here did it.

It took out following this Court's precedent any override for risk of nonsuccess.

Mr. Salmons: That's right, Your Honor.

The Ninth Circuit has--

Justice Ginsburg: So I'm not talking about the rates that the lawyers asked for, I'm talking about the rates that they got.

My concern is this.

If you just say well judge, look at the agreement.

Look at the hourly rate.

You can get swings from one court saying as I think was true here, 7.8 percent to another judge saying in that very same case 25 percent.

That's why I think you have to have a little more control, a little more uniformity.

Mr. Salmons: --Your Honor, let me make two points very quickly.

One is that when Congress enacted this statute, it recognized not only that lawyers were charging an inordinately large percentage in terms of their contingency fees, but there was an inherent problem with contingency fees because in this context they do not track the value, a reasonable value of legal services.

They turn unnecessarily on factors such as the number of dependents and the amount of delay that it takes in order to get the benefits over which time the benefits continued to accrue which just has no bearing whatsoever on the amount, the value of the legal services provider.

Justice Ginsburg: Are you recommending that we say let the judge do it, no matter what?

Is that the government's position?

I thought the government was coming in with a pretty stiff position that it's the lodestar method period.

Mr. Salmons: That is the government's position, Your Honor.

We think that the lodestar method.

Let me just see if I can, and be very clear.

Justice Scalia: Your position is that we do not want to subsidize bad suits?

Mr. Salmons: Yes.

That is exactly right.

Justice Scalia: It is not in the best interests of anybody, the country or anybody else, to encourage lawyers to bring bad suits and then get paid for it when they win a good suit, right?

Justice Breyer: I was wondering if you had spent a lot of time--

Justice Scalia: --This is certainly a way to get lawyers in the good suits.

Mr. Salmons: But, Your Honor, there is no, there is no evidence of that.

And in fact the evidence that it does exist is to the contrary.

There are six circuits that have been employing the lodestar method for, for decades without any evidence that there is a failure of lawyers who want to take these cases.

The lawyers in these cases submitted affidavits that said we, we practice regularly in federal courts in Title II cases and we have been doing it for years and years and that's in the context of lodestar statutes.

Justice Ginsburg: Why not make it run the same way the veterans' benefits do?

I mean, after all, it's a similar kind of set up.

You claim that if it's at the agency, you lose, you come to court, and there it's the agreement is 20 percent, so it's, but that seems to be working fine, right?

Where the judge gives the 20 percent.

Mr. Salmons: Your Honor, that would certainly be an alternative availability to Congress.

The difference would be the statutory language would prohibit this Court from adopting a rule that would look primarily to the fee contracts.

Congress knows how to write that kind of statute when it wants to.

It did so in 406(a)(2).

It has not done so here.

Another point I would like to make, Your Honor, is that, is that these cases are, as both sides seem to agree, are somewhat unique in that they generally require a very low number of hours.

They don't require the same kinds of risk undertaken by the lawyers as other contingent fee cases do.

Justice Breyer: Well, if that's so then the judge in all the circuits that follow the contingent method would reduce the award.

I mean, in one way you are going to start with the lodestar enhance.

In the other way you are going to start with the contingent fee reduce it.

I guess the simpler is the contingent fee reduce it.

I think frankly you don't have to go into the hours.

Mr. Salmons: I disagree, Your Honor, because of the court's experience, the lodestar method, I think that's the most efficient way for courts to determine the fee.

Justice Kennedy: Beyond the record, do you have any statistics on how often contingent fees are reduced in the contingency circuits?

Mr. Salmons: I do not, Your Honor.

I do not.

One other thing that I think--

Justice Breyer: Do you have any sort of egregious examples where there was a lot of delay in those circuits just to build up the recovery?

Has that turned out to be a problem for the agency anywhere?

Mr. Salmons: --Your Honor, the agency has not experienced any particular problem under either of these standards.

We do think that the lodestar method as this Court announced it in Dague is the best way to effectuate Congress' intent under the purposes of this statute.

I think it's important to keep in mind that Congress has already provided a mechanism to ensure adequate counsel here, and that is the payment out of the back benefit awards directly to the lawyer.

That's different than in other contingent fee contexts.

So that Congress was concerned with the need to encourage counsel and it provided a provision to do that.

It struck the balance, and then it requires the courts to determine the reasonable fee in each case based on a fair value of the legal services provided and this Court has long held that there is a strong presumption that when Congress says courts determine a reasonable fee, Congress means the lodestar method.

If the lodestar method--

Justice Ginsburg: That wasn't even established until Hensley against... whatever it is.

The lodestar got settled around in the circuits in the 1980s.

Social Security claims have been going on a long time.

Wasn't it standard before, but it was contingent?

Mr. Salmons: --Your Honor, courts used a variety of standards before as they did under other fee statutes.

The fact that the lodestar method wasn't fully developed didn't prevent this Court from adopting it under the Civil Rights Act of 1964, for example, but prior to the adoption of the lodestar method, it's not the case the courts were routinely deferring to the fee contracts.

Rebuttal of Eric Schnaufer

Chief Justice Rehnquist: Thank you, Mr. Salmons.

Mr. Schnaufer, you have two minutes remaining.

Mr. Schnaufer: Yes, Mr. Chief Justice.

I believe that the government's position is a bold new position.

The government has not previously advanced except for in its brief that all circuits are wrong, that even the lodestar jurisdictions are wrong.

That no one can, no enhancements for contingencies can ever be permitted and so the agency cannot rely on the experience in the circuit lodestar to say that this method is the preferable method.

Claimants need attorneys.

In these cases the government conceded that the agency's position, underlying agency position was not substantially justified without attorneys whose claimants most likely would never receive the benefits that they were due.

Justice Stevens, you asked about possibly about the EAJA of lodestar.

There are many reasons why the EAJA, Equal Access Justice Act is not the lodestar amount.

The EAJA has an artificial hourly rate capped below the prevailing market rate.

The EAJA also often represents a settlement of the parties for the risk of litigating the substantial justification issue.

And so we cannot rely, just because there is an Equal Access Justice Act award, there is not in the case already a lodestar amount.

Then I guess I think it allows this Court to distinguish easily Dague.

Dague should not be applied outside of the fee-shifting context because as its request, a plaintiff should be able to pay his or her own attorney to take into account the risk of loss.

Justice O'Connor, I think was asking whether or not contingency could be taken into account by a district court in determining the fee.

I believe that if this Court can direct that the lodestar method be adopted to enhance for contingency reflecting the necessary contingent nature of the claim or the court can use a contingent fee method, there again looking at the contingent nature of the fee, regardless of which way the court goes, the court allows more than one method.

I brief that the contingent nature of Social Security cases should be taken into account.

The government describes dependence.

The government objects that attorney fee awards would be arbitrarily different based upon the number of dependents.

The government lost that issue in Hopkins vs. Cohen in 1968.

This Court held in Hopkins the number... thank you, Mr. Chief Justice.

Chief Justice Rehnquist: Thank you, Mr. Schnaufer.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Buckhannon Board & Care Home v. West Virginia - Oral Argument

Fri, 09 Jan 2009 14:50:28 +0000

Case:

Buckhannon Board & Care Home v. West Virginia

Media File:

99-1848_20010227-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Webster J. Arceneaux, III

Chief Justice Rehnquist: We'll hear argument now in Number 99-1848, Buckhannon Board and Care Home v. The West Virginia Department of Health and Human Resources.

Mr. Arceneaux.

Mr. Arceneaux: Mr. Chief Justice, and may it please the Court:

This case presents a simple issue, whether the Fourth Circuit's decision in this case that a party is not a prevailing party unless they obtain a judgment, consent decree, or settlement is in accordance with this Court's prior decisions and the intent of Congress in establishing the term, prevailing party, in the Civil Rights Attorneys' Fees Award Act of 1976, commonly referred to as section 1988, and the two statutes at issue in this case, the Fair Housing Amendments Act, and the Americans With Disabilities Act.

When Congress enacted all three of these fee-shifting statutes, it did not condition an award of fees only upon the result of a judgment, consent decree, or settlement.

In fact, nowhere in these--

Justice O'Connor: Well, the language of the statutes in each case, does it not, refers to prevailing party?

Mr. Arceneaux: --Yes, Your Honor, it does.

Justice O'Connor: So we do have to be satisfied that the person seeking fees is a prevailing party.

Mr. Arceneaux: Absolutely.

Justice O'Connor: And how is that to be determined where the case is dismissed as moot?

Mr. Arceneaux: Well, I think in that situation, we have a declaration that the case is moot, so... in this particular case we had that as well... and then we can look and see under what is known as the catalyst theory, whether that lawsuit caused the defendant to act to render that suit moot.

Justice O'Connor: I would have thought the language, prevailing party, suggests something else, that there ought to be some nominal damages, or some judgment, or some indication that the person seeking fees did, in fact, prevail in a judicial proceeding.

Mr. Arceneaux: If we look just to the word, prevail, I believe it is a broad word, and this is my point.

Congress didn't say prevail by judgment, consent decree, or settlement, Congress said prevail, and I believe that--

Justice Kennedy: But the term, prevailing party, has a pretty well-established meaning in the law, doesn't it?

It means you prevailed by getting something in a lawsuit.

Mr. Arceneaux: --Yes, and I think that's a fine way to put it.

If I sued someone for damages I think is an easy way to put it, if I sue them for $50,000, and they hand me $50,000 and say, go dismiss this lawsuit, I don't have a judgment, I don't have a consent decree, I don't have a settlement, but I have the $50,000.

Justice Kennedy: But that's not the way lawsuits are ordinarily settled.

If someone sues you for $50,000, you will probably pay it, but you'll get a stipulation and order dismissing the thing.

It will be a matter of court record--

Mr. Arceneaux: That's correct.

Justice Kennedy: --that it was dismissed not because of mootness but because you're paid.

Mr. Arceneaux: That's right, but... and that's the same thing in this situation, where, when I sue somebody and I say, don't shut down my home, don't throw the residents out of the home, and they say, okay, we won't do that, now, I don't have a judgment, consent decree, or settlement, but I have the same effect, the same result as if they had handed me the $50,000.

Justice Scalia: But that's not what the statute says.

It says you have to be a prevailing party, and I think prevailing obviously means prevailing in the lawsuit, not... it doesn't say the happy party, you know, the party who goes away smiling.

It says the prevailing party.

I think it means prevailing in the litigation, and to prevail in the litigation there has to be something that ties the result to the litigation, it seems to me--

Mr. Arceneaux: And--

Justice Scalia: --other than simply, it came out the way the plaintiff would have liked.

Mr. Arceneaux: --And that is one of the factors that is looked at, whether there is a causal relationship between--

Justice Ginsburg: But you would have to establish it.

It's not just a factor.

You would have to show--

Mr. Arceneaux: --Absolutely.

Justice Ginsburg: --that the litigation caused the result, caused, in this case, the homes to remain open, even though they didn't have the--

Mr. Arceneaux: Absolutely, and that is what we intend to do.

We were not given our day in court, so to speak, because we were not allowed to proceed with any factual development of that, but we think that we have a very strong case, and we will absolutely be able to establish the causal relationship.

Justice Breyer: --All right, suppose I sue my next-door neighbor for making loud music at night and keeping me awake, all right.

He turns off the music, and I drop the lawsuit.

Why am I the prevailing party?

I mean, we both... everybody agrees on the facts.

I got exactly what I wanted, but also there is no piece of paper in the suit that says anything.

All it says is, the suit is dropped.

Now, I think the Chief Justice and Justice O'Connor and I wanted to know why that's a prevailing party within the meaning of the word prevailing in this statute.

Nobody doubts you got what you wanted, but why is that sufficient?

Mr. Arceneaux: When you look to the prior decisions of this Court, the definition of prevailing party under the cases has been, they personally achieve some of the benefits they sought in bringing the suit.

Their lawsuit completely changed the defendant's behavior towards the plaintiffs, and in this case and in your example--

Justice Breyer: And those are cases in which there was no piece of paper saying anything?

Mr. Arceneaux: --Sometimes there are settlement agreements--

Justice Breyer: No, but the question is, is there a case which, the person got just what he wanted, but there is no piece of paper saying anything in the lawsuit.

All there is, is that the plaintiff dropped it.

Mr. Arceneaux: --Right.

I mean, this is a case of first impression.

There's not been a case from this Court.

Justice Breyer: All right.

Mr. Arceneaux: There are obviously numerous cases in the courts of appeals.

Justice Breyer: Then we're back to my question.

Why, given this statute, is the word prevailing party here to be interpreted to mean you are a prevailing party, even though there is no piece of paper saying anything in the lawsuit--

Mr. Arceneaux: Right.

Justice Breyer: --but for a piece of paper that says, I terminate the lawsuit?

Mr. Arceneaux: Two reasons.

Justice Breyer: That's the basic question--

Mr. Arceneaux: Yes.

Justice Breyer: --in the case, and I want to hear your answer.

Mr. Arceneaux: Two reasons.

First, because I think it's consistent with the meaning of the word, prevail, which can also mean persuade, induce, or influence another to act, and second, because I believe that's what Congress intended.

When one looks at the House report, for instance, it says similarly, after a complaint is filed, the defendant might voluntarily cease the unlawful practice.

A court might still award fees, even though it may conclude as a matter of equity that no formal relief such as injunction is needed, and the legislature then cites to the decision of Parham v. Southwestern Bell Telephone Company.

Justice Scalia: I'm sure every Member of Congress read that case.

They ran to their library and looked up that case.

You really think that anybody who voted for that bill had the slightest idea what that case held?

Mr. Arceneaux: I think that that--

Justice Scalia: How many people do you think knew what that case held?

Two?

You think... I think two would be an extravagant number.

Mr. Arceneaux: --I think that it is consistent--

Justice Stevens: There is a presumption that we follow that the Congresspeople know what the law is, isn't there?

Mr. Arceneaux: --Yes.

Justice Stevens: We said that in some of our opinions.

Mr. Arceneaux: Yes.

Justice Stevens: Cannon, for example.

Mr. Arceneaux: Yes, and I think that had they--

Justice Scalia: Do they know what the court of appeals law is?

They know what the court of... lower courts have been holding as opposed to what this Court has held?

Justice Stevens: The Marr case was a Supreme Court case, wasn't it?

Mr. Arceneaux: --Yes, and this was section 1988.

where this Court had said in Alyeska that we were not going to have attorney's fee award under what was called the Private Attorney General, and so Congress intended to have these type of civil rights lawsuits filed, and they wanted to encourage these type of lawsuits.

That's what the language says, and this is what is under the discussion of prevailing party, and so the issue is, is that what Congress intended, we think that you can look to the legislative history and to the plain meaning of the terms, prevailing party, and say that yes, that is what is intended here.

Justice Kennedy: Mr. Arceneaux, in the event of ambiguity, I am reluctant to read a term in a way that's going to get courts into areas that it's very difficult for them to maneuver in.

In the present case, you want the opportunity to demonstrate below that an act of legislation, right... I mean, what happened was that the law was changed.

Mr. Arceneaux: Yes.

Justice Kennedy: And you want to show that the legislators who change the law were motivated by this lawsuit.

This is a very peculiar area for courts to be functioning in, to try to figure out what prompted legislators to enact a particular law.

I mean, would it be enough to be a catalyst, for example, if one legislator found out about this lawsuit and said, why, that's outrageous, that the law should be that way.

In other words, they weren't worried about losing money.

All they were worried about is, all the lawsuit did was bring to their attention a disposition that seemed to them outrageous, and so they said, let's change the law.

Is that enough to be a catalyst?

Mr. Arceneaux: I do not think that we have to make that inquiry, Your Honor.

I think that while--

Justice Kennedy: Well, I'm happy to hear that.

Mr. Arceneaux: --Yes.

Justice Kennedy: But I'd like to know why.

Mr. Arceneaux: And I will tell you, Your Honor, because West Virginia is unique.

It is unlike the Federal Government or most States in that administrative agencies cannot promulgate regulations.

We don't think that the inquiry in this case, the factual investigation that we're trying to establish here, will involve the legislature whatsoever.

Certainly we have no intent, as one of the amici suggests, that we need to go out and depose legislators.

This is not going to be an inquiry about a legislative activity.

Justice Kennedy: What will you do?

How will you prove it?

Mr. Arceneaux: We think that we have an overwhelmingly strong case, because what happened here, we took the deposition of the State fire marshal in March of 1997.

He said that it was absolutely impossible for the State of West Virginia to adopt this rule.

Six to eight weeks later, he changed his mind.

He made the decision to promulgate the rules and change the rules as we were requesting in the lawsuit.

What happened in that interim?

We took the deposition of Dr. Bernard Levin, who was the expert who explained how the States had all abandoned the position that he was taking.

Justice Scalia: But he had no authority to change the rules.

It had to be done by the legislature.

Mr. Arceneaux: But he had to initiate the process.

Chief Justice Rehnquist: You said, I thought, that you wouldn't have to deal with the legislature at all, but here it had to be passed by the legislature.

Mr. Arceneaux: That's correct, but we don't believe that in looking at the causation analysis we need to look at what the legislature did.

It is not the legislature that made the decision to change the rule.

Chief Justice Rehnquist: Well, I'm amazed that you say that.

I would have thought that anything the legislature enacted, you would say the legislature made a decision to enact it.

Do you think not?

Mr. Arceneaux: Clearly they did, Your Honor.

Chief Justice Rehnquist: Okay, well, how do you get from the fire marshal's change of mind to the legislature's legislation?

What's the interim step?

Mr. Arceneaux: The unique process of the rulemaking process that's in West Virginia.

These rules are just all batched.

Hundreds of agencies all--

Justice Souter: Just tell me what... tell us what happened in this case.

What happened?

What did the fire marshal do?

Mr. Arceneaux: --And all of the exhibits that are attached to our motion for attorney's fees has this all documented in it.

Justice Souter: Okay, but we want to know here and now.

Mr. Arceneaux: Yes.

The fire marshal changed his mind, made a decision to promulgate these new rules.

He has to go to the fire commission and then the fire commission presents it to the legislature.

Justice Souter: Well, is that what he did?

Mr. Arceneaux: Yes.

Justice Souter: Did he go to the fire commission and said, I want to change these rules?

Mr. Arceneaux: Yes.

Justice Souter: And the fire commission says, we agree, we will change these rules?

Mr. Arceneaux: Yes.

Justice Souter: And the fire commission then did what?

Mr. Arceneaux: Then the fire commission has to promulgate the new rules, and then they submit them to the legislature.

Justice Souter: And what--

Mr. Arceneaux: There's a special committee.

Justice Souter: --Was the legislation that was passed in effect the verbatim embodiment of what the fire commission proposed?

Mr. Arceneaux: I believe that to be the case, and that is why I referred to the legislature in this process as merely a rubber stamp.

Justice Scalia: Now, do you think the fire commissioner changed his mind because he was afraid of losing the lawsuit, or because he was persuaded that it was a good idea?

Mr. Arceneaux: We think he was motivated by the lawsuit.

Justice Scalia: Can you prove that?

Is there any possible way of proving it?

Mr. Arceneaux: Well, as some of the courts have noted... I don't know what is in his mind.

Justice Scalia: Exactly.

That's the problem.

Mr. Arceneaux: Yes.

Justice Scalia: What if your lawsuit... what if he had nothing to do with the lawsuit.

It may be against his agency, but he happens to read about the lawsuit in the paper and he says, this... what, this is an outrageous thing.

You mean, that's what our rules say?

And then, motivated by your lawsuit, okay, he does the same thing you said he's done here and gets the rule changed.

Does that make your case a catalyst?

I guess it does, in a sense.

Mr. Arceneaux: Well, we have two distinctions that I would draw.

One is, he knew about the case, and he was deposed in the case.

He was active.

He attended every deposition, so it's not like he's sitting back in his office, okay, and the... I've lost my second point, but also there is this intervening deposition of our expert that he's in attendance and he hears what they have to say.

Unlike the regular--

Justice Scalia: Instead of reading it in the paper.

I mean, what difference would that... I don't see what difference it makes.

Mr. Arceneaux: --Well, most of the cases that I've seen where they talk about the legislature... and there are some cases that are simple.

Some cases they have found, and it's right there in the legislative history, they enacted this provision... Paris is an example, where they say in the legislative history, we don't have documented legislative history.

What we're saying is, there should not be a per se rule just when the legislature acts that we cannot then present our evidence.

The second thing is, unlike a lot of the legislative cases, when they talk about the legislative cases they talk about intervening causation, that here is some third party that has taken the lawsuit away, the legislature has acted.

We don't believe there's any intervening causation here, because we were suing the fire commission and the fire marshal, and they're the ones that made the decision to change this.

Justice Ginsburg: Do you rely at all on your warding off the cease and desist order?

Mr. Arceneaux: Yes.

Justice Ginsburg: Which, if you had done nothing would have surely followed, and then you would have been the object of an adverse judgment.

Mr. Arceneaux: Yes, and we believe that we prevailed.

We were under cease and desist orders, and the homes were going to be shut down, and all the residents were going to be thrown out, and we presented expert testimony... these were clients that were 102 years old, and that they could suffer transfer trauma just by the very act of them being moved into another home.

We went in on a TRO.

We were able to obtain an agreed order.

That agreed order remained in place for the duration of the litigation, and no one was ever thrown out of the home.

The homes were never shut down.

Justice Scalia: Well, my goodness, you don't become a prevailing party by getting a preliminary order just leaving the status quo in effect while the case is being adjudicated.

I mean, is that all it takes to prevail?

Mr. Arceneaux: We think that it is part.

We understand that it was only a interim relief.

Justice Souter: Does it matter to your case whether the fire... whatever it is, the fire marshal's judgment, or for that matter the legislature's judgment, was based on the fact that they thought the law was outrageous, as distinct from the fact that they may not have wanted to take a hit by losing this case?

Does it matter one way or the other?

Mr. Arceneaux: Well, we think that our lawsuit brought that to their attention.

Justice Souter: But that's not my question.

Does it matter, on your theory--

Mr. Arceneaux: I think we have to show--

Justice Souter: --whether they simply said, we're suddenly aware of the law and we think it's bad and it ought to be changed, or on the other hand they say, we think the law is great, but we don't want to lose this lawsuit, so we're going to change the law?

Does it matter to your case?

Mr. Arceneaux: --I think that it would relate to the causal relationship.

We do recognize that we would have to establish a causal relationship, so in your one we may not be able to do so.

Justice Stevens: But why isn't--

Mr. Arceneaux: Your Honor--

Justice Stevens: --Why isn't... each case why isn't there a causal relationship?

That's what I don't understand.

I think he's trying to help you, in other words.

I don't think you realize that.

Justice Souter: I really was.

[Laughter]

Mr. Arceneaux: --Maybe I'm--

Justice Scalia: I'm with you.

I think he was trying to hurt you.

[Laughter]

Mr. Arceneaux: --Maybe I was just distracted by the light.

I was going to--

Justice Souter: Isn't there causation in either case?

Mr. Arceneaux: --Yes.

Justice Souter: The one cause, the lawsuit brings it to the attention, but for the lawsuit it would not have come to the attention, it wouldn't have been changed.

In the other case, there's a different chain of causation, but it's still the same causation.

They say, in order to avoid losing, we get rid of the lawsuit.

Is causation in each case?

Mr. Arceneaux: Yes, I agree.

Justice Scalia: Then why not, just reading about it in the papers, the legislators read about this lawsuit, and but for this lawsuit they would never have known about this outrageous law, and that's enough, right?

Mr. Arceneaux: Yes.

We think--

Justice Scalia: The fire marshal had nothing to do with it.

He never ran to the legislature.

They just read about it in the paper.

Mr. Arceneaux: --That would be a different case.

Justice Scalia: I know it would be a different case, but why would it be different as far as your claim is concerned?

Mr. Arceneaux: We think as long as we have the opportunity to establish causation we should be able to do so.

Justice Scalia: And that's causation.

They would not have known about this thing except, because of your lawsuit, it gets in the papers.

They read about it, they think, gee, that's a stupid law, let's change it.

Mr. Arceneaux: Your Honor, may I reserve the remainder of my time for rebuttal?

Argument of Beth S. Brinkmann

Chief Justice Rehnquist: Very well, Mr. Arceneaux.

Ms. Brinkmann, we'll hear from you.

Mr. Brinkmann: Mr. Chief Justice, and may it please the Court:

The categorical rule adopted by the court of appeals that allows fees only in a case where there is a judgment, consent decree, or settlement, is contrary to the text, history, and purpose of the civil rights fee-shifting statutes.

That rule would deny fees in the most meritorious case that directly obtains all of the relief sought in that case if the defendant on the eve of trial complies with the demand without a court order.

Justice Kennedy: In this case, was the matter moot as a matter of Article III jurisdiction, so the judge had no choice, or would the judge have had some discretion to retain jurisdiction to enter some sort of declaratory relief?

Mr. Brinkmann: It appears, Your Honor, that it was, in fact, moot because of a legislative change under this Court's standards in Laidlaw and City of Mesquite.

There's such a minuscule likelihood that that law would be changed back.

The plaintiff did contest mootness at the trial court level--

Justice Kennedy: I take it the usual rule is that it must be absolutely clear that the alleged wrongful conduct cannot recur before the case can be dismissed, is that the way the rule works?

Mr. Brinkmann: --Yes, for mootness, Your Honor.

That's under the Laidlaw case from last term and also the City of Mesquite case, that's correct.

Justice Kennedy: Could the plaintiff here have asked for nominal damages in order to keep the case alive?

Mr. Brinkmann: No, Your Honor, because this is Ex parte Young case against State officials enforcing a law.

Justice Kennedy: Oh, okay.

Mr. Brinkmann: That's often the situation.

Also, there are several statutes that we cite in a footnote of our brief that limit relief in civil rights cases to injunctive relief, and those are often the most important kinds of cases that the fee-shifting statutes are intended to get at, where a plaintiff has a meritorious claim for injunctive relief to enforce a civil rights law, but does not have the money to pay an attorney, and no possibility of a damages relief that could perhaps pay those attorneys' fees.

The court of appeals' categorical rule undermines that.

Justice Scalia: Ms. Brinkmann, what if I were a member of the West Virginia legislature and I know this suit has been pending for a long time, and they have hired very expensive lawyers to sue the State, there's a lot of money involved, and I would really... I think this is a dumb law that's on the books, and I would really like to change that law, but then the fire marshal comes to me and he says, you know, if you change that law, the State is going to be liable for millions of dollars in attorneys' fees, because it will be held that the suit was the catalyst for the change, and we'll have to pay all this money.

Why would we want to distort the legislative process in West Virginia by making a change in the law that the members of the legislature think desirable costly because of the existence of a lawsuit, even though the State believes it can win the lawsuit?

Mr. Brinkmann: A couple of--

Justice Scalia: They don't think they're going to lose.

They just say, if we change the law because it's a bad law, we're going to have to pay all this money in attorneys' fees.

Mr. Brinkmann: --A couple of responses, Your Honor.

First of all, I just want to make clear that, of course, the catalyst rule does not just apply to legislative change, and also a point I want to get to later that it also applies in settlements and consent decree cases, but talking about the application of that to a situation in which there is a legislative change that would... the legislature would want to make as a matter of policy, there are several approaches that the defendant has available.

First of all, the defendant has it within his control, if they make that decision promptly, to avoid the build-up of attorneys' fees.

Indeed, that's what often happens in Government cases.

The most meritorious of claim may come in.

There may be a settlement within a week.

Justice Scalia: I understand.

Mr. Brinkmann: In addition to that, the defendant is able to defend against the causation and the merits issue in this type of litigation.

For example, if the legislature has another reason, they were already considering it, policy reasons, the plaintiff will not be able to establish causation.

Justice Scalia: Do you have to show, in order to establish the causation you're talking about, that the legislature made the change because it knew it would lose the lawsuit?

Is that a condition, you have to show that the legislature made the change because it realized that its law was contrary to Federal law?

Mr. Brinkmann: No.

You would have to show that the claim was not meritless.

Our proposition is--

Justice Scalia: Ah, well--

Mr. Brinkmann: --that you would have to show that the merit... that--

Justice Scalia: --So they could have changed it for a reason that has nothing to do with their... with the lawsuit, except that the lawsuit brought the matter to their attention, even though they weren't worried about losing the lawsuit.

Mr. Brinkmann: --That would not--

Justice Scalia: They knew they could win the lawsuit.

Mr. Brinkmann: --That would not establish the causation requirement, and I want to--

Justice Scalia: Wait, that... it--

Chief Justice Rehnquist: --Why wouldn't it, Ms. Brinkmann?

Mr. Brinkmann: --Because it would not establish that that change was made as a result of the lawsuit.

There's two aspects of the causation, Mr. Chief Justice.

There's the causation as a matter of fact, but then there's also the question more of a proximate causation, that that change has to be because of the claim, not because of the nuisance value of the lawsuit, for example.

That's why there is... the lower courts have always applied the type of frivolousness standard, and we suggest it should be a standard where you state a claim upon which relief could be granted.

And if I could, Your Honor, I want to really make the point clear that that is the same standard the courts currently, and have for a long time, applied to cases involving consent decrees and settlements.

There's no reason to treat this case differently because--

Justice Kennedy: Well, except that the statute says, prevailing party, and it's quite logical, I think, to read the term, prevailing party, as meaning that you should have something to show from the lawsuit itself.

Mr. Brinkmann: --And you do have something to show in these cases.

You obtained the relief that you sought.

In this particular case, you have a law to enforce, a regulation to enforce--

Justice Kennedy: Yes, but it's not a part of any decree.

Mr. Brinkmann: --No, Your Honor, and in a settlement, it is very analogous to a settlement and a consent decree.

Justice Kennedy: Yes, but except that a typical settlement, you'll get some document from the court.

Mr. Brinkmann: But it's simply a contract, Your Honor, just as the law here, a separate lawsuit would have to be brought to enforce that, in fact, under this Court's opinion in Kincannon, it's not even clear there would be a Federal cause of action to enforce that.

Moreover, even if--

Justice Scalia: If you get a settlement approved by the court, the court will enforce that settlement, won't it?

Mr. Brinkmann: --As your opinion explains--

Justice Scalia: So you really have to prevail.

You have some judicial power behind that contract.

It's just a contract, but this is one that the Court is behind.

Mr. Brinkmann: --But, Your Honor, it depends.

If the court incorporates that, otherwise you just have a contract.

You have to go prove the validity of that contract.

Here, they have a cease and desist order that was pending against them before the lawsuit that can no longer be enforced.

They have a statute and a regulation they can enforce.

I also want to point out that in both the consent decree and settlement situations, there is no requirement of a determination of any violation of law, any determination of liability.

In fact, as this Court repeatedly has recognized, that's one of the motivations for settlements, consent decrees, to be able to resolve the case without an admission of liability.

Justice Kennedy: Ms. Brinkmann, correct me if I'm wrong, I think there's a difference between your position and Mr. Arceneaux's.

As I understood his argument, it would be enough if the legislature learned about this bad law through the lawsuit, and you insist that the legislature must have changed the law because it was worried about losing the lawsuit?

Mr. Brinkmann: No, Your Honor, I'm sorry.

Justice Kennedy: No?

Mr. Brinkmann: I must have misspoken.

Justice Kennedy: Okay.

Mr. Brinkmann: I thought your question to me was a situation in which there were other policy reasons that the legislature had taken into account to change the law.

If the lawsuit is a factual causation for the relief, the relief is something that the plaintiff sought, and if the claim is not meritless, that does meet the standard for--

Justice Scalia: Even if the legislature just read about it in the newspapers?

Mr. Brinkmann: --If it--

Justice Scalia: That's a factual predicate.

That's how they learned about it, and it was not a meritless lawsuit, and that's all that's needed?

Mr. Brinkmann: --If the lawsuit brought that about.

I have to emphasize--

Justice Kennedy: We'd have to read the Palzgraf case in order for this all to work out?

[Laughter]

Mr. Brinkmann: --Proximate causation does come to mind, Your Honor, when we talk about the fact that it cannot be a frivolous or a meritless claim--

Justice O'Connor: But it sounds like but-for causation, not proximate cause, that you're talking about.

Mr. Brinkmann: --Well, I think, Your Honor, that--

Justice O'Connor: Why wouldn't that enable an astute lawyer to kind of spot administrative or legislative changes in the offing and file some suit so they can run in and get some kind of attorney's fees?

Mr. Brinkmann: --Your Honor, the lower courts have rejected just those types of claims--

Justice Breyer: You don't object to tough causation requirements?

Mr. Brinkmann: --No, Your Honor.

Justice Breyer: All right.

Mr. Brinkmann: We believe that that's the meaning of the statute--

Justice Breyer: And you respect Justice Scalia's practical point, which I thought was correct, isn't it?

It's a correct point that sometimes the legislature would be in just the situation he mentioned.

I wonder if that's neatly counterbalanced by what I would think would be a worse problem the other way, namely, the plaintiff has to fight to the last ditch, because if... he can never settle, because if he doesn't push his most unreasonable claim, he won't get any attorneys' fees.

Mr. Brinkmann: --Exactly, Your Honor.

Justice Breyer: That also is a practical problem, isn't it?

Mr. Brinkmann: Exactly, Your Honor.

Justice Breyer: Is it a practical problem also for the legislature to be caught in what I'd call a formal settlement, with a Government department?

I've seen a few of those, and if the only way you get attorneys' fees is to force the court to enter some kind of complex settlement decree, is it clear what happens later in State government?

I mean, I've seen an awful lot where the legislature feels bound by a settlement decree of private parties, with a separate... do you see my problem?

I don't know if it's a practical problem, but I'd like you to comment on it.

Mr. Brinkmann: I'm not sure I understand your question.

Justice Breyer: If you recover only if a there's a piece of paper called, settlement, that means there are words on a piece of paper--

Mr. Brinkmann: Yes.

Justice Breyer: --filed in court, those words can sometimes extend to thousands of pages, and legislatures and Governments don't like to be subject to such decrees.

Mr. Brinkmann: That's absolutely correct, and this is the most efficient... may I respond to that--

Chief Justice Rehnquist: No, I think that's enough, Ms. Brinkmann.

Mr. Brinkmann: --Thank you, Your Honor.

Argument of David P. Cleek

Chief Justice Rehnquist: We'll hear from you, Mr. Cleek.

Mr. Cleek: Mr. Chief Justice, and may it please the Court:

Let me say at the outset I want to respond to a couple of the remarks that have been made in the arguments by counsel for the United States and also for the petitioner's counsel.

It was an inaccuracy, and I'm certain an inadvertent inaccuracy, by counsel that this is an Ex parte Young situation where you only have injunctive relief requested.

There was actually a demand in this case for punitive damages and compensatory damages, and that claim was voluntarily dropped by the plaintiff.

Now, in response to Justice Kennedy's question--

Justice Ginsburg: May I just ask for a clarification?

I thought that to the extent that the action was against the State, it couldn't be brought, you couldn't get damages.

The only thing you could get against the State was injunctive relief.

Mr. Cleek: --That's right.

The damage claims would have been against the individuals in their personal capacities.

Justice Ginsburg: And is... that would be rather strange, wouldn't it, to say these officials, who were clearly acting in their official capacity in having a fire code and a cease and desist order, that they were doing something in their personal capacities?

Mr. Cleek: I believe, Your Honor, that that's the only way a damage claim could have been returned in this case, in view of the rule of the Eleventh Amendment, and nonetheless those claims were made, punitive and compensatory damage claims were made in the original complaint and the amended complaint.

I should also point out to the Court that, with regard to the issue of the--

Justice Ginsburg: And on what ground were they dismissed?

Mr. Cleek: --They were dismissed by a voluntary action of the plaintiff.

I don't know the motivation for that.

Justice Ginsburg: You hadn't put in a defense to it?

Mr. Cleek: To the damage claims?

Justice Ginsburg: Yes.

Mr. Cleek: Those had not been addressed, Your Honor.

As a matter of fact, as I recall, with regard to the discovery in this case, the only people who had been deposed were two persons from the fire commission, the fire marshal and an assistant, and some experts.

Justice Ginsburg: I mean, an answer.

I mean, you said they made a complaint that included a request for punitive damages and compensatory damages--

Mr. Cleek: Yes, Your Honor.

Justice Ginsburg: --against the defendants.

Defendants put an answer in--

Mr. Cleek: Yes, ma'am.

Justice Ginsburg: --to that claim?

Mr. Cleek: Yes, Your Honor.

Justice Ginsburg: And what was the answer?

Mr. Cleek: We denied that there was... it was a denial that there were any damages due.

Justice Ginsburg: On what ground, because this was a claim about State action.

Mr. Cleek: There was an Eleventh Amendment defense asserted, but with regard to those damage claims, I assumed, from reading the complaint, that they were against individuals in their personal capacity, otherwise they couldn't be returnable against the State.

Justice Ginsburg: I don't want to deflect you on this, but to the extent that they were seeking injunctive relief it was a pure Ex parte Young case?

Mr. Cleek: Yes, Your Honor, that's correct, and let me respond for a moment about the issue about the intrusion into legislative prerogative here that this catalyst theory may engender.

Mr. Arceneaux, the petitioner's counsel, on page 44 and 45 of the initial brief in this case, sets out that if he is entitled to review in front of the district court, some theory under the catalyst theory that he's... he motivated by his lawsuit the State to take some voluntary action here, he suggests in his initial brief that the legislative enactment would be part of his inquiry.

In his reply brief, for the first time, he suggests that that's not going to happen, and that it's going to be an agency issue, and the legislature will not be addressed.

For the first time in the reply brief we also find that petitioners have suggested that they prevailed because they got this agreed order.

That's never been a demand to the district court for attorneys' fees in any case.

Justice Scalia: Mr. Cleek, Mr. Arceneaux was queried extensively about some of the practical problems with his position.

What about the practical problems with yours?

What do you do about the agency that is really guilty as sin, and they're going to lose this case.

They know they're going to lose it, so after dancing the plaintiff around for several years, causing great expense in attorneys' fees, when the case is about to come up for judgment, they just fold, and revise the regulation that's been under challenge... don't enter a settlement, they just revise the regulation that's under challenge.

Mr. Cleek: There are two means--

Justice Scalia: Attorneys' fees payable?

No.

Mr. Cleek: --Two means to address that issue, Your Honor.

Firstly, if the district court decides that the voluntary action that ceases whatever activity there is--

Justice Scalia: Yes.

Mr. Cleek: --just enforcement of this regulation, or whatever, does not moot the case, then you can proceed to merits.

Justice Scalia: Oh, no, it moots the case.

That's why they do it.

They do it to moot the case.

Mr. Cleek: In that case, that is the one area in which it would appear that unless Congress has approved the catalyst theory, assuming the catalyst theory is the only means of addressing that mootness issue, unless Congress has approved the catalyst theory, there's no relief there.

Justice Scalia: Okay.

Justice Souter: The problem goes one step further, doesn't it, because we have indicated that settlements may qualify, a settled case may have a prevailing party within the meaning of the rule, and I would suppose that if you prevail in any case in which the settlement would otherwise give the plaintiff the relief that the plaintiff was seeking, there just won't be any more settlements.

There will simply be the voluntary provision of the relief, whether it be affirmative, or the cessation of something the plaintiff is objecting to, and we're not going to get any more settlement cases in instances in which the plaintiff ends up getting what the plaintiff wants.

Mr. Cleek: Your Honor, this Court has recognized in Maher and Farrar as well, and also it's indicated in the legislative history, that settlements constitute prevailing party status.

Now, if your question is, if the State or any governmental body can simply say, we're going to stop, and not enter into an enforceable agreement, is that going to prevent settlements?

As a matter of judicial policy, of course, settlements are preferred.

Would it cut down on them?

There's the possibility, but I think--

Justice Souter: Well, it's not going to cut down on settlements in which in effect they in some ways split the difference, but when, in fact, you have a case that traditionally would have resulted in a settlement, there would be an orderly process, they'd sign a neither party docket marking, whatever, and give it to the judge, the judge would approve it, and the defendant agrees in that kind... in a settled case to provide exactly what the plaintiff wants, there'll be no more settlements.

So it won't affect the split-the-difference settlement, but it will affect the give-them-what-they-ask-for settlement.

Mr. Cleek: --It could affect, in candor, a settlement where a regulation is involved or where a policy is involved, because in that case it is arguable that the governmental body could simply stop the conduct and moot the case.

Justice Scalia: Well, how many settlements are you aware of that are not split-the-difference settlements?

I mean, what advantage is there to entering into a settlement if you're coughing up everything that the plaintiff has asked for?

Mr. Cleek: Your Honor--

Justice Scalia: In my experience, at least, when you sign a settlement agreement you get something in exchange for that settlement agreement.

If you're just going to cut and run, just cut and run and save the attorneys' fees in drafting the settlement agreement.

Mr. Cleek: --I have been litigating these cases for 27 years, even before the Attorneys' Fees Act, and I have not had the occasion to see any cases where they weren't--

Justice Stevens: Well, isn't this such a case?

You're in such a case.

Isn't this an example of that case?

Mr. Cleek: --This is an example of it--

Justice Stevens: The State totally abandoned its position.

Mr. Cleek: --Yes.

It's an example of the worst that can happen under a circumstance where there's an argument, at least, to be made by someone who suggests that there was a but-for element of the Government's action that is related to the lawsuit.

This case that you have before you is the kind of case that suggests that there ought to be some other avenue to address a case where some voluntary action moots the case.

However, if Congress hasn't provided for that, Justice Stevens, then it doesn't exist and, as the Court pointed out earlier, if you connect these fee-shifting statutes in any action a prevailing party may be entitled to fees, it has to be within the action.

We're talking here, Your Honor, about a nonparty who takes the action.

Justice Breyer: Well, if you say... if we're at that point, that is, if you agree... given your answer to Justice Scalia I think you do agree that if you look at the practicalities, for every bad thing you can find one side you can find a bad thing the other side.

We can match example for example.

Then you're back to the language.

All right, what about the language?

Prevailing party covers their case literally.

Then you have Farrar, which favors you.

Then you have, I take it, Hewitt, which uses an example of where you could recover where there is, quote, a change in conduct that redresses the plaintiff's grievances, and then we have the statutory legislative history where they define in the House report, prevailing party, they say, a court should still award fees where, after a complaint is filed, a defendant might voluntarily cease the unlawful practice.

All right.

Is that it?

It seems to me we now have the whole case, and you have to balance the practicalities and decide whether you're going to give credit to that House report.

Is that right?

Mr. Cleek: Your Honor, you're quite right.

The House report refers to the voluntary cessation of an unlawful act.

Obviously, if Government quits a lawful act, even if it's accused... even if the allegation is it's an improper act, then attorneys' fees would not be appropriate.

Where an unlawful act is used there, this Court has repeatedly, from Hanrahan, to Hewitt, to Farrar, said... and Hewitt says this as well, by the use of ordinary language, prevailing party means that you must get some success on the merits.

The catalyst theory doesn't provide for that.

Justice Breyer: What about the House report?

I took it that Hewitt and the House report in particular are thinking of the case where a complaint is filed charging X as unlawful, and before there is an adjudication the defendant ceases the unlawful practice, and it says in that instance the Court should still award fees, even though it concludes that no formal relief is necessary.

Now, as I read that report, I thought it certainly favors your opponents, and then the question would be whether this Court should credit it.

Now, I'm asking you that because I want to... you know, I want you to point out why I'm wrong, if I'm wrong.

Mr. Cleek: Your Honor, I think that you're wrong for this reason.

The whole background for 1988, and of course we're interpreting the two statutes here for prevailing party considerations based on 1988, the whole background for 1988 is Alyeska.

The United States district courts don't have equity power to give attorneys' fees, so Congress must explicitly set out what the parameters of that power is and describe, pick who gets it.

Congress decided in this case prevailing parties got it.

Now, the House report does refer to informal relief, but the informal relief, Your Honor, could be a settlement.

The informal relief could be a consent decree.

Justice Kennedy: Mr. Cleek, I'm not--

Justice Breyer: --Well, in looking... right in this, where it says voluntarily ceasing, I didn't think it was formal, but then I thought many of these statutes were passed at a time where civil rights violations all over the country were common, and many of the statutes were passed to end widespread violations of civil rights.

Now, with that in the back of my mind, would I think that Congress would want plaintiffs to get their attorneys' fees where they led to the cessation of civil rights violations?

I would think yes.

But that's a general comment, and I want you to respond to that, to correct me if I'm wrong about that.

Mr. Cleek: All right, sir.

Let me respond in this manner.

The Hewitt case does suggest, particularly in declaratory judgment case, that a voluntary change that affords the relief might make the person prevailing in that circumstance.

I believe that Hewitt has to be read with the other cases that this Court has considered, from Hanrahan to Hewitt, and including Hewitt, that say you must get success on the merits.

Now, that voluntary change, success on the merits, and then we have Texas Teachers v. Garland two years later that says there must be a material alteration of the legal relationship of the parties, and then Farrar, that says it must be formalized in some fashion, all those must be read together.

If you read Hewitt by itself, it does support an argument for the other side.

I can't deny that.

But Hewitt must be read with all of these other considerations, and when you read it with all those other considerations, it does not support the catalyst--

Justice Scalia: Mr. Cleek, I'm not a big fan of attributing a House report to the entire Congress.

I would much rather look to the language of the statute, but isn't it... if you look to the reports, isn't it possible that when whoever wrote it was speaking about voluntary cessation of the unlawful conduct, he was talking about voluntary cessation of conduct acknowledged to be unlawful, that there's a difference between ceasing it because oh, yeah, you got us, and we'll... you know, I agree that this was wrong, and ceasing it because, my God, this lawsuit is going to cost us another $2 million, it is simply not worth it?

By the way, I'm not sure whether that makes the lawsuit a catalyst or not.

It probably does.

You know, there's something to the claim, but it's just not worth fighting it for another 3 years and $2 million in fees.

Let's throw in the towel, forget about it, even though I think what we're doing is lawful.

I suppose that would be a catalyst.

But can't you read the House reports as meaning voluntary cessation of conduct acknowledged to be unlawful?

Mr. Cleek: --Your Honor, I think that you can do that, and as a matter of fact it makes eminent good sense, because otherwise the use of unlawful would have been unnecessary.

Justice Ginsburg: But the dividing line that you put with a settlement... now, a settlement, many of these settlements, am I not right, say, I don't admit that I did one thing wrong, but I'm settling this lawsuit, and the Congress would make a distinction between that kind of settlement just because it's on a piece of paper filed in court, where the defendant said, I am paying the plaintiff out of the goodness of my heart, but we were never any wrongdoers.

We never violated any law.

That counts for the catalyst, because it's a settlement, and then to say if the same exact thing happens, it doesn't count, that seems irrational to me.

Mr. Cleek: Your Honor, that argument has been made by the petitioners and their amici in this case, and what I think you're suggesting is, if you have a settlement that Congress has recognized and this Court has recognized grants prevailing party status, then if you have a voluntary act that affords the same sort of relief, how is that any different.

The difference is this.

A settlement, of course, clearly, obviously, is tied to a litigation.

We don't need to have district courts deciding whether 52 legislators met by their action--

Justice Ginsburg: Well, that means that the causation problem is not a problem.

The causation problem is not a problem, but it doesn't strike it out if there is... this case is difficult because of the legislative action, but there are other cases where it's just as clear that the plaintiff propelled this action on the part of defendant.

Mr. Cleek: --Your Honor, the only way I can respond to that sensibly is that Congress had the right to choose.

They chose settlement.

Justice Scalia: Why couldn't you respond to it by saying that where you have a written settlement you don't have to acknowledge liability because the written settlement is what ties it to the litigation?

Where you don't have that tie to litigation, the only thing that could possibly tie it to the litigation is the acknowledgement that the litigation was correct.

The acknowledgement, since you don't have a written settlement, that, indeed, our action was unlawful and therefore we're going to stop it, at least that ties it to the litigation somehow.

Mr. Cleek: That would be correct.

Justice Scalia: Whereas just stopping it, without any acknowledgement that what you were doing was wrong, you have no idea whether the litigation was what produced it, or whether the West Virginia legislature just decided this was a stupid law, which is frankly what I think it thought.

Mr. Cleek: Your Honor, and let me follow up that with this comment.

If Congress, when it enacted 1988, understood the difficulties that the courts faced in controlling their dockets, and congested dockets, if they understood the difficulties that this catalyst theory might present in this kind of case, where you may be having the legislators' motives inquired into, and depositions of those officials, if Congress understood that, and if Congress appreciated those problems as well as what we have in circuit courts... we have all sorts of different requirements for proving catalyst theory, from provocative in the First Circuit--

Justice Stevens: May I interrupt you, Mr. Cleek?

Let's assume there's a special problem when you have to prove it through a legislature, but as I understand your position, you would take precisely the same position if the fire marshal had had the authority on his own to change the regulation and just not say anything about it.

You'd still say there's no entitlement to fees.

Mr. Cleek: --Yes, I would.

Justice Stevens: Isn't that right?

Mr. Cleek: Yes, I would, and the reason, Your Honor, is, that I believe--

Justice Stevens: So that it is not important for us to decide whether the legislature has to be involved, because your theory doesn't really depend on legislative action.

It just happens to be what is true of this case.

Mr. Cleek: --I think, Your Honor, that the only reason this Court should address the legislative difficulties and the concerns about intrusions into the motivations of legislators is that that is such an important issue that if the Court accepts the catalyst theory that if there's an exception to be made for that area, then it ought to be made, but with regard to your first question about whether or not, if the fire marshal had simply changed the rule and been motivated by the lawsuit there would have been recovery, the answer is still no, because the catalyst theory is not recognized, in our view, under the prevailing party designation in 1988 or any of the other fee-shifting statutes.

It does not include--

Justice Stevens: No, I understand your position.

I'm just suggesting your position really doesn't require a legislature to be involved in order to have a valid objection to the fees, but I don't really get, except you say we ought to read a lot of other cases, what is your response to the rather clear language in the Helms case that a monetary settlement or a change in conduct that redresses the plaintiff's grievances, when that occurs, the plaintiff is deemed to have prevailed despite the absence of a formal judgment in his favor.

I mean, it seems to me that reads on this case.

There's a fact question, of course, but it certainly doesn't say there's got to be a settlement.

It says, despite the absence of a formal judgment, and it doesn't require a settlement or a change in conduct that redresses the plaintiff's grievances.

You just say we should abandon that language.

Mr. Cleek: --No, Your Honor, I'm not suggesting that at all, and I think that I addressed that issue earlier with--

Justice Stevens: You say read a lot of other cases and read it in context, is what your answer is.

Mr. Cleek: --That is the only means that I can address that language and explain it.

That language suggests that you would prevail if there was a voluntary change by the defendant in the course of the litigation.

The only way that I can respond to that is to suggest what I suggested to Justice Breyer's question, is that all these cases must be read in context.

If you isolate that language out, then you have difficulty.

Justice Kennedy: Wasn't that language dicta?

Mr. Cleek: It was, Your Honor.

It was not necessary for the resolution of that case.

And let me say this about Hewitt, and Your Honor, of course, this is perhaps suggesting hypotheticals one ought to be entertaining from the Court, but if we took Hewitt out, let's assume that Hewitt never happened, and you read Hanrahan and Hensley and Rhodes and Texas Teachers and Farrar, there is no support in any of those cases for the catalyst theory.

The only support--

Justice Ginsburg: Well, it wasn't at issue.

It wasn't at issue in Farrar.

There was a judgment.

There was a judgment, but it was just for $1, so anything that Farrar said would have been the clearest dictum, because there was a prevailing party, not by much, and there were no fees, because the Court said, I'm not going to give you attorneys' fees for a $1 judgment.

Mr. Cleek: --That's correct, Your Honor.

Justice Ginsburg: But there was no doubt that there was a prevailing party in that case.

Mr. Cleek: In fact, this Court found that they were a prevailing party because even the $1 caused a change in the legal relationship between the parties, because the defendant had to pay something to the plaintiff he otherwise wouldn't have had to pay, but Farrar still... and you know, if we have dicta in Hewitt, and dicta in Farrar, both sides are arguing that they have some value, but if we look at Farrar just for the purpose of establishing what this Court said is a definition of the parameters of prevailing party, if we look at it just for that purpose alone, then I think that the argument that we made that it's not consistent with the catalyst theory is very easily made and very easily understood.

Now, if the Court was willing to say--

Justice Ginsburg: Well, I thought you accepted that this Court had said in Friends of the Earth that the catalyst theory remained an open question and that Farrar did not deal with it.

That's what the Court said in Friends of the Earth, and I didn't think--

Mr. Cleek: --Yes.

Justice Ginsburg: --you were quarreling with that.

Mr. Cleek: I'm not quarreling with that.

The language is clear in Friends of the Earth that Farrar was not a catalyst case, and I'm not arguing that Farrar was a catalyst case.

What I'm arguing is that Farrar set out parameters for prevailing party which has to be utilized by this Court and analyzed in any sort of attorneys' fees matter before the Court.

So we have--

Justice Thomas: --simply whether or not someone who received the nominal damages a prevailing party?

Mr. Cleek: --That's correct, Your Honor.

Justice Thomas: Okay.

Mr. Cleek: And the Court found that they were a prevailing party--

Justice Thomas: And the holding below was that they were not a prevailing party?

Mr. Cleek: --That's correct and, of course, the Court continued to say that under those circumstances, even to be given that designation was insufficient to award fees, because there were just some cases where there was no entitlement.

Justice Stevens: Refresh my memory.

In Farrar, did they affirm or reverse the judgment?

Mr. Cleek: You reversed the lower court, I believe, Your Honor.

Justice Stevens: We held there was a prevailing party, but didn't we say there were no fees that were due?

Mr. Cleek: That's correct, and I think what the lower court had said, that there wasn't prevailing party status, that's my recollection, and there was some difference there.

We had... essentially the lower court had found that there were no fees, no entitlement to fees and, of course, Farrar found that there were no entitlement to fees as well.

If there are no further questions--

Justice Scalia: The lower court found no entitlement, why?

I don't recall that.

Why did the lower court find no entitlement?

Mr. Cleek: --It seems to me, Your Honor, in Farrar that--

Justice Scalia: Because not a prevailing party.

Mr. Cleek: --Right, that it was just such a--

Justice Scalia: And we found no entitlement because why?

We found it was a prevailing party, but no entitlement because of--

Justice Stevens: --Didn't prevail enough.

[Laughter]

Justice Thomas: No, we found that they were a prevailing party but there was nominal damages, so the attorneys' fees were reduced.

There were... the court awarded $1--

Mr. Cleek: --It was a de minimis--

Justice Thomas: --and we said it was not because they were not a prevailing party, but rather that it was nominal damages.

Mr. Cleek: --That's correct.

Chief Justice Rehnquist: Thank you, Mr. Cleek.

Mr. Cleek: Thank you, Your Honor.

Rebuttal of Webster J. Arceneaux, III

Chief Justice Rehnquist: Mr. Arceneaux, you have 2 minutes remaining.

Mr. Arceneaux: Thank you, Mr. Chief Justice.

Mr. Cleek was assuming a hypothetical.

I want to assume a hypothetical for the Court as well.

Let us assume this Court does not accept the catalyst theory.

This Court is concerned with the issue of administration of justice, and I am concerned that if this Court does not accept the catalyst theory, then the game's been shifted we talked about that Justice Scalia pointed out, where a defendant that might be incredibly guilty on the eve of trial, after the plaintiff has incurred a lot of expenses, can moot the case out.

On the other hand, there may be motivation on the plaintiff's part to start engaging in gamesmanship.

We recognize that once we had the consent or the agreed order, we did not have damages.

The home wasn't shut down, the people weren't thrown out, we had no damages, so we stipulated to take damages out of it.

Had we known that this rule might have jumped up at us, we might have thought otherwise about the damages issue, so there can be gamesmanship on both sides if we don't have the catalyst theory.

We think... and one of the points that seems to get lost, we often talk about this as if the catalyst theory doesn't exist, but the fact of the matter is, the catalyst theory has existed.

It has been applied for 30 years, and the courts have not had trouble.

When you look at the cases, the courts are able to apply the causation test.

They are able to deal with these issues.

The district courts are equipped to make these decisions, and they have made these decisions for 30 years, and we think that the Fourth Circuit is wrong, and this Court should find, inasmuch as it did in the Laidlaw case, that Farrar had no catalytic effect, that the Fourth Circuit has misread Farrar, and that we should have our opportunity, our day in court to present the motion for attorneys' fees.

Chief Justice Rehnquist: Thank you, Mr. Arceneaux.

Attribution:

The Oyez Project

Featured:

Martin v. Hadix - Oral Argument

Fri, 09 Jan 2009 14:50:12 +0000

Case:

Martin v. Hadix

Media File:

98-262_19990330-argument.mp3

Related Transcript:

1998_98_262_argument.xml

Transcript:

Argument of Thomas L. Casey

Chief Justice Rehnquist: We'll hear argument first this morning in No. 98-262, Bill Martin v. Everett Hadix.

Mr. Casey.

Mr. Casey: Mr. Chief Justice, and may it please the Court:

Congress intended the PLRA attorney's fee cap to apply to cases precisely like the two before the Court this morning.

Congress intended not only to limit frivolous claims in cases and to limit Federal court involvement in the details of State prison management, but it also intended to relieve States of some of the financial burden of such cases and, in particular, some of the financial burden of attorney's fees ancillary to such cases.

42 U.S.C. 1988 provides that a district court may allow reasonable fees to prevailing parties.

The PLRA, in effect, has defined prevailing party and reasonable fee.

Justice Scalia: Mr. Casey, some of the fees in this case are not... reasonable fees to prevailing party.

I normally think it applies to the... the fees that have been expended in the course of the litigation before the judgment.

But some of these fees were for the purpose of policing the injunction after it was issued?

Mr. Casey: That's correct.

Justice Scalia: The attorneys' efforts undertaken in... do the courts have the power to do that, to sort of hire, you know, a private marshals force to... to see that their injunctions are being complied with?

Is this a common practice?

I frankly was unaware of it.

Mr. Casey: My understanding is that it is a common practice.

Once a consent decree or a judgment after trial has been entered, the district court frequently retains jurisdiction to monitor compliance.

Remedial orders are entered, and the court monitors compliance.

In Michigan, we've had these remedial orders...

Justice Scalia: Oh, I now it monitors compliance, but...

Who pays for it?

who pays for it?

Justice Kennedy: That's...

Mr. Casey: The State pays for it.

Chief Justice Rehnquist: Why is that?

Mr. Casey: The court has in one case determined after trial and in another case by consent decree that there has been constitutional violations sufficient to require the defendant to make... to rectify the constitutional violations.

In this case...

Justice Scalia: Well, that's fine.

And if they should... if they should commit the violation again and you should sue again, then I assume the attorney's fees expended in demonstrating that they continued the violation would be fees expended by the prevailing party in that later litigation.

But once litigation has been completed, the... the injunction has... has issued, I... I find it... I find it extraordinary...

Mr. Casey: Your Honor...

Justice Scalia: that you can hire attorneys to... to oversee the... the prisons for... for the court.

Mr. Casey: The States have objected loudly and long against that practice, and now in the PLRA, Congress has directed its attention to it.

And in...

Justice Scalia: Well, that... that feature colors my whole view of this case, and I'm... I'm worried that... that how I come out in this case is... is going to be dependent on a... on a practice that I'm not sure is even... is even authorized.

But there's... there's no challenge to that here I gather.

Mr. Casey: Not in this case, no.

Justice O'Connor: Would you give us a little more background?

There are two cases here: one in class actions I take it, one involving female prisoners and one male prisoners

Mr. Casey: That's correct.

Justice O'Connor: In both cases is there still an ongoing monitoring or has one of them been concluded at last?

Mr. Casey: We filed a supplemental brief a few weeks ago, Your Honor.

In the Glover case, 6 months ago or so the circuit court remanded the case to the district court with instructions to make findings as to whether there are current violations.

The district court has now made those findings, has found that there are no current violations, and has terminated its jurisdiction.

The Sixth Circuit had retained jurisdiction, so now briefs are scheduled to be filed.

Justice O'Connor: Well, now on... on that one, do we have an issue remaining as to attorney's fees for monitoring in the Glover case...

Mr. Casey: Yes.

Justice O'Connor: post PLRA and until the termination of the suit?

Mr. Casey: Yes.

I believe that termination of the suit does not moot out the current attorney fee requests.

Justice O'Connor: And... and the Hadix suit is one where there is still an ongoing monitoring?

Mr. Casey: Yes.

Justice O'Connor: And there's been no petition to end that one?

Mr. Casey: There have been.

We have unsuccessfully appealed portions of it.

The case most recently was remanded from the Sixth Circuit back to the district court for further proceedings to determine whether there are current constitutional violations.

Justice O'Connor: Now, one other housekeeping sort of question.

Has the State paid all the fees to the attorneys for monitoring up to the effective date of the PLRA?

Mr. Casey: The mechanism for attorney's fees in these cases was that each 6 months the plaintiffs' attorneys would submit a request for attorney's fees.

We would make objections, as we saw appropriate, and then the district court would enter an order.

So...

Justice O'Connor: Well, I asked a pretty simple question.

I... I thought PLRA became effective April 26th, 1996.

Justice Kennedy: Is that right?

Mr. Casey: That's correct.

Justice O'Connor: Has the State paid the attorney's fees up to that date?

Mr. Casey: There is a period of 4 months where we are challenging.

The fee cycle started January 1 of 1996, and we are asserting that the determinative date under the PLRA is the date of the award.

And the cycle that is at issue is for the 6 months starting December of 1996.

The PLRA took effect, as you say, in April of 1996.

So, we have in Michigan...

Justice O'Connor: So, the answer is that the State has not paid everything.

Mr. Casey: That's correct.

We have not paid the entire fee.

Justice Ginsburg: Up to the effective date.

Mr. Casey: Correct.

Chief Justice Rehnquist: Would you tell how long each of these two cases has been going on?

Mr. Casey: One was filed in 1977 and the other in 1980.

Chief Justice Rehnquist: So, they were cash cows, in effect, weren't they?

Mr. Casey: They were, indeed, Your Honor, and the Sixth Circuit stated that in one of its opinions, which we've quoted in the brief.

Particularly since...

Justice Ginsburg: Well, the record before us of the extent of the violations of the injunction... we don't know that.

It may be that these... that there were consistent violations and the monitoring was necessary so that the officials would abide by the court's orders.

So, but that's... the sole issue here is how much per hour, as I understand it, and not whether these injunctive decrees were needed.

Mr. Casey: That's correct, Your Honor.

As... as the case is postured now, we are only dealing with the attorney fee cap in section 803(d)(3) of the PLRA.

Justice Stevens: May I ask just one other question?

Your... your position is that the date of the award governs.

Supposing there's an award before the statute was passed, but you challenged it and appealed it, and then it became final after the statute was passed, how would you deal with that?

Mr. Casey: For an award which has not been liquidated and finalized, we believe that the PLRA would apply.

Justice Stevens: I see.

Mr. Casey: We... we are not seeking to reopen old...

Justice Stevens: I understand that, but I just...

Justice Breyer: Is there any... I mean, the common sense of this I guess would be Congress passes a statute saying put a cap on rates.

Justice Kennedy: All right?

Mr. Casey: Yes.

Justice Breyer: Somebody who knew nothing about it would say, I guess they mean that the cap applies to people for future work, and it doesn't apply for past work.

All right.

I guess knowing nothing about it, that's what I would say.

Now, why is it knowing a lot about it, I'd have to say something else?

Unidentified Justice: [Laughter]

Justice Scalia: Well, some of this is future work.

I mean, lest...

Mr. Casey: Oh, yes.

Justice Kennedy: lest it be thought the...

Mr. Casey: Some of it is...

Justice Breyer: I mean, I assume you're not going to object to that part of it, but the... the common sense... what I think is the common sense of it.

And the other part...

Mr. Casey: Well, as... as this Court has told us in Landgraf, you first look to see if Congress has made a clear statement about its intention, and to do that, you first look at the text of the statute and the legislative history.

Justice O'Connor: Well, the statute here doesn't say anything about what is supposed to happen.

It just says there is this cap on attorney's fees, and we know it became effective in April of 1996.

Isn't that right?

That's all we know from looking at the statute.

Mr. Casey: We believe that the text of the statute does clearly show Congress' intent that it apply to pending cases.

Section 803(d)(1) refers to in any action brought by a prisoner who is confined.

Those are words of the present tense.

We believe they apply to pending cases.

In Hutto v. Finney, this Court said of similar language in section 1988 that the words any action could not be broader and contained no hint of an exception.

Justice Stevens: Of course, the word brought was not in that statute.

Mr. Casey: That's correct.

We are not saying that any individual word here by itself is determinative.

To determine the intent, you must look at the entire statute.

There are three subsections: the one I've just read and also section 803(d)(3), which says no award of attorney fees shall be greater than 100 percent

Again, these are all encompassing words.

No award we say means no award.

Thirdly, the definition of prisoner in section 8038 says any person incarcerated who is convicted or sentenced for.

Again, words in the present tense which are all-encompassing and contain no exception and no limitation to solely prospective application.

Justice Ginsburg: And yet, there is another section that does state it is to be retrospectively applicable, and this section that we're dealing with conspicuously does not contain any such explicit instruction.

Mr. Casey: Section 802 of the PLRA was an amendment to the Code of Criminal Procedure, 18 U.S.C. 3626.

In that section, the... there is an explicit statement that section 802 applies to pending cases.

We believe that Congress knew after this Court's opinion in Landgraf that in order to make that section apply to pending cases, they had to do it explicitly because that was a substantive section.

It applied to the relief to which plaintiffs would be entitled and to terminating current relief.

The sections that we are talking about, particularly section 803(d), we submit is more of a procedural than a substantive section.

All of the sections of the PLRA, except section 802, are sort of a grab bag of different kinds of statutes.

They deal with such things as filing fees, exhaustion of administrative remedies.

We have the attorney fee provision.

There is a...

Justice Scalia: Well, I don't understand the principle you're espousing, that all procedural things... I don't understand.

The line between retroactivity and non-retroactivity or between a presumption of retroactivity and a non-presumption of retroactivity is the same as the line between substance and procedure?

Mr. Casey: That is one of the factors the Court identified in Landgraf.

Justice Scalia: I thought that... that the distinctive feature of 802(b)(1) is the fact that it says it shall apply with respect to all prospective relief whether such relief was originally granted or approved before, on, or after the date of enactment of this title.

I mean, that... that is a degree of retroactivity, admitted retroactivity.

You're not arguing for retroactivity here, are you?

You... you don't think that this applies before.

Mr. Casey: Section 802 is... is not at issue here.

What...

Justice Scalia: No, but that's the section we're comparing it with.

We're saying that 802 has this explicit statement.

Mr. Casey: Yes.

Justice Scalia: And it seems to me the explicit statement was necessary in 802 to make it clear that 802 was retroactive.

Mr. Casey: That's correct.

Justice Scalia: That is, it applied to matters before the date of enactment of this title.

Mr. Casey: That's correct.

Justice Scalia: You don't assert that 803 applies to matters before the date of this title.

You just... you just assert that it applies to all fees awarded.

Mr. Casey: We say it applies to all awards made after the effect of the statute.

Justice Scalia: Right.

Justice Souter: But it does apply to awards made for work done before the date of the statute.

Mr. Casey: That is our contention, yes, Your Honor.

Justice Souter: Let's assume, for the sake of argument, that I don't think the... the text really answers the question so that we have to go to step two in... in the retroactivity analysis and ask sort of the Justice Story questions which in this case I guess would be the question whether the act imposes a disability with respect to completed acts as of the date of its enactment.

And I take it in this case that would translate into the question whether the... whether the act in effect interferes with the... sort of the... the fee agreement or the... the terms of the fee that had been set before the date of the act.

Now, my... my question I guess is this.

Is it... is it your argument that the... as it were, the expectations for payment of fee, the fee arrangement, was simply a fee which in the terms of 1988 was a reasonable fee, whatever that might turn out to be, so that if the statute comes along at a later time and says, well, we think reasonable is this lesser amount, the statute applies?

Mr. Casey: Yes.

Justice Souter: Or... that's... that's your position.

Mr. Casey: Yes.

Justice Souter: Why shouldn't... why shouldn't the... the analysis be that we're talking about the real world here and the... the fee arrangement was the fee arrangement which the... which the lawyers and the court had at the time they began their work?

And at the time they began their work, and certainly at all... at the time that they did the work up until at least the effective date... forget the later period... their... their expectation was that they would be paid on whatever the... sort of the going rate was at that time, which was the higher amount.

Why isn't the proper analysis... the kind of real world factual analysis that the... that the terms were that they would be paid at that higher amount?

If you impose the... the act with respect certainly to... to work done prior to the date of the act, you are imposing a disability.

You are interfering with that kind of fee arrangement.

And therefore, it's retrospective.

Why isn't that the proper analysis?

Mr. Casey: Our position is that the plaintiffs and their attorneys do not have a reasonable expectation in a particular rate.

Justice Souter: Well, why don't they?

Mr. Casey: The most that they...

Justice Souter: I mean, why... that's... I know that's your position, but why... why don't they?

At the time they... they did this work, there was no reason to suppose that the... that the practice of the court was going to be, in effect, interfered with.

Mr. Casey: Well, I disagree with that, Your Honor.

In fact, there have been many changes in the fees paid here.

Justice Souter: Have... have any of those changes been retrospective in the sense of applying to work previously done before the change was announced?

Mr. Casey: Every 6 months plaintiffs submit a bill for their expenses, and at that time they say what they want their fee to be.

Chief Justice Rehnquist: So, in effect, every... every award of fees is for work previously done.

Mr. Casey: Correct.

Justice Souter: Yes, but did... did they argue about the amount of the work they've done and whether they have earned the fee, or did they argue about the... the terms upon which they will be compensated for work done once the amount of work is determined?

What's... what's the... what is the... the contest at the time they submit the bill, about the one point or the other?

Mr. Casey: They submitted a... a bill for fees for January 1 through June of '96.

They are asking for an increase in the rate of pay from $ 150 to $ 200 an hour because that they say is the prevailing market rate.

Justice O'Connor: Has that happened...

Justice Scalia: Okay.

Justice O'Connor: all... all along?

Have... have they asked for years... periodically they ask for more...

Mr. Casey: Yes.

Justice O'Connor: in hourly rate?

And then the court decides whether to increase it or not?

Mr. Casey: That is... that is...

Justice Scalia: But that hasn't...

Justice Kennedy: Yes, but...

Justice Souter: Go ahead.

Justice Scalia: No, please.

Justice Breyer: There...

Justice Souter: It seems to me beside the point that you can always increase the rate.

A windfall is lovely, but can you decrease the rate if there is an understanding that there is at least a... a floor, and if you... can you decrease that rate?

Do you have any instances of past practice in which the court has said, well, I've been approving rates at... at $ 100 an hour, but I think I'll drop down to $ 80 with respect to the... to the work you've previously done?

I think it was just too high.

Any instances of that?

Mr. Casey: I don't believe there have been any instances like that.

Justice Scalia: Well, then why...

Mr. Casey: But there...

Justice Souter: isn't the actual expectation that... that we should bear in mind when we're doing a retroactivity analysis, the expectation that, in fact, there... there was at least a floor?

They may or may not succeed in getting it raised, but there was at least a floor and that floor is the... sort of the benchmark that we should consider for retroactivity analysis.

Mr. Casey: Our position is that that floor is subject to change.

Justice Souter: Well, I know that's your position, but why?

I mean, what reason do you have for me to accept your position?

Justice Scalia: Mr. Casey, can the... can the district court disappoint the expectations of the defendants?

Mr. Casey: Of course.

The district...

Justice Scalia: By... and every time it increases the fees beyond the fees that it gave the last time around, I suppose it is disappointing the expectations of the defendants, isn't it?

Mr. Casey: That's correct.

Justice Scalia: And that's perfectly okay.

Mr. Casey: Yes.

Justice Souter: Well, maybe on your analysis...

Justice Scalia: Presumably it could... it could disappoint the expectations of the plaintiffs as well should it decide at some time that it has been giving too much money in the past.

Mr. Casey: That's... that's correct.

Justice Souter: Have you ever objected to an increase in the fees?

Mr. Casey: Yes.

Justice Scalia: Yes.

Justice Souter: So, I... I assume you didn't think that was proper.

Mr. Casey: That's correct.

Justice Souter: And by a parity of reasoning, I suppose it would not be proper to... to decrease retroactively.

Mr. Casey: If, for example, the economy went into a depression...

Justice Souter: Well, isn't that... is my logic correct?

Mr. Casey: If there was a... if there was a decrease in the prevailing market rate of attorney fees, then the plaintiffs in one of their 6-month cycles would be entitled to a lesser amount than they received the preceding cycle.

Justice Souter: Well, why?

Mr. Casey: Because under their view, the prevailing market rate would have... instead of being $ 150 an hour, say it was $ 100 an hour.

Justice Souter: Well, so you're... you're saying that the only arrangement... that the only expectation ever expressed was whatever the market rate is you'll get.

Mr. Casey: Under... under 1988...

Justice Souter: If it goes up, you get it.

If it goes down...

Mr. Casey: That's correct.

Justice Souter: yours goes down.

Mr. Casey: That's correct.

Justice Souter: Now, what about... and I'm not sure that this really is to the point, but I want to explore it.

What about the feature in this case, as I understand it, that at least after the judgment for the period in which counsel was... was policing the judgment, acting as monitor, and so on, that the court actually set fees in terms of specific figures.

Didn't... wasn't there an order in one or the other of these cases or perhaps both saying you will get paid at such and such an hour for this prospective work?

Mr. Casey: For a particular fee cycle, yes.

Justice Souter: Okay.

Justice Scalia: For the future?

Mr. Casey: I don't believe for the future, no.

For the billing cycle that was before the court.

Justice Scalia: Which was past.

Mr. Casey: Which was past.

Justice Souter: So that it was never forward looking.

Mr. Casey: It's my understanding.

We certainly never agreed to any order which would say that plaintiffs are henceforth entitled to a particular amount.

Justice Souter: Now, let me go back to my question and I won't... I won't occupy your whole argument.

I just want to go through one... one time on this.

You say they cannot look backwards and say the reasonable fee is less than we have been paying.

And as I understand it, you're saying they can't do that because the actual understanding between court and counsel was simply a general understanding.

You get what's reasonable...

Mr. Casey: On the date of the award.

Justice Breyer: not any specific amount.

Mr. Casey: Yes.

Chief Justice Rehnquist: Okay.

Justice Souter: What is the basis for your saying that?

Was that... was that proposition that you are putting forward ever set forward on the record?

Is it in writing anywhere?

How do we know that that was the arrangement?

Mr. Casey: I don't think it was articulated in those terms in front of the district court.

It was essentially every 6 months, they would submit a bill.

We would object.

But I... I don't think we got into this level of subtlety.

Justice Kennedy: Are... are you saying that in light of the statute, amounts previously awarded are now known to be unreasonable?

Mr. Casey: We are not...

Justice Kennedy: Or put it another way, would it be unreasonable to award more than the statutory amount?

Assuming no retroactivity, we know that there's a policy in the Congress to put this cap on.

Does that mean anything above that is unreasonable...

Mr. Casey: Yes.

Section 1988...

Justice Kennedy: But isn't there a range of reasonableness?

Mr. Casey: Of course, and what we are saying is that all the plaintiffs are entitled to is a reasonable fee on the date of the award, and that reasonable fee changes.

Justice O'Connor: I would have thought... I would have thought that you'd look at when the work was performed.

And one line you could draw with this statute that wouldn't pose a retroactivity problem, I assume, would be to say that work performed by the lawyer after the effective date is governed by the provisions of the PLRA.

But you don't take that position.

Mr. Casey: We do take that position.

Justice O'Connor: I thought you said it turned on the date of the award, regardless of when the work was performed.

Mr. Casey: The court has specified...

Justice O'Connor: That's what I heard you to say.

Which is the line you're drawing?

Mr. Casey: The court has specified two issues: one for work performed before the date of the PLRA and one for work performed after the date of the PLRA

Justice Breyer: Well...

Mr. Casey: We say that the date of the award is the operative date.

Justice O'Connor: Yes, but what I'm saying to you is I would think a line could be drawn saying it depends on when the work was performed, and if it was performed after the effective date, the statute applies.

But you do not take that view.

Mr. Casey: The statute applies to all awards after the effective date of the statute regardless of when the work was performed.

That is our position.

Justice O'Connor: That's your view, yes.

Mr. Casey: That's correct.

Justice O'Connor: And I think one could make an argument for a different approach.

Mr. Casey: I think a stronger argument can be made for work performed after the date of the statute.

Justice O'Connor: Let me ask you one more thing.

Do you think that an attorney who is involved in the monitoring would have the right to withdraw, go to the court and say, I'd like to withdraw because I don't want to work for the amount provided in this statute?

Mr. Casey: They would need the court's permission, but yes, they could seek it.

Justice O'Connor: Yes, but that's possible to do.

Mr. Casey: Yes, yes.

Justice Scalia: Excuse me.

They... they would need the court's permission.

Are they designated by the court or they just happen to be the attorneys for... for the client and they... they need to get the court's permission to cease being attorneys for the client?

Mr. Casey: They were the plaintiff class counsel from the beginning of the lawsuit, and I don't believe they could unilaterally just withdraw at this point.

The court would have to... I assume would look to see if there is substitute counsel available and make sure...

Justice Ginsburg: They would... do they have court appointments?

Because I assume...

Mr. Casey: No.

Justice Ginsburg: They did not have court appointments.

Mr. Casey: No.

These are... these are private counsel.

They're not appointed by the... by the court.

Again, we think you look to the relevant activity affected by this statute and that is the award of attorney fees.

And I'd like to reserve the rest of my time.

Argument of Deborah A. Labelle

Chief Justice Rehnquist: Very well, Mr. Casey.

Ms. LaBelle, we'll hear from you.

Mr. Labelle: Mr. Chief Justice, and may it please the Court:

I would first like to just clarify briefly one of the inquiries of Justice O'Connor and that in this case, both in the Glover and Hadix, the defendants have paid at pre-PLRA rates all of the fees up to the date of enactment of the act.

The way that happened is the...

Justice O'Connor: The date of the enactment or the effective date of the act?

Mr. Labelle: Up through April 26th, 1996.

Justice O'Connor: The fees have been paid, contrary to what counsel has just told us.

Mr. Labelle: Yes.

They did not seek review of the Sixth Circuit's prior opinions in both Hadix and Glover awarding specifically that pre-enactment...

Justice O'Connor: So, in your view, the only thing at issue is fees earned, if you will, after the effective date of PLRA?

Mr. Labelle: Absent this Court ruling that defendants, which they sought to come back and get those fees back, yes.

They've already paid them and before the Sixth Circuit and at the later opinion they asked that they be able to go back and reclaim them.

Justice Ginsburg: Did they pay them because the district court required them to?

I mean, they did contest them all, didn't they?

Mr. Labelle: They did contest them.

They paid them because the court of appeals affirmed the district court and they did not seek review of that.

Justice Ginsburg: Yes, but it was not a voluntary payment and then they sought to get it back.

Mr. Labelle: That's correct.

Justice Ginsburg: They didn't pay until ordered to do so by the court.

Mr. Labelle: That's correct, Your Honor.

And clarifying one other point...

Justice Scalia: Excuse me.

That means then that... that really question 1 in the questions presented is not really before us.

Is that... yes.

I'm sorry.

No.

Question 1 is not before us.

Mr. Labelle: It is true that they have paid all those monies.

Chief Justice Rehnquist: Wait a minute.

Justice Scalia: Oh, it's question...

But they...

question 2 that's not before us.

Mr. Labelle: Correct.

Justice Souter: They have paid them, but are they still able to contest them procedurally?

Mr. Labelle: I don't know the answer to that question.

Justice Ginsburg: Didn't they challenge that in the Sixth Circuit?

Mr. Labelle: They challenged it in the Sixth Circuit, but the Sixth Circuit ruled that they had to pay it.

They did not seek review of that prior opinion.

It was the subsequent opinion which covered both pre and post awards, pre and post fee awards, that they sought review of and that is before this Court now.

Justice Kennedy: Why did the subsequent opinion address it if it had been paid under the earlier opinion?

Mr. Labelle: Because the original opinion dealt with a time period way before the passage of the act from June 1995 through December 1995, which the court, because they contested some other matters, didn't hold a hearing and get around to awarding until after the passage of the act.

Therefore, they said, okay, it's an award for fees from June through December 1995.

Now we want to apply the PLRA.

Subsequent to that came a time period of January '96 through June '96 which encompassed both pre and post enactment hours.

And that is the matter which they sought review and is before the Court.

For whatever reason, they decided that when the Sixth Circuit ruled even as to that matter to pay all of the fees up through April 1996 at the pre-PLRA rate.

Chief Justice Rehnquist: Ms. LaBelle, let me get at least myself straight.

Maybe my colleagues are already straight.

Question 2 is whether in such litigation this fee provision applies to fees awarded after the act's effective date for services rendered before that date.

Now, do you say that that question is not before us?

Mr. Labelle: I think that it's not before the Court...

Chief Justice Rehnquist: And why is that?

Mr. Labelle: Mr. Chief Justice, because they paid all of those fees, did not contest them, did not... did not contest them at the time of paying it, did not say we retain the right, and in fact, did not seek in their petition for review before this Court to review that matter.

Justice Stevens: So... go ahead.

I just... does the record show that they were paid?

Mr. Labelle: Yes.

Justice Kennedy: Why did they not seek to pursue that matter if it's included in the questions presented?

Or it's not in the cert petition?

Mr. Labelle: It's not in their cert petition, Your Honor, and this Court then issued them the two questions splitting the matter.

Justice Scalia: It's our fault.

You're blaming it on us.

Unidentified Justice: [Laughter]

Justice Scalia: Yes, it was framed much more generally in the question presented.

It would have embraced both, though, whether the attorney fee provision applies to fees for services in litigation pending on the effective date of the PLRA.

That would include both, but it didn't split them out.

Mr. Labelle: And, Your Honor, I think that there's a good reason actually to include both in this Court's inquiry because I do not think that the statute, by the language of the statute itself, allows for the distinction.

And in fact, that's one of the problems.

Justice Stevens: Let me just be sure I get... you do tell me this in the record, the fact that they were paid before.

Mr. Labelle: I do not know if it's in the record, Your Honor, in the joint appendix.

The decision... the prior decision of the court is in there, and I would have to look at the joint appendix to see if there is a specific notation of them paying it.

I don't think it was included in their joint appendix, Your Honor.

Justice Souter: I see.

Well, is it in the record of...

Justice Stevens: Well, because he has a different memory.

Justice Souter: I was... is it in the record of a Michigan court, whether it got...

Mr. Labelle: Yes, it's certainly...

Justice Souter: into the portion you sent to us?

Mr. Labelle: Yes, Your Honor.

It's certainly in that record.

I would... I would like to address the fact that we think that the... the plain language of the statute at issue here does not evince a congressional intent with regard to its temporal reach.

However, if you apply this Court's other general rules of statutory interpretation, there are several bases for concluding that Congress intended the statute only to apply to actions brought after the passage of the act because, while Congress did not state in any...

Chief Justice Rehnquist: So, your... your position then is... is you reject all of the previous positions that have either been suggested from the bench or by... by your opponent.

It applies only to a lawsuit that is brought after the act.

Mr. Labelle: I think that's correct, Your Honor, to an action brought after the passage of the act.

And it does not apply to pending cases because, while this Court has, certainly in Landgraf, told Congress that if they want to apply things to pending cases, they should clearly make that evident in the language of the statute.

Here Congress did in one section of the statute, in 802, clearly say that this applies to pending cases.

What they...

Justice Scalia: Well, we didn't say that in Landgraf.

I mean, it depends on what the rule is.

I mean, if... if Congress changes, for example, a rule of evidence, as to the admissibility of evidence, I didn't understand Landgraf to say that we would treat that as inapplicable to cases filed before the rule of evidence was adopted.

Mr. Labelle: I think that's true, Your Honor.

I think that in Landgraf the Court set out some narrow lines in saying in purely procedural matters, for example, or in matters that have occurred in the past, that... in purely procedural matters, that this Court would not have a presumption against retroactivity.

Chief Justice Rehnquist: But this is procedural a fortiori.

It's really tertiary conduct that we're talking about here.

You don't need to look at the clock either.

We're looking at presumably actions taken by Michigan correctional authorities some time ago dealing with prisoners.

That would be the primary conduct.

Now, here we get to something.

We're talking about the rate at which attorneys for the prevailing party which prevailed somewhere back in the '70's are to be paid in the '90's.

Mr. Labelle: But I think, Your Honor, Mr. Chief Justice, what we're talking about here is that the way these cases were filed were based upon a reliance on the act that existed at that time and which this statute amends.

And the... the understanding at that time is that if you bring these cases... and in fact, Congress evoked the act to induce parties to bring these cases and attorneys to represent these parties who didn't have the wherewithal to challenge their constitutional rights in any other manner... if you bring these cases, you will have an entitlement to reasonable attorney fees.

Justice Scalia: Well, only if you win.

I mean, this... this was crap shoot anyway.

You... you didn't know you were going to get any attorney's fees whatever, much less were you guaranteed the absolute amount of them.

You knew you would get attorney's fees if you won.

Mr. Labelle: That's correct, Your Honor, but that is exactly the balancing act that goes on when a case is filed.

You know that you may not win, but if you do win...

Justice Scalia: But it's a good deal less certain than the kind of reliances that... that we typically say cannot be upset by future legislation.

I mean, there's all sorts of reliance.

I mean, the person who... who builds a nuclear plant may rely on the existing state of the law and make substantial investments on the basis of it, but the law changes and he's just... he's just out his investment.

Why isn't this that kind of reliance?

There was no guarantee you were going to get attorney's fees at all, much less the fixed amount of them.

Mr. Labelle: Well, I want to distinguish two things.

The facts of this case which, in fact, the court did rule in both of these cases that you would for your future work have an entitlement to attorney fees at a set market rate.

And these are orders in both of these cases establishing at that time that you would have $ 150 an hour.

It was the market rate established.

Justice Scalia: The court can bind Congress that way for the future?

I would think at least as soon as Congress says we repudiate that court's pronouncement for the future, Congress wins rather than the court.

Mr. Labelle: That the Congress, Your Honor, can say that... that that... that fees worked... Congress can say that, Your Honor, but I don't think they said it in this act.

And I think that that's an important point.

What the Congress did say is they said... in 802, they said, yes, it's going to apply to pending cases, and in fact in a case where it involves specifically prospective relief.

In a prospective relief, which I think has a little more ambiguity as to whether that applies anyway, the retroactive analysis, but Congress there said it will apply in 802.

It did not have that language in 803, and it did something more significant.

It took...

Justice Scalia: The reason they did it in 802, as I suggested earlier, was... was that 802... they had to say it because they... they said whether the relief was originally granted before the date of enactment.

There's no contention here that we're going to go back before the date of enactment.

Mr. Labelle: Well...

Justice Scalia: And he just says all orders entered after the date of enactment.

Now, had they wanted in this case to cover even attorney's fees orders entered before the date of enactment, then they would have had to have something like what was said in 802.

But... but that wasn't what... what they wanted here according to the other side.

Mr. Labelle: Or what will be covered is three things because I don't think you can separate the act.

What will be covered is fees worked prior to the passage of the act by the language of the act, which were worked under an entitlement, an order of the court saying you will be entitled to future monitoring fees at this rate.

And I do want to note and clarify for the Court, the way the court has always awarded fees is for future fees.

Defendants have always fought the concept that we can then... at the time we are petitioning for fees, we could raise the rate and get it for the time worked.

Defendants have said no, and the court has agreed.

Only work...

Justice Souter: But you're saying they cannot do that.

You're saying that even as to future rates set after a hearing for the purpose of determining future rates.

As I understand your argument, you're saying in this case the rate as determined by the statute may not, in fact, be applied.

Mr. Labelle: That's correct.

That's what would happen.

Justice Ginsburg: The statute... yes.

Justice O'Connor: Well, why... why could not the statute be given effect as of its effective date to work performed after that date?

Because after that date, counsel must know, of course, that the statute was enacted and that it might well apply.

Mr. Labelle: The... I think that if you go by the language of the statute, it doesn't allow parsing the statute in that manner because it speaks in terms of any action brought by a prisoner who is incarcerated, the court... fees shall not be awarded except to the extent that.

And it does not have, as any of its delineation, hours worked, when the hours are worked, what the time period, and so it's...

Justice O'Connor: But it's a very simple line to draw and certainly could be I think on the face of the statute.

In fact, that's the most common sense reading of it I would think.

Mr. Labelle: I think that it is a simple line to draw, Your Honor, but I don't think Congress drew that line.

And I... I think that what...

Justice Ginsburg: It was the line the district court drew, though, wasn't it?

Mr. Labelle: The district court drew that line, Your Honor, finding that not that the statute's wording provided that, but that there would be a retroactive... an impermissible retroactive effect if you got past the congressional intent...

Justice O'Connor: Well, how... how is it retroactive if you say it applies to work performed after the effective date?

How is that retroactive?

Mr. Labelle: I think because what we're looking at is what is the conduct and what is the triggering event here, what is the event you look at for purposes of determining whether it has that kind of effect.

Justice O'Connor: Well, how could... how could attorney's fees at an hourly rate be applied on any basis other than work performed?

Mr. Labelle: Because the attorney fees... first, the attorney fees are only provided if you prevail in a litigation that you've filed under the prior act.

In terms...

Justice O'Connor: Yes, but we're over the point of getting paid for the litigation, and we're talking I think only about these endless monitoring arrangements, these open-ended, ongoing monitoring arrangements.

Isn't that what we're talking about here?

Mr. Labelle: In this case you're talking about the monitoring arrangements, but certainly if it's allowed to apply, it will apply to cases in which have not yet prevailed and which work has performed.

The statute comes in in between filing the case and prevailing.

And then the... at that time... and there are a number of cases certainly out there in which it's before prevailing in which you file the case with the understanding that if you did vindicate the constitutional rights of your client, that you would obtain reasonable fees.

Justice Kennedy: If you have a trial court that said, you know, counsel, we've been working with this case for 2 or 3 years.

I've been making attorney fee awards.

I want to tell you that henceforth, I'm going to put a cap on the fees of X dollars an hour, which is lower.

You're telling us that that is retroactive.

That's a very strange way to use the term retroactive.

Mr. Labelle: Because I think that it does unsettle expectations and disrupt and injure the client in a way that it should not, in the sense that what the attorney may do in that case, who has committed to the client to represent them, is withdraw.

It's the...

Justice Kennedy: Well, except the attorney never had the expectation that he would get anything more than a reasonable fee.

Mr. Labelle: But this does not provide for a reasonable fee now.

This caps the fee at a certain rate, which is not a reasonable fee.

Justice Breyer: Well...

Well, I suppose by a miracle that they... which I think they should do... that they increase or double the rate that's paid to counsel in criminal cases, then what would you be saying?

Would you be saying that doesn't apply to us?

In other words, instead of the $ 75 an hour max, which is awfully low... I think far too low... they said, very well, it will be $ 150.

And then your fees would go way up and would you be in here saying, no, no, no, that doesn't apply?

It's all...

Mr. Labelle: I think defendants would, Your Honor, because...

Justice Breyer: Yes, yes, but I mean, your point... the issue, I would have thought, was not retroactivity.

I don't see this retroactivity jurisprudence as relevant either.

It's just an issue of whether or not the statute applies to future work in pending cases.

Mr. Labelle: I think...

Justice Breyer: And normally you'd think it does apply to future work in pending cases, but... but you produce some reasons why not, and that's what I want to hear.

Mr. Labelle: I think it's true.

I don't think this Court needs to get to the retroactivity analysis because you only get there if you find that there is... it's not clear what congressional intent was.

Justice Breyer: I don't think you'd be making this as a set deal... years ago we decided initially what all the future rates would be... if tomorrow they come along and they double the... the base rate for the... for the defendant.

That's my point.

I'm trying to focus you on reasons.

What are your reasons why you say, gee, this seems awfully... if it favors you, it does; if it doesn't... that isn't going to be a reason.

Mr. Labelle: Well, I think that in some sense this is a flip side of Landgraf in which the Court said there that although it was just potential, that you could not tell... you could not grant or extend a potential benefit to... to the plaintiff, a right of compensation, that had the potential of extending the liability of the defendant after the case had been filed.

And in this case, what you're doing is you're decreasing the entitlement to the plaintiff in such a way not just with fees, Your Honor...

Chief Justice Rehnquist: But you're... you're not just... you're talking again about secondary or tertiary conduct.

Landgraf was dealing with primary conduct: What is the basis for liability

We're not talking about liability in the lawsuit at all here.

We're talking about compensation of attorneys.

Mr. Labelle: Well, I think you're talking about, Mr. Chief Justice, more than compensation of the attorneys, both... for two reasons.

One, the statute, which also controls... is... is controlled.

The subsection of the statute also talks about the damages to the client.

In this act, what it says is that in any awards in any case brought, the party also loses a portion of their damages and has to move those damages over to pay for...

Chief Justice Rehnquist: But that's not involved here.

Mr. Labelle: It's not involved here, but it's necessitated by this Court's opinion because they are both... both subsections are under, in any case brought, fees shall not be awarded except to the extent that, and one is... sets the cap on attorney fees.

Justice O'Connor: Well, if you drew the line at the mechanics of awarding, I can understand your concern.

If you drew the line at when the work is performed, that's a different question it seems to me.

And I... is there any reason why a lawyer who is governed by the act in a situation where the lawyer is providing monitoring services... is there any reason why the lawyer couldn't withdraw if the lawyer thought, well, this is just not enough for me?

Mr. Labelle: I think that the lawyer could withdraw, but then the concern comes in terms of the effect on the client who is now deprived of the lawyer with the experience and the ability...

Justice Ginsburg: Ms. LaBelle, didn't Judge Wald bring up some ethical constraints that might operate on a lawyer in that situation?

She apparently didn't think that the lawyer could just walk away from this kind of undertaking.

Mr. Labelle: I think, Your Honor, it probably... I think it does involve ethical concerns certainly, especially in the circumstance where you would be saying whether you should withdraw because it's overwhelming you in terms of the... the financial burden where you know that it is unlikely to have any other... to get any other counsel to represent the client.

Chief Justice Rehnquist: It may be a good reason to stop monitoring if... if the rates are such that you can't get competent counsel to do it.

Maybe the district court should take another look at that.

Mr. Labelle: I think that the monitoring, Your Honor, came in only after, in the Glover case, the Sixth Circuit found these defendants in omnibus contempt of the court's orders and then ordered a development of a plan that actually complied with the court's orders.

Chief Justice Rehnquist: When... when was that, Ms. LaBelle?

Mr. Labelle: The order of the Sixth Circuit initial one was in 1991, and the district court subsequently in 1995 found again that defendants were not complying and were in contempt.

The... it has not been, at least in the Glover case, ongoing monitoring.

There was a period in which everyone expected the defendants to obey the court's orders and it was only after 5 or 6 years in which no action was done, that the parties for the class of women prisoners came back in and said, excuse me, we don't have any compliance here.

And then that started again the contempt and the monitoring award.

Chief Justice Rehnquist: Ms....

That was the Glover case?

Mr. Labelle: That's correct.

Chief Justice Rehnquist: And that was the one from 19... that started in 1977?

Mr. Labelle: Yes, it did, Your Honor.

Chief Justice Rehnquist: Ms....

Go ahead.

Justice Scalia: I'm sorry.

Ms. LaBelle, is it... is it the expectations of the lawyers we ought to be looking at in this case anyway?

These... these fees are not really awarded to the lawyers, are they?

Mr. Labelle: The fees are the fees of the client.

Justice Scalia: Right, and... and in what respect was the expectation of the client disappointed?

Mr. Labelle: I think in... in these cases that what happens when they are filed is that the... it is the party that has a right to, under the act prior to this amendment, reasonable attorney fees and...

Justice Scalia: The party is going to turn over whatever attorney's fees the party gets to the lawyers is what's going to happen.

I don't think the party really... really cares whether the party turns over more or less.

I understood the... the purpose of this provision to be to help parties, not to... not to help lawyers.

Mr. Labelle: I think that's true, Your Honor, but this... this statute does more.

It takes from the party up to 25 percent of their damages when they win, and it's found that they are the victims of constitutional violations and says you must turn that portion of your damages over to pay the defendant's obligation to pay attorney fees.

So, it certainly does affect the party in a way more than just paying the lawyers.

They must now, under this subsection, pay up to 25 percent of any damages awarded to them to offset the award to the wrongdoer, the defendant in this case, as obligation for attorney fees.

So...

Justice Ginsburg: How frequent is it in these prison reform litigation cases that... that there is any significant monetary award to the plaintiffs?

Mr. Labelle: I think that in... the most significant awards do occur in situations of wrongful death and in rapes.

Certainly that's my familiarity, more in the women's prison situation.

There are...

Justice Ginsburg: Those cases would tend to be brought not as these large class actions, would they?

The wrongful death case?

Mr. Labelle: There are cases brought as class and as individuals, Your Honor, addressing both where there is a pervasive condition that is alleged.

But I think in... in the general situation where there are damages, I would agree that in general they are brought in individual circumstances.

Justice Ginsburg: May I ask you to clarify one point to make sure I got it right?

Did you respond, in answer to Justice Breyer's question, that you would take the same line with respect to a Congress that doubled the fee, because it wanted to give people incentive to bring these actions, that the word brought would mean that the increase applied only to actions brought after the effective date?

Mr. Labelle: If the statute had the same evolution, Your Honor, and the procedure that I think we have here, where Congress took that section out of a section that applied to pending cases and put it in a section that did not and did not specify that it applied to pending cases, I think that you would have to use your general rules of statutory interpretation to say that Congress did not intend it to apply to pending cases.

Justice Ginsburg: So, the answer is yes.

It would have the same...

Mr. Labelle: Yes.

Justice Ginsburg: words, the same history.

Mr. Labelle: The answer is yes.

Justice Ginsburg: It would work both ways.

Mr. Labelle: It would work both ways, Your Honor, because it would... in that circumstance I would not argue that the defendants who also work under these circumstances with the knowledge as to what the fees would be should have to, in pending cases, then have to reassess that and now be told not that it will be market rate, but that it might be double market rate, and especially in circumstances where they can't go back and change their conduct, as is urged here, where we worked under an entitlement of a court order to what had been defined as market rate and performed that work, and then the act came into effect.

And so that certainly we can't alter and we can't go back and make a decision whether to withdraw.

But... but I would think that here, where Congress... I think that although I do believe that there is a retroactive effect on the parties by applying this act to cases that are pending, I think that Congress... you don't need to get to that if you look at what Congress did here.

Justice Souter: Well, may I raise a question here?

I have one basically simple problem with your statutory argument, to the extent that you are arguing that at no time may the court prospectively change the rate in this case to conform to the new... to the new act.

The problem that I have with it is that I assume... I have to assume... that Congress legislated against a background of... of fee award practices in... in which we... we all find it a familiar feature of the system, that the court is constantly reexamining fee orders in... in these continuing cases.

Lawyers come in, just as I guess... I don't know whether you did, but I gather a lawyer did in this case and said I ought to paid more, and that was even for work that had been completed.

But in any case, I ought to get a higher rate.

And it seems to me that the... that the background principle against which Congress probably legislated was the principle in which adjustments are made as we go along.

Now, we may fight about the retroactive effect of making that adjustment with respect to a post-enactment period for work done before the adjustment is made.

Let's leave that aside.

But with respect to an adjustment which is by any standard totally prospective, the adjustment that is made when the court says, from now on any work that you do is going to be compensated at the... at the rate under the new statute, it seems to me that that is probably in conformance with what Congress would have assumed as a background principle for the way fee awards in continuing cases are made.

Now, is... is my simple problem subject to a simple answer?

Mr. Labelle: Your Honor, if... perhaps in cases where you're in monitoring, but that would not be the way...

Justice Souter: Which is what we have here.

Mr. Labelle: Correct, but this would also apply to cases where attorneys are in midstream on a case, where they started the case under the understanding that they would get those fees.

Justice Souter: Well, what... may I question that?

How many... this is really a question.

It's not just a rhetorical question.

How many lawyers begin cases... let's say, prison litigation cases... with a... a clear understanding about what the hourly rate is going to be if they win?

Is that... is that commonly done?

Do we go into court and pretrials in these cases and say, if you're the prevailing party, you're going to get X dollars an hour?

Mr. Labelle: I think, Your Honor, the answer to some extent is not X dollars an hour, but prevailing party, yes, that you will not suffer...

Justice Souter: Do they say that at pretrials, or is that again just kind of a background principle upon which everybody behaves?

Mr. Labelle: I think in these difficult cases, it is the background principle, that if in these difficult cases, you do prevail, you will not... it will not be a punishment.

You will... you're not sacrificing other work in order to do these cases.

Justice Souter: But is the prevailing rate understood as the prevailing rate for fee awards in the Federal courts for assigned counsel cases or the prevailing rate in the bar in general?

I assume the former, but maybe I'm wrong.

Mr. Labelle: I think that it has... it has been determined both by Hensley and in the precedents in... in the district circuit that we practice in, that it is the prevailing market rate in the community in which you practice.

Justice O'Connor: Is that so?

Chief Justice Rehnquist: Thank you, Ms. LaBelle.

Mr. Labelle: Thank you.

Rebuttal of Thomas L. Casey

Chief Justice Rehnquist: Mr. Casey, you have 4 minutes remaining.

Justice Scalia: Mr. Casey, would you clarify a factual matter for me?

I had thought that you had said that all of the awards here were retrospective; that is, you came in after 6 months of work, and at that point the court would tell you what rate you would get for the 6 months preceding.

But I understood Ms. LaBelle to say the opposite, that the court was... was saying for the next 6 months, you're going to get such and such a rate.

Mr. Casey: My understanding is that every 6 months, they submit a bill and they ask to be paid at a certain rate for that work which was performed in the past.

Justice Scalia: And the order does not say, moreover, this rate will continue for the next 6 months.

Mr. Casey: Correct.

I do not believe the orders say that.

Justice Breyer: Is there any indication here that Congress focused specifically on what I'd call prison litigation, long, ongoing cases, 20-year cases, 15-year cases, as compared to just an ordinary case where a prisoner says I'm being held under bad conditions, one person, one time, et cetera?

Mr. Casey: Yes.

What legislative history there is available is focused on these consent decree cases which go on for decades, not just in Michigan's, although Michigan's cases were specifically mentioned because Senator...

Justice Breyer: Do you have any empirical data on... on how many old cases there are hanging around forever as compared to the number of new that are brought from year to year?

Mr. Casey: I don't know.

Justice Scalia: No is the answer.

Mr. Casey: There was a letter introduced into the record from the National Association of Attorneys General which indicated I believe 54 cases as of 1994, but I do not know how many... Michigan has 4 pending...

Justice Stevens: Is it correct that the theory on which the cases go on so long is that the plaintiffs contend... maybe their wrong... that the violations of the Constitution have not been terminated?

Mr. Casey: That's correct.

Justice Stevens: And the district court must find that to be true in order not to terminate the litigation.

Mr. Casey: That's correct.

And the problem, as Congress recognized in the PLRA, is that district courts have gotten bogged down in the minutia of management.

The Sixth Circuit in Hadix in an opinion we've included at page 164 of our brief, in which they remanded the case back to the district court, pointed out that the district court had gotten bogged down in the minutia of remedial activities rather than focusing on the alleged constitutional violations.

They sent the case back to the district court and they said just determine whether there is a current constitutional violation.

The district court examined it, found no current violations, and now that case will be dismissed.

Justice Scalia: General Casey, could I clarify one more factual matter?

Am I correct that none of the fees involved in this case involve the fees incurred in litigating the initial... to the initial judgment?

Mr. Casey: Correct.

Justice Scalia: They are all later...

Mr. Casey: Monitoring has been...

Justice Scalia: Monitoring fees.

Mr. Casey: going on for 15 or 19 years.

Justice Scalia: And may I ask with respect to my previous question that if... if Ms. LaBelle is of a different view, namely, is of the view that these judicial orders were prospective and said that you're entitled to so much of a rate for the future, that perhaps she... or where that... where that would... would appear in the record.

This is an important fact for me and I think the two of you have said different things.

And... and...

Mr. Casey: The orders of the court are included in the joint appendix.

If they're not all in the joint appendix, then certainly they would be...

Justice Scalia: But they're all in the same...

Mr. Casey: Yes, I believe so.

I believe so, Your Honor.

Justice Kennedy: How much has the State paid in... in the Glover case to date?

Everything.

Mr. Casey: I don't know specifically over the past 22 years.

For the four cases, consent decree cases, class actions we have pending now, the difference, if the PLRA limit applies, for '96 through June of '98 is $ 550,000 apparently.

Chief Justice Rehnquist: Thank you, Mr. Casey.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Florida Bar v. Went For It Inc. - Oral Argument

Fri, 09 Jan 2009 14:50:00 +0000

Case:

Florida Bar v. Went For It Inc.

Media File:

94-226_19950111-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Barry Scott Richard

Chief Justice Rehnquist: We'll hear argument next in case number 94-226, Florida Bar v. G. Stewart McHenry.

Mr. Richard.

Mr. Richard: Mr. Chief Justice and may it please the Court:

This case arose out of the adoption by the Florida supreme court of a rule which prohibited attorneys from engaging in direct mail solicitation to victims of accidents or their survivors for a period of 30 days after the accident.

The district court declared that the rule was unconstitutional, and the Eleventh Circuit affirmed.

In an unusual postscript to its opinion, the Eleventh Circuit stated that it was disturbed that it was required by this Court's earlier decision in Bates and its progeny to reach that result.

The concern that was expressed by the Eleventh Circuit reflected similar concerns expressed by at least seven justices in full or partial dissents in Bates and the cases following Bates.

Bates itself was a limited decision by its own characterization.

It held only that a State could not entirely prohibit an attorney from engaging in what the Court later in Ohralik referred to as restrained advertising of the rates for routine legal services and nothing more.

A year later, in Ohralik, this Court stated that the States had a critical interest in maintaining the high standards of professionalism in connection with attorney advertising, and in fact it permitted States to prohibit altogether an attorney from engaging in direct, person-to-person solicitation of any nature.

Unknown Speaker: Does Florida permit lawyers to solicit business in person?

Mr. Richard: No, ma'am, it does not.

In doing so, this Court in Ohralik noted that an attorney's interest in his or her remunerative employment was charged with only marginal First Amendment concerns, and that regulation of that type of advertising falls within the State's proper sphere of economic and professional regulation.

In Ohralik, the Court noted a significant distinction between the restrained advertising that the Court had permitted in Bates and what it referred to in an earlier case of Railroad Trainmen v. West Virginia as ambulance chasing.

The case this Court stated in Ohralik did not involve ambulance chasing.

Ten years later, however, in Zauderer and Shapero, the Court prohibited the States from regulating what in essence amounted to ambulance chasing.

In Zauderer, the Court held that States could not prohibit direct solicitation of clients based upon a particular legal problem, and in Shapero, the Court took another giant step forward when it held that States could not regulate the direct, targeted solicitation of particular individuals who had suffered or were about to suffer a particular legal problem.

Unknown Speaker: How do you distinguish this case from that of Shapero?

It seems pretty close.

Mr. Richard: Justice O'Connor, I believe that this case can be distinguished from Shapero on the basis of the fact that it is a reasonable time, place, or manner restriction.

Unknown Speaker: Well, doesn't a time, place, and manner restriction have to be content-neutral?

Mr. Richard: It does, and we believe that--

Unknown Speaker: How is this content-neutral?

Mr. Richard: --Well, we believe it is content-neutral within the scope of what this Court has interpreted as content-neutral.

What it said in Clark v. Community for Creative Nonviolence, and in Ward v. Rock Against Racism, and in Renton v. Playtime Theatres is that the issue, the principal inquiry in determining content neutrality, and I'm quoting from Ward, is whether the Government's purpose in control... is the controlling consideration.

Government regulation of expressive activity is content-neutral, the Court said, so long as it is justified without reference to the content of the regulated speech.

Unknown Speaker: But doesn't this regulation address only certain types of speech, and it's there with reference to a particular kind of speech?

Mr. Richard: Yes, Justice Connor, it does, but this Court has never--

Unknown Speaker: O'Connor.

Mr. Richard: --has never said that simply because you must make reference to the content in order to determine whether or not it falls within the scope of the regulation, that it therefore violates the content-neutral rule.

Unknown Speaker: Yes, but you justify this regulation by what the communication says.

Mr. Richard: We justify it--

Unknown Speaker: And that was not true in the cases that you've cited.

Mr. Richard: --It justifies... I'm sorry.

Unknown Speaker: Here, you do justify the regulation in terms of the content of the communication.

That's the whole point of the case.

Mr. Richard: Well, Just--

Unknown Speaker: Now, you might... you might still prevail, but it's not content-neutral.

Mr. Richard: --Well, Justice Kennedy, I would suggest that it's justified by the nature of the person to whom the communication is sent, the circumstances of that individual.

In Renton, clearly it's necessary to make reference to the nature of the film to determine whether or not it contains adult situations, which is what the Renton ordinance provided, that you had to... you could prohibit it within certain zoned areas.

You must, therefore, make reference to the content of the film to determine whether or not it's subject to the regulation, but what this Court said was that that wasn't the controlling factor if the purpose of it was not to control the content but rather to control the secondary effects of it.

It said the same thing essentially in Ward, that you have to look at whether or not reference to the content was for the purpose of controlling the content.

Here the content is permitted--

Unknown Speaker: But do you think the effect on the person to whom the message is addressed is a secondary effect within the meaning of Renton?

Mr. Richard: --Well, that... that is, Your Honor, if you're talking about the effect upon that individual.

If you're talking about the--

Unknown Speaker: In Renton, you're not talking about the people who wanted to go to these theaters.

Mr. Richard: --Well, you are--

Unknown Speaker: You're talking about what it did to the neighborhood.

Mr. Richard: --You're talking about the effect upon the community and the surrounding area.

Unknown Speaker: Not the audience or the message.

Whereas here, you're talking about the effect of the message on the people who receive it.

Mr. Richard: What we're suggesting, Your Honor, is that the State has the right to determine that it has a secondary effect upon the legal profession as a whole and, in turn, the administration of justice, and that the ability of the State to make that judgment has been entirely removed by this Court's prior opinions.

Unknown Speaker: What the State is saying, then, is that a certain number of lawyers will chase ambulances if we don't prohibit them, and it's going to make the whole bar look bad if they find out that these people are chasing ambulances, therefore we'll prohibit it.

That sounds like an odd justification.

Mr. Richard: What we're talking about, Justice Rehnquist, is the extent to which we are going to permit the States to make these judgments, as opposed to the extent to which the Federal courts are going to micromanage the question of attorney advertising, and what's happened here is that as a matter of law, essentially this Court has said that the question of whether or not a given type of attorney advertising will have an adverse effect upon the view of the public as to lawyers and the institutions that they serve is beyond the scope of State consideration.

Unknown Speaker: Well, but is it really a terribly legitimate State goal to say, we want to protect not the substance of the reputation of the legal profession but the appearance of the reputation?

Mr. Richard: Well, Your Honor, I believe it is.

The justices of this Court and most judges wear black robes.

We hold these proceedings in a magnificent edifice.

We require lawyers to meet certain dress codes.

Why do we do that?

We do that, I would--

Unknown Speaker: Personal injury lawyers, not probate lawyers.

Potential plaintiffs' lawyers, not potential defendants' lawyers.

How can you say this isn't based on content if it is the potential personal injury plaintiff's lawyer that is being stopped within 30 days but not the probate lawyer, not the insurance adjuster, and not the attorney for the potential defendant?

Mr. Richard: --Well, that's indistinguishable, Justice Ginsburg, I would suggest, from the Renton situation with adult films.

What we're really talking about when you ask that question is whether it's underinclusive, which is not a constitutional issue.

You can make reference to the content if your purpose is not to control the content.

Here, the State of Florida doesn't seek to control the content.

Unknown Speaker: I don't see how, in terms of your justification, the privacy of the person, it makes any difference whether the person who is making the solicitation is an insurance adjuster for the other side, or a potential defendant's lawyer, or a probate lawyer.

If the idea is this person should be let alone, should not get lawyer' letters, then I don't understand even the rationale for saying only certain kinds of lawyers.

Mr. Richard: Well, Justice Ginsburg, that may well be true, and it's an issue that was addressed by this Court in Ohralik, where they mentioned precisely what Your Honor is saying with regard to the possibility of adjusters contacting individuals.

What the Court said in Ohralik, which I think is accurate, implicitly what they said was, that's not a constitutional question.

That can be dealt with and, in fact, is dealt with by courts which view with a very dim eye agreements that are entered into by individuals prior to the time that they've had an opportunity to visit with a lawyer, but that's... that is--

Unknown Speaker: Did Ohralik say only personal injury lawyers can't have face-to-face contact, or was this all lawyers?

Mr. Richard: --That is what the rule says, but this Court has said time and time again... well, it doesn't define the lawyer.

It says that you can't contact a person in order to solicit business for a period of 30 days after a personal injury.

Now, that, of course, wouldn't affect an adjuster, who's not a lawyer.

It wouldn't affect a lawyer for an insurance company who is not seeking to solicit business.

But this Court has said time and time again that the State may deal with these issues on a step-to-step basis as it sees a need for it, and that that's not a constitutional issue, so it may well be that the State ought to go back at some point and look at that question as to whether or not it should be expanded, but the constitutional issue before this Court is whether the State can deal with this as to anyone.

Unknown Speaker: Does the State bar regard this Court's decision in Edenfield v. Fane as a guiding light in this area?

You seem to be making a grand scale attack on everything since Bates, so I would like to know in particular, since that has been an important decision in this line of commercial advertising lawyer solicitation cases, Edenfield v. Fane, do you regard that as a precedent that you have no quarrel with?

Mr. Richard: The Edenfield case was a case of limited application, and we do not have a problem with Edenfield.

We believe... and I'm glad you asked the question, because we believe that the essential problem here was created in Zauderer and in Shapero, and not solely because this... and that goes well beyond the question of whether this is a time, place, or manner restriction.

We believe that the decisions that were made in Zauderer and Shapero were blatantly inconsistent with two other lines of cases that this Court had been deciding simultaneously.

One of them was the cases on commercial solicitation, commercial advertising generally, and the other was what we have referred to in our brief as the institutional speech cases.

What this Court said in Central Hudson v. Public Service Commission and in Board of Trustees v. Fox is that the States are entitled to considerable deference in determining where to draw the line on commercial advertising, and when it begins to be too much to meet the requirements of the First Amendment.

In Board of Trustees v. Fox, in addition to saying that there is no least restrictive means test, the Court said this: it said, we have been loath to second-guess the Government's judgment regarding where to draw the line.

We take into account the difficulty of establishing with precision the point at which restrictions become more extensive than their objective requires, and provide the legislative and executive branches needed leeway in a field, commercial speech, traditionally subject to Government regulation.

Well, at the same time the Court was saying that, it was saying with respect to lawyers... and this is just commercial solicitation, which in Ohralik the Court said was only marginally charged with First Amendment protection.

At the same time it said that, it essentially, in Zauderer and Shapero, gave the courts... gave the States no leeway... no leeway to deal with this.

It basically said, you don't have a substantial enough interest to consider it.

In fact, in Shapero, in part 3 of Shapero, which represented the views of only four justices but nevertheless was part of the opinion of the Court, it said you couldn't even deal with the format of the letter.

You couldn't even deal with the letter that was essentially a used-car type of an advertisement that said to an individual, free legal services, that made subjective predictions of success, that said, call me now.

Now, In Ohralik, this Court said that the State had a substantial interest in avoiding the potential that a lawyer, because of the lawyer's training and experience, could be overbearing with an individual, and yet, in Shapero, in part 3 of Shapero, it essentially said, you can use any type of enticement to get that individual to call you, and then you're basically free.

Unknown Speaker: So suppose that in Florida... I can... suppose there's been a bad accident, and it involves a man or a woman who knows nothing about law, so obviously they're terribly upset, and I can understand why you might want to keep lawyers away from them for 30 days.

But suppose that man or that woman, who's terribly upset and doesn't have much money and knows nothing about law, would like to find a lawyer.

How, in Florida, can they do it?

That is, what well-known ways are there for people who know nothing about law, who have just been in a bad accident, who think they might need a lawyer, who don't have friends who are lawyers, how do they find out where to go?

Mr. Richard: Well, there are numerous ways to do it.

They can, of course, look in the yellow pages, they can call the local bar, they can call friends who are lawyers, but beyond that, we are not suggesting to this Court--

Unknown Speaker: I'm not asking you... I wanted a factual answer.

That is, I'm... what actually do they do?

They could go to the yellow pages, maybe they have a friend who has a lawyer, and you say, call the bar.

What does that involve?

Is there a system so that people who don't know how to get to lawyers can?

Mr. Richard: --Both of--

Unknown Speaker: Is there a lawyer referral service--

--Yes, what is there?

--operative?

Mr. Richard: --Yes, ma'am.

Both at the State level and at the local bar level there are lawyer referral services.

Unknown Speaker: How does it work?

Mr. Richard: You call the bar and they make available to you from a list of lawyers those who have indicated that they handle that type of work.

In addition, Florida recognizes both designation of fields and specialization as certification, so there are a list... lawyers are listed in the yellow pages by designation of a field or by certi... the fact that they've been certified to handle a particular field.

My understanding is that most States now permit lawyers to list in the yellow pages with designations.

Unknown Speaker: Do lawyers advertise on television in Florida?

Mr. Richard: Yes, they do.

Unknown Speaker: Personal injury lawyers?

Mr. Richard: Yes, they do.

Unknown Speaker: And do they advertise on billboards in Florida?

Mr. Richard: I'm not aware of whether or not we have billboard advertising, but this Court's decision in Shapero would not allow the State to control billboard advertising.

In fact, part 3 wouldn't allow the State to control what it looked like.

Unknown Speaker: But should we be con--

--May I ask another question about the Florida practice?

Does the bar routinely either prohibit or encourage letters to accident victims within the first 30 days of the accident?

Mr. Richard: The bar takes no position as to that, because it believes it is not permitted to as a result of this Court's decisions.

Unknown Speaker: Did the bar association... I'm talking about the bar association, not individual lawyers.

Does the bar association affirmatively make an effort to make known to the accident victims that they have this referral service available?

Mr. Richard: Oh, yes, sir, and as a matter of fact it has publications that it attempts to widely distribute, it has public service announcements that it distributes, all of which a bar is entitled to do as a public service in the Florida--

Unknown Speaker: And they mail those to the accident victim within the 30-day period after the accident?

Mr. Richard: --I'm not aware of any practice by the Florida Bar to mail things to any victims.

Unknown Speaker: I'm just wondering if it would be consistent with your position here to say maybe we should prohibit it because they don't want to be... they're... you know, they're emotionally disturbed during that 30-day period.

Mr. Richard: Well, I would like to address that, Justice Stevens.

In the first place, I think that would... personally, I see nothing wrong with a letter that does not seek to get business for a given lawyer advising an individual that they have rights that they may seek a lawyer for, and in that regard, the Florida Bar is not asking this Court to reverse the holding in Bates.

The holding in Bates simply said that restrained advertising of availability and prices of services for routine legal matters are permissible under the First Amendment.

We don't challenge that, but we believe that the Court should return to the States the ability to manage the degree and the manner in which lawyers proceed to do that, rather than--

Unknown Speaker: Within limits.

You're not quarreling with Ibanez.

Mr. Richard: --That's correct.

Ibanez, which--

Unknown Speaker: Indeed, you supported... you came in as a friend of this Court and said the State is not permitted to have that kind of regulation.

Mr. Richard: --Yes, Justice Ginsburg, and we were happy with the opinion that you wrote in the case, and the opinion was a unanimous opinion, and we had no problem with Ibanez whatsoever.

Ibanez went to an extreme by saying that a person could not even... a lawyer, according to the Board of Accountancy, could not even indicate that that lawyer was also a CPA, a simple, truthful statement which had... which reflected nothing with respect to any substantial State interest, and I can't see how that could, either.

Now--

Unknown Speaker: Well, maybe you want to add a word or two.

You're interested very much in all these legal cases, which is right, but I'm interested at the moment in the facts.

That is, on the one hand you're saying what justifies this are lawyers' reputations and the need to give a man or a woman a little... a few days of peace.

On the other hand, they're saying, but how would such a person find a lawyer when they might need one?

Now, so far you've said the yellow pages, which strikes me as not terrific, the... maybe they've seen some ads somewhere, and then there's this thing called the referral service.

But I mean, does the referral service get to people?

Do they know about it?

Is there a way for a human being to find a lawyer when he or she feels he needs one?

Mr. Richard: --Justice Breyer--

Unknown Speaker: One way is they'll write him a letter, and then he'll know somebody's interested.

Mr. Richard: --I'd like to give you several responses to that.

There are those things.

In addition, because we are not asking this Court to overturn Bates, there's no reason why a lawyer who desires to make the public aware of the fact that that lawyer is available and provides services in a given area should not be able to run an ad.

That's not the issue, we believe, in this case.

In addition, we don't believe that it's a proper, constitutional purpose for the Federal courts to micromanage the question you're raising, which is, to what extent should States be able to tell lawyers that they can or cannot engage in these activities?

The one other remark that you made that I would like to respectfully comment on was that the substantial State interest that we were suggesting here was that lawyers be able to protect their reputations, which is what the respondent wishes to suggest is the substantial State interest, and I think that trivializes what we are really suggesting here.

We are not saying that lawyers should be able to protect their reputations, but what we are saying is that we learned several hundred years ago that the manner in which we treat our fundamental institutions, that the dignity which we grant to those institutions, has a great deal to do with the respect the public has in them and their credibility as institutions.

Unknown Speaker: May I follow up on how this works?

Suppose that you do go to the yellow pages and you phone an attorney and you say, I've had a terrible accident, will you please write me a letter about the terms of the employment, and this is all within the first or second day.

Is the lawyer permitted to write the letter?

Mr. Richard: Yes, he is, or she is.

Unknown Speaker: How does... that's... is there some exception to the written communications rule that you quote at page 2?

I mean, I assumed that your answer would be what it is, but I don't get that from reading the regulation at page 2 of your brief.

Mr. Richard: Florida interprets that rule not to prohibit it once a contact has been made with the lawyer and he has a relationship with the potential client.

Florida does not interpret that rule to prohibit a lawyer from responding to a prior request by a client, or a potential client.

Unknown Speaker: What about... suppose a relative of a client writes... tells the attorney please write my nephew?

Mr. Richard: Your Honor, you're asking me questions now that I don't know the answer to.

I don't know whether Florida has addressed that, or the extent to which it has addressed that.

The only concern that I have here is the extent to which the lower court said Florida cannot address it at all.

Unknown Speaker: Well, we have to examine the regulation as it's given to us, and as I read it, at least in the case that I put the lawyer could not write the client, or the proposed client.

Mr. Richard: Florida I can tell you doesn't interpret it that way, but the question of that interpretation was never an issue in this case, and--

Unknown Speaker: Mr. Richard... I'm sorry.

I didn't mean to interrupt you.

Please finish your answer to Justice Kennedy.

Mr. Richard: --I was just going to point out that there's a significant distinction between what Your Honor is suggesting and a mass mailing of innumerable letters to an individual who has just been involved in an accident or a personal tragedy at any point and who has not sought any lawyer, and finds a virtual feeding frenzy taking place as to who that individual is going to select as a lawyer, or whether that individual is going to select anybody, and the issue here which this Court has recognized is that there is a substantial State interest in protecting the professional standards of the bar, and the question is what does that mean, and I would suggest--

Unknown Speaker: I thought your... I thought your primary justification was protecting those who were in shock and grief.

Mr. Richard: --Well, we--

Unknown Speaker: And you said, we don't want to trivialize this case by saying we're simply trying to protect the image of the bar.

Mr. Richard: --We see--

Unknown Speaker: I took it from that that your primary justification is the sensibilities of the people to whom the letters would be addressed.

Mr. Richard: --Justice Souter, we have advanced two separate substantial interests.

One of them is the protection of the... or the enhancement of the professional standards of the legal profession, and the second is not so much to protect individuals, but that the State has a substantial interest in maintaining a community standard of privacy and tranquility, the same thing--

Unknown Speaker: Well, if that is the... to the extent that that is the justification, may I take you back to the underinclusiveness point, because the issue that is raised by that is the extent to which the regulation in question really does have any substantial effect in accomplishing your object, and when it is as underinclusive as this is... insurance adjusters can get in touch with them, potential defendants can get in touch with them, probate lawyers can get in touch with them, and so on... isn't that a rather heavy mark against your justification, to be as underinclusive as that?

Mr. Richard: --Well, the Florida supreme court, and the Florida Bar prior to that, perceived a particular problem.

The problem that the bar perceived and that the supreme court perceived was that attorneys were obtaining mass listings from the Department of Motor Vehicles of individuals who had been injured, and sending mass--

Unknown Speaker: Well, I have no doubt of that.

I mean, I will assume that, but there's still the problem of underinclusiveness, because the same people can be victimized by insurance companies and by defendants and by other kinds of lawyers, and how do you deal with the underinclusiveness problem?

Mr. Richard: --Well, this Court has said in a number of cases that underinclusiveness is not itself unconstitutional.

Unknown Speaker: No, but it goes very much to the question of the degree to which your regulation advances the interest that you claim.

Mr. Richard: I think that's correct.

Unknown Speaker: I suppose one reason for the underinclusiveness, if it be that, is that the Florida bar can't regulate insurance adjusters.

Mr. Richard: Well, that is an answer, Your Honor, and that's correct.

It cannot regulate insurance--

Unknown Speaker: No, but it can regulate defense lawyers and probate lawyers.

Mr. Richard: --It can regulate defense lawyers, but Florida apparently has not perceived a problem with defense lawyers inundating an individual who's been... who has been injured.

Unknown Speaker: There can only be one defense lawyer at a time, I suppose.

That's right.

There wouldn't be a flood of them in any one case.

[Laughter]

But it seemed to me it might be equally offensive to the plaintiff.

Mr. Richard: You know, Your Honor, the lower court here didn't strike--

Unknown Speaker: What is the evidence that there's these mass mailings?

Is that really the fact?

I can understand there'd be a lot of them, but what do you mean by mass mailing?

What does a typical injured plaintiff get in the mail, according to their--

Mr. Richard: --That's not in the record, Your Honor, and I don't know the answer to that question.

Unknown Speaker: --Mr. Richard, for purposes of judging this case, do we have to simply... do we not, in fact, simply assume that what is being used here is State power, and therefore it... as a practical matter it's the State rather than a bar association as such which is being judged by First Amendment standards?

Is that a correct assumption?

Mr. Richard: That is correct, Your Honor.

It's the Florida supreme court that adopts this rule.

Through the Florida bar as an arm of the court, the court requests the bar to propose rules to it, but it is the Florida supreme court, after public debate, at which, by the way, the Florida supreme court hears from the public at large... it's not limited... the court will adopt the rule as it sees fit, and will modify the rule that's been proposed.

Unknown Speaker: And one of those justices made the point that several of the questions you've received are trying to get at... Justice Shaw.

How do you answer his concern that this ban will effectively deprive many accident victims of information that would be helpful to them at the most crucial time for them, that that 30-day period may be the most crucial time when they need help most?

Mr. Richard: We think here are numerous ways in which the Florida bar and the Florida supreme court through the bar can remedy that problem, which is essentially a problem of the social question of how we make people aware of the accessibility of legal services.

We do not believe it's necessary to remedy that problem by the Federal courts, and in particular this Court, decreeing that it is beyond the power of the State to consider the strictly commercial implications of certain types of attorney advertising.

Because what's happened here is, it has been raised to a constitutional level, and what has been imposed upon the States in reality is a least restrictive means test and what appears to be pretty close to a clear-and-convincing-evidence test, something that hasn't been done in any of the other commercial fields, and something in fact that hasn't been done in fields involving political and ideological speech when it comes to issues of protecting public privacy and public tranquility and issues involving matters that may affect the mission of other fundamental public institutions in which this Court has said considerable deference must be granted to the States to make this decision.

Instead, when it comes to attorney advertising, the Court has interjected itself and Federal courts have interjected themselves to the point of saying, we will manage this issue, and we will allow the States whatever the other problems may be that the States ought to be able to address.

The real question here is, shouldn't the States be able to address whether or not an attorney, by the manner in which he is approaching individuals with whom he has no prior relationship, by the manner in which he is presenting himself and, in turn, the legal profession, and perhaps in turn the administration of justice, shouldn't the State be able to consider whether or not that has an unduly adverse effect upon not only that individual, not only a community standard of propriety in terms of privacy and tranquility, but upon the entire--

Unknown Speaker: Thank you, Mr. Richard.

Your time has expired.

Mr. Richard: --Thank you, Mr. Chief Justice.

Unknown Speaker: Mr. Rogow.

Argument of Bruce S. Rogow

Mr. Rogow: Mr. Chief Justice, and may it please the Court:

The fundamental premise of the commercial speech cases is that truthful, nonmisleading information is of great benefit to the listener, and that's what this case is about.

The letters at issue in this case are highly regulated by the Florida Bar.

At page 12-A of the appendix to our brief, we set forth the extensive regulations about these letters... what they must contain, what they must say, the fact that the envelope and each page must be stamped "Advertisement".

These are the least intrusive, the most discreet forms of communication, and the question is whether or not that mode of communication can be precluded by the Florida Bar for a period of 30 days during the time, as then Chief Justice Shaw of the Florida supreme court said, during the time when a person is most in need of the information.

And yes, the question of underinclusiveness, as Mr. Richard I think has now conceded, goes to whether or not this regulation directly and materially advances substantial State interests, and if one of those State interests is this theoretical privacy right, then how is that State interest directly and materially advanced by a rule which precludes the lawyer from sending a letter informing a person of his or her rights but allows the insurance adjuster or the defense lawyer to communicate with that person any time.

Unknown Speaker: Well, certainly some of our cases, Mr. Rogow, in the commercial speech area have said that the Government can confront evils one step at a time.

It doesn't have to regulate the whole waterfront before it addresses a single evil that it perceives.

Mr. Rogow: It is true, Mr. Chief Justice, but there are several problems with this.

One, the evil, if, indeed, it is an evil to hear truthful, nonmisleading information, and we don't subscribe to the notion that that's evil or injurious in any way, but that evil, if it's going to be directly and materially stopped, if a State regulation is going to accomplish that, has to be even-handed.

It has to be fair.

Unknown Speaker: Why can't they say--

--Of course, at the time the First Amendment was adopted, all advertising by lawyers could have been restricted.

I mean, this is a... the change was effected by our decision in Bates.

I don't know that the change has to go so far as to say that you cannot in any respect treat lawyers differently.

Mr. Rogow: Justice Scalia, the change--

Unknown Speaker: That's been a long tradition.

Mr. Rogow: --It has, and lawyers are treated differently.

Indeed... indeed, the regulations that the Florida Bar imposes are different.

Unknown Speaker: So at least insurance adjusters are irrelevant.

Mr. Rogow: No, I don't think they're irrelevant when the purpose stated by the bar, Justice Scalia, is to protect the privacy of people at moments when they've had an accident.

Unknown Speaker: That's one purpose.

The other purpose is the decorum that's appropriate to the instrumentalities of justice.

Mr. Rogow: The State has made this argument, which basically is an image and dignity argument.

There is absolutely nothing in this record that supports the notion that truthful, nonmisleading letters sent to people, highly regulated letters, have any impact upon the administration of justice.

That's a hollow argument.

It's a shallow argument that's been made.

The lesson from Virginia Board of Pharmacy and Central Hudson is that commercial speech is of value, and if it is of value, then it must have protection.

All I hear... I hear no rule suggested by the bar.

I hear this kind of vague leave it to the States, but--

Unknown Speaker: Well, Mr. Rogow, supposing the bar were to conclude, and the Florida supreme court should agree, that this kind of solicitation gives an impression to people who receive it that lawyers are extremely greedy, and very anxious to make a lot of money.

Do you think the State or the bar has any... consistent with the First Amendment could somehow try to prevent that image from prevailing?

Mr. Rogow: --I do not think it could try to prevent that image by trying to preclude truthful, nonmisleading speech.

There are ways to try to preclude it.

President Bushnell of the ABA in this month's ABA Journal, in his president's letter, says we should address the good things that we do.

That is the high road.

The high road is to let the public know, as the bar in Florida and other States have done, that lawyers serve important purposes righting wrongs, redressing grievances, not to--

Unknown Speaker: Well, what if the Florida State Bar tries that and it just doesn't work.

People still think lawyers are greedy.

[Laughter]

Mr. Rogow: --We have fought an image issue for a long time, Mr. Chief Justice.

It's not going to be remedied simply by precluding these letters, certainly not under the constitutional standards that have been set by this Court.

Unknown Speaker: We should probably pass a statute saying you can't say un-nice things about lawyers.

[Laughter]

And not read Dickens or Shakespeare.

[Laughter]

I wondered if that was them.

And not admit greedy people to practice law.

Mr. Rogow: I'm sorry, Mr. Justice Souter?

Unknown Speaker: Not admit greedy people to practice law.

Mr. Rogow: Justice Breyer--

Unknown Speaker: I'm certainly glad I never passed through the stage of being a lawyer before--

[Laughter]

It might have helped you, actually.

[Laughter]

The... what I wondered was this.

It seemed to me they're... a) I don't know if they're arguing this as their strongest justification, but it did make an impression upon me that a man or a woman who has just suffered a serious accident, maybe has lost a husband or a wife, is not a model of a rational consumer, and so what they're saying is, protect that person for 30 days both from harassment and so that when a choice of lawyer is made it's more rational.

You can tell them during that 30 days who's available.

You can refer them to the referral service.

You could keep big lists of people.

You could keep all the advertising material in one place and tell them, go there, but for 30 days, leave them alone so that they have a chance to make this decision more rationally.

Now, that I took it, at least to me, was a fairly powerful justification.

Now, what's wrong with it?

Mr. Rogow: --Well, Justice Breyer, grief is not the gravamen of this rule and, indeed, there are two other portions of the rule that address that.

One precludes harassment, and the other says that if a person... if a lawyer knows or should know that a person is not able to make a principled decision, then that person should not be contacted.

But remember, this rule applies to all accidents, not just the grief-stricken situation, and I think that people who are in grief need some information, too.

The suggestion that a letter, which can be discarded, and this Court has said that in both Bolger Drugs and in Shapero, the suggestion that a letter which can be discarded somehow intrudes upon that grief I think stretches the notion of this mode of communication.

Unknown Speaker: Yes, but your opponent says it's not one letter, it's a flood of letters, and as I understand it you said there's nothing in the record, and I haven't read this, but they do refer to a study that the bar made that indicated that this was regarded as a problem of some magnitude.

Mr. Rogow: The study that the bar made was made of 200 people in 1987 who apparently received direct mail letters, and something like 11 percent, or 21, said that they were offended by receiving the direct mail letters.

Now, that is not the kind of burden of proof that the bar would have to carry under Ibanez or any of the First Amendment cases dealing with this.

But even if some people are offended... and I'm sensitive to the good manners of respecting grief.

Even if they are--

Unknown Speaker: Well, do you think your client is sensitive to such matters?

Perhaps you are, Mr. Rogow, but this... now, who is it you're presently representing?

It's not a lawyer, it's some entity, as I understand--

Mr. Rogow: --It is a lawyer, Justice O'Connor.

John Blakely is a lawyer who sends direct mail advertising, and he is a plaintiff in the case along with Went For It, Inc., which is a referral service.

Unknown Speaker: --Went For It, Inc., and do you represent Went For It, Inc.?

Mr. Rogow: I do, and--

Unknown Speaker: And would you describe for us just what it is that Went For It, Inc. does in Florida to contact accident victims?

Does it study police reports and get information about any incidents and then identify the people and write letters?

Mr. Rogow: --It does not, Justice O'Connor, because as a referral agency, all it can do is identify people who may be in need of this information and then a lawyer can obtain that information from the referral service, but the referral service is bound by the same rules as the lawyer is, and that's why Went For It, Inc. is a plaintiff also in the case.

Unknown Speaker: Yes, but I... it gets information about accidents and then--

Mr. Rogow: Shares them with lawyers.

Unknown Speaker: --shares that with lawyers who send letters to these victims.

Mr. Rogow: Yes, Justice O'Connor, letters that are highly regulated by the bar that must include a statement of the lawyer's qualifications that are at the same moment--

Unknown Speaker: And what does it do?

It looks at police reports or something?

Mr. Rogow: --Police reports, accident reports, which are matters of public record.

Unknown Speaker: And presumably it also runs ads, does it?

Mr. Rogow: It does not.

It does not, no.

Unknown Speaker: Do the lawyers run some ads, do you--

Mr. Rogow: Well, some lawyers may run advertisements of different sorts, but whether or not they run an advertisement of their availability is different from running an advertisement saying, I am in the referral business.

Unknown Speaker: --The service Went For It provides is finding names of victims and furnishing them to lawyers who pay them for that information--

Mr. Rogow: Yes, Justice O'Connor.

Unknown Speaker: --is that it?

Mr. Rogow: Yes.

The commercial speech cases that we rely upon, Bates--

Unknown Speaker: Mr. Rogow, maybe you could just go back and amplify your statement that these letters are highly regulated.

Now, there isn't a form letter that the bar association gives out.

Mr. Rogow: --Well, actually, there is, Justice Ginsburg, although it's not in this record.

The bar has recently promulgated a handbook for lawyer advertising which contains forms of suggested different kinds of communications that would meet bar standards, but no, the regulation that is before the Court sets out 15 or 16, and they were summarized by the court of appeals, regulations upon the letters.

Unknown Speaker: Could... does the bar, or could it, consistent with the First Amendment, require pre-screening of letters, solicitation letters that are going to be sent out within the first 30 days, or ever?

Mr. Rogow: I don't think the bar could... could require pre-screening, and one of the problems is, is that this delay in the access to information is inconsistent with the notion that it is important for people to have information quickly, and I think that the bar agrees, and has stated in its brief, that it is important to communicate to people the availability of legal services.

But there is no pre-screening, but there is a contemporary submission.

Unknown Speaker: Not letter-by-letter, but the attorney's own form letter.

Mr. Rogow: I... perhaps the bar could request these letters and look at them.

There is a contemporary filing of each letter with the Florida Bar Advertising Commission, I think it is, so a lawyer is obligated to also send a copy of the letter after it's been out, and so the bar would have an opportunity to review these letters, but it would not be prior to the submission of these letters, to the depositing of them in the mailbox.

We rely upon the commercial speech cases which form the underpinnings of the decision below and have been consistent.

There is no reason to retreat, and the bar has really offered no principled reason to retreat from the line of cases, beginning with Virginia Board of Pharmacy, running through Central Hudson, Bates, Zauderer, RMJ, which are on the foundation that I have said, that truthful, nonmisleading information conveyed in a mode, and the mode the Court described in Shapero, the most unobtrusive mode of communication, conveyed in a mode which the bar has now even taken a step beyond and regulated and required that they be stamped with "Advertisement", that these are threatening to any substantial State interest.

Basically, the bar's argument is, is that that line of cases from Central Hudson through Ibanez should be discarded, or at least discarded as to lawyers, and that Bates, RMJ, and Zauderer were wrongly decided, and that really is the essence of what the bar is saying, and its other suggestions... the measure of an argument oftentimes is how far one must stretch to make it, and when the bar likens these lawyers' letters to sound trucks and residential picketers, trying to draw strength from residential privacy, from those kinds of analogies, I think that demonstrates how far the bar must reach to try to get around what the established jurisprudence is.

And when the bar says lawyers are like prisoners and military personnel and schoolchildren and the institutional speech cases should somehow or other be applied to lawyers, I think that, too, demonstrates how difficult the bar's case is, but it is--

Unknown Speaker: What do you refer to as the institutional speech cases, Mr. Rogow?

Mr. Rogow: --Pardon me, Mr. Chief Justice?

Unknown Speaker: You referred to the institutional speech cases.

What cases are those?

I'm not sure I know exactly what you mean.

Mr. Rogow: Kuhlmeier, Hazelwood v. School District, whether or not schoolchildren can publish things, Goldman, the yarmulke case in the military, situations in which there is custody and control in employment and property interests at stake of the Government.

I think those analogies just reach too far.

The bottom line in this case is whether truthful, nonmisleading, carefully tailored information regulated by the bar harms any substantial State interest.

The answer--

Unknown Speaker: Do you think there's room for any more regulation under the commercial speech doctrine for people who are licensed by the State to carry out their duties?

It isn't as though a lawyer is a totally free agent.

The lawyer, presumably in Florida as in most States, must be licensed by the State, and the State thereby gains more control over that person than over somebody who goes into the business of selling shoes, for example.

Mr. Rogow: --It is true, Justice O'Connor, and they are more highly regulated, and yet that regulation must be delicate, because the lawyer's work informing people of their rights, remedying wrongs, redressing grievances, may be more important than selling shoes, and so it needs to be able to be communicated if it's truthful and nonmisleading, and that's exactly what this case is about.

There is no issue in this case about anything being untruthful or anything being misleading.

This information is important.

It needs to be protected.

The court of appeals decision should be affirmed.

Chief Justice Rehnquist: Thank you, Mr. Richard.

The case is submitted.

Unknown Speaker: The honorable court is now adjourned until Tuesday next at ten o'clock.

Attribution:

The OYEZ Project

Featured:

Ibanez v. Florida Department Of Business And Professional Regulation, Board Of Accountancy - Oral Argument

Fri, 09 Jan 2009 14:49:52 +0000

Case:

Ibanez v. Florida Department Of Business And Professional Regulation, Board Of Accountancy

Media File:

93-639_19940419-argument.mp3

Related Transcript:

1993_93_639_argument.xml

Transcript:

Argument of Silvia S. Ibanez

Chief Justice Rehnquist: We'll hear argument now in 93-639, Silvia S. Ibanez v. the Florida Department of Professional Regulation.

Ms. Ibanez.

Mr. Ibanez: Mr. Chief Justice, and may it please the Court:

This case presents an important commercial speech issue.

Specifically, whether the Board of Accounting censure of Petitioner's truthful communications in attorney advertising violate her First Amendment rights.

The truthful speech in question consists of the CPA and the CFP credentials, which communicate licensure status.

Petitioner is indeed a CPA, licensed in good standing by the State of Florida.

Petitioner is indeed a CFP licensee in good standing.

The Board has acknowledged and agreed in accepting these findings of facts.

The Board says, no, that these truthful communications are somehow not... are somehow misleading.

In doing so, it charges Petitioner with a deceptive advertising statute and regulations.

It does so by using a contrived rationale.

It uses a complex hypothetical, an irrelevant argument, that attempts to transform what is truthful speech into violative conduct.

The record is devoid of anyone having been misled.

The record is absolutely devoid of any violative conduct.

The record does disclose that no one has been misled as to Petitioner's truthful speech contained within her attorney advertising.

Thus, the Board is punishing Petitioner for truthful speech.

There are no charges as to conduct.

And the BOA's, the Board of Accounting's, censure of Petitioner's truthful speech provides no latitude.

It constitutes a ban.

Unknown Speaker: Ms. Ibanez, may I inquire of you?

You... do you acknowledge that you engage in public accounting on occasion?

Mr. Ibanez: Your Honor, the record is clear, the Petitioner has maintained that she does not practice public accounting; she practices law.

She does this by choice, because she is authorized to practice public accounting.

The Board, however--

Unknown Speaker: If you did practice public accounting, do you recognize that you have to abide by the regulations of the Board of Public Accounting?

Mr. Ibanez: --Your Honor, I believe that anyone who practices public accounting or doesn't practice public accounting is subject to Chapter 473.

Yes, Your Honor.

Unknown Speaker: And did you take a different position earlier in the litigation?

Mr. Ibanez: No, Your Honor.

I believe that the entire record of the rule challenge proceedings clearly states that Petitioner understands that Chapter 473 has two different layers of regulation.

The first layer covers all CPA's good moral conduct, continuing education requirements and so forth and so on.

There is a second layer of regulation that, by the express provisions of Chapter 473 and some other rules, are conditioned on the practice of public accounting.

Unknown Speaker: Reading the briefs, I got the impression that the position you've taken has shifted somewhat during the course of the proceedings.

Mr. Ibanez: Your Honor, I believe the record is clear that in the rule challenge proceedings, a lot of hypothetical questions were posed... that was not the disciplinary proceeding... and the questions, I believe, and the answers are consistent.

The record--

Unknown Speaker: And does the Board take the position that your law firm somehow has to be licensed or authorized as... by the Board of Accounting for accountancy?

Mr. Ibanez: --Your Honor, it appeared that initially the Board thought so.

It included a charge in the amended complaint.

But even after hearing Petitioner's opinions in the rule challenge proceeding, it decided to withdraw that charge just a few mere days before the disciplinary hearing.

The record is clear.

So, there has been no--

Unknown Speaker: And while I have you interrupted, the CFP designation after your name in the advertisement, how is somebody reading that ad supposed to verify what that means and whether you're a member in good standing of whatever that organization is?

Mr. Ibanez: --Your Honor, the record is clear, at the disciplinary transcript found at the joint appendix, that the public is very well aware and informed about the CFP credentialing... considers it quite valuable.

Mr. Robert Goss, the expert witness, spoke about the hundreds of calls that they get about referrals from the CFP organization.

It is a national, bona fide organization.

There are strict requirements as to a comprehensive examination to be--

Unknown Speaker: But does... your advertisement at least doesn't make any explanation about what that is or who has issued the certificate, I take it?

Mr. Ibanez: --Your Honor, the CPA and CFP within the context of attorney advertisement, and in the case of a multiple-licensed professional such as Petitioner is, clearly could disclose some disclaimers in connection to the--

Unknown Speaker: Excuse me.

The question I asked was whether your advertisement, the one at issue here, had any explanation about the CFP designation?

Mr. Ibanez: --No, Your Honor.

Unknown Speaker: Thank you.

Well, could... could the State require some explanation of the certified financial planner designation?

Mr. Ibanez: I believe that the State could certainly require, as to the CPA, some disclaimer.

And that disclaimer is the threshold issue.

And that disclaimer would cover the CFP issue.

The CFP issue would come later.

Because this is in the context of attorney advertising, Your Honor.

Unknown Speaker: I'm not sure that I understood your answer.

I think it was a concise answer.

But you're saying that the State could require this of an... of an accountant, but not of an attorney?

Mr. Ibanez: Your Honor, I believe in the context of attorney advertisement the CPA credential, which is the credential regulated by the Board, certainly the Board regulate for some disclaimer language.

It has not done so here.

Unknown Speaker: In other words, your position then, is that a State may require some sort of disclaimer or explanation of the use of the term C... certified financial planner, CFP, either when that is used by someone in conjunction with advertising their services as an attorney, or in advertising their services as an accountant?

Mr. Ibanez: Yes, Your Honor, with the following qualification if I may, because it's the CPA credential that's the threshold issue.

If there was a disclaimer or additional information required of a CPA licensee within attorney advertising that would say, for example, not engaged in public accounting, or a positive disclaimer that says, attorney engaged in the practice of law, then that disclaimer would serve as to all other multiple credentials, whether Petitioner includes two, three or four credentials that are all, on its face, truthful communications, rather than require Petitioner to add disclaimers to every credential.

I believe that would only confuse the public.

Unknown Speaker: Of course, I don't understand why there's concern about lack of information as to what the letters mean.

After all, physicians use M.D. There are a lot of people that don't know what that means.

And I... I don't recall anybody ever requiring an explanation of M.D.--

And now we're developing the practice among lawyers of using E-S-Q, Esquire.

Mr. Ibanez: Yes, Your Honor.

Unknown Speaker: May I ask... you said there are two levels of regulation by the Accountancy Board, and you comply with one about your general qualifications.

And I gather you do not comply with the different level?

Mr. Ibanez: Your Honor, Petitioner has not been charged as to whether she complies or doesn't comply regarding the allegation of unlicensed firm status; only when she is confronted directly, and not indirectly, can she be afforded her due process rights.

And then there can be a conclusion, and not a summary conclusion, about whether she has violated this provision or not.

Unknown Speaker: What... just help me out a little bit... what is the nature of the reg... the second layer of regulation?

What are we talking about anyway?

What do they require that arguably you may or may not do?

I'm not asking you to plead guilty, but what is it that we're talking about here?

Mr. Ibanez: Your Honor, as I understand the Board's position, Chapter 473, in various of its statutes and in some of its regulations thereunder, actually counts the regulations and the statutes with the phrase

"only if engaged in the practice of public accounting. "

So, apparently there is some concern from the State that in some areas this would apply to only CPA's in public accounting and not to other CPA's engaged in the practice of law or banking or other professions.

Unknown Speaker: But I still don't understand what this second layer of regulation regulates.

What does it make you do or forbid you from doing?

I mean, what... how could you possibly violate that?

I don't even understand that.

Mr. Ibanez: Well, I could possibly think of one example in the area of contingency fees, for example.

There is a provision that says CPA's may not accept in the form of remuneration contingency fees.

That is a regulation of conduct.

Certainly the Board can regulate conduct.

Unknown Speaker: I see.

Mr. Ibanez: It has an ample regulatory arsenal to regulate conduct.

It has--

Unknown Speaker: But that would be contingency fees for performing accounting services?

Mr. Ibanez: --Yes, Your Honor.

Unknown Speaker: I see.

And you're saying if you took a contingency fee for handling a lawsuit, that should not violate that provision?

Mr. Ibanez: Yes, Your Honor.

And that is not part of the record.

These are hypothetical musings of the Board.

Unknown Speaker: Were you ever told... was Petitioner ever told expressly what she must do to bring herself into compliance with the regulation that she was censured for violating?

Mr. Ibanez: No, Your Honor.

The record is clear that she was never even given the opportunity.

The Board uses the phrase, "refuse"...

"she refuses to comply, she refuses to comply. "

There is nothing in the record to show that she's ever been offered... first of all, she was never charged... and then she was never offered to then comply because of the charge.

Unknown Speaker: Is--

Mr. Ibanez: She could not have refused if she was not offered.

Unknown Speaker: --In... in your view, does the State have a valid interest in... in prohibiting the... the... the formation of an accounting firm which includes non-accountants... or non-CPA's, I should say?

Mr. Ibanez: I believe there are some provisions under Chapter 473.

Unknown Speaker: Well, I know there's a provision, but do you... do you agree that it is a valid provision?

Mr. Ibanez: Yes, Your Honor.

I have... I have no problems with any of the regulations of the Board of Accounting.

Unknown Speaker: Including the regulation that requires separate firm registration?

Mr. Ibanez: Yes, Your Honor.

All those regulate conduct.

And I believe those are perfectly permissible.

Unknown Speaker: Okay.

Do you happen to know whether in Florida CPA's can list... who are practicing CPA's... they're accountants... can they list the fact that they're lawyers?

Mr. Ibanez: Excuse me.

If I understand the question--

Unknown Speaker: Could a CPA with... perhaps I should ask your opponent this rather than you... but could a CPA, without violating the regulations, who is a practicing CPA, does tax work and audits and all that sort of stuff... could such a CPA put on his or her business card, also a member of the Florida Bar?

Mr. Ibanez: --I am not quite sure what the answer would be to that question.

I believe that Professor John Sullivan, in the rule challenge proceedings, indicated that CPA's in accounting practices may certainly add J.D. or Esquire, along with CPA.

So, when the shoe is on the other foot, it is all right.

Unknown Speaker: Well, from a constitutional standpoint, what's your answer to that question?

Mr. Ibanez: I believe it is constitutionally permitted.

Unknown Speaker: In other words, there is a constitutional right for an accountant to say that... who is practicing as an accounting... to list on their letterhead or in their professional announcement the fact that they are an attorney?

Mr. Ibanez: Yes, Your Honor, I think that this Court's commercial speech cases in the area of attorney advertising clearly articulate the doctrine of truthful speech, on its face, passive speech, non-coercive, relevant to the listener... because the public interest is very well served by providing them more information, not less.

Unknown Speaker: One other question.

Since you indicate... I think this was your position... that a disclaimer or an explanation of CFP might be required, should this case be remanded?

Mr. Ibanez: No, Your Honor.

I believe the Board's position in its order is clear... they use the advertising rule, subsection (i), which is an absolute prohibition on the use of the word "certified".

Subsection (i) does not give leeway for adding disclaimers.

In addition, this case represents a separate discipline.

So, even though the case of Peel v. Illinois Regulatory Commission certainly applies to this case and provides protection... constitutional protection to the speech in this case, it certainly goes beyond.

We're in an era where many individuals and professionals seek higher education, seek to better themselves for their own reasons, but mostly so that they can offer additional competence to the public.

It--

Unknown Speaker: Ms. Ibanez, do I understand your answer to Justice Kennedy to say that you... you were laced with a total prohibition, and there might not be any controversy if the Board came back with something specific... you might agree with it and there might not be any controversy?

Is that--

Mr. Ibanez: --Yes, Your Honor.

If I may clarify.

Because there are multiple licenses here, whether there were two or three, if the threshold issue is, can the State regulate an ad or restrict the CPA credential by adding more information and more... and a disclaimer, certainly that is always a possibility and consistent with this Court's decisions.

However, to the extent that there are additional licenses, to what point does... at what point does it begin to chill the speech?

If there are two credentials or three credentials, is the professional then supposed to add a disclaimer to each credential, or just the threshold credential that the Board of Accountancy was trying to clarify?

Unknown Speaker: --But that remains hypothetical at this point, because we don't have any specifics of what a clarification might be.

Mr. Ibanez: Yes, Your Honor, right now it is hypothetical.

The Board could have chosen that route to add more information to the CPA credential.

It certainly could have regulated a disclaimer or an asterisk regarding CPA.

It has not done so.

But it may certainly do so.

And that is a more reasonable form of regulation than totally inhibiting and suppressing truthful speech that deserves constitutional protection.

The Petitioner's speech is truthful.

No one has been misled.

It is non-coercive.

It communicates valuable information.

The truthful speech deserves constitutional protection, not so much to protect Petitioner, but to protect listeners.

This Court has said time and time again, it is the listeners' rights that we are protecting here, not so much the speakers.

The public interest is well served by providing disclosure of relevant information, to help potential legal clients.

And certainly this is the context presented before the Court... attorney information in attorney advertisement.

So, it is definitely directed to potential legal clients.

Certainly, it is relevant to their decision-making process in helping them choose a lawyer.

The Federal Trade Commission has a staff report that we have cited in our brief regarding the additional information disclosures that should be encouraged and not censured when an attorney attempts to help in this decision-making process that only benefits the marketplace of ideas.

The Central Hudson test, which is a balancing test well known and applied by this Court in the attorney advertising cases, requires a balancing test.

When the speech is truthful, as it is here, and deserves constitutional protection, then the State has a heavy burden.

The State must have a constitutionally adequate reason to suppress Petitioner's commercial speech.

The State, in this case the Board of Accounting, has not met its burden.

As recent as in the 1993 decision of Edenfield v. Fane, this Court has reiterated that the burden of providing substantial government interest in suppressing Petitioner's truthful speech must directly advance the government's goal... in this case, the Board of Accounting's interest.

In this case, there is no substantial government interest.

Unknown Speaker: Well, I... I think when you come to the use of cert... CFP, which stands, I guess, for certified financial planner--

Mr. Ibanez: Yes, Your Honor.

Unknown Speaker: --I would think that at the very least you would have to acknowledge there is a potential there that the public will be misled into thinking that somehow the State has certified you as a certified financial planner.

And, in fact, this is a certificate issued by some private organization, as I understand it.

And so, I would think there would be that much of a concern there at the State level that might justify either an outright ban or some kind of a disclaimer.

Mr. Ibanez: Yes, Your Honor.

But the substantial government interest, I believe, answers the question as to which credential should this additional disclaimer or information be provided to.

Certainly, the Board does not own the word "certified".

So, whether... whether it's certified pilot, certified financial planner, certified engineer, it certainly cannot be the word "certified" that does it.

So, the interest as to disclaimer and more information, I believe, is to the threshold question of, can the Board of Accounting... could it have regulated in a more reasonable way?

Is there a more reasonable fit?

And, yes, a disclaimer to the CPA credential.

And that would have cured any possibility of potentially misleading effect regarding any of the other credentials.

Unknown Speaker: How could that... how could that be?

What disclaimer attached to the CPA would make it clear that the CFP is not a State credential?

Mr. Ibanez: Justice Scalia, very simply, if there is an asterisk to a CPA credential, not engaged in public accounting--

Unknown Speaker: Yes.

Mr. Ibanez: --That would cure all misleading effects.

Because the advertising rule says at subsection (2), this only applies to public accounting advertising.

And this is attorney advertising.

So, that disclaimer would cure not only as to the CFP credential, but as to any other credential.

Unknown Speaker: Well, it would... it would prevent you from misleading any people looking for accountants.

It would not prevent you from misleading people looking for lawyers.

But you're saying that's none of the Board's business, I suppose?

Mr. Ibanez: Your Honor, anyone looking for lawyers has found a lawyer under the attorney advertising and has found a lawyer that complies--

[Laughter]

Unknown Speaker: But... but the person looking for the lawyer sees CFP> ["] next to CPA> ["] and knows that CPA is a State-conferred certificate and assumes that CFP is a State-conferred... and you say, that's okay because people looking for lawyers deserve what they get... is that it?

[Laughter]

Mr. Ibanez: Your Honor, I... I will agree with... with Your Honor, but what I would like to say is, if the Florida Bar, who is also the State, regulates attorney advertising... and I believe we all agree on that... and they have already indicated that the credential from a recognized institution is all right with them, then obviously the attorney who uses CFP in the Bar's... in advertising rules, in compliance with the Bar's rules, is perfectly in compliance.

And they do not require a disclaimer.

Unknown Speaker: What you're saying is that... that people who are being misled are people in the market for lawyers, not people in the market for accountants... if there is any misleading?

Mr. Ibanez: Yes, Your Honor.

Which we do not believe they are misled.

Unknown Speaker: And the Florida Bar takes the position that you're not misleading anybody?

Mr. Ibanez: Correct, Your Honor.

Unknown Speaker: The Petitioner would not be before this Court if she were attorney-at-law and CFP and not CPA?

Mr. Ibanez: Correct, Your Honor.

There must be a reasonable fit between the goals of the legislature and the means chosen.

And what were the goals of the legislature?

The legislators... legislature spoke clearly.

At section 473.322 of Florida's statutes it says, a CPA who holds an active license may append credentials after his or her name to designate status, connote status.

This is speech.

This is passive, truthful speech.

It's not conduct.

I urge the Court not to travel this winding, complex road with twists and turns that the Board of Accountancy has put before the Court regarding hypothetical conduct that it has not even charged Petitioner with.

Unknown Speaker: May I ask you one other factual question about this winding road?

I'm still somewhat un... I don't really thoroughly understand the second layer of regulation referred to earlier.

Is there a procedure in the Florida regulation of accountants whereby they not only regulate the individual... you have a license as a CPA, as I understand it... but if you did want to practice accounting, would you have to get a separate license to have your firm also licensed?

Mr. Ibanez: Your Honor, in the rules which are in the rule challenge portion of the proceedings in the exhibits at R. 377 to 700, you will find rule 21A-20.006, Florida Administrative Code, that says a CPA may practice as a sole proprietor.

So, if a CPA-attorney, such as Petitioner, or others--

Unknown Speaker: Well, that's not my question.

My question is, supposing you got another person who is also an accountant, you are a CPA, your other person is also a CPA, but you want to practice as a firm of X and Y, do you have to get a third license for the firm to do that?

Mr. Ibanez: --The license needs to be, yes, with the firm, as I understand it.

Unknown Speaker: You do.

I see.

And that's what their really... their... their complaint is... that you don't have such a license.

Mr. Ibanez: Yes, Your Honor.

But that--

Unknown Speaker: And you say you don't need it because you're not practicing accounting?

Mr. Ibanez: --Correct.

And... and certainly the record has been somewhat misinterpreted regarding the attorneys and CPA's out there who have chosen to practice dual professions.

Certainly, those are practicing dual professions and, of course, need to license their firm.

That is not the case before the Court.

The public interest is certainly well served by protecting commercial speech.

Why?

Because it assures free flow of information to the public.

In turn, this helps consumers to make more informed and rational decisions.

It also encourages competition, which benefits the public.

It also benefits small and large businesses alike.

For, in this marketplace of large law firms, the sole practitioner... the small businessman, the businesswoman... needs to have the opportunity to truthfully disclose any distinguishing and differentiating factors.

Unknown Speaker: Let me... I hate to be asking these stupid little questions, but I wanted... if... if you just want to be a sole practitioner as a CPA, do you need two licenses or one?

Mr. Ibanez: As a sole practitioner?

Unknown Speaker: Yes.

Mr. Ibanez: Without being incorporated?

Unknown Speaker: Without, yes, being incorporated or a partnership.

Mr. Ibanez: Possibly the Board can answer that question better than I, but as I understand it, the sole practitioner needs to be individually licensed.

Unknown Speaker: Period?

Mr. Ibanez: I believe so.

Unknown Speaker: Okay.

Mr. Ibanez: The public is not easily misled.

The Board of Accounting would have this Court believe that the public can be easily misled.

But that is not so.

That merely follows a paternalistic argument that has been rejected by this Court.

The public needs truthful, relevant information to make informed decisions.

And Petitioner and others like her, multiply licensed in good standing, communicating truthful speech, should be encouraged and not censured for disclosing it.

If there are no further questions of the Court, I would reserve the rest of the time for rebuttal.

Unknown Speaker: Very well, Ms. Ibanez.

Ms. Nelson, we'll hear from you.

Argument of Lisa S. Nelson

Mr. Nelson: Mr. Chief Justice, and may it please the Court:

The Petitioner contends that the Florida Board of Accountancy refuses to allow her to advertise her status as a CPA.

That is not actually the case.

The State intends to demonstrate that we are here because of Petitioner's refusal to offer her services as a CPA in a manner that complies with the law.

Although she is individually licensed as a CPA, the firm which she... through which she provides accounting services and which she is advertising does... is not.

Unknown Speaker: She claims she is not providing accounting services.

Mr. Nelson: Your Honor--

Unknown Speaker: What is there in the record that shows that she is providing accounting services?

Mr. Nelson: --The record is very clear and Ms. Ibanez admitted during hearing that she is providing exactly the same kind of services now... tax representation, interpretation of financial records, representation before the IRS--

Unknown Speaker: Is that the practice of accountancy under Florida law?

Mr. Nelson: --Yes, it is.

The practice of accountancy is governed by a title act.

Chapter 473 is a title act in Florida, which means that the practice of the attest function is... can only be practiced by a certified public accountant.

Unknown Speaker: So, then... then a lawyer who represents people in tax matters is practicing accounting?

Mr. Nelson: Not necessarily.

Because the definition of the practice of public accounting in Florida has two components.

The first component is the offering of accounting services or... or consultant management services.

The second--

Unknown Speaker: And tax representation is included among them?

Mr. Nelson: --If it's within those.

The second prong is to also hold yourself out as a certified public accountant.

If you are simply a lawyer who is providing those services, unless you are providing the attest function, you may do so.

You are not practicing public accounting under Florida law, because it is a title act, unless you... unless you both perform the service--

Unknown Speaker: She could do... she doesn't do audit and attest, right?

Mr. Nelson: --That is correct.

Unknown Speaker: That's undisputed?

Mr. Nelson: That is correct.

Unknown Speaker: Are you saying to us now that she could do everything that she's doing... the tax representation... if she were merely a lawyer?

Mr. Nelson: Yes.

Unknown Speaker: She could do those functions?

Mr. Nelson: Yes.

Unknown Speaker: But if she is also certified as a CPA--

Mr. Nelson: If she holds herself out--

Unknown Speaker: --She can't?

Mr. Nelson: --If she holds herself out as a CPA, then she can do those things.

But she must adhere to all of the regulations under Chapter 473.

It's a two-pronged test.

Unknown Speaker: Well, do you... do you have... what... what is... what is your evidence that she is not adhering to them?

The only thing I gather that's apparent on the face of the record is that she did not separately register her professional corporation.

Do you--

Mr. Nelson: That is true.

And that was alleged in the administrative complaint.

Unknown Speaker: --Then why didn't you... why didn't the Board simply go after her to revoke her CPA license because she had failed to register her corporation?

Mr. Nelson: We originally did have a charge... or the administrative complaint was amended to add that charge to the... the charges against her.

However, it was withdrawn because the hearing officer felt that that amendment was untimely.

However, the conduct in this case and the speech in this case are inextricably intertwined because of the definition of public accounting.

The administrative complaint, as it was--

Unknown Speaker: Well, they may inextricably intertwined, but do you not understand... is there any reason... let me put it this way... why the Board cannot go after her for failing to... to register her corporation and fight it out as a matter of fact and fight it out as to the validity of the regulation, if she contests it... and I don't know that she does--

Mr. Nelson: --Yes, they could.

Unknown Speaker: --Without... without raising any First Amendment problem?

Mr. Nelson: They could do that, as well as what they have done in... in raising the advertising violations here.

But in this particular case, what she is doing is advertising that she can provide these services through a professional association.

And that professional association is not licensed.

That is an unlawful act.

This Court--

Unknown Speaker: But... but my understanding is that that wasn't a part of the complaint that was retained before the Board.

Mr. Nelson: --Yes, it was, Your Honor.

If you look at page 33 of the record, in the allegations that are in the record, on paragraphs eight and nine, it specifically indicates that the respondent provides or offers to provide services to the public through her firm, called Silvia S. Ibanez, P.A., which firm is not licensed by the Florida Board of Accountancy.

Unknown Speaker: Are you referring to the Joint Appendix?

Mr. Nelson: No; in the record itself.

I don't believe that the administrative complaint is in the Joint Appendix.

But it's on page 32 and 33 of the record.

And the respondent--

Unknown Speaker: My understanding is that the only rulings that were before the Board after the complaint was amended was, first, that this CFP designation was misleading, and the second, that the CPA designation was misleading.

Mr. Nelson: --That is true.

Unknown Speaker: Is that an incorrect statement?

Mr. Nelson: No, Your Honor.

Those are the conclusions of law that they reached.

But the allegations of fact that were part of the complaint also indicated that the respondent holds herself out to the public as a CPA in this unlicensed firm by appending the CPA designation after her name.

Unknown Speaker: Well, but if the conclusions of law... which was the basis of the... the Board's action... were simply that CPA and... and CFP were misleading, why isn't... that's... that's all that's before us.

Mr. Nelson: No, Your Honor.

Their conclusion was that her advertisement, because she doesn't comply with this requirement, is misleading.

Because she is misleading the public by... by letting the public believe that she is in conformance with the requirements of law, when in fact she is not.

Unknown Speaker: Can you read the finding on which you're relying that says just that?

Mr. Nelson: It says in the Joint Appendix--

Unknown Speaker: This is a finding as distinguished from a charge.

Mr. Nelson: --Yes.

In the Joint Appendix, in the final order of the Board... which is found at approximately page 180 and--

Unknown Speaker: Approximately?

Mr. Nelson: --Excuse me.

On page 185 of the Joint Appendix it specifically indicates that respondent is unwilling to acquiesce in the requirements of Chapter 473 and Chapter 21A, Florida Administrative Code, by complying with those requirements, which are the requirements in Chapter 473.

She does not license her firm as a CPA firm.

Unknown Speaker: Now--

--She is... she is a CPA?

Mr. Nelson: Yes, she is, individually.

Unknown Speaker: Is there... in the... in the view of the Board, is there any way that she can distinguish herself legitimately from a non-CPA?

She's an attorney-at-law, she advertises as an attorney-at-law.

She is also a CPA.

Is there a way that she can present that credential to the public... that she is in fact a CPA, which is undisputed?

Mr. Nelson: There are two answers to that question, Justice Ginsburg.

The first is if she licensed her firm, then there would be no problem whatsoever.

The second is if her business card indicated Silvia Ibanez, Attorney, CPA, and stopped there, there would also be no problem.

The Board has absolutely no problem with the designation of Attorneys and CPA's together.

It is her advertisement of her status in conjunction with the unlicensed firm that makes this advertisement misleading.

Unknown Speaker: How does it mislead?

It seems to me you confuse the Board's power to compel licensing of the firm with the Board's power to prohibit speech because it misleads the public in some detrimental way.

How is the public detrimentally misled?

Let's assume that she's failed to license her... her full... her whole firm.

The public sees CPA> ["].

She is a CPA.

How has the public been harmed?

Mr. Nelson: Because the public is allowed to believe that she can offer these services through the professional association that she is advertising when in fact that is unlawful.

Unknown Speaker: Well, the worst that can happen then is that some member of the public calls up and says, I want you to perform an audit function for me.

And she says, well, my firm is not licensed as a CPA firm and I can't go that far.

I mean, that's the extent of the misleading.

If she then goes ahead and says, all right, I will do it, the Board may very well have a complaint for her failure to conform to the Board's regulations by... by registering the firm.

But I... the extent of the possible misleading of the public in your answer, it seems to me, is... is in the suggestion that might lead them to call her up and get a "no" answer.

Mr. Nelson: Your Honor, there are two answers to that.

The first is that the disclaimer that she may give by telephone is not in conjunction with the advertisement itself.

And the public has already had to take the step to either call her or go to her office.

Unknown Speaker: No.

But I think my point was that what you call misleading does not run a very high risk of anybody being seriously misled in any way that's going to harm them unless she goes a further step and starts performing acts which she is not... which she is not licensed to do.

And your claim is not that she has performed acts, but simply that the advertising is misleading.

Mr. Nelson: Your Honor, any time that she performs any of the services which fit within the definition of public accounting, which she has indicated she does perform through this firm, she is committing an unlawful act.

And the public is misled by believing that they can obtain and do obtain--

Unknown Speaker: But you said she could have on her card Attorney, CPA.

That's what a member of the public sees.

Mr. Nelson: --Yes.

Unknown Speaker: Now, what is it that a member of the public would see differently from her current card than it would see... I mean, if it gets Attorney, CPA, it's still going to have the problem with it, well, a CPA can audit, so I'll call her up and ask her to audit.

I don't see the difference from the public perception in a card that says Attorney, CPA, and a card that says what this card says, in terms of misleading or deception of the public.

Mr. Nelson: Because the public is led to believe that she can provide these services through the P.A., which she in fact cannot do.

Unknown Speaker: Through the?

Mr. Nelson: Through the professional association.

And the professional association--

Unknown Speaker: My, that's a very refined misleading.

The public is going to think that she can provide the services through the association instead of individually.

And this is what the Board is protecting the public against?

Mr. Nelson: --Yes.

Because there are ramifications that attach to providing your services as a sole proprietor that are different than those from providing your services--

Unknown Speaker: Do I understand this, to be sure, the card I guess is at page five of the Joint Appendix and it gives her name and her... her degrees and so forth, and then says law offices, and then Silvia S. Ibanez, P.A. Now, if after the words "law offices", there were a parenthesis, and said not engaged in public accounting, parenthesis, then you'd have no problem?

Mr. Nelson: --That would not be a truthful statement, because the Board found that she was in fact practicing public accounting.

Unknown Speaker: You are engaged in accounting if you are... if you are... if you are an accountant and practice law?

Mr. Nelson: If you provide accounting services and--

Unknown Speaker: Well, not distinctively accounting services, whatever the Board chooses to define as accounting services... if you do those acts and are an accountant.

Mr. Nelson: --Using accounting skills, and you hold yourself out as P.A. and CPA.

Unknown Speaker: I suppose the Board could say that just addition and subtraction are accounting skills and that anyone who performs addition and subtraction and has a CPA is practicing accounting if it wants?

Mr. Nelson: I don't think there's been any interpretation--

Unknown Speaker: It hasn't moved to that yet?

Mr. Nelson: --No, it has not.

[Laughter]

Unknown Speaker: So, where... so, where we are is this: If John Doe, who is an attorney and not an accountant, and has simply advertises that he's an attorney, does exactly what Ms. Ibanez is doing, the Board has no problem?

Mr. Nelson: None at all.

Unknown Speaker: All right.

But the minute you have a double qualification and you advise the public that you are also a CPA, then that's prohibited?

Mr. Nelson: Only if you do so in terms of providing those services through an entity that it not licensed if that entity needs to be licensed.

Unknown Speaker: So... so, what you are accomplishing in order to protect the public is not allowing her to disclose her additional qualification?

Mr. Nelson: No, she may--

Unknown Speaker: And your position is: that protects the public?

Mr. Nelson: --She may disclose her additional qualification if she complies with the other requirements of Chapter 473, which she has chosen not to do.

Unknown Speaker: And those other requirements are to get a license for the firm?

Mr. Nelson: Yes.

Unknown Speaker: Well, she... as I... I'm sorry--

--What is entailed in getting a license for the firm?

I mean, are there qualification examinations for the firm that are different from her individually?

Mr. Nelson: She has to submit an application, pay a fee of $150, and she has to provide proof of insurance for the professional service corporation.

Which she does not have to do individual.

Unknown Speaker: Does an individual seeking a CPA license have to provide proof of insurance?

Mr. Nelson: No, they do not.

Unknown Speaker: I take it, under no circumstance is she... could she add the CFP designation, because, as I understand it, one of the regs is that one may not add any term... and I presume any abbreviation indicating a term... with the word "certified" on it if the certification is not a State certification?

So, the... the prohibition on that, I take it, is absolute?

Mr. Nelson: The prohibition there is only in conjunction with the CPA designation.

Unknown Speaker: Yes, yes.

Mr. Nelson: It is not... and that is the only time that it comes into play.

Unknown Speaker: But I mean that's... that's the... that's the only way she wants to use it.

So, if she holds herself out as a CPA, assuming she may otherwise do that, I take it there are no circumstances in which she could also add CFP?

Mr. Nelson: No, that is not true, Your Honor.

The rule specifically indicates that if she were to seek approval from the Board to do so, and the Board were to grant that approval, she could certainly do it.

Unknown Speaker: But I--

Mr. Nelson: The Board has also--

Unknown Speaker: --I thought that was under a separate section.

I don't have it in front of me.

Mr. Nelson: --No.

Unknown Speaker: That... that applies to the... to the prohibition against using the term "certify"?

Mr. Nelson: Yes, Your Honor, it does.

It's on page 209 of the Joint Appendix.

And the... the Board--

Unknown Speaker: And which... which section is the provision for Board approval of a deviation here?

Is that under (g)?

(i).

Mr. Nelson: --Actually, it's a combination; (i) is the one that specifically talks in terms of the term "certified".

The Board order, however, made it very clear that since 1982, the Board had interpreted that section as being a specialty designation that if someone sought approval from the Board, they may be allowed to do so.

In fact, no organization--

Unknown Speaker: How has the Board made this known?

Is it in a separate reg, or informal announcements or what?

Mr. Nelson: --They have... they have formal opinions which are available by public record.

It was also a finding of fact by the hearing officer in this particular case.

I think it may be provided through their newsletters, which are required to be--

Unknown Speaker: Is... is... does the record... excuse me... does the record contain any citation to any formal opinion in which it... the Board has indicated that (i) is subject to this dispensation?

Mr. Nelson: --Yes.

And the hearing officer so found--

Unknown Speaker: It is--

Mr. Nelson: --There are multiple opinions by the Board.

Unknown Speaker: --But does the... does the hearing officer's finding cite one of the... the letter rulings?

I... I don't want to take a lot of your time if you're not sure.

Mr. Nelson: I do not believe that they specifically cite an individual opinion.

But they do make the specific finding that the Board has, since 1982, taken that position.

And there were multiple exhibits in this case which were formal opinions of the Board that were submitted both by Ms. Ibanez and by intervenors in the rule challenge case.

In this particular instance, there has been no effort by either the parent organization or by Ms. Ibanez to seek approval by the Board.

In addition, the Board... the Board's opinions have indicated that this is also treated as a specialty designation in many instances, and a disclaimer is available for specialty designations, which would indicate that this is not a specialty that is granted by a govern... or affiliated with a government entity, whether State or Federal.

In this particular instance, Ms. Ibanez's advertisement does not have the approval of the Board, nor does it have the disclaimer that is required under the rule.

This--

Unknown Speaker: Are you suggesting that had there been a... the disclaimer, which you see as required under the rule, she would have been in compliance?

Mr. Nelson: --I think there's a great possibility that would be the case.

She should seek approval from the Board directly, but I think if there had been the disclaimer, we would not be here.

Unknown Speaker: Well, but if you look at the rule... the regulation... on its face, it says in (i) that use of the word "certified" is prohibited.

Mr. Nelson: Because of the confusion that is created with the use of the word "certified".

Unknown Speaker: Okay.

But I mean, you're... you're here today telling us, don't pay any attention to what the regulation says, because maybe she could have done something else, and maybe the board would have authorized it.

Is that what I'm hearing you saying?

Mr. Nelson: No, Your Honor.

What I'm saying--

Unknown Speaker: I mean, the Board seem... the... the regulation seems clear on its face as a ban.

Mr. Nelson: --Yes, Your Honor.

However, the Board has interpreted that these other avenues are available to her, and those interpretations are available to the public.

I do think, however, that it could be banned in this particular instance because of the confusion that can be generated by the use of exactly the same term in certified public accounting, which connotes State licensure, and the term "certified" in certified financial planner, which has no government affiliation.

And unlike the situation that was presented to this Court in Peel, there is no indication on the advertisement at all as to who grants the CFP designation.

At least in Peel you had the designating authority or designating agency revealed to the public.

In this case, the only member of the public who testified at all regarding the CFP had no idea what it was.

So, there was absolutely no public knowledge that was demonstrated--

Unknown Speaker: Well, that can't be misleading then.

I mean, if I don't know what it means, I'm not being misled.

[Laughter]

The only... the only person who is... how can you possibly be misled if you have no idea what it means?

Mr. Nelson: --I think that while that person didn't know what it was, I think there is still the potential there, at least a potential there, that it is misleading because they clearly knew what certified meant in terms of a certified public accountant.

They just didn't know what CFP meant.

Unknown Speaker: But her card doesn't say C.> ["]--

--"C", they don't know what "C"--

--Maybe that means College of something or other.

[Laughter]

Could somebody who is in an accounting firm advertise... and let's assume it's truthful... on the card, in the yellow pages, J.D.?

Mr. Nelson: Yes.

Unknown Speaker: This is somebody who is in a firm that's qualified to do audit and attest and all the rest, and that person has whatever is the designation of the accounting firm and then J.D.--

Mr. Nelson: That is perfectly permissible.

Unknown Speaker: --And that's... well, you don't care because that's another profession and you don't care about it?

Mr. Nelson: The Board does not seek to regulate the practice of attorneys.

Unknown Speaker: May I just go back to an earlier question?

Assuming just for the sake of argument... and maybe more than just for the sake of argument... that the Board has these interests and that some of the objectives are perfectly legitimate, why isn't the Board sufficiently and why isn't the public sufficiently protected if the Board simply proceeds to revoke the CPA license of the person who does not abide by the rules?

Mr. Nelson: I think the public would be protected in that particular instance.

And the proper course in this case would have been to charge her with both.

Unknown Speaker: So, you can... you can accomplish everything you claim that you ought to be able to accomplish without regulating speech.

Mr. Nelson: Not entirely, because... because of the very definition of the practice of public accounting, as it is defined in Florida... and Ms. Ibanez has not challenged that definition--

Unknown Speaker: Well, who cares about definitions if she is not using the term CPA> ["]?

I mean, if you are... if the Board is correct and the Board revokes her CPA license, and she stops using CPA because she is no longer is one, then why... why does... why does an abstract interest in definitional matters help the public one way or the other?

The fact is, you can accomplish as much public protection by going after the CPA license as you can possibly accomplish even on the rosiest First Amendment view to you of trying to regulate speech.

Mr. Nelson: --If in fact... if in fact her license was revoked and she quit using the title, then yes, that interest would be served.

Unknown Speaker: And if she didn't quit using the title and she was no longer a CPA, you would have a very different First Amendment case, wouldn't you?

Mr. Nelson: Yes, we would.

Unknown Speaker: May I ask the question about the insurance requirement for if you practice as a professional corporation?

Mr. Nelson: Yes.

Unknown Speaker: Is it different for a lawyer who practices as a professional corporation?

Does the Florida Bar require insurance and so forth?

Mr. Nelson: I have no idea.

Unknown Speaker: You don't?

Mr. Nelson: Working for State government, I don't have--

Unknown Speaker: I just wonder if... if the insurance policy she had with the... with the... to protect her from legal malpractice would have been adequate to satisfy your insurance requirement to also say you're a CPA even though you're not practicing accounting.

Mr. Nelson: --As I indicated, I don't know what the requirements are under the Florida bar.

Unknown Speaker: I see.

Mr. Nelson: However, the fact would remain that even if she had that insurance for the purposes of her law practice, the Board would never have that assurance unless she actually submitted an application and provided that information to them.

Unknown Speaker: Yes.

Mr. Nelson: And they would therefore not be performing their regulatory function.

If the Court has no other questions, we would--

Unknown Speaker: Thank you, Mrs. Nelson.

Ms. Ibanez, you have four minutes remaining.

Could you tell us how one does go about getting a CFP?

Rebuttal of Silvia S. Ibanez

Mr. Ibanez: Yes, Mr. Chief Justice.

There is a comprehensive examination over several days' time.

There are educational requirements and components.

Unknown Speaker: What is the organization that gives the designation?

Mr. Ibanez: It was called, up until February, the IBCFP.

It has undergone a name change.

It is now called the Certified Financial Planning Board of Standards.

And the Certified Financial Planning Board of Standards has a coordination with multiple universities and colleges and institutions of higher education across the United States... I believe, according to their amicus brief, over 50 at this point... that, in coordination with the universities, there is an educational component and, at the end of all the educational requirements having been met, then there is a certification component.

The Certified Financial Planning Board is a national licensing nonprofit body.

It has a Federal trademark over the use of CFP and over the use of certified financial planner.

And there are a code of ethics to comply with, which are also in the record... were submitted in the disciplinary hearing, a strict code of ethics.

There are also continuing education requirements to ensure that the CFP licensee continues to stay up to date and continues to stay informed.

Unknown Speaker: Is... is your failure to have a CPA license for your firm and to comply with CPA requirement... i.e., insurance... an issue that's before this Court and that's before the Board in its proceedings?

Mr. Ibanez: No, Your Honor, it's not an issue before this Court.

Unknown Speaker: Was it an issue before the Board?

Mr. Ibanez: No, Your Honor.

Those are hypothetical situations that could have been confronted in this case.

Unknown Speaker: So, the Board's order was not predicated on your failure to comply with requirements for CPA's?

Mr. Ibanez: As I understand it, no, Your Honor.

They also made reference to forgoing certain remuneration.

That was also hypothetical... at the same record page that Counselor Nelson already cited to.

These were hypothetical.

In the footnote to that same record reference it said, it could have simply charged Petitioner.

Indeed, why did it not?

In such a confrontation there would have been some complex regulatory determinations.

And the Florida Bar's conflict with the rules, and the CPA Board's rules.

And out of that there would have been some... some, I'm sure, some rationale.

But that did not happen in this case.

That is another case for another day.

It is not the case before the Court today.

The Court was asking about accounting skills.

If I may make reference to one of the informal opinions that is available, and the Court may make public notice, in 1991, early 1991, CPA Price, business owner, sole business owner of a beauty salon, asked if she could use CPA.

She was denied.

She was told because she offered services to the public and uses accounting skills, the beauty salon could be engaged in the practice of public accounting.

Your Honor, this shows that this is an absolute ban.

This... this poor woman... this CPA business owner, who is owning her own shop and is indeed licensed, was told she could not use it.

Petitioner is duly licensed as a CPA and is duly licenses as a CFP.

She has not refused in any way, shape or form to comply.

There is only one thing she's refused to do.

She refuses to refrain from exercising her First Amendment rights.

If there are no further questions, may it please the Court.

Chief Justice Rehnquist: Thank you, Ms. Ibanez.

The case is submitted.

Unknown Speaker: The honorable court is now adjourned until tomorrow at ten o'clock.

Attribution:

The OYEZ Project

Featured:

Key Tronic Corp. v. United States - Oral Argument

Fri, 09 Jan 2009 14:49:50 +0000

Case:

Key Tronic Corp. v. United States

Media File:

93-376_19940329-argument.mp3

Related Transcript:

1993_93_376_argument.xml

Transcript:

Argument of Mark David Schneider

Chief Justice Rehnquist: We'll hear argument next in Number 93-376, Key Tronic Corporation v. United States.

Mr. Schneider.

Mr. Schneider: Mr. Chief Justice and may it please the Court:

This case raises a question of statutory construction.

Key Tronic submits that the Federal Superfund statute, or CERCLA, authorizes the recovery of attorneys' fees by private parties where they undertake cleanup and then take steps to compel others to participate in the cost of the cleanup.

CERCLA section 107(a)(4) provides for the recovery of response costs by parties.

The term 101(25) to include enforcement activities.

Where a party imposes the liabilities and obligations of CERCLA on others by undertaking cleanup and then compelling others to share in the cost of cleanups, those actions constitute enforcement activities within the meaning of the statute.

The term CERCLA includes attorneys' fees because the primary enforcement activity in the context of section 101(25) and in the context of section 107 is a suit to impose the liabilities and obligations of CERCLA on parties that have caused environmental contamination.

Unknown Speaker: Because that has already occurred, hasn't it, prior to the stage that we're dealing with here?

Mr. Schneider: Yes, Justice Souter, in this case that has already occurred.

Unknown Speaker: And it may have... indeed, have occurred because of action commenced by non-Government parties, but there's sort of an obvious reference to them as enforcers in the citizens' suit provision, so it's not, on the face of it, obvious that a person in the position of your client is enforcing as opposed simply to spreading the burden of liability.

Mr. Schneider: In the context of a Superfund, Justice Souter, the meaning of the word "enforcement activities" does include the activities of a private party.

As this Court recognized in the Union Gas decision, EPA does not have the resources to engage in activities at all of the sites across the country, and so Congress in CERCLA expressly provided for and encouraged private parties to engage in cleanup and then to bring cost recovery.

Unknown Speaker: That's the citizens' suit provision.

Mr. Schneider: No--

Unknown Speaker: I'm sorry.

Mr. Schneider: --No, Justice Souter.

The citizens' suit provision is in section 9659, and a citizens' suit can bring an action to compel the EPA to act if there's a violation of a standard.

Section 107 provides for a right to recover response costs.

The definition of response costs is defined in section 101(25), and section 101(25) is a section of general application.

It's a definitional section to define the word "response cost".

A response cost is something that a private party may recover.

Unknown Speaker: May I ask you one other question?

I should know the answer to this, but I don't.

Is there a separate counsel fee provision for citizens' suits?

Mr. Schneider: Yes, Justice Souter.

Section 9659 provides that when a citizen brings a

"citizens' suit under section 9659, it may recover its attorneys fees. "

but that is the only relief that a citizens' suit plaintiff can recover.

In CERCLA section 1... a citizens' suit plaintiff under section 9659 does not have the ability or the authority to bring an action to recover response costs.

That is limited--

Unknown Speaker: Can they get investigators' fees, and so on?

Mr. Schneider: --No, Justice Souter, they cannot.

Unknown Speaker: It's strictly limited to counsel.

Mr. Schneider: The only monetary reimbursement that a citizens' suit plaintiff can recover under section 9659 are the attorneys' fees enforcing the EPA to act, no other monetary reimbursement.

In contrast, section 107, which is an action for cost recovery, which applies both to the Government and to private parties, states that parties can recover their costs of response.

Section 101(25) specifically defines response to mean enforcement activities.

In the context of a Superfund site, the primary enforcement activity will be an action to compel other parties, pursuant to their statutory obligations, to pay their fair share of cleanup cost.

Typically, what happens is one party will undertake cleanup and pay for the entire cost of the cleanup.

That party will then bring an action to enforce the statute to compel other parties who are also liable under the statute to pay for their fair share of the cleanup costs.

Unknown Speaker: What happens if a party does not think it's liable at all, but thinks that parties A, B, and C are?

Mr. Schneider: That would be an enforcement activity if that nonliable party is able to establish that the other parties are liable under the statute to pay portions of the response costs.

Unknown Speaker: And does he bring a suit other than for money?

Mr. Schneider: No, Justice Kennedy.

The only relief available for a cost recovery plaintiff is to recover costs that have been spent for cleanup.

By definition, a cost recovery case under section 107 requires the plaintiff, whether it's the Government or a private party, to undertake cleanup, to spend response costs, and then bring an action to recover those costs.

Unknown Speaker: The Government's right to recover attorneys' fees comes from still a different section, doesn't it, under the legal studies section?

Mr. Schneider: Mr. Chief Justice, that's correct.

Prior to the passage of the amendment of CERCLA in 1986, the United States relied on section 104(b) as well as section 107 to recover the costs of attorneys' fees in bringing these types of actions.

Prior to the amendment of Superfund in 1986, all of the lower courts held that the Government was entitled to recover its fees under section 104(b) as well as under section 107.

Key Tronic submits that if... and the language used in section 104 was cost of legal study or investigation.

Key Tronic submits that if the term

"cost of legal study or investigation. "

is sufficiently explicit to authorize the award of attorneys' fees, then certainly the word "enforcement activities", which appears in the section of general application to both private parties and the Government, also is entitled to recover its attorneys' fees.

The reason that an enforcement activity includes attorneys' fees is because the primary enforcement activity within the meaning of section 101(25) and section 107, is an action to compel other parties to pay their share of cleanup costs.

Enforcement activities means the actions that are undertaken to enforce the statute.

In most cases, as a practical matter the word... the activities will be undertaken by attorneys, and so the most logical reading of the phrase "enforcement activities" includes attorneys' fees.

But "enforcement activities" is broader, because there are some activities that will be undertaken not by attorneys.

For--

Unknown Speaker: Doesn't the word "enforcement action"... "enforcement activities" usually refer to Government action, action by Government agencies?

Mr. Schneider: --No, that is not correct, Justice Ginsburg.

As this Court noted in the Cargill case, where the Court was construing section 4 of the Clayton Act, the Court characterized a private action under section 4 of the Clayton Act as a private enforcement action.

In the Alyeska decision, this Court stated that Congress often encourages private parties to act by awarding attorneys' fees, and that will allow for "private enforcement of the statute".

Unknown Speaker: Well, but that's quite different.

I mean, the Sherman Act situation, you're talking about a party who's been injured going after the wrongdoer.

That's quite a different situation from one wrongdoer who has been compelled to cough up the entire compensation for the wrong going after another wrongdoer to get back some of what he's paid.

That seems to me not... I would not normally call that enforcement.

I would call it contribution.

Mr. Schneider: With all due respect, Justice Scalia, under the Clayton Act, a party is taking steps to enforce the liabilities against those parties who have undertaken activities prohibited by the antitrust statute.

In CERCLA, the word "enforce" is used to enforce the liabilities and obligations of the statute.

For example, in CERCLA, a party is liable if it arranges for the disposal of hazardous substances.

To enforce this statute in the context of section 101(25) means to make sure that that party that arranged for the disposal of hazardous substances pays for the cost of cleanup.

In the... I would note that even both prior to the amendment of Superfund--

Unknown Speaker: Can you give another example of a Federal statute where enforcement action, or enforcement activity, is... the actor is someone who is himself liable for violating some prescriptions of the statute, who has a liability as distinguished from someone who is either a private attorney general or has been injured in fact and is bringing a claim against a wrongdoer?

Mr. Schneider: --Off-hand, Justice Ginsburg, I cannot think of another example, but CERCLA is a unique statute which uses the word 101(25) which is a definitional section.

It says, for purposes of section 107, in defining the word "response", that word "response" includes the words "enforcement activities".

The reason that CERCLA is a unique statute is because in 1986, when Congress amended the Superfund statute, the legislative history was replete with references as to what an utter failure the Superfund program had been.

The legislative history contains many references explaining that EPA simply was unable to make the Superfund program work by itself.

The response, Congress decided to fix that problem by giving more incentives to private parties to act.

One of those incentives was in section 101(25), enabling private parties to recover their costs of enforcement activities which we submit includes attorneys' fees.

The language of the statute is unlike virtually any other statute, and this Court has recognized in the Exxon decision that in fact it is an inartful statute, but what Congress decided to do in Superfund was to make sure that any party, whether it was a governmental party or a private party, whether it was a liable party or a nonliable party, any party that undertook cleanup could then bring an action to recover its cost, and it used the term "enforcement activity" in a section which expressly applies to any party, liable or nonliable, governmental party or private party.

Unknown Speaker: You want us to construe the term under the policy of the amendments, which was to induce private parties to act.

As I understand it, no one has an inducement to act under the circumstances that your client acted unless that person has already been found liable and otherwise, as Justice Scalia said, would have to pay the whole tab, so that the public as a practical matter gets nothing from the recovery that you want.

The problem has been identified, someone has been made liable, and somebody's got to pay the bill, and I don't see why Congress had any reason to induce this action.

Mr. Schneider: Justice Souter, with all due respect, in this particular case Key Tronic acted... well, Key Tronic has never been held liable.

It acted voluntarily, immediately after contamination was discovered, but what Congress noted--

Unknown Speaker: It didn't contest liability.

Mr. Schneider: --No action had been brought.

It started its actions in 1980, 3 years before the EPA was involved, 10 years before--

Unknown Speaker: I'll grant you that, but isn't it fair to say that basically what your client was doing was essentially what might be called a preemptive strike?

I mean, ultimately, what it wanted to ensure was that it would not end up paying the whole bill.

Mr. Schneider: --Justice Souter, there's nothing in the record which would support that statement, but regardless of what happened in this particular--

Unknown Speaker: Well, why else was it doing it?

I mean, it has not contested liability.

You don't argue here that it would have been free of liability, and what else was it doing?

Mr. Schneider: --We don't argue that it would have been free of liability, but a case was never brought.

What Congress did, though, in 1986, was it recognized there were not enough Key Tronics in the world to make the Superfund process work.

Congress in 1986 noted that EPA had not done its job.

It was simply too enormous a task to be undertaken by EPA alone, and this Court recognized that in the Union Gas decision.

Congress did not think it enough to give the tools only to EPA.

As a result, it also encouraged private parties to act.

The question, Justice Souter, you raised as to what does the public get as a result of this cleanup, what the public gets is a clean site that might otherwise not occur.

Congress had two goals when it passed the Superfund statute.

One of the goals was prompt... making sure that hazardous waste sites were prompoly cleaned up, and the other goal was to make sure that those parties that caused the contamination would pay for the contamination costs that they had caused.

As a practical matter, Congress chose as its mechanism to get to cleanup... it chose to arm private parties and the Government with extraordinary abilities to enforce the Superfund statutes.

Unknown Speaker: You're implicitly arguing, I guess, that two pockets are better than one, and that's what the public gets.

Mr. Schneider: Justice Souter, I am arguing that in the context of--

Unknown Speaker: Which I don't think is a bad argument, having just made it myself.

[Laughter]

I mean, but isn't that sort of what... the point that you're making?

Mr. Schneider: --Well, it is--

Unknown Speaker: The public does get something, because it gets another pocket to go after if the first one is not full enough.

Mr. Schneider: --Absolutely, and the reason Congress used the word enforcement activities "and not" attorneys' fees

"is because the enforcement activities could include the actions in this case, for example, where a private investigator was hired to do the gumshoe work to find out who disposed of hazardous substances at the corporate landfill. "

"The cost-- "

Unknown Speaker: Mr. Schneider, is the term 107(4)?

Mr. Schneider: --Yes, Justice Scalia, it's used in a number of other places within the statute.

Unknown Speaker: Well, I think your argument would be a lot stronger if the only place in which the term occurred was in this provision, because then that specification that it includes enforcement activities would have to be referring to this section, but if it appears elsewhere, there might well be what Justice Souter and I would call genuine enforcement activities, in other sections that are involved.

Mr. Schneider: The... Justice Scalia, the problem with that argument is that if Congress had wanted only to give the right of attorneys' fees to EPA, it could have done so by using the terms EPA... for example, in section 104(b)... but it didn't do that.

It could have put the right to recover attorneys' fees or enforcement activity costs in section 107(a)(4)(A), which applies only to the Government, but it didn't do that.

In defining the term 101(25), and section 101(25) defines the term 107(a)(4)(B) of CERCLA.

The enforcement activity under CERCLA is to make sure that those parties that have caused contamination will pay for a portion of the cleanup costs.

That's consistent with the common, every-day understanding of the word "enforce".

In our brief, we have set forth the position that a party wants to enforce its rights... that doesn't require governmental action... or that there's an enforceable contract.

That doesn't require enforceable action.

This Court's decision in the Alyeska case and in the Union Gas case, both refer to the word "enforcement" without any consideration of governmental involvement.

As a practical matter, the use of the word "enforcement" in the Superfund statute has to include attorneys' fees.

Now, the United States... well, maybe I should take a step back.

Key Tronic's argument is supported by the fact that the phrase, 101(25).

Prior to 1986, the word "response" meant environmental investigation, technical services, cleanup activities.

Prior to the amendment in 1986, all of the lower courts had held that the EPA was already entitled to recover its attorneys' fees.

In 1986, Congress put the word 101(25), which is a definitional section of general application.

Since prior to the amendments, the phrase had... since prior to the amendments, the EPA was already entitled to recover its attorneys' fees, and since Congress put it in a section of general application--

Unknown Speaker: You're talking about subsection (25) now?

Mr. Schneider: --Yes.

That's section 101(25) of the Superfund statute.

Unknown Speaker: Well, certainly the way the section... that (25) starts out, the term "respond" or "response" means "remove", "removal", "remedy", and "remedial action".

Mr. Schneider: That's--

Unknown Speaker: Certainly you wouldn't think lawyers were much good for cleaning up waste, or cleaning up a mess.

Mr. Schneider: --That's correct, and we expressly rely on the new language which was added, the words "enforcement activities".

That's the language we rely on in order to establish that Congress intended both the Government and private parties to recover fees.

Unknown Speaker: So that "respond" and "response" and "remove" now mean... now include enforcement activities relating to removal or remedies.

Mr. Schneider: That is correct, Mr. Chief Justice, and in this case an action to reallocate cost among liable parties is related to a removal action.

It's related in the sense--

Unknown Speaker: Well, that's rather attenuated, isn't it?

Mr. Schneider: --Well, Congress used the word Mr. Chief Justice.

Unknown Speaker: Well, it... it's a word that could have a broad meaning or it could have a narrow meaning, depending on how one defines it.

Certainly it doesn't just spring to one's thoughts immediately that there's that connection that you say.

Mr. Schneider: Mr. Chief Justice, Congress used the word "related" in the common, ordinary use of the term "related", meaning does it pertain to, does it relate to an action to reallocate cost of cleanup, does it relate to the cleanup.

But there's a second argument that we raise, and that is, actions to reallocate costs among liable parties will directly lead to cleanup, and the reason it will lead to cleanup, Mr. Chief Justice, is because if private parties know that they can undertake cleanup, spend the money, spend far more than their fair share of the cleanup costs, and then get a portion of those costs and attorneys' fees back from other parties, they are far more likely in the first place to undertake cleanup.

And so the use of the word "related" we submit has a very broad meaning, but even if one used a very narrow meaning, Congress decided that the mechanism to get to cleanup was to allow private parties as well as the Government to enforce the statute.

If I could respond to the question of Justice Souter, the United States argues that enforcement activities is something that only the EPA can conduct, but nothing in the statute or the structure or the language of the statute supports that argument.

CERCLA expressly provides that any party, whether it's a governmental party or a private party, may undertake response action, and as this Court noted in the Union Gas decision, EPA cannot address all of the sites across the country.

Here, as a result, Congress expressly provided for and it encouraged private parties to act.

Here, Key Tronic did precisely the same things that the EPA does when it does enforcement activities.

Key Tronic did an environmental investigation, it prepared the cleanup plan, it performed a search for potentially responsible parties, it sued the Air Force, which was ultimately held liable, and then the Air Force finally paid.

These are precisely the same steps that the EPA takes when it undertakes enforcement activities.

Unknown Speaker: Did Key Tronic itself arrange to have any of the cleanup done?

Mr. Schneider: Yes.

Key... there were two phases of cleanup, Mr. Chief Justice.

In the early phases, before the EPA got involved, Key Tronic did the environmental investigation, it provided bottled water, it provided a new water main so that residents living near the landfill would not be exposed to that.

They also did, as I understand it, some excavation measures, but the real long-term cleanup occurred once the... after Key Tronic prepared the consent decree which set forth the remedy in the case, that as the long-term cleanup, and the long-term cleanup, and it's going on today, is to pump the groundwater out of the water... pump the contamination out of the groundwater, and to treat it.

That long-term cleanup occurred, as the district court found, because Key Tronic acted to prepare the consent decree.

We hired the scientists who prepared the work plan.

Key Tronic hired the lawyers who wrote the consent decree which set forth the cleanup plan that EPA ultimately adopted, and which the Air Force belatedly contributed to.

Unknown Speaker: May I ask you a question?

I'm just trying to piece this statute together as in your brief.

9607 is the liability provision, and it describes in subsection 4 any person, and so forth, shall be liable.

Now the "any person" we're referring to in this case is the Air Force, right?

Mr. Schneider: That's correct, Justice--

Unknown Speaker: (B),

"for any other necessary costs of response incurred by any other person. "

and that's you.

Mr. Schneider: --That's correct.

Unknown Speaker: But now, does the... where does the source of your action against the Air Force come from?

Is it in 9606?

Mr. Schneider: No.

Unfortunately, Congress--

Unknown Speaker: Because I... let me just get the whole thought out so you can explain what my problem... I read 9607 as describing the liability that may be incurred in actions authorized by 9606... it follows the next one... and I thought you said earlier that the private cause of action under 9659 wasn't relevant here.

Mr. Schneider: --That is correct, Justice Stevens.

Unknown Speaker: So if it relates to 9606, why does it authorize payments to you?

That's what I--

Mr. Schneider: Justice Stevens, it does not relate to section 106.

Section 106 allows the EPA to seek injunctive relief.

Section 107 is what gave the authority to Key Tronic to recover its cost, and it gives--

Unknown Speaker: --But there's no provision in 9607 authorizing the cause of action by Key Tronic against the Air Force, is there?

Mr. Schneider: --Justice Stevens, the only answer I can get is, every court has considered this statute and says that the authority to bring a private action comes under section 107.

It's a very in--

Unknown Speaker: It's an implied cause of action we're talking about.

Mr. Schneider: --Well, Congress... every court has held it's an express cause of action.

Unknown Speaker: Well, I'm not saying that makes it wrong.

I'm just trying to understand how it fits into the statutory--

Mr. Schneider: Maybe I could take a step back.

The private... if a party seeks to recover the cost it has spent, the only mechanism it has, or the only mechanism at issue in this case, is section 107, which applies to both EPA and to private parties like Key Tronic.

Justice Stevens, you are correct, the words do not appear in section 107(a), which would expressly authorize that, but all of the lower courts have held that private parties, when they seek to recover their cost under section 107, that's their authority, and that applies both to the Government, and it also applies to private parties.

Section 106, which, Justice Stevens, you have referred to, allows the EPA to seek injunctive relief, or to--

Unknown Speaker: --Doesn't it also authorize action by State agencies in some situations?

Mr. Schneider: --In the event that the EPA has authorized the State agency to act, that's correct.

Unknown Speaker: Basically, they're governmental enforcement actions.

Mr. Schneider: That's correct, Justice.

If there are no further questions, I would like to reserve the remainder of my time for rebuttal.

Unknown Speaker: Very well, Mr. Schneider.

Mr. Wallace, we'll hear from you.

Argument of Lawrence G. Wallace

Mr. Wallace: Thank you, Mr. Chief Justice, and may it please the Court:

We do not contest that there is an implied cause of action under 9607 to recover contribution of costs.

And that was confirmed by Congress in adding a contribution provision in the 1986 amendments in 9613, but that does not itself provide the cause of action; it provides guidelines for the cause of action.

And Key Tronic has been paid its costs of the cleanup.

The issue here is its claim for attorneys' fees, not for other costs.

And if I may just amend one other factual point in petitioner's response to a question, we do refer to a consent decree that Key Tronic entered into at the bottom of page 3 and the top of page 4 in our brief.

Now, they did not explicitly admit liability, but they entered the consent decree which recounted actions that would have made them liable under CERCLA and actions of depositing hazardous wastes at the site, and this is consistent also with a jury trial that was earlier reached on the complaint of some neighbors that we refer to in footnote 2 of our brief.

So there has been some adjudications with respect to liability.

Now, the... in our view, the issue in this case is controlled by the rule of this Court's decisions in Alyeska and Runyon against McCrary, which hold that under the American rule there has to be explicit authorization for the recovery of attorneys' fees.

And in Runyon against McCrary in particular, there was an effort by the plaintiffs to rely on what they argued was an implicit authorization and a broadly granted... a broadly worded grant of remedial authority, and the Court said, no, it has to be an explicit authorization for recovery of attorneys' fees.

Petitioner's claim here is... rests on a request that the Court build an inference upon an inference from the statutory language on which the petitioner relies, and that does not meet the standard.

Unknown Speaker: Well, Mr. Wallace, how is the Government's desire to recover attorneys' fees any easier to discern?

Mr. Wallace: There is an explicit reference to legal costs incurred by the Government.

Not... that is in section 104(b), and we quote it at the very bottom of page 13 and the top of page 14 of our brief.

And it's the interplay of sections, including this one, which is the only one that the Government can rely on as explicitly referring to legal costs.

Unknown Speaker: Well, what about States and Indian tribes, how does that leave their ability to recover attorneys fields, in your view?

Mr. Wallace: Well, we think that they would enjoy that... the fees under the same provision because they act only by delegation from us with respect to a particular site.

When EPA, which has delegated authority from the President, turns over the lead responsibility at a particular site to the local or--

Unknown Speaker: It doesn't sound very explicit to me, as you describe it, does it, for States and Indian tribes?

Mr. Wallace: --It's not as ideal as we would wish it but, of course, that is not the question at issue in the case.

Unknown Speaker: One might say it was building inference upon inference.

[Laughter]

Mr. Wallace: But at least... at least there is a reference to costs of attorneys explicit in the statute.

Unknown Speaker: Well, but that's... excuse me, but that's not specifically what it says.

It refers to costs of legal and other studies.

Mr. Wallace: Yes.

Unknown Speaker: I mean, to speak of a cost of a legal study as being the way to recover attorneys' fees is a very odd use of language.

I mean, it's not only a question of inference; it's a question of sort of wrenching, isn't it?

Mr. Wallace: Well, I understand that this language is not ideal as a starting point for our own purposes.

It was construed by the lower courts to authorize EPA to recover attorneys' fees, and that was really reconfirmed, in our view, in the SARA amendments which added the words "enforcement activities".

But the question in the case is not EPA's right to recover; the question is petitioner's right to recover.

Unknown Speaker: Well, no, but if EPA is resting on a thin reed and you knock out the other block you might rest on, the next case might be an expensive one.

Mr. Wallace: Well, we have been sensitive to that problem in the way we have briefed this case, I can assure you, Mr. Justice.

[Laughter]

It has been the subject of much discussion.

[Laughter]

Nonetheless, we can't responsibly ask the Court to resolve that issue in this case, which doesn't involve that question.

The--

Unknown Speaker: But may I ask you if the word "legal studies", maybe that fits in more with the Tenth Circuit kind of inbetween decision of this case; no litigation fees, but other legal fees.

Mr. Wallace: --Well, it certainly fits in well with that, but we don't think it's limited to that because it... the statutory phrase doesn't end there.

It says as it may deem necessary, appropriate to... and/or appropriate to plan and direct response actions.

And that includes enforcement activities in our view, that could include litigation as... but it is not ideally drafted, from our standpoint.

Nonetheless, there has been a course of judicial decision upholding EPA's and the Environment Division's ability to recover these fees as part of its enforcement activities, and we think Congress built upon that in the SARA amendments, in adding that reference to "enforcement activities".

But to get back to this case, petitioner has to... in order for its view to prevail, it has to have two inferences... not just one of the two, but both of them drawn in petitioner's favor.

And the first inference is that enforcement activities standing alone, without the support, such as it is, of this reference, at least, to legal activities, would be a reference to attorneys' fees explicit enough to meet the standard of Alyeska and Runyon.

Unknown Speaker: Well, if they don't include attorneys' fees, what do they include when private parties are... just investigators and stenographers?

Mr. Wallace: Well, of course, our view is that they don't include anything for a private party; that's the second inference.

But if there isn't agreement on that, then we would think that it would perhaps be--

Unknown Speaker: Yeah, but you can't... you can't really plausibly argue that costs of response do not include enforcement activity.

That's the only thing that's clear in the text of the statute, in section 25.

Mr. Wallace: --Of course.

Of course.

Unknown Speaker: It says response includes enforcement activity.

Mr. Wallace: Well--

Unknown Speaker: But you're disputing that.

Mr. Wallace: --We don't dispute that.

We think that enforcement--

Unknown Speaker: Well, then, if you don't dispute that, what is it that enforcement activities includes, other than attorneys' fees, when you're talking about private litigation?

Mr. Wallace: --The most direct things involved are the studies and nonlitigation attorney time that would have to be involved in arranging for the cleanup.

You're entering into contracts with the landfill companies and others who--

Unknown Speaker: You acknowledge that is covered in a private action.

Mr. Wallace: --Well, we don't think that "enforcement activities" refers to that.

We think "enforcement activities" refers only to the Government.

But we do think that those are appropriate response costs by a--

Unknown Speaker: Private party.

Mr. Wallace: --Private person undertaking the cleanup activities.

The line that we think is drawn--

Unknown Speaker: Well, what about the argument that enforcement activities would be redundant because the EPA was already getting its... those costs?

Mr. Wallace: --But that was being contested in litigation and this was a way of reconfirming that EPA would have that authority.

Unknown Speaker: And so, Mr. Wallace, you can't give us an example of an enforcement activity applicable to a private party that is not also covered as... in the term "response".

Mr. Wallace: Well, I can't, because we don't think enforcement activities applies to activities by private parties.

Unknown Speaker: But, if it did, what... you say it's just an empty set.

Mr. Wallace: No.

The... I think it would be redundant of what they could already recover as responses.

And it was put in, as the House report indicated... we've quoted it right in the middle of page 23 of our brief... that this refers...

"This section also modifies the definition of response action to include related enforcement activities. "

"The change will confirm the EPA's authority to recover costs for enforcement actions taken against responsible parties. "

It was Government enforcement that Congress had in mind in making this change--

Unknown Speaker: May I ask, Mr. Wallace... I didn't mean to interrupt... but the enforcement action, that's you recovering Government counsel's attorneys' fees, is that right?

Mr. Wallace: --That is correct.

Unknown Speaker: How do they compute those?

How do they compute Government counsel's attorneys' fees?

Mr. Wallace: Well--

Unknown Speaker: Is that on an hourly basis as if market value, like we do?

Mr. Wallace: --The... it's... there's a complicated accounting method that's used that attributes time spent by the hourly wages and fringe benefits that the attorneys get--

Unknown Speaker: I see.

Mr. Wallace: --On particular sites, plus what would be regarded as an overhead factor, according to proper accounting methods.

Unknown Speaker: Is it unusual for the Government to be authorized by statute to recover its attorneys' fees against someone it's litigating with?

Mr. Wallace: Well, I can't think of any other example in particular.

Unknown Speaker: I can't either.

Mr. Wallace: But I do think that it is not correct to think of this as a disparity between the Government and private parties.

What were--

Unknown Speaker: It may not be if none of them can recover their attorneys' fees.

[Laughter]

Mr. Wallace: --Well, that's true, Mr. Chief Justice.

But there... there... the litigation in this area typically proceeds in stages.

There is an initial stage to accomplish the cleanup, and that is typically brought not against all of the potentially responsible parties; there can be scores or even hundreds of those, many of which are relatively small factors.

It's brought against somebody who's a major factor, who can be depended upon... or maybe two or three who can be depended upon to get the cleanup done, and there are certain time bars that prevent other litigation from going forward until cleanups are accomplished.

And then the second stage of litigation, which is what we are talking about in these contribution actions, is litigation in which these people who were jointly and severally liable and who tend to be relatively strong litigants and relatively well-to-do, can seek contribution from a large number of other potentially responsible parties who may be much smaller contributors to the site.

And there tends to be a considerable disparity of bargaining power between the litigants in these contribution actions to begin with, because the ones who are going to become the plaintiffs were selected because of their ability clean up the site in the first place.

And that disparity in bargaining power can be considerably exacerbated in some cases if there is also the potential liability for attorneys' fees.

I'm not saying that Congress had this in mind and made a conscious decision to bar recovery of attorneys' fees in the contribution litigation, but I'm pointing out that Congress was aware of these underlying problems.

And one of the less admired aspects of the implementation of CERCLA, that the so-called transaction costs... which is a word that has become part of the lexicon of environmental law, the costs of litigation and of studies, the costs that are not directly involved in the cleanup itself... have been soaring.

And--

Unknown Speaker: Mr. Wallace, can you help me out?

I reveal my ignorance about the whole program, but is it the fact... you mentioned the deep-pocket person who's given responsibility.

Is it true that if you have... say three companies contributed to pollution of a particular site and the very large company was only 75 percent responsible for the pollution, can that large company be made to pay 100 percent of the costs and then seek contribution from the others?

Mr. Wallace: --So long as the pollution has become mixed.

Unknown Speaker: I see.

Mr. Wallace: And has not... is not severable within the site, and that they're jointly and severally liable.

Unknown Speaker: So then the costs that it has to recover because it had to pay in the first place include not only the physical costs of the actual engineering and so forth, but also the costs that it had to pay to the Government for its enforcement activities.

That's part of what it then seeks contribution for.

Mr. Wallace: It can get contribution for its cleanup, but we're of the view that it cannot get contribution for its attorney costs for either trying to resist its liability to EPA or for trying to find out who else were the contributors--

Unknown Speaker: For bringing contribution actions.

Mr. Wallace: --And getting the contribution.

Because those costs can soar a good deal, and can--

Unknown Speaker: Maybe the total amount in dispute would be significantly reduced if we followed the American rule across the board?

Mr. Wallace: --Perhaps so, but considerable budgetary adjustments would have to be made in order for Federal enforcement to be able to proceed.

Unknown Speaker: Mr. Wallace, you acknowledged a bit earlier that it's unusual, if not, indeed, unique, for the Federal Government to be awarded its attorneys' fees.

Is it not also unusual and perhaps unique for the Government to be able to recover its enforcement costs, apart from attorneys' fees?

Do you know of any other statute that lets the Government get its--

Mr. Wallace: Well, there are fee statutes in some agencies that require applicants for licenses to bear what amounts to the Government's costs.

Unknown Speaker: --Enforcement costs?

I mean--

Mr. Wallace: Well, they're not really enforcement costs.

Unknown Speaker: --Enforcing violations of the law, I'm talking about.

Well, your civil penalty statutes often do this, yeah.

Mr. Wallace: I guess that would be true.

We haven't really given thought to analogies of that kind because the case before the Court is not about the Government's ability to recover.

Unknown Speaker: No, but I'm trying to help you, Mr. Wallace.

Mr. Wallace: Yes--

Unknown Speaker: I will say, you know, just as well... you may it is unusual to get attorneys' fees, but it's also unusual to get enforcement costs.

In for a penny, in for a pound.

Mr. Wallace: --It certainly is an unusual--

Unknown Speaker: But you were referring to statutes that have user fees.

Mr. Wallace: --Yes, user fees.

It certainly is unusual, to get a little closer to home here... and I appreciate all of these thoughts, but to get a little closer to home--

Unknown Speaker: I don't often help you, Mr. Wallace.

[Laughter]

Mr. Wallace: --I should welcome it when it occurs.

It certainly is unusual for attorneys' fees to be available in contribution actions.

This is not the common law rule, and as a matter of fact, the contribution provision itself says that it will be governed... that contribution will be governed by Federal law, and the Federal common law rule is the rule of Alyeska and of Runyon against McCrary, that in the absence of explicit authorization there should be no recovery of attorneys' fees.

Now, I don't think that it is for the Court in this case to resolve whether it would be more desirable or less desirable for attorneys' fees recoveries to be available in contribution actions, and I don't think that Congress decided to bar the recovery of attorneys' fees.

What I do think is that the line that we see between actions that are taken to remedy the pollution and assure that a polluter... rather than the public... who is jointly and severally liable will bear the cost... the line between that and reallocating costs among polluters is a very rational line.

And it is rational in terms of considerations the Congress was aware of in the course of considering this legislation, and I want to just refer very briefly to a couple of indications of that.

Not because I say that Congress explicitly resolved it, because... but because I think it shows the wisdom of applying the Alyeska rule here, that Congress could have rationally not wanted to proceed that far.

And one is in the Senate committee report which accompanied the 1986 amendments, and the committee says that responsible sites often involve dozens or even hundreds of potentially responsible parties with differing types and degrees of involvement with the release.

While the Government may sue all potentially responsibilities, it need not sue all these parties; it may instead sue a limited number of parties to secure a complete cleanup or all costs of cleanup under the principle of joint and several liability.

Generally the Government seeks to obtain complete cleanup.

In some instances where the Government has sued major contributors of hazardous substances to a site but not lessor contributors, the parties named by the United States have, in turn, sued other potentially responsible parties in the same judicial action.

In several cases this has resulted in massive and potentially unmanageable litigation.

There is an amicus brief filed in our support in this case by a group called Sand Springs Superfund PRP Group, which claims to be put upon in this way, mostly because of claims for attorneys' fees that are being made against it.

I can't vouch for the accuracy of what they say, but it's an example of the kinds of complaints that have been made.

Then on... in supporting the conference report on the floor of the Senate, Senator Simpson, who was a member of the conference committee, pointed out to his colleagues:

"There is not doubt that the immense transaction costs generated under Superfund, meaning lawyers' fees and the many technical and scientific studies required in litigation, have come to symbolize the worst excesses of the American legal system. "

"Senator Domenici quoted Dickens' Bleak House in describing it last year, and he was right. "

"We simply must work to have more societal resources spent on necessary and effective cleanup of Superfund sites and less on convoluted litigation which merely extends any public health threat that exists from these sites. "

There are plausible reasons why Congress might have wanted to draw the line that we think emerges on the face of the statute, and reasons why there might have been concern that settlements that might be encouraged were attorneys' fees available in the contribution phase of the litigation, might sometimes be in terrorem settlements rather than something that would move the litigation along in a fair and just manner.

In any event, when the provisions on which petitioner relies are contrasted with the explicit provisions made for the award of attorneys' fees... and I realize that these create some difficulties for us as well, but not as much.

And we've set forth the citizens' suit provision on page 13 of our brief... Justice Souter was asking about it earlier... where section 310(f) of CERCLA provides that a court, quote, may award costs of litigation, including reasonable attorney and expert witness fees, to the prevailing or the substantially prevailing party whenever the court deems such an award appropriate.

This is far different--

Unknown Speaker: But Mr. Schneider said that that's all you get under citizens... it's the only... there's nothing... no other category that this can be placed under, as distinguished from the cleanup recovery.

Mr. Wallace: --It still is a rather striking difference in statutory drafting, and this provision was added at the same time in the 1986 amendments that the reference to enforcement activities was added, which certainly makes no explicitly reference to attorneys' fees.

And then we refer later in the same paragraph to section 110(c) of CERCLA, which also is an explicit attorneys' fees provision.

So we think that there simply is not a sufficiently clear... there's too much ambiguity in resting on the double inferences that petitioner asks the Court to draw, to meet the standards of Alyeska and Runyon.

And as we've explained in the concluding pages of our brief, the request for nonlitigation attorneys' fees really should be evaluated under the same standard; whether these were office costs devoted to securing a remedy and actually doing the cleanup or whether they were office costs devoted to reallocating the costs among consumers.

If the Court has no further questions.

Unknown Speaker: Thank you, Mr. Wallace.

Mr. Schneider, you have 5 minutes remaining.

Rebuttal of Mark David Schneider

Mr. Schneider: Thank you, Mr. Chief Justice.

The Government contrasts the citizens' suit provision, which uses the word "attorneys' fees", with the cost recovery provision, which uses the word "enforcement activities".

The reason Congress chose the word 10125 is because it's broader than attorneys' fees, to encompass the costs of... incurred in enforcing the statute which are not incurred by attorneys; for example, private investigator costs.

The Government draws a distinction between the fees that might be awarded when a party is not liable versus the fees that might be awarded when a party is liable.

There's no basis for that distinction in the statute.

Nothing in the language or the structure of the statute supports that distinction.

And as a practical matter, that distinction does not make sense in the Superfund context, because Superfund imposes liability on virtually any party which is even remotely associated with the contamination.

In fact, in many, if not most of the cases that EPA brings against... that the United States brings against one or two private parties, it's the United States Department of Defense which is, in many cases, the largest polluter at that particular site.

With respect to the issue of 10125 includes attorneys' fees.

We agree.

The Government has contended that the language in section 10125 confirmed EPA's right to recover fees.

We agree, but Congress put that language of 10125, which was a section of general application, not one that applied only to the United States.

Thank you.

Chief Justice Rehnquist: Thank you, Mr. Schneider.

The case is submitted.

Unknown Speaker: The honorable court is now adjourned until tomorrow at ten o'clock.

Attribution:

The OYEZ Project

Featured:

Fogerty v. Fantasy, Inc. - Oral Argument

Fri, 09 Jan 2009 14:49:50 +0000

Case:

Fogerty v. Fantasy, Inc.

Media File:

92-1750_19931208-argument.mp3

Related Transcript:

1993_92_1750_argument.xml

Transcript:

Argument of Kenneth I. Sidle

Chief Justice Rehnquist: We'll hear argument next in Number 92-1750, John C. Fogerty v. Fantasy, Inc.--

Mr. Sidle.

Mr. Sidle: Mr. Chief Justice and may it please the Court:

The application of the dual standard for the award of attorney's fees to petitioner Fogerty in this case results in a perversion of the policies of the Copyright Act.

The Ninth Circuit standard is based upon an implicit assumption about the nature of the parties to a Copyright Act, to wit, that the plaintiff is a copyright author who is seeking to sue a business enterprise that has copied his work, but in this case, we have only one author.

That's John Fogerty.

He had a copyright, a work that he said was an original creation, that was not copied.

He has vindicated that copyright by being the prevailing party in a copyright case.

He applied for his attorney's fees, as was authorized in section 505, and the court denied those fees.

They denied the fees because he was a defendant.

There is no policy in the Copyright Act that justifies the distinction against this author based upon his status as a defendant.

What possible policy could there be under the copyright laws that the plaintiff in the case, a copyright owner, had Fantasy won the case, would be awarded its fees, but Fogerty, the author in the case, would not be awarded his fees even though he had done exactly what the copyright laws asked him to do, which is create a new original work?

Unknown Speaker: Mr. Sidle, of course, this Court has to face up the Christiansburg case, where virtually identical language on attorney's fees was interpreted to suggest that we don't grant attorney's fees under it as respondents--

Mr. Sidle: But the Christiansburg--

Unknown Speaker: --so I think really we need to face up to what differences there are that would compel a different result here.

Mr. Sidle: --Well, I think there's dramatic differences between civil rights cases and copyright cases.

We have different types of cases, different issues, different types of parties, and different policies.

We also have a dramatically different legislative history.

The legislative history in connection with the civil rights statute show a clear recognition on the part of Congress to a dual standard.

The legislative history of this act is virtually silent as to the intention of Congress--

Unknown Speaker: Well, do you think Christiansburg was correctly decided?

Mr. Sidle: --Christiansburg was correctly decided in the civil rights context, but I don't think this Court can carry over from the civil rights context to the commercial context of the copyright law area.

Unknown Speaker: Well, you say civil rights context.

What does that mean?

Does that mean that civil rights statutes are considered something special?

Mr. Sidle: I think they are special.

I think they're--

Unknown Speaker: What's your authority for that?

Mr. Sidle: --I think just a general principle that Congress--

Unknown Speaker: What's your authority from this Court?

Mr. Sidle: --Well, I don't know that I can say there's any particular authority from this Court because it hasn't faced that issue.

I think this case faces that issue.

What this Court has in the copyright area has a clean slate, virtually.

It's got a one-sentence statement in the 1976 Copyright Act authorizing the award of attorney's fees.

It then has a whole line of cases in the civil rights area, but the civil rights area is a concept of a private attorney general bringing an action for remedying social problems and class-wide problems.

The copyright area is typically a dispute between two owners of property.

The typical copyright case is two copyright proprietors, one trying to stop the other from marketing their product, and that kind of property dispute should not use the analogy from a civil rights case where you're invoking principles of class discrimination and concepts of private attorney generals.

There's no concept of a private attorney general.

Unknown Speaker: Mr. Sidle, will you remind us where the language showed up first, because it is identical language?

Mr. Sidle: The language showed up first in the Copyright Act.

I believe the first Civil Rights Act was a '64 act, and then this Court had its Alyeska decision, and then there was the '76 Civil Rights Attorney's Fee Act that Congress enacted in response to that.

It's only in the very recent past that there's been any suggestion from even the courts that have the dual standard, and I think they're just make-weight, drawing an analogy to the civil rights statute.

There's no indication in the courts that they were viewing the plaintiffs in a copyright case as being like private attorney generals.

And I can just point to cases... and there's also a happenstance nature to this.

Who happens to be the plaintiff in a copyright case can be any one of a number of parties.

This Court has had cases before it... for example, Mills Music.

You had... a party who received music copyright royalties interpleaded the funds.

The contesting parties were both defendants in an interpleader action.

How do you decide who's the plaintiff if they prevail and there's a dispute there over whether the termination of a copyright under the '76 act terminated the music publishing company's right to royalties?

You also had the statute case, Community of Non-Violence v. Reid, which was a declaratory relief action.

It was a question of who owned the statue, and it involved the question of a work for hire.

Either of those parties could have filed that action.

Unknown Speaker: Mr. Sidle, isn't it true that in 190... this statute was enacted in 1909.

Isn't that when the language got in?

Mr. Sidle: Yes.

Unknown Speaker: And at that time, isn't it fair to assume that the typical case Congress was thinking about was sort of a garden variety infringement suit, or something?

Mr. Sidle: I think if we're looking back to 1909, the proper thing... the proper motive to project on Congress was that it was adopting the British Rule.

We have an American Rule that parties bear their own fees, and every first-year lawyer knows that the alternative to that is the British Rule.

At that time it was somewhat unusual to have statutes awarding attorney's fees.

Congress decided--

Unknown Speaker: But to argue for the British Rule, that statute has been on the books for 87 years, or whatever it is, and nobody's ever adopted the British Rule.

Mr. Sidle: --When you say, nobody's ever adopted the British Rule, we cite the Lewys case in our brief which says that that's what Congress did, and that's one of the pre-1976 act cases that Fantasy relies upon as authority that there was a dual standard.

I mean, in fact, there are judges who interpreted Congress as doing that.

Unknown Speaker: One judge.

Mr. Sidle: One judge.

Unknown Speaker: Well, Mr.--

--If they... I'm sorry.

Mr. Sidle, now, the British Rule generally awards attorney's fees as costs just as a matter of course to the prevailing party.

Now, I think we have some other circuits, do we not, that would say there is no presumption of the award of attorney's fees to a prevailing party?

Mr. Sidle: What the Ninth--

Unknown Speaker: The Third, maybe, and the Fourth Circuit, they consider a variety of factors.

What is it, do you think--

Mr. Sidle: --Well--

Unknown Speaker: --Congress adopted here?

Mr. Sidle: --I think that what the Ninth Circuit and the Second Circuit do with respect to plaintiffs is what Congress intended, and they just have not done it with respect to defendants.

They've adopted a different standard in this case for defendants.

We have in the Lanham Act and the Patent Act language that says... and those are the closest analogies we have to the Copyright Act.

We have Congress saying in exceptional circumstances--

Unknown Speaker: Well, excuse me, what I'm trying to pursue is whether you take the position that we should have just as a matter of course a policy that the prevailing party gets the fees--

Mr. Sidle: --Well, when you say, as a matter of course, the British Rule--

Unknown Speaker: --or do you approach it without any such presumption?

Mr. Sidle: --I believe that as a matter of general course... there would be exceptions, but generally the prevailing party should be awarded their fees.

I believe that's what Congress intended.

I believe that's consistent with the policy of the Copyright Act.

I think--

Unknown Speaker: If that was the intention of Congress in 1909, why did it use such neutrally permissive language?

Mr. Sidle: --Well, I think that's--

Unknown Speaker: I mean, the British Rule is a lot stronger than "may also award".

Mr. Sidle: --Well, I think that when we talk about generally award, or usually award, it's a bit slippery.

We're not talking about an open--

Unknown Speaker: Well, it's less slippery than leaving it in an entirely permissive posture.

Mr. Sidle: --Well, but that's also in the context of granting an authority where there's very few statutes that give that authority.

Unknown Speaker: Which would seem to me to counsel somewhat greater precision, if that's what they intended to do.

Mr. Sidle: Well, I think that what this... this Court is writing on a clean slate as far as what it should do in guiding the lower district courts, and I think--

Unknown Speaker: Mr. Sidle, in addition to the "may" language, it's a double... it's in its discretion.

If you just had "may", then your argument of the British Rule might be stronger, but

"the Court in its discretion may-- "

Mr. Sidle: --Well then, what's the rationale for the Ninth Circuit adopting the British Rule with respect to plaintiffs?

I submit to you that Congress, in looking at the Lanham Act and the Patent Act, where it says,

"under exceptional circumstances the court may award fees. "

intended that to be the standard there.

What has happened in the Ninth Circuit is, it's done two things.

With respect to plaintiffs they have adopted the British Rule, and with respect to defendants they've adopted the Lanham Act and the Patent Act standard for defendants.

Unknown Speaker: --Well, maybe you have a strong argument that whatever rule they adopted ought to be... it ought to be even-handed, but I don't see how you have an argument that it ought to be the British Rule.

Mr. Sidle: I think... I think that the strongest argument for that comes from the language in the Strauss Report that was submitted to Congress, and I believe it's cited in our reply brief.

There were only really two reports given to Congress, the Brown Report and the Strauss Report, and what they say about attorney's fees is very limited, but if the Court reads that language on page 17, I think you come away with basically an idea that at least what was presented to Congress was to award... a rule that was an economic award of making the prevailing party whole.

Unknown Speaker: But suppose I agree with you that what's sauce for the goose is sauce for the gander, but I don't agree with you that the British Rule was necessarily adopted, I just think that Congress meant to leave it to the trial judge, and the trial judge had a lot of discretion, but he shouldn't load it for one side rather than the other?

How do I dispose of this case then?

Mr. Sidle: Well, I think that you should maybe do a bit more than that and enlighten the district court judges that they should look to the policies of the Copyright Act in determining how to exercise their discretion.

Unknown Speaker: No, but assume... assume that the only thing I think that the court of appeals has done wrong is to apply a different standard to defendants than it applies to plaintiffs.

How do I decide this case?

Mr. Sidle: Well, you reverse this case--

Unknown Speaker: Why?

They... I don't know which standard... they should apply to both.

I just... why don't I just affirm and say but, you know, but in the future be sure that you treat plaintiffs and defendants alike?

I'm not sure they've treated you wrong.

The only thing I'm sure about is that they shouldn't treat you differently from plaintiffs.

Mr. Sidle: --Well, I think that then the Court will have cases in the future that... they're all over the place, and I think that you would--

Unknown Speaker: Well, that's how the statute reads... in its discretion.

I think the statute meant to leave it to the judge to decide.

Mr. Sidle: --Yes, in the context of a Copyright Act that has policies that it's trying to promote.

I think that in the case where you have a def--

Unknown Speaker: Well, is your point that the district judge did not exercise discretion because the district judge didn't believe that he had discretion with respect to a successful defendant?

Mr. Sidle: --Correct.

Unknown Speaker: So... but... am I correct in understanding that at one time the patent fee-shifting statute had identical words, and then Congress added the qualification, "in exceptional cases"?

Mr. Sidle: That I don't know.

Unknown Speaker: Of course, the--

--In any event, the Lanham Act and the Patent Act are the same except for the addition of the words, "in exceptional cases".

Mr. Sidle: Correct, and the Lanham Act also has the additional gloss that they put... shift the burden... normally they award fees to defendants, and not to plaintiffs, so they have a somewhat dual standard.

Unknown Speaker: Of course, the argument is made that even under the present dispensation in the Ninth Circuit, what's sauce for the goose is sauce for the gander, because each of the awards rests upon a fault theory.

Mr. Sidle: That's--

Unknown Speaker: Why is that unsound?

I mean, your argu... your response to that, as I understand it, is well, there may indeed be a fault justifying the award in each of the two sets of circumstances, but that rule should be avoided here because a defendant like my defendant is basically conveying a benefit upon society, but I take it you don't find anything analytically wrong with the theory that there is fault justifying both the plaintiff rule and the defendant rule.

Mr. Sidle: --Well, the existing Ninth Circuit standard has a different standard of fault, if you want to look at it that way.

If you're a defendant, the fault that you've got to show is either frivolousness or bad faith.

That's a very heavy standard.

Plaintiff essentially just has to win.

That's all the fault he has to show.

Unknown Speaker: Because if the plaintiff wins, the plaintiff has shown that there is a violation of a Federal statutory policy.

That's the fault.

Mr. Sidle: Yes, but I think that again gets off into the concept of wrongdoing in a business statute.

The statute... in the copyright area you have defendants--

Unknown Speaker: Well, they're not saying that you're... you know, that you're morally reprehensible, or that you're going to be dammed for eternity.

They're simply saying that the... that the defendant who loses has violated a statutory policy, and that's important.

It's just as important as avoiding frivolity by plaintiffs.

Mr. Sidle: --Okay, I accept all that, but then that finding of civil liability is a sufficient finding of wrongdoing to award fees to a prevailing plaintiff.

You posited some degree of fault.

All he has to do is win, whereas the defendant, who may be promoting policies that this Court has recognized, the value of having works in the public domain... I dare say that over the last 20 years, every new technology case that has come before this Court, this Court has allowed the new technology to go forward rather than finding a copyright monopoly.

Now, are all of those defendants... they've done a public benefit.

They're creating works, they're prevailing parties, they should be entitled to their fees on the same standards as the plaintiffs, not based on a disbalanced fault scale, which is what happens right now in the Ninth Circuit.

We would suggest that this Court advise the district courts that in exercising their discretion they should look to the policies of the Copyright Act, and it's not a question of wrongdoing.

This is not a question of finding particular fault, but it's a question of whether the party involved has promoted the purposes of the Copyright Act, and a defendant author has promoted the purposes of the Copyright Act.

He's created an original work, an original writing, he's increased the access of the public to goods.

There may be other cases where other factors might come in where you don't have a defendant author, where the defendant is a restaurant owner who's broadcast radio signals, or something like that, but in this type of a case you have the exact kind of a person who the copyright laws have tried to encourage to create new and original works, and he has done exactly that.

He has created a new and original work, and he's prevailed in a trial that raised that very issue.

Unknown Speaker: May I ask you if you... what standard you would apply if the... as I understand it there are counterclaims in this case back and forth--

Mr. Sidle: Yes.

Unknown Speaker: --and there are some fairly important issues on which your client lost.

Mr. Sidle: Well, I dare say in every case there are motions and things... people don't win everything in a lawsuit.

Unknown Speaker: No, but supposing you had a counterclaim and you lost on a lot of... they spent a lot of time and attorney's fees on that.

Would the judge have had discretion to award fees against you on the portions of the case that they prevailed on?

Mr. Sidle: Well, I think there are several open issues on how the judge will go about determining the amount of fees in this case, and that may well be an appropriate thing for the judge to determine the amount of fees, what time--

Unknown Speaker: They can reduce your fees on issues you were not prevailing on, but my question is whether... supposing that they... even though on the bottom line you won in this case, that in some other cross-claims or counterclaims, they were successful on those, and there was much more attorney time and effort spent on those.

Could the net recovery go the other way?

Mr. Sidle: --No, I don't believe so.

I believe that we're the prevailing party in this case entitled to our fees, and the fact that there may have been some motions or other things that they prevailed on along the way does not turn them into a prevailing party.

Unknown Speaker: Suppose that one of our concerns is to avoid an interpretation that would generate excessive fees.

Suppose that we are concerned that fee statutes seem to create an incentive to increase attorney's fees.

Which interpretation should we adopt, yours or the respondent's?

Mr. Sidle: Well, I believe that an even-handed approach will have a dampening effect on litigation.

I mean, I think that's the general consensus of economists, but you can find an economist who can create a model for almost any view in this area, as you read those, but I think that's kind of the general consensus.

I think the argument in this case is that the Ninth Circuit statute results in encouraging more lawsuits being filed, and we're saying that's not really a proper copyright statute policy, to foment more lawsuits.

A proper copyright policy is to have serious copyright issues litigated and determined, and that is best done with an even-handed standard.

If there are no further questions, I'll reserve the balance of my time for rebuttal.

Unknown Speaker: Very well, Mr. Sidle.

Mr. Robbins, we'll hear from you.

Argument of Lawrence S. Robbins

Mr. Robbins: Thank you, Mr. Chief Justice, and may it please the Court:

Petitioner asks the wrong question in this case and provides two competing but I think equally mistaken solutions.

The question presented in this case is not whether the standard for prevailing defendants and prevailing plaintiffs ought to be the same, even-handed, or different... dual.

Unknown Speaker: Well, that's the question we granted certiorari on, Mr. Robbins.

Mr. Robbins: Well, I think, Your Honor, that the way the question was formulated was, should there be a dual standard and should the defendant receive its fees pursuant to a standard that says, do you get fees only when they're objectively unreasonable?

It is the last prong of that question, however it may have been formulated, that was in fact what the lower court decided.

The lower court did not decide this case by virtue of a rule that says, the standards have to be different, because there isn't a prevailing plaintiff in this case.

The ques--

Unknown Speaker: Certainly, the Ninth Circuit opinion gives one the impression that they thought that's what they were doing...

"with regard to Fogerty's argument that the existing Ninth Circuit standard should be abandoned in favor of the approach of the Third and Eleventh Circuits, this panel is bound by the existing circuit rule. "

--and then the preceding paragraph, they say there was no bad faith, therefore no attorney's fees.

Mr. Robbins: --Yes.

Mr. Chief Justice, the latter half of what Your Honor just quoted from the opinion is in fact the theory, the argument, the rationale of the lower court opinion.

That is to say, the Ninth Circuit decided this case against petitioner because it found, I think correctly, that plaintiff, although unsuccessful at trial, brought neither an objectively unreasonable lawsuit nor litigated in bad faith.

That's why we won the fee-shifting issue.

Whether... whether we would have won fees if we had been the prevailing party under the Ninth Circuit's standard for prevailing plaintiffs is, I think, a question not presented.

Now, it's true, Your Honor--

Unknown Speaker: Well, that's the question we granted certiorari on, that we took the case to decide.

Mr. Robbins: --Well, Your Honor, I'm prepared and happy to address the question of what standard should apply to prevailing plaintiffs.

All I'm suggesting, Your Honor, is that the piece of the question presented, that in fact constitutes the rationale for the decision below, is in my judgment the only question that is really before the Court.

In other words, Your Honor can... this Court can affirm--

Unknown Speaker: Mr. Robbins--

Mr. Robbins: --I'm sorry.

Unknown Speaker: --this Court is concerned with disparity among the circuits, and it has the civil rights legislation, and it has the Lanham Act and the Patent Act, and if the question is, as the one on which the Court granted cert, which of these models is the appropriate one for the Copyright Act... now, we have statutes using similar language.

Why should this case... why should the Copyright Act be bracketed with the civil rights legislation rather than with the trademark and patent legislation?

Mr. Robbins: Well, Your Honor, I don't actually think you have to make... bracket it with one or the other.

It seems to me that... first of all the Lanham Act... and let me go back to a question you asked my adversary.

In fact, it is the case that the Patent Act was amended to incorporate the language, "exceptional circumstances".

Unknown Speaker: Before that, it was identical to the Copyright--

Mr. Robbins: It was indeed.

Unknown Speaker: --And was it interpreted, when it was identical to the copyright language, with a tilt toward prevailing plaintiffs?

Mr. Robbins: It was interpreted with, I think, no tilt at all, but interpreted with respect to prevailing defendants the same way... the same way that the Ninth Circuit interpreted this statute and so that, had this been a Patent Act case adjudicated under the prior version of the patent law, this case with respect to the prevailing defendant would have come out in exactly the same way.

Unknown Speaker: Then why did Congress add, in exceptional cases, just to conform the law to what the courts were doing?

Mr. Robbins: Exactly, and they said so in exactly those words, Justice Ginsburg.

They said, we want you to know that the courts have been getting it right.

We want you to know that the courts have correctly construed the statute, and that even though the words, "exceptional circumstances", have not previously appeared in the statutes, the courts have been getting it right.

Unknown Speaker: What year was that changed?

Mr. Robbins: I believe it was the amendment of either '46 or '52.

Unknown Speaker: Then, when Congress redid the Copyright Act and left it without the qualification, wouldn't the implication be, it wanted to have a standard that would be equal on both sides, but not limited to exceptional cases?

Mr. Robbins: I think not, Your Honor.

I think in fact the presumption is exactly the opposite, and let me turn to that argument in particular.

The present version of section 505 is essentially unchanged from the version that appeared in the 1909 act with respect to the attorney's fees.

The language has been... they changed some dependant... the order of some dependant clauses, but basically the text is identical, unchanged, and prior to 1976, that language with respect to prevailing defendants, which is what Mr. Fogerty is this morning, that language was construed in dozens of cases.

Case after case, circuit after circuit, the courts grappled with what that language meant, and in every single case of a prevailing defendant, without exception, a prevailing defendant got his attorney's fees if, but only if, the plaintiff's case was objectively unreasonable, and that is the standard that the Ninth Circuit applied to petitioner, and that's why petitioner is here today asking for his attorney's fees.

Unknown Speaker: Mr. Robbins, can I interrupt?

I just want to ask you if your... you said there was no change in the language in '76.

Mr. Robbins: That's correct, Your Honor.

Unknown Speaker: Is it not true that before '76 costs were awarded as a matter of course, but after '76 it was within the discretion of the trial court?

Mr. Robbins: That's exactly right.

Unknown Speaker: And is it not true that attorney's fees are now a part of costs?

Mr. Robbins: And were even before that.

Unknown Speaker: But doesn't... if they were awarded automatically before, and now as a part of a discretionary award, isn't that perhaps of significance?

Mr. Robbins: No, I think actually it isn't, Justice Stevens.

Attorney's fees were always discretionary, even when costs were mandatory, so the earlier version, the precursor to which Your Honor adverts, the 1909 section 40 and later section 116 of the 1909 act, said that you get your fees... you get your costs automatically if you prevail, and you may get your attorney's fees as part of costs... you may.

The costs--

Unknown Speaker: But now the whole package is, it may.

Mr. Robbins: --All of it is discretionary, but what I think that tells you is that the doctrine, the presumption of ratification... this goes back, Justice Ginsburg, to your question.

The presumption of ratification is as compelling as you can imagine, because in contrast to many of the Court's other ratification cases... and they're as recent as last year's opinion for the Court in the Keene case, where the presumption that Congress knows of and ratifies a prevailing construction of identical language when it reenacts that language, that presumption has special force, I suggest, in this case, because here, the 1976 act was a dramatic overhaul of the Copyright Act, top to bottom.

In fact, they even amended, Justice Stevens, the piece of the cost and fee provisions that dealt with costs, but what they left alone was the one and only part of the statute that is before the Court this morning, and they left it alone in the face of--

Unknown Speaker: But if you say they were ratifying the rule that existed before, one rule was that the parties were not... plaintiffs and defendants had the same standard and another rule was they didn't have the same standard.

Which of the two were they ratifying?

Mr. Robbins: --Well, unless I'm misunderstanding your question, Justice Stevens, no court to my knowledge ever said, under the fee provision of the 1909 act, the attorney's fee provision, no court had ever said plaintiffs... prevailing plaintiffs and prevailing defendants get them on the same terms.

Unknown Speaker: But that's what the Register of Copyrights said when she talked about this issue in 1976 She used precisely the same standard to talk about both.

It's on page 49 of your brief.

Mr. Robbins: Well, I think if you're adverting.

Justice Stevens, to the six--

Unknown Speaker: "Courts have generally denied fees of... awards of attorney's fees where the losing party had solid grounds for litigating his claim or defense. "

Mr. Robbins: --That's correct.

Unknown Speaker: Which certainly applies the same standard for both.

Mr. Robbins: I think it does, but again, I don't want to beg the question that has been formulated by petitioner--

Unknown Speaker: I know you don't want us to answer whether there's a different rule or not, because you think you win anyway--

Mr. Robbins: --But what... but--

[Laughter]

Unknown Speaker: --but we are interested in whether there's a difference--

Mr. Robbins: I understand.

I understand, and I'd like to make a defense for... and I propose to make a defense for prevailing plaintiffs this morning as well, which we've been a prevailing plaintiff.

Unknown Speaker: --But I take it if you were prevailing plaintiff and the same standard applied, you would not get fees--

Mr. Robbins: If--

Unknown Speaker: --in this very case.

Mr. Robbins: --If the standard for prevailing plaintiffs, Justice Ginsburg, were that prevailing plaintiffs, like prevailing defendants, get their fees only when the opposing side's arguments were merit... were objectively unreasonable, I suspect we would have had a hard time getting our attorney's fees.

Let me also say that that is in fact not the standard for prevailing plaintiffs even in the most generous pro-plaintiff circuits, so that the premise of the British Rule that petitioner asked for this morning in fact rests on a false premise even about what's true for prevailing plaintiffs.

But Justice Stevens, to get back to the Register's report, what the Register of Copyrights said in '61 is that the courts have generally denied award of attorney's fees where the losing party had solid grounds for litigating his claim or defense, and that is a correct statement of the law as to prevailing defendants, and my submission on ratification is simply this, that that was the state of the law not just in most cases, but I defy... I defy my colleague to find a single exception to that doctrine.

It sure isn't Lewys v. O'Neill.

Unknown Speaker: Mr. Robbins, in the sentence before, you suggest that the Register is talking only about the awarding of fees to the defense, but in the preceding sentence, she says the discretionary power of the courts to require the losing party to pay a reasonable... is intended to discourage unfounded suits and frivolous defenses.

It sounds like she's talking about both plaintiffs and defendants.

Mr. Robbins: I think that's quite correct, Mr. Chief Justice, she is, and I think that--

Unknown Speaker: It really can't have been ratifying.

I mean, her view was... if her view is accepted, Congress certainly did not ratify the view that you say obtained before 1976, that only plaintiffs got their law... got their attorney's fees.

Mr. Robbins: --Well, in fact, Mr. Chief Justice, that's actually not my position on plaintiffs at all.

I mean, defendants got attorney's fees before '76, and plaintiffs did.

They tended to get them under different circumstances, and I think my reliance on what the Register said goes only to the question whether the Ninth Circuit standard that was applied in this case for prevailing defendants is correct.

Now, it's true that the Register also made a statement summarizing what she took to be the law for prevailing plaintiffs as well.

I would respectfully suggest that her assessment of the state of the law as to prevailing plaintiffs was not correct.

Unknown Speaker: Well, you shouldn't have quoted so much of her report, then.

Mr. Robbins: Well, I--

Unknown Speaker: But isn't that same assessment made by Professor Brown in his 1960 study, when he said, or if the losing defendant raised real issues of fact or law--

Mr. Robbins: --I--

Unknown Speaker: --If losing defendant raises real issues of fact or law, then he doesn't pay the plaintiff's counsel fees.

That's quite a different standard from the one in Christiansburg.

Mr. Robbins: --Again, that statement is in the Brown report, and it may well be that there were cases with respect to prevailing plaintiffs that had a somewhat less generous standard than any sort of presumptive award for prevailing plaintiffs, and I don't want to overly resist the question that I know the Court is interested in, but I suggest that whatever the rule for prevailing plaintiffs may ultimately be, the same as defendants or different from defendants, or marginally different from defendants, this defendant, the petitioner, is still going to lose, because--

Unknown Speaker: Well, Mr. Robbins, maybe that's so, but as others have suggested here, we are concerned with the rule, and there are at least some members of this Court that think the text of the statute is where you start and where you look, and it's a little hard to read a dual standard into that text--

Mr. Robbins: --Let me--

Unknown Speaker: --and maybe it's time we reiterated that to a Congress--

Mr. Robbins: --Well--

Unknown Speaker: --that is concerned with writing these things, and if a dual standard isn't set forth, why should we strain to find one--

Mr. Robbins: --Well--

Unknown Speaker: --particularly in a context like this statute, where there can be policies on either side that as a public matter need supporting?

Mr. Robbins: --Well, let me address that directly, Justice O'Connor.

It seems to me, first of all, that whatever... even if it's an even-handed standard, and I dislike the metaphor, because it suggests that the other view is a somehow underhanded... underhanded standard, and one certainly doesn't want to be called not even-handed... I actually believe... and this harkens back, Justice Souter, to a point that you made earlier.

I actually believe that what is called a dual standard, or what I would prefer to call a standard that says, in essence, that the plaintiff will generally receive its fees unless certain factors are met, whereas a prevailing defendant gets its fees only when the plaintiff's lawsuit is objectively unreasonable or litigated in bad faith, is in fact even-handed in the sense that matters, and let me turn to what I take to be, I submit this morning, the controlling decision of this Court after which one needs, I think, to look no further, and that is this Court's decision in Zipes.

Zipes is a case in which you have a prevailing civil rights plaintiff, a plaintiff that by petitioner's view this morning is advancing a public policy of surpassing, almost unequalled importance.

Nevertheless, that prevailing plaintiff did not get its attorney's fees.

It didn't get it's attorney's fees because the losing intervenor in that case was held not to have commit... be a wrongdoer within the required sense of fee-shifting provisions.

What the Court said in Zipes is that the rule for a fee-shifting should respect... and I'm quoting now from the Court's language...

"the crucial connection between liability for violation of Federal law and liability for attorney's fees under Federal fee-shifting statutes. "

I think that is a rule that decides this case.

When a defendant loses a copyright infringement case, that constitutes a finding that the defendant violated statutory law, not that he's a bad person, and that gets... deals with the quibble in the reply brief that unconscious copying doesn't make you a bad... a wrongdoer.

I don't mean that, you know, literally someone, you know, who's... this is not sort of a moral... a sense of blameworthiness in that sense.

It is someone who has violated the law, someone who ought to be assessed attorney's fees.

Conversely, when a plaintiff acts unreasonably, or litigates in bad faith, or brings a frivolous lawsuit, he, too, is abusing the machinery of the copyright system.

Unknown Speaker: Mr. Robbins, that would be a far more impressive argument if that were the rule with respect to patents and trademark, but you concede it isn't, and what I find so difficult to understand is why the regimes for patent and trademark are not the ones that we should look to.

Mr. Robbins: Well, with respect to trademark, I'd like to suggest, Justice Ginsburg, that this Court's discussion in footnote 19 of the Sony case in which the Court said that the trademark law lacks the necessary kinship with the copyright law to be a workable analogue--

Unknown Speaker: Then let's go to the patent law, where you told me that before the change for exceptional cases it was identical and it was interpreted the same way for prevailing plaintiffs and prevailing defendants.

Mr. Robbins: --Right.

Unknown Speaker: So why isn't that the closest model for us?

Mr. Robbins: Well, I think the answer is that with respect to the patent law, it may not... I guess I can define some policies in the patent area, for example, the greater ease with which you might innocently infringe on a patent, and so there's a fear that, you know, fee-shifting too readily would sweep up innocent--

Unknown Speaker: Why is that so?

Mr. Robbins: --defendants.

Unknown Speaker: I'm sorry, I have difficulty following that.

It seems in this very case we're talking about the same composer, and a question of whether there was an infringement of something that he himself created.

That would be... I can't imagine anything that's more difficult than that, to determine whether you've been careful enough not to copy yourself too much.

Mr. Robbins: Well, I'm not suggesting this wasn't... you know, a case without its difficulties.

Unknown Speaker: But is there anything to support your notion that as a general matter it's easier to infringe a patent than a copyright?

Mr. Robbins: Well, I mean, I don't... I'm not insisting on those differences.

I mean, obviously in the copyright area there is the notion of copying, which obviously has a notion of deliberateness to it, and I think... I suspect that there is less reason to believe, in the copyright area... though this may not ultimately be true if you looked at every individual litigation, I suspect there may be a sense in which, in the copyright area, you are less likely to sweep within your net defendants who have acted completely by happenstance and just happened upon the exact same text, or the exact same song.

But I think, Justice Ginsburg... and I really do need to recur to this basic point.

In the patent area as well, the standard for prevailing defendants is the same as the standard that was applied to Mr. Fogerty.

It's the same.

Patent defendants do not get their fees unless the patent claimed by the plaintiff was objectively unreasonable or frivolous, or litigated in bad faith, and that's the standard on which this case was decided, and that's the standard on which we win, and if anything, the patent law, I think, is good for the piece of the case that I believe is truly before the Court.

At the end of the day, it may be that the analogue to the patent cases suggests a closer harmony between plaintiffs and defendants.

Unknown Speaker: That really is hemming in the discretion.

If you just looked at the statute that says may in its discretion, what you've just said, there really isn't any discretion.

It has to be an extreme case, even though... and this statute doesn't use the word, in exceptional cases, as the Patent Act does.

Mr. Robbins: That's true, Justice Ginsburg, but truly that was equally the case in the Zipes... in Zipes as well, where the fee-shifting provision of title VII was... on its face conferred significant discretion and in fact this Court... the opinion--

Unknown Speaker: Mr. Robbins, wouldn't you say that it may be not the typical, but in a large number of copyright cases the standard would be met, because it's perfectly obvious there was copying and they just didn't expect to get caught, or something?

Aren't there a lot of very small-time suits in this area where there really isn't a defense, and there has to be a motive, but the amount involved isn't enough to justify the recovery unless the copyright owner brings a fee... gets fees, so that even... you could say even in a large number of ordinary cases, fees are appropriate in this area for the plaintiff?

Mr. Robbins: --Yes.

I mean, I think... I mean, I think that's right.

Unknown Speaker: That's why it seems to me you might have a different language than you would in the patent case, and the standard could still be the same.

Mr. Robbins: I think that's correct.

I think ultimately the circuits that have distinguished between plaintiffs and defendants have focused on the need to create the requisite--

Unknown Speaker: But there might be more of a question about whether the item was copyrightable in the first place, because isn't there a rather more stringent test that a patent has to pass than a copyright has to pass?

Mr. Robbins: --I believe that to be the case, but I don't want to overstate my--

Unknown Speaker: So it's one thing--

Mr. Robbins: --knowledge of patent law.

I think the point, Justice Stevens, that you get to, is that the greater readiness of some circuits to shift fees towards prevailing plaintiffs reflects a view that is sort of a matter of economic reality.

That incentive is needed to provide... to encourage the plaintiff to bring the lawsuit to litigate his claim and to enforce and therefore effectuate the purposes and policies of the Copyright Act as a whole, so let me turn--

Unknown Speaker: --How about the purpose of the Copyright Act of not allowing the copyright holder to extend that exclusivity too far?

Mr. Robbins: --Well, I think... I don't dispute that there is some public purpose served--

Unknown Speaker: Some of them written right into the statute, like the fair use defense?

Mr. Robbins: --I think that's right, and if a defendant has a fair use defense, the fair use text will make--

Unknown Speaker: Wouldn't that be vindicating a public policy?

The defendant who was saying, this is fair use and this is what Congress says is good for the public?

Mr. Robbins: --I think that's right.

I think when a defendant vindicates a fair use he is serving a purpose that is plainly written into section 107 of the act.

But I also think, Justice Ginsburg... I also think that the Ninth Circuit standard allows sufficient adversarial play in the system for just exactly the reasons that this Court in Christiansburg Garment thought the fee-shifting provision of title VII gave defendants a robust... a sufficient incentive to litigate their legitimate claims.

The fact of the matter is that a defendant in a copyright infringement action within the Ninth Circuit standard has all the incentive in the world to do a really good job, and this lawsuit is ample proof of that.

After all--

Unknown Speaker: That's true of defendants generally, right?

Mr. Robbins: --I think it is true of defendants generally, but I also think that where you have a fee-shifting provision that allows the defendant... in the event that he shows the plaintiff's case to be objectively unreasonable, that gives him the incentive to fight that much harder to make the requisite showing.

I think there's very little evidence that any defendants in copyright infringement cases are hiding their light under a bushel on the ground that they may not have exactly the same fee-shifting standard that prevailing plaintiffs do, and surely that is not true of this petitioner.

The fact is that a defendant has the same incentive that this Court thought in Christiansburg Garment was sufficient to warrant the construction of the identical language in section 706(k) of title VII that this Court in Christiansburg Garment construed to have the same standard that the Ninth Circuit applied for prevailing defendants under section 505.

Let me just recur again to this Court's admonition that similarly worded fee-shifting provisions ought to be similarly construed, and the most similar fee-shifting provision that this Court has construed is the fee-shifting provision in title VII.

Unknown Speaker: Yes, but of course, we didn't construe it till long after the copyright fee-shifting statute was drafted, so Congress could... you cannot say Congress could have predicted we would have construed the Civil Rights Act in the future the way we did.

Mr. Robbins: On the other hand, at the time that the Copyright Act was enacted, they also enacted section 1988, the same Congress, and both of those... and 1988 has also been construed by this Court to have the same standard for prevailing defendants.

Unknown Speaker: But not until after it was passed.

Mr. Robbins: I'm sorry, Your Honor?

Unknown Speaker: But not until after it was enacted.

Mr. Robbins: Well, I think that's right, but I also think that the policies and purposes that this Court identified in Christiansburg Garment, and that explained why that identical language was given exactly the construction that the Ninth Circuit applied to section 505 for prevailing defendants, those policies are ones that I suggest transcend the particular statutory provision in which the fee-shifting statute happens to be embedded.

Unknown Speaker: Oh, I don't know, we spoke in Zipes and we spoke in a number of civil rights cases of private attorneys general.

I don't think anybody had that notion in 1909 and frankly I don't consider the suing copyright holder as being in any sense a private attorney general vindicating the public, not the way we regard civil rights plaintiffs.

Mr. Robbins: No, I think that's correct, Justice Scalia, and I don't want to overstate the similarities, but I also don't have to, because Christiansburg Garment turns not simply on the metaphor of private attorneys general, although to be... not to put too fine a point on it--

Unknown Speaker: You're going to do it anyway.

Mr. Robbins: --I'm going to do it anyway.

[Laughter]

I think, in fact, this Court's copyright jurisprudence makes the central point that copyright plaintiffs are suing not only, and for that matter not even merely in their own interests, though surely that's what they do, but also, and more importantly, to advance a larger--

Unknown Speaker: Mr. Robbins, do you attribute any significance to... the image of the civil rights plaintiff is the individual alone against the Government, against the corporation, but that doesn't translate in the copyright and patent area, where, as in this very case, the plaintiff is a corporation, and the defendant is an individual, so the two don't fit together very neatly, do they?

Mr. Robbins: --In fact, Justice Ginsburg, respectfully, I do not attribute much significance to that distinction, and let's step out of the title VII context and turn to 1988.

1988, which also has the same language, and also gets construed exactly the way the Ninth Circuit construed section 505 for prevailing defendants... 1988 is the attorney's fee provision that allows 1983 prevailing plaintiffs to get their attorney's fees, and as Your Honor knows, 1983 has been the engine for recovery for a number of plaintiffs who don't look anything like the typical civil rights individual struggling against the wealthy corporation.

Golden State, you know, the Virginia Hospital Association, these are wealthy corporate plaintiffs who had the wherewithal to bring that lawsuit.

They won it under 1988... 1983, and in some cases have gotten their attorney's fees, and I don't think that the metaphor translates very well, nor do I think that 505 should be specially carved out for one type of plaintiff, another type of defendant.

The statute I think deserves the kind of categorical construction that the analogies in similarly worded fee-shifting provisions warrant.

Unknown Speaker: Thank you--

Mr. Robbins: If there are no further questions--

Unknown Speaker: --Mr. Robbins.

Mr. Robbins: --Thank you.

Unknown Speaker: Mr. Sidle, you have 10 minutes remaining.

Rebuttal of Kenneth I. Sidle

Mr. Sidle: Thank you, Your Honor.

I would like to respond to a couple of points.

The Zipes case is somewhat difficult to conceptualize as a copyright case, but if we did, I think it would be fairly easy to see that that's a good case that illustrates what the rule should be in copyright cases versus what the rule is in civil rights cases, and I submit that because there's a dual standard in civil rights cases, this Court had its problems in Zipes.

If you had had an even-handed standard, it wouldn't have been that difficult, but if we have an intervenor, let's say, in a copyright case that comes in and says, hey, but I have a copyright, and that keeps the plaintiff from bringing this case, and the plaintiff prevails against that, on an even-handed standard he would get his fees.

The problem in Zipes was, you in effect had two people that were in the category of the favored plaintiff in a civil rights case, and maybe Justice Blackmun's dissent was correct that the defendant TWA should have won the costs.

That at least would have been consistent with the policy.

But I think that the Zipes case is a strong argument for why, in the copyright area, where you just have businesses fighting over control of literary properties, that there should be an even-handed standard.

Now, opposing counsel says that from the patent area we have the law applied that was applied to the defendant in this case, and that's correct.

The only difference is that in the patent law it expressly says that it will only be under exceptional circumstances that fees are awarded, whereas in the copyright law, it just says the court may, without any requirement of exceptional circumstances.

Unknown Speaker: Well, how was it interpreted before that language was adopted?

Mr. Sidle: The patent cases?

Unknown Speaker: Yes.

Mr. Sidle: It's even-handed, and that's what we're asking for, is an even-handed standard, and I think Justice Ginsburg's point is well-taken, that Congress decided to change the patent law to make it only exceptional circumstances.

It did not make that decision when it passed the 1976 Copyright Act.

It did not put exceptional circumstances--

Unknown Speaker: No, but they argued it had been so construed up until... I mean, even before the language went in the statute.

Mr. Sidle: --But that, I submit, is... and I also submit, despite the analogy of patent law being closer to copyright than civil rights cases, I think there are also some unique considerations in copyright cases.

The simple fact is that prior to 1976, the cases were all over the board.

You couldn't say that there was certainly any dual standard that was clear.

I would point out, the Senate report on the Civil Rights Attorney's Fee Award Act in 1976, which we cite in footnote 16 of our reply brief, the Senate report goes on and recites the history of the '64 Civil Rights Act, the Alyeska case, and then the dual standard, and then it goes on to say that there are other statutes where a similar dual standard has been interpreted by the courts, and it cites the Water Pollution Control Act and the Marine Protection Act as other places where there's a dual standard.

It doesn't mention the Copyright Act, and that was enacted the same year as the Copyright Act, so I don't see how you can imply that Congress had in mind that there was a dual standard that they were ratifying by enacting the 1976 Copyright Act.

There is an argument that defendants have sufficient incentives to litigate cases, and an example is given that Fogerty defended this case.

Well, I dare say that plaintiffs have a sufficient interest to litigate cases whether they get preferential treatment in attorney's fees or not.

Typically, plaintiffs in copyright cases are trying to reap a substantial reward that the defendant is reaping.

If there's any common denominator in copyright cases, it is that the defendant has been successful.

Plaintiffs don't bother suing an unsuccessful writer, or author, or songwriter, and they are looking at their pot of gold, and you can make the same... just turn the mirror around and say the same things to plaintiffs.

Congress has seen fit in certain circumstances to put its thumb on the scales.

In the copyright laws we have statutory damage provisions, which they say to plaintiffs, well, maybe there's not enough money here to bring a suit, so we'll specifically enact statutory damages that you can enact, and that gives a further incentive to the plaintiff.

So here we have Congress saying we're going to put the thumb on the scales here, and maybe there's other provisions where we extend the duration of copyright, and we do various things to favor copyright owners, but when it comes to attorney's fees, it doesn't do that.

It doesn't put its thumb on the scales, it simply says the court may award to the prevailing party, and that's what the court should require be done in this case.

Thank you, Your Honors.

Chief Justice Rehnquist: Thank you, Mr. Sidle.

The case is submitted.

Attribution:

The Oyez Project

Featured:

Shalala, Secretary Of Health And Human Services v. Schaefer - Oral Argument

Fri, 09 Jan 2009 14:49:27 +0000

Case:

Shalala, Secretary Of Health And Human Services v. Schaefer

Media File:

92-311_19930331-argument.mp3

Related Transcript:

1992_92_311_argument.xml

Transcript:

Argument of William K. Kelley

Chief Justice Rehnquist: We'll hear argument next in No. 92-311, Donna E. Shalala v. Richard H. Schaefer.

Mr. Kelley.

Mr. Kelley: Mr. Chief Justice, and may it please the Court:

The question in this case is whether respondent's application for attorney's fees under the Equal Access to Justice Act was filed on time.

The case involves the interplay between two statutes, section 2412(d) of EAJA, and 42 United States Code, section 405(g), which is the provision in the Social Security Act that gives unsuccessful applicants for benefits a right to bring a cause of action challenging that decision in district court.

Respondent in this case applied for benefits, and his claim was denied at all levels of the administrative process.

He then filed a civil action pursuant to section 405(g) in district court.

The district court concluded that the agency had made a mistake and reversed the decision denying respondent benefits and remanded the case for further proceedings.

It is undisputed here that the court acted pursuant to sentence four of section 405(g).

That sentence gives district courts the authority to enter a judgment affirming, modifying, or reversing the decision of the Secretary with or without remanding the case as well.

Respondent did not at that time file his EAJA fee application, but instead waited until after he was awarded benefits on remand and filed an application at that point.

We contend that that application was untimely.

Under the language of subsection (d)(1)(B) of EAJA, a fee application must be filed within 30 days of final judgment in the underlying civil action for which fees are being sought.

Subsection (d)(2)(G) of EAJA, in turn, defines the term final judgment to mean a judgment that is final and not appealable.

Sentence eight of section 405(g) says that the judgment entered pursuant to sentence four is a final judgment.

It follows under the language of these statutes that respondent's fee application was due at the time that the sentence for judgment was entered and this case was remanded to the Secretary.

Now, this Court's recent decisions in Sullivan against Finkelstein and Melkonyan against Sullivan confirm our reading of the statute as correct.

In Finkelstein, the Court held that sentence four remands constitute a final judgment and that such judgments are appealable.

In that decision, the Court said that any action a court takes under sentence four must include a judgment, whether or not a remand is included as well.

That conclusion followed from the language of sentence four which the Court in Finkelstein said, quote, directs the entry of a judgment.

The statute does not say that a district court can do anything under sentence four without also entering a judgment.

Unknown Speaker: Well, what if a court makes a mistake?

Isn't that possible?

I mean to say that the court should have entered a judgment is not necessarily to say that the court did enter a judgment.

Mr. Kelley: In Finkelstein, Justice Scalia, that very argument was made, and the Court rejected that point saying that regardless of the label the district court attaches to its order, it is a judgment and it is final and effective as such.

Unknown Speaker: It shall be deemed a judgment whether the court says so or not.

Mr. Kelley: Yes, otherwise a court would simply be free to act contrary to what the statute permits.

Now, sentence six of section 405(g) stands in contrast to sentence four, for in that sentence Congress gave district courts the authority to remand cases without entering judgment and also to require the Secretary to return to district court after the remand for further proceedings in district court, at which point a judgment would then be entered.

The unanimous opinion a year later in Melkonyan confirmed... further confirms our reading here.

In Melkonyan, the Court said explicitly that section 405(g) only authorizes district courts to act pursuant to the procedures of sentence four or sentence six.

There is no room in that statute for a hybrid procedure, such as the one respondent urges here.

Unknown Speaker: Well, now, Mr. Kelley, I think that in the Hudson case, which was the first, that the Government conceded there was no final judgment for Equal Access to Justice Act purposes until the administrative proceeding on remand was concluded.

Mr. Kelley: That is correct, Justice O'Connor.

We did concede that in that case.

This Court's decisions in Finkelstein and Melkonyan following Hudson have--

Unknown Speaker: Well, Melkonyan certainly said it wasn't overturning Hudson.

Mr. Kelley: --That is certainly true as well, but Melkonyan referred to Hudson as encompassing a narrow class of cases.

Unknown Speaker: On sentence six.

Mr. Kelley: And our submission is that Hudson applies only in sentence six cases because under the terms of sentence four, as the Court interpreted that sentence in Finkelstein and Melkonyan subsequent to Hudson, the Court has concluded that there is no such jurisdiction.

Unknown Speaker: And just what is it you think that one of these Social Security claimants should do who wants to have an EAJA claim?

I mean, it's... there has to be some way to work this out.

Congress intended under EAJA that these claimants, if the Government's position was substantially unjustified, are going to recover their costs.

And just how is it you think this is going to work?

Mr. Kelley: We quite agree that Congress intended applicants who succeed in litigation against the Government and obtain benefits in which in our case... our position was not substantially justified to get benefits.

Unknown Speaker: And the time of the remand, they don't know whether they're going to obtain benefits.

Mr. Kelley: That is quite true, and that problem is easily solved, we would submit, simply by filing an application at the time Congress has required under the terms of the two statutes.

That application can be held in abeyance until after it is clear whether the person is a prevailing party and resolved at that time.

Unknown Speaker: It can also be held in abeyance for the duration of life on this planet so far as the statute is concerned.

Isn't the problem there that if you do that, you have no time limit disciplining the point at which the claimant has got to come in for the fees?

Mr. Kelley: I don't believe that is a problem, Justice Souter, for this reason.

The claimant, after proceedings on remand have been finished, has every incentive to rush back to district court for his fees.

And I would also point out that under respondent's view there is similarly a problem of no time limit.

Under respondent's submission, the burden is on either the Secretary or the claimant to go back to district court at some unspecified time, without time limit, after the remand proceedings are completed and obtain a judgment.

Unknown Speaker: Well, that may be, but there's a third possibility in which the claimant who cannot at the point of remand certify that he is entitled as a winner, that the claimant, in effect, is going to take the benefit of the tolling of the statute until the prevailing... his prevailing party status is clear, and then the 30 days runs.

Mr. Kelley: Well, that's precisely... in effect, I should say, precisely the submission the Court rejected in Melkonyan, which is that matters should stand in abeyance until the proceedings on remand are finished and the decision of the administrative agency will demonstrate whether the party is a prevailing party, and the time period should then start then.

That... the Court rejected that position of the Government in that case unanimously.

And it seems to me that that position would have workability problems as well because it would be... it will be an inchoate time which... at which the fee application would be due.

Congress made a very deliberate decision here to put a strict 30-day limit--

Unknown Speaker: Why would it be... I'm sorry.

No, you go ahead.

I was going to say why would it be an inchoate time.

I mean, you'd have to determine it in relation to the conclusion of the administrative proceeding.

Mr. Kelley: --I suppose that is correct, and perhaps I misspoke, but the point remains that the Court in Melkonyan concluded that that very regime was unauthorized by the statutes.

The Court in Melkonyan said that EAJA requires the time period to be measured from the judgment of a court.

Unknown Speaker: But, Mr. Kelley, if we're talking about what EAJA requires, it... the provision says within 30 days of final judgment, the party seeking the award shall submit to the court an application for fees, not just an application for fees, but an application which shows that the party is a prevailing party and is eligible to receive an award under this subsection and the amount sought, including an itemized statement from any attorney or expert witness representing or appearing in behalf of the... blah, blah, blah, and so forth.

That can't possibly be done at the time you say it's supposed to be done because he won't know what his attorney's fees are.

Mr. Kelley: Oh, but he will, Justice Scalia.

At that point, he will know how much time and money has been spent in litigation, and--

Unknown Speaker: In the court of appeals.

Mr. Kelley: --In the district court.

Unknown Speaker: In the district court.

But... well, you do not contend then that he's entitled to any of the fees from what occurs on remand.

Mr. Kelley: We contend that he is not entitled to such fees in sentence four cases if Hudson is limited as we have submitted.

Even if Hudson is not limited in that fashion, however, it is a small matter.

Unknown Speaker: Well, then why do you have to wait?

Why do you... oh, you have to wait for the completion of the proceedings below not in order to get the fees, but simply to be sure that he's the prevailing party.

Mr. Kelley: That's exactly right.

Unknown Speaker: I see.

I see.

That's a real limitation on Hudson.

Hudson was, in fact, despite what we said in Melkonyan, a sentence four remand, wasn't it?

Mr. Kelley: It has never been adjudicated as such, but we agree that it was, yes.

And--

Unknown Speaker: And that case held the litigant was entitled to fees for the agency proceedings, didn't it?

Mr. Kelley: --The case did so hold, and we would submit that the Court's subsequent decisions in Finkelstein and Melkonyan have demonstrated that the statutory authorization for the district court to retain jurisdiction in the manner the Hudson court contemplated is limited to sentence six cases.

Unknown Speaker: Is that a sub silentio overruling of--

Mr. Kelley: Well, I don't believe it's an overruling, Justice Kennedy.

We believe it has been limited in... just by terms... in terms of the logic of the Court's subsequent cases.

Unknown Speaker: --You say that there's just no fee allowable for attorney's fees and other expenses before the agency--

Mr. Kelley: Well--

Unknown Speaker: --either... or... either initially or on remand.

Mr. Kelley: --Well, it's quite clear we believe, Justice White, that initially that is certainly true.

5 United States Code, section 504(c) governs fees for adversary adjudication before agencies, and these are not adversary adjudications.

And the Hudson court did not suggest that you're entitled to fees for the initial administrative process.

But under our submission in this case, it would... we do contend that the fees on remand in sentence four cases are inappropriate because of the Court's subsequent decisions in Finkelstein and Melkonyan.

I would hasten to add, however, that that is not necessary to our prevailing in this case.

It is a small matter for a fee applicant to supplement his fee application that is already on file if the court subsequently determines that he's entitled to fees.

Unknown Speaker: Well--

--True, but it makes mush of subsection (b), which obviously anticipates that at the time you... within that 30 days, when you have to appeal the final judgment, simultaneously have at hand the amount of your fees.

That's what it assumes--

Mr. Kelley: Well, it assumes that you will know what amount of fees you are entitled to to that point, but it is not a known in the law... and we do not believe it makes a mishmash of subsection (b) to supplement a fee application.

For example, the court... courts frequently award fees for proceedings on appeal, and fee applications are supplemented to cover those fees.

In fact, the fee application in this very case was so supplemented.

Unknown Speaker: --Well, Mr. Kelley, the First Circuit and the Eighth Circuit have a different view, don't they?

Mr. Kelley: Yes, they do, Justice O'Connor.

Unknown Speaker: And what's the matter with that view?

They presume an intent in the district court to retain jurisdiction unless there is some express indication to the contrary.

Mr. Kelley: The problem with that position we believe that it is inconsistent both with section 405(g) and the terms of sentence four and sentence eight and with this Court's decisions in Finkelstein and Melkonyan.

In Finkelstein, the Court held that a sentence four action by a district court had to be a judgment and that that judgment terminates the civil action.

Unknown Speaker: Well, we certainly were concerned in Finkelstein with the right of the Government to raise its arguments--

Mr. Kelley: That is true.

Unknown Speaker: --at that stage.

We weren't dealing with the claimant.

Mr. Kelley: That is true, but--

Unknown Speaker: Is it conceivable that the judgment is final for one side and not the other?

Mr. Kelley: --I would suppose it is conceivable, but--

Unknown Speaker: It's kind of odd.

Mr. Kelley: --We believe it is odd, and the Court in Finkelstein rejected our... I'm sorry... declined to adopt our alternate submission under the collateral order doctrine which would more readily lend itself to one side appealing and not the other.

But in any event, we don't think that it matters whether the claimant can appeal a sentence four judgment because a claimant who has reason to appeal has no reason to file a fee application ordinarily.

The time for filing a fee application... the fee application issue only arises if the Government has had an unfavorable ruling against it.

Unknown Speaker: Now, tell me again how... under 2412(d)(1)(B), how does the party applying for a fee within the 30 days show that he is a prevailing party?

Mr. Kelley: He submits--

Unknown Speaker: Just because he's a... he has prevailed in the district court?

Mr. Kelley: --Well, he has done everything he can to that point--

Unknown Speaker: Yes.

Mr. Kelley: --to be a prevailing party.

That's correct.

Unknown Speaker: And... but then... and he has to show that he is eligible to receive an award under this subsection.

Mr. Kelley: He has to show that as well.

Now, we believe--

Unknown Speaker: Well, how does he show it at that time?

Mr. Kelley: --The eligibility provision we believe is naturally read to refer to the financial status of the fee applicant, which is further down in section 2412(d), which is having a net worth of less than $2 million.

That is the eligibility.

Unknown Speaker: Well--

Mr. Kelley: But in any event--

Unknown Speaker: --why can't the... well, why can't then... why couldn't a fee... the fee be immediately awarded?

Mr. Kelley: --The reason it could not be immediately awarded is that under current law and as the courts of appeals have held and this Court has recognized in Hudson and Finkelstein, that simply obtaining a remand is not enough to qualify one for attorney's fees.

One has to gain benefits after remand.

Unknown Speaker: So, you have to actually prevail at the agency level?

Mr. Kelley: That's correct.

What these people are after, of course, is benefits, and if you don't get--

Unknown Speaker: Well, then you certainly can't show that you are a prevailing party in that sense--

Mr. Kelley: --At that point--

Unknown Speaker: --because you don't... you have no idea whether you're going to win or lose.

Mr. Kelley: --At that point, we would acknowledge he cannot state that he is for certain a prevailing party.

Unknown Speaker: So, you do have to sort of, as Justice Scalia said, make mishmash out of this provision.

Mr. Kelley: Well, we would suggest that it is not so much of a mishmash.

The only difficulty here is the--

Unknown Speaker: You can't have it both ways.

Mr. Kelley: --is the verb tense of the word is.

And a fee applicant is fully able to state--

Unknown Speaker: You read is to mean will be, and that is not making mishmash of it.

Mr. Kelley: --Well--

Unknown Speaker: Or not even will be, may be.

Mr. Kelley: --Well, in any event, we would suggest that the alternative to that view is an amendment to the substantive terms of the cause of action, which is a standalone cause of action provided in section 405(g).

We would submit it would be quite odd for an attorney's fees statute to be interpreted so as to change the very nature of a cause of action that was otherwise provided by Congress.

Now, it is not an unworkable regime.

It is a small matter we believe to file a fee application.

Unknown Speaker: Well, it sounds pretty unworkable.

I mean, there are hundreds of thousands of these claims, and you're proposing that people who have no idea whether they're going to prevail at the end of the line have to file these things, and the district court has to sit on them.

And we have some amicus briefs that say about 40 percent of those who get a remand never get benefits and never become a prevailing party.

Mr. Kelley: In recent years, it has been--

Unknown Speaker: I mean, this thing sounds to me like a real bureaucratic nightmare that you want us to institute.

Mr. Kelley: --Oh, I don't think so at all, Justice O'Connor, and let me tell you why.

The... there are not hundreds of thousands of these cases.

In fact, in the most recent fiscal year for which we have statistics, 1991, the maximum number of possible fee applications that would have been filed that turned out to be unnecessary would have been somewhere around seven or eight per judicial district across the country.

Unknown Speaker: In other words, that's the 40 percent factor?

Mr. Kelley: That... in the last 2 years, it has run roughly about a third have not gotten benefits on remand, and that... so, the--

Unknown Speaker: So, the average of the judicial districts would be, say, 20, 21 applications, and a third of those would result in no fees?

Is that the calculation?

Mr. Kelley: --25 perhaps per district, and a third would result in no fees.

That would be my estimation.

It's very close to that.

And it's a small matter for a district court to have that fee application on its docket.

It requires the district court to do nothing, and when matters on remand are completed, the claimant certainly has every incentive to come back and say I'm ready to get my money.

So, I--

Unknown Speaker: In all of those, I take it, though, the Government is not substantially unjustified.

Mr. Kelley: --That is true.

Unknown Speaker: He still has to show that.

Mr. Kelley: That is true.

He has to show that, and I would also point out that that number includes both sentence six and sentence four remands.

Our statistics don't yet distinguish between the two.

So, it's even fewer than that.

So, I don't want the Court to be thinking that this really is an enormous number of cases that we're talking about here.

Unknown Speaker: If we write a few more cases on this in the next... coming terms, maybe the statistics will break it down then.

[Laughter]

Mr. Kelley: Well, the--

Unknown Speaker: Mr. Kelley--

Mr. Kelley: --Yes, Justice Stevens.

Unknown Speaker: --The more you demonstrate the lack of likelihood of their coming back to get fees, the more you are demonstrating the fact that there's going to be an awful lot of wasted filings because everybody who gets a remand would file.

Mr. Kelley: We would agree that people who get a remand would thus have to file.

Unknown Speaker: And really our... I mean, maybe the statute compels it.

I don't know.

Things are kind of confused I have to confess, but it is true that your approach would require more than half of the litigants to file papers that will not produce any result and just clutter up the files.

Mr. Kelley: No, I don't think that is true, Justice Stevens.

It's about a third at the maximum--

Unknown Speaker: I'm talking of those who have gotten remands.

Mr. Kelley: --Oh, I see, but only a very small number of those will turn out not to be... turn out to be unnecessary.

Excuse me.

Unknown Speaker: Only a small number will be--

Mr. Kelley: About a maximum of a third, in recent years at least.

The other two-thirds succeed in getting benefits on remand and they have... their fee application will be litigated on the merits.

Unknown Speaker: --Oh, all right.

But I suppose if they can wait until they are actually prevailing before the agency, you're just ignoring the fact that the remand judgment was a final judgment subject to appeal.

Mr. Kelley: We would submit, Justice White, that the statute doesn't permit that to be ignored.

Unknown Speaker: Exactly.

I mean, you either... it looks like you would either have to ignore the 30 days from final judgment rule or play games with the word is.

Mr. Kelley: That's... we believe that that, in effect, is true.

And--

Unknown Speaker: It's a... you have to do something with the first part of this provision or the last part of the provision.

Mr. Kelley: --It's not only these two provisions, Justice White.

It is also section 405(g).

If, as you put it, that you play games with the first part of the provision and just wait and ignore the 30-day time limit, what you've established then is the system the Court rejected in Melkonyan, which is that the administrative decision will be the triggering event.

Unknown Speaker: Well, but you don't have to play games, do you, if you prevail in the court of appeals whether or not you prevail before the agency on remand.

Have we ever held that in order to be a prevailing party, you must prevail in a section 4... in a sentence four case, not a sentence six case?

Have we ever held that in a sentence four case you're not entitled to fees unless you prevailed before the agency on remand?

Mr. Kelley: No, Justice Scalia, the Court has never held that.

The courts of appeals--

Unknown Speaker: I know they have, but we haven't.

Mr. Kelley: --Yes, you have.

Unknown Speaker: And doesn't the scheme make total sense if we hold that you prevail in a sentence four case as soon as you win the court of appeals judgment?

Thereupon, you file your application for fees, you get your fees in the court of appeals, and whatever happens back below on remand, happens back below on remand.

The game is over.

Just as far as the mishmosh problem is concerned, wouldn't that solve it?

Mr. Kelley: That would go a long way toward solving it, but I would hasten to add that it would also upset a lot of settled law in the lower courts to hold that.

Unknown Speaker: In the court of appeals.

Mr. Kelley: That is correct.

But those cases--

Unknown Speaker: Yes.

Well, but maybe it's wrong law.

Mr. Kelley: --I was going to get to the point that those cases are... have a lot going for them.

Unknown Speaker: Well, from the standpoint of the Government, I'm sure that's true.

Mr. Kelley: Well, they make sense, Justice Scalia, because these people, the claimants, are not after simply getting a remand.

What they're after is benefits, and it is well established, as I've said, in the courts of appeals that it is not enough.

You haven't won anything, in effect, if you just get a remand.

Unknown Speaker: Of course, you have.

You've won your point that the agency procedure or whatever it was was wrong, and the agency wouldn't straighten it out.

And you go to the court of appeals, and the court of appeals says to the agency straighten it out and sends it back down.

You've certainly won that.

I mean, yes, you haven't gotten your money yet, but--

Mr. Kelley: It certainly is a favorable legal ruling.

I would agree with that.

But the point is that it doesn't require the Secretary to give you anything.

Unknown Speaker: --No, but is it not true that if you have been a prevailing party at that point and if the Government's resistance to the claim at that point has not been substantially justified, isn't there good reason to say that the claimant ought to get his fees up to there whether he wins or loses on remand because he has been put to a lot of unnecessary expense is the theory?

Otherwise, he doesn't get any fees at all.

Mr. Kelley: Well, that is true in theory.

Unknown Speaker: But the Government wins on remand.

Mr. Kelley: About a third of the time.

Unknown Speaker: And how can your position be unjustified?

Mr. Kelley: Well, it's theoretically conceivable that your initial decision and your decision to contest it was unjustified, but when you go back and do it right, it turns out that the--

Unknown Speaker: The real problem here is our decision in Hudson, not in Melkonyan.

Mr. Kelley: --Well, we would submit, Mr. Chief Justice, that Hudson, as limited to sentence six cases, is fully consistent with Finkelstein and Melkonyan.

Unknown Speaker: In a sentence six case, you have not won anything because the court hasn't made its decision yet.

It sends it back to the agency, retains jurisdiction because it needs more information, the agency has to develop more, whatever.

And only after it comes back do you know whether the claimant has won or lost.

So, it makes total sense in the section 6 case to wait until it comes back.

But, of course, in the sentence six case, the judgment is not final until it comes back, and you take the final action.

Mr. Kelley: That is quite right, Justice Scalia.

But I would hasten to point out that the question of what you need to do to become a prevailing party really isn't presented here.

It certainly is lurking behind the scenes, but it hasn't been briefed by the parties, and it hasn't been passed upon by the lower courts.

So, I would urge the Court not to make a holding on that basis.

In our view, our submission--

Unknown Speaker: Not to make a holding on what basis?

Mr. Kelley: --On the basis Justice Scalia is suggesting that one is a prevailing party simply by virtue of getting a remand.

That would work a large change in the law in the lower courts, as I fully recognize.

Unknown Speaker: If I think that that's the only solution that makes sense out of the statute, how can I avoid... I mean--

Mr. Kelley: Well, we would... I would agree, Justice Scalia, that you should not rule against us on the premise that you're not a prevailing party.

It does make sense, if you're truly concerned about the is issue, to hold based on the premise that one might be a prevailing party at the time of remand.

It does make sense of the whole scheme.

But I would hasten to add that it is fully consistent with the statute and very workable to say that you can file a fee application when the proceedings on remand begin or... excuse me... after you get your remand, and you can state at that time you've done everything you can to be a prevailing party, and it is a small matter to come back to court after the proceedings on remand are finished.

If there are no further questions--

Unknown Speaker: --Well, the... Justice Scalia's suggestion, which is very attractive since it's so simple, but it also would involve deciding here, which has never been decided here before--

Mr. Kelley: --That's exactly right.

Unknown Speaker: --that you're not entitled to fees on remand.

Mr. Kelley: That is true, Justice White.

Unknown Speaker: Which is inconsistent with what we held in Hudson before the Melkonyan gloss.

Mr. Kelley: That's right, Justice Kennedy.

Unknown Speaker: Wait, Mr. Kelley.

I don't understand that.

I asked you earlier.

The Government does not contend that you're entitled to fees on remand in a sentence four case.

Mr. Kelley: Well, that's true.

Unknown Speaker: Okay.

They're not.

Mr. Kelley: They are not.

That's true.

Unknown Speaker: But that is not... but we've never decided it.

Mr. Kelley: That's true as well, Justice White.

Unknown Speaker: And have some other courts decided that they are entitled to remand in a sentence four remand?

Mr. Kelley: Entitled to fees?

Unknown Speaker: Entitled to fees.

Mr. Kelley: Well, since Hudson and the subsequent cases in this Court, I don't believe that the lower courts have focused on that issue.

Unknown Speaker: So, it is sort of a wash for the Government really.

You have to pay the fees in the district court whether or not the claimant wins on remand, but on the other hand, the Government doesn't have to pay the fees that are incurred on the remand--

Mr. Kelley: That is exactly right, and we believe it's very important, if you go on the prevailing party side, to recognize that Hudson fees are not available in sentence four cases.

If I may reserve the remainder of my time, Mr. Chief Justice.

Unknown Speaker: --Yes, Mr. Kelley.

Mr. Fuller, we'll hear from you.

Argument of Randall J. Fuller

Mr. Fuller: Mr. Chief Justice, and may it please the Court:

Today the Court is presented with the question whether the Equal Access to Justice statute permits a Social Security disability claimant, whose case is remanded from the Federal court to the Secretary for further administrative proceedings, under the fourth sentence of section 405(g) to file his application for EAJA fees upon successful completion of the administrative remand proceedings, or whether as urged by the Government, every such claimant must immediately after receipt of a sentence four remand file a conditional EAJA application at that time.

We contend that the decision below of the Eighth Circuit Court of Appeals granting my client, Mr. Schaefer, an EAJA award in the amount of $1,372.50 should be affirmed, and today I would like to focus upon the three main reasons why it should be affirmed.

The first is that the lower court decision, in accordance with nationwide practice since at least 1989, is consistent with the plain terms and the intent of the EAJA statute.

Secondly, considering the matter from a common sense standpoint, our approach is much more practical and reasonable than the unworkable solution posited by the Government today.

Finally, the procedure that we followed in asking for EAJA fees in this case was directly consistent with and, indeed, may be mandated by this Court's decision in Hudson.

Unknown Speaker: Well, didn't we say in one of the later cases that Hudson applies only to sentence six cases?

Mr. Fuller: I don't believe that that was said at all, and Hudson in fact was a sentence four case, as the Government has indicated today.

Unknown Speaker: Well, did we say it applied only to sentence four cases then?

Mr. Fuller: No.

Hudson was decided before all this litigation regarding the distinction between the two.

Hudson simply stood for the proposition that a claimant, after remand, was entitled to EAJA fees for the work performed by his counsel during the remand process.

Unknown Speaker: Well, then what was the limitation on Hudson in one of the... either Melkonyan or Finkelstein?

I can't remember which one is was.

Mr. Fuller: Well, Melkonyan and Finkelstein both discussed Hudson.

They did not overrule Hudson.

They said that Hudson was not to the contrary.

Melkonyan was a sentence six case.

It was clearly not a sentence four case.

And there the question was whether the administrative agency decision or the Federal court decision was what started the time limit ticking.

Finkelstein was not... that was also a sentence four case, but there the issue importantly and very significantly... this is crucial.

That was not an EAJA case.

In Finkelstein, what this Court said was that that decision of the district court was appealable as a final order.

Unknown Speaker: Well, didn't Finkelstein say that Hudson was discussing sentence six remands, not sentence four remands?

Mr. Fuller: I don't think that it explicitly said that.

Unknown Speaker: Well, don't you think that's the fair import of it when it says it applies to a narrow category of cases?

Now, the Government takes the position that Hudson applies to sentence six.

What is your position?

Do you think--

Mr. Fuller: Our position is that Hudson applies to both types of remands.

Hudson did not limit itself by its holding--

Unknown Speaker: --No, Hudson didn't, but didn't Finkelstein limit Hudson?

Mr. Fuller: --I don't believe it did.

Unknown Speaker: You don't read that language as limiting it?

Mr. Fuller: I don't read it that way, Your Honor.

Unknown Speaker: Well, your position is that Hudson is correct and that the later cases, to the extent they impinge upon Hudson, are perhaps confusing and wrong.

Mr. Fuller: Well, I don't know that I would say that they're wrong.

I would say that there has been some confusion caused by some of the later holdings, but it's not confusion which cannot be harmonized.

And let's talk about that.

Melkonyan seems to be the case which the Government relies upon most significantly and particularly the dicta in Melkonyan relative to sentence four remands.

Now, Melkonyan is not against us in this case because it specifically discusses Hudson and says that Hudson is not to the contrary.

Melkonyan was a sentence six.

Ours is a sentence four case, just as Hudson was.

And even the dicta referring to sentence four from Melkonyan in this case can be harmonized and reconciled completely with our position, and the reason for that is because under sentence four and my experience and a reading of that sentence indicates that there are two potential types of sentence four remands.

The first would be that present in our case, and that is where the Secretary's decision is reversed on legal grounds and sent back for further proceedings.

The second possibility under sentence four is that the decision of the Secretary is out and out reversed and simply sent back for a ministerial or administrative calculation of benefits.

Unknown Speaker: I think that's contrary to our whole description of what the basic distinction between four and six is.

I thought the basic distinction is under sentence four, the district court is done with the case.

It reverses the Secretary and sends it back.

The claimant has won on the point that is the subject of the appeal; whereas, in a sentence six case, the court says, well, I can't decide this without some further action below and I'm going to sit on it and send it back for more... a bigger record to be made or whatever.

And I'm not making any decision yet.

I'm just asking the agency to give me more action, more information.

I thought... well, I don't--

Mr. Fuller: I would say that the distinguishing feature between the sentence four and sentence six remands is what the statute calls for, which is good cause for evidence, which was not developed in the record.

And the reason under sentence six that cases get sent back and the reason that sentence six permits the Secretary to... before she even files her answer in a case, to move for a sentence six remand is that new evidence was not present and needs to be developed.

That is the distinguishing feature as I read those--

Unknown Speaker: --Right, so that the case is really not over in the district court--

Mr. Fuller: --Right.

Unknown Speaker: --under sentence six.

Mr. Fuller: Yes.

Unknown Speaker: But it is over under sentence four.

Mr. Fuller: Well--

Unknown Speaker: Somebody has won and you go back, just as any other administrative agency case is remanded after the agency has reversed and the case is remanded for continuation of the agency action.

Mr. Fuller: --Let me turn to that.

Unknown Speaker: But the lawsuit is over.

Mr. Fuller: Let me turn to that and discuss why, even if that is true, Justice Scalia, that does not start the time limit ticking for EAJA fees.

And the reason--

Unknown Speaker: Right.

I'm not saying... that doesn't necessarily answer the question.

Mr. Fuller: --And the reason that it doesn't start the time limit ticking is because that decision, that sentence four remand, is not appealable by the claimant, while it is appealable by the Secretary.

The EAJA statute contemplates a final judgment for which the appeal time has run as to the party seeking the fees.

Finkelstein reserves the question of whether a claimant can appeal a sentence four remand.

It's not allowed at the present time under the law, and in the Eighth Circuit, it has been held that a claimant cannot appeal such a remand in the Bohms case, which is cited.

Unknown Speaker: Of course, he can't appeal it because he has won.

He has won what he... we're talking about a sentence four.

Mr. Fuller: Sentence four remand.

Unknown Speaker: Well, he has won.

Why... how could he appeal it.

That's absolutely right.

Mr. Fuller: That's right.

Unknown Speaker: So, maybe at that juncture, as Justice Scalia has suggested, maybe at that point, the claimant is entitled to seek EAJA fees for the court proceeding that resulted in a sentence four remand order.

Mr. Fuller: And that may, in fact, be the case, as was discussed previously by counsel.

The Court has not held--

Unknown Speaker: All right.

So, what's the consequence of that if we were to so hold?

It would mean in this case your client would fail because no application was made on a timely basis at the end of... at the time of the order of remand.

Mr. Fuller: --Actually it would not affect our case.

Mr. Schaefer would still prevail in this case for two reasons.

First, there was no rule 58 judgment issued at the point in time of the sentence four remand in our case.

Therefore, that appeal time had not started to run.

The time limit had not started to run.

More importantly, we followed the practice that was the law at the time.

Under the Secretary's theory... and you have to look at the time frame and the background of our case.

The administrative remand occurred on April 5, 1989.

Under the Secretary's theory, we then had until July 5, 1989 in which to make that application.

At that point in time... and this Court did not decide Hudson until June of 1989.

So, at that point, there was no way for us to know or anticipate that not only would Hudson come, but... although we may have filed after Hudson under the Secretary's theory, in which case we never would have filed at that point because Hudson tells us to wait until the administrative process is complete and the prevailing party status is determined.

At that point in 1989, there's no way that we could have anticipated that Finkelstein would come later and Melkonyan would come after that.

So, the position of Mr. Schaefer is vindicated regardless of what the Court finds.

Unknown Speaker: Is there any court of appeals that holds that you don't have to be a... to win below to be a prevailing party?

Mr. Fuller: I don't believe that that has been held.

Unknown Speaker: But there are a lot of courts of appeals that say that you do have to prevail below--

Mr. Fuller: Right, that you must--

Unknown Speaker: --to be a prevailing party.

Mr. Fuller: --Right, that you must win your benefits to be the prevailing party.

Exactly.

Unknown Speaker: Well, is that correct?

I mean, can it be demonstrated that the claimant has prevailed insofar as the district court action is concerned at the time the claimant gets an order for remand?

You've prevailed to that extent.

Mr. Fuller: You've prevailed in the sense of a sentence four.

I think it's arguable that you have prevailed at that time because a sentence four usually contemplates a reversal of some action by the Secretary in denying the benefits.

Unknown Speaker: So, that certainly is a potentially workable theory.

What's the effect of that for other claimants, not yours?

Let's talk about other claimants.

It would mean then that there would be no EAJA fees obtainable for the administrative work after the remand I assume.

Mr. Fuller: Unless this Court held that to effectuate Hudson, that a second petition for EAJA fees was possible for the administrative work if the claimant prevailed.

Unknown Speaker: Well, yes, but as the Chief Justice has noted and I think others, the Court has limited Hudson and has distinguished between section... sentence four and sentence six remands.

Mr. Fuller: I think what... Justice O'Connor what you're suggesting is probably true as to the practical effect of a decision that the claimant became the prevailing party upon remand.

Then lots of claimants would get fees.

Those 31 to 38 percent of the claimants who lose upon remand would have gotten fees at that time.

Unknown Speaker: Yes.

It means the Government may end up paying more in fees because it will be paying fees even though the claimant might lose ultimately.

Mr. Fuller: That's possible, but there would not be the Hudson fees added on later.

So, it may work out to be essentially a wash.

Unknown Speaker: Well, I would think you would embrace Justice Scalia's proposal if you assume that you're not going to get fees for your work after remand.

Mr. Fuller: And as we have... as I have indicated, Justice White, we would not be opposed to such a ruling.

Unknown Speaker: Yes, and if... I would think you would just like to be able to collect fees immediately and... because your fee won't depend on whether or not you win below, but you will still want to win below for your... on behalf of your client.

Mr. Fuller: Yes.

We want to win at all times on behalf of our clients.

[Laughter]

Unknown Speaker: Yes.

And it is the case that there's no doubt that you cannot get fees in the district court for the agency work that is done before the district court action.

Right?

Mr. Fuller: That's true.

Unknown Speaker: So, it really is a strange scheme where you don't get any fees for the work up to the district court, but then if the district court reverses the agency and says do it again and do it right this time, then you do get fees for the... for that one, or maybe.

Well, that's what the Chief Justice suggests isn't true because Hudson was limited.

Mr. Fuller: And if it's limited, then it isn't true.

Unknown Speaker: Would you tell me how it is that you think you win under that one anyway?

I thought you hadn't filed an appeal within the 30 days from the district court judgment.

Mr. Fuller: That is true.

Unknown Speaker: But you think that that can be waived because you couldn't know from Hudson that you had to.

Mr. Fuller: Well, that's the second reason.

The first reason was there was no rule 58 judgment entered in our case--

Unknown Speaker: That's true.

Mr. Fuller: --at the time--

Unknown Speaker: That's true.

Mr. Fuller: --of the sentence four remand, which is required.

It's an absolute requirement of the rule.

Unknown Speaker: Right.

Mr. Fuller: And therefore--

Unknown Speaker: And you'd say it was a mistake on the part of the district court not to enter that judgment, but nonetheless, there was no judgment entered.

Mr. Fuller: --That's true, and that's why Mr. Schaefer prevails.

That's the first reason why he prevails.

The second reason is what I indicated--

Unknown Speaker: Well--

Mr. Fuller: --developments in the law--

Unknown Speaker: --Well, on that basis, we don't need to decide all of this stuff about the is or anything like that.

I mean, you just have a... you have an independent reason for winning your case.

Mr. Fuller: --Right.

We contend the statute means what it says, that when you make your application for fees, you must show at that time that you're the prevailing party.

And under the Government's scheme that is not possible.

That's one of the reasons why it is totally impractical and unworkable.

I'd like to focus on some of the other--

Unknown Speaker: In these appeals to the district court, is new evidence sometimes a ground for asking that the case be remanded, new evidence of disability, new medical evidence?

Mr. Fuller: --It is sometimes.

Those are typically sentence six remands.

Unknown Speaker: Those are typically sentence six remands.

Mr. Fuller: Yes.

Unknown Speaker: What I was wondering was whether or not it's going to be difficult to determine whether there was lack of substantial justification on the part of the Government if we make the fee assessment at the... after the district court proceedings in sentence four cases.

What are the typical cases--

Mr. Fuller: Well--

Unknown Speaker: --in which the Government would be substantially unjustified?

If the hearing examiner hears only one doctor instead of three?

Mr. Fuller: --In a sentence four case, it could be numerous things.

It could be a lack of the appropriate experts being present.

It could be an improper hypothetical given to one of the experts, a vocational or medical witness.

It could be, as in our case, the failure to follow the Eighth Circuit law relative to the evaluation of pain and certain factors set forth in the circuit case--

Unknown Speaker: And the Government is substantially unjustified because... for raising an objection before the hearing examiner?

Mr. Fuller: --No.

They would be unjustified if they failed to follow the legal principles set forth in that circuit, such as in our case where there's a precedent in the Eighth Circuit which says that these are the factors you must look to to evaluate chronic pain.

In our case it was found that the Secretary had not properly followed those factors.

That is one of the reasons... one of the legal reasons why the sentence four remand was given.

So, sentence four has lots of legal aspects to it which I think would be relatively easy to make a finding as to whether there was substantial justification at that point.

The practicalities--

Unknown Speaker: Do you agree that the substantial justification referred to in (B) is whether the United States position before the district court was substantially justified?

Is that what it refers to?

Mr. Fuller: --No.

It refers to the denial of benefits by the Secretary.

Typically the kind of analysis that the Federal courts engage in is to review very carefully the decision of the administrative law judge which becomes the final decision of the Secretary and to determine whether or not the appropriate legal standards were followed.

Unknown Speaker: Well, the denial of benefits... if the denial of benefits was unjustified, the Government's position before the district court will always be unjustified.

Right?

Mr. Fuller: Yes.

Unknown Speaker: But in some cases, the denial of benefits might have been quite justified, but for some procedural reason, nonetheless, the Government's position before the district court may be unjustified.

Mr. Fuller: That is true.

Unknown Speaker: Do you follow me?

Mr. Fuller: Yes.

Unknown Speaker: So that you may be able to get fees before the district court on the basis of unjustification there.

Mr. Fuller: Oh, yes.

There are several ways in which the position could be found unjustified.

The practicalities in this situation strongly favor our approach as opposed to the Government's approach.

I believe the Court has a good understanding of what the Government's approach entails.

Let me highlight some of the practical problems with it.

The first is that their scheme is the ultimate in setting traps for the unwary.

They have indicated that a conditional filing must be made shortly after the sentence four remand is issued by the district court.

They don't indicate what documents they would deem necessary at that time.

They don't indicate what would have to be filed.

It is very possible that district courts for failure to fulfill all of the requirements of the EAJA statute, particularly the showing of prevailing party status, the showing of the specific amount of fees requested and so forth, could dismiss those type of premature petitions as being inappropriate under the plain language of the EAJA statute.

I think what the Government's approach invites is a potential of a multiplicity of litigation and further appeals and so forth dealing with what the proper filings would be under a conditional type filing theory, as the Government urges.

In addition, the amount, which Justice O'Connor asked about, of needless filings that would be required.

If you look at our brief, we cite the 1990 statistics in which there were over 4,300 remands nationwide from district courts to the Secretary.

38 percent of those claimants lost on remand.

So, when you analyze those figures, at least 1,600 of those petitions that would have had to have been filed were superfluous or unnecessary and were clogging up the district court dockets.

Unknown Speaker: Do you agree with the... with Mr. Kelley's figures on the numbers of cases involved?

Mr. Fuller: Mr. Kelley is citing some figures that are a little bit more recent than the 1990 figures.

In 1991, the total number of remands nationwide went down to 2,526, and the percentage of claimants which lost on remand went down a little bit to about a third at that time.

I think that he attempts to minimize the nationwide impact by breaking it down to 21 or whatever per judicial district when, in fact, you have to look at the nationwide effect because they're not necessarily spread out on an average basis among judicial districts.

The Secretary is concerned about delay.

Let's talk about delay because they contend that, under the present system and the approach urged by our side, the respondent in this case, there is this great potential for delay.

First of all, there's no evidence that claimants or their counsel have been dilatory or routinely delayed these type of filing.

In fact, even as the Secretary concedes today, there is a tremendous incentive on the part of claimants and their counsel to get these in and to get the fees paid as quickly as possible.

Under the Government's theory, you'd have to first file this conditional application for fees.

You would then have to go back and go through the remand proceedings before the Secretary, but then significantly, the Government's theory contains no mechanism for triggering any further time limits upon the claimant or their counsel to come back to court and file for those fees.

Under their theory, assuming that there was the incentive to delay, which we deny, the claimant and their counsel could wait forever before coming back and having the district court finally act upon those fee petitions.

Under our system, it's very simple.

Once the administrative process is complete, the Secretary herself, if she's concerned about delay, can come in and simply file a motion for entry of final judgment, which will automatically trigger that EAJA time limit to start running.

Therefore, the Secretary under our theory has within her own power the power to limit the untimely applications that she fears would be coming.

Unknown Speaker: Mr. Fuller, could you tell me... and you just have to give me your impression because I don't know there would be any statistics on it, but as a general matter, when a claimant wins before the district court and there is a sentence four remand and he's victorious on the remand... he's among the... what is it... the--

Mr. Fuller: Two-thirds.

Unknown Speaker: --two-thirds who are victorious.

Does that normally take a lot more time or basically has the agency been beaten into the ground and they throw in the towel?

I mean, does it normally take a lot more work back before the agency?

Mr. Fuller: It really varies widely from case to case, frankly, Justice Scalia.

The averages... and we cited some of the statistics in our brief.

The average length of time that elapses from a remand... and again, this isn't broken down sentence four versus sentence six.

But the average length of time is 13.9 months from the time the court orders the remand until you know whether you won or lost in the administrative process.

And in my experience, it varies greatly from a year and a half, possibly as short as 6 months in some cases.

It just depends upon the individual calendars and dockets of the administrative hearing judges that hear these cases.

So, tremendous delay is going to ensue under the Government's theory, and there's no need to have these useless, superfluous fee petitions sitting before the district court judges and magistrates for a year or so on the average until--

Unknown Speaker: So, the judgment is final for the Secretary, but not for you.

Mr. Fuller: --That's what the holdings are at this point.

The claimant cannot appeal that sentence four remand, and therefore it's not a final appeal.

Unknown Speaker: And so, he doesn't need to do anything in the district court within 30 days.

Mr. Fuller: That's true, until the case is over.

And that goes back to the intent of the EAJA statute.

And what Justice Scalia was focusing on earlier--

Unknown Speaker: But what... let's just assume that it is irrelevant as to whether you prevail on remand or not, as to whether or not you are entitled to fees for the work in the district court.

Mr. Fuller: --Assuming that the remand is the victory, makes us the prevailing party?

Unknown Speaker: Yes.

Mr. Fuller: Well, then that makes it very easy, as Justice Scalia pointed out.

Unknown Speaker: Yes, it makes it very easy.

Yes.

Well, which would you rather have?

Mr. Fuller: If I had my druthers, in the perfect world I would say that the existing system should continue and the reason being that when you look at--

Unknown Speaker: Well, yes, but just... but also on the assumption that you're not entitled to fees for your work after remand.

Mr. Fuller: --In a sentence four or sentence six?

Unknown Speaker: Sentence four.

Mr. Fuller: Okay.

I think that we should continue the way things are at the present time, and here's why.

Because when you talk about the prevailing party status, that gets into the question of fees and benefits.

And at the present time--

Unknown Speaker: Oh, you think you'll get more if you prevail.

Mr. Fuller: --Well, I'm trying not to analyze it from the standpoint of what I'm going to get.

Unknown Speaker: All right.

Well, but you are.

Mr. Fuller: I'm trying to analyze it from the perspective--

[Laughter]

Unknown Speaker: Yes, but you are.

Mr. Fuller: I'm trying to analyze it from the perspective of the Social Security claimant whose fees or whose abilities financially are very limited by definition.

And the claimant is affected by the EAJA fee process.

He's affected because, as we did in our case, for example, we waited until the contingency fee was fixed, the 406(b) fee, and then we came in and asked the court to award the EAJA fee in addition to that so that the court could compare those two fees and see--

Unknown Speaker: I see.

Mr. Fuller: --that the proper refund was given to Mr. Schaefer, which he was refunded the less... would be refunded, if we are successful, the lesser amount, which is the EAJA fee amount in this case--

Unknown Speaker: So, your preference to leave the present system intact is a dollars and cents calculation.

Mr. Fuller: --On the basis of what's good for the claimants, yes.

We contend in the final analysis that the system urged by the Secretary, the change in the existing practice, is unworkable and impractical and does not give effect, as the present system and as our approach does, to the intent and the plain language of the Equal Access to Justice Act.

On that basis, the lower court decision should be affirmed and the award of EAJA fees in the amount of $1,372.50 to my client, Mr. Schaefer, should be affirmed.

Unknown Speaker: Thank you, Mr. Fuller.

Mr. Kelley, you have 2 minutes remaining.

Rebuttal of William K. Kelley

Mr. Kelley: Thank you, Mr. Chief Justice.

I have two points.

First, we believe that our approach, as set forth in the brief, accommodates the language of all the relevant statutes in this Court's cases, quite unlike respondent's approach.

But if the Court disagrees with that, we believe it would be preferable to adopt the approach suggested by Justice Scalia that one is a prevailing party when one gets a sentence four remand.

But we would also urge at that point that there is simply no basis for an award of so-called Hudson fees for the proceedings on remand.

The second point is as to the application of the rules in this case, respondent's argument regarding rule 58 and retroactivity was not raised or passed upon below, and we would urge the Court to remand the case for the court of appeals to consider those issues in the first instance.

Thank you.

Chief Justice Rehnquist: Thank you, Mr. Kelley.

The case is submitted.

Unknown Speaker: The honorable court is now adjourned until Monday next at ten o'clock.

Attribution:

The OYEZ Project

Featured:

Farrar, Coadministrators Of Estate Of Farrar, Deceased v. Hobby - Oral Argument

Fri, 09 Jan 2009 14:49:25 +0000

Case:

Farrar, Coadministrators Of Estate Of Farrar, Deceased v. Hobby

Media File:

91-990_19921007-argument.mp3

Related Transcript:

1992_91_990_argument.xml

Transcript:

Argument of Gerald M. Birnberg

Chief Justice Rehnquist: We'll hear argument now in No. 91-990, Dale Farrar and Pat Smith v. William Hobby.

Mr. Birnberg.

Mr. Birnberg: Mr. Chief Justice, and may it please the Court:

In Carey v. Piphus this Court held that procedural due process is so important to organized society that it is actionable even without a showing of actual damages.

In this case a jury found that the respondent had knowingly violated Joseph Farrar's constitutional rights to procedural due process essentially by obtaining a closing of this school for incorrigible delinquent children without prior administrative proceedings and hearings to which he was entitled under state law and by the process of a state court proceeding that didn't involve a fair and unbiased judge.

In all events the Fifth Circuit in 1985 concluded on the basis of that jury verdict that the petitioner was entitled at least to nominal damages, it having been found by the jury that his rights to procedural due process have been violated.

They found that notwithstanding the fact that that same jury had also found that Dr. Farrar had been unable to prove that he had sustained actual damages, but of course under Carey against Piphus that was essentially irrelevant.

He was entitled to an award of nominal damages.

The question in this case is does that final determination of entitlement to a judgment for nominal damages, not more than $1.00, in a case involving the deprivation of procedural due process entitle the plaintiff who recovered that judgment to also recover reasonable attorneys' fees under 42 United States Code Section 1983.

We submit that the question, that the answer to that question can be found in four separate places.

Unknown Speaker: What was the denial of procedural due process?

Mr. Birnberg: The denial of procedural due process was very complex, Justice White.

It involved essentially two things.

Number one, it involved having a decision made to shut down the school and not utilize the administrative procedures that Texas law provided.

And secondly it involved interfering with the, there was a district court hearing, a temporary restraining order, and at that district court hearing there was, it was an ex parte hearing--

Unknown Speaker: But did the, was the proceeding... was due process finally given?

Mr. Birnberg: --Was due process finally given?

I don't know that that question was ever presented to the jury, nor is it in this record, Justice White.

Our view of that fact is no.

But I would say this, and I think this is the gravamen of your question--

Unknown Speaker: Well, was the school, are we talking about a school?

Mr. Birnberg: --The school was closed.

Yes.

Unknown Speaker: Which was shut down?

Mr. Birnberg: It was shut down and it remained closed.

Unknown Speaker: And it has never opened?

Mr. Birnberg: It has never opened.

It was never reopened.

And in fact--

Unknown Speaker: And is it conceded that it didn't deserve to be opened?

Mr. Birnberg: --Well, conceded by whom?

It is conceded that that's what the verdict of the jury implicitly holds, that by finding that we had not proved actual damages I think that that in fact establishes that the jury--

Unknown Speaker: That the school should have been, that the jury found that if due process had been given it still would have been closed.

Mr. Birnberg: --I think that's a fair inference of what one could read into the jury verdict.

Unknown Speaker: So you lose on the merits, you lose on the merits but by the wrong process?

Mr. Birnberg: Lose which by the merits, Justice White?

Unknown Speaker: Well, you lost on the merits of whether the school should be open.

Mr. Birnberg: We certainly lost on the merits of whether the school should be opened or should be closed.

Unknown Speaker: The only problem was that they, that it was by the wrong process?

Mr. Birnberg: I think in part that's true.

I think the point was that there was never a process that was provided.

But I think this is of crucial importance, the decision on the merits before the jury, all that said is we did not prove any actual damages from the closing without due process.

That's something that occurred in a trial that occurred 10 years after the fact.

By that time Dr. Farrar had died.

He wasn't present to testify to many of the things that were brought to the, brought forth for the first time during the course of that proceeding.

But in all events, Justice White, that's not the question that's presented here, whether the jury's verdict was right or wrong.

The question that's presented here is whether or not having recovered a judgment that says procedural due process was violated, and Carey against Piphus says that is a judgment which is vindicated by award of nominal damages whether we, since we prevailed to that extent whether we are entitled to reasonable attorneys' fees, whether we are a prevailing party at that point.

We submit that--

Unknown Speaker: The lieutenant governor didn't have the authority to close the school?

What is your, was your theory of the lieutenant governor's liability?

He was a co-conspirator or--

Mr. Birnberg: --No, in fact he acted substantively.

Justice Kennedy, the lieutenant governor under Texas law had no role in the closing of this school whatsoever.

He was in the midst of a heated political contest and for reasons of furthering his political contest the evidence at trial was, the theory at trial was that he had intervened by calling the commissioner, he did have the authority in telling the commissioner he wanted the school closed and without the administrative procedures being followed.

Then Lieutenant Governor Hobby, despite the fact that he had no relationship to the closing of the school, actually went to the hearing in Liberty County, which was an ex parte hearing, the theory that was presented to the jury being that that was to bring political pressure to bear on the fact finder to make him not an impartial fact finder in the procedural due process sense.

Now, Governor Hobby could have challenged, had he chosen to do so, the fact finding that he violated the petitioner's rights in the Fifth Circuit in 1985 or in the district court earlier than that.

For whatever reason he did not undertake to do so and this case involves that as a given.

That is to say the given is that the procedural due process rights were violated.

We submit that the plain language--

Unknown Speaker: --I just have one other question.

Mr. Birnberg: --I'm sorry.

Unknown Speaker: Did he argue that there was some, that there was a privilege?

Did he argue that he had a privilege to make these statements?

Mr. Birnberg: A privilege to make the statements?

I do not recall ever having seen that in any of the pleadings or any of the briefs.

I do not... well, there was a qualified immunity issue that was submitted, but I don't think that's what you have in mind when you ask about privilege.

Unknown Speaker: Well, in any event we take the case with the jury finding against the lieutenant governor?

Mr. Birnberg: I believe that's the posture of the case at the present time, Mr. Justice.

Unknown Speaker: Mr. Birnberg, do you take the position that any nominal damages award entitles the winner to get a fee award for attorneys' fees--

Mr. Birnberg: Justice O'Connor, I take the position--

Unknown Speaker: --regardless of the context in which it's given?

Mr. Birnberg: --Yes, if it is a procedural due process violation which is thereby vindicated according to Carey against Piphus.

In all candor in preparing for the argument I have tried to conjure up what might be a nominal damage situation that would not involve an entitlement to attorneys' fees.

Unknown Speaker: I guess this Court has at least spoken in dicta to the effect that a de minimis victory does not justify the award of fees.

Mr. Birnberg: That's absolutely correct.

In your opinion for the Court in TSTA v. Garland there is that sentence of dictum, and it's purely technical or de minimis is the standard that you referred to.

We believe that this case does, that a nominal damages award in a Carey against Piphus case does not involve de minimis victory nor technical victory for a number of reasons.

Let me direct first the question of de minimis.

The term de minimis refers to a type of injury which is so trifling that the law can't take it into account, the law can't do anything about it.

That's what the phrase de minimis non curat lex means, the law can't do anything about it because it is so trifling.

In fact Carey against Piphus specifically says that the law can, will, and indeed must do something about procedural due process violations, namely give a judgment, albeit for $1.00.

That means that the law will, in fact this is the phrase that comes out repeatedly both in Carey and of course in Memphis Community Schools v. Stachura, vindicate the right to procedural due process.

Procedural due process rights are intrinsically non-pecuniar.

They are the type of things that don't necessarily result in money damages occurring.

So how do you cure those kinds of problems which are so, procedural due process being so fundamentally important to the society.

Unknown Speaker: Well, I would have thought that the statute 1988 speaks both in terms of discretion whether to award the fees and secondly that they should be in a reasonable amount.

And I wonder if the very small nominal damages award shouldn't be taken into account in any event under those provisions.

Mr. Birnberg: Of course it should, and our point is not that you should not take into account the amount of the recovery in fixing what is a reasonable fee.

But as you said yourself, Your Honor, in TSTA v. Garland, where it goes into the formula is in figuring the amount that constitutes a reasonable fee, not in establishing whether you have crossed the threshold to any fee at all.

Unknown Speaker: Well, I guess the language in Garland said you're not entitled to any fee at all.

Mr. Birnberg: I would... you were the author of the opinion, Your Honor--

Unknown Speaker: Right.

Mr. Birnberg: --but I would respectfully--

Unknown Speaker: It may not have been felicitous phrasing, but that's certainly is what it suggests.

Mr. Birnberg: --Oh, you're talking about the dictum?

Unknown Speaker: Uh-huh.

Yes.

Mr. Birnberg: I think the dictum says that... in fact that's, the dictum even, Your Honor, says that there may be cases which are so technical or de minimis that a district court would be justified, not that it would be mandatory but that a district court would be justified in concluding that the minimum threshold we announce today has not been satisfied.

But in fact the holding of the Court, the holding of the Court in TSTA v. Garland is that you are entitled, you are regarded as a prevailing party entitled to recover fees if you have succeeded on any significant issue in the litigation that produces some of the benefit sought in bringing suit.

Certainly that's what occurred here.

We can't... if we focus exclusively on the amount of the damages which were recovered, $1.00, then we have ignored Justice White's admonitions in Blanchard against Bergeron that civil rights cases are not driven by trying to up the amount of money damages that are recovered.

What's important in civil rights cases of course is the constitutional right that's involved.

Unknown Speaker: Mr. Birnberg, did you seek other relief than monetary damages in this case?

Mr. Birnberg: In the third amended complaint, Your Honor, no.

The third amended complaint sought only money damages.

Unknown Speaker: So it wasn't as if you had obtained an adjunction or, all you wanted was money damages and you got nominal damages?

Mr. Birnberg: Well, Rule 54 of course says that we're entitled to any relief that the evidence at trial supports.

Unknown Speaker: Well, you wouldn't have gotten any damages without a rule, without having a rule of law announced that would permit, that would entitle you to.

And you got that.

Mr. Birnberg: Exactly, Your Honor.

That is precisely--

Unknown Speaker: You got in effect a declaratory judgment at least.

Mr. Birnberg: --That is precisely the point, Your Honor.

That is what is so unique.

I was contemplating last night, it seems to me that a nominal damages award really in many theoretical respects is closer to the traditional equitable relief of injunction or declaration than the traditional tort type relief.

Unknown Speaker: Well, it certainly differs rather sharply from an injunction in that nobody is ordered by the court to do anything other than to pay nominal damages.

Mr. Birnberg: It's certainly, that's certainly correct, Your Honor, but what it does is it adjudicates that there has been a constitutional deprivation.

And that is the crucial point here.

Unknown Speaker: No, that can be valuable to your client or to the plaintiff where the client is still in the business, and so that deprivation will not occur again in the future, or at least where it is not terribly fact bound it might be useful to some other people.

But I don't see how this adjudication that on these peculiar facts there had been a violation of due process benefits anybody in the world, neither the plaintiff in the future nor anybody else in the future.

The only thing to come out of this case is nominal damages.

What other good came out of it, and a statement that this person was wronged in the past?

Mr. Birnberg: But you see, that's an important thing.

A statement that this person was wronged was, and in this context, Justice Scalia, and that is in a situation in which a person's good name is at stake.

Had Dale Farrar been given procedural due process he would have had an opportunity to at least make his case at the time.

That--

Unknown Speaker: And in fact we know from the lack of damages that he would have failed.

He would have failed.

Mr. Birnberg: --Well, I think that's not correct.

I think, Justice--

Unknown Speaker: Then why didn't he get, then why didn't he get some damages?

Mr. Birnberg: --We did not prove the monetary damages which he would have, that he sustained.

And that's an important distinction.

We don't... and secondly and more importantly because the trial happens years later once Dr. Farrar is in fact dead, there were witnesses who testified at that trial who had never surfaced before Joseph Farrar's death.

Therefore there was no possible opportunity to rebut what they had to say.

Had they made their statements in 1973 at a procedural due process opportunity then Dr. Farrar may very well have been able to rebut it.

Unknown Speaker: Well, it may very well have been the case, but that, I mean that's just the luck that goes, good or bad, with trial dates, and that kind of speculation can't be a basis for determining an entitlement to counsel fees.

Mr. Birnberg: That is the reason that procedural due process is so vital.

That is the reason that we insist and the Constitution insists that procedural due process take place.

Now, given the fact that is established by the jury verdict that this petitioner had his rights to procedural due process violated, then the question is what, I guess what Justice Scalia's question is is what benefit comes from that.

And the benefit that comes from that is that originally Dale Farrar, had he lived, Dale Farrar's estate can say that the procedure by which my good name was taken from me was fundamentally flawed, it was a flawed procedure.

Now, I'm not saying that that means had it not been a flawed procedure the same result might not have obtained, but it was a flawed procedure.

And when your good name is taken by a flawed procedure the law says that must be vindicated.

Unknown Speaker: Is your good name--

--Was that the basis for the jury finding, that his good name was taken?

I thought the basis for the jury finding was that the school was improperly closed.

Mr. Birnberg: Justice Kennedy, it's very, I can't give you a yes or no answer to that question because the jury verdict was regrettably obtuse.

The jury verdict says that you find that Lieutenant Governor Hobby violated the constitutional rights of Joseph Farrar.

Now, in the various pleadings that the respondent has filed throughout the course of these proceedings, the respondent has said that what that jury verdict meant was that his procedural due process rights were violated, and that's therefore what I am essentially relying on.

Unknown Speaker: But I take it the procedural due process rights had to be to vindicate the closing of the school, not damage to reputation, or am I incorrect about that?

Did you, was there an instruction to the jury that they were entitled to compensate for damage to reputation?

No.

Mr. Birnberg: I'm not sure that... well, I will answer that question during my time on rebuttal.

I have the jury instructions here and I'm not sure that they did not in fact permit that.

I do know this, Justice Kennedy, they permitted the emotional distress that Dr. Farrar, they would have permitted the emotional distress to which Dr. Farrar was subjected to be compensated.

That can only have come necessarily from loss to reputation, loss of, the closing of the school would not have given rise to claims, it seems to me, for emotional distress.

Unknown Speaker: Well, if that's the case aren't you in more serious trouble because loss of reputation is not compensable in 1983, is it?

Mr. Birnberg: Well--

Unknown Speaker: And if you're saying he got his emotional damages simply, damage for emotional distress simply as a kind of pendant or consequent to damage to his good name, and his good name is not subject to clearance under 1983, then you should be entitled to nothing.

Mr. Birnberg: --I am saying, Justice Souter, no, in fact not.

I'm saying, Justice Souter, that what he benefitted was he got a judgment, and enforceable judgment which vindicated his rights to procedural due process.

Unknown Speaker: Right.

Well, but a minute ago you were saying that it also vindicated his good name.

And do you agree that his good name is not subject to litigation and damage to it is not subject to compensation under 1983?

Mr. Birnberg: Candidly I don't, but I don't believe that that's presented by the case--

Unknown Speaker: I think you should, but in any case if--

Mr. Birnberg: --I believe there are certain circumstances in which one has a liberty interest.

I also understand... in one's good name.

I also understand that that's a pretty complex additional area of the law and I don't mean to trip into that, if I can avoid it.

My point--

Unknown Speaker: --All right.

But if you don't trip into it and if you stay away from vindication of good name, then aren't you right back where you left off with Justice Scalia's question, and that is there has been a finding that in fact there was a procedural due process violation but there has been an equally clear finding, implicit as you said a moment ago, that no substantial harm was done by it.

And if we exclude reputation here, then absolutely, absolutely nothing was affected except a pure procedural error per se.

Isn't that correct?

Mr. Birnberg: --I don't believe that is correct.

I think the error in that question, Justice Souter, is in the suggestion that that, question number 8 that says how much was he damaged, and the jury says nothing, that that necessarily means that, everything that you imply in your question.

I believe that all that means is that we failed in our burden of proof to prove the dollars and cents value of the procedural due process violation.

I believe that the vindication was--

Unknown Speaker: What could that dollars and cents value be if you accept, as I think you do and have to do, that he had no right to continue operating the school, and with all the procedural due process in the world the school would have been shut down and the result would have been reached, the result that would have been reached is exactly the result that was reached.

Where can you find damage in this?

Mr. Birnberg: --I'm sorry, I would like to concede that.

I can't concede that point.

I don't believe that the record necessarily shows that to be the case.

The jury found only that, notwithstanding the procedural due process violation, the petitioner failed to prove any actual damages flowing from the procedural due process violation.

There can be any of a number of reasons why that is so, but the crucial point here is that what the judgement does is it gives us a judgment.

It is an enforceable judgment.

Unknown Speaker: Let me ask you, do you suppose that you could have stayed in court and litigated a procedural due process violation if you claimed no damages at all?

Just say I want a declaratory judgment that there was a violation of procedural due process.

Mr. Birnberg: I believe the answer to that is yes, Justice.

And certainly if I had said we want procedural due, a declaration that procedural due process has been violated and nominal damages--

Unknown Speaker: No, no, I didn't ask that.

All he wants is a procedural due process judgment.

Mr. Birnberg: --I have never seen a case that is a declaration of--

Unknown Speaker: Do you think that presents a case in controversy?

Mr. Birnberg: --I believe that it can.

Yes, an appropriate case, I think that it can.

Unknown Speaker: Well, it's subject though to this, declaratory judgments are subject to some of the same rules that injunctions are.

I don't think you can get an injunction about conduct which is simply in the past and that there's no prospect of repeating.

I would think the same rule would apply to declaratory judgments.

Mr. Birnberg: I think that is correct, Your Honor, and I do... in fact I think that is correct, Chief Justice Rehnquist, that there is a requirement in the rules of equitable relief that before you can get a declaratory judgment there must be some showing that there is a likelihood of repeat in the future.

Which is why I believe the court says in Carey against Piphus the way you vindicate procedural due process violations is with nominal damages.

I mean, that's the vehicle.

That's the remedy that the court has chosen and that the court says vindicates--

Unknown Speaker: It's not... what does vindicate mean?

I don't know what vindicate... what does vindicate mean?

I thought vindicate means you get something out of it.

You get money or you get the other fellow to say I won't do it again, or something like that.

This is just sort of a bare acknowledgement that somebody created, made a technical mistake in the past which as far as we know didn't cause any damage to anybody.

That is vindication?

Mr. Birnberg: --It is vindication to say that this individual so transgressed the constitutional rights, the procedural due process rights of the petitioner that the court will intervene and correct it.

And the way, the court will say, the court will say that your rights were violated.

Now the court won't say your rights were violated unless there is a real concrete dispute.

Unknown Speaker: You say intervene and correct it, but the court did not correct anything.

It neither said don't do it again, nor did it say here's the money for, you know, pay him money for having done it in the past.

It didn't correct a thing.

Mr. Birnberg: The court said your right to a hearing has been violated.

In the same sense in Carey against Piphus, Justice Scalia, in Carey against Piphus we talk about a student who was suspended for, I have forgotten, 20 days or something like that, without any kind of a prior hearing, for passing a marijuana cigarette on the play ground.

He never maintained in any way that he was not guilty of that.

He never maintained that had he had a hearing that the result would have been different.

What he maintained was that he was entitled to a hearing as a matter of procedural due process.

And what this Court held is, of course it's a two-fold hearing.

Number one is that there is no substantial damages that you can recover simply because your procedural due process rights have been violated without a showing that had they not been violated there would have been a different result.

But number two, so long as you make that minimum showing then you are entitled to a judgment which will vindicate the loss of procedural due process and that judgment is a judgment for nominal damages.

Unknown Speaker: Well, you ought to say that, maybe you ought to say that maybe the civil rights laws and the attorneys' fee provisions are to sort of get people to act as private attorneys general.

Mr. Birnberg: Well, certainly they are, Justice White, and certainly that, the congressional intent I think in this circumstance frankly could... well, I was going to say--

Unknown Speaker: At least I suppose your judgment sends a message to other state officials.

Mr. Birnberg: --Oh, and that of course is what Judge Hughes says in his opinion.

At the very least that is what he says.

And that brings us to what would have been my third point of argument, and that is that the congressional intent clearly was to encourage private attorneys to engage in this kind of litigation precisely because it is for the public good and for the public benefit.

Now, admittedly under Hewitt, Justice Scalia, that in and of itself would not be enough to carry the day.

What is the threshold that gets us to get reasonable fees, whatever reasonable means in the context of superimposing the recovery upon the effort that was expended to get it.

We got the judgment.

We got a judgment for nominal damages, and that vindicates the constitutional rights, it does something, it is some benefit.

If the marshall goes out to execute on that judgment General Hobby can't say wait a minute, that doesn't count, that's only a technicality.

I mean, it is something that changes the legal position of the parties.

Now why would the courts say you do that?

The courts don't engage in meaningless acts.

The courts don't do things that aren't meaningful.

It is precisely because that is meaningful, because it has a benefit, and because it is substantial.

It seems to me that where this case gets bogged down conceptually is in our failure to distinguish between the qualitative significance of the judgment and the quantitative significance of it.

Quantitatively $1.00 is not necessarily a lot of money.

Qualitatively we got the vindication that we sought in that we got a judgment that said our procedural due process rights had been violated and for that we were entitled to the relief which the law establishes, namely nominal damages.

Mr. Chief Justice, I will reserve the balance of my time.

Unknown Speaker: Very well, Mr. Birnberg.

Mr. Cowan, we'll hear from your.

Argument of Finis E. Cowan

Mr. Cowan: Thank you, Mr. Chief Justice.

If it please the Court:

My friend Mr. Birnberg and I agree on one significant point about this case which I think is very relevant to one of Justice White's questions and one of Justice Kennedy's questions.

The point that we agree on is that the verdict in this case is truly obtuse.

We agree on that.

And that, Your Honor, Justice White, is very pertinent to your question of what kind of a message does this send.

And we'll get to this--

Unknown Speaker: But I suppose there had to be the equivalent of a declaratory judgment here that the procedural due process rights were violated.

Mr. Cowan: --No, Your Honor, there was never any judgment of any kind, even a judgment for $1.00.

Unknown Speaker: Why pecuniary damages then?

Mr. Cowan: Why pecuniary damages?

Unknown Speaker: I mean why nominal damages then?

Mr. Cowan: Because... well, no judgment for nominal damages was ever entered, which is one of the facts that my friend and I differ about.

The court of appeals said a judgment for $1.00 would be appropriate, but that amount was so nominal, so technical--

Unknown Speaker: Well, all right, but anyway--

Mr. Cowan: --that the judgment was never entered.

Unknown Speaker: --Why would the court of appeals have said nominal damages unless there had been a violation of the due process rights, which it said there were?

Mr. Cowan: The jury in fact found that there was.

Unknown Speaker: All right.

Mr. Cowan: And if you look at that single jury finding you get one result.

Unknown Speaker: Well, that's what the case is all about.

Mr. Cowan: But if you look at the whole case and if you look at the entire test set forth in TSTA v. Garland you come up with an entirely different result than if you look at that one jury finding.

And I suppose the bulk of our plea to Your Honors is to ask you to look at not a single jury finding but to look at the entire case.

Unknown Speaker: And when you look at it what do you come up with?

Mr. Cowan: You come up with--

Unknown Speaker: That there shouldn't have been even nominal damages, I suppose.

Mr. Cowan: --That can be argued, but you come up with--

Unknown Speaker: Well, you aren't arguing that.

Mr. Cowan: --It's too late to argue that.

What you come up with is the result that the Fifth Circuit majority came up with, and that is that under the facts of this case, applying the four-fold standard set forth in TSTA v. Garland, by no means can these plaintiffs be designated as prevailing parties.

That's, Your Honor, where you come up with.

Unknown Speaker: Just as a factual matter, Mr. Cowan, the opinion of the Fifth Circuit says that following remand from that court the trial court awarded the Farrar's $1.00 in nominal damages.

Mr. Cowan: Factually inaccurate, Your Honor.

Unknown Speaker: Well, we're certainly not going to delve into that here.

I think you take that as a given in order to deal with the question presented.

Mr. Cowan: Except that in the record before Your Honors and the briefs it is factually undisputed that the judgment for $1.00 was never entered.

And that we say is very, highly relevant although it's not controllable.

I think you would get the same result, but it is highly relevant to the fourth prong of the standard which Your Honors enunciated so carefully in TSTA v. Garland.

What I would like to do today--

Unknown Speaker: Mr. Cowan, is there--

Mr. Cowan: --in addition to--

Unknown Speaker: --Justice Blackmun wants to ask you a question.

Is there any significance at all in the amount that the district judge originally gave as damages in six figures?

Mr. Cowan: --Well, Your Honor, the, no one has ever awarded these plaintiffs any compensatory damages.

The jury found from the start that the plaintiffs had not proved actual damages.

In other words while the jury, perhaps displeased in some respects with the conduct of the defendants, they still held that the plaintiffs have not proved that any of the plaintiff's rather considerable damage was caused--

Unknown Speaker: But what is the significance of that $280,000 figure?

Mr. Cowan: --That's the attorneys' fees, Your Honor.

That's the attorneys' fees that were assessed against my one single poor client against whom there is just this--

Unknown Speaker: Well, I'm asking about its significance.

We're speaking of attorneys' fees here, aren't we?

Mr. Cowan: --Yes, sir.

Unknown Speaker: Now, of course that's faded into the background, but is there any significance in that six figure figure?

Mr. Cowan: Well, yes, it's significant to my client who may have to pay it, Your Honor.

It's of great significance to him.

[Laughter]

Unknown Speaker: You keep emphasizing $1.00 and the absence of a judgment.

I just say that in the background of this record there is another figure that, and I'm asking you whether it has any real significance.

Mr. Cowan: Well, yes, Your Honor, the $280,000 in attorneys' fees has real significance.

But the jury didn't find that the plaintiff had suffered $280,000 in damage.

That's the attorneys' fees, that's the full lode stone amount that the trial court, in direct contravention of Your Honor's instructions in Hensley v. Eckerhart, which I don't intend to argue here today because it's not the key thing that I want to say to you.

But the trial court, that's the amount that the trial court awarded in direct contradiction to Your Honor's instructions that you had given to trial courts in Hensley v. Eckerhart where Justice Powell said the result is the chief thing to look at.

Unknown Speaker: Mr. Cowan, the question presented here by the petitioners was whether the award of reasonable attorneys' fees to civil rights plaintiffs wh recover nominal damages is proper.

And in your brief in opposition it doesn't seem to me that you raised any question about the fact that $1.00 had been awarded in damages.

So I suggest you not argue that point.

Mr. Cowan: With all respect, sir, that is in our brief.

I apologize if I contradict you, sir, but I have read it over and over and it is there.

What I would like to do, Your Honors, today in addition to responding to your very perceptive questions is, what I would really like to do is to discuss with yo the very careful, the very eloquent standard enunciated TSTA v. Garland and Hewitt v. Helms, and to demonstrate Your Honors why under the facts in this case applying th standard and the four prong test in that standard the plaintiffs here can by no means be regarded as prevailing parties.

In addition to that, Your Honors, we would als like to talk to you about one of the aspects of the TSTA v. Garland in which you ask what does this case do as a matter of public policy.

What are the public policy ramifications of this and related cases.

Unknown Speaker: Well, even if they are prevailing parties, are they entitled to any attorneys' fees here under the statute?

Mr. Cowan: Yes, a prevailing party is entitled to some attorneys' fees.

It may be nominal--

Unknown Speaker: Even when the recovery is limited to $1.00?

Mr. Cowan: --If the plaintiff as prevailing party is entitled to some attorneys' fees.

Now, under Hensley v. Eckerhart the trial court should look at the amount as being the crucial amount, or the trial court could conclude, although he did not here, that special circumstances of this case would make any award of attorneys' fees inequitable, but we have not argued that.

Our--

Unknown Speaker: And you don't take that position.

You say if they're prevailing parties they get some attorneys' fees.

Mr. Cowan: --They get some attorneys' fees, we say, and we don't... we raised it in the court of appeals and we have preserved the point here.

We say that the trial court did not apply Hensley v. Eckerhart correct and we challenge the amount of the attorneys' fees.

But as we appear before Your Honor today our principal purpose is to argue that the plaintiffs by no means can be regarded as prevailing parties, that they just don't get over the threshold at all of being prevailing parties.

But Your Honor is correct, the trial court could have said $1.00 in nominal damages, $1.00 in attorneys' fees, and we wouldn't be here today, of course.

Unknown Speaker: Or maybe nothing.

Mr. Cowan: Or maybe nothing.

Unknown Speaker: Or maybe nothing.

Why, why does it make more sense to make the trial court go through a separate determination of whether... you acknowledge that in some cases nominal damages, where nominal damages are awarded there will have been success on the merits.

You don't say that nominal damages never justify attorneys' fees, do you?

Mr. Cowan: Yes.

The answer to your question is yes.

Unknown Speaker: Yes, no.

Mr. Cowan: Yes, we acknowledge that in some cases nominal damages will support, maybe in most cases, but not in this case.

Unknown Speaker: Okay.

Then why does it make sense to do it in a two-step process instead of in a one-step process?

Why do you have to have the district judge first ask himself whether he is a prevailing party given that it's nominal damages, and then go through well, you know, and then step two, having decided that even though it's nominal damages he is a prevailing party, then go through analyzing well, how much money should I give him?

Why not compress the two into one and say look, whenever he gets damages, nominal or not, he is a prevailing party.

And it's in the step two when you decide how much money he ought to get that you come in and say well, it's so nominal that it's not worth anything, I'm going to give him no attorneys' fees, or $1.00 attorneys' fees.

Mr. Cowan: Because, Your Honor, that is a per se rule and we do not believe that a per se rule is called for by the standards and the test which Your Honors set forth in TSTA v. Garland and Hewitt v. Helms.

Now, as a practical matter to support your line of reasoning a different trial judge differently motivated would have said look, nobody can sensibly say this plaintiff prevailed or if he did he prevailed at such a minor level that no substantial attorneys' fees are called for, and we wouldn't be here today.

Unknown Speaker: My point is if you're dealing with a trial judge who's going to make that mistake when you split it into a two-step process, he's going to make it when you have it in a one-step process as well.

It really doesn't matter, does it?

Mr. Cowan: Well, Your Honor, that goes to what I'm going to respectfully suggest to you as the third part of my argument, and that is where Your Honors ought to go with this case as far as establishing the law.

While I hope it's not presumptuous, I do have some respectful suggestions to make to you in that regard.

But Your Honors in TSTA v. Garland and Hewitt v. Helms went to great lengths to establish very, very carefully a standard, that's the way you describe it, and you set forth the various tests or prongs that one needs to go through in order to determine whether that standard has been met.

And we would respectfully say that when you look at this case, not an isolated part of the case like one jury finding, but when you look at the whole case one comes to the conclusion that the plaintiff has not gotten over any of the four hurdles, and he certainly has not gotten over the last of those four hurdles, or the second of the hurdles for that matter.

The first hurdle is the one where the plaintiff comes close to getting over the hurdle.

And the first aspect of the hurdle is whether or not the plaintiff has achieved success on a significant issue in the lawsuit.

And civil rights are so important, and Your Honors' regard for those civil rights is so important that it can be certainly argued that in this case the jury finding creates success on the significant issue.

We would say here, however, that if you look at the entire jury verdict and if you look at the jury verdict in the light of the pleadings and the facts, the plaintiff has not even established success on a significant issue.

And that is true for this reason.

Hobby was one of only multiple defendants.

Hobby was accused, along with the others, of being a member of a conspiracy to deprive Farrar of his civil rights.

The jury found that all of the other defendants were conspirators, but that Hobby was not.

If Hobby had been found a member of the conspiracy we wouldn't be here today because they would have never reached the issue that was decided against Hobby.

The jury went on to find, however, that the conspiracy did not cause these plaintiffs any damage.

In response to a conditioned question they found that Hobby had committed an action under state law which deprived the plaintiff of his civil right, but that that was not the cause of any damage to the plaintiff.

Now, in the light of the pleadings and the evidence that Hobby did nothing alone, there was no evidence that Hobby did anything by himself, the jury's finding is senseless.

It just doesn't make any sense.

In the light of the jury's finding that the plaintiffs had proved no damage, it is clear in the light of the evidence, which was largely undisputed, that these defendants did not cause the plaintiffs any damage and that the Farrar's own conduct was the cause of their rather considerable pecuniary damage.

And they had considerable pecuniary damage which was constantly emphasized during the trial of the case.

So we contend first of all that if you look at the case as a whole, not just a single jury verdict, that the plaintiffs didn't get over the first hurdle of proving significant success on the material issue in the case.

The second prong of the test is even more clearly applicable to our test, and that is that the plaintiff in the language of Garland received some of the relief which he sought.

Here, as I think my friend Mr. Birnberg clearly admits, the plaintiff sought only considerable monetary compensable damages.

He got not one penny of compensatory damages.

Unknown Speaker: So it was, the jury then did not award $1.00?

Mr. Cowan: No, sir.

The jury did not award $1.00, and that's a critical point because the jury was not even charged that they had the option of awarding $1.00, and the plaintiff did not object to the jury charge on that basis.

Unknown Speaker: They just found no compensatory or punitive damages?

Mr. Cowan: Correct.

Now, punitive was conditioned on an affirmative finding on compensatory, but the jury found no compensatory damage, which in the light of the evidence can only mean that the jury concluded that the plaintiffs were the authors of their own misfortune.

Unknown Speaker: Do you think the case would really be different if they found the $1.00 nominal damages?

Mr. Cowan: Well, at least, Judge, the plaintiff would have the option of arguing that that was some of the relief which I sought.

Here--

Unknown Speaker: Well, they did recover $1.00 according to the court of appeals, which is some of the relief they sought under the same light, it seems to me.

Mr. Cowan: --Your Honor, I would answer that question no for this reason, and the reason relates to a point that we discuss in great detail in our brief, and that is the difference between nominal and compensatory damages.

The scholars who have looked at this question for years have said that nominal damages is not just a little bit of compensatory damages.

Unknown Speaker: Well, I understand, but earlier you said, and this is what puzzles me about your argument, if I remember correctly you said in many if not most cases where nothing is recovered except nominal damages fees could properly be awarded, but not in this case because this case is different.

Mr. Cowan: Right.

Unknown Speaker: And the difference, I gather, is the jury didn't do it until after the second, even the jury didn't do it then but it took two appeals to get the dollar recovery.

Mr. Cowan: No, Justice Stevens, the critical difference is this.

In most cases where nominal damages are awarded the evidence and the jury verdict will establish some specific violation of right which the plaintiff has remedied or he is in the process of remedying.

That is not the case here.

One cannot look at the evidence or the verdict in this case and establish a single thing that Governor Hobby or any other future or past lieutenant governor can look at and say that's not what I should do.

Unknown Speaker: Well, take Carey against Piphus, those.

Would you say fees should have been awarded there?

Carey against Piphus.

Mr. Cowan: Carey v. Piphus was a much stronger case for attorneys' fees than here, and that goes to Your Honor's first question.

There the plaintiffs did not seek compensatory damages.

They didn't even bother to prove compensable damage.

They had identified a specific way in which they were harmed, and they got a judgment which said to that specific defendant don't commit that specific kind of conduct any more.

They did in fact send a message, and there are plenty of cases like Carey v. Piphus.

And so the court in Carey--

Unknown Speaker: But don't you think the effect of this judgment will be to suggest to the defendant not to do the same thing all over again?

Mr. Cowan: --Well, Judge, all he did under the undisputed evidence was talk to the press, send a letter to Commissioner Vowell saying look into this situation and consult with the attorney general, and attend a hearing which was conducted by people over whom he had no control.

We say that the judgment here sends exactly the opposite message, and the wrong message, which is why you have so many amicus briefs in this case.

Because what happened here and what can happen in similar cases sends not the right message, but the wrong message.

Unknown Speaker: Well, it seemed to me what your client should have done was to appeal the jury verdict on sufficiency of the evidence.

Mr. Cowan: He should have done.

Unknown Speaker: We take the case based on a finding that he violated due process rights, procedural due process rights.

Carey v. Piphus says this is of great importance, it's of importance all of its own, and I don't think you can impeach the verdict the way you're doing.

Mr. Cowan: Well--

Unknown Speaker: We take this case on the assumptions that the lieutenant governor by his activities in this case violated the due process rights of the defendants, of the plaintiffs.

Mr. Cowan: --Conceded, Your Honor, and I stand corrected in that regard.

But my position is that in applying the standard of TSTA v. Garland you need not look at a single jury issue but are permitted to look at the entire four prongs of the TSTA v. Garland standard in determining how you ought to handle this case.

And the third of those standards is the one which Justice O'Connor referred to in some of her questions, and that is is the relief here so de minimis that a fee award is not justified, and that was one of the prongs of the test which Your Honors enunciated in TSTA v. Garland.

Unknown Speaker: Well, on that basis you should say that in any case where only nominal damages are awarded there should be no fee.

Mr. Cowan: No, sir.

Unknown Speaker: Well, why not?

That's so minimum.

Mr. Cowan: Because in many cases where nominal damages are awarded the plaintiff has succeeded by the evidence and the verdict or the court's finding in identifying a specific constitutional violation--

Unknown Speaker: Well, here's, the court of appeals says we have awarded nominal damages not to exceed $1.00 when an infringement of a fundamental right was shown.

And because the jury explicitly found that defendant Hobby had violated Farrar's civil rights the jury should have awarded Farrar nominal damages not to exceed $1.00.

And it was there for the trial court not to do so when the Farrar's so moved in their motion for a new trial.

Now, the court of appeals said there was a specific finding that the, that your client had violated a fundamental constitutional right.

Mr. Cowan: --There was such a jury finding, Your Honor.

Unknown Speaker: Well, and the court of appeals certainly accepted it and said that there was.

You didn't, you didn't convince the court of appeals that there wasn't any violation of a constitutional right.

Mr. Cowan: No, sir, that part was never raised.

And in support of Justice Kennedy's statement, in hindsight if Governor Hobby--

Unknown Speaker: You should have cross-appealed, I suppose.

Mr. Cowan: --If Governor Hobby and his lawyers had foreseen the future they undoubtedly would have raised that point on motion for new trial, motion for judgment notwithstanding the verdict.

But in the practical context of this case no one after the jury verdict in this case, and I think I can say this without any dispute, no one foresaw that 15 years later Mr. Hobby would be surprised by an award of $270,000 in attorneys' fees in a case he felt he had won, and which everybody else felt he had won.

Unknown Speaker: Your point is that in this case, unlike in most cases, although the defendant was found guilty of a constitutional violation we have no idea even what that constitutional violation was?

Mr. Cowan: Exactly, sir.

Unknown Speaker: And that that's not a situation that will always arise?

Mr. Cowan: And that's a situation that will rarely arise, particularly if Your Honors send the type of message that I would respectfully suggest to you that you should send by your--

Unknown Speaker: Now, I presume that if we find that ipso facto nominal damages renders somebody a prevailing party you would continue to make this same argument when it goes back down on the amount of the fees.

Mr. Cowan: --We certainly would make an argument based on--

Unknown Speaker: You'd make the same argument.

You'd say look--

Mr. Cowan: --Well, we would make an argument based on Hensley v. Eckerhart below, and here we principally rely on TSTA v. Garland and Hewitt v. Helms.

Unknown Speaker: --So if the court of appeals had spelled out here in so many words what this fundamental violation of a fundamental right was, that here's what happened and here's what he did, you would say the, would you say the plaintiff was then a prevailing party?

Mr. Cowan: No, Your Honor, because I would still argue that he hadn't gotten over the last two prongs of the test, but I will concede to you that that would be a lot better case for the plaintiff's receiving attorneys' fees than this case.

And that, and part of that, Your Honor, rests on Your Honors' decision in Hewitt v. Helms.

On Monday I heard Judge Stevens say very rare that we get a four square decision up here, an on all fours case.

And I'm sure you don't get the luxury of dealing with cases on the basis of all four decisions.

Unknown Speaker: But this is one, right?

Mr. Cowan: No, sir, it's not.

But it's mighty close.

Mighty close.

[Laughter]

It's as close, I would submit, as you're ever going to get.

And the one, the decision that I would respectfully urge Your Honors is as close as four corners as you're ever going to get is Hewitt v. Helms.

And it relates, Your Honor, to the question Judge White asked about whether or not the plaintiff didn't in effect get a declaratory judgment here, and you read Hewitt v. Helms and the answer to that is no.

Helms had a lot better case for attorneys' fees than do the plaintiffs here.

Helms got a finding from the court of appeals that the defendants had violated his civil rights in two very specific ways.

But when the case went back Helms was out of prison, and the basic fact of Hewitt v. Helms, and Helms probably would have been entitled to a declaratory judgment or he probably would have been entitled to expungment, but the teaching of TSTA v. Garland which used Hewitt v. Helms as an example of de minimis victory is that a mere identification and a finding of a violation of civil rights when it doesn't stop the defendant's conduct, when it doesn't change the relationship, does not get over the de minimis hurdle.

Your Honors used that as an example--

Unknown Speaker: But is it not true that your client owes the plaintiff $1.00?

Mr. Cowan: --No, sir.

Unknown Speaker: Did you pay it?

Mr. Cowan: No, sir.

Unknown Speaker: You don't think you owe $1.00 after what the court of appeals did?

Mr. Cowan: No, sir, because of the exchange which Judge Rehnquist and I had earlier.

May I speak to you for a minute about--

Unknown Speaker: Well, they have never, they, your opposition says it isn't worth collecting, I guess.

Mr. Cowan: --And that proves it's de minimis, Your Honor.

Unknown Speaker: But you know in your brief in opposition at page 5 you say according to the inquiry here is whether Joseph Farrar's recovery of $1.00 in nominal damages constitutes a material alteration, and so forth and so on.

But now you're saying there was no recovery of $1.00.

Mr. Cowan: No, sir.

Unknown Speaker: Which is not what you said in your brief in opposition.

Mr. Cowan: We say in, we raise the point in the brief that the judgment was never--

Unknown Speaker: Well, your brief as I read it assumes there was recovery of $1.00, and that's what I thought was true.

You say it on page 4, the recovery of $1.00 as nominal damages.

Mr. Cowan: --May I speak to Your Honors as to where, assuming that you agree with me or have some agreement with me in what I'm saying, where we think you ought to go with this case?

We think what you ought to do, Your Honors, is say when we decided TSTA v. Garland and Hewitt v. Helms we were serious, we were setting up a standard.

The standard does in fact have objective requirements.

We think those objective requirements should be looked at and should be met.

We also say to Your Honors that--

Unknown Speaker: Mr. Cowan, I have to interrupt you again, because you really rely on the absence of a judgment.

Page 7, you say the Farrar's were granted just one thing, they got $1.00.

Then you have a footnote that says in fact the district court never signed a judgment against Hobby for the $1.00.

But you don't attach any legal significance to that fact that you make in a footnote, you just sort of point it out.

Mr. Cowan: --We don't think it's a controlling fact, Your Honor.

Unknown Speaker: You didn't attach any significance to it in your brief in opposition, at least I can't find that you did.

Mr. Cowan: I'm sure, Your Honor, if that's what, that's the way you read our brief that's the way it should be read.

But one, another thing that our adversary and I agree on is the importance of Carey v. Piphus.

Carey v. Piphus we, with respectful for Your Honors, is frequently miscited or overstated.

What the plaintiff was attempting to establish in Carey v. Piphus was that constitutional rights were so different from usual rights that the plaintiff was entitled to an award of compensatory damages even if he hadn't proved any.

That approach was rejected, and it was rejected by Justice Powell saying this, rights, constitutional and otherwise, do not exist in a vacuum.

Their purpose is to protect persons from injuries, to protect particular interests.

Our legal system's concept of damages reflects this view of legal rights.

The cardinal principle of damages in Anglo-American law is that of compensation for the injury caused to plaintiff by defendant's breach of duty.

And we say to Your Honors that the key fact in this case is that the jury's verdict says loud and clear that these defendants and their conduct did not cause any injury to these plaintiffs.

And in the light of that, Your Honor, we say it would be inconceivable that the plaintiffs could, using ordinary, standard, common sense language be deemed to be prevailing parties.

Thank you very much.

Unknown Speaker: Thank you, Mr. Cowan.

Mr. Birnberg, you have 5 minutes remaining.

Rebuttal of Gerald M. Birnberg

Mr. Birnberg: Thank you, Mr. Chief Justice, and may it please the Court:

Let me address that very last point first as a matter of fact and try to clarify, and I think Justice Scalia was particularly interested in this.

The specific jury question about the compensatory damages was this, do you find from a preponderance of the evidence that such act or acts were a proximate cause of any damages to plaintiff Joseph Davis Farrar.

Now, the jury's instructions, the court's instructions erroneously described proximate cause as requiring foreseeability in the sense that Governor Hobby had to foresee that what he did would cause the type of results that they caused.

So the explanation in this particular case for why the jury found a lack of actual damages actually goes to, and this was litigated in the courts below, the erroneous definition of foreseeability.

And that is what taints that whole suggestion--

Unknown Speaker: 0 xxx.

Mr. Birnberg: --That is correct, and that's the reason the appellate court didn't address it.

But that does deprive that very jury instruction of its significance.

Unknown Speaker: Well, just as respondent is stuck with the $1.00 award because it's in the question presented, I don't see what you gain by arguing that there was an improper jury instruction.

Mr. Birnberg: Then, Chief Justice, I shall not anymore.

I shall move on instead to the next point which is I wanted to correct something my very, that Mr. Cowan, very able counsel, but I think he may be confused about the facts of Hewitt against Helms.

That's the one he said was the on all fours case.

Well, of course in Hewitt against Helms, and it starts with Justice Scalia's comment about the fact this is bizarre, here we have somebody who is claiming to be a prevailing party who had never won anything and lost the judgment.

Hewitt against Helms is the case in which the judgment goes against the plaintiff on qualified immunity grounds and the plaintiff actually won nothing at any time in Hewitt against Helms except an interlocutory declaration by the appellate court that it was okay for him to maintain his lawsuit, that it couldn't be dismissed on 12(b)(6) grounds.

That certainly is not anything approaching the situation here.

In fact we have got exactly the opposite here.

We've got a case here in which the plaintiff in fact got the judgment and the respondent is saying nonetheless he is not the prevailing party.

It seems to us it's the flip side of the situation that was presented in Hewitt against Helms.

I had started, Justice O'Connor, addressing the two phrases are de minimis and technical, and I think I had addressed the de minimis issue in the context of de minimis non curat lex.

Technical, there's a very interesting thing about all of the cases that you describe in that opinion, and all of them really, in which you suggest that these might be examples of technical victories.

And every technical victory has this common thread.

They are all cases in which really there was no concrete justiciable controversy.

They were all contrived or hypothetical controversies, such as there was the footnote that referred to the old district court opinion where there was a challenge to an ancient curfew law.

Nobody had threatened prosecution under the curfew law.

Yes, they won a finding that the curfew law had unconstitutional aspects to it, but so what, nobody was threatened under that law.

All of those cases, I submit to the Court, where there has been something that one could regard as a technical violation, are cases in which in point of fact they were non justiciable to begin with.

The TSTA v. Garland has the example of the one part of the regulation that none of the teachers had ever been denied permission to meet pursuant to, never expected to ask that that particular part of the regulation be implication, and counsel at oral argument conceded that that part of the case did not come across the threshold.

It was a hypothetical, theoretical, not real violation.

And that's really the difference here.

What we're dealing with here is, and I think this is the threshold, is an actual deprivation, one that the jury has found actually occurred.

And in fact the jury instruction, it's not just one, it's two jury questions that find that.

The one that we have referred to before where the jury found that Hobby committed act or acts under color of law that deprived the plaintiff of civil rights guaranteed by the Constitution, but there is also, and I think this is a significant one, the very, the second jury question asked whether Hobby was entitled to qualified immunity, and the jury found that he was not.

And when you superimpose that upon the instructions which defined qualified immunity you will find that the qualified immunity instructions required them to find that he knowingly violated a constitutional right, knowing that he had done wrong, and without any good faith or other extenuating circumstances.

So... I see the red light is on.

I appreciate, we would ask the Court that this judgment be reversed.

Chief Justice Rehnquist: Thank you, Mr. Birnberg.

The case is submitted.

Unknown Speaker: The honorable court is now adjourned until Tuesday next at ten o'clock.

Attribution:

The OYEZ Project

Featured:

City Of Burlington v. Dague - Oral Argument

Fri, 09 Jan 2009 14:49:31 +0000

Case:

City Of Burlington v. Dague

Media File:

91-810_19920421-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Michael B. Clapp

Chief Justice Rehnquist: We'll hear argument next in No. 91-810, The City of Burlington v. Dague.

Mr. Clapp.

Mr. Clapp: Thank you, Mr. Chief Justice, and may it please the Court:

The issue presented in this case is whether a district court, in determining a reasonable hourly fee, a reasonable fee award under Federal fee-shifting statutes, may enhance that award above the lodestar amount in order to reflect the fact that plaintiff's attorneys have taken the case on a contingent fee basis, thus assuming the risk of receiving no attorney's fees at all, and this case the district court denied a preliminary injunction motion and ultimately issued an order on the merits which denied all of the relief sought by the plaintiff and granted relief limited to the ratification of a preexisting state court order.

On that basis, when determining the reasonable attorney's fees to be awarded to the plaintiffs, the district court concluded to award the full lodestar amount and in addition a contingency bonus or enhancement to reflect the fact that plaintiff's counsel had taken the case on a contingency basis.

The decision that the enhancement award was in order was based upon the bizarre conclusions that in the first place the plaintiff's loss of the preliminary injunction motion somehow entitled plaintiffs to be compensated at a greater rate, not only with respect to the effort expended with respect to the preliminary injunction motion and other claims that were lost, but with respect to all hours devoted to the case.

Secondly, the court based its decision on its determination that plaintiff's attorney who brought and prosecuted the case with no guarantee of an enhancement was nevertheless entitled to the enhancement award.

This case, we submit, demonstrates an example of the Hensley lodestar method of fee calculation run amuck.

Our response to the precise issue presented to the Court is first, no enhancement for a, of a lodestar fee to reflect risk of lost contingency should ever be granted, for the reason that any such award of an enhancement is necessarily speculative and contrary to the evidence of the market's response to risk of loss assumption as demonstrated by the evidence before the Court.

Unknown Speaker: How about that it's contrary to the fee-shifting statute?

Mr. Clapp: It's also... for that reason, contrary--

Unknown Speaker: Shouldn't you start with that?

Mr. Clapp: --Well, the fee-shifting statute provides, of course, that fees should be reasonable, and this Court has determined on several occasions that--

Unknown Speaker: It only provides for fees when you win--

Mr. Clapp: --That's correct, Your Honor.

Unknown Speaker: --not when you lose.

Mr. Clapp: Precisely the point that we were raising with respect to the basis for this Court's determination, that it is absolutely bizarre--

Unknown Speaker: And if you're getting enhanced when you win, you're getting enhanced and being paid for when you lose.

Mr. Clapp: --That's correct.

Unknown Speaker: That's just a plain old statutory question, isn't it?

Mr. Clapp: We would certainly contend that it was, Your Honor.

The respondents, we anticipate, will argue that on the basis of economic theory that despite what the facts show the enhancement should be available in order to encourage the bringing of these types of lawsuits in general.

Unknown Speaker: And the arguments for both sides are pretty well set forth in the various opinions for the Court in the second Delaware case, aren't they?

Mr. Clapp: That's correct, Your Honor.

The difficulty with the various opinions set forth in the Delaware case is that both... that's a major problem, of course, but I will address my comments for the moment to--

Unknown Speaker: Otherwise you wouldn't be--

Mr. Clapp: --Otherwise we wouldn't be here today.

Unknown Speaker: --And you wouldn't be being paid to be here.

Mr. Clapp: That's correct.

Very true.

[Laughter]

I would like to address my observations, if I could for a moment, to Justice O'Connor's concurring opinion and the dissenting opinion in Delaware Valley II.

I would like to preface those remarks by pointing out that this Court determined in Delaware Valley I, or set forth in Delaware Valley I in Justice White's opinion, that the whole purpose for this Court's selection of the Hensley method of fee calculation was to avoid, was precisely to avoid the sort of arbitrary and capricious conclusion that enhancement of an otherwise reasonable lodestar fee presents.

The difficulty, it seems to me, with both the concurring opinion and the dissenting opinion in Delaware Valley II is that neither of those opinions address the difficult issue that arises when a court attempts to venture beyond its role as a fact-finder and to begin enunciating policy.

Unknown Speaker: Mr. Clapp, may I ask a question to show my ignorance of this whole area of the law?

Where did the term lodestar come from in this context?

Mr. Clapp: Your Honor, I understand that the term lodestar was coined by the Third Circuit in its early development of the method of fee calculation that refers to a base of all hours expended on a case, reasonably expended on a case, times the reasonable hourly rate.

Beyond that, I cannot explain the derivation of the term.

Unknown Speaker: It always struck me as a strange kind of a term.

Mr. Clapp: It struck me as a strange term, too.

Unknown Speaker: But it nevertheless was adopted by this Court, wasn't it?

[Laughter]

Mr. Clapp: The term was adopted by this Court.

Unknown Speaker: Well, we do do strange things.

Mr. Clapp: The method of--

Unknown Speaker: Stare decisis, as they say.

Mr. Clapp: --The method that is referred to by the term that was adopted by this Court was a modification of that Third Circuit approach that had been developed prior to that time.

Unknown Speaker: In computing the lodestar, now that we know what it is, you do take market forces into account, do you?

Mr. Clapp: My understanding of that, Your Honor, is that the market determines what the reasonable hourly rate to be used in calculating the fee is.

Unknown Speaker: What if an economist could convince us, and I probably couldn't, that the market is different in a free market when you're just charging clients and you don't have Government mixing into the thing, the market pays a little more when there's a contingency involved than it does when there's no contingency involved?

Mr. Clapp: Assuming that such evidence could be developed, then that evidence would simply be evidence of what the market rate is in that particular market.

Unknown Speaker: And then it would indicate that the contingency factor would be reasonable, I guess, because within the higher--

Mr. Clapp: It would simply indicate that to whatever extent that market compensates for contingency, that figure is already reflected in the, in that market hourly rate.

Unknown Speaker: --On the lode, because the lodestar assumed when it is worked out that there is a, that if there has been a contingency factor, it was taken into account in computing the lodestar?

Mr. Clapp: It was taken into account by the market in determining what the market rate was, and the courts should be limited to simply determining what that market rate is.

Unknown Speaker: But it isn't the fact of contingency, is it?

It's a question of how difficult the issue is and what kind of skill it takes to win.

Mr. Clapp: The definition of the risk of loss is complicated, Your Honor, and I would address that question specifically by saying whether, or the extent of the risk of loss in a particular case is a function not only of the complexity of the issues advanced, and to that extent the plaintiff controls that issue by the extent of the relief that is granted, or requested in a case like this.

Unknown Speaker: Mr. Clapp--

Mr. Clapp: Yes, sir, Justice Blackmun.

Unknown Speaker: --I have a question.

Perhaps I should direct it to your opposition, but isn't there a state law claim remaining in this case for which damages are available?

Mr. Clapp: There certainly is, Your Honor.

There is a state law claim remaining on the face of the complaint for $1 million.

Unknown Speaker: How does that affect the outcome of this argument?

Mr. Clapp: Well, assuming, Your Honor, that a rational support for fee enhancement, lodestar fee enhancement, could be constructed, I think amicus, the American Bar Association and this Court in other occasions has recognized that a fee arrangement between plaintiff and their counsel may have the effect of reducing whatever risk would otherwise be inherent in a particular case.

Thus in this case, as we understand plaintiff's arrangement with their attorney, if the plaintiffs are successful in establishing a right to a fee award in this case, that will be the limit of the compensation that they receive.

If they are not, plaintiffs will still be compensated on a percentage fee basis for any work that is performed in this case, assuming that they are successful in establishing their state related claims to damages.

Unknown Speaker: Assume that we say that contingent fees are inappropriate and that the court is concluding a lodestar fee and the court hears expert witnesses or considers an affidavit, and the testimony is that in cases of this kind since recovery is uncertain the hourly rate is generally $50 an hour higher than other hourly rates.

Should that be included in the lodestar amount?

Mr. Clapp: We think not, Your Honor.

The market rate which should be used in calculating the lodestar is not a reflection of what a particular supplier in the market hopes to obtain.

It should be, and we contend under the Hensley lodestar method, should reflect how the market compensates for those services, not, to repeat, what a particular attorney hopes to receive.

Unknown Speaker: Well, what if the testimony is that this is how the market compensates for it?

Mr. Clapp: Then the market rate in that particular case would reflect the--

Unknown Speaker: The $50 an hour increase?

Mr. Clapp: --the $50 an hour increase.

Unknown Speaker: Well then are we engaged in a circular enterprise no matter which way we rule?

Mr. Clapp: To the extent that the Court becomes involved in trying to parse the elements that a particular market rate reflects, my answer to Justice Kennedy's question would be that there is no need for the Court to get involved in that parsing.

The market reflects whatever considerations the market considers in fixing a prevailing market rate.

Unknown Speaker: Well, should the market be defined as the market for attorney's fees generally and not just for fees of cases of this type, so that if you were the trial judge you'd ask a defense firm what they charge an insurance company by the hour and use that as the rate?

Mr. Clapp: The question before a court in any fee-fixing case, fee-shifting case, is what is the appropriate market rate to use.

The evidence that the court considers to be relevant with respect to that particular market's compensation rate might include how much attorneys generally charge for the provision of services.

The precise question would be how does the market compensate attorneys providing similar services and having similar skills.

Unknown Speaker: Well, if there's no objection to the trial court taking into account the discrete market which consists of those who undertake representation in cases of this type, and if that discrete market includes an enhanced hourly rate for the contingency factor then it seems to me it makes no difference what we rule in this case.

We might as well rule against you and have it all out in the open.

Mr. Clapp: I think there is a basic distinction that the lodestar method adopted by this Court contemplates.

That is in effect there is no market that measures risk of loss contingency compensation for these types of cases because the market is in fact determined by the courts and not by market forces.

There is no relevant market to look to to attempt to measure any difference in compensation for risk of loss in these particular types of cases as opposed to the market in general.

Unknown Speaker: Mr. Clapp--

Mr. Clapp: Yes.

Unknown Speaker: --Could I test that with you just a moment?

I know when I was in practicing sometimes you take a case and you get, say, paid, say, maybe then it was $25 or $30 an hour, win, lose, or draw.

But if you were going to take the case and you make a deal with the client that if I win it you'll pay me $40 an hour, instead of $30 or $25.

Now which... and that's, say all lawyers, a lot of lawyers made those same alternative offers to their prospective clients, $40 if I win, I get paid, I get nothing if I lose, $25, win, lose, or draw.

Which is the right lodestar fee in that market, say that's the evidence?

Mr. Clapp: If that's the evidence, Your Honor, the evidence with respect to the $40 fee is irrelevant to this particular market.

Let me explain very briefly why.

That $40 fee is negotiated between the lawyer and his client.

That $40 fee typically in a tort contingency case--

Unknown Speaker: It's a contract case.

Mr. Clapp: --reflects cross-subsidation of other efforts by that attorney representing similar plaintiffs.

And the point finally, Mr. Justice Stevens, is that you simply could not, no court could determine how that particular market compensated for risk.

That $40 that you're quoting represents that particular attorney's hope with respect to a fee recovery.

Unknown Speaker: No, it's the bargain... the client had the choice.

He could either make the $40 commitment or the $25, win, lose, or draw.

And you say the $25 fee would be the one that would be the market-determined?

Mr. Clapp: That's correct.

Unknown Speaker: But the other one is also.

Everybody in the market has the other alternative too.

Mr. Clapp: But it's a different market from fee-shifting statutes for the reasons that I have indicated.

Unknown Speaker: Oh, I see, we have a special market when there's a fee-shifting statute?

Mr. Clapp: No, we have the market... whether we're talking about a market for legal services or a market for automobiles, Your Honor, reflects different subclasses, and fees that are negotiated--

Unknown Speaker: That's right.

You pay a little more if you get a warranty and a guarantee than you do if you don't when you buy a car.

Mr. Clapp: --Well, but fees that are determined with respect, or by negotiation between a party and his attorney--

Unknown Speaker: Against the background of what alternatives are available in the market.

Mr. Clapp: --But that... understand, Your Honor, that in these sorts of cases, in fee-shifting cases, the client is going to have no interest in limiting his attorney's compensation where the case is on a contingency basis, because he's not going to pay it anyway.

It's going to be someone else who will pay that fee.

He might as well agree to a rate of, in your example, $200 an hour.

Unknown Speaker: No, but I'm assuming he would, you try to make him... you would make the statutory fee be one that would be a duplicate of what would have been negotiated in a free market.

That's what I was suggesting.

Mr. Clapp: And my response to that is, Your Honor, if the free market doesn't reflect that hourly rate to the extent the courts intervene--

Unknown Speaker: Well, how did the $40 figure get there if it wasn't determined by market forces?

I mean, do you think just the lawyer just cooked it up out of thin air?

In my hypothetical, don't you have to start from the assumption that he thought that the market would justify these two alternative ways of computing a fee?

Mr. Clapp: --Well, the market might justify that--

Unknown Speaker: Well, it did when I was in practice.

Mr. Clapp: --Your Honor, but it would not be the result of free market operation.

It would be the result of negotiations between that party and his client.

Unknown Speaker: But your argument assumes that if the client had hung tough and said no, $25 is as high as I'm going to go, he would have taken the case anyway on a contingent fee.

If the client had said, you know, $25 only if you win, that he would have taken the case anyway.

And that's... I mean, I don't think we can make that assumption, can we, if we are fact-finders?

Mr. Clapp: It's not necessary to make that assumption.

Unknown Speaker: Maybe what you're saying is go ahead and make that assumption and see what happens, and if it turns out that nobody takes these cases, then maybe you'd better modify your assumption.

But if you can, if you the court can hang tough as a fact-finder and still get the lawyers, that's what you ought to do.

Mr. Clapp: Well, and my response to that should be, Your Honor, is that if in fact the market rates are insufficient to attract counsel, then Congress should make decisions about what steps it wants to take to enforce its policy.

It shouldn't be the courts--

Unknown Speaker: Well, isn't the problem with that response that Congress, I thought, gave the courts the responsibility for determining a rate that would in fact attract?

Mr. Clapp: --Congress authorized the court to award a reasonable fee.

It did not, it seems to me nothing in the statutes or the legislative history authorizes the courts to legislate, make legislative decisions about what that reasonable fee ought to be.

Unknown Speaker: No, but I thought you were telling me that if we took the hang tough position as fact-finders and said look, we're going to latch onto the $25 figure and if it works, fine, that's the figure we'll use for the future, maybe adjusted for inflation.

If it doesn't work we'll go back to the drawing board and say maybe we'd better go up to 40.

And I thought your response was no, no, it's up to Congress whether to decide to go up to 40.

Mr. Clapp: That's precisely my point.

Unknown Speaker: Well, I think you're saying, then, that it is not our's, it is not the court's responsibility to determine as a matter of fact what is necessary to attract counsel to take these cases.

You're saying if the court comes up with a figure that doesn't attract them, too bad, the court's job is done.

Look to Congress.

Isn't that what you're saying?

Mr. Clapp: In essence that's what I'm saying, Your Honor.

Any other solution necessarily gets the court involved in those sorts of policy decisions.

To what extent should our system encourage the bringing of these sorts of cases?

Those are policy decisions that Congress should make and that this Court is frankly not equipped to make.

Thank you very much.

Unknown Speaker: Thank you, Mr. Clapp.

Mr. Seamon, we'll hear from you.

Argument of Richard H. Seamon

Mr. Seamon: Thank you, Mr. Chief Justice, and may it please the Court:

I'd like to begin by addressing the question that has arisen already as to what hourly rate a court does look at and should look at in calculating the lodestar.

I would note that at page 14 of the ABA's brief they mention that the only ascertainable prevailing market rate is the rate charged to clients who pay regardless of the outcome.

So as a practical matter it is difficult if not impossible to find lawyers in the market who tell their clients I will charge you $25 an hour if you're willing to pay regardless of whether we win or lose, but if you want me to take this on a contingency basis then I'm going to charge you $40 an hour.

Unknown Speaker: What about the situation which certainly was more common at the time when I practiced, I'll either take it so much an hour if you're good for the fee, win or lose, or else I'll take one-third or one-half, you know, not always one-half, of the recovery if we win?

How does that fit into the picture?

[Laughter]

Mr. Seamon: I think that that is still the prevailing practice, that when a lawyer takes a contingency, makes a contingency arrangement he contracts with the client for some percentage of the ultimate recovery.

Now, Justice Stevens raised the question well, what if you can get an economist to come in and say I have looked at all of these contingency arrangements and I have decided that in fact they end up amounting to $40 an hour of compensation for the lawyers rather than 25.

We would say that it may be fair in that case for a lawyer to charge $40 to his client, but the fairness in that instance resides on the fact that it is the product of the consensual arrangement between the plaintiff and his client.

In the fee-shifting context the situation is very different.

There isn't this consensual relationship at all that determines the payment.

In fact the defendant in the case is required to pay the plaintiff not based on the defendant's conduct that led to the suit in the first place, and for that matter not based on the defendant's conduct during the trial, but based--

Unknown Speaker: Well then when you say a fee is fair in the sense of the $40 fee, you mean it's fair by virtue of the fact it was consented to, and not by virtue of the fact that it represented market?

Mr. Seamon: --That's correct.

Or to put it another way, the fact that it is consensually agreed to is what makes it the market, you know, what the market calls for and what the market will provide.

The fee-shifting context by definition is very different.

The very existence of the fee-shifting provisions means that the normal market is not going to operate in fee-shifting litigation--

Unknown Speaker: Well, doesn't that simply mean that you've got to look for your examples outside the sphere of these kinds of cases?

Mr. Seamon: --That's correct, you do have to look outside--

Unknown Speaker: But it doesn't mean that the $40 is not the market figure, assuming that that was not a case of this sort, assuming we're outside this sphere of cases.

The $40 is still the market figure, isn't it?

Mr. Seamon: --Yes, it may be possible to establish a market figure that prevails in the private, unregulated market, but to apply that in the context of fee-shifting is to say that the defendant should pay not on the basis of what he did that led to the lawsuit but on the basis of what arrangement the plaintiff has made with his client.

Unknown Speaker: Do you think you can establish such a contingent fee in the private market for a category of cases?

Mr. Seamon: No.

Unknown Speaker: I mean, isn't it the nature of a contingent fee that it depends enormously upon how good the case looks to the lawyer?

Mr. Seamon: That's right.

I was assuming in my earlier answers that you can come up with a fee of $40 per hour that are charged by contingency lawyers.

Unknown Speaker: For a whole category, but I don't... that doesn't strike me as likely.

Mr. Seamon: No, I think that normally the percentage of recovery is going to in large part reflect the amount at stake as well as the merits of the particular case.

And--

Unknown Speaker: And the latter would be quite, quite counter-productive as far as the policies of this statute are concerned.

That is the riskier the case, the higher the fee you should get.

Whereas the statute wants to reward lawyers for taking worthy cases.

And what you're saying is the less worthy the case, the higher the fee.

Mr. Seamon: --That's correct.

And that reasoning also punishes defendants who have the most meritorious defenses.

The defendants who are most difficult to prevail against should in theory, under the theory that our opponents espouse, be charged the highest bonuses because they are--

Unknown Speaker: Are you saying the difficulty of the case is irrelevant in computing this magnificent certitude that we call the lodestar?

Mr. Seamon: --In practice it has turned out to be largely irrelevant because the hourly--

Unknown Speaker: Well, should trial judges be instructed that they may not take into account the difficulty of the case in setting the fee?

Mr. Seamon: --Not as a separate matter, Justice Kennedy, because the difficulty of the case is going to be reflected both in the hourly rate that a lawyer of the adequate experience is able to charge as well as the number of hours expended in litigating the case.

Presumably the more difficult the case, the harder it will be to litigate, the more hours expended, and the higher the lodestar.

Unknown Speaker: What about the probable merits of the case, the probability of success?

Mr. Seamon: No, we think that the probability of success is irrelevant in calculating the lodestar and also should be irrelevant as a separate matter--

Unknown Speaker: I take it most of the circuits are in disagreement with that proposition and most of the circuits do include probability or likelihood of success in assessing the lodestar amount?

Or am I wrong about that?

Mr. Seamon: --Basically right.

Most of the circuits have attempted to follow this Court's decision in Delaware Valley II by taking the approach proposed in the concurring decision there and look to whether the plaintiff had actual difficulty in getting counsel, and secondly how, if at all, the market compensates for contingency.

I just want to emphasize the first point that, even assuming we get beyond these evidentiary difficulties and decide that in fact the contingency market charges $40 an hour, it is still very different from saying that that's fair to charge a client, to go from that conclusion to the conclusion that this is fair to make a defendant pay.

Again, this charge is not based on the defendant's conduct, but is based on whatever arrangement the plaintiff has made with his attorney, and we don't think that Congress intended the term reasonable attorney's fee to mean different things depending simply on what arrangement the plaintiff has made with his attorney.

And in fact this Court rejected a similar view of congressional intent in Blanchard v. Bergeron where it held that the amount of the fee cannot be determined by whatever contract the plaintiff has made with his attorney.

The same principle operates here.

Unknown Speaker: The problem with that is in cases where there are no damages being sought or awarded.

Mr. Seamon: I'm sorry, I don't--

Unknown Speaker: Well, where only an injunction is sought, why, what deal the lawyer and his client make seems to me to be irrelevant.

Mr. Seamon: --It absolutely is irrelevant in our view as well.

Nonetheless many of the lower courts, including the court in this case, has held that this arrangement, this contingency arrangement that was in fact made is a basis for enhancing the lodestar fee by 25 percent.

Beyond the evidentiary problems, and we think the unfairness problem that this confronts or assumes that Congress intended, there are a number of fundamental conceptual difficulties with the market theory that is driving our opponent's position.

In our view one essential flaw is that it assumes that litigation under fee-shifting statutes should operate in the same way as litigation does in the private market.

But in fact the very existence of the fee-shifting provision radically alters the way the litigation will proceed, as this Court recognized in Evans v. Jeff D..

In a fee-shifting case there is this prospect of a lodestar or some sort of award sitting at the end of the litigation that will influence the way a defendant considers litigating the case and influence the defendant's judgments about making a settlement or not.

That same dynamic doesn't operate in the typical contingency case where the plaintiff in a personal injury suit, for example, pays the same amount as a judgment whether the plaintiff has a contingency arrangement with his attorney or not, and if there is a contingency arrangement whether the attorney is going to get 25 percent or 40 percent.

The only point here is that the dynamics are different, and so there's no reason to assume that the litigation should operate the way the market operates.

Unknown Speaker: Thank you, Mr. Seamon.

Mr. Seamon: Thank you.

Unknown Speaker: Mr. Goldstein, we'll hear from you.

Argument of Barry L. Goldstein

Mr. Goldstein: Thank you, Mr. Chief Justice Rehnquist, and may it please the Court:

What did Congress mean by the term reasonable attorney's fees?

There is no dispute on this record or by the parties that contingent risk of non-payment is taken into account on occasion in the legal marketplace.

In fact the City asserts in its brief that the lodestar calculation already reflects consideration of contingency, apparently because contingency is taken into account in the legal marketplace.

In its reply brief, the City reiterates that point.

If the market compensates for risk of loss contingency, determination of the market rate subsumes and incorporates that factor.

We're not here today to argue whether or not contingency should be taken into account in that mythical term, or that real term now that it has been adopted by the Court, lodestar, or after a lodestar is determined by an enhancement or adjustment.

The only issue before this Court is whether the risk of non-payment because of the contingent nature of a case should be taken into account.

There is no question that that is taken into account in the legal marketplace.

Congress has legislated--

Unknown Speaker: Mr. Goldstein, you say there's no question it's taken into account in the legal marketplace, but what evidence is there before us that it's taken into account in a differential and hourly rate as opposed to a percentage of recovery?

Mr. Goldstein: --Well, that's a good question, is how--

Unknown Speaker: I'm glad you think so.

[Laughter]

Mr. Goldstein: --In this particular case there is evidence in the record that attorneys in the Burlington, Vermont market expect a higher return for their hourly time when they take a case on a contingent basis.

Unknown Speaker: Lawyers quote a higher, or simply their experience is that they take, that their percentage recovery gives them a higher hourly rate?

Mr. Goldstein: That's one way that it can be shown, as to what expected hourly rate will be satisfactory for a lawyer to invest, as Mr. Pearson did, 7 years of time and 3,000 hours with only a chance of getting paid.

What anticipated hourly rate?

There are also other types of evidence available on that.

Justice Stevens pointed to his experience in private practice, and we have lodged with the Court a series of declarations that have been used in fee-shifting statutes, and there's a declaration of a Mr. Camen who is a partner at Jenner and Block in Chicago in which he attaches the agreement that Jenner and Block entered into with MCI in the big antitrust lawsuit against AT&T, in which MCI agreed to take half of their normal hourly rate, a partial contingency--

Unknown Speaker: Jenner and Block agreed to take.

Mr. Goldstein: --Yes, excuse me.

I'm sorry.

Thank you.

Unknown Speaker: And then what was the other?

Mr. Goldstein: And if they succeeded then they would get paid 2.5 times their hourly rate, and that's set forth in the agreement.

Another way of proving... excuse me.

Unknown Speaker: That is all by contractual agreement.

I mean, I suppose that in a particular case a lawyer on a non-contingent basis can cut a deal with a client.

Even though the market is $60, he may agreed with the client for $80.

But that's by special contractual agreement.

Now, we wouldn't allow the $80 fee to be recovered simply because they bargained for it, so why should we allow the higher contingent fee to be recovered just because they bargained for it?

Mr. Goldstein: Justice Scalia, the one contract, the contract that Mr. Camen attaches to his declaration, would not determine the market, but it would be evidence of the market.

The market would be determined by all of the contracts, all of the evidence that was put before a court by both sides in order to present what the market would pay a lawyer for a comparable case.

That is what Congress, we submit, intended by adopting the term reasonable attorney's fees.

Congress has used this term for over, for approximately 80 years, in a whole series of statutes, statutes enacted way before the Environmental statutes at issue in this case.

Unknown Speaker: Mr. Goldstein, could I ask you, am I right in reading the court below as not thinking that Delaware Valley II was, should be used as any guide to resolving the fee issue, and then instead it just relied on one of its prior, one of its prior authorities and certainly didn't go through the approach that Justice O'Connor suggested?

Yes, that's correct, Justice White.

It relied on Friends of the Earth, a Second Circuit authority which in fact adopted part of the, prior to Justice O'Connor's opinion, adopted part of that opinion or set out what became that opinion.

Was there any proof in this case as to what it would take to get a lawyer for this plaintiff?

Mr. Goldstein: Yes.

The only proof in this case is that there would need to be an enhanced hourly rate, that is an enhancement over what is paid, win or lose, in order to get a lawyer in the Burlington market.

Unknown Speaker: You mean they just referred to the market and decided what it would take to get a lawyer in this case, rather than having any kind of actual proof that this plaintiff tried to get a lawyer and couldn't find one, or what?

Mr. Goldstein: Well, like the standard adopted by Justice O'Connor, the proof depended upon what was generally expected in the Burlington, Vermont market, and Mr. Pearson and the Dagues put in the affidavits of three practitioners in the Burlington market in addition to three affidavits by members of the firm saying that there was no incentive to take a case without an--

Unknown Speaker: The court below didn't determine its fee based on either the... either of the opinions in Delaware II.

They didn't use the standard of either the opinion that I wrote or the opinion that Justice O'Connor wrote.

Mr. Goldstein: --No, that's correct, Your Honor.

But the issue before this Court, the question presented is whether district courts have under any circumstances the discretion to consider the risk of non-payment in determining what is a reasonable fee, not the method.

The lower courts both said that, but for the opportunity for enhancement to an hourly rate, there would be substantial difficulties for a plaintiff to obtain counsel in the Vermont marketplace.

Prior to the passage of these statutes it was common under the reasonable fee provision in the antitrust statutes, in the securities statutes, for lower courts to take into account contingent risk of non-payment in determining a reasonable fee.

It was against this backdrop that Congress legislated in the environmental area and adopted the reasonable fee statute in the 1970's.

In interpreting these statutes prior to the passage of the environmental statutes in the seventies, clearly risk of non-payment was taken into account.

Congress has to be credited with knowing how a statutory term that they used in the 1970's has been interpreted from 1914 when the Clayton Act was passed until the 1970's.

This is especially true where, as pointed out by the American Bar Association in a forceful way in its amicus brief, that the fact that contingent risk is taken into account in the American legal marketplace is notorious.

Everyone knows it.

Now, how it's taken into account in a specific case may vary.

All that we are saying is that the court should not turn a blind eye to the reality of the legal marketplace and permit, where appropriate, local courts to consider the risk of contingent non-payment.

Moreover--

Unknown Speaker: What claim of enhancement was presented to the Court?

Mr. Goldstein: --A 2.0 claim, that is a doubling.

The court ruled that a 1.25, that is a 25 percent enhancement was appropriate and would prevent--

Unknown Speaker: Were you claiming that it was... a 50 percent enhancement really reflected what the market in Burlington was?

Mr. Goldstein: --A doubling.

Yes.

Unknown Speaker: And the court said sorry, that isn't what the market requires in Burlington?

Mr. Goldstein: That's correct.

Unknown Speaker: How did he, how does a court go around figuring out how to disagree with these experts in the market?

Mr. Goldstein: The court, as courts do, sometimes reject experts, sometimes reject testimony and sometimes accept it in part.

And of course--

Unknown Speaker: Does it involve, doesn't it involve a court deciding what the degree of risk is?

If you're going to enhance for risk, I suppose you'd give a different enhancement for a small risk and a bigger one for a larger risk.

Mr. Goldstein: --Well, this court--

Unknown Speaker: Is that right?

Mr. Goldstein: --I'm not sure if the question goes to what this judge did or if it's a general question that you're asking me, Justice White.

Unknown Speaker: I'll take it both ways.

Mr. Goldstein: Okay.

What this court did was not look at the risk of this particular... excuse me.

This court did look at the risk of this particular case and say that it was a risk--

Unknown Speaker: And do you think that's proper?

Mr. Goldstein: --No.

Unknown Speaker: I didn't think you did, because you put in, you asked for 50 percent, which you thought reflected the market.

Mr. Goldstein: No.

I don't think--

Unknown Speaker: You must have thought it reflected the market.

Mr. Goldstein: --Excuse me.

We think that the approach suggested by Justice O'Connor in Delaware Valley II is the appropriate way of determining whether an enhancement should be awarded, and if so, the degree of the enhancement.

And that is to look at the risk in a comparable class of cases, which in this particular situation would be complex contingent civil litigation in the Vermont marketplace.

Unknown Speaker: 50 percent.

I mean, a 50 percent enhancement.

Mr. Goldstein: Whatever the evidence would show.

Unknown Speaker: Well, you thought it showed 1.5.

Mr. Goldstein: 2.0, actually.

Unknown Speaker: I mean 2.0.

Mr. Goldstein: Yes.

But the analysis that was done in this case, and again the issue of how it should be done is not before the Court--

Unknown Speaker: Well, if you thought it ought to be done according to Justice O'Connor's opinion, which would have come out with 2.0, you should have cross-petitioned for not enough money.

Mr. Goldstein: --Well, I think there's a time... well, perhaps we should have, but we did not.

And the only issue that's before this Court is whether enhancement for contingent risk can be taken into account under any conditions by the local courts like this judge did.

Let me just add one other thing to answering your question, Justice White, and that is unlike some of the technical issues that were before the court in this case, that is the extent of the toxic waste in this particular dump and how it was impacting on the Burlington marketplace, which I don't think the local judge, I may be wrong, had any particular knowledge about, determining the legal marketplace and appropriate and reasonable attorney's fees is something that, as this Court has said on a number of occasions, that courts have familiarity with.

Justice Stevens referred back to his experience in private practice.

Judge Billings has a lot of experience as a state court judge, as a Federal court judge, as a practitioner in the local marketplace in Burlington.

There should not be a national rule.

The situation may be quite different in Burlington, Vermont and where I practice in Oakland, California.

Moreover, Congress well knows how to limit the award of attorney's fees.

It has done that on many occasions.

In these statutes Congress put a standard, reasonable attorney's fees.

Congress placed no limits on this standard as Congress has done in many other statutes.

To name just a couple, in the Individuals with Disabilities in Education Act Congress said no bonus or multiplier may be used in the calculation of the reasonable attorney's fees.

There was no such restriction in this case.

In the Equal Access to Justice Act Congress said reasonable attorney's fees, prevailing market rates, but not more than $75 an hour.

There is a host, as this Court well knows, of other statutes with limitations on fees.

Unknown Speaker: Some of those limitations that Congress put in later statutes were in response to the emerging fee jurisprudence of this Court, were they not?

Mr. Goldstein: Well, I think yes, Mr. Chief Justice Rehnquist, but I think it goes to prove our point rather than undercut it.

Because for example, let's take the Individuals with Disabilities in Education Act which was passed in 1986.

In that statute there was a limitation put on bonuses and multipliers.

At almost the exact same time as this act was passed Congress also passed the Superfund law amending, CERCLA, to put in a citizens' suit provision.

In that law, passed at the same time when the limitation was put in the IDEA statute, Congress put in the Superfund law the exact same reasonable attorney's fees statute as exists in the two statutes before this Court, the Clean Water Act and RCRA.

And I think when you take all of these statutes together you come to a conclusion that Congress, under these statutes where it did not put limitations on reasonable attorney's fees, meant for the market to govern, and that contingent risk may be taken into account under appropriate circumstances.

Justice Scalia's statement in Casey I think is right to the point, where the Court said a comparison of statutes is proper because statutes are construed to contain that permissible meaning which fits most logically and comfortably with the body of both previously and subsequently enacted law.

Unknown Speaker: It's harder to do that when the later law is a specific response to a judicial decision that has come in the interim, because if... if you know what I mean.

It may be an indication that that Congress thought that the judicial decision was wrong, in which case they would have meant without that qualification what they meant in the earlier statute.

Are you following me?

Mr. Goldstein: I am, but... perhaps I am--

Unknown Speaker: And that was not the case in Casey.

There you had qualifications upon the term that had been adopted down through the years and not in response to any particular line of jurisprudence.

Mr. Goldstein: --I'm not trying to say that's a direct relationship with Casey, it's just the principle.

But I think my answer to Chief Justice Rehnquist's question still applies, and that is Congress certainly looked with open eyes to the possibility of contingency fee enhancements after a certain point and decided to include such enhancements in some statutes and not in others.

In a statute very much like the ones before this Court, Congress decided not to place a restriction.

And let me just add one other part to it.

There were restrictions on fees that Congress put in prior to 1972 and prior to when anybody, as far as I know, heard of the term lodestar.

Unknown Speaker: But not particularly on contingencies.

I mean, that's the only kind of restriction that I think really, really speaks clearly to what we're talking about here.

Mr. Goldstein: Well, in the American-Mexican Chamizal Convention Act of 1964 reasonable attorney's fees shall not exceed 10 percent of the amount awarded, and similar restrictions--

Unknown Speaker: No, but, but you have some later statute that specifically says shall not include any amount for contingency.

Mr. Goldstein: --Well, for bonus or multipliers.

Unknown Speaker: Bonus or multipliers.

Mr. Goldstein: You know, I really think that--

Unknown Speaker: That's impressive.

I don't think the mere fact, however, that some other statutes limit the upper amount or said not in excess of 10 percent, I don't think that necessarily speaks to whether Congress thought that a contingent fee would be allowed.

Mr. Goldstein: --Justice Scalia, I hate to argue with you if you say an argument you heard was impressive--

Unknown Speaker: No, I want you to.

I mean, I'm not raising it with you for, you know--

Mr. Goldstein: --But let me just say that I think that, you know, the terms changed.

And, you know, bonus, multipliers, lodestar, I don't think Congress would have thought in those terms in the 1940's and the 1950's or the early 1960's.

What they thought about when they wanted to limit contingency enhancements was limit the percentage, and that's exactly what Congress did.

Unknown Speaker: --But they were still saying a reasonable fee but no allowance for contingencies.

Mr. Goldstein: Reasonable attorney's fees which shall not exceed 10 percent of the amount awarded.

Unknown Speaker: Or will not reflect any risk.

Mr. Goldstein: Above the amount of risk reflected by the 10 percent.

Unknown Speaker: But even with that limitation it still would have been a reasonable attorney's fee.

Mr. Goldstein: Well, there was a limitation on what could be a reasonable attorney's fee.

Unknown Speaker: Well, it was still reasonable.

Mr. Goldstein: By the definition under that act.

Unknown Speaker: Yes, under that act.

And of course what Congress meant by reasonable in one act, especially a later one, shouldn't be a measure of what they intended reasonable to be on an earlier act, I suppose you would argue, correctly.

Mr. Goldstein: I think Congress determined that a reasonable attorney's fees under a particular act which could be reasonable with limits, but with other acts, such as the ones before this Court, a reasonable attorney's fees would be one that would be motored by the economic forces in the legal marketplace without limit, other than the limit of the discipline of the marketplace.

I don't think this question is a lot different in theory or practice than many other questions that this Court has wrestled with with respect to the interpretation of the term reasonable attorney's fees.

In wrestling with these other terms this Court has looked to the marketplace.

For example, in Blum v. Stenson the Court considered what should be the hourly rate factor that's involved in the lodestar.

The Court said that the hourly rate would be calculated by prevailing market rates for similar services by lawyers of reasonably comparable skill, experience, and reputation.

Again, go to the market.

In Missouri v. Jenkins the issue of delay came up.

Should delay be compensated for.

That is Mr. Pearson has put in more than 3,000 hours in this case to close the toxic dump in Burlington.

He has not gotten paid a penny.

He advanced $16,000 out of his own pocket.

He hasn't gotten reimbursed yet.

Should the delay in payment be compensated for.

In Missouri v. Jenkins the Court said that since the market treats compensation paid years after it was rendered differently from compensation paid when the services were rendered, courts may consider delay in determining a reasonable fee.

Without going into it, the Court also looked to the marketplace to determine what is appropriate compensation for paralegals and law clerks, which is... and relied on the market.

Compensation for paralegals and law clerks is nowhere near as embedded in the marketplace for legal services in this country as is payment for contingent risk.

All we are saying is that as this Court has directed local courts to look at the marketplace to resolve these other questions which can be difficult, the Court should also direct lower courts to look at the marketplace to determine payment for the contingent risk of non-payment.

The last part of my argument is that Justice O'Connor's test, which borrows in significant part from Justice White's opinion in Delaware Valley, is workable.

Not only is it workable, but it has worked.

The Court now has the experience of several years of implementation of the Delaware Valley test.

Nine circuits have applied it.

We go through the way the circuits have applied it in our brief, and courts have applied it.

They have awarded contingent risk in some cases--

Unknown Speaker: So what should we do?

This isn't the standard the lower court used.

They rejected the standard and moved to, and decided it on another standard.

Should we just... if we agree with you shouldn't we remand for recomputation of the attorney's fees?

Mr. Goldstein: --I have two answers to that.

First, it is not... the issue of whether or not the enhancement was correctly calculated in this case is not before the Court in the question presented.

The only question is whether or not the court had discretion.

If the Court limits its opinion in this case to the question presented, then it should affirm.

If the Court sets a standard and as we suggest adopt Justice O'Connor's standard and feels that it should apply to this case even though it's outside the question presented, then of course it should remand the case.

Justice O'Connor's test we believe provides the answer to a lot of the legitimate concerns raised by Justice White in the opinion in Delaware Valley.

If, as Justice O'Connor suggest, contingent enhancement is based upon a comparable class of cases, then the discipline of the market serves the purpose of the statute.

It serves to weed out the less worthy cases.

An attorney, as we suggest--

Unknown Speaker: There's no market for contingent fees in non-monetary cases.

I mean, there are for Sherman Act cases, but for cases seeking injunction against Federal action, what's the contingent fee market here?

You're going to have to make it up.

Mr. Goldstein: --Well, the Congress addressed that problem, and that's one of the reasons there are attorney fee statutes in a case like this in which there, it principally is focused on an injunction to close the toxic landfill or a civil rights case where it's to integrate a plant.

And Congress said that the court should look to cases in, comparable cases, and in particular, and I'm now referring to the legislative history of the 1976 Civil Rights Act which courts have looked to, cases that present a comparable difficulty, such as antitrust cases, and particularly said that civil rights plaintiffs should not be put in a different and less beneficial place--

Unknown Speaker: Congress said all this where?

Mr. Goldstein: --In the Senate report--

Unknown Speaker: Not in the statute.

Mr. Goldstein: --Congress... yes.

Congress relied on the term reasonable attorney's fees.

Unknown Speaker: And the committees used this language you're referring to?

Mr. Goldstein: That's correct, Mr. Chief Justice.

And the term reasonable attorney's fees has, as I have discussed, been used to focus the courts upon the relevant market as best as the courts can find it.

In conclusion, local courts have discretion to consider the risk of non-payment as a part of reasonable attorney's fees.

The courts should have that discretion, just as local courts consider other aspects of the award of reasonable attorney's fees.

In the legal marketplace fixed fees are treated differently, generally treated differently than contingent fees.

The two should not be considered the same in the determination of a reasonable attorney's fees.

Unknown Speaker: I would think if it's, I would think the way to go about this compensation for risk would be to pay the lawyer when he loses.

He has taken... you know, you want these people to have lawyers, and if a lawyer is willing to take this case, he, some lawyers are bound to lose, you ought to pay them for that rather than have the defendant when he wins have to pay for the cases when you lose.

Mr. Goldstein: Justice White, I would disagree with you on that, but the important point is that Congress has decided that question and determined that only prevailing parties obtain fees.

And the result of that, coupled with Justice O'Connor's test, is that the marketplace forces attorneys to weed out the less worthy cases and to select the strongest cases.

Lastly, under different statutes and for many years courts have considered risk of non-payment in determining reasonable attorney's fees.

The Court should affirm this long-standing practice and adopt the practical and workable approach suggested by Justice O'Connor.

Thank you.

Chief Justice Rehnquist: Thank you, Mr. Goldstein.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Ardestani v. Immigration And Naturalization Service - Oral Argument

Fri, 09 Jan 2009 14:49:34 +0000

Case:

Ardestani v. Immigration And Naturalization Service

Media File:

90-1141_19911008-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of David N. Soloway

Chief Justice Rehnquist: We'll hear argument now in No. 90-1141, Rafeh-Rafie Ardestani v. Immigration and Naturalization Service.

Mr. Soloway, you may proceed.

Mr. Soloway: Mr. Chief Justice, and may it please the Court:

This case addresses the applicability of the Equal Access to Justice Act, or the EAJA, to deportation hearings before an immigration judge.

More particularly, this case deals with 5 U.S.C. Section 504, that prong of the EAJA that applies to administrative proceedings.

And those proceedings, in order to be eligible for EAJA fees, the Government must be represented by counsel.

In this case, the Government, the Immigration Service, was represented by their trial counsel.

In addition, it is required that the statute say that this proceeding be determined.

It must be determined on the record.

That is the case here.

And in addition, the position of the Government must be not even substantially justified.

Here the Immigration Service produced no evidence at all in support of its position.

The EAJA was enacted to further specific purposes.

One was to aid victims, to help avoid the situation where someone might have to surrender their rights and succumb to unjustified Government action just because of the expense of hiring an attorney.

Mrs. Ardestani's petition for asylum was wrongfully denied and she was unjustifiably placed in deportation proceedings, proceedings so complex and with consequences so harsh, that it was necessary for her to engage an attorney.

Another specific purpose of the EAJA statute is to deter unjustified Government action.

And that's done by holding the agency itself accountable.

The Service did not dispute the Secretary of State's determination that Mrs. Ardestani had a well-founded fear of persecution were she to be returned to Iran under the Khomeini regime.

Instead, the Service unwarrantedly asserted that Mrs. Ardestani had firmly resettled in a third country.

They asserted that even though she had been in a third country for only 3 days, staying in--

Unknown Speaker: We're really not... those are really quite peripheral facts, aren't they, Mr. Soloway?

What we're talking about here is whether a deportation proceeding is an adjudication under Section 554 for purposes of the EAJA?

Mr. Soloway: --That's correct, Mr. Chief Justice.

The EAJA provides broadly for protection for people who have been subjected to severe agency misconduct.

And of all the possible Government agencies, and of all the possible agency proceedings, deportation proceedings are the ones that most specifically meet the EAJA context.

They're the ones where the most harsh consequences meted out by any agency are meted out... consequences that may be tantamount to banishment or exile, or in the words of Justice Brandeis,

"the loss of life and property and all that makes life worth living. "

This is particularly so in the context of asylum where, as here, it had been determined that the refugee would be subjected to persecution.

Moreover, persons in deportation proceedings are the very people for whom the remedial measures of the EAJA most perfectly are met.

Unknown Speaker: Mr. Soloway, I mean, that's all... yes, I mean, it's very sympathetic, but the fact is even in criminal trials, when someone is wrongly prosecuted, and it turns out there was no basis for the prosecution, EAJA does not reimburse the wrongfully prosecuted criminal defendant.

Although he may have spent hundreds of thousands of dollars on his defense, he's not reimbursed, is he?

Mr. Soloway: That's correct, Your Honor.

Unknown Speaker: So, we're here to read this statute.

Is this one of those instances that's reimbursed or one that isn't?

There are some very touching situations that are not reimbursed.

This may be one of them.

Can we talk about the statute?

Mr. Soloway: Yes, Your Honor.

Unknown Speaker: Good.

What does it say?

Mr. Soloway: This statute says that adversary adjudications, that is the adjudications for which EAJA applies, are those that are under Section 554.

554> ["] is a term that has been the focus of the various circuit courts, and it's a term upon which the majority and the dissentient court below focused.

It's an ordinary, common preposition.

It's a word with perhaps as many as 25 meanings as a preposition.

In order for this Court to properly glean the correct meaning of the definition 554> ["], it's necessary for this Court to look at the entire statutory scheme.

This Court has held that interpretation of a statute is not an inert exercise in grammatical or literary composition.

Instead, we have to look at what was the EAJA statute about.

And, Justice Scalia, I think it's important to understand the way that deportation hearings are precisely those that fit that statutory scheme.

554> ["], those words are merely a cross reference to the definitional provisions in Section 554.

It merely means that Congress was cross-referencing and importing into the statute the definition in Section 554.

That definition requires... that definition provides that a statute must require that the hearing be determined on the record.

In addition, there are six express exemptions, none of which arguably are involved in this case.

Confronted by a foreign language, confronted by the most harsh consequences meted out, confronted by a strange culture where the necessity of having a lawyer be involved are at its apex, deportation proceedings are most precisely in concert with the EAJA provisions.

Unknown Speaker: I don't know.

Maybe they more resemble, in fact, some of our opinions have said that they, and we've accorded some protections that are otherwise accordable in criminal proceedings.

I mean, we've analogized them on occasion... being deported to criminal proceedings.

And if they're analogized to that rather than other 554 proceedings, then there'd be no compensation.

I don't--

Mr. Soloway: Your Honor, of course, if they were tantamount to criminal proceedings, were this Court to so hold, the Sixth Amendment right to counsel may be invoked.

The... that's not something that's being urged in this case.

As a matter of fact, here particularly, we're talking about someone who has engaged counsel at their own expense and merely a fee shifting in those adversary adjudications where the Government has been abusive.

Unknown Speaker: --Of course the Sixth Amendment right to counsel is not a right to have counsel paid for.

Mr. Soloway: Well, I'm talking about appointed counsel, yes, Your Honor.

Your Honor, if I understood your earlier question correctly, you were suggesting that were these to be viewed as criminal proceedings, deportation proceedings, because they mete out consequences that may be as harsh or harsher than many criminal sanctions.

What seems to follow is that perhaps a person, an indigent person, is entitled to appointed counsel under the Sixth Amendment, although the Ardestani case doesn't specifically require this Court to address that.

However, in looking at the statutory scheme and in understanding what this statute means, it's helpful to note that in the legislative history there was a change in the Senate bill from 554> ["], and the joint explanatory statement of the conference committee, which may be particularly probative because it represents the views of both the House and Congress, stated that adversary adjudications were those, and I quote, are defined under the Administrative Procedures Act, where the agency takes a position through representation by counsel.

But it's probably a lot more instructive for this court to note that there were no discussions about whether or not different agencies, different categories of agencies were to be within the scope of EAJA.

Instead, EAJA was a broad remedial statute, and the discussions were about categories of proceedings, those that were... pardon me... trial like, versus those that are rule making or price fix... rate fixing.

In addition to that, in order to get... to understand the meaning of the common preposition under, in this particular instance, the EAJA, on its face, recognizes the Administrative Conference of the United States as an authority on the EAJA implementation.

The EAJA... pardon me... the ACUS chairman is required to be consulted with in order for--

Unknown Speaker: We will resume there at 1:00, Mr. Soloway.

Mr. Soloway: --Thank you, Your Honor.

Chief Justice Rehnquist: We'll resume argument now in No. 90-1141, Ardestani against INS.

Mr. Soloway.

Mr. Soloway: Mr. Chief Justice, and may it please the Court:

More important than the rejection of the Senate language EAJA recognized the ACUS as an authority on the subject of the EAJA, and there the chairman stated that questions of EAJA's coverage should turn on substance.

The fact that a party has endured the burden and expense of a formal hearing, rather than technicalities.

This is particularly important because that's precisely what we're faced with here... a suggestion that a hyper-technical interpretation of the word EAJA statute to those particularly in need of the statute is to be compared to the functional and more appropriate interpretation as "as defined in"... in other words, just mere importation, a cross-reference of those terms.

And for that reason, the burden should be on the Government to show that the Congress intended not to have merely a cross-reference to import those definitional words, but the Government really should have the burden to show that Congress intended to cover and protect people from all sorts of agency adjudications, but not those particularly in need of it in deportation proceedings.

There's no dispute that the EAJA statute applies to certain Social Security cases, those in which the Government, as represented by counsel--

Unknown Speaker: Have we held that?

Mr. Soloway: --Your Honor, the practice... let me answer your question directly.

I don't believe that question has ever been presented.

It's been so clear on its face that it's never been challenged.

In those instances where Social Security proceedings have counsel representing the Government, the EAJA applies.

There have been fees award... awarded and there's not been a challenge.

And the Government in this case hasn't urged a different interpretation.

As a matter of fact, in the legislative history of the 1985 reenactment, there's a specific example used of application of the EAJA statute.

In that explicit example, the Congress... the legislative history states in those instances... for example, Social Security proceedings... where the Government is represented by counsel, then in those events... in those events the EAJA will apply.

Unknown Speaker: But that's in legislative history materials.

There's nothing in the statutory language itself that answers the question whether Social Security hearings are covered.

Is that correct?

Mr. Soloway: Except for the interpretation and the same reasoning that's urged in this case, Your Honor.

Unknown Speaker: In other words, if they are under the APA or whatever it is, then you argue that by a parity of reasoning, the deportation proceeding is also under?

Mr. Soloway: Mr. Justice Stevens, that's largely correct, but there's even more to the argument than that.

In 1971, this case, in the Richardson v. Perales case, declined to decide the distinction whether or not Social Security proceedings are technically governed by the Administrative Procedure Act, or instead by the more specialized version of the APA, namely the Social Security Act.

That arcane legal distinction has never been resolved.

That debate has never been terminated.

Yet Congress clearly wasn't interested in whether or not Social Security proceedings were technically governed by that statute.

Instead, they simply wished to categorize by types of proceedings, rather than by agencies or by governing statutes.

Unknown Speaker: Well, isn't there a case in this Court that says that INS proceedings are not under the APA?

What is that... Morello?

Marcello.

Or Marcello?

Mr. Soloway: Well, Justice White, the Marcello case was not an EAJA case, but there this Court was called to look upon a divergence, a unique divergence that existed 36 years ago between the Immigration Nationality Act and the APA.

Only in the immigration act could one person have both adjudicatory and prosecutorial functions.

And this Court ruled that in those hearing provisions, that differed from the APA's hearing provisions, that the INA proceed... INA provisions would prevail.

Unknown Speaker: Well, does a proceeding under the APA have any... what does it mean to say under the APA?

Mr. Soloway: Your Honor, the statute here says under Section 554.

Unknown Speaker: Yes.

Mr. Soloway: Do I understand you correctly to be meaning under Section 554 as opposed to under--

Unknown Speaker: Yes.

Mr. Soloway: --Under Section 554, the definition of an adversary adjudication is defined under Section 554.

Unknown Speaker: And so what does "under" mean in your--

Mr. Soloway: It merely means, Your Honor, a cross reference, as defined in that section, in accordance with that section.

It merely is a phrase used to transport, if you would, the definitional section with its exceptions into the EAJA statute.

Unknown Speaker: --But these hearings are not conducted in accordance with that section.

Mr. Soloway: They are, Your Honor.

There... all of the statutes are identical.

There's the requirement that determinations be made on the record.

There's the entitlement to a personal appearance and reasonable notice.

All of the Section 554 elements, all of them, without exception, are in place in deportation hearings.

Unknown Speaker: What about the requirement that was at issue in Marcello?

Mr. Soloway: That's no longer a distinction.

That distinction has evaporated.

No longer do deportation adjudicative officers have prosecutorial functions.

It no longer exists.

Were Marcello to be--

Unknown Speaker: But the requirement, the issue is whether the requirement exists.

You're just saying that voluntarily the Government may be complying with it, but the fact is that the requirement that Marcello addressed does not exist.

And if the requirement does not exist, then these things are not really under 554.

Mr. Soloway: --Justice Scalia, I respectfully disagree with you.

If the analysis is going to look at what takes place, what are the rights of people in deportation proceedings, and are they different, can they rely upon, are they in some functional and meaningful way different than those hearings conducted under the technical governance of the APA, the answer has to be no.

And the fact that the Marcello distinction has long since evaporated is an important fact.

Unknown Speaker: How did the distinction... what... as I remember, and I am very vague on it, but this distinction only lasted for a couple of years, 1950 or '52, when they allowed the INS Hearing Officer to have investigative functions.

What is it that terminated the INS Hearing Officer's ability to have this dual function?

Is it statute or a practice?

Mr. Soloway: It was not a statute, Your Honor.

It was a regulation.

Unknown Speaker: I see.

Mr. Soloway: And there's been no need for a statute since that's been the long-standing practice for... in deportation proceedings.

Unknown Speaker: Well, speaking of regulations, Congress has never taken issue with the Department of Justice regulation on this matter, has it?

Mr. Soloway: Your Honor, if you're specifically referring to the 1985 reenactment, which has been raised by the Service in this case, it's important to note that in 1984, before that reenactment, there were two circuit court of opinion decisions that looked at the terms 554> ["] and interpreted those to be... to mean simply as defined in that section... namely, requiring that a hearing be determined on the record and that Government be represented by counsel.

And while neither of those were deportation--

Unknown Speaker: Yeah, but who is the officer... is the fee statute administered by the Department of Justice?

Mr. Soloway: --Yes, Your Honor... well, in the setting of deportation proceedings--

Unknown Speaker: You don't say that the Attorney General doesn't have authority to issue regulations under the fee statute?

Mr. Soloway: --The fee statute itself states that the agencies may promulgate their rules after consultation with the ACUS chairman.

And in fact, the ACUS chairman has taken a position that's completely at odds with the interpretation reached by the Attorney General.

Unknown Speaker: Well, that may... that may be so, but do you say that any regulation of the Attorney General under this statute is invalid?

Mr. Soloway: No.

Unknown Speaker: Just any?

Mr. Soloway: No.

Unknown Speaker: Well, so he does have a regulatory authority?

Mr. Soloway: Your Honor--

Unknown Speaker: But you say he's quite mistaken in this case, but Congress has never taken issue with the regulation.

Mr. Soloway: --Your Honor, while that's true, that the Congress has not focused upon the Attorney General's regulation--

Unknown Speaker: And if you think they focused on the two cases you mentioned, I would think they focused on the issue and at the same time didn't disturb the Attorney General's regulation.

Mr. Soloway: --I suggest that it's just as plausible that Congress didn't look at either the Seventh Circuit or the Eighth Circuit's interpretation, or this regulation.

It had... the issue of EAJA fees being within the scope of deportation hearings had simply never been adjudicated, had never come up through the courts.

The Escobar Ruiz case in the Ninth Circuit came after the 1985 reenactment.

Unknown Speaker: Do I understand your position correctly that... it seems to me what you're saying is that if an agency is conducting its proceedings... happens to be... in accordance with the requirements of Section 554, even though it's not obligated to, and even though it doesn't say I am trying to conduct it pursuant to 554.

If it just happens to be doing that, EAJA applies.

Mr. Soloway: No, Your Honor.

The reason for that is that Section 554 requires, it states that the Statute must mandate that a hearing be required on the record and the mere fact that an agency might in its discretion allow hearings to be determined on the record, would not place it within the ambit of the EAJA.

Unknown Speaker: No, but carrying Justice Scalia's question a bit further, if there were some statute, not part of APA, just some... one statute at large in some isolated part of the U.S. Code that said proceedings X shall be conducted in accordance with the procedural requirements of the APA.

Then you would say there was an entitlement to fees.

Because then you would say that proceeding is an adjudicatory proceeding as defined in Section 554 of the Title V.

Mr. Soloway: I think there could be no dispute that if the statute on its face used the more restrictive language than is even necessary, then, yes, it would be within the ambit of EAJA.

Unknown Speaker: And it wouldn't matter whether it was some third statute or if the INS statute itself required an adjudication to fit the definition of 554.

You would still say it's an adjudication as defined in 554, and therefore, under 554, as you read the word "under".

Mr. Soloway: That's correct.

Yes.

Unknown Speaker: May I?

In response to my question, I gather then, what you would say is if the statute requires a hearing to be on the record, any statute requires that there be an on-the-record hearing, and if the agency chooses, although it is not obliged, to conduct that on-the-record hearing pursuant to 554, then EAJA applies.

Mr. Soloway: No, Your Honor.

I don't believe... if I understand you correctly--

Unknown Speaker: Well, then I don't know how you reconcile Marcello, because that is exactly the situation we have here.

We have a requirement of an on-the-record hearing.

We have the Supreme Court holding that the agency is not obliged to comply with all the requirements of 554.

But nonetheless, you tell us, it is complying with all the requirements of 554, and therefore, it's under 554.

Isn't that what you're telling us?

Mr. Soloway: --Justice Scalia, no, that's not what I'm urging upon this Court.

What... I'd like to try to make this more clear, if I may.

The EAJA statute says that the hearing... must be required by statute to be determined on the record.

That is the one that has to be specified in the statute because that's what EAJA says.

However, the other aspects about whether the adjudicative officer can be the same person as the prosecutorial officer is simply not something that... upon which EAJA pivots.

Unknown Speaker: The reason being that the Hearing Officer's capacity is not defined in 554.

Isn't that right?

Mr. Soloway: That's correct, Your Honor.

That's exactly right.

Unknown Speaker: Which is entirely different from Marcello.

Mr. Soloway: Yes, Your Honor.

In addition to the parallel between Social Security Act proceedings which are... where it has not been determined to be under the APA--

Unknown Speaker: You're saying the Marcello requirement is not in 554 itself?

Mr. Soloway: --That... that's correct.

Unknown Speaker: What about (d) that says the employee presides at the reception of evidence, shall make the recommended decision, blah, blah, blah, blah, except to the extent required for the disposition of ex parte matters.

Such an employee may not... that is the employee who presides at the reception of evidence... may not be responsible to or subject to the supervision or direction of an employee or agent engaged in the performance of investigative or prosecuting functions for an agency.

Mr. Soloway: Yes, sir.

Unknown Speaker: Isn't that the type of thing that was involved in Marcello?

Mr. Soloway: It is related to Marcello in that way.

Unknown Speaker: It is indeed.

It is exactly what was involved in Marcello.

And it is exactly within 554, isn't it.

Mr. Soloway: But, Your Honor, it's not within the definitional part of Section 554.

In other words, 554 also deals with the type of notice, the method of notice, things like that.

Instead, the importance of 554 and the reference to 554 is merely to import the definition.

Unknown Speaker: But the statute doesn't say under the definitional part of Section 554.

It says under Section 554.

Mr. Soloway: Well, yes, it does, Your Honor, that's correct.

On the other hand, the statute... the EAJA statute is using Section 554 only for a definition.

There's no reason either from the context of the statute or the legislative history, or any other plausible reason to view those additional requirements.

But even if you did, they're all met here.

All of them are met.

Marcello doesn't stand in the way here because the difference that had existed 36 years ago no longer exists, and didn't exist in Mrs. Ardestani's case.

The entire panoply, the full... all of Section 554, if you will, has been met in the deportation proceedings.

Unknown Speaker: Not by the force of statute.

Mr. Soloway: The one that's been pointed out by Justice Scalia is by regulation.

That's correct.

Unknown Speaker: The regulation might change and go back to the Marcello situation.

Mr. Soloway: Even if that were the case, Justice White, you'd still have the requirements of Section 554, the definition that's in 554, the requirement of a hearing on the record.

That would still be met.

In addition, the interpretation that's urged, a meaningful, functional definition that includes those most in need of the EAJA, the ones that... for which the EAJA goals are most precisely in concert, that interpretation provides a bright line, an easy application for the courts rather than require the courts to look to Richardson v. Perales analyses or Marcello analyses, as has been discussed this afternoon.

I'd like to reserve my time if there are no questions.

Unknown Speaker: Very well, Mr. Soloway.

Mr. Wallace, we'll hear now from you.

Argument of Lawrence G. Wallace

Mr. Wallace: Thank you, Mr. Chief Justice, and may it please the Court:

This is not a case in which the question presented is left unresolved by the statutory text that Congress enacted.

The very purpose of a definition section in a statute is to delimit the scope of the operative terms that the definition section undertakes to define.

Here the operative term on which petitioner must rely in Section 504(a) is "adversary adjudication by the agency".

And subsection (b) of the same section, 504, defines that term as an adjudication under Section 554 of the Administrative Procedure Act.

Unknown Speaker: Mr. Wallace, can I ask you right there, if one were to agree, and I understand you don't agree with this, but the word "under" should be given the meaning

"as defined in, then would you win or lose? "

Mr. Wallace: I think that's a close question, the... but I... only because procedures adopted by regulation now have brought the administrative deportation proceedings closer, and very close, to what is described in Section 554.

But there has been no pertinent statutory change since Marcello against Bonds was decided in 1955.

So as far as statutory requirements are concerned, the same discrepancies occur in the statutory obligations between what the Immigration and Nationality Act provide and what Section 554 provides.

And our position is that EAJA should not be interpreted, and there is not indication that EAJA was intended to deter agencies from voluntarily adopting procedures that more closely conform to Section 554 of the Administrative Procedure Act by imposing a cost on that kind of agency procedural reform by making EAJA fees kick in.

And indeed, the very authority that petitioner cites, the Administrative Conference of the United States, came to that same conclusion after receiving comments on their proposed model rule.

And in issuing the final model rule at the page of the Federal Register we cite in our brief, volume 46, page 32901, they say quite specifically after discussing this problem of the possibility of deterrence of voluntary adoption of the improved procedures, we have decided, therefore, to drop the provision of the draft rules suggesting that awards will be available and agencies voluntarily use the procedures described in Section 554.

Unknown Speaker: That seems like a good answer.

What do you do about the Social Security cases?

Mr. Wallace: The... in the 1985 reenactment of EAJA, there was a reference in the legislative history, in the reports to a procedure under the Social Security Act, which was a pilot program that has now been entirely discontinued as of 1987.

We describe that in some detail in a footnote in our brief in Sullivan against Hudson in this Court.

That's No. 88-616.

Footnote 25 in that brief explains that after a district court decision called Solling against Bowen, criticizing the adoption of this pilot program as unauthorized by statute and saying that the statue requires proceedings in which the Secretary is not represented, and therefore, wholly outside of the EAJA context.

The Secretary, as we explained at 52 Federal Register 17286, discontinued in 1987 that pilot program all together.

Now, apparently the committee thought that adjudications under that pilot program were governed by 554.

That is not definitively resolved what the rationale was for the committee saying that it thought that such Social Security hearings would be covered, but that has become a moot point in light of the discontinued use of that program.

Unknown Speaker: I'm not really troubled with the legislative history part of it.

I'm asking for your opinion on whether... and other Social Security proceedings are not at all covered.

Mr. Wallace: They are not at all covered.

Unknown Speaker: In the case we had last term, Melconian, was a court action, I take it, which is different.

Mr. Wallace: That is correct.

The question in this case is only the question of the scope of the authorization of the award of fees for administrative adversary adjudications, defined as adjudications under Section 554.

So we have explained in detail in footnote 12 of our brief that throughout Section 504, the indisputable, repeated usage of the word "under" in conjunction with another section of the United States code, or another provision of law, the indisputable usage is that it means governed by that provision or subject to that provision.

Unknown Speaker: Well, if it means that, the Social Security Act, there should be no fees under the Social Security.

Mr. Wallace: Well, that was a question left open in this Court's decision.

Unknown Speaker: But I mean if your argument is consistent, that's the result it would lead to, wouldn't it?

Mr. Wallace: Well, we don't know whether this now discontinued procedure was subject to Section 554 or not.

This Court's decision in Richardson against Perales left that question open, and it had never been definitively determined.

And there will not be an occasion now to determine it, because the program is discontinued.

So we don't know whether that was correct.

Unknown Speaker: But you're saying if a statute enacts the precisely identical procedures to those set forth in the Administrative Procedure Act, that then EAJA fees would not apply... say you enact a new statute... Nuclear Regulatory Agency, or something or another... that that would not apply unless the statute, its only word said that these procedures... these proceedings are governed by the APA.

Their enacting parallel procedures would not be--

Mr. Wallace: Parallel procedures would not do it, but they would not preclude the possibility that Section 554 would also apply.

They might by implication be construed to exclude the separate application of Section 554, but that would be a question to be litigated.

Unknown Speaker: --You have precisely that problem in the National Labor Relations Act, don't you?

I think the board proceedings are governed by the NLRA, which predated the APA and tracks it to some extent.

And you would say that they are under... are those proceedings under or not?

Mr. Wallace: I can't say that I've looked into that precise question in connection with this case.

But I think the statutory criterion for the award of fees is very clear.

They are available for adjudications that are governed by Section 554 of the Administrative Procedure Act.

Unknown Speaker: Well, it's very clear if you read the word "under" to mean governed by.

It's very fuzzy if you read the word "under" to be as defined in.

Mr. Wallace: Well, that... there are barriers to reading it that way, Mr. Justice.

And we think they are insuperable barriers.

I mentioned one of them to you already, that throughout that section, 554, the word 12 of our brief, page 14.

We collected all... many examples of this.

Indisputably, they have to mean governed by, subject to.

And the contention would be that this one, and this one alone, is different.

And indeed--

Unknown Speaker: But if... couldn't one counter with the argument that why would Congress single out this small category of agency proceedings for different treatment from all others when the equities would seem to be the same and the purpose of the statute would seem to apply?

Mr. Wallace: --Well, the equities may--

Unknown Speaker: And without saying a word about it?

Mr. Wallace: --The equities may not be the same.

If Congress were to give specific attention to the question of administrative deportation proceedings, and I don't want to belittle the utility of counsel in such proceedings, but Congress might well come to the conclusion that applying EAJA to these proceedings would not be the best way to address this problem.

There are more than 100,000 such proceedings conducted each year by the 92 immigration judges of the INS.

And the vast majority of these proceedings... everyone I've talked with there estimates that it's upwards of 90 percent... the question of deportability is either conceded by the alien or very quickly resolved against the alien, and the whole issue becomes a claim by the alien for political asylum or for suspension of deportation.

Unknown Speaker: It seems to me what you're saying is that the cases in which the Government's position would not be substantially justified are a very small number of the total universe.

Mr. Wallace: The Congress might conclude that because these all are a matter that involve discretion on the part of the Government, and they're all matters on which the burden of proof has shifted to the alien, that there would be very few cases in which the Government's position could fairly be said not to be substantially justified.

That doesn't mean that there wouldn't be a lot of litigation about that and a lot of courts awarding fees.

But Congress could conclude that this isn't really the tool.

And it might also be concerned that the exercise of that discretion in favor of aliens in these proceedings might be deterred if it could become a drain on the agency's budget through the award of attorney's fees.

Unknown Speaker: Well, didn't they budget about 100 times as much money for this statute as they've actually spent?

Mr. Wallace: Well, it's true that the costs have not reached the initial estimates that were made when it was--

Unknown Speaker: They've failed by about 99 percent.

Mr. Wallace: --That is correct.

But there are reasons why, if Congress gave attention to this question it might conclude that there are better and more effective ways of meeting a need for the provision of counsel in this proceedings than by applying EAJA, and that EAJA might not be well suited to it.

That is a matter that Congress simply has not addressed.

And I have not yet mentioned another barrier which we think is a very strong barrier to the alternative interpretation that petitioner espouses and that you have queried about.

And that is that we are dealing here with a waiver of sovereign immunity.

And those must be strictly construed in the first place.

And that, in this context, really fairly precludes departure from the ordinary meaning of the word 554> ["], to a more expansive, unusual meaning of the words 554> ["].

And they must... in waivers of sovereign immunity must be express rather than applied, which it seems to us, fairly precludes analogy.

Unknown Speaker: How about the Erwin decision last year?

Mr. Wallace: Well, the Erwin decision was one in which Congress had clearly subjected the category of cases to a waiver of sovereign immunity and the only question was whether the ordinary rules of the road for waivers of sovereign immunity, the usual tolling rules of the road, would apply.

Unknown Speaker: So you think the narrow reading of waivers is... that rule is still in place?

Mr. Wallace: Well, this Court has repeatedly referred to it, and has referred to it approvingly in an analogous contexts because ultimately it is a rule that assures against intrusion by the courts into the legislative function of determining what claims on the public fisk should be honored and what claims should not.

Of course an argument can be made that this would be a worthwhile use of public funds.

But there are many requests for arguably worthwhile uses of public funds and Congress has to determine how to apportion the limited resources that are available.

And in at least two decisions of last term that come to mind, the United States against Dolm, and OPM against Richmond, the Court emphasized that this is the essence of the legislative function under our constitutional system.

And in any event, it was the well-established principal at the time Congress was drafting EAJA and that established the rules of statutory draftsmanship under which Congress put together this text, with its definition section specifying the proceedings for which fee-shifting would be available.

So that is the proper way to read the statutory text, and it was equally well established at the time this statute was drafted by this Court's 1955 decision in Marcello against Bonds, that administrative deportation proceedings are not proceedings governed by Section 554 of the Administrative Procedure Act.

We have also collected in our brief, in footnote 26 on pages 28 and 29, some examples of the many uncertainties that would be opened up if, instead of the terms of the waiver of sovereign immunity, the Congress used being the criterion, a more elastic criterion of procedures functionally similar to Section 554 procedures were to be adopted.

This would--

Unknown Speaker: I'm going to have to start reading your footnotes, if they're important enough to bring up in oral argument.

[Laughter]

Mr. Wallace: --Well, we have not yet refrained from writing footnotes, although I don't take issue with those who have.

So that is--

Unknown Speaker: Who is that?

Mr. Wallace: --Well, some opinions of this Court are now coming out without footnotes, and they're a pleasure to read.

[Laughter]

In any event--

Unknown Speaker: Thanks very much.

[Laughter]

Mr. Wallace: --Some of the footnotes are also a pleasure to read.

[Laughter]

So, in essence, our position is that the terms of EAJA's waiver of sovereign immunity govern here.

It happens that there's also another barrier to recovery in administrative deportation proceedings.

And that is that a holding to that effect would require construing EAJA to repeal by implication Section 1362 of Title VIII.

This is to us illustrative of the difficulties that are encountered by straying beyond the terms of the waiver of sovereign immunity that Congress utilized.

If there are no further questions, we're submitting our case.

Unknown Speaker: Thank you, Mr. Wallace.

Mr. Soloway, you have a minute remaining.

Rebuttal of David N. Soloway

Mr. Soloway: Thank you.

I respectfully disagree with the interpretation of the ACUS exemption or discussion about voluntary compliance.

I read from the Federal Register,

"Congress has provided that private parties in disputes with the Federal Government are entitled to hearings as a right, and others, for whatever reasons, it has been determined that hearings may be provided at the discretion of the Government. "

"On reflection we have concluded that it is more consistent with the purposes of the legislation not to cover proceedings of the latter type than to include them. "

"We have decided, therefore, to drop the provision of the draft rules suggesting that awards be available when agencies voluntarily comply with the procedures described in Section 554. "

That reference to voluntary acceptance of procedures precisely deals with the requirement of hearings being required to be on the record.

In addition to that, I wish to bring to this Court's attention that there's been no suggestion of why an agency adjudication--

Chief Justice Rehnquist: Mr.... your time has expired, Mr. Soloway.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Kay v. Ehrler - Oral Argument

Fri, 09 Jan 2009 14:49:39 +0000

Case:

Kay v. Ehrler

Media File:

90-79_19910225-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Timothy B. Dyk

Chief Justice Rehnquist: We'll hear argument next in No. 90-79, Richard B. Kay v. Bremer Ehrler and Kentucky Board of Elections.

Spectators are reminded that the Court remains in session.

There is to be no talking inside the courtroom.

Mr. Dyk, you may proceed whenever you are ready.

Mr. Dyk: Mr. Chief Justice, and may it please the Court:

This case presents an important question under Section 1988 of the civil rights laws which allows a reasonable attorney's fee to prevailing parties.

Petitioner in this case is an attorney who, proceeding pro se in the United States district court for the Eastern District of Kentucky, succeeded in having two state statutes restricting access to the ballot declared unconstitutional.

And one of those had been declared unconstitutional 4 years earlier and it had been reenacted by the State in its identical form despite the court's ruling.

Unknown Speaker: What was the standing in this case?

Mr. Dyk: In this case?

Unknown Speaker: In this case, yeah.

Mr. Dyk: He was a--

Unknown Speaker: Was he a candidate or something?

Mr. Dyk: --Yes.

He was a candidate for President of the United States.

He has run for various offices on the Democratic ticket a number of times, and has received access to the ballot in a number of States and a fair amount of media coverage for a minor party candidate, and for a minor candidate for the Democratic nomination.

He, in doing this, fulfilled the purposes of the civil rights laws, and that is he acted as a private attorney general vindicating not only his own rights, representing not only his own rights, but those of other people in the United States.

Unknown Speaker: Was it ever established, Mr. Dyk, that he was admitted to the bar in the Eastern District of Kentucky, or Western District, wherever it was?

Mr. Dyk: He didn't need to be admitted to the bar pro hac vice.

He was not a regular member of the bar, but he did not need to seek a pro hac vice admission because under the rules of the Eastern District he was allowed to proceed without doing that since he was pro se.

He is a member of the bar of the States of Florida and Ohio.

Unknown Speaker: So he was enabled to proceed in Kentucky not because he was admitted to the bar, but because he was pro se?

Mr. Dyk: Well, he could have... he could have proceeded either to seek admission pro hac vice or to proceed under this rule.

It wasn't necessary for him to do the pro hac vice because the rule allowed it anyway.

Unknown Speaker: So at any rate he was not admitted to practice as an attorney, either for this case or generally, in the Federal court in Kentucky?

Mr. Dyk: That is correct, he was not.

Unknown Speaker: Now, Mr. Dyk, you don't take the position that all pro se litigants are eligible for attorneys' fees, just those who are attorneys?

Mr. Dyk: That is correct, Justice O'Connor.

We take the position that while some of the purposes of the statute would be served by allowing attorneys' fees to pro se litigants who are not attorneys, that the language of the statute in referring to an attorney assumes a licensed member of the bar--

Unknown Speaker: Well, the statute also refers to prevailing parties, which might more easily be read to cover all than just attorneys.

I thought it was curious that you limited your argument.

Mr. Dyk: --I... Justice O'Connor, I would agree that there are many of the policies of this statute which would be fulfilled by allowing attorneys' fees to non-attorney pro se litigants.

But there is the reference in the statute to attorney, and there is the reference in the legislative history wishing to involve attorneys in these cases.

Unknown Speaker: Well, if you... if you look to the language the phrase "attorneys' fee", isn't the more natural meaning of that to presuppose that there is an attorney-client relationship?

Mr. Dyk: I think not, Justice O'Connor.

I think the reference is to the fee that the court allows to the attorney in the case, and of course this statute comes to the Court today with the gloss placed on it by both the Blum and the Blanchard cases, which have specifically held that this statute does not contemplate cost-based recovery.

In other words, it does not make any difference under this statute whether there is a paying relationship between attorney and client.

Indeed, if one looks at the legislative history, it seems that one of the clear purposes of the statute was to award fees to individuals who were not charging their clients for their services.

So despite the reference in the statute to the word fee, it is now clear under this Court's earlier decision that the payment of... an actual payment of the fee is not what the statute means.

Unknown Speaker: True, but it may still contemplate an attorney-client relationship.

Mr. Dyk: I think... I think not, Justice O'Connor, because not only does the statutory language not draft it in a way that requires representation, and I think it would have been relatively easy for Congress to do that if it intended to do it, but the policies of the statute are fully served in the case of an individual attorney who is proceeding pro se.

First of all, the statute is designed--

Unknown Speaker: What about that old saw that he who represents himself has a fool for a client?

Mr. Dyk: --Well, I realize--

Unknown Speaker: Maybe Congress had in mind that people should get attorneys in order to vindicate civil rights causes of action.

Mr. Dyk: --I think there is no question but that Congress wanted attorneys to be involved.

There is no question that Congress to some extent, to a significant extent, was motivated by the desire to provide attorneys to people who could not afford them.

But it did not draft the statute in that way.

For example, it could have said, and it had the Fair Housing Act before it as an example at the time that it passed this statute, it could have awarded fees only to people who are, quote,

"unable to assume the payment of the fees themselves. "

It didn't do that.

It acted more broadly, and it acted more broadly because it had broad purposes in enacting this statute.

It was concerned that without private enforcement of the civil rights laws, that the civil rights laws might become a dead letter.

It was actively seeking to encourage civil rights litigation by awarding these fees, not to discourage it.

And again and again this Court has said and the legislative history has said that this was the central purpose, to encourage these suits to be brought to vindicate the civil rights not only of the plaintiffs in the cases, but of other people whom the plaintiffs represented.

At the same time there was a lesser purpose to some extent deter the defendants in these cases from raising defenses to meritorious claims.

And for these... these purposes are fully served by cases in which an attorney is proceeding pro se.

It is also quite clear, we think, and conceded by the other side, by both the respondent and by the United States, that pro se organizations proceeding under the statute are entitled to recover an attorney's fee.

And I think the same purposes of the statute which lead to that result should lead to the result of a pro se individual being covered by the statute as well.

And if this Court were to rule otherwise I think there would be extremely difficult line-drawing problems.

I mean, you could have one case in which an individual represented a corporation or a nonprofit corporation.

You could have a case in which an individual was a member of a voluntary association which was bringing the suit, or, as in some of the cases, you could have an individual who was representing a partnership, or in this case--

Unknown Speaker: In all of those cases the entity is larger than the attorney who is appearing before the court on its behalf.

Mr. Dyk: --I think there are, there are in the examples that I have given so far, that is true, Mr. Chief Justice, but Mr. Kay could also have sued in the name of the Kay for President Committee, which may consist of one or two people.

The fact is that there may be... by introducing a distinction between organizations and individuals, I think we're suggesting that some very difficult line-drawing problems could be introduced, line-drawing which isn't justified by the purposes of the statute and that we would end up, as this Court said in Hensley should not be the case, we could end up with other litigations to try to determine whether it's an organizational situation or an individual situation.

Unknown Speaker: Mr. Dyk, what is your answer to the situation where house counsel represents a nonprofit organization?

Mr. Dyk: That does happen with some frequency.

It was something that they were apparently aware of in passing the statute.

There are references to it in the hearings, and there is a specific reference to it in the House report, and, that clearly says that under those circumstances that the organization is entitled to recover the attorney's fee.

And the amicus brief of Public Citizen has pointed out how often that occurs and how important it is.

And I understand that point to be conceded by the other side, that if it's a nonprofit corporation, if it has a corporate form, that it is within the statute and that an attorney's fee can be recovered, even though it is another pro se situation.

Unknown Speaker: Well, I suppose organizations, corporations and other organizations have to be represented by counsel.

I mean, they can't come in as a corporation and represent themselves.

They have to have an attorney there, house counsel or otherwise, don't they?

Mr. Dyk: Well, I think, Justice O'Connor, that is true in the case of a corporation.

But in the case of a voluntary association or a partnership, which also qualify for this organizational status, they don't have to proceed by an attorney.

They can proceed by a member of the organization.

And if it so happens that they proceed being represented by an attorney who is a member of the organization, it seems difficult... very difficult to distinguish between that situation and the corporate situation, and very difficult to believe that Congress could have intended to do that.

Unknown Speaker: Is that, is that for certain, Mr. Dyk?

I'm not sure.

Do you know of any cases where a partnership appears pro se?

Mr. Dyk: Yes.

There is one of the leading District of Columbia cases, the D.C. Circuit cases here, the Cuneo case, involved a case in which the partnership appeared pro se and Mr. Cuneo represented them, and the D.C. Circuit held that he was entitled to fees.

So these things do happen.

And if, if the Court tries to draw a line between individuals and organizations I fear it will be a very difficult line for the courts to administer in practice, not only because these situations do exist, but it would create an incentive for people to create an organization for the purpose of getting the attorneys' fees.

Now the Solicitor General tells us don't worry, we'll pierce the corporate veil, we'll go behind that, but there again I think one is just getting into all sorts of difficult litigation over the question of attorneys' fees.

We are told... we are told by the other side that there are purposes of the statute which would be defeated if attorneys' fees were allowed here.

It is said, for example, by the brief of the State of Hawaii and others as amicus that if attorneys' fees are allowed here it will devastate the State treasuries, and that for that reason the Court should not construe 1988 as allowing attorneys' fees in this situation.

The difficulty with that argument, of course, is it will devastate the State treasuries only, only if the petitioner as the plaintiffs in these cases prevail.

And if they prevail they are serving the very purpose of the Civil Rights Act that led Congress to award of an attorney's fee.

They also argue that the reason that Congress wanted to get attorneys involved in these civil rights cases was to perform a sifting function, that they would sit there and decide which cases were meritorious and ought to be brought, and which cases were not meritorious and should not be brought.

And they somehow suggest that a pro se attorney isn't going to perform the same sifting function.

The difficulty here again is that there simply isn't a single statement in the legislative history suggesting that Congress enacted 1988 or brought attorneys into the process in order to perform this sifting function.

Unknown Speaker: Well, the whole idea of our profession is that that degree of insulation, independence, and professionalism prevails because there is a distance between you and the client.

And you would concede on the one hand that a pro se who is not an attorney cannot get the fees, and yet you would create for the legal profession this little option where they could represent themselves.

And it seems to me that it somewhat detracts from the purpose of the Congress in asking for professional representation.

Mr. Dyk: The problem, Justice Kennedy, that the Congress faced in 1976 after this Court's decision in Alyeska was that they thought these cases would not be brought because they could not be brought based on the traditional attorney-client relationship in which the client retained the attorney and agreed to pay the attorney.

Congress felt, in fact, so strongly about this that they concluded that if they did not provide for an award of attorneys' fees, that the civil rights laws would not be enforced.

And it is clear, I think, that pro se attorneys, individuals proceeding pro se as attorneys, have made valuable contributions in this area.

This petitioner did in this particular case.

The briefs that we have filed--

Unknown Speaker: Well, I suppose you could say the same about some pro se's who are not attorneys.

Mr. Dyk: --I agree with you, Justice Kennedy, that is quite true that there are purposes of this statute which would be served by awarding fees to individuals who are not attorneys.

And if I were to approach this as a legislative matter I would completely agree that there was a great deal to be said for that.

But there is the word "attorney" in the statute, there is the reference in the legislative history to the desire to bring expert individuals into this, and for that reason we think that the language and the history of the statute suggests that it falls short of awarding it to non-attorney pro se's, a result which has been reached by many of the circuits which have nonetheless agreed that pro se attorneys should recover.

Unknown Speaker: Mr. Dyk, I don't understand how you make that distinction.

As Justice O'Connor points out, the person who gets the award is simply described in the statute as the prevailing party, which would include anybody, attorneys or not.

The award is described as attorney's fees, a reasonable attorney's fee, but you're ignoring the word fee.

There isn't any fee, nobody has paid any money to anybody, so why not ignore the word attorney's too?

I mean, it's just a description of what the money is for, not a description of what, what the function actually is.

Mr. Dyk: I think I'm not, Justice Scalia, ignoring the word fee.

I think that based on this Court's decisions in Blum and Blanchard that I read the word fee as referring to the payment that is made to the prevailing party.

And I approach the statute with the understanding from this Court's decisions that it is... does not provide for cost-based recovery.

But I also approach the statute not only looking at the word attorney, but looking at the legislative history which suggests this desire to have attorneys involved.

There was an apparent conclusion that attorneys were invaluable contributions to these cases.

Now, a number of members of the Court have suggested that non-attorneys may bring valuable contributions.

I don't dispute that.

I say again that I agree that non-attorneys may make very valuable contributions to these cases, and that there are many reasons for arguing that they should also be covered.

And I agree that if you look at the words "prevailing party" instead of attorney's fee, that maybe it is possible to reach the conclusion under this statute that it covers non-attorneys.

That issue of course is not before the Court today.

But we, I... I'm giving you my best understanding of what I think Congress intended, and I think that Congress probably did not intend to include pro se non-attorneys within the statute, even though there are strong reasons for doing it.

Mr. Chief Justice, unless there are further questions I'd like to reserve the remainder of my time.

Unknown Speaker: Very well, Mr. Dyk.

Ms. Sheadel, we'll hear from you.

Argument of Ann M. Sheadel

Mr. Sheadel: Mr. Chief Justice, and may it please the Court:

The question presented in this case is whether a pro se litigant who is an attorney is eligible for attorneys' fees under 42 U.S.C. Section 1988.

The language of 42 U.S.C. Section 1988 indicates that pro se litigants, whether attorneys or not, are not eligible for attorneys' fees.

The language of that statute provides that the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee as part of the costs.

The issue before the Court is to determine the meaning of the phrase

"attorney's fee as part of the costs. "

In examining the definition of attorney's fee, we believe that it becomes clear that pro se litigants, whether or not attorneys, are not eligible for fees.

The phrase "attorney's fee" is defined as meaning charged to client for services rendered, and examples given, hourly fee, flat fee, contingency fee.

Looking at that definition,

"charge to client for services rendered. "

indicates that there is a presupposition that there are two parties, that there is an attorney on one hand and the attorney... client on the other.

Unknown Speaker: But it also assumes that there is a charge, and we have ignored that assumption because we allow pro bono attorneys to, we allow the recovery of fees for pro bono attorneys.

Mr. Sheadel: Yes, Your Honor, but here--

Unknown Speaker: So if we ignore the one, why can't we ignore the other?

Mr. Sheadel: --We believe that if you look at the words in the entire context, attorney's fee as part of costs, that it would indicate that there is an attorney-client relationship from which a fee arrangement springs.

Now the fee arrangement may ultimately be that there might not be an actual paying relationship other than some kind of contingency fee arrangement, such as contingency fee if we lose the case there are no attorneys' fees paid, if we win the case attorneys' fees will be paid if attorneys' fees are recovered.

We do believe that the language, looked at in its entire context, indicates that there is the requirement of an attorney-client relationship from which springs a fee arrangement.

We believe that that is--

Unknown Speaker: Well, what about the house counsel's situation or the pro bono organization's situation?

Mr. Sheadel: --We believe that there is still a fee arrangement.

In-house counsel is in fact acting as retained counsel by the organization that has hired it.

In-house counsel is paid the retainer of the yearly salary and benefits to be there for the organization and to represent the organization in any matters that the organization requires, much as an outside counsel might be put on retainer for the same purpose.

We believe that that is the kind of... is a kind of fee arrangement that would qualify as part of this attorney-client relationship.

We believe that that also is true in the situation of a pro bono attorney representing a client.

That relationship also has a fee arrangement much like a contingency fee arrangement.

If the case is lost there are no fees that are paid.

If the case is won, fees are paid based on whatever attorneys' fees are recovered.

That is a fee arrangement that stems from the attorney-client relationship, the attorney representing his client as anticipated by the language in the statute itself.

Unknown Speaker: May I ask this question?

Supposing in this case the presidential candidate had also put on the complaint that he had also represented a voter in Kentucky to get not only the candidate's point of view but the voter's point of view for standing.

Fees in that case?

Mr. Sheadel: If the petitioner were representing someone other than himself, then we believe he would have qualified for fees for that particular representation.

But for matters in which he was representing himself, we would believe that he would not qualify.

Unknown Speaker: How do you differentiate if there, if a common interest... say the vice presidential candidate was plaintiff also.

He represents X and Y, presidential and vice presidential candidate respectively, and he is one of the two.

Does he get a fee?

Mr. Sheadel: It may be in that situation that when the court is asked to examine the facts connected with it that it might not be possible to make a distinction.

If the common interests were such that everything the attorney did was on behalf of the clients together, you might not be able to make a differentiation.

Unknown Speaker: Which means he would or would not get a fee?

Mr. Sheadel: It means he would, if he were representing a party other than himself.

Unknown Speaker: I see.

Mr. Sheadel: Because there would in fact be an attorney-client relationship and a fee arrangement that would stem from that.

Unknown Speaker: You say, Ms. Sheadel, that the statute contemplates an attorney-client relationship which will ultimately give rise to some sort of fee arrangement.

How does the existence of that sort of a relationship advance the purpose of the statute?

I mean, more so than just an arrangement just where the... if the attorney is pro se he can get a fee.

Mr. Sheadel: The language used by Congress in the legislative history indicates that Congress was concerned with enabling individuals who might not be able to afford to hire attorneys and get into court the means by which they would be able to hire an attorney to represent him or her in the court in order to vindicate his or her civil rights.

Congress' intent seems to us to be that encouragement... that giving individuals the ability to hire attorneys to represent them, and was in fact contemplating the existence of the attorney-client relationship that we are describing.

Unknown Speaker: Are you arguing that... that because a man was a lawyer he didn't need to go out and find a good lawyer?

Is that it?

And therefore Congress didn't intend to have him compensated because he didn't need to go out and hunt a lawyer?

Is that it?

Mr. Sheadel: We would not say it that way.

We believe that Congress meant to treat all pro se litigants the same in that they were encouraging everyone who believes that he or she should file a civil rights action to go and find an attorney to represent him or her in that lawsuit.

And that would include attorneys.

If attorneys decide to proceed pro se, they are making the decision in the same way that any other litigant might make that decision.

But the congressional intent was to give individuals the means by which they could hire attorneys to represent them.

Unknown Speaker: Well, unless a pro se lawyer gets paid, I suppose he would be less likely to bring a civil rights suit, because while he's pursuing it he can't take any other clients.

Mr. Sheadel: We don't believe he would be any less likely to bring the suit than any other individual who is contemplating it.

Certainly the attorney always has the opportunity to hire--

Unknown Speaker: Well, I don't know about that.

The nonlawyer pro se fellow hasn't got that problem, or may not have that problem of paying the rent and not having any clients, not being able to serve any other clients.

Mr. Sheadel: --It might apply to some pro se litigants and might not apply to others.

For example, if there are pro se litigants who have professions and who do work, any time--

Unknown Speaker: Well, it's certainly likely if the lawyer, if the fellow is making his living as a lawyer it is likely that, that... well, he normally doesn't take cases that interfere with his practice.

Mr. Sheadel: --Yes, that's true, Your Honor, but we do not believe--

Unknown Speaker: So he won't be likely to be going out pursuing civil rights cases if he's not going to get paid.

Mr. Sheadel: --That's right.

He might not pursue them himself, but he has the same option that every other citizen in the country has, as encouraged by Congress, and that is to hire an attorney to represent him if he decides that he should file a civil rights claim.

Congress has put every citizen in the country on the same plane, the same starting point with its concern about hiring an attorney to represent him if he's filing a civil rights action.

Attorneys certainly have the capability of finding attorneys to represent them if they wish to bring these actions and do not wish to spend the time on it themselves as far as litigating the action.

And we believe--

Unknown Speaker: There's always the risk, naturally there's always the risk of losing.

You always... if you go out and hire an attorney and you have to pay him, maybe, win, lose, or draw.

And if you lose you're going to have to pay him anyway.

Mr. Sheadel: --That certainly is the possibility.

A Congress intent in enacting the statute obviously was not to, to award fees to anyone whether or not prevailing.

Fees are available to prevailing parties only, and that is true for anyone that hires an attorney to represent him or her in these actions.

We believe if you compare the wording

"attorney's fee as part of costs. "

with the meaning of the phrase "pro se", it becomes even clearer that Congress was contemplating the attorney-client relationship.

Pro se means appearing for oneself, as in the case of one who does not retain a lawyer and appears for himself in court.

Someone who is appearing pro se is doing it for himself on his own behalf.

Someone who is... who is qualified for attorneys' fees is an attorney who is acting on behalf of someone else, his client.

The legislative history supports this conclusion.

Congress' main concern was with citizens who might be unable to assert their civil rights because they could not afford to hire attorneys to represent them in court.

Congress expressed this concern in several places in the legislative history, and in one place stating that it was very concerned about citizens who must sue to enforce the law but who had little or no money in which to hire an attorney.

That was the concern that Congress was addressing in enacting 42 U.S.C. Section 1988.

It very much wanted to enable citizens to hire attorneys to represent them in these actions.

Nowhere in the legislative history does Congress talk about any intent in allowing pro se litigants, whether or not attorneys, to be awarded attorneys' fees in this kind of action.

Unknown Speaker: May I ask you a question?

Would it make any difference if it were a class action and the litigant was proceeding on behalf of a class and was the named plaintiff and also the lawyer?

Mr. Sheadel: We don't believe that it would make a difference, if you mean if the attorney should get attorney's fees for representing clients, we believe that in that situation the attorney would be eligible for fees.

Unknown Speaker: Because of the class members, yes.

Mr. Sheadel: He does in fact represent parties other than himself and has the attorney-client relationship that the statute contemplates.

Unknown Speaker: Another example occurs to me.

I remember there's the Shakman case in Chicago.

Shakman was a lawyer, but he was a member of a law firm, and I think probably everybody in the law firm worked on the case.

Would his partners be... under your view his partners would be entitled to a fee but he would not?

Mr. Sheadel: Assuming from your question that the partners were representing him and there was the attorney-client relationship, we believe that the partners would be eligible.

Unknown Speaker: But he couldn't... he probably couldn't count his own hours working on the case as part of the fee?

Mr. Sheadel: We would agree that he should not be able to be compensated for his own representation of himself.

Petitioner has argued that pro se litigants should be awarded fees because organizations are mentioned in the legislative history, and that organizations that proceed pro se are allowed fees and so pro se individuals should receive fees.

We do not think that that argument is persuasive because organizations do not in fact proceed pro se, and indeed the organizations that Congress specifically mentions in the legislative history were all represented by counsel.

They were all part of an attorney-client relationship, and the intent of the Congress would seem by the language that it used in the legislative history to indicate that it was still looking at the attorney-client relationship.

Organizations indeed are represented by other parties as a general rule, whether the attorney is an inhouse counsel or outside counsel, and certainly that was true in all of the specific situations that Congress was examining in determining the wording of 42 U.S.C. Section 1988.

Unknown Speaker: You would apply that to all organizations, including partnerships?

You disagree with Mr. Dyk as to whether a partnership can appear pro se?

Mr. Sheadel: I don't know if courts allow partnerships to proceed pro se without a licensed attorney there in the courtroom for them.

My experience has been that there has always been a licensed attorney representing these organizations and these partnerships.

But if there is someone who is not a licensed attorney representing a partnership, then we would say that there cannot be an attorney-client relationship because there is not even an attorney.

We would... we would say that... we would agree with petitioner that at the least the statutory language would require there to be an attorney involved in the representation.

Unknown Speaker: Well, would you... a law partnership where a lawyer represents the partnership, would you treat the partnership and that lawyer like a... like a corporation?

Mr. Sheadel: Yes, we would, if the lawyer is representing the partnership and there is the attorney-client relationship.

Unknown Speaker: Well, he's representing himself, too.

He's a partner in the firm.

Mr. Sheadel: Yes.

We believe that if the partnership or organization is greater than the individual that is representing the partnership or organization, then that there is an attorney-client relationship, and that that is what the language and the intent for 42 U.S.C. would require, and fees would be applicable and the individual would be eligible for attorney's fees for that reason.

Unknown Speaker: What, what courts have been against you?

Mr. Sheadel: The Ninth Circuit and the Eleventh Circuit have held--

Unknown Speaker: Are those, are there only three circuits ruled on that?

Mr. Sheadel: --There are only three circuits that have ruled on this specific question, although the Duncan case involved a defendant obtaining attorney's fees, and so the question is enough different that it's difficult to know if that court would also make the same ruling for a plaintiff that was proceeding pro se.

We do not believe that Congress' intent to foster private enforcement actions is in any way undercut by the decision that we are asking this Court to make in this case.

It's clear that Congress did not intend to foster all enforcement actions.

If it had that intent it would have in fact awarded fees to all parties that brought suits, whether or not the parties prevailed.

Clearly Congress' intent to encourage enforcement actions was limited by the means that it adopted for this statute, and those means being that attorneys' fees... that prevailing parties would be eligible for actorneys' fees if in fact there were an attorney-client relationship... an attorney representing another person, that attorney's client.

We believe that the language of the statute and the legislative intent are clear that pro se litigants, whether or not they are attorneys, are ineligible for attorneys' fees under 42 U.S.C. Section 1988, and we ask this Court to affirm the decision of the Sixth Circuit.

Thank you.

Unknown Speaker: Thank you, Ms. Sheadel.

Mr. Long, we'll hear now from you.

Argument of Robert A. Long, Jr.

Mr. Long: Thank you, Mr. Chief Justice, and may it please the Court:

Let me begin with a point Mr. Dyk raised.

He referred to pro se organizations, and there was also a question whether a partnership can litigate pro se.

Our understanding is that the general rule is that organizations cannot litigate pro se.

That is certainly true of corporations, and we think that is the majority rule as to partnerships and also as to unincorporated associations.

Unknown Speaker: Corporations can't litigate pro se because the corporation can't come into court?

Mr. Long: It could not appear through its president or through some officer of the corporation.

It has to hire a member of the bar to represent it.

Unknown Speaker: Well, what if its vice president is a lawyer?

Mr. Long: I think that then the courts have allowed the attorney--

Unknown Speaker: They don't need to go out and hire anybody.

It's just part of his job.

Mr. Long: --Well, that would be the in-house counsel situation, and that is certainly okay.

I might add--

Unknown Speaker: But how about a voluntary organization, say an environmental organization or, you know, any one of the groups that litigate.

If they're simply an association, are they allowed to appear in court by one of their members who is not a lawyer?

Mr. Long: --We think the general rule is they are not, and the cases on this are collected under 28 U.S. Code 1654, which is a statute we did not cite in our brief, but that is a statute that generally gives all parties in Federal courts a right to conduct their own cases personally or by counsel.

Unknown Speaker: So, under your view an organization would have to be represented by an attorney, but it could be an attorney who was also a member of the organization?

Mr. Long: Yes, that's exactly right, Mr. Chief Justice.

We think the language of Section 1988 which provides that a prevailing party other than the United States may recover a reasonable attorney's fee as part of the costs answers the question presented in this case.

The word "attorney" ordinarily denotes a person who is both licensed to practice law and who acts as the representative or agent of a client.

Members of the bar generally do represent clients, but that does not mean that a lawyer who litigates a case pro se is functioning as an attorney.

Standard dictionaries define attorney as the agent or representative of another.

And representation is the essence of phrases such as attorney in fact and power of attorney.

We also think other language in Section 1988 reinforces the conclusion that Congress used attorney in its usual sense.

Unknown Speaker: Let me ask you a question there.

Supposing you had an attorney who was a beneficiary of a trust with a lot of money in it, and he brought suit in his own name as a beneficiary to surcharge the trustees for wrongful action of some kind, and he collected a million dollars or so.

Fee or no fee, do you suppose, as a matter of normal common law approach to that?

Mr. Long: He is the beneficiary of the trust?

Unknown Speaker: He is both the beneficiary... he brought an action on behalf of all... well, I suppose you could say, say he's the sole beneficiary.

I have to make him the sole beneficiary.

Mr. Long: I think in that case it is simply a pro se example.

If he were the trustee, he might be acting on behalf of the beneficiary or the cestui, then he might well be entitled--

Unknown Speaker: No, I'm thinking of an action where he creates... a common fund case, where he creates a fund for the trust and he is the individual beneficiary.

Mr. Long: --If he is the sole beneficiary, I think our position would be that he is not entitled to a fee.

I mean, I should add--

Unknown Speaker: I suppose in most of those cases that there would be... he in effect would be doing a service for the trust as a whole.

Mr. Long: --Yes, and in that case he might well get a fee.

And I should add in general that Mr. Dyk rests a great deal of his argument on the proposition that this distinction between organizations and pro se litigants would be very difficult to apply in practice.

And first of all we think this statute requires the distinction, so the difficulty of it is not really an issue, but we also think in the ordinary run of cases it's not going to be difficult to apply.

It is the kind of determination courts make routinely, for example under this statute 1654, also in determining whether there is an attorney-client relationship or who the attorney represents in a corporate setting.

It is the kind of question that courts can answer quite easily in the borderline or difficult cases that may arise.

But in addition to a requirement of an attorney, there is a requirement of an attorney's fee as part of the costs, and a pro se litigant cannot pay himself a fee.

A pro se lawyer also incurs no costs for legal services other than opportunity costs, and this Court has never held that opportunity costs are compensable as attorneys' fees.

Now, it is correct, as petitioner observes, that organizations represented by in-house counsel, as well as clients represented by attorneys on a pro bono basis, are eligible for fee awards under Section 1988.

But this does not foreclose reliance on the statutory language authorizing an award of fees as a part of costs for two reasons.

First, organizations actually incur costs for representation by in-house attorneys, although the costs may be in the form of a flat fee, that is a salary, and lawyers who represent clients pro bono have a fee arrangement with the client, even if it is to waive the fee, and more typically the arrangement is in the nature of a contingent fee, that is to recover any fee award under Section 1988.

Second, the cases awarding attorneys' fees to in-house counsel rest on... I'm sorry, the second reason is that the awards of fees to organizations rest on the legislative history rather than the language of the statute, and we think the legislative history simply doesn't apply to pro se lawyers, because, as we have already argued, pro se lawyers are easily distinguished from organizations.

We think the language of Section 1988 answers the question presented in this case, but the legislative history reinforces our interpretation of the language.

Statements in the legislative history such as

"many citizens have little or no money with which to hire a lawyer. "

indicate that Congress had in mind encouraging plaintiffs to obtain legal representation rather than litigating cases on their own, and we think that applies to lawyer litigants as well as to all other litigants.

And finally, awarding attorneys' fees to pro se lawyers would not further the purpose of Section 1988, which is to make sure that competent counsel are available to civil rights plaintiffs.

At a minimum, it's certainly not necessary to adopt the result petitioner argues for to achieve the purpose of Section 1988, because under the court of appeals decision lawyers have precisely the same ability to vindicate their civil rights as all other litigants, and in fact they may have a greater ability because if they choose to litigate pro se they can apply whatever additional skills they have.

And we also think, frankly, that encouraging pro se litigation by lawyers would not ensure that competent counsel would be available in civil rights cases.

Pro se lawyers often lack the detachment and objectivity that is necessary for effective professional representation.

A pro se lawyer may be inclined to focus on the recovery of a fee to the exclusion of vindication of the merits.

And pro se litigation also--

Unknown Speaker: Why would a pro se lawyer be any more apt to do that than any other lawyer?

Mr. Long: --Well, if a lawyer--

Unknown Speaker: They both have the same--

Mr. Long: --has a client, the lawyer has to consult with the client about various important parts of the litigation, including settlement offers, and presumably the client is going to be particularly interested in achieving the result on the merits.

I think this Court's decision in Evans against Jeff D. suggests some of that concern.

Section 1988 ensures effective access to the courts for all citizens, including members of the bar.

A rule that provides lawyers with additional rights and privileges not available to other citizens, with the right to litigate pro se and to recover an attorney's fee, is not justified.

Unknown Speaker: --Thank you, Mr. Long.

Mr. Dyk, do you have rebuttal?

You have 12 minutes remaining.

Rebuttal of Timothy B. Dyk

Mr. Dyk: As I listen to the United States and the respondent, I begin to hear that almost everybody other than an individual can litigate on a pro se basis and recover under the statute.

I hear concessions that a voluntary association could do that.

I hear the concession, I think, that a partnership could do that.

I even hear a concession that an individual could proceed to bring a class action and recover.

And I find great difficulty in finding any distinction between those people, if they're allowed to recover under Section 1988, and the petitioner in this case, who was a prevailing party.

He prevailed mightily in having these two statutes declared unconstitutional, having to attack one of them for the second time, and allowing him the fee that the statute contemplates fully serves the statutory purpose.

One of the things that Congress was fully conscious of in enacting this legislation was that it was not easy to get people to take civil rights cases.

It was not easy to get people to take civil rights case even if you provided for a statutory attorney's fee.

Unknown Speaker: Wouldn't the statutory purpose been have served just as well in this case if your client had retained an attorney to represent him, and then there would be no question that attorney could get an attorney's fee?

Mr. Dyk: Mr. Chief Justice, that is surely true that the statutory purpose would be served if he had gotten an attorney to represent him.

The difficulty is, and I think it's reflected in the history of this statute that I am talking about, is that he may not have been able to get an attorney to represent him, and as a result of that--

Unknown Speaker: But that, that's true of any potential civil rights plaintiff.

Mr. Dyk: --That is true.

But if, if the effect of denying the fee here is to cause this individual petitioner not to bring this suit, the purpose of the statute is defeated.

In order to bring this suit he has to suffer significant opportunity costs.

He may also have paralegal costs, which under this Court's decision in Missouri and Jenkins can only be recovered as part of the attorney's fee.

They are not recoverable as part of the costs.

So he has the opportunity costs, he has the potential paralegal costs and related costs, and if he can't recover those he may not bring the suit at all.

I think it is not possible to assume that every pro se attorney litigant has the capability to go out and hire an attorney, that that's an option available to him.

I think in many cases it is not an option that is available to him.

Unknown Speaker: So Congress intended pro se attorney potentially to be more favorably situated with respect to getting attorneys' fees than the typical nonlawyer civil rights plaintiff?

Mr. Dyk: As I said earlier, I think there are, that the nonlawyer civil rights plaintiff who proceeds pro se can make a significant claim that he is serving the purposes of the statute.

And as Justice Scalia pointed out, if you focus on the terminology "prevailing party" rather than on the word "attorney", maybe one concludes that the non-attorney pro se should also recover.

But the fact is that the pro se attorney is directly serving every significant purpose that this statute was designed for.

He is bringing a meritorious civil rights case.

We have to assume that the case is meritorious, because there are no fees if he does not prevail.

And indeed there are disincentives written into the statute, not only the denial of the fee, but the possibility that the defendant would recover a fee against the plaintiff if the action was unfounded.

This pro se attorney brings to bear on the litigation his expertise as an attorney to litigate these civil rights cases.

Mr. Kay in this particular case has argued 20 cases in the courts of appeals.

Unknown Speaker: How many of them were pro se?

Mr. Dyk: How many?

I do not know the answer, but I think a relatively small number of them.

And by seeking out these statutes, by successfully having them declared unconstitutional, by litigating these issues he is doing exactly what Congress wanted done, and that is that the civil rights of people in this country are vindicated.

Not just Mr. Kay's rights, but those of the people in general.

Congress wasn't just concerned about the individual litigants, it was concerned about the breadth of enforcement.

And there is no basis, we suggest, for distinguishing between a situation in which the individual is proceeding pro se and all these other situations where it is conceded that the organization or the class or the partnership is proceeding pro se and would recover fees.

Unless there are further questions, I have nothing more.

Unknown Speaker: Thank you, Mr. Dyk.

Mr. Dyk: Thank you.

Chief Justice Rehnquist: The case is submitted.

Unknown Speaker: The honorable court is now adjourned until tomorrow at ten o'clock.

Attribution:

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Featured:

West Virginia Univ. Hospitals, Inc. v. Casey - Oral Argument

Fri, 09 Jan 2009 14:49:41 +0000

Case:

West Virginia Univ. Hospitals, Inc. v. Casey

Media File:

89-994_19901009-argument.mp3

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transcript.xml

Transcript:

ORAL ARGUMENT OF ROBERT T. ADAMS ON BEHALF OF THE PETITIONER

Chief Justice Rehnquist: We'll hear argument now in No. 89-994, West Virginia University Hospitals v. Robert Casey.

Mr. Adams.

Mr. Adams: Thank you, Mr. Chief Justice, and may it please the Court:

The issue in this case is whether experts' fees are compensable under the provisions of 42 U.S.C. section 1988.

West Virginia University Hospitals asked the Court to decide this issue in the only way that would achieve Congress' stated intent to give civil rights litigants the opportunity to recover what it cost them to vindicate their rights in court.

The fee-shifting provision in section 1988, intended by Congress to be a full and complete remedy, enables the Federal courts to return to their pre-Alyeska fee-shifting practices, and those practices included the shifting of experts' fees.

Unidentified Justice: Well, Mr. Adams, what the statute says I guess is that court may allow the prevailing party a reasonable attorney's fee as part of the costs.

Now do you say expert fees are attorney's fees or do you say they are other parts of the costs?

Mr. Adams: We say that expert fees are part of the attorney's fee, because they are part of the work product.

In other words, reasonable attorney's fee is a term of art.

Unidentified Justice: Even though concededly experts are not attorneys.

Mr. Adams: Concededly--

Unidentified Justice: And they don't do attorneys' work.

Mr. Adams: --Concededly they are not, but before the... before the attorney can do his work, he's got to work with that expert so he knows how to present his client's case and how to prove it.

Unidentified Justice: Well, that would be true of any witness.

Mr. Adams: But with respect to expert witnesses, it's particularly important because when you're dealing with civil rights litigation, it's a rare case when you can have that kind of litigation go forward without an expert.

I think the thing that drives that--

Unidentified Justice: Well, that's true of... you can say that about any... you can't win a lawsuit without a witness unless it's just a question of law.

Mr. Adams: --That's true, but if you have fact witnesses you subpoena them and they come to trial and they're going to testify.

Expert witnesses unfortunately have rents to pay, college tuitions to pay and they normally will request some fee for their services.

But I think the point that drives us home is the fact that when Congress enacted the fee-shifting provision in section 1988, it did not sail into uncharted waters.

Instead, it selected the language of title VII's--

Unidentified Justice: Well, an attorney... an attorney can certainly get... they can get attorney's fees and they can recover a fee that reflects the time the attorney spent with an expert witness.

If he... he goes and finds them and he forks him up, and he knows his testimony.

He can get him an attorney's fee for that.

But you say that included in the attorney's fees is the separate sum that he must pay the expert?

Mr. Adams: --Yes, sir, I do.

We would respectfully submit--

Unidentified Justice: And he... and the expert is a witness?

Mr. Adams: --The expert can be a witness.

Sometimes he is not.

In this particular case it turned out that all of our experts ended up testifying.

Unidentified Justice: Uh-huh.

Mr. Adams: We would respectfully submit to the Court that the starting point for this Court's analysis of this issue ought to be the same starting point that this Court employed in the case of Missouri v. Jenkins.

Unidentified Justice: But you would... you would be making the same argument even if these experts did not testify?

Mr. Adams: I would be making the same argument.

Yes, sir.

Unidentified Justice: I guess that's... because you say the $30 provision just doesn't cover this.

Mr. Adams: Just doesn't pay and quite candidly, Your Honor, in today's litigation the attorney I think most often goes out, finds the experts, gets them acquainted with the case so they can do their work, and in most instances, even though there may be the initial expectation that the fee is going to be paid for by the client, I can assure you that that expert is going to look to that lawyer in the law firm to makes sure that he bill gets paid to some extent.

And that's very important to a lawyer, because if he is able to find quality people to be experts and all of a sudden his experts don't get paid, I would submit that it's going to be very hard for that attorney to attract that expert again or other experts of like quality when they hear that their fee is going to go unsatisfied.

Unidentified Justice: Mr. Adams, I guess there are a number of Federal statutes where there is express provision made for expert witnesses?

Mr. Adams: Yes, Your Honor.

Unidentified Justice: And their fees?

Mr. Adams: Yes, Your Honor.

Unidentified Justice: And that was not done in section 1988.

Should that be a concern to us?

Congress knows how to provide for them expressly.

Mr. Adams: I think that is probably the best argument that the Commonwealth of Pennsylvania has.

But I think when the argument is examined, it doesn't wash and for a couple of reasons, Your Honor.

First of all, just as an initial matter, you would have to completely ignore the legislative intent behind the fee-shifting provision in section 1988.

Secondly, what you're really suggesting is that Congress must use particular words and particular ways every time it legislates.

You effectively place Congress into a legislative drafting straightjacket which is pretty much akin to the way we used to have old common law pleading, and courts and lawyers who were trained in pleading found that to be an unworkable situation.

And I would submit it would not be appropriate to place Congress in an equivalent situation.

Unidentified Justice: Well, I guess it's not unreasonable to think that we should apply the common ordinary understanding of the words that Congress does choose to employ.

That's not putting Congress in a straightjacket, would you say?

Mr. Adams: It is not.

But when you find plain evidence of a legislative intent to work some other result, then the result would be if you followed a plain language construction--

Unidentified Justice: Well, but it's just a little bit of a stretch isn't it to say an attorney's fee includes fees paid to experts?

Mr. Adams: --With respect, Your Honor, I would disagree and for this reason.

If you examine both the Senate report and the House report, both reports specifically comment that they are selecting title VII's fee-shifting language and they say the reasons for that selection... they said, number 1, the courts are familiar with these terms.

They have interpreted these terms and have given them meaning, and furthermore they cite case law that have interpreted title VII's fee-shifting language.

And when you examine that case law, they have interpreted title VII's language to embrace experts' fees.

Unidentified Justice: Well, and you think that every committee member who signed on to that report not only read those cases and knew that that's what those cases said... that they covered not only attorney's fees but also expert fees.

Mr. Adams: I think that's the presumption, Your Honor.

Unidentified Justice: And it's also the presumption not only that the other members of the Congress read those committee reports, but also that the other members of Congress also read those cases that were cited in the committee reports, even though the committee... as I understand it the committee reports don't even say explicitly that experts' fees are covered.

Mr. Adams: That's correct.

Unidentified Justice: All they do is cite these cases which had held that experts' fees were covered.

Mr. Adams: That's correct.

Unidentified Justice: And the theory of the matter is that from that citation of the cases we can be sure that the whole committee and the whole Congress intended expert fees to be covered.

Mr. Adams: I think that's the evidence that would be before the court, and I don't think there's any evidence to contradict that particularly when you examine--

Unidentified Justice: Well, there's the evidence of the language which says attorney's fees and the evidence of other statutes which say attorney's fees and expert fees are recoverable.

Now, if I'm a member of Congress and voting on that statute, I'm not going to go and read a committee report and then read the cases cited in the committee report.

I'm going to know that when we say attorney's fees, we mean attorney's fees and when we say attorney's fees and expert fees, we mean both.

Mr. Adams: --Your Honor--

Unidentified Justice: Isn't that much more reasonable to assume?

Mr. Adams: --I would disagree.

I'm aware that you in some of your opinions have approached legislative history in a different way than perhaps we would--

Unidentified Justice: No, but this goes beyond legislative history.

This goes relying on nothing but the name of a case which you expect the members of Congress to have read.

Mr. Adams: --But I think, Your Honor, when you look at the entire set of contemporaneous circumstances that surrounded the enactment of this fee-shifting provision, it is absolutely clear in my opinion that the Congress wanted to abrogate the effects of Alyeska with respect to civil rights litigation.

And they were particularly concerned that when they took this legislative action that they supply something that was a meaningful and fully compensatory remedy.

Unidentified Justice: Well, Alyeska just dealt with attorney's fees.

They didn't deal with expert witnesses.

Mr. Adams: Well, unfortunately I think everybody concluded from reading your opinion, Justice White, that it had--

Unidentified Justice: That wasn't my opinion.

It was the Court's opinion.

Mr. Adams: --You're correct, Your Honor.

But I think everybody assumed and I believe correctly so that based upon that opinion it would be a very weak argument to suggest that that opinion did not reach to expert fees.

Unidentified Justice: This presumption that the members of Congress or at least the committee have read all the cases, have we said there's that presumption?

Mr. Adams: I don't think you have said it in those terms, but I don't think that this Court has ever abandoned the notion that legislative reports and whatever legislative... other legislative history exists is not something appropriate to look at and--

Unidentified Justice: When the statutory language is ambiguous--

Mr. Adams: --I think in this case, Your Honor--

Unidentified Justice: --Do you think attorney's fees is ambiguous, so that just reading that language it might include expert witness fees?

Mr. Adams: --I think to people who are aware of--

Unidentified Justice: You can answer that question yes or no, and then you can explain your--

Mr. Adams: --I think it is ambiguous to the uninitiated.

Unidentified Justice: --Of whom do the uninitiated consist?

Like us?

Mr. Adams: Certainly not, Your Honor.

[Laughter]

Unidentified Justice: Well, absent any legislative history, would you say the language is ambiguous?

Mr. Adams: If--

Unidentified Justice: Absent any legislative history?

Mr. Adams: --If there was no legislative--

Unidentified Justice: None.

Mr. Adams: --history.

It was just this statute, I would probably not be sitting here today.

Unidentified Justice: So you say it would not be ambiguous?

Mr. Adams: If there were not this legislative history--

Unidentified Justice: Yes, yes.

Mr. Adams: --if there were not this set of contemporaneous circumstances--

Unidentified Justice: So you say this is a plain language case and I lose.

Mr. Adams: --If all you do is look to the four corners of this statute, if you are not willing to ask the additional question of what else was Congress trying to do, yes, I think I do lose.

Unidentified Justice: Of course, you'd lose the paralegal case, too, wouldn't you?

Mr. Adams: Yes.

Unidentified Justice: Yeah.

Mr. Adams: And I think that's the significance of this Court's beginning of its analysis in the Missouri v. Jenkins case.

Because in the very initial part of that decision, it's apparent to me that this Court considered and rejected the plain language argument that's being advanced by the Commonwealth of Pennsylvania today.

Unidentified Justice: In fact, we rejected it 8 to 1, didn't we?

Mr. Adams: I believe it was 7 to 1.

I believe that Justice Marshall--

Unidentified Justice: No, I think it's 8 to 1 on the question whether any paralegals were allowed.

Only the Chief Justice ruled and said, no fees at all for paralegals.

Mr. Adams: --I will defer to you, Justice Stevens.

I believe Justice Marshall took no part in that decision.

I hope to get his vote today.

[Laughter]

Unidentified Justice: But I suppose there's quite a difference between paralegals and expert witnesses.

Paralegals are in essence doing part of the attorney's work, are they not?

Mr. Adams: They clearly are and so are--

Unidentified Justice: And expert witnesses are perhaps more like independent contractors in a sense.

They're outside a law office and the lawyer's work.

Mr. Adams: --With respect, I would disagree.

I think you are... I think with... that you're trying to draw a distinction based upon employment relationships and I think Judge Posner's decision for the Seventh Circuit is particularly good in explaining that if you really examine that, that doesn't seem to be a very appropriate basis for a distinction.

You can have... you've got a... you pay for a paralegal in order to make this fully complete remedy, but you don't pay for the expert and yet the expert probably provides a far more valuable service and the attorney needs access to his services more than he does his own paralegal.

Unidentified Justice: Well, then you disagree with Missouri v. Jenkins, because that was the rationale of Justice Brennan.

He said that attorney's fees include secretaries, those that are integral to the operation of the office.

And it seems to me that, page 2470, that that's all he means.

Mr. Adams: With respect, I would disagree.

I read... I read that his decision as indicating that any person whose labor has contributed to the work product of the attorney ought to have--

Unidentified Justice: No, for which an attorney bills the client.

--bills the client.

Before the attorney can bill his client for a successful prosecution of a civil rights claim, he has got to work with that expert.

He cannot even seriously consider taking the case unless he knows there is some reasonable expectation in a meritorious civil rights case of being able to pay that expert.

When you refer to civil rights cases, uh, you obviously refer to your own case here where the West Virginia University Hospital sued the State of Pennsylvania or sued the Governor of Pennsylvania on a statute where it claimed it had some entitlements.

So you're really not talking about civil rights in any narrow sense.

You're talking about any plaintiff who has a claim under Federal law.

Mr. Adams: --As broadly as this Court has construed that.

In my particular situation, of course, Your Honor, your... this Court--

Unidentified Justice: And you aren't talking about somebody who couldn't independently... wouldn't independently have the money to pay the expert.

Mr. Adams: --I think I am talking--

Unidentified Justice: Why?

Mr. Adams: --about the person, because if you were to decide this case against my client, it would seem to me that you have established a precedent, not just for my client who had the fortune of having some kind of cash flow, but you'd have also set a precedent for the individual who did not have--

Unidentified Justice: Well, that may be but your client has the money to pay the expert.

Mr. Adams: --Not true, Your Honor, and let me explain why.

I would direct the Court's attention to page B48 in the petition's... appendix.

There the district court discusses the testimony of Dr. James Vertrees, who was the Commonwealth of Pennsylvania's expert.

And the reason the district court was discussing that particular testimony was that Dr. Vertrees had clearly testified that the imposition of Pennsylvania's payment system on a hospital such as my client had the potential, the real potential of bankrupting a large university teaching hospital.

And that's particularly serious in a Medicaid program, because if you examine the legislative history to the Social Security Act you will find that Congress had an express concern for these large teaching hospitals that... to put it bluntly... are the dumping grounds of... for poor patients.

And so my client as I said... it had a cash flow, but I would respectfully submit my client did not have a deep pocket that was unending.

So, it's very important if we're going to continue to deliver... in my client's case... needed health care to our indigent citizens that they are able to recover what it costs them to vindicate their rights in Federal court.

I would point out to the Court with respect that this Court has not shied away from rejecting plain language arguments when it has come to section 1988.

Missouri v. Jenkins was not the first time this Court so held.

I would point you specifically to the Christiansburg Garment case where you rejected that kind of argument because it would have frustrated Congress' intend.

Likewise in related fee-shifting statutes, EAJA, for example, the Clean Air Act shifting statute, you have not given any credence to arguments based on minor variations in language between one statute and another.

You have been more concerned about ensuring that Congress' intent behind those statutes was followed.

Unidentified Justice: Yeah, except that, you know, if we ignore the plain language of what the statute and says and goes to what Congress intended, I doubt whether very many members of Congress thought that civil rights actions consisted of suits by hospitals, for-profit hospitals, some of them, for millions of dollars that were wrongfully withheld under a statute for Medicaid treatments.

I don't... how many members of Congress do you think would consider that a civil rights action.

That's what they had in mind when they were talking about civil rights actions?

I doubt very many.

Mr. Adams: Your Honor, I don't know really how to answer that other than to--

Unidentified Justice: Well, the way to answer it is the statute says what it says and it describes this kind of an action and that's good enough.

Mr. Adams: --I disagree, because I think if Congress was truly serious about making any kind of promise to the American people it had to be a substantial promise not a hollow promise, and I would submit it is a hollow promise if expert witnesses cannot be made available to all civil rights litigants.

I would also respectfully submit that the adoption of the construction that we are proffering to the Court is fully consistent with the notion that we are dealing with a remedial statute that is entitled to a broad construction.

Furthermore, we believe that that notion of a broader construction than the one being offered up by Pennsylvania is also consistent with the notion of work product as we find that mentioned in the Jenkins case, because this Court has said that the work product doctrine is an intensely practical doctrine grounded in the realities of litigation, and experts are a reality of litigation whether we like it or not.

West Virginia's construction, we believe, is fully consistent with every expression of legislative intent that we can find.

Unidentified Justice: I suppose you can also make the same argument about private investigators and private detectives?

Mr. Adams: If an--

Unidentified Justice: Here's a case... here's a case that a lawyer wants to hire an investigator to find out the facts and find some witnesses, and he just won't get off the ground without him?

Mr. Adams: --A qualified yes, Your Honor, and let me explain the qualification.

As we understand the legislative history behind section 1988, Congress intended to restore the courts to what their practice had been in fee-shifting prior to the Alyeska decision.

I am not here to suggest that that means that we should vest into the Federal courts the ability to further expand whatever that equitable fee-shifting policy was.

Instead I'm suggesting whatever it was in 1975 that's what Congress intended to give back.

Now, if investigators... which are not a part of this case... but if investigators had been considered a part of the appropriate fee shifting under pre-Alyeska practice, yes, I would give you the... I... a yes answer to that.

Unidentified Justice: Do you think prior to Alyeska it was an accepted practice to shift... shift the cost for expert witness fees to the loser?

Mr. Adams: Yes, sir, and the court exercising its discretion, and if you examine our footnote 15 on page 18 of the opening brief, you'll see what we hope is a fairly complete list of the reported cases on that point.

We have certainly found no reported case that suggests otherwise nor have we seen any case cited by the Commonwealth of Pennsylvania for a contrary position.

Well, we believe that the construction that we would offer to you today is consistent with the intent to encourage the private enforcement of civil rights.

We think it's consistent with the notion of creating a broad remedy.

We think it's consistent with the purpose of equalizing the resources between the litigants and we do think it is fully consistent with a continuation of the pre-Alyeska practice.

Unidentified Justice: Mr. Adams, I suppose in any event if these witnesses were to testify in court that the Crawford case would limit the payment to $30 a day.

Mr. Adams: I've given that a great deal of thought, Your Honor, and I can say that, yes, you can probably construct an argument where you could draw the line in that fashion, but I don't really think that's the correct place to draw the line.

The reason being--

Unidentified Justice: Crawford said at least in the opinion that expert witnesses are limited by the statute to $30 a day, absent explicit authorization to the contrary.

Mr. Adams: --Yes, ma'am... yes, Your Honor, but two responses to qualify my answer.

Number one, if you examine the provisions of section 1821 which was the subject matter of Crawford, clearly Congress... there's a clear recognition that Congress might come in with some other fee-shifting statute to supplant 1821, 1920, and 54.

And we believe 1988 is such a statute.

And my second point has just gone out of my head and I apologize for that.

But going back to Pennsylvania's arguments.

We believe when you examine their arguments that they are plainly inconsistent with the expressions of legislative intent that we can find for this statute.

It would not encourage private enforcements at least in those cases where the civil rights plaintiff does not have the means to proceed.

It's not a fully complete remedy.

It's an incomplete remedy.

There certainly would be no level playing field between a State actor who can access the State treasury and the private litigant.

And lastly, the pre-Alyeska practice simply is not restored.

We think in the final analysis reasonable attorney's fee is a term of art.

It's just as Judge Posner described it in the Friedrich case.

It's a shorthand expression.

And I can only go back and iterate the point that I made earlier, that Congress did--

Unidentified Justice: Well, it's the shorthand expression for what?

Mr. Adams: --I think the way he phrased it is it's a shorthand expression for what the courts were doing, what was taken away from them, and what Congress then restored to them.

And that's why I would go back to the point where if we try to draw lines between testimonial and nontestimonial services, it seems to me that really the better approach is to look at what pre-Alyeska practice was, and I don't believe that line drawing took place at that time.

I see that my time is about up.

I'd like to reserve the balance for rebuttal, if I may.

Unidentified Justice: Very well, Mr. Adams.

Mr. Koons, we'll hear now from you.

ORAL ARGUMENT OF CALVIN R. KOONS ON BEHALF OF THE RESPONDENT

Mr. Koons: Thank you, Mr. Chief Justice, and may it please the Court:

We believe the starting point for the Court's analysis in this case should begin with the Crawford decision rather than the Missouri v. Jenkins opinion.

In Crawford the court specifically said that the $30 a day limit for attendance fees for witnesses in Federal court was fully applicable to expert witnesses and further said that this limitation would be respected or had to be respected by Federal courts unless there was some explicit statutory authorization which would modify the limit.

The court went on to say that repeals by implication were not favored and that it would not likely infer that the limitations of the $30 a day limit would be repealed absent some statute or authority explicitly referring to witness fees.

Quite simply, 1988... section 1988 upon which petitioner relies to shift the cost of expert witness fees contains no specific authorization.

It contains no specific authorization either in the plain language of the statute, which refers to a reasonable attorney's fee and not a witness fee, nor does it contain any explicit statutory authorization in the legislative history which contains in the comments and the floor debates no reference to witness fees whatsoever.

And finally,--

Unidentified Justice: Excuse me, may I ask you a question about your interpretation of the plain language, just focusing on the language for a minute?

Do you read the statute as saying it authorizes the prevailing party in the discretion of the court to recover, one, attorney's fees; and secondly, where it says costs, does that mean taxable costs to you?

What does the word costs mean?

And, of course, the witness fee of $30 a day would be a taxable cost.

Mr. Koons: --What I read the statute 1988, Justice Stevens, as saying is that a reasonable attorney's fee is allowed as part of the costs.

I interpret that as adding to section 1928 U.S.C.... 1920... another item of taxable cost in the form of--

Unidentified Justice: So, it's... other than attorney's fees and those items that are taxable by statute is cost, that's it?

Mr. Koons: --That's the way I interpret it.

Unidentified Justice: I'm putting aside for a moment the paralegal problem because I... what about things about Justice White indicated investigators, telephones, xerox, transportation to depositions, a lot of things that are not taxable as costs but are commonly billed by lawyers to their clients as expenditures or disbursements and I noticed in this case there are $45,000 of disbursements that you did not challenge, most of which were not taxable costs.

Mr. Koons: That's correct, Your Honor, we did not challenge them in this case.

However,--

Unidentified Justice: Why didn't you if the language was as plain as you say it is?

Mr. Koons: --Well, Your Honor, we wanted to choose our issues, and the decision was simply made that we would not contest those expenditures.

Unidentified Justice: You're just giving the State's money away, weren't you, under your view of the case?

Mr. Koons: Well, Your Honor, we made a decision as to--

Unidentified Justice: Right, but under view of the case you could have challenged most of the $45,000?

Mr. Koons: --I think some of those expenditure we may have been able to challenge.

Unidentified Justice: Well, including cab fare for the attorney to get to the deposition?

Mr. Koons: Well, Justice--

Unidentified Justice: I thought you meant by attorney's fees anything that the attorney would normally bill to the client for his work in the case, which would include that stuff--

Mr. Koons: --Justice--

Unidentified Justice: --including xeroxing.

Mr. Koons: --Excuse me, Justice Scalia, I think that many of those items probably would have been better looked at as cab fare and so forth as items which the attorneys would absorb on terms of overhead rather than billing directly to the client.

Unidentified Justice: Well, some attorneys bill them separately.

Let's assume you have... just as some attorneys bill paralegal time separately and some don't.

You can either bump your rate up or you can show it separately.

But let's assume that an attorney shows in his billing... shows travel expenses separately as many do, airfare... I'm not sure about cab fare, but airfare--

--And as they did in this case.

And as they did in this case.

You wouldn't consider that to come within attorney's fees?

Mr. Koons: What I would consider to be within attorney's fee, Your Honor, in conjunction with the Court's decision in Missouri v. Jenkins, is work which is performed by an attorney, work which is... monies which can be incorporated into overhead in terms of the lawyer's office, what it takes him to run his office, and that, I think, would be it.

Unidentified Justice: And not anything else that's necessary for him to do his part of the case.

Mr. Koons: Well, Your Honor, there might be a few things... no, I would have to say that that's the best... correct--

Unidentified Justice: I would think--

Mr. Koons: --The other items I think would have to be absorbed in perhaps the attorney's rate.

Unidentified Justice: --Are you answering Justice Scalia... are you now reading the statute differently than when you answered my question?

What about xerox, just xerox expenses, long distance telephone, travel to a deposition?

Those are not taxable as costs but now you're saying they are part of attorney's fees.

Mr. Koons: Your Honor, I think perhaps they could be in connection with those types of things that are done in the office for the attorney to present the case, although I point out--

Unidentified Justice: Well, what if the... what if there's a normal practice in a particular community?

The lawyer normally hires (a) an investigator, (b) an expert to just help him on reading Forbes documents, say, and he normally bills the clients, disbursement, expert to help reading Forbes documents and that's the normal practice of that community.

Does he recover it or not under your view?

Mr. Koons: --I think not, Your Honor, because I think that the phrase reasonable attorney's fee has to be given some kind of meaning.

To say... to say simply--

Unidentified Justice: Not the meaning Justice Scalia has described to us.

Mr. Koons: --To say simply that it means all expenses of litigation is really to deprive it of any meaning whatsoever.

I think, Justice Stevens--

Unidentified Justice: No, but his suggestion was it means all expenses normally charged by an attorney in performing the routine work of an attorney in trying a lawsuit.

Mr. Koons: --Well, Your Honor, if accepted that earlier, I reject it because if... if we get to the level of investigator and that sort of thing--

Unidentified Justice: Can I reject it, too?

I didn't say that.

[Laughter]

Mr. Koons: --Thank you, Your Honor.

Unidentified Justice: I said, normally charged by an attorney for his work in the suit.

If it's charged for somebody else's work... I mean, and that's where paralegals are different because that's his work.

He can do it himself or he can have somebody else do his work and bill that... anyway, so--

--But I'm still not sure--

--Don't include me in your condemnation.

[Laughter]

I'm still not clear whether long distance telephone, travel, and depositions and so forth is included or not, or a secretary.

You have to hire a secretary to do work late at night.

Mr. Koons: Well, Your Honor, I think if you've suggested in Missouri... or it has been suggested in Missouri v. Jenkins that that might be an item that would be includable at least as overhead, although I don't know that it would be separately billable.

But in any case, in this case we do have a statute which specifically--

Unidentified Justice: Well, I'm thinking of items that are not overhead.

They're work that is especially required for a particular piece of litigation, which lawyers regularly charge and they list in their disbursements and normally get them.

And you had them in this case, $45,000 worth that you didn't challenge.

Mr. Koons: --Well, Your Honor, we did... that did actually represent a compromise of a claim.

We did... we did negotiate a settlement--

Unidentified Justice: But you didn't challenge... you disagreed as to certain items I know, but you didn't challenge the general principle.

Mr. Koons: --Well, we didn't challenge it in this case, Your Honor.

We think that the argument of the Petitioner really boils down to this that they're asking the Court to rewrite the language of the statute because they say that its purpose would be better served and that it would be a better law.

It would effectuate Congress' purpose better if it included more things.

We think that it is certainly true that Congress intended to promote private enforcement of civil rights laws, but that it did not intend to write a blank check.

It chose a very specific means to do that.

The means that it chose was to award a reasonable attorney's fees and to shift that major expense of litigation in favor of the prevailing party.

It did this also to make legal representation available to civil rights plaintiffs.

It's certainly true that Congress could have done more.

Congress could have said that it wanted to provide all expenses of litigation.

It could have said it wanted to award treble damages or liquidated damages, but it did not.

Now, clearly all of those things would have done more to encourage private enforcement of civil rights actions.

But Congress did not choose those avenues, and it would be no more proper to write into the law an expert witness fee as part of the cost than it would be to include those items as well.

We say that the Court should respect the limits of the language that Congress used, which deserve certainly as much respect as the ends, as well as respect the limits that Congress set on taxable costs in 1920 and 1821.

Secondly, we say that the legislative history does not show that Congress meant to include expert witness fees.

The fees... the only reference that petitioner can point to are several witnesses who at the subcommittee level requested that expert fees added... would be added.

The issue of witness fees is never mentioned in any report or in floor debates and there is certainly no evidence of clear congressional intent, such as the court in Crawford said it would require, even by examining a legislative history.

Congress specified in other pieces of litigation when it wanted to award expert witness fees as part of the costs.

For example, in... many cases which we've cited at pages 34 and 37 or statutes of our brief, Congress specified reasonable attorney's fees as well as expert witness fees.

Some of these statutes were passed right around the time the amendments to section 1988 were being debated, the Toxic Substance Act, for example, the Natural Gas Pipe Line Safety Act, and the Resource Conservation and Recovery Act.

So, it does appear that Congress knew how to specify both expert fees and attorney's fees when it wanted to do so, and here it did not.

We say, again, that the result that we're urging is not in conflict with the court's decision in Missouri v. Jenkins, because in that case we did not have a specific statute which governed the item of cost as we have here and in addition it is a different thing we think to say that... that attorney's fees may include paralegal time than to say that it may include expert witness time.

Paralegals are a separate class of legal assistant who are trained in the law and who typically do for lawyers at a cheaper rate that kind of work that they would have to do themselves otherwise.

They do work which typically eventuates into a legal work product.

That's not the case with expert witnesses or with any witness.

Witnesses are in the business of giving testimony of producing evidence, and we think that to apply the term attorney's fee to witnesses would really be to distort it beyond all recognition and deprive it of all meaning whatsoever.

In conclusion, we think our construction fairly gives effect to all three statutes as Congress wrote them, is fully in accordance with Crawford and is not inconsistent with Jenkins, and respects the fact that in some statues Congress chose to shift both expert fees and attorney's fees and in other statute it did not.

Unidentified Justice: Mr. Koons, maybe you've said this... what is your position with respect to expert fees that do not result in expert testimony and were not intended to result in expert testimony.

Let's say the lawyer consults an expert to find out something about the case.

Mr. Koons: Yes, Justice Scalia.

Our position--

Unidentified Justice: Is that attorney's fees?

Mr. Koons: --Our position would be that it would not be, because it is not work done by an attorney that results in a legal work product, although, of course, the Court would be free to resolve... reserve that issue for another day--

Unidentified Justice: Uh-huh.

Mr. Koons: --as the witnesses here were purely testimonial witnesses.

Unidentified Justice: Well, supposing in like the case against Brown against the Board of Education, the lawyers decide to hire some historians to do a lot of research on the enactment of the Fourteenth Amendment and so forth, strictly to help them prepare their brief.

Attorney's fees or not?

Mr. Koons: I think not, Your Honor.

Under our construction, it would not be work done by an attorney and it wouldn't be... wouldn't be compensatory.

Unidentified Justice: Well, Mr. Koons, what do you make of the language in Missouri v. Jenkins to the effect that the terms reasonable attorney's fees must refer to a reasonable fee for the work product of an attorney.

The fee must take into account the work not only of attorneys but also of secretaries, messengers, librarians, janitors, and others whose labor contributes to the work product for which an attorney bills her client.

Mr. Koons: We interpret that phrase, Your Honor, as referring to those people that are necessary in the running of the attorney's office and who assist the attorney in generating the work product.

Unidentified Justice: Well, by its terms, it's not so limited, is it?

Mr. Koons: It may not be, Your Honor, but that is... that is our construction of it.

Thank you, Your Honor.

Unidentified Justice: Well you just... it's just wrong to say that 1988 covers all reasonable expenses incurred by an attorney in representing a civil rights plaintiff.

Mr. Koons: I think... that is our construction.

Unidentified Justice: Thank you, Mr. Koons.

Mr. Adams, you have 5 minutes remaining.

REBUTTAL ARGUMENT OF ROBERT R. ADAMS ON BEHALF OF THE PETITIONER

Mr. Adams: Thank you.

With respect I would disagree with Mr. Koons' statement that the witnesses in this case were purely testimonial.

That is not correct, and I believe that the bills that we have supplied to you in the appendix demonstrate that for 2 years, for 2 years before we got to trial we were working hand in glove with these experts in how to draft the pleading, and how to develop discovery strategy, and how to assess and analyze the discovery results that we were finally given in this case.

Unidentified Justice: Does the record show they... that they were the regular counsel for the hospital, regular accountants for the hospital or that--

Mr. Adams: I don't believe that the record shows that and that is not correct, because as a matter of fact it was myself and my colleague, Mrs. Krebs, who essentially located the experts for the hospital to see whether or not there was a case to bring in view of the hospital's belief that they were not getting paid the right amount of money.

Unidentified Justice: --And what about the billing?

Does the record reflect that the billing went directly to the client?

Mr. Adams: The record doesn't reflect, but I will stipulate that the billing did go straight from the experts to the client after it had been approved by me.

But I think the point that's so crucial, particularly in modern civil rights litigation, is that lawyers do not sit in their ivory tower by themselves.

They sit there next to their experts, and if you deny the attorney access--

Unidentified Justice: Mr. Koons, this is also true in the antitrust litigation.

Do you know what the practice is with the fee-shifting provisions of the antitrust laws?

Mr. Adams: --Your Honor, I stayed so far away from the antitrust laws I would not even want to hazard a guess on that.

I don't have an answer for you.

Unidentified Justice: There are a lot of experts there and it's been a fee-shifting statute that's been on the books a long time.

But you don't know what the answer is there?

Mr. Adams: I really do not.

Unidentified Justice: But... you're arguing that, you know, gee, you can't have an attorney without... without all these experts.

It would really apply across the board to every other kind of statute as well.

Mr. Adams: That's true, but you know there is one unique distinction about 1988 in comparison to all these other fee-shifting statutes that we have.

And that is, to the best of my knowledge, 1988 is a statute which addresses not only violations of Federal statutory law that is the... in place to address constitutional violations.

We have one in this case, a violation found by the district court of the equal protection clause.

And I find it somewhat amazing that you could have a fee-shifting statute that, granted, is part of a very important national policy for the environment which covers the experts, but when you get to the area of constitutional violations, Congress was somehow inept and didn't cover fees in that arena?

It just doesn't make sense, with all due respect.

Unidentified Justice: Well, maybe it thought... you know, when you think of environmental litigation, you think of experts right away.

When you think of civil rights cases, as I think civil rights cases meant... what civil rights cases meant to Congress, you don't as automatically think of expert witnesses.

Mr. Adams: That may be true, but as a matter of fact today if we are to give honor to this notion of work product, this intensely practical doctrine, I think the court ought to.

Unidentified Justice: But I would... you would then be making the same argument in... on... in any other fee-shifting statute which simply said the prevailing plaintiff in this kind of a case is entitled to recover reasonable attorney's fees.

Mr. Adams: If it had the same legislative history as--

Unidentified Justice: No, no, no, no, no, no, no.

Just attorney's fees.

I thought you were really arguing that reasonable expenses that were... that... that are necessary for the attorney to represent the client can be compensated under attorney's fees.

Mr. Adams: --My case is only about a civil rights violation under section 1988.

Unidentified Justice: You mean you're going... if we don't... if we don't think the legislative history is that potent, you lose, is that it?

Mr. Adams: I think that is correct, Your Honor.

Unidentified Justice: Mr. Adams.

Mr. Adams: Yes, sir.

Unidentified Justice: Somebody that works with you 2 years, working up questions and answers and all, and that's a witness?

Mr. Adams: In this case, we were fortunate that the people--

Unidentified Justice: You haven't used any other experts to work up your cases?

Mr. Adams: --Yes, sir.

Yes, Your Honor.

Unidentified Justice: And you get fees for that?

Mr. Adams: Yes, Your Honor.

Unidentified Justice: Or can you get fees for only testifying?

Mr. Adams: You should get fees for both functions.

Unidentified Justice: You do?

Mr. Adams: Yes, Your Honor.

That's what our position would be.

Unidentified Justice: I just... the only trouble... I said what is a fact?

Mr. Adams: What is a fact?

Yes, until, until the courts--

Unidentified Justice: It's these people who work up a case with you, and I would consider that legal work.

Mr. Adams: --You're exactly right, Your Honor.

Unidentified Justice: Well, if you call one of your lawyers as a witness, would that be an expert witness?

Mr. Adams: Well, Your Honor, I guess it would depend on what he was testifying about, but, yes, I guess he could qualify as an expert witness.

Chief Justice Rehnquist: Thank you, Mr. Adams.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Commissioner, INS v. Jean - Oral Argument

Fri, 09 Jan 2009 14:49:18 +0000

Case:

Commissioner, INS v. Jean

Media File:

89-601_19900423-argument.mp3

Related Transcript:

1989_89_601_argument.xml

Transcript:

Argument of Paul J. Larkin, Jr.

Chief Justice Rehnquist: We'll hear argument first this morning in Number 89-601, the Commissioner of the... Immigration and Naturalization Service v. Marie Lucie Jean.

Mr. Larkin.

Mr. Larkin: Thank you, Mr. Chief Justice, and may it please the Court:

The Equal Access to Justice Act generally requires the United States to pay reasonable attorneys fees to a prevailing party in a non-tort civil action if the position of the United States is not substantially justified.

The question in this case is whether the substantial justification component of that statute applies at the fee stage of litigation, the so-called fees for fees question.

For three reasons we believe that it does.

First, the fee stage of the case is part of the overall civil action.

Indeed, if the fee stage of a case were not part of the civil action, then a prevailing party could not recover attorneys fees for that phase of a lawsuit at all.

Second, Congress limited the liability of the United States for attorneys fees to those instances where the position of the United States was not substantially justified.

Nothing in the text of the statute renders the United States automatically liable for attorneys fees at any stage of the lawsuit, at the merits or at the fee stage.

And third, the best reading of the text of the act, and the one that best serves its purposes, is that the substantial justification requirement applies at the fee stage of a lawsuit.

The fee stage and the merit stage are conceptually distinct, the legal issues involved are quite different, and the United States can and often does take different positions in fact and law at each stage of a lawsuit.

Unknown Speaker: Well, what is there in the statute which justifies our making the distinction between the merits stage and the fee stage?

You have mentioned fee stage very adroitly now six times, I've noticed.

Aren't we going to hear that there is no basis for that dichotomy?

Mr. Larkin: No, Your Honor, it is that point where the parties really disagree, and it is that point that I was about to address right now.

Let me do so.

And let's start with the text of the statute.

And when you look at the statute we think you first have to look at the forest and not just the trees.

The reason is the very existence of an attorneys fees statute is significant.

It modifies the American rule; it's a partial waiver of sovereign immunity.

What a fee statute does is create a new cause of action for a plaintiff and impose a new form of financial liability on the United States.

In fact, the version of Section 2412 of the Judicial Code that existed before the EAJA was adopted expressly exempted attorneys fees from the costs that could be awarded against the United States in a lawsuit.

The statute itself, therefore, creates an entirely new claim that is separate from the dispute on the merits.

Now that is not, we think, a novel proposition.

This Court's cases, beginning with its 1982 decision in White v. New Hampshire Department of Employment Security, have recognized that the fee stage of a lawsuit involves different issues, and is--

Unknown Speaker: Mr. Larkin, can I interrupt with something that ran through my mind?

Supposing you have a case in which there is quite a difference between the liability issues and the remedy issues, and you have two separate stages, liability and remedy.

And it is determined that your position on liability was not substantially justified, but there were substantial merit to your objections to the remedy.

Would you... would you just get fees for the liability part of the lawsuit?

Mr. Larkin: --Well, that is one way to break the statute down.

It would be to decide that the merits and... excuse me, the liability and relief stages are discrete.

And if the United States was not substantially justified at one stage but was at the other, then a party would get attorneys fees only for that stage where the United States was not substantially justified.

There is an even simpler way to break down the statute if you wanted to.

What you could... if you look to the statute it requires a party to file a fee request within 30 days of the entry of a final non-appealable judgment.

You could draw the first line right there.

Unknown Speaker: I know you could draw the line either of the ways.

What is your position on the question of differentiating between merits and remedy?

Mr. Larkin: Well, in most cases there are not going to be a difference.

Unknown Speaker: If cases are--

Mr. Larkin: The one... there is... there will be a category of cases where there is a difference, and that is this category.

If a lawsuit ends in a settlement... and the statute uses that term to describe when a lawsuit ends, so it contemplates that a lawsuit can end in a settlement.

The settlement may be a consent decree.

The consent decree may contemplate that there is future litigation down the road over questions such as whether the United States lived up to its obligations under the decree, whether the decree should be modified or whether the decree should be entirely vacated.

In that sort of circumstance you have a relief part of the action, if you will, that extends well into the future.

Generally we think you can collapse the two, because in the vast majority of cases what a person is going to be claiming is, for example, an entitlement to benefits that were wrongfully withheld.

When the United States pays over those benefits, that's the end of the case as far as what that party was trying to get.

Where you have a lawsuit that is going to extend into the future, for example in a prisoners lawsuit where he claims that the law library at a Federal prison was not adequate and a consent decree is entered, you are going to have then litigation extending into the future.

And we think in that case you would have perhaps three lines, not... not the two.

Unknown Speaker: --But I still don't think I have an answer to my rather simple question.

Supposing you have a claim for Social Security benefit or something like that, and there is a big fight about liability, and on that position the judge says your position was not substantially justified.

But you also have a dispute over the amount of benefits, maybe you get credit for past months or you don't... you often get that kind of a dispute.

And on that issue the government's position was substantially justified.

Does the plaintiff get fees for that part of the litigation?

Mr. Larkin: We... we think that if we were substantially justified in that sort of circumstance on the remedial stage, you wouldn't get fees for that part.

But if the Court found that that was too complicated and the Court wanted to collapse the two--

Unknown Speaker: But your position is anything that is severable as to which you have a substantial... substantially justified position, no fees as to that phase of the litigation.

Mr. Larkin: --Yes.

But if the Court found that... like I say, if the Court found that that was too complicated, it could collapse the two into one, draw the first line once the final non-appealable judgment is entered, and consider everything up to that point.

Unknown Speaker: What do you mean could?

Could as a matter of law, or... or... I mean... are you saying we could adopt a different legal rule?

Mr. Larkin: Yes.

Because--

Unknown Speaker: Or are you saying that it's up to the discretion of the... of the district court to decide whether it is going to do the one or the other?

Mr. Larkin: --The former.

Unknown Speaker: Okay.

Mr. Larkin: The legal rule would... in that case would rest and give primary emphasis to that portion of the statute which says the fee request has to be made once the final non-appealable judgment is entered.

That's an interpretation of the statute, and that is a legal rule.

It wouldn't simply leave it up to the discretion of the district court.

Unknown Speaker: I would think Hensley would... the Hensley case would support some sort of distinction whether or not you make a formal break down between two sections of the case.

Doesn't Hensley say that the fee award, even to a prevailing party, has to be tied to the parts of the case in which the prevailing party actually won?

Mr. Larkin: Yes, Your Honor, and Hensley, as we explained in our opening brief, would be authority for looking at the statute that way.

The prevailing party inquiry that is made under Hensley is the one that is normally made under most fee statutes.

This statute is unique.

It also adds not only a prevailing party... not just a prevailing party inquiry, but it has a substantial justification inquiry.

And we think the statute can logically be read so that the two should be made virtually simultaneously.

You can apply the two to the same stages of a lawsuit, and therefore you could decide whether someone prevailed at a particular phase, and even if they did, whether we were nonetheless taking a reasonable position at that stage, either the agency or the United States in court.

And specific provisions of the act we think also show that the attorneys fee stage is clearly a separate stage of the lawsuit.

Before a court can award attorneys fees it has to make an inquiry into a variety of different issues that arise only at that stage.

Those questions typically involve the inquiry whether or not a party was a prevailing party, whether that claimant is eligible for a fee award, whether the number of hours that were spent on the case were adequately documented and are otherwise reasonable and whether there is present in the case a special factor justifying an award of fees in excess of the fee cap, which, due to inflation, is now about $100 an hour.

Even if the only inquiry that the court makes at the fee stage is whether the position of the United States was substantially justified, that inquiry, too, is distinct from the one that is made at the merits.

As the Court held in the Pierce v. Underwood case, the question at the merits is whether the government was correct, while the question under EAJA at the fee stage is whether the government's position, although incorrect, was nonetheless reasonable.

Unknown Speaker: Mr. Larkin, what do you do about the perpetual motion objection that is made here by... by the respondent?

Mr. Larkin: Your Honor--

Unknown Speaker: That is to say it will never end.

I mean, if you get the fees on this basis, then you are able to argue again that whatever fees are awarded below were on the basis of a reasonable opposition by the government.

How does it ever end?

Mr. Larkin: --Your Honor, my answer to that is a practical one.

That in the vast majority of cases a court is going to be able to decide all of those inquiries at one time.

It will be able to decide whether a plaintiff was a prevailing party, whether the United States was substantially justified, if not, whether the inquiry into the hours and fees should be done and whether the fees requested are reasonable, and whether the position the United States took at the fee stage was also reasonable.

Now, that problem--

Unknown Speaker: What court can decide that all at once?

The district court?

Mr. Larkin: --The district court.

Unknown Speaker: The district court.

Mr. Larkin: In a lawsuit that begins in the district court, the district court can make that inquiry.

It can make each of those, and it can then lay those out, whatever determinations it makes--

Unknown Speaker: Fine.

Mr. Larkin: --for the court of appeals.

Unknown Speaker: Right.

Mr. Larkin: The court of appeals will then be able to look at all of those at one time.

And that, I think, in the vast majority of cases is what is going to happen.

Even in the circuits that object--

Unknown Speaker: Well... well... but, excuse me.

But the court of appeals looks at all of that, but there is also the question of the fees for the appeal.

Right?

Mr. Larkin: --If... if the court of appeals goes through all of those inquiries and rules against us on every one--

Unknown Speaker: Right.

Mr. Larkin: --what is left at that point is the question of whether or not they spent a reasonable number of hours on the appeal.

And that, we think, is going to be a very small matter.

Because if you assume that the parties are acting in good faith, the only inquiry at that point a court has to make is whether or not they spent a reasonable number of hours.

Unknown Speaker: Oh, there... there is no inquiry as to whether your appeal was reasonable?

Mr. Larkin: Well, if the court of appeals concluded--

Unknown Speaker: I mean, they could find against you even though you were reasonable.

Mr. Larkin: --Well, that's right.

I'm saying if the court of appeals concluded, in a case where we took an appeal--

Unknown Speaker: Right.

Mr. Larkin: --that our position--

Unknown Speaker: Was wrong.

Mr. Larkin: --was wrong, and we were unreasonable in taking the appeal, then the other side would be entitled to fees in the court of appeals, and the question would just be a reasonable number of hours.

Unknown Speaker: Okay.

And the court of appeal has... has an obligation to decide both of those issues?

Mr. Larkin: If the... if the court of appeals rules against us and says they are eligible for fees, the court of appeals can then ask the parties to submit the number of hours they reasonably spent on the appeal.

Unknown Speaker: Suppose the court of appeals doesn't say anything?

It just... just says you are wrong, finds against you on the appeal.

Mr. Larkin: Well, then the other party is certainly going to file a request.

And so--

Unknown Speaker: Before the district court.

Mr. Larkin: --No, or before the court of appeals.

We think before the court of appeals would be the more natural way to do it.

Because, for example in the Seventh Circuit case that rejected the automatic rule, that was a case where the decision was from the NLRB to the court of appeals.

Now, there was no district court in that context.

The request went back to the court of appeals.

And the court of appeals had to make this sort of inquiry.

Now, the court of appeals there rejected the automatic rule and found that we were substantially justified in taking the position that we did.

Unknown Speaker: Is there any question involved here of fees on appeal?

Mr. Larkin: Well, the narrow question that the court of appeals addressed in this case really just dealt with the fees in the district court, because there haven't been any calculation yet or anything made to fees on appeal.

Unknown Speaker: So we are talking about fees for fee litigation in the district court for work done in the district court.

Mr. Larkin: Correct.

That was the holding under the facts of this case.

Unknown Speaker: May I ask--

--And you conceded, I take it, or you concede in your brief that the initial work that the prevailing party does to calculate its fees and to make its motion to the district court is compensable.

Mr. Larkin: Correct.

We thought that that was a reasonable approach to the statute--

Unknown Speaker: Well, if... if... if you say that there are these discrete stages, how does your concession square with your argument that there are discrete stages?

Mr. Larkin: --Well, that... that serves as the bridge from the merits to the fee stage.

If we are not substantially justified in the merits, then they are entitled to an award of attorneys fees for the merits.

Unknown Speaker: And they are entitled to all of the time they expend reasonably in compiling their hours and making their fee request.

I didn't know you conceded that.

Do you?

Mr. Larkin: Well, what we said was--

Unknown Speaker: Isn't that a fee on a fee that you don't want to pay?

Mr. Larkin: --No, no.

It is not a fee for the litigation at the fee stage.

It is just a reasonable amount of hours that someone spends putting the fee request together.

Unknown Speaker: Well, why isn't it a fee on a fee?

Mr. Larkin: Well, if they are entitled to fees on the merits, we thought that that was best seen as part of the merits.

Now maybe we were wrong.

I mean, we conceded it, but it is not a question of fact, it is a question of law.

And if you think we were wrong, I don't think--

Unknown Speaker: Well then, what is, what is wrong with... what are you complaining about now?

[Laughter]

Mr. Larkin: --What we're complaining about is this.

When the United States receives a fee request you have to take a position on that request.

And any further litigation, we think, from that point on, if we are reasonable in the positions we take, should not be paid entirely by the government for both sides.

Now, oftentimes if the request is reasonable the government wouldn't oppose it, and there wouldn't be any fee litigation.

But it is our position that if there is litigation over the amount of fees someone claims, that that is litigation at a divisible, discrete and separate portion of the lawsuit, and the substantial justification requirement--

Unknown Speaker: Yes, but--

Mr. Larkin: --has to apply, because it's the only requirement that there is in the statute, and because the Congress required... limited the waiver of its sovereign immunity to situations where we were not substantially justified.

Unknown Speaker: --But, Mr. Larkin--

Mr. Larkin: We don't think there should be an exception, in other words, just for fee litigation.

Unknown Speaker: --Well, what if you... what if you challenged the number of hours or the rate that is to be applied, and the district court thinks your position is substantially justified, but just plain wrong?

Now, I would... under your concession I would think they would be entitled to fees for that time and effort spent against your position.

Mr. Larkin: No, no.

What the concession, let me explain, and perhaps maybe we made it too readily, was that a reasonable number of hours spent preparing the fee request would be compensable because it is part of their case on the merits.

It is really a bridge between the merits and the fees--

Unknown Speaker: But you don't think they would be entitled to fees for defending that submission?

Mr. Larkin: --If we are substantially justified, they are not entitled to fees for defending that submission.

That is our position.

Unknown Speaker: What if they... but if you weren't substantially justified?

Mr. Larkin: Then they are.

Unknown Speaker: Just like any other--

Mr. Larkin: That's right.

The reason is Congress chose that approach because--

Unknown Speaker: --Well, what about you challenge, you say that you challenge the fee because you think on the merits you were substantially justified, and the court says well, you were, but you are wrong.

Mr. Larkin: --Then they--

Unknown Speaker: You say no fee?

Mr. Larkin: --Then they don't get a fee at all.

If we were substantially justified on the merits, then--

Unknown Speaker: No, no.

I see.

No fee at all then, on the merits.

Mr. Larkin: --That's right.

That's right.

Unknown Speaker: I am still puzzled about this bright line, because it seems to me that there are fee requests and fee requests.

Some are rather conclusory and some are very detailed.

And if you got a fee request that was very, very detailed, took many, many hours to get it together, you would say that was compensable.

But if they send in one that just kind of in general described what the various associates had done, and without... and you thought you had to take their depositions or do discovery to find out exactly what was covered, is that compensable or not, responding to your very reasonable inquiries about we want a little more detail here?

Mr. Larkin: No, if... if... that would not be.

Particularly if you have an outstanding rule of law that says you have to itemize and adequately document your request for fees.

Suppose the rule in the circuit is--

Unknown Speaker: So what you do, then, you spend lots and lots of time itemizing and documenting so you are sure nobody is going to raise any questions about the form of your submission, because you know you will get paid for that.

Mr. Larkin: --Well, if... and if that is what happens, then that should simplify the litigation over this matter.

If the rule in the circuit is you have to with specificity itemize and document your requests, then a party who follows that rule will simplify matters for the district court.

If the rule in the court is you can't just submit a request that the lawyers in my firm spent 100 hours on this case--

Unknown Speaker: Without the... I see.

Mr. Larkin: --then, if they... if they do that, then we are reasonable, because they are not following the law in that circuit.

Unknown Speaker: May I ask a question?

How does this normally work in the district court?

Does the district judge combine all the issues in one hearing, or will they sometimes decide I'd better determine... make the substantial justification determination first before I spend a lot of time worrying about hours and rates, or do they do it all at once?

Mr. Larkin: I'm not sure whether there is any uniform rule on that.

It may turn on whether or not the case involved primarily a legal issue--

Unknown Speaker: Because it would seem to me that if you have made that determination, then you know you are going to get fees and you would pay them.

But if you haven't made that determination, there may be a lot of waste time.

Well, anyway, I just--

Mr. Larkin: --It's possible.

And if a court thinks that there's going to be time wasted, then it... a district court, which is certainly interested in processing its cases efficiently, will be able to do so in that type of manner.

If the substantial justification question is a question of law that can be examined by looking at a statute or some other cases, the district court might believe that is the way... the best way to start out.

Once I have made that inquiry, that may end it.

The court may also say but to be safe I may also want to look at some of the other objections in order to avoid having to do this again.

Unknown Speaker: --Well, now the time that is compensable for preparing the fee request, suppose some of that time is devoted to research to develop the argument that there was no substantial justification?

That's part of your presentation.

You have got so many hours, and the reason it wasn't... I mean, your fee application ought to cover that too.

Is that time compensable?

Mr. Larkin: That would be, under the way we've looked at the statute.

Unknown Speaker: So a lot of their research and work on the substantial justification issue would be compensable under your bright line.

Mr. Larkin: They only have 30 days to do it, so it is not as if someone can prepare, you know, the same way that you can for litigation on the merits.

And perhaps if they spend that time at the outset that may reduce the need for litigation further down the road.

But if they decide to present a novel claim, and we had some in this case.

The award in this case of attorneys fees was $1.2 million.

It is one of the largest attorney fee awards that was ever handed down under EAJA.

And the district court gave Respondents a 15 percent enhancement above their hourly rates, which in some cases were already above the cap set by the statute, because of factors such as the emotional hardship suffered by Respondents' counsel.

Not by Respondents, but by Respondents' counsel.

Now, we thought we had a reasonable objection to an enhancement on a basis like that.

And it was our... and matter of fact, not only did we think we were reasonable, the court of appeals agreed with us.

So it is our view that the Congress did not intend to chill the government from taking those sorts of positions.

I mean, the reason that it adopted the statute the way it did was to serve two masters.

It wanted on the one hand private parties to be able to vindicate their rights in court, and on the other hand to ensure that it wouldn't chill legitimate exercise of government enforcement responsibility.

Well, one of the responsibilities the government has is a fiduciary duty to the agency involved, from whose budgetary appropriations EAJA awards are made--

Unknown Speaker: Mr. Larkin, you are going to do it issue by issue?

I mean, that sounds like a pretty reasonable objection that you described, especially since you won on it, but maybe you took some other unreasonable... while you were at it, maybe you objected unreasonably to some other of the elements of the fee award.

Now, would the time spend defending the unreasonable objections be compensable?

In other words, are you going to divide up the whole fee appeal into its various issues?

Mr. Larkin: --You could.

There are two ways of doing it.

That would be one way, which is consistent with what the Chief Justice mentioned is the prevailing party approach under Hensley.

I mean, if they don't prevail on an issue, they shouldn't be entitled to fees for litigating that issue at all.

And you could, therefore, break it up that way.

Another way to do it is... would rely on the sort of substantial justification in the main approach that Your Honor wrote about in the Underwood case.

What you would do is look to the issues where we lost overall and see whether we nonetheless overall had a reasonable position.

Now that... how you conduct that inquiry is not before the Court in this case, and the lower courts really haven't spent a great deal of time discussing it.

All you have to decide here is that we are allowed to make an argument that we were substantially justified, that we were reasonable at the fee stage.

How you want to break it down doesn't have to be decided here, but there are, as I said, those two approaches.

Unknown Speaker: Well, I suppose it could be that the time in litigating the government's objection to fees on the ground that your position was reasonably justified, it could be that the time litigating that might exceed, in terms of attorneys fees, might exceed any recovery that--

Mr. Larkin: Well, it would be an unusual case for that to happen.

Perhaps in a case like this--

Unknown Speaker: --Well, it may be, but I suppose if, if the... suppose there weren't any recovery.

Suppose it was an injunction you were after.

Mr. Larkin: --Well, it... there wouldn't be any dollar award in that case to a party.

Unknown Speaker: Exactly.

Mr. Larkin: But--

Unknown Speaker: But there would be an attorneys fee.

Mr. Larkin: --There would be an attorneys fee.

Unknown Speaker: If you were not substantially justified.

Mr. Larkin: Correct.

If we were not substantially justified at the merits, then we have to pay their attorneys fees for the merits.

Unknown Speaker: And if they are not entitled to fees for proving that you were not substantially justified, why, every dollar they pay their attorney for that litigation comes out of their own pocket.

Mr. Larkin: Well, they are entitled to--

Unknown Speaker: And I would think... don't you think that Congress had some idea of making a recovery... rendering the plaintiff cost free for attorneys fees if he prevails and the government's position was untenable?

Mr. Larkin: --Well, if our position at the fee stage is, as you put it, untenable--

Unknown Speaker: No, on the merits.

On the merits.

Mr. Larkin: --Oh, well, if our position on the merits was untenable, then they will get an award of fees for the time they spent to vindicate their rights at the merit stage.

Unknown Speaker: But not at the time... not if you oppose their submission and say that you were substantially justified, and then thereafter you litigate like mad.

And every... and you say no money for that.

No fee for that.

Mr. Larkin: Correct.

At the fee stage.

Unknown Speaker: And so every dollar they pay their attorney to oppose your submission is out of their pocket.

Mr. Larkin: For the fee litigation, yes.

But we are not saying that if we--

Unknown Speaker: No, no.

For the--

Mr. Larkin: --For the merits?

No, Your Honor.

Unknown Speaker: --Every dollar that they pay their attorney reduces in effect their recovery on the merits.

Mr. Larkin: That... that's correct.

But that is, we think, the con--

Unknown Speaker: Don't you think Congress had some idea that it ought to be cost free to them?

Mr. Larkin: --No, Your Honor.

This statute is unique.

In the other statutes, like 1988, like Title VII, in the other attorneys fees statutes, you don't have a substantial justification requirement.

Here you do.

That makes this statute different, and we think that is why, in this type of context, you should have that type of rule.

Unknown Speaker: Mr. Larkin, when you are... what you are proposing is that the standard where... where you have lost on the merits, but you assert that attorneys fees should not have been awarded because although you lost, you were substantially justified.

What you are proposing is that the standard that be applied is whether you were substantially justified in saying that you were substantially justified.

Isn't that right?

Mr. Larkin: And that can--

Unknown Speaker: You think the judicial mind can entertain this concept?

[Laughter]

Mr. Larkin: --Yes.

It's like saying... it is the same as the inquiry now a court has to do, in a way, as to whether we were substantially justified, where we lost under the APA, and the APA standard is whether we were arbitrary and capricious.

But let me give you an example.

Suppose the court of appeals rules against us on the substantial justification issue by a two to one vote.

It seems to me that our position that we were reasonable is evidenced by the fact that one of the judges in the court of appeals voted for us.

But this whole type of inquiry that you mention is not, I think, going to happen that often.

What is going to happen more often--

Unknown Speaker: Well, but if that is true, Counsel, the district judge was also reasonable in making the original fee award, so far as appeals are concerned.

Mr. Larkin: --I am not saying you can just tally up the numbers on each side, but what I am trying to do is give you an example of how that can occur.

But I think it is more important to keep in mind cases where someone asks for award in excess of the statutory cap.

The problem you mentioned won't happen there.

If I could reserve the balance of my time.

Unknown Speaker: Very well, Mr. Larkin.

Mr. Kurzban.

Argument of Ira Jay Kurzban

Mr. Kurzban: Mr. Chief Justice, and may it please the Court:

I would like to begin by taking up Justice White's point on the fees accrued in litigating the fees, because that goes to the heart of what this statute is about.

Congress clearly intended to make fee litigants whole, to the extent that they could under this statute, by awarding them their fees not only for the underlying merits, but for the fees in litigating the fees.

Not to do so would undermine the purpose of the act, because it would establish an economic deterrent that this Court noted in Sullivan v. Hudson should not exist.

In this case, and our case here I think amply demonstrates the problem, we need to look no further than the statute itself.

The statute talks about substantial justification and the position of the United States in terms of the government's underlying conduct, as well as their litigation position.

The government studiously avoids the 1985 amendments to this act, because those amendments make it crystal clear that the government's position is not tenable here.

In our case, in 1981 the government engaged in activity by incarcerating 2,000 people, and then not publishing a regulation that their own counsel advised them to do a the agency level, clearly were not substantially justified.

We then have spent, since 1982, seven years, almost eight years now, litigating solely the fee issue.

Congress could not have intended, and clearly said so in the 1985 amendment, to allow us fees for the underlying litigation, but then allow the government to--

Unknown Speaker: Well, Mr. Kurzban, wasn't our decision in Commissioner against Jean several years ago, wasn't that part of this case?

Mr. Kurzban: --Yes, Your Honor.

Unknown Speaker: Well, that wasn't fee litigation, was it?

Mr. Kurzban: No, Your Honor, it was not.

Unknown Speaker: So the merits have also been litigated during this period of time.

Mr. Kurzban: That's correct, but the government's position has not been advanced one iota since that litigation.

Because the reality is that the Haitians were released, and the government came to this Court, and in Your Honor's opinion you noted specifically that the government conceded in this Court, and the dissent noted that for the first time the government conceded that--

Unknown Speaker: Just a minute, Mr. Kurzban.

The reason I asked you the question was because I got the impression from what you've said that all the litigation in this case since 1981 had been over fees.

And I thought that was a mistaken impression.

Mr. Kurzban: --Oh, I am sorry, Your Honor.

But the fee litigation did begin in 1982, and we did file our first fee petition in 1982.

It is true that there was other litigation as well, but they... they went forward simultaneously.

And it is also true, and the point that I wanted to make is that that other litigation would not have been necessary if the government had made the concession that they made in this Court, which is that their regulations and statutes were neutral and nondiscriminatory.

The government's argument also, in many respects, tortures and certainly strains the language of this act.

To take Justice Kennedy's point, there is nothing in this statute that indicates that fees should be separated into different aspects of the litigation.

The statute talks of fees in the civil action.

To reach the government's position in this case, this Court would have to amend the statute not once, but twice.

You would have to amend it to say that fees and substantial justification are determined at different stages of the litigation, which the statute does not say, and you would have to read out, as the government does in their brief, the question of substantial justification with respect to the government's underlying action.

Unknown Speaker: Mr. Kurzban, under your view of the statute, do you nonetheless concede that under Hensley the district court has considerable discretion about allowing fees at all, for instance for losing claims, if several claims are made?

Mr. Kurzban: Absolutely, Your Honor.

Unknown Speaker: And also, discretion to determine what is reasonable for attorneys fees, and perhaps to adjust within that category.

Mr. Kurzban: Absolutely.

And that is why we think that the government's concerns here are purely hypothetical.

The government's description of absolute fee shifting, the government's description that they would have to pay untold fees, is completely unreasonable and unrealistic.

What we are saying is substantial justification, consistent with the statute, like prevailing party in Hensley, is a threshold determination.

Once that determination is made, just as in Hensley, then it's a matter of the district court's discretion as to what is a reasonable fee.

And on the facts in this case, for example, to the extent that the government won in the court of appeals and to the extent that we then submit other applications for fees for those, the court... the district court judge can take that into consideration and make a determination that we are not entitled for X number of dollars for pursuing one issue that the government won on, but we are entitled to others.

What we are saying is not that the district court doesn't have broad discretion, because I think that was the point of the statute, but that the government shouldn't be allowed to come in and allege different issues, as they are suggesting here, at different phases, the substantial justification threshold.

They have all the protection they need under a Hensley rationale with respect to what a reasonable fee is.

And the statute specifically contemplates that, because the statute says in the appropriate sections, in Section (1)(C) and in Section (2)(A), that plaintiffs are entitled to a reasonable fee.

In Section (1)(C), to the degree that the plaintiffs are unreasonable in prolonging the litigation, at whatever phase of that litigation they are involved in, they are entitled to no fee.

So that the district court is intended to be that party to make these decisions.

And I think it is clear--

Unknown Speaker: Mr. Kurzban, how, what... let's take the government's doomsday case, where... where you come in with a fee request that is plainly in excess of the statutory limit, and there's no justification.

And the government objects, but the district court nonetheless grants it.

All right?

And then that is reversed on appeal.

What... what fees would you be entitled to?

Mr. Kurzban: --Under Hensley rationale, we might not be entitled to the fees for the appeal.

Unknown Speaker: Well--

Mr. Kurzban: And we might not be entitled to the fees for pursuing that issue.

Unknown Speaker: --On appeal.

Mr. Kurzban: On appeal, and in... and in the district court we might not be entitled to those.

Unknown Speaker: But then... but then you have already divided the litigation into two pieces, which you say is a no-no.

Mr. Kurzban: No, Your Honor.

What we are saying is that substantial justification is a threshold.

We have met that, because you look at the agency's underlying action.

Once that is met--

Unknown Speaker: You get all your fees.

Mr. Kurzban: --No.

Then the determination is left to the district court as to what a reasonable fee is.

Within the rubric of a reasonable fee, as this Court said in Hensley, they can take into consideration whether or not we prevailed, as you are suggesting, on an issue or not.

So the government's worst case scenario is met by the fact that the district court judge, or if he is reversed by the court of appeals, the court of appeals can say, under Hensley, we are entitled to no fees at all for pursuing that particular issue.

Unknown Speaker: Well, if the government then says well, we oppose this fee request because we think the hours spent were excessive, or the rate requested is too high, and the district court agrees with them, you're not entitled to fees for defending your submission?

Mr. Kurzban: On those issues, under Hensley, under a reasonableness test, yes, we would not be entitled to it.

And I think that is what really meets all the government's concerns here.

And those concerns are also consistent with the legislative history of this act.

And I think the clearest example of that, Your Honors, is the case with respect to litigating the fees.

The average case, the actual case that comes before the courts is where a fee is generated of only $4,500.

The government, I think, as Justice White was pointing out, the government can then litigate.

And we assume the government in many instances may be reasonable.

They may lose, but they are very good lawyers, they can fashion very reasonable arguments.

And in the process of doing that they can run up enormous fees, far beyond the average fee in an Equal Access to Justice Act case.

And that fee is $4,500; 90 percent of the fees in Equal Access to Justice Act cases are less than $3,000.

So if the government has an interesting issue, as they did, for example, in Sullivan v. Hudson, where the lawyer as a matter of record had to drop out of the case, because the government took that all the way to this Court, where the government has an interesting issue and they wish to pursue it all the way to the Supreme Court, the fee litigant is going to be discouraged from taking those kind of cases.

And the thought of Congress here is we want to encourage people to take cases.

We want to make sure that they don't feel that there is a tremendous risk that down the road the government will litigate against them for... for years to come, as they have in this case, and... and wind up with enormous fees that the party cannot pay.

Unknown Speaker: Suppose we thought that there was something to the government's submission that fee litigation really is a separate lawsuit.

And if you start out from that position, doesn't everything the government has submitted here follow?

Mr. Kurzban: No, because the statute says that it's fees in the civil action.

And the government concedes--

Unknown Speaker: Well, I know, but I am just assuming that... I guess we disagree with you on that, that fee litigation is a waiver of sovereign immunity really, involves a waiver of sovereign immunity.

You ought to construe it strictly.

And suppose we say this is... it's just like filing a separate lawsuit against the government.

Suppose we agree with the government to that extent.

Mr. Kurzban: --Okay.

Well, I think first of all the government doesn't take that position.

They say that--

Unknown Speaker: I believe they just said it right here in Court.

Mr. Kurzban: --Well, they take the position that the fees are fees in the civil action.

So to the degree that they separate out, they are talking about only separating out the fees for litigating the fees.

They are not talking about separating out the fees for the underlying merits of the case.

So it's not clear that any of those analogies--

Unknown Speaker: Well, I agree.

I agree, but we are talking about whether there are fees on fees.

And if this is a separate action for fees, then the question becomes whether you are entitled to fees during that litigation.

Mr. Kurzban: --Well, assuming the hypothetical, and obviously we don't want to concede that, but assuming what Your Honor is saying is correct, I think the answer is that no, the substantial justification threshold would not apply, because it would defeat the very purpose of the act for the very reasons that you have suggested.

Which is it would allow the government to litigate issues endlessly.

It would give them a weapon that would serve as an economic deterrent for litigation.

I... I'd like to address just one more point in closing, which is the Russell v. Heckler point, which the government suggests is a compromise position.

We would submit to the Court that, as the government concedes that that position is not well grounded in the statute itself, this statute is absolutely clear, and technical defenses and Russell v. Heckler types of defenses are just inapplicable.

They are in effect an attempt to amend the statute.

To amend the statute, number one, when it is not necessary, because Hensley and the reasonableness test address all those issues.

But secondly, they are clearly an amendment of the statute because they allow the government to make certain litigation arguments separate from the agency's underlying conduct.

And the Court, in 1985 in... I am sorry, the Congress in 1985 indisputably said that you cannot separate those; that you must look at the agency's underlying action; and that you can't let lawyers come into court, whether it is a technical defense, whether it's a Russell v. Heckler type of defense, whether it is any other kind of defense, and make the argument that because their litigation position is reasonable, that that is sufficient.

Thank you.

Unknown Speaker: Thank you, Mr. Kurzban.

Mr. Larkin, you have three minutes remaining.

Rebuttal of Paul J. Larkin, Jr.

Mr. Larkin: And I will make only two points.

First, the '85 amendment doesn't undermine in any way our interpretation of the statute.

Congress addressed a problem in '85 dealing with the front end of litigation.

What we are dealing with here is a problem that arises at the back end.

There is no logical reason to assume that Congress wanted the same answer to apply in both circumstances where there are different problems.

And if anything, the 1985 amendment actually helps us in a way, because it indicates that there are two positions that have to be considered: the agency's and the lawyer's position that is taken in court.

The second point I would like to make is just that we think the statute has to be read so that the substantial justification provision and the civil action have to be read reasonably, because the statute uses them in the same sentence.

If the fee stage is not part of the civil action, then they don't get fees for fees at all.

If the fee stage is part of the civil action, then the substantial justification provision has to apply.

Unless the Court has any further questions, I have nothing further to add.

Chief Justice Rehnquist: Thank you, Mr. Larkin.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Venegas v. Mitchell - Oral Argument

Fri, 09 Jan 2009 14:49:21 +0000

Case:

Venegas v. Mitchell

Media File:

88-1725_19900221-argument.mp3

Related Transcript:

1989_88_1725_argument.xml

Transcript:

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.

Thank you.

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.

Why not?

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.

It's our--

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.

Now--

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.

And in--

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.

Forty--

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.

Thank you.

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.

He's only--

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.

That's right.

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?

Exactly.

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.

To--

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--

--No.

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?

Is that--

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.

The... the--

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.

And he--

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.

Yeah.

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.

Attribution:

The OYEZ Project

Featured:

Peel v. Attorney Registration and Disciplinary Comm'n of Illinois - Oral Argument

Fri, 09 Jan 2009 14:49:22 +0000

Case:

Peel v. Attorney Registration and Disciplinary Comm'n of Illinois

Media File:

88-1775_19900117-argument.mp3

Related Transcript:

1989_88_1775_argument.xml

Transcript:

Argument of Bruce J. Ennis, Jr.

Chief Justice Rehnquist: We'll hear argument first this morning No. 89-1775, Gary Peel v. the Attorney Registration and Disciplinary Commission of Illinois.

Mr. Ennis.

Mr. Ennis: Mr. Chief Justice, and may it please the Court:

Petitioner's letterhead contains the truthful and verifiable statement of fact that he has been certified as a civil trial specialist by the National Board of Trial Advocacy, a highly respected organization of judges and lawyers whose certification program has been endorsed by the--

Unknown Speaker: How do we know that?

That it's highly respected?

Mr. Ennis: --Your Honor, there is no dispute in this record that the National Board of Trial Advocacy is a reputable and nonbogus organization.

It is sponsored by seven national organizations, including the National District Attorneys' Association, the Association of Trial Lawyers of America.

On its governing board sit many judges, including judges in--

Unknown Speaker: And this is all in the record, I take it?

Mr. Ennis: --This is in the record below.

Yes, that's correct, your Honor.

Unknown Speaker: Uh-huh.

Mr. Ennis: There is no dispute about that fact.

Unknown Speaker: Does the state recognize it as a... as an organization that certifies specialists?

Mr. Ennis: The state does not recognize any organizations to certify specialists.

In the hearing below, the state took the position that it was not going to argue one way or another about whether the National Board of Trial Advocacy provided meaningful information or not.

The state was willing to assume that the National Board of Trial Advocacy certification did provide meaningful information to consumers.

Nevertheless, the state thought that in order to prevent bogus organizations from springing up, the state needed to have a complete categorical ban, a prophylactic rule which prohibited all statements of certification.

Unknown Speaker: How much of your case, Mr. Ennis, depends on the stature of this particular organization?

Mr. Ennis: In this particular case, Your Honor, it does not matter at all because this Court's decisions made clear, beginning with R.M. J and followed in Shapero and Zauderer, that the states cannot place an absolute ban on potentially misleading speech.

Unknown Speaker: So if it were the Sangamon County Trial Lawyers' Association with a membership of about six in rotating musical chairs, that would still be true, so long as the statement were not false?

Mr. Ennis: No, Your Honor.

We do not quarrel with the ability of the state to regulate, to make sure that statements by certifying organizations do provide significant and meaningful information to consumers.

The state could adopt a regulatory scheme and could prohibit statements about certification by bogus organizations.

That is not this case.

Illinois has not tried to distinguish between bogus organizations and meaningful organizations.

Illinois has attempted to prohibit--

Unknown Speaker: Well, what if it isn't a bogus organization but some little two-bit club that the lawyer truthfully says he belongs to and they've recognized him and given him some certificate?

That's fine, I take it.

And--

Mr. Ennis: --No, Your Honor.

I think--

Unknown Speaker: --And the state has to permit that?

Mr. Ennis: --Your Honor, I think that the same test would apply but in that circumstance application of the test may permit the state to ban statements of certification by that particular organization on the ground--

Unknown Speaker: On what theory?

Mr. Ennis: --on the ground that those statements of certification do not provide significant or meaningful information to consumers and are potentially deceptive and cannot be proved--

Unknown Speaker: Well, how does an average consumer know anything at all about this organization?

They're not even listed in the telephone directory in some cities.

And how is the average person to have any feeling at all about what that organization represents?

Mr. Ennis: --Well, Your Honor, as the FTC will argue as amicus, Petitioner's statement, like statements like physicians that they are board certified, does provide meaningful and relevant information to consumers.

Consumers, if they want, can go to the trouble to find out what being a board certified--

Unknown Speaker: Well, so it really does make a lot of difference, contrary to what you said earlier, what kind of an organization this is.

Mr. Ennis: --Your Honor... Justice White, I think if the state had a regulatory process, it would make a lot of difference whether--

Unknown Speaker: Well, you seem to say it does make a lot of difference.

It has to provide... this statement has to provide meaningful information.

And I take it from what you've said in your answers that whether it provides meaningful information or not depends on what kind of an organization it is.

This two-bit club?

No.

But this group, yes.

Mr. Ennis: --Yes, Your Honor, that is correct.

Our position is, and I think it is the same test, the same rule this Court applied unanimously in R&J and later in Shapero and Zauderer, that the state cannot have a blanket prohibition on potentially misleading speech, as a speech by a bogus organization might be, if there are regulatory mechanisms which could eliminate the deception.

Here there are at least four, and maybe five, simple and reasonable regulatory mechanisms that Illinois could use to eliminate any potential for deception by bogus organizations.

First, Illinois could itself on an ad hoc basis approve certifying organizations as meeting its standards for what provides meaningful information.

Second, Illinois could--

Unknown Speaker: You say that's a simple step, Mr. Ennis.

But actually, that could involve a fairly substantial commitment of resources on the part of the Supreme Court of Illinois, couldn't it?

Mr. Ennis: --Justice Rehnquist, it certainly could provide... require some commitment of resources, but less, I think, than the administrative burden this Court has already upheld in the other attorney advertising cases.

In Zauderer and in Shapero this Court upheld requirements and suggested that in order to regulate potentially misleading speech the state could require filings of all speech with the state and then on a case-by-case basis the state could make a decision about whether that particular speech was or was not misleading.

Unknown Speaker: Well, what if--

Mr. Ennis: That is a greater--

Unknown Speaker: --if this is commercial speech.

Mr. Ennis: --Justice White?

Unknown Speaker: What if this is commercial speech that these... that he's putting out?

Is your rule of applying a narrower... or the requirement that they use a less-restrictive means is that really... will that really get you very far if it's [inaudible].

Mr. Ennis: Your Honor, I hope so because I'm relying principally on your opinion for the Court in Zauderer, which was a commercial speech case, which squarely ruled that states cannot prohibit potentially misleading information if reasonable regulatory measures would suffice to cure the deception.

Zauderer--

Unknown Speaker: Is this commercial speech?

Mr. Ennis: --Your Honor, we argue in our briefs that this speech should be categorized as fully protected speech rather than commercial speech.

But because this case can and should be decided on the narrower ground that even if it is commercial speech it cannot be categorically prohibited, I will rely on the arguments in our brief to support the broader ground.

Let me make clear that Illinois has not argued that its prophylactic ban is a reasonable accommodation between First Amendment interests and the state's interests.

Instead, Illinois has argued that no accommodation is necessary because there is no First Amendment interest to be protected.

That argument is based solely on the conclusory assertion, without any support in the record, that all statements of certification or specialization will inevitably and necessarily mislead consumers.

But as the Federal Trade Commission will argue as amicus, Petitioner's statement, like the statements by physicians that they are board certified, provides relevant and meaningful information that will promote informed consumer decisions.

Petitioner's statement, according to the FTC, is not even potentially misleading, and even if it were, there are numerous reasonable regulatory measures that would eliminate any potential for deception.

And Illinois has not even bothered to consider those regulatory measures, much less prove that they would not suffice.

Unknown Speaker: Mr. Ennis, what does the certification here tell the consumer?

Does it tell the consumer that the lawyer has had a good win/loss record in cases in court?

Mr. Ennis: No, Your Honor, not at all.

And that is a quite different situation.

A good win/loss record, a statement about a good win/loss record, might imply success, that the attorney will be able to be successful for the client.

This is not that at all.

A statement of certification--

Unknown Speaker: Well, what do you think the average non-law-trained person would think that it might indicate or might encompass?

Specialized training or--

Mr. Ennis: --I think that the--

Unknown Speaker: --win/loss or lots of experience?

What is it--

Mr. Ennis: --I think--

Unknown Speaker: --we're... we're to think that that means?

Mr. Ennis: --I think, Justice O'Connor, that the average person might reasonably think that certification by the National Board of Trial Advocacy would imply something about experience in civil trials and a knowledge of basic procedures in civil trials, which is exactly what NBTA certification does.

In order to be certified by NBTA, as the Minnesota Supreme Court ruled, NBTA certification is based upon a rigorous and exacting set of requirements which require proof of five years of practice in civil trials, including at least 30 percent concentration in each year in civil trials; lead counsel in 15 completed trials, including five jury trials and at least 45 full trials days; lead counsel in an additional 45 litigated matters; 45 hours of continuing legal education in civil trial practice in the previous three years; confidential peer review by both judges and lawyers of the attorney's trial abilities; a substantial trial brief; and a day-long written examination which tests knowledge of evidence, ethics, substantive and procedural law and trial tactics.

Unknown Speaker: But, as you've said, Mr. Ennis, that's... that's really just incidental.

I mean, the principle you're arguing for is that even if that weren't all true, the state's absolute ban would not be any good.

They... it would be up to the state to show that this was not a reputable organization, isn't that... that's your point.

Mr. Ennis: That's right, Justice Scalia.

Unknown Speaker: What would you... what would you do if... if Mr. Peel put on his letterhead... instead of certified by this organization it just says on the letterhead

"The best in legal representation; new improved lawyering? "

[Laughter]

Mr. Ennis: The same test would apply.

Unknown Speaker: The same test?

Mr. Ennis: The same test.

But under that test, the statement has--

Unknown Speaker: So the Supreme Court of Illinois would have to show case by case that this individual is not the best... isn't providing the best in lawyering?

Mr. Ennis: --That's not exactly my answer, Justice Scalia.

That is a different factual circumstance from this case because it's a statement of opinion.

"I am the best lawyer in the East Coast. "

is a statement of opinion.

It is not verifiable.

A statement by Peel that he has been certified by the National Board of Trial Advocacy is a statement of fact.

Unknown Speaker: He says he's the best lawyer in Sangamon County.

You think that's not verifiable?

Mr. Ennis: No, I think it's certainly not verifiable, Your Honor.

I'm sure that some other lawyers in Sangamon County would disagree with that assessment.

It's a very different circumstance to say a statement of opinion,

"I'm the best lawyer in the universe. "

on the one hand and say,

"As a matter of fact, I have been certified by a highly reputable organization. "

Unknown Speaker: Which says that in their opinion I'm a good lawyer.

Mr. Ennis: Which says that--

Unknown Speaker: So, a second-hand opinion is better than a first-hand opinion.

Mr. Ennis: --It's not just... it's not just their opinion.

It's not an ad hoc basis, Justice Scalia.

NBTA certification is based upon a rigorous set of preexisting standards and qualifications.

Unknown Speaker: Well, that isn't what is... what he... what he says.

He doesn't say anything about the organization.

He just says that I'm certified by so and so and so and so.

And I thought you said a while ago that if he put on his letterhead that I've been certified by this little club that no one ever heard of that, as applied, this blanket ban would be all right.

Mr. Ennis: Your Honor, I believe that--

Unknown Speaker: Well, would it or not?

Mr. Ennis: --I believe that a blanket ban is never acceptable in this circumstance.

Unknown Speaker: So, he could put on... he could... he could put on his letterhead that... that he had been certified by some club that no one had ever heard of and he could use it... and he could say you cannot keep me from doing that--

Mr. Ennis: No.

Unknown Speaker: --because--

Mr. Ennis: No.

Unknown Speaker: --Now, wait a minute.

You cannot get... you cannot make me... you cannot keep me from doing this under this blanket ban.

As applied to me even, this ban is bad.

Mr. Ennis: Well, Your Honor--

Unknown Speaker: Is that right?

Mr. Ennis: --Well, that is not necessarily correct because this Court's opinions made clear that [inaudible].

Unknown Speaker: Well, what... yeah, but what's your view?

What's your view of how he would come out if he put on his letterhead that this little club name that no one ever heard of--

Mr. Ennis: My... my view is that that statement could not be banned if the justification for the ban is a prophylactic ban that all such statements must be banned.

Unknown Speaker: --So, it's just overbroad is it, or what?

Mr. Ennis: No.

It's not just overbroad because it applies to Peel.

He's not arguing--

Unknown Speaker: Yes.

Right.

Mr. Ennis: --about the rights of other people and saying that his speech would not be protected but the rights of others would.

He is arguing that his speech itself is constitutionally protected because it provides meaningful information.

Unknown Speaker: Well, yes, but you seem to say that if the... if the state sorted groups out and said here are the groups that we recognize and here are the groups that we don't, that they could... that they could do that.

Mr. Ennis: I'm sorry, but I didn't quite follow that, Your Honor.

Unknown Speaker: Well, why don't you go ahead.

Maybe I can follow you.

Mr. Ennis: Let me... let me point out that the three ways in which Illinois claims that Petitioner's speech could be misleading are not self-evident and they are not based on any empirical evidence, any study, or any expert opinion that that speech would be misleading.

Illinois first suggests that a statement of certification will imply that the state itself has certified or has endorsed the certification.

But as the FTC will argue, it is implausible to believe that consumers will think certification by the National Board of Trial Advocacy is certification by the State of Illinois.

Furthermore, even if there were evidence that Petitioner's statement was potentially misleading in that way, there are many simple regulatory measures to cure that misleading statement.

First is a simple requirement for a disclaimer.

Illinois could require attorneys to say on their letterheads that certification does not mean or imply certification or approval by the state.

Second, there could be ad hoc approval of certifying organizations.

Third, there could be approval of certifying organizations pursuant to preexisting standards and criteria that Illinois would find to be meaningful.

Fourth, there could be case-by-case review of all such statements, as this Court found would be a reasonable regulatory burden in Zauderer and in Shapero.

And finally, the states themselves could engage in certification of attorneys, as 11 states have done.

Under NBTA requirements, if a state provides itself for certification of attorneys, NBTA will not certify an attorney until the attorney has first been certified by that state.

In all these ways the entirely speculative fears of Illinois could be cured through reasonable regulatory measures.

With respect to the burden point that you raised, Justice Rehnquist, let me simply say that in Zauderer the Court said, quote,

"Our recent decisions involving commercial speech have been grounded in the faith that the free flow of commercial information is valuable enough to justify imposing on would-be regulators the costs of distinguishing the truthful from the false, the helpful from the misleading and the harmless from the harmful. "

Unknown Speaker: So if... putting aside opinion problems, if there were... if they were on the letterhead, you know, graduated first in his class from the University of Chicago Law School, more hours on his feet in a courtroom than any other lawyer in Sangamon County and a few other things, what would... the state would have to allow that and its only remedy would be to investigate those allegations one by one?

Mr. Ennis: I think, Your Honor, that so long as the state has not bothered to distinguish at all between the harmful and the harmless, the answer would be yes, the state would be relegated to a case-by-case approach.

So--

Unknown Speaker: It's a lot of work.

Mr. Ennis: --But our argument is that the state could adopt reasonable regulatory mechanisms to review that kind of speech as well as this kind of speech, which is a very different kind of speech.

The state in Illinois has not bothered to do that.

And as this Court's decisions made clear, Illinois cannot impose a prophylactic ban on useful speech simply to, quote, "spare itself the trouble" of distinguishing between the harmful and the harmless.

I'd like to reserve my remaining time for rebuttal, if I may.

Unknown Speaker: Very well, Mr. Ennis.

Mr. Marzen, we'll hear now from you.

Argument of Steven J. Marzen

Mr. Marzen: Mr. Chief Justice, and may it please the Court:

On behalf of the Federal Trade Commission I'd like to make two submissions this morning.

First, that Mr. Peel's certification claim, and other claims like it, are valuable commercial speech.

And second, that certification claims cannot be entirely prohibited by the state on the record in this case.

First, information about lawyer certification is valuable commercial speech.

The First Amendment protects commercial speech on the theory that it performs a valuable function in allocating resources in a free-market economy.

Among other things, such information helps consumers pick out desirable goods and services.

The First Amendment theory, as applied to this case, would indicate that information about lawyer certification would help consumers pick out lawyers who are particularly competent to handle their particular problems.

Unknown Speaker: Mr. Marzen, how would this particular certification on Mr. Peel's letterhead help consumers?

Mr. Marzen: Well, if a consumer had a problem that involved litigation, they could look for someone who is certified as a civil trial specialist by the National Board of Trial Advocacy, in comparison to another practitioner who didn't have any certification or also didn't, through looking at Martindale-Hubbell or something else... didn't have any indication that he had courtroom experience for example.

Unknown Speaker: You think that would... that a lay person would understand the significance of that certification?

Mr. Marzen: A lay person certainly isn't going to know that NBTA certification means all the specific things that are required to get the certification.

He's not going to know that it requires 15 trials, five jury trials or a minimum of 45 days trial experience.

At the same time, the vast majority of people in this courtroom probably wouldn't know what tests a product had to go through to get an Underwriter's Laboratory certification.

He or she will know, however, that the certification implies that the attorney has passed some tests, some tests with bite, that are related to the subject area of the certification.

And that's... that's the sort of implied claim that a certification statement makes.

And in that case it's true.

I detected in the questions posed to previous counsel some limits as to what... or some questions as to what is left for the states if you recognize the ability of an attorney to say that I'm a certified civil trial specialist, or any other certification claim.

And in the Federal Trade Commission's view, substantial leeway is left within a wide zone of reasonableness for states to continue regulating.

Within the certification area, for example, if the organization had a musical chairs requirement or just had the requirement that one pay a certain fee, a state could of course prohibit that in their entirety.

The reason... the theory would be that those claims do not... or that the requirements of the certification organization have no relationship at all to the implied claim the consumer would read from the certification.

In addition, depending on what the state reasonably finds the reasonable consumer to understand the claim to be, the state could prohibit claims by certification organizations with insufficient requirements.

For example, in this case if the State of Illinois had found that a reasonable consumer assumes that a civil trial specialist has at least tried one case, they could forbid organizations from... or forbid people from making claims that they are certified as a civil trial specialist by an organization that didn't have those particular requirements.

Unknown Speaker: One case.

Mr. Marzen: Excuse me?

Unknown Speaker: One case.

That's pretty tough.

Mr. Marzen: Well, what one has to realize is that this is sort of a dynamic process.

There were... there was a time in the medical profession and in... in certain products where they were just starting certification.

And in those cases, consumers did not... you know, the certification took more and more meaning over time.

For instance, the Sunkist Grower's Association... you know, who knew... who knew what Sunkist meant when it first started out?

It was a group of people, you know, growing oranges.

Over time, though, it became--

Unknown Speaker: But you're not dealing with light bulbs here.

You're... you're dealing with the process of justice that the Illinois Supreme Court has a special responsibility for.

Mr. Marzen: --That's--

Unknown Speaker: And... and simply because you can allow any organization to certify something... Good Housekeeping or United Labs, or whatever else for light bulbs... it doesn't mean you have to do it for the process of justice, for which counselor are... are members of the bar of the court.

Mr. Marzen: --Absolutely true and the legal services--

Unknown Speaker: And all... all you tell me the state can look to is whether you have one trial.

Mr. Marzen: --No.

It depends on what the assumption of reasonable consumers are.

For example, if one... over time there may be more and more state certification and certification by more and more private entities.

Just as in the medical profession, you may evolve towards higher and higher standards.

Unless you allow the process to get started, however, you're never going to reach that higher goal.

There's no question but that you're correct that legal services are far more complex, and claims that you wouldn't allow in the areas of products, for example, would not be allowed in terms of legal services.

Unknown Speaker: It isn't just a matter of complexity, it's a matter of it being part of the process of justice that the Illinois Supreme Court and other courts are charged with meting out.

Mr. Marzen: I understand that it's part of the process of justice, but in fact allowing people to... to announce and to disseminate information about certification is in the very highest traditions of the standards of the bar in maintaining and improving the quality of advocacy and all other forms of service.

As the study cited on page 2 of our brief in this case indicate, more than 90 percent of the people who suffered serious property damage, employment discrimination or had problems with their landlords, don't go see a lawyer.

Those exact same studies reveal that the principal barrier is because people don't know that there is a particular... can't find a particular lawyer who they feel is competent to deal with the problem.

That same... another study cited in that... our... our same FTC submission indicates that in certain copy tests with 276 individuals, that when you give them information about professional qualifications they... the intentions to go out and obtain legal services increases.

Justice is a very, very important goal.

But the information that is... that would be disseminated as a result of this case is in... would actually help promote justice.

It would help people who have serious legal problems vindicate public and private rights.

And that is a significant interest weighing in the balance on the other side.

The state, of course, has substantial leeway to prohibit false or misleading claims but it's not necessary to reach... to have a prophylactic ban to do so.

In fact, in this particular case the State of Illinois had already means to achieve all of its goals with... with far less intrusion on First Amendment costs.

Specifically, the claims of the State of Illinois are that someone reading Gary Peel's certification statement and any other certification statement would think that there was an implied claim of either state sponsorship or an implied claim that Gary Peel is a superior trial lawyer.

If those claims are accurate, which we disagree for the reasons in our brief and I can elaborate on, the State of Illinois could have had a prophylactic disclaimer saying that certification is not by the state and infers no claim of expertise.

That would have cured any potential confusion or deception, and it would have not trenched nearly on the First Amendment interests that--

Unknown Speaker: But it would have pretty well killed the usefulness of the... of the letterhead, too, wouldn't it?

Perhaps you say that Illinois should be pleased with that result.

If you... I mean, are you really winning much for Mr. Peel if you say he can put this on but after it the state can require him to put it, this is not a certification by the state and it does not import any claim of expertise?

Mr. Marzen: --Not as much as I'd like, Justice Rehnquist.

It's better than a flat ban on any certification statements and it would probably require the attorney to make the certification information useful to specify more about what the standards of the certifying organization were.

Unknown Speaker: But that's not true, is it?

It... it does imply a claim of expertise.

I mean, that... now we're... now we're just saying that the state can impose something that isn't true.

Mr. Marzen: That's... we... okay.

The two points I would make is that it's less intrusive.

We would... I entirely agree with your point, though, that on the facts of this case the state should not be allowed to require a disclaimer.

Disclaimers are extremely valuable when there is some potential--

Unknown Speaker: So... so you say the state should not be allowed to require a disclaimer as to this ad?

Mr. Marzen: --Yes.

Unknown Speaker: You're saying it's a... it's a lie, but at least it's constitutional?

Is that your position?

Mr. Marzen: No.

Not at all.

[Laughter]

It's not a lie at all.

The express statement in this case is: I have been certified as a civil trial specialist by the NBTA.

That is absolutely true.

There are implied claims, however, which may or may not be intentionally made that could be confusing or deceptive.

When one is dealing with such implied claims, the experience of the Federal Trade Commission is that you can address an implied claim by an express statement that is... an express statement that that is not what I meant.

Unknown Speaker: So... so where do we come out here?

That the State of Illinois in your view could not constitutionally require a disclaimer in this case?

Mr. Marzen: I would not think that a disclaimer would be appropriate.

Unknown Speaker: No, I... I--

--I thought you said it would be.

Mr. Marzen: Okay.

Unknown Speaker: It's not a question as to whether it's appropriate.

It's whether or not it's permitted.

Mr. Marzen: We... the... on behalf of the Federal Trade Commission, a disclaimer would not be permitted by the Constitution in this case.

My... my initial claim was directed to the fact that the state had lesser intrusive measures that it... that it could have considered--

Unknown Speaker: Well, I thought you said--

Mr. Marzen: --that would have entirely remedied what it had--

Unknown Speaker: --I thought you said a moment ago that the state could require not only the disclaimer but that this does not imply any claim of expertise.

What's your answer to that?

Mr. Marzen: --My answer is no.

The state--

Unknown Speaker: No, that you didn't say it or no that you wish you hadn't said it?

[Laughter]

Mr. Marzen: --The latter, Justice Rehnquist.

[Laughter]

Unknown Speaker: Mr. Moran.

Argument of William F. Moran, III

Mr. Moran: Mr. Chief Justice, and may it please the Court:

The Illinois Code of Professional Responsibility prohibits attorneys from holding themselves out as being either certified or a specialist.

The policy supporting this prohibition is that Illinois does not recognize or sanction any certification or specialization process.

Therefore--

Unknown Speaker: Do you... Mr. Moran, do... do... does Illinois do it on the medical side?

Mr. Moran: --The state does not do it, Your Honor.

Doctors... the medical profession... are allowed to hold themselves out as being specialists or board certified.

Unknown Speaker: And the state doesn't object to that?

Mr. Moran: They do not regulate it, though it is our argument that if the state chose to regulate those board certifications, it would be with... it would be within their authority to do so.

Unknown Speaker: May I ask one... one?

Does the state permit a member of the bar to list on his letterhead that he's a member of the United States Supreme Court Bar?

Mr. Moran: Yes.

Like in R.M. J, an attorney can list the court where he is admitted to practice.

Unknown Speaker: Don't you think that's perhaps more misleading than this... this... particular--

[Laughter]

Mr. Moran: Well, Your Honor, because this Court sets the qualifications--

Unknown Speaker: Doesn't that imply that they've been here a lot and argued a lot of cases and we know them very well?

[Laughter]

Mr. Moran: --Well, they would be allowed to say that they were admitted in the Court--

Unknown Speaker: Yeah.

Mr. Moran: --to practice and... and--

Unknown Speaker: But do you think that's more or less misleading than this particular letterhead?

Mr. Moran: --I obviously think that it's less misleading than this particular letterhead.

Unknown Speaker: Well, what's misleading about this letterhead?

Mr. Moran: There's three reasons why Petitioner's letterhead is misleading.

The first and most obvious reason it's misleading is that to the reader Petitioner's statement implies that his certification is sanctioned by the state or a governmental authority when there is no question on the record that it is not.

Unknown Speaker: Of course that could, as your opponent just suggested, easily be corrected by saying not a government organization or something like that.

Mr. Moran: Your Honor, we... we believe there's three reasons why it's misleading.

The first, that it implies sanction.

The second, that it impinges upon the inherent authority of the Supreme Court of Illinois to set qualifications for the practice of law in Illinois.

Unknown Speaker: Yes, but they can't set unconstitutional qualifications, can they?

Mr. Moran: That's correct, Your Honor.

And the third reason is that on this record Petitioner's claim is an unverifiable claim as to the quality of services he provides.

Petitioner in his reply brief even admits or argues that a disclaimer in this case would be highly burdensome, and it is our argument that a disclaimer that would have to be created to vitiate the three components of why Petitioner's statement is misleading would have to be so long, so detailed as to be even--

Unknown Speaker: On the unverifiable point--

Mr. Moran: --more confusing to the public.

Unknown Speaker: --is there any distinction between this and the... and the board certification in the medical fields that Justice Blackmun asked about?

Mr. Moran: Well, the unverifiable claim on this record, Your Honor, is that before the Illinois court the various amicus who filed briefs on behalf of Petitioner and Petitioner all stated that there were different qualifications.

Each one had a different set of--

Unknown Speaker: Well, I suppose they've changed over the time.

But there isn't really any doubt about the fact that this is a pretty reputable organization, is there?

Mr. Moran: --We believe that it's irrelevant one way or another whether it's a reputable organization.

We believe the important focus is on the terms themselves: certified and specialist.

Unknown Speaker: But, again, going back to the medical because... do you think that this is less verifiable than the number of examinations a particular specialist in some medical field might have had?

Mr. Moran: I don't know if it would be more or less but in the case of the medical profession research shows that the medical profession has been certifying specialists, board certifying physicians, for 40 to 50 years.

Unknown Speaker: Yeah, but how... but how can these people ever get started?

That's... that's one of the arguments your opponents made.

Mr. Moran: Well, in... in the comments to our rule, the legislative history, our court sets forth that some day the court may see fit to implement a certification or specialization program in Illinois.

Obviously, the opinion in this case is indicative of the fact that the court does not feel that now is the time to implement a certification process.

We argue that it's within the inherent authority of the Supreme Court of Illinois to decide when it is appropriate to join the 11 other states who have their own certification processes.

Unknown Speaker: Well, now, Illinois does, however, permit lawyers to disclose their specialization in some areas... patent, admiralty and what's the other?

Mr. Moran: And trademark.

Unknown Speaker: Trademark.

Mr. Moran: In those cases, Your Honor, the attorneys who practice in those areas are now allowed to use the inherently misleading terms "certified" and "specialist".

Unknown Speaker: What are they allowed to do in those areas?

Mr. Moran: I'll go directly to the rule.

And a lawyer admitted to practice before the United States Patent and Trademark Office may use a designation patents, patent attorney, patent lawyer or registered patent attorney, or any combination of those terms on his letterhead.

A lawyer engaged in the trademark practice may use the designation trademarks, trademark attorney or trademark lawyer or a combination of those terms.

And a lawyer engaged in the admiralty practice may use the designation admiralty, proctor in admiralty or admiralty lawyer or a combination of those terms.

Unknown Speaker: But a lawyer who is engaged primarily in civil litigation practice cannot so indicate?

Mr. Moran: We believe that an attorney could indicate that he was a civil trial advocate or a civil trial attorney, because that statement would not be misleading for the three reasons that we've set out.

That does not imply state sanction, that doesn't set a qualification for the practice of law.

In other words, a reader could not look at that statement and think, but for that certification the attorney could not practice in that area of the law.

Unknown Speaker: And Illinois would permit that, although it isn't expressly allowed?

Mr. Moran: That's correct.

And also because though a reader might infer a term of quality or a certain quality because of that statement that would be readily verifiable.

All attorneys in Illinois--

Unknown Speaker: How would it be readily verifiable?

Mr. Moran: --All attorneys in Illinois are presumed to be competent to handle matters in which they are retained to represent a client.

Factually, if an attorney... and we cited in our brief the case of Zimmerman from New York where they determined the... the New York court determined that an attorney who held himself out as available to practice and was experienced in 25 areas of law was--

Unknown Speaker: Well, if... if the lawyer chose to engage in a civil litigation practice and so indicated on the letterhead, and the lawyer in fact was newly admitted to practice and had had only a trial or two before doing this, Illinois would nonetheless permit that chosen designation on the letterhead?

Mr. Moran: --It would truly be a question of fact, though, Your Honor, whether or not he was a civil trial advocate.

I believe that would be something that a hearing board in a preliminary disciplinary matter could determine factually whether or not--

Unknown Speaker: Well, is that what Illinois does?

Is it... is it set up to examine those claims individually and determine the extent to which the attorney has in fact had--

Mr. Moran: --If--

Unknown Speaker: --trial experience?

Mr. Moran: --If a problem arose and it came to the attention of the administrator of the Commission and a disciplinary investigation was instituted against the attorney, yes, we would determine on a case-by-case basis whether or not that attorney was qualified as a civil trial advocate and whether his statement was--

Unknown Speaker: But you say it is too burdensome to do that with regard to this organization's certification even though you're perfectly willing to do it in the other instance?

Mr. Moran: --That's correct, Your Honor, because for, again, the inherently misleading nature of any certification or specialization term.

A specialization--

Unknown Speaker: Excuse me.

Does Illinois allow you to say practice limited to civil litigation?

Mr. Moran: --That's correct.

Unknown Speaker: It does allow that?

Mr. Moran: That's correct, Your Honor.

Unknown Speaker: Even if you... even if you've just been admitted for a day and have never been in court?

Mr. Moran: Again, that would be a factual determination.

And just as an example, I would again point to the Zimmerman case, where--

Unknown Speaker: Well, facts for determination... I mean, it's true, he won't do anything but civil litigation.

That's his intention, and it's hard to disprove that, isn't it?

Mr. Moran: --But if that was misleading to the public, which is based on the facts of the situation, that an attorney... an attorney who was just admitted to the practice of the bar very well may be competent to be a civil trial advocate in some situations.

But in order to take a case, in order to represent a client, the Code... our Code... requires that the attorney be competent to handle that matter.

And if he's--

Unknown Speaker: I thought you presumed that.

Mr. Moran: --Well, it requires but it... all attorneys who are presumed to act ethically at al times are presumed to be competent to handle the matters where they are retained.

Unknown Speaker: Well, why doesn't that presumption cover this lawyer insofar as he represents he's a competent lawyer able to try civil cases?

Mr. Moran: Again, because of the inherently misleading nature of his statement for the reasons that we set forth.

And especially on the--

Unknown Speaker: Because he thinks the average reader will think that he's specially certified by Illinois even though it doesn't say that?

Mr. Moran: --That's correct.

The reader... and this is not just... this was a finding of the Supreme Court of Illinois but it was supported by an ABA study that found that the terms "certified" and "specialist" themselves have acquired a secondary meaning to the public.

The public cannot differentiate between terms "certified" and "specialist" and the term "licensed", the term "licensed", which means sanctioned by an official entity.

"Certified" and "specialist", especially on this record--

Unknown Speaker: The public in Illinois can't make that distinction is what you're saying.

Mr. Moran: --That's correct.

And that was the finding of both the Illinois court and the ABA in their report.

Unknown Speaker: And I think that's very true when you said certified... certified trial specialist.

Yes, I think the public would think that means certified by the state.

But when you say, you know, certified by Milton Berle or certified by somebody in particular, why does that necessarily indicate the state?

I mean, that's just not plausible.

It's just not plausible.

You... you're not arguing, are you... it might be a plausible argument to say that the public might believe that any organization mentioned as being the certifier has been reviewed by the State of Illinois.

Maybe that's plausible.

But that isn't... that isn't your argument, is it?

And that isn't what the Supreme Court of Illinois relied on.

They didn't rely on the fact that the public would think that Illinois, like a lot of other states, or 11 other states, has actually examined this... this association to see whether they're worthy of certifying.

That... but that isn't your point, is it?

Mr. Moran: In fact, though, in this case we have argued that one of the things that a reader might imply from Petitioner's statement is that the National Board was recognized by the state.

Also, especially when you look at this record, you have to look at the facts.

You have to look at Petitioner's letterhead.

Specifically, on his letterhead he has the name of his law office, his address, his phone number, and to the left in the same size print he lists his name, then he lists his certification claim.

And then, without any spacing, he places the words "licensed" and he places the three states--

Unknown Speaker: No, but you omitted the words by the... certified trial specialist by the National Board of Trial Advocacy.

And after that, the licensed by the three states.

Mr. Moran: --And in this case he is--

Unknown Speaker: And you think that when he says civil trial specialist... I mean, certified by the National Board of Trial Advocacy, the reader will think he was certified by some Illinois organization?

Mr. Moran: --But I don't believe--

Unknown Speaker: I don't understand that.

Mr. Moran: --Your Honor, that the public would be sophisticated enough to determine the true meaning.

Now, we as lawyers, we know that Illinois does not recognize his certification or specialization process.

But the reader to the public... or, the reader in the public, would not realize that that claim is not--

Unknown Speaker: And what great harm would come if the... if the uninformed reader thought the organization had been certified by the Illinois Supreme Court when it hadn't.

It had been certified by somebody and perhaps looked at a lot more closely than the Illinois Supreme Court looks at all these lawyers who get this presumption?

[Laughter]

Mr. Moran: --I don't really understand your question, Your Honor.

Unknown Speaker: I'm just... what is the... supposing a... a substantial number of readers mistakenly think there was some kind of an Illinois approval of the organization when there wasn't?

What harm?

Mr. Moran: Well, they would be misled to believe that the state has certified this attorney to be better qualified.

He has attained a special qualification in order to practice in the area of civil advocacy.

They would be led to believe in an unrealistic--

Unknown Speaker: Which is exactly what he has.

Mr. Moran: --an unrealistic expectation would be raised in the reader that this attorney, because of his special qualifications, will do better for my case regardless of what the outcome--

Unknown Speaker: Well, not the better for my case.

He does in fact have all these extra qualifications, though.

He's had a lot of trials, he's passed a lot of exams, and this is an organization which encourages people to take this training so they can make a truthful representation that they have extra training.

Mr. Moran: --The state--

Unknown Speaker: And if the... if the reader thinks, well, perhaps Illinois sponsored it, and that's wrong, the essential message is still absolutely correct.

Mr. Moran: --We would still argue, though, that the terms are just inherently misleading to the reader regardless of how there would be any disclaimer to them.

And any disclaimer that would be created would be so burdensome and confusing as to even confuse the public even more than Petitioner's statement on its face.

Unknown Speaker: How many claimants do you think understand what the word advocacy means?

Mr. Moran: Could I explain what the term advocacy means?

Just simply that--

Unknown Speaker: Would it be over five?

Would it be over 5 percent of the--

Mr. Moran: --Of the population that would understand?

Unknown Speaker: --Who understand what the word advocacy means?

Mr. Moran: I wouldn't want to hazard a guess, Your Honor, but I think if you use a normal standard of a person who has, let's say, the median intelligence, they very well may have some idea.

But I would say that a large segment of the... of the population would not even know what the term advocacy meant.

Unknown Speaker: Well, what's the damage in that?

Mr. Moran: Because he's holding himself out as civil trial.

I believe that people would understand that he was a trial attorney.

I think most people, the majority of people would understand the word trial.

Unknown Speaker: Well, if he said trial specialist, they'd understand, wouldn't they?

Mr. Moran: But again, you would still have the inherently misleading component of his statement in that the public would be led to believe that the state sanctioned his claim.

The public would be led to believe--

Unknown Speaker: I think that it gives the person as some sort of an expert over and above the other lawyers.

Mr. Moran: --And that the state has sanctioned his claim of being an expert--

Unknown Speaker: No, no, no.

Not that the state has sanctioned it.

But he just actually is.

Mr. Moran: --Well, Your Honor, obviously we would disagree with that.

In this case we believe, for the reasons that we set forth, the fact that it implies state sanction.

Again, state or governmental sanction.

Secondly, that it sets a qualification.

And I really haven't explained the setting the qualification.

Unknown Speaker: Well, how... how much... is there any examination given to these advocates?

Mr. Moran: As a matter of fact, Your Honor, that came up when we argued the matter before the Supreme Court of Illinois.

And there is a written examination that is given in relation to this test.

One of the justices, though, on the court asked counsel for Petitioner the question,

"How do we know that the janitor doesn't come in during the middle of the test and give all the applicants the answers to the test? "

The attorney responded,

"Well, Your Honor, I guess you wouldn't know that because the test is given in Massachusetts and in other areas. "

And Justice Stamos said,

"That's exactly my point, Counsel, that when we give the Illinois bar examination which sets the qualification for the practice of law in Illinois, we know that the janitor doesn't come in and give the answers because the test is given under our authority, by our agents, and we control the entire process. "

In this case, with private bar group associations... and especially on this record... how is the Illinois court ever to determine what the real qualifications are to receive this certification and especially--

Unknown Speaker: Well, what about... it seems to me that when you say "ever" what's wrong with... what's wrong with doing what you say the bar does often?

That you go on a case-by-case basis, and you say, well, this is misleading.

Well, how do you know it's misleading?

Why shouldn't you have a hearing and say, well, is this... is this claim of some kind of a specialty or expertise misleading and why couldn't you determine that this organization is really a pretty high-class organization that actually tests people's qualifications before they certify them?

Mr. Moran: --First of all, in response to your question--

Unknown Speaker: In a hearing.

In a hearing.

Mr. Moran: --Your Honor, we believe that it's... this Court has held in the Goldfarb decision that the states have a compelling interest in regulating the profession of law within their boundaries.

This is especially true because attorneys--

Unknown Speaker: Well, what's... what's wrong with the suggestion that you could really tell what kind of an organization this is that did the certifying in a hearing?

Mr. Moran: --Well, Your Honor, it would... first of all, the hearing would have to be... in this case, let's take, for example, the National Board is located in residence... whatever that means... in Boston, Massachusetts.

Unknown Speaker: Well, it might be hard but I... just on the merits of the hearing do you think you could conclude that this organization is a perfectly legitimate high-class organization that really has high standards for admission?

Mr. Moran: It very well may be possible that you could do that.

Unknown Speaker: Let's assume you had the hearing and you said, you cannot be certified by this organization unless you've had lots of experience and you're highly qualified?

What if you made that... had that conclusion after a hearing?

Mr. Moran: Your Honor, it would--

Unknown Speaker: Do you think that this man could still be prevented from putting it on his letterhead?

Mr. Moran: --That's correct because we believe until the state recognizes, sanction... sanctions, a certification process or a specialization process which we believe is the--

Unknown Speaker: Well, the state isn't about to do that, is it?

Mr. Moran: --Well, in the comments to the rules the state does say that in the future we very well may find that it is appropriate to have a certification--

Unknown Speaker: Even though--

Mr. Moran: --or specialization process.

Unknown Speaker: --Even though indicating that some special expertise might be inherently misleading?

Mr. Moran: Depending on what the... no, because when the state sanctioned a claim of certification or specialization, that would vitiate the misleading nature of the statement.

Unknown Speaker: Just like a hearing that showed this organization really was... really had high standards might do the same?

Mr. Moran: An example, Your Honor, is the two supreme courts, Minnesota and Alabama, who, through contested proceedings, have allowed attorneys to hold themselves out as being certified by the National Board found they struck down essentially the same rule that we have here.

In both those cases, the courts did not automatically say that attorneys from this day forward can hold themselves out as being certified by the National Board.

The court said that we direct that the buyer in those states create a process for recognizing these certifications, and, in fact, I assume have hearings to determine whether or not these... these boards are--

Unknown Speaker: Well, what's wrong with that... what's wrong with that result here?

Mr. Moran: --Well, that shows, though, that this certification... this board certification here was still inherently misleading until the court set in motion a sanctioning process for those certifications or for those boards to obtain.

We, in this case, again fall back to our three arguments why we believe that it's misleading.

One, it sets state sanction; secondly, it implies--

Unknown Speaker: Your second one is that it impinges on the authority of the court.

Mr. Moran: --the authority of the court.

Thanks.

[Laughter]

I was looking at the third trying to say the second.

And, finally, that it is an unverifiable claim of quality, especially to the general public.

This is not dry cleaning or, as the attorney for the FTC said, oranges.

There is a tremendous difference between oranges and providing legal services.

There's a tremendous difference between providing legal services and the medical profession.

We believe in this situation that these misleading statements can be prohibited for the three reasons that we have stated.

The history of advertising in Illinois shows that the court was highly concerned with the free flow of nonmisleading commercial information to the public.

Also, attorneys were given a wide range of opportunity to advertise.

The rules relating to advertising are set forth in our brief, and they show that the Illinois court has given attorneys in Illinois every opportunity to advertise in every medium.

The only real restriction is that their advertising not be misleading.

In this case we ask that this Court affirm the well-reasoned, thoughtful and well-analyzed decision of the Illinois court that Petitioner's letterhead, the statement on his letterhead, is misleading.

In this case, Your Honor, Petitioner's... and I feel that I must mention these... has also raised two other issues.

The first being that Petitioner's statement is not commercial speech.

We have two short arguments on this point.

The first argument is that Petitioner has waived this argument.

Petitioner did not raise this issue at any time below.

During five levels of review Petitioner never mentioned that his speech was not commercial speech.

Unknown Speaker: Did anybody say it was?

Mr. Moran: Well, in fact, Petitioner urged the lower levels to consider his speech as being commercial in nature by defending his statement by using precedents developed by this Court in commercial speech cases.

Unknown Speaker: But did the state ever argue that the standards governing commercial speech be applied in this case?

Mr. Moran: In response to his arguments in response to his defense that his statements under the attorney advertising decisions of this Court were proper we did, yes, retort that these decisions do apply in this... in this situation because we believe that it's obvious that even if this Court finds that Petitioner hasn't waived this argument, there is no question that Petitioner's statement is commercial speech.

Petitioner's definition that statements which explicitly propose a commercial transaction are commercial speech is meritless.

This Court's decisions hold that statements which explicitly and implicitly propose a commercial transaction constitute commercial speech.

Unknown Speaker: Well, but this letter was written to your organization, wasn't it?

Mr. Moran: Well, the record shows--

Unknown Speaker: It didn't promote... isn't that what the... the only thing in the record is he wrote to the Disciplinary Commission.

Mr. Moran: --No, Your Honor.

The record shows that Petitioner uses this letterhead during the ordinary course of his practice of law and that he sends his letterhead out to clients, past and present, and other attorneys who he admitted refer a majority of his business to him.

Unknown Speaker: I see.

And so part of the misleading public were other lawyers who were also terribly confused by this.

Mr. Moran: Well, or their clients who the lawyer says: Here's this letterhead; this is the guy I think you should hire.

Finally, Petitioner makes two arguments that the Illinois court's prohibition of his statements violates the Equal Protection Clause.

Again, I will refer the Court to our brief to these arguments.

We feel that there is a rational basis--

Unknown Speaker: Suppose that the only way the state claimed this was misleading was that it implied a... approval by the state that this was... organization was sanctioned by the state or this certification was sanctioned by the state.

And suppose, as I think you probably agree, that that could be negated, that inference by a... something on the letterhead to the contrary.

Would you think the state would be required to use that means to cure the problem rather than this blanket ban?

Mr. Moran: --Following your hypothetical, Your Honor, it may be possible.

Unknown Speaker: Well, it may be possible.

Do you think the state is required to... in this commercial speech area to use that... that less intrusive way of curing the problem?

Mr. Moran: Still, though, what the inherently misleading terms "certified" and "specialist" to the public, and the public's unsophistication concerning delivery--

Unknown Speaker: Well--

Mr. Moran: --of legal services, we believe that it would be almost impossible to create an effective disclaimer in this case.

In summary of our argument, the rules in question clearly advance the state's substantial interest in providing the free flow of commercial information to consumers of legal services.

In reading the rules, the comments to the rules, the legislative history and the opinion, it is clear that the Supreme Court of Illinois takes seriously its responsibility to regulate the practice of law in Illinois and to protect the public from misleading information.

The Illinois court's finding that Petitioner's statement is misleading is supported by thoughtful well-reasoned analysis.

The policy supporting the court's rule is sound.

Petitioner's statement can constitutionally be prohibited.

We request that this Court affirm the lower court's decision.

Thank you.

Unknown Speaker: --Thank you, Mr. Moran.

Mr. Ennis, you have two minutes remaining.

Rebuttal of Bruce J. Ennis, Jr.

Mr. Ennis: In response to questions from Justice O'Connor and Justice White, the state acknowledged that Illinois does not have a blanket rule which prohibits attorneys from saying they concentrate their practice in civil trials, even though there is no objective standard in Illinois for what concentrate means.

Instead, Illinois reviews those claims under a different rule, Rule 2101, which prohibits any misleading claim on a case-by-case basis.

That is exactly the rule we are arguing for here.

There is no more justification for a blanket ban on this statement than there is for a blanket ban on statements that Illinois... in Illinois that attorneys concentrate their practice.

To the contrary.

Concentrate means something.

In NBTA certification it means the attorney has spent at least 30 percent of his time in the previous five years in civil trials.

Justice Kennedy asked a question about--

Unknown Speaker: Mr. Ennis, I've been thinking about your assertion that the source of confusion said to exist by the Illinois Supreme Court is that they think that certified means certified by Illinois.

I don't think that's what the court said.

I think all the court said is when you say certified by the NBTA the average person would think that that is a permission to practice, that the NBTA is somehow an official organization.

The Supreme Court doesn't say that they'll think that constitutes Illinois approval.

But when you say NBTA> ["] and then under that

"licensed by the State of Illinois. "

I think the... the... the unsophisticated person reading that might well think that... that indeed the more important thing is that you're certified by NBTA, which is, for all they know, some official organization.

Why isn't that correct?

Mr. Ennis: --First, Your Honor, that speculation.

There is no evidence in this record that there is that potential for deception.

Even if there were such evidence, that also could be cured by a simple requirement of a disclaimer statement or by the other regulatory measures we have addressed.

So, as in Zauderer, because the potentially misleading statement can be cured through regulation, a prophylactic ban is impermissible.

Justice Kennedy raised a question about expertise.

In Zauderer the Court ruled that states, quote,

"may not prevent an attorney from making accurate statements of fact regarding-- "

Chief Justice Rehnquist: Your time has expired, Mr. Ennis.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Department of Labor v. Triplett - Oral Argument

Fri, 09 Jan 2009 14:49:17 +0000

Case:

Department of Labor v. Triplett

Media File:

88-1671_19900116-argument.mp3

Related Transcript:

1989_88_1671_argument.xml

Transcript:

ORAL ARGUMENT OF MICHAEL R. DREEBEN ON BEHALF OF THE PETITIONER

Chief Justice Rehnquist: We'll hear argument first this morning in No. 88-1671, United States Department of Labor v. George Triplett, and a companion case.

Now, Mr. Dreeben.

Mr. Dreeben: Thank you, Mr. Chief Justice, and may it please the Court:

The question presented in this is whether the system for awarding attorney's fees in the Federal Black Lung Program violates the due process clause by denying claimants access to counsel.

We believe that the holding below, that the fee system is unconstitutional, is wrong for two basic reasons.

First, there is no adequate showing that meritorious black lung claims are being lost because of the attorney's fee system; or even that attorneys are unavailable for vast numbers of claimants.

Second, evaluated under the Mathews v. Eldridge test, the black lung system does not deny claimants fundamental fairness.

The black lung program is a unique Federal effort to pay disability benefits to eligible coal miners and their survivors.

Under the program, hundreds of thousands of miners have been paid benefits.

The fee regulations are designed to protect claimants by ensuring that no claimant must bear his own attorney's fees in a contested case.

They also provide that no fee will be charged if the applicant does not succeed in obtaining benefits.

These provisions serve the goals of maximizing the use of funds for the benefit of claimants, and relieving claimants of the responsibility of paying fees, win or lose.

Any system of fee regulation will discourage some attorneys from participating.

But in the context of this disability program, in which fee regulation is designed to protect claimants, and where changes to the fee system will impair other important government interests, we believe the Congress and the Department of Labor must have considerable flexibility to structure appropriate procedures.

Unidentified Justice: Mr. Dreeben, this case comes to us in a rather peculiar posture, does it not?

This was not an enforcement proceeding brought by the Department of Labor below--

Mr. Dreeben: That's correct, Justice--

Unidentified Justice: --against some lawyer who accepted unapproved fees.

Mr. Dreeben: --That's correct.

This is a state attorney disciplinary proceeding, in which the respondent collected fees that were not approved by the Department of Labor.

And the West Virginia Committee on Legal Ethics commenced a disciplinary proceeding based on the violation of--

Unidentified Justice: And I suppose that decision doesn't bind the United States, in any event, if it chose to enforce it some other way?

Mr. Dreeben: --That's correct, Justice O'Connor.

We do not believe that the decision binds the Department of Labor, except as to Respondent.

It does have the effect of res judicata as to Mr. Triplett.

And in that sense the United States is bound.

But I think the more fundamental interest that caused us to bring to the Court here is that the decision below, by holding that the fees are unconstitutional, the system for awarding fees, casts a cloud over the legitimacy of the program.

And we believe that the Department of Labor has an interest in establishing that its program is operated constitutionally and does not violate any due process interests.

We are also concerned that this decision may encourage lawyers in West Virginia and in other states to violate the Department of Labor's fee regulations, believing that they can do that with impunity.

And to a certain extent, that may be true, because the Department of Labor does not have an established mechanism to police the attorneys who practice before it and to ensure that they comply with the fee regulations.

Unidentified Justice: Do you... do you think the government has any standing problem here?

Mr. Dreeben: No, Chief Justice Rehnquist, we don't think the government has a standing problem.

The Department of Labor's interest here is in establishing that its fee system is constitutional.

And to the extent that it's bound against Respondent by virtue of having participated in this case as a party, it clearly has the standing of an aggrieved party to bring the case here.

But in any event, there is another petitioner in this Court, the Committee on Legal Ethics has filed its own petition.

It has an interest in continuing to enforce its disciplinary rules against Respondent.

And the sole reason given by the court below for not enforcing its own disciplinary rules was its belief that the fee system is unconstitutional.

Unidentified Justice: Mr. Dreeben, how did you get to be a party below?

Mr. Dreeben: The court, when it issued its initial opinion, invited the Department of Labor to intervene in the proceeding as a party, either to seek rehearing or to file a petition in this Court.

And the Department of Labor did intervene.

It had a limited amount of time to supplement the record, and it did that.

And it filed a petition for a rehearing, which was denied.

And subsequent to that we filed a petition in this Court, as did the Committee on Legal Ethics.

We don't actually believe the Court need to reach the standing question as to the government in this case, because the presence of the Committee on Legal Ethics as a petitioner satisfies any possible standing concerns from [inaudible].

Unidentified Justice: But, Mr. Dreeben, the Committee on Legal Ethics has virtually indicated that it doesn't care one way or the other.

I mean, if there is a... a Federal law that is valid, they're willing to enforce it.

If there isn't, they're not going to.

I... I don't see that they're... they have a real interest at stake here by virtue of what they're saying.

Mr. Dreeben: Well, the West Virginia Supreme Court believed that it wasn't going to enforce the disciplinary rules here, but the Committee on Legal Ethics has brought a petition to this Court, and it does continue to assert an interest in enforcing the disciplinary rules against Respondent.

Unidentified Justice: So what... what business have you got in taking up their cause?

Mr. Dreeben: Well, we believe that we have independent standing as well, because--

Unidentified Justice: Well, then we mustn't reach your standing... the question of your standing?

Mr. Dreeben: --Only if the Court concludes that the Committee on Legal Ethics does not have standing so that the case is not properly in this Court, unless the Department of Labor does.

We believe that either of those grounds would furnish an adequate basis for a decision in this Court.

Turning to the constitutional question--

Unidentified Justice: May... may I just ask one other question in these preliminary matters?

Is there any enforcement proceeding pending, or has the Department indicated any desire to bring an enforcement proceeding against this lawyer?

Mr. Dreeben: --No, Justice Stevens.

The Department actually doesn't have machinery set up to bring its own enforcement proceedings against lawyers.

It really does rely on state bar organizations like the Committee on Legal Ethics to enforce its regulations through the enforcement of their own disciplinary--

Unidentified Justice: You mean if a lawyer just, without regard to local discipline, just went ahead and ignored the regulations and charged people fees that the Department didn't approve and all, there would be no remedy, other than... other than ethical remedy?

Mr. Dreeben: --Well, I wouldn't say that there would be no remedy.

There would be possibly a criminal remedy if there were fraud involved.

Unidentified Justice: No, assume no fraud; just assume they... they think it's a bad statute and the people are entitled to representation, and they're willing to work for a black lung claimant if they get paid.

Mr. Dreeben: There... there is a limited amount of machinery built into the current system that the Department of Labor might be able to draw upon to discipline attorneys or to preclude them from representing claimants in the future.

It doesn't have a... an adequate disciplinary mechanism, because its primary function is really to adjudicate black lung claims and to pay beneficiaries, not to police attorneys.

Now the rules are there, but it's been the long-standing practice of the Department, which it's found satisfactory, to rely on state committees on legal ethics to enforce unlawful fee arrangements.

Unidentified Justice: May I ask also, is... is that also the practice under the Longshoremen's Act, which I guess is the basis for... for this procedure, that they... they don't really enforce the provision, other than relying on local bar associations?

Mr. Dreeben: That's my understanding, Justice Stevens.

I don't think that this has been a major problem in the sense that there has been hundreds of cases that the Department of Labor becomes aware of in which people ignore the fee regulations, and the Department doesn't do anything.

I think cases like this serve a deterrent function, and most attorneys probably are not going to deliberately flout rules that they know are valid.

However, there has been something of a problem in the black lung area, particularly since this case, because some attorneys have notified the Department that they believe that the regulations are no longer valid and they intend to charge contingent fees and to collect 25 percent of back benefits.

And that does directly infringe upon the policy that supports the fee regulations.

We believe that the attorney's fee system is constitutional if evaluated under the Mathews v. Eldridge test, which the court below purported to apply but we believe applied incorrectly.

I'd like to note at the outset that it's notable that this decision rests upon an extraordinarily frail factual record.

There is very little in the record, other... to talk about how the fee system actually affects the incentives of attorneys, other than the affidavits of a relatively small number of attorneys, and some selective citations from congressional testimony.

We do not believe that that is a sufficient record to support a finding of unconstitutionality in dealing with a large-scale benefits program like the one at issue here.

Now, we also believe that it's inappropriate for a court to determine on such a small record that the Department has not acted in good faith to develop adequate procedures.

But, regardless of the criticisms of the record, we also think that the court went seriously astray in applying the analysis directed under Mathews v. Eldridge.

There are two important government interests that are served by the fee regulations.

The first is that benefits go for the benefit of a qualified claimant, or an applicant's survivor, so that the money that the government devotes to this program serves for the support of coal miners and their survivors and doesn't, in effect, turn into a lawyers' relief act, in which substantial amounts of the benefits are diverted to attorneys.

There is also a secondary motive underlying the fee regulation of ensuring that claimants do not make improvident agreements with attorneys.

And for that reason there is an approval requirement even when claimants do bear their own fees, which they do if a case is not contested.

There is a second important government interest that I believe the court overlooked, and that is the following.

Once Congress determined to protect claimants by shifting fees to the losing party, the responsible operator or the trust fund, the government has a substantial interest in assuring that the system under which that party must pay the fees determines the fees fairly.

In other words, it's not appropriate that the fees would be paid before a benefits award is final, because in that event the attorneys may collect the money that subsequently has to be repaid, and this could prove difficult as a practical matter.

Unidentified Justice: May I ask one other preliminary question?

What is the impact of the regulations on the situation in which a potential claimant would like to consult an attorney about whether or not he has a valid claim that he'd like to pursue?

May he do that and pay the attorney for that advice?

Mr. Dreeben: I'm not aware of any case that's actually raised that, Justice Stevens.

But I think we would take the position that that kind of consultation, preliminary to a benefits application, could not be compensated without approval from the appropriate agency.

And if no claim were actually filed, I believe that it would be impossible for the attorney legitimately to charge.

One important aspect--

Unidentified Justice: And what is the government interest that justifies that prohibition?

Mr. Dreeben: --The government interest that justifies that prohibition is in having a program that offers to claimants and their survivors the opportunity to apply without having any risk of paying attorney's fees at all.

There is no reason why a claimant who is not going to receive a benefit under this program pay attorney's fees in order to find that out.

That at least, I believe, is the theory underlying the total prohibition of any attorney's fees, unless the claimant actually prevails.

And so for that... that purpose actually helps claimants, because they can go to an appropriate Social Security office or Department of Labor office and receive a claims information form that tells them here are the basic criteria in the program.

It provides that you will have an attorney and you won't have to pay if you prevail and it's not contested.

And I think that that's a substantial government interest to be able to offer in a disability program of this type that was designed to reach hundreds of thousands of people, many of whom may have no idea whether they actually do have a valid claim, but might be willing to pay two, three, four or $500 dollars to find that out, and would thereby just lose that money.

I was saying that there is a second government interest in this program, and that is to ensure that if fees are to be borne by the losing party, they are determined fairly.

And that support is in the requirement that no fees are paid until a benefits award is final.

It also supports the method of determining fees in this case, which does not permit great multipliers.

It does account, I would like to stress, for both the delay factor and the risk of loss factor that were very heavily relied on by the court below.

The way in which the Longshore Act and the Black Lung Benefits Act account for these two factors is by assuming that the hourly rate of attorneys practicing in this field takes those matters into account.

Attorneys have argued in various papers filed with the government that these methods are not adequate to provide sufficient compensation.

But I think that the answer to that is the statute does call for the payment of a reasonable attorney's fee.

The Department of Labor has interpreted that to include a risk of loss component.

And the attorneys who are dissatisfied with the exact way in which that's been applied can continue to litigate that, and can attempt to obtain a larger benefits award... or a larger award of attorney's fees if they believe it's justified by the statutory criteria.

But any system of awarding fees that is in a sense contingent, which is this one, will have the effect of forcing attorneys to be somewhat selective in the cases that they take.

And we do not think that the... the way in which the Department of Labor has applied this program has denied all incentives for attorneys to take on cases that, after evaluation, appear reasonably meritorious.

Unidentified Justice: May I ask this question?

Supposing the government would advance the same interest in all other claims against the government for which attorneys fees can be recovered if the plaintiff is successful... civil rights claims of one kind or another and claims against the government... would you think that would be constitutional?

Mr. Dreeben: I'm not sure, Justice Stevens, whether it would or wouldn't.

It would... the... it would depend upon a rather particularized analysis of exactly what is at stake in each type of program.

What makes this program special is that it is a Federal disability benefits program in which the government is prepared to come up with money to pay people who satisfy these statutory criteria.

Unidentified Justice: Of course, the government has to come up with money to pay people whose constitutional rights are violated if they sue them [inaudible].

Mr. Dreeben: Yes, that is true.

Unidentified Justice: And I suppose they have to budget for that.

Mr. Dreeben: But I think that the... the... the flexibility that... that is warranted when the... when the... the individual interest at stake is a disability benefit, is somewhat greater than in some of the other areas that... that could be identified, perhaps a Federal torts claims act suit, or a constitutional rights suit.

Unidentified Justice: Mr. Dreeben, I don't understand what you're saying.

I... I thought the government's position was that there is no... no constitutional obligation to provide attorney's fees anyway.

And I assume there is no constitutional obligation to provide attorney's fees for 1983 actions either.

Mr. Dreeben: No, there isn't, Justice Scalia.

But the analysis, I think, would be the same as it is in this case.

One would look at the three factors identified under Mathews v. Eldridge and try to determine whether a fundamentally fair proceeding can be achieved if--

Unidentified Justice: But I thought part of your argument was that Mathews doesn't even apply anyway because this is not the taking away of a... that... that it... it is not a Mathews kind of a benefit.

Didn't the government make that argument here?

Mr. Dreeben: --Well, the... the question of whether applicants have a protected property interest under the due process clause was noted in the opinion below and it's noted in our brief.

But we don't think that the Court need to decide in this case any more than it needed to decide it in the Walters case.

There is at least one beneficiary in this case who is actually awarded benefits, and a... a hearing was to be held to be determine whether the operator's challenge to that award would be sustained or rejected.

And in that context we think that under this Court's cases there is a protected due... property interest that would require appropriate procedures.

And because the court below--

Unidentified Justice: To... to take the benefit away from the person--

Mr. Dreeben: --Yes.

Yes.

The... the--

Unidentified Justice: --But isn't there also a liberty interest involved, if just any ordinary citizen wants to talk to a lawyer about the possibility of suing somebody, and the... and there's a category of cases that you are saying the government could say, no, you can't do that if you have to pay him.

The only way you can consult a lawyer is if he's willing to do it for free.

And you can say that in the black lung area, but you're not so sure about it in the civil rights area.

But is... isn't there... that possibly of some constitutional significance, that just the ordinary citizen's desire to... to get advice?

Mr. Dreeben: --Well, I... I think that there is a liberty interest that could be asserted in that context, but I do not think that it lends any additional weight to the kind of claim that's being pressed in this case on behalf of black lung claimants.

It might have a different significance in some other context.

But here the primary aim is to obtain benefits the Congress provided under an entitlement program to make up for the fact that states were not really adequately affording benefits for this particular occupational disease.

Unidentified Justice: But... but isn't there also another interest?

I mean of course if you file a claim you want to get the benefit, but... but most situations, before somebody gets involved in a lawsuit, the person wants to know whether all the... the turmoil that's associated with litigation is worth the trouble.

And you... you just don't like to have people blithely going ahead and suing.

Sometimes they need... need good advice on whether it's worth the... the mental anguish and all the other difficulties and burdens associated with litigation to get involved in it.

And what you're saying, in effect, is that that decision on whether to assume that cost of prosecuting a claim must be made without the benefit of counsel, unless counsel is willing to work for nothing.

Mr. Dreeben: I... I think that's essentially right.

Unidentified Justice: Yeah.

Mr. Dreeben: And I think that that actually makes some sense in this... in this program.

The... the typical beneficiary is not someone who has a vast amount of resources.

It's probably also not the kind of person who is terribly sophisticated in legal matters.

And Congress can take into consideration in that particular type of situation that there is a danger of exploitation.

And it want... if it wants to avoid that danger of exploitation it sets up a fee system in which the beneficiary doesn't pay fees at the outset.

The program is, in essence, contingent, and the lawyer does have to undertake the initial analysis of the case without the benefit of being paid.

But that is not very unusual in a personal injury context.

In fact I would suggest that it's the norm in any area that's a contingent area.

The lawyer evaluates the case up front to try to decide whether there is a sufficient amount of merit to the case to make it reasonable for him to go forward, or for her to go forward.

Unidentified Justice: In that respect, is this program any different from the Veterans' Administration program that we've upheld?

That is to say, would they have allowed the lawyers to charge fees for initial consultation?

Mr. Dreeben: No, I... I don't think so, Justice Scalia.

I think that the statute there was quite explicit, that... that there was a $10 cap on fees in any context.

Unidentified Justice: For everything.

Mr. Dreeben: And I think that as a matter of statutory construction, this program should be dealt with in the same sense.

That is, that the attorney's fees regulations apply to preliminary consultations just as much as to pressing the actual benefits claim.

Otherwise they would really fail over their fundamental purpose of making sure that the claimants had the opportunity to participate in this program without the risk that they would lose money if their claim did not succeed by virtue of having to pay an attorney.

Unidentified Justice: But suppose it were shown, counsel, that in a significant number of cases, a meritorious claim was not prosecuted because the fee schedule was unreasonably restrictive or unreasonably low.

What would be your position then?

Mr. Dreeben: Well, our... I would like to say at the outset, of course, that we don't think that's been shown in this case.

But if there were some showing that the fee system actually was preventing people from getting counsel, we still think that this program would be constitutional as applied.

The reason is that the Department of Labor has taken some significant steps to ensure that even if a claimant does not have counsel he has a fair opportunity to press his benefits claim.

And we do not think that the risk of a loss without an attorney is so significant in the context of this program that the fee system should be invalidated and the government interests supported be denied in order to allow some people to get lawyers.

The program is--

Unidentified Justice: Well, part of my hypothetical was that a significant number of meritorious claims were not prosecuted as a result of the low fee schedule or restrictive fee schedule.

And I think your answer was, oh well, the act allows those claims to be prosecuted anyway.

But you then took away one of my factual predicates.

Mr. Dreeben: --Your assumption, Justice Kennedy, is that people would not pursue the claim--

Unidentified Justice: Yes.

Mr. Dreeben: --Pro se at all?

Unidentified Justice: Yes.

Mr. Dreeben: Again, I would note that there isn't a showing of that's happening.

That would be a different case and perhaps a harder case, because it might suggest that in some sense the program is so inhospitable to pro se claimants that they refuse to participate.

Unidentified Justice: But what would be... what would be the grounds for the constitutional objection, the First Amendment ground that you were barred from seeking an entitlement?

Mr. Dreeben: I'm not really sure what constitutional provision would be involved.

The first question would be whether the Court was prepared to say that someone who has a... someone who was an applicant has a protected property interest.

We would dispute that, and if that contention prevailed then there would be no constitutional issue, other than either a First Amendment or some sort of a liberty issue in consulting counsel, and it's not clear to me that either of those interests would be sufficient to determine that this program is unconstitutional.

This is, after all, a program in which Congress is attempting to supplement financial benefits for a certain category of workers, and it sets up a program which it believes is fair.

And unless there's a showing that it's fundamentally unfair to people who proceed pro se, the decision of some individuals not to proceed pro se probably would not be a ground [inaudible].

Unidentified Justice: Do you think the... do you think there's a... Justice Scalia brought this up.

Do you think there's a constitutional right for the government to pay for counsel and before... in a hearing to determine the entitlement to benefits?

Do you think there's a constitutional right to counsel in this case?

I... I... perhaps there is, as in Goldberg, if the party wants to hire one, you have to permit the counsel.

But is there a constitutional right to provide counsel?

Mr. Dreeben: No, I don't think that there is a constitutional right to provide counsel.

This isn't a case like Gideon v. Wainwright, or Lassiter v. Department of Social Services.

Unidentified Justice: Well Goldberg... Goldberg said that the government doesn't need to provide counsel in a pre-termination hearing--

Mr. Dreeben: That's correct.

Unidentified Justice: --But that the claimant has the right to--

Mr. Dreeben: That's correct.

Unidentified Justice: --hire his own.

Mr. Dreeben: That's correct.

But in Walters, the Court noted that the program at issue in Goldberg didn't have a policy against prohibiting the welfare applicant from dividing his check with the lawyer, and that policy is very clearly present here, just as it was present in Walters, and thus there has to be some sort of a weighing process to determine whether the program becomes fundamentally unfair if somebody does not have free and unrestrained access to lawyers.

Unidentified Justice: But weren't you suggesting, in answer to my and several other questions, that there is constitutional authority to prohibit counsel?

Mr. Dreeben: I think there would be constitutional authority to prohibit counsel, provided that the procedure itself is designed to operate without lawyers, which was the case in the Walters decision.

It really is not the case here to the extent that the Department of Labor actually wants lawyers out of the system.

It doesn't want lawyers out of the system.

What it does is provide what it believes is fair compensation for lawyers, and it provides a procedure where, if somebody does not proceed with a lawyer, they still have a fair chance to establish their claim.

And it balances various factors.

It tries to ensure that government money is essentially applied to the benefit of beneficiaries, it tries to ensure that claimants don't squander their fees consulting attorneys when they don't have a valid claim.

And we think that Congress really needs to have a considerable amount of latitude to structure these types of programs within the general bounds of fairness.

Unidentified Justice: But do you think that latitude would go to the extent that where the Defendants can have lawyers, as I guess they can here, the government could say that those interests would best be served by flatly prohibiting lawyers for all claimants because they'll get a fair hearing, the tribunals will look out for their interests, and so forth?

Mr. Dreeben: I think that would be a much harder case.

Unidentified Justice: Well, sure it would be a harder case, but what do you think about the... outcome of that case?

Mr. Dreeben: Well, it would really depend on whether in analyzing the specific procedures that claimants without counsel could get a fair hearing.

I think it's possible.

I think the closer that you move to a pure adjudicatory model and you unbalance the scales by allowing one side to have lawyers and the other side not--

Unidentified Justice: Well, we do have an adjudicatory model here, unlike the Veterans system, because the government doesn't pay the awards here, and the people who do have their own lawyers.

Mr. Dreeben: --Well, the government does pay a substantial number of awards.

Unidentified Justice: Well, but not in one category.

Isn't one category entirely financed by the operators?

Mr. Dreeben: Yes, it is.

Unidentified Justice: Well, I'm directing my question to that category.

Mr. Dreeben: Well, as to that category, of course, the government isn't paying but it still does provide a variety of protections for claimants.

The initial stage of the process is not adversarial.

It's a claims examiner which helps.

Then the ALJ proceeding is really not like a proceeding in Court.

Obviously, evidentiary rules don't apply, and the ALJs do take some steps to assist the pro se claimants.

And finally, the Benefits Review Board reviews with particular care any case brought up by a pro se claimant.

Unidentified Justice: And the question is whether all of that is sufficient if, say, one side can have a lawyer but the other side can't.

Mr. Dreeben: In a certain category of cases that's correct.

Unidentified Justice: Do you think it would be sufficient?

Mr. Dreeben: I think that that is sufficient in this case.

I'd like to reserve the balance of my time.

Unidentified Justice: Very well, Mr. Dreeben.

Ms. Moran?

ORAL ARGUMENT OF JANE MORAN ON BEHALF OF THE RESPONDENTS

Mr. Moran: Mr. Chief Justice, may it please the Court:

A very interesting thing happened in this case when it was in front of the West Virginia Supreme Court.

As you've been told, the Department was given the opportunity to petition for a rehearing, which they did, and they filed a motion asking to be allowed to supplement the record, which was granted.

Now, one would assume that the Department at this point would put together the very strongest evidence that they had to convince the West Virginia Supreme Court that their findings were incorrect.

Included in the evidence that they presented was an affidavit by their own chief administrative law judge, Nahum Litt, and that affidavit is interesting both because of its brevity and because of the limits of its scope.

It does not challenge the findings of the court that too many pro se claimants are being forced to proceed without counsel.

It does not challenge the assertions in the briefs below that only 12 attorneys in the entire State of West Virginia will take these cases on a regular basis.

In fact, he goes into some detail explaining the very unusual efforts that are being made by his administrative law judges to help people to find the counsel that will take these cases.

The reason for this can be found in his testimony before the Congressional Subcommittee on Government Operations in June of 1985.

Judge Litt was asked at that time what could be done about all these attorneys complaints about delays, meaning delays in processing of claims, delays in processing fee petitions.

Judge Litt responded, and I quote,

"I have not addressed what other avenues might be explored that would change that and provide for better representation."

"One of the fears I certainly intend to stress is if you go to a larger and larger number of cases being tried in a given year with a finite number of attorneys who are willing to take these cases, that we will end up with more and more claimants being pro se, and being poorly represented in an ever-increasing complex area of law."

This was in June of 1985, and the Department of Labor now tells the Court that they have never kept any statistics that would tell them how often people are represented in front of the administrative law judges.

Unidentified Justice: Ms. Moran, I don't... it seems to me that... I don't know that we can very well tell how many people are not being represented on the basis of scattered indications by Judge Litt or anybody else if there are no impossible for me to predict whether they are going to do the things that I think they should do.

And our problem right now, which has been recognized by the West Virginia Supreme Court, is that we have many black lung claimants with good claims that are being lost because of the manner in which the law is being applied by the Department of Labor.

The briefs would have this Court believe that 92 percent of the black lung claimants are being represented.

This figure is grossly misleading, and I would ask the Court to look very closely at the source of these figures.

The Department tells us that they have never kept any statistics on this, so in December of 1988 they had their employee, Miss Denney, go to the administrative law judge's office, and she reviewed approximately 3,700 files which had been docketed with the administrative law judge's office in fiscal 1987.

In December of 1988, she found that 77.1 percent of those cases had been either dismissed, remanded, or she found no decision there.

In December.

This is one year... over one year--

--Now, where do we find this, counsel?

This is in the record of the supreme court... the state supreme court?

Mr. Moran: These figures that I'm giving you statistics.

But even if we could, can't Congress make the judgment that even though a large number of people might not be able to get counsel, in our judgment it's worth it to enable more funds to be dispensed to those who are seriously enough harmed that they have enough incentive on their own, without having to get counsel, to go... to go and make claims?

Why would that be an unreasonable judgment?

It all comes out of the same pot.

Well, Your Honor, I would say first of all I don't think Congress has made that judgment.

I don't think it's that clear.

I think Congress has indicated some very serious concern about this, and they continue to have hearings on the question of attorney's fees and the sufficiency of attorney's fees and the availability of counsel.

Unidentified Justice: So if what you say is correct, why do we have any reason to believe that Congress won't change?

And they're in a much better position than we are to figure out whether people who should be represented aren't?

Mr. Moran: Well, Your Honor, I mean no disrespect when I say it's very hard for me to figure out why Congress does much of what they do, and it's now, Your Honor?

Unidentified Justice: Yes.

Mr. Moran: These are in the evidence that was submitted by the Department of Labor to the West Virginia Supreme Court.

Unidentified Justice: Let me ask you, the Supreme Court made some of its own findings of fact at the appellate level in the state system?

Mr. Moran: They made findings of fact, Your Honor, based on the affidavits of the attorneys which were submitted to the Court, the testimony that had been given in the ethics hearing, two congressional hearings in which... I believe there was eight attorneys testified.

Judge Litt testified.

Unidentified Justice: Is your challenge to the statute a facial challenge?

Mr. Moran: No, as it's applied, Your Honor.

Unidentified Justice: As it's applied in this case?

Mr. Moran: As it's applied in this case and generally in West Virginia, that the fee structure--

Unidentified Justice: Did the Department of Labor in the state Supreme Court ask the case be remanded to the trial court for further findings?

Mr. Moran: --No, they did not.

Unidentified Justice: This all arises out of a Department of Labor regulation, doesn't it?

Mr. Moran: It arises out of Mr. Triplett's failure to comply with the Department of Labor regulation, yes, Your Honor.

Unidentified Justice: Well, the regulation is what sets the fee, isn't it?

Mr. Moran: Well, the regulation does not set the fee, no.

There is no--

Unidentified Justice: Well, it sets--

Mr. Moran: --Standard fee.

That is determined... when an attorney applies for fees, he must... he must--

Unidentified Justice: --Is it the regulation that sets consent?

Mr. Moran: --Pardon me, Your Honor?

Unidentified Justice: Do you have to have... does the regulation or does the statute say that you need consent to have a--

Mr. Moran: The regulation.

Unidentified Justice: --Well, isn't that what's at issue here?

Mr. Moran: Yes, and that's why I argue, Your Honor, that the--

Unidentified Justice: You must argue that the regulation is inconsistent with the statute.

Mr. Moran: --I argue... yes, that it is inconsistent with the intent of the black lung law.

Unidentified Justice: And you say that there's no basis for the Department of Labor to construe the statute the way it has under its regulation, is that right?

Mr. Moran: I say that it is inconsistent with the intent of the law, and that the effect of it is to prevent people with good claims from getting an attorney.

Unidentified Justice: So you think it's just irrational to construe the statute in this way, that there's no other way to construe the statute other than what you urge?

Mr. Moran: Let me say, Your Honor, one of the positions that the Department of Labor has taken is that we are holding out for straight contingency fees with no regulation.

That is not our position.

It has never been our position.

We think that regulation is appropriate.

We have... the first thing that I am asking this Court today is to support the West Virginia court in their... in their finding that the statute is unconstitutional as it is applied.

However, we have other suggestions that we would make.

Unidentified Justice: Ordinarily, we wouldn't get to the question of whether the statute is unconstitutional as applied until... if you're arguing that the regulation isn't supported by the statute.

And if you were to accept that--

Mr. Moran: I think... I must say it is not supported by the statute, because I think it's effect is inconsistent with the statute and with the intents of the statute.

Unidentified Justice: --Do you have anything more to say on that subject?

I mean, ordinarily we give a considerable deference to the views of a Department to whom Congress has confided the administration of the act as to regulation.

Mr. Moran: Well, Your Honor, I have... I would say in response to that, that we now have in excess of a 96 percent denial rate on initial application, and after three levels of appeal we only add 1 percent to that.

I think that we have to ask whether Congress put this whole system together for 4 percent of the people who are applying for benefits to be able to qualify, and that one of the problems is, these cases come down again and again.

Unidentified Justice: I think maybe they're very... maybe they're very generous at the first level.

I mean, that would explain it as well as anything else.

Mr. Moran: No, Your Honor, I'm saying--

Unidentified Justice: I mean, this is a benefits program.

I assume that Labor regards this as a benefits program.

Mr. Moran: --I'm saying that they're denied.

That there are more than 96 percent of the cases denied at the initial level.

Unidentified Justice: At the initial stage?

Mr. Moran: That's correct.

Unidentified Justice: What were you saying about the appeals?

Mr. Moran: There is only 1 percent added to that.

There is an overall denial rate of 5 percent... of 95 percent.

Unidentified Justice: I suppose there are an awful lot of the 96 percent that are denied have counsel.

Mr. Moran: No, Your Honor.

That... I was trying to break down this figure--

Unidentified Justice: What percent of that?

Mr. Moran: --I don't have that figure, Your Honor.

The only people who have those figures are the Department of Labor, and the only figures that we have available are the findings of Miss Denney, and what Miss Denney's figures come down to is that she looked at 800... well, if I may go back.

She found that 77.1 percent in over a year after being filed with the administrative law judges have gone nowhere, and it is our position that the figure of representation on that 77.1 percent would be the most informative figure for this Court.

Unidentified Justice: Miss Moran, I guess they aren't allowing reasonable fees then.

I mean, if they are not... if lawyers are not coming into the system, the fees being allowed are not reasonable.

Mr. Moran: Your Honor, they are not reasonable for the amount of work that is entailed, for the level of expertise that is involved and for the delay in receiving fees.

Unidentified Justice: Well, you don't have any argument with the agency over that.

They say that they're supposed to be giving out reasonable fees.

It seems to me that what you should be litigating is before the agency whether they are giving out high enough fees.

But the... I mean, the system can work so long as they give high enough fees, isn't that right?

There's nothing inherently bad about the system.

Mr. Moran: But, Your Honor, what... how do we determine the fee for the affidavit before the Supreme Court saying... from the attorney saying that he has been owed $30,000 in fees for upwards to ten years, for close to ten years?

Unidentified Justice: Well, however you determine it, it doesn't render the statute unconstitutional.

It just means the agency is not giving high enough fees to bring lawyers into the system.

Isn't that your basic complaint?

Mr. Moran: Well, Your Honor, I believe, based on the prior decisions of this Court that when we find that, whether it's the fee or whether it's the handling, the processing of the fee, if generally the effect of this is to be inadequate, then the regulation is improper.

It is inconsistent with the intent of getting these benefits to worthy recipients.

Unidentified Justice: The regulation says reasonable fees.

I mean, it seems to me what's the matter is that in each case enough fee is not being given, and the lawyers should litigate to get more fees.

It seems to me that that's the solution.

Every time an agency doesn't live up to its regulation, we don't strike the regulation down.

We say you have to live up to it.

Mr. Moran: If I may, Your Honor, the other problem along with the actual dollar amount of the fee are the inordinate delays in waiting for them, the fact that the attorney who tells us he's owed $30,000 in fees is not going to receive one cent of interest on those fees.

There is a procedure that requires the attorney to submit a petition at each level.

At first at the deputy commissioner, at the ALJ, the Benefit Review Board... each one of those persons who determine that fee may come up with a different level.

Therefore, it is impossible to predict what fee is going to be paid.

Unidentified Justice: If he's not getting interest, he should get higher fees.

I think a fee without interest should be higher than a fee that draws interest until the time it's paid, and that argument should be made to the agency.

Mr. Moran: Well, Your Honor, with all due respect to the agency and to this Court, I don't that the Department of Labor administrative law judges or the deputy commissioners are going to provide for fees for the lack of interest.

They are going to take the position that nobody is telling them that they have to pay interest.

Unidentified Justice: Take them to court.

Mr. Moran: Well--

Unidentified Justice: And you will get a judge under the Administrative Procedure Act to say this is arbitrary and capricious action.

You have a regulation that says reasonable fees.

You are not paying reasonable fees.

Mr. Moran: --Your Honor, I have taken them to court in the vehicle that I had to work with.

Unidentified Justice: When would... when would this lawyer who... who didn't get consent of the agency, when would he get paid, if he won?

Mr. Moran: You're talking about my client now, Your Honor?

Unidentified Justice: Yes.

Mr. Moran: In fact, my client has returned every cent of fees that he received.

Unidentified Justice: Well, I... I know, but here... here's a lawyer who says I should be free from this consent requirement.

I should be able to make my own deal with a particular client.

So, he says he... he... establishes... he... he makes a contingency arrangement with them.

Now, he isn't going to get paid until there's a final decision, is he?

Mr. Moran: That's correct, until... until--

Unidentified Justice: And so the... that's going to be considerably delayed, I suppose.

Mr. Moran: --Well, I... I think we could compare what happens--

Unidentified Justice: Would he be paid any sooner than he would be under the... under the--

Mr. Moran: --Oh, yes, Your Honor.

The litigation over attorney's fees and... and the affidavits that were submitted to--

Unidentified Justice: --It takes as long after the final decision--

Mr. Moran: --Yes, that's correct, Your Honor.

Unidentified Justice: --to... to litigate attorneys fees as it did to get the liability judgment, I guess.

Mr. Moran: I don't know whether I can absolutely balance the two--

Unidentified Justice: Yeah.

Mr. Moran: --but the affidavits that were submitted to the West Virginia Supreme Court show that there are considerable periods of time of waiting after the fee is approved.

Unidentified Justice: And of course he isn't going to get paid at all if he doesn't win?

Mr. Moran: That's right.

That's correct.

Unidentified Justice: But how does... how does that bear on the validity of the regulation?

It doesn't seem to me there is anything in the language of the regulation that imposes that delay.

Mr. Moran: Well, the language of the regulation directly applies to the... the necessity to submit fee applications to different bodies, to different judicial bodies and... and as is explained in the affidavit, one of the things that happens is you present a petition to the deputy commissioner.

The file is in the administrative law judge's office, and it takes two years to get from the administrative law judge's office back down to the deputy commissioner.

This is specifically what is described in the affidavits.

Unidentified Justice: Well, isn't it hard to say that the regulation that calls for the payment of reasonable attorney's fees, isn't it hard to say that's inconsistent with the statute?

What... what should the regulation say?

Mr. Moran: Well, I... I'm not arguing with the... with the reasonable attorney's fees, Your Honor.

I'm arguing with the method that one must use to attach the--

Unidentified Justice: And is there any... do you think there's any... anything inconsistent with the statute to require consent for a private agreement?

Mr. Moran: --To require the Department's consent?

No, Your Honor, I do not find some kind of regulation to be inconsistent.

Unidentified Justice: Well, then, what's wrong with this regulation?

Mr. Moran: The regulation is that they have created a very cumbersome manner of us collecting the fees which adds a great deal of time to the... to the time involved for processing, and also that when... when this is applied, that a reasonable fee becomes less reasonable when you have to wait ten years for it.

Unidentified Justice: Well, then, you... you really don't argue on the same basis, then, as the Supreme Court of West Virginia did or... the... it's holding was that the statute was unconstitutional.

You're really not arguing that?

Mr. Moran: No, no, they're not... no, Your Honor, they do not argue that the statute is unconstitutional.

They argue that it is unconstitutional as applied.

I mean, that's their position, that it is unconstitutional as applied.

Unidentified Justice: Well... what... what's the... what's the difference?

You... the... you mean it was unconstitutional as applied to Mr. Triplett?

Mr. Moran: And as generally applied in the state of West Virginia.

Unidentified Justice: Well, what... what's the difference between saying a statute is unconstitutional as generally applied in the state of West Virginia and saying it's unconstitutional in toto?

Mr. Moran: I would say the regulation that is between the two, between the statute and the application, and... and that is what we're attacking... is that the regulation creates such a cumbersome way of... of proceeding.

I... I--

Unidentified Justice: Are you... are you claiming that the statute is... is unconstitutional?

Mr. Moran: --I am claiming that the... the regulation is an unconstitutional application of the statute.

Unidentified Justice: Well, but there is... do you really need to say that the... if the regulation doesn't conform to the statute, I would think say it... it's not supported by the statute.

It's not authorized by the statute rather than it's an unconstitutional application of the statute.

Mr. Moran: Well, it is unconstitutional, Your Honor, in that the method in which it's applied prohibits people access to counsel to represent them in their claims.

Of the 23 percent that Ms. Denney found an indication of an award or a denial of benefits, she tells us that claimants with counsel had a better than two-to-one chance of winning as compared to those who did not have counsel.

Every piece of evidence that was in front of the West Virginia Supreme Court indicates that there is a serious problem in the availability of counsel.

In addition, in our brief we cite a Law Review article by Alan Prunty and Mark Solomons.

Alan Prunty is the head of the administrative... the administrative head of the Black Lung Division of Jackson & Kelly, which is a law firm in Charleston that represents more responsible operators than any other law firm in the country.

Mr. Solomons was with the Department of Labor from 1983 until 1980 and has appeared many times in front of this Court.

Both Mr. Prunty and Mr. Solomons concur with the findings of the West Virginia Supreme Court.

They recognize this as a real and a widespread problem, and their article says it will not be resolved until there is some accommodation in the attorney fee structure.

Probably the single most important failing in Ms. Denney's statistics--

Unidentified Justice: Excuse me, Ms.... Ms. Moran, if some accommodation in the fee structure... what do you seek from this Court?

Mr. Moran: --I seek from this Court--

Unidentified Justice: Do you want us to write a whole new structure or... or--

Mr. Moran: --No, Your Honor, I'm not asking that.

I think that appropriately that is to be done by the Department of Labor.

However, if we have suggestions I am asking that this Court uphold the West Virginia Supreme Court's ruling that it is unconstitutional in its application.

Unidentified Justice: --Well, but wait.

It... it seems to me that in order for the individual who's been... who... who's been charged with practicing unlawfully, in order for him to vindicate himself against that charge, we would have to strike down that... we would have to say under no circumstances is it valid to prevent a lawyer from charging a fee that isn't approved by the agency.

Don't we have to find that that provision could not under any reasonable system be left in place?

Mr. Moran: No.

And I think--

Unidentified Justice: We don't have to say that?

Mr. Moran: --I think that's a very important point for me to make if I have failed to do it, Your Honor.

I think that is the position that the Department of Labor is taking, that we are... we are asking for an absolute bar of regulation.

We are not.

We do not find it inappropriate that there is some form of regulation, and the amicus brief supports us in that.

Unidentified Justice: Well, how does this lawyer win, then, if it's okay to prevent him from charging a fee that isn't approved by the agency?

If your only complaint is the agency is not approving high enough fees, he loses.

Mr. Moran: That's... that's not my only complaint, Your Honor.

I am also complaining that the system is so burdensome that it is a disincentive to attorneys to take the cases.

Unidentified Justice: No, but don't you have to establish--

Mr. Moran: --along with the actual dollar fee.

Unidentified Justice: --that it's burdensome in the specific respect that it requires a lawyer to get his fee approved by the agency?

That is... that is what this lawyer was charged of... charged with.

That's the provision he violated.

If you don't establish that that provision is unconstitutional, is... could not be there in any good system, then it seems to me he was properly--

Mr. Moran: Your Honor, I think what the West Virginia Supreme Court says is that it... it's more complex than that, that he was... that he was asked to seek approval of a fee which is being controlled in an unconstitutional manner.

I think... I think the Supreme... the West Virginia Supreme Court finds that it is a rather complex system that he was being asked to follow.

It's not... the... I don't think the Supreme Court has said that it an absolute bar on regulation.

One thing that it is very important to communicate to the Court that is... that was missing from Ms. Denney's figures is the picture of representation on the other side, which has always been an important factor to this Court in determining due process issues.

In fact, the benefit trust fund is always represented by the Solicitor General's office.

It is virtually unheard of for an identified responsible operator to appear unrepresented.

These claims... the actuarial tables cited in our brief show that these claims are worth $150,000 over the lifetime of the coal miner and his family, and responsible operators are--

Unidentified Justice: --Ms. Moran, may I ask one... may I ask one other background fact?

Mr. Moran: --Yes, Your Honor.

Unidentified Justice: These claims, as I remember during a period before '73 or 4 sometime, were administered by HEW rather than the Secretary of Labor and the government picked up the tab.

Mr. Moran: That's correct.

Unidentified Justice: Did the HEW have the same rules about attorney's fees that labor does?

Mr. Moran: Well, I think at the very beginning, Your Honor, they were using the same system that we use now with social security which... it requires regulation.

It requires fee approval.

But the understanding was that the attorneys could get up to 25 percent of the back benefits.

When they went from--

Unidentified Justice: So, it was the social security system rather than the... than this particular labor--

Mr. Moran: --They were applying the system that is used by the social security system, yes.

Unidentified Justice: --I see.

Mr. Moran: And also, a thing that has to be considered in evaluating that, Your Honor, is like the Walters VA system.

At that time it was a user-friendly system.

The approval rates were very high, and it... the government... the representatives of the government were obliged to help people with their claims.

In fact, counsel for the Department of Labor... it... there is regulation in the black lung regulations that provide for appointment of counsel.

And at one point the Department of Labor did provide counsel for claimants to represent an initial award when it was being challenged by the responsible operator, which it is 90 percent of the time.

They also... the Department of Labor also provided informal conferences, as the Social Security Administration does, to work with people and to help unrepresented people put their claims together.

Both of those practices have been discontinued without any explanation.

There's... I would contend that this is a clear recognition on the part of the Department that people need help.

The Department of Labor argues that we should use fundamental fairness, and I would go along with that.

That's fine.

Goldberg and Mathews tell us that it is... fundamental fairness is a procedure that is tailored to the capacities and circumstances of those to be heard to ensure a meaningful opportunity to be heard.

The Department of Labor argues we can't provide for better representation of claimants because it will cost money and because it will make the process more adversarial.

In other words, if we ensure that claimants are as well represented as the operators and the trust fund, there's a real danger that eligible miners who are now being lost in the morass are, in fact, going to be able to successfully pursue their claim and they're going to demand benefits.

The West Virginia Supreme Court found that this was an unconstitutional kind of fiscal responsibility which is denying the benefits that Congress has promised to sick old coal miners who, by the way, the Department of Labor tells us three-quarters of the claimants never attended high school.

So, we have the... these sick old coal miners with less than a grade school education defending their claims against highly paid, skillful experts in the field of black lung law.

It is not surprising that we only have a 5 percent approval rate at this time.

The West Virginia Supreme Court found that this was unacceptable and cannot be tolerated.

Thank you.

Unidentified Justice: Thank you, Ms. Moran.

Mr. Dreeben, you have two minutes remaining.

REBUTTAL ARGUMENT OF MICHAEL R. DREEBEN ON BEHALF OF THE PETITIONER

Mr. Dreeben: Thank you, Mr. Chief Justice.

The low approval rate in the program as it's currently structured is not an accident.

Congress was aware when it tightened the eligibility criteria in 1981 that there would, indeed, be a low approval rate, and there is no showing in this record or anywhere else that I'm aware of that that low approval rate flows from the presence or absence of counsel in a particular case.

The respondent has relied quite heavily on the affidavit of Ms. Denney.

I would only suggest that affidavit indicates that there is a higher rate of representation than Respondent would have one believe, and the burden in this case was not on the Department of Labor to establish the constitutionality of its program.

The burden was on whoever challenged it to establish that it was not constitutional.

And, finally, the regulation that governs fees, we believe, is consistent with the statute and can be applied consistently to provide a sufficient incentive for lawyers to come into the system.

Unidentified Justice: Mr. Dreeben, am I correct that the agency concedes that the rate has to be high enough to allow for the contingency?

Mr. Dreeben: Justice Scalia, the agency construes a reasonable attorney's fee to include a component for risk of loss and for delay.

There's going to be some fighting about how you determine those two factors, and I don't think that the Department would agree with some of the proposals that have been made to it to give a multiplier of two, three, four, five or six because of the contingency factor.

In any area where there's a contingency factor lawyers are going to be selective, but I think that's a good thing, not a bad thing, and the regulation is adequate to provide a sufficient fee, we believe.

And if the lawyers disagree, they can litigate that issue.

Thank you.

Chief Justice Rehnquist: Thank you, Mr. Dreeben.

The case is submitted.

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Flight Attendants v. Zipes - Oral Argument

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Flight Attendants v. Zipes

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ORAL ARGUMENT OF STEVEN A. FEHR ON BEHALF OF PETITIONER

Chief Justice William H. Rehnquist: We'll hear argument next in No. 88-608, Independent Federation of of Flight Attendants v. Anne B. Zipes.

Mr. Fehr: Thank you.

Mr. Chief Justice, and may it please the Court:

This case involves an award of attorney's fees pursuant to Section 706(k) of Title VII in favor of the settling plaintiffs and against a union when that union was not a defendant and intervened only because the settlement agreement would override the union's contract and impair the seniority rights and job security of its members.

Petitioner IFFA is the labor union which represents TWA's flight attendants.

In 1970, the union which formerly represented TWA's flight attendants filed charges in this class action suit challenging TWA's practice of terminating all flight attendants who became mothers.

The class was defined as all flight attendants so terminated from 1965 forward.

Two months later, the union successfully negotiated the elimination of the "no-mothers" policy pursuant to a new collective bargaining agreement.

The case was settled in 1971, but the Seventh Circuit reversed the district court's approval of that settlement because of a conflict of interest it perceived between the union's obligations to the class members on one hand and its duties to represent the incumbent employees on the other.

And it was those same duties, of course, which brought about IFFA's intervention years later.

But, at that point, in 1973, the union and union counsel were replaced as class representative and class counsel by the parties and counsel who had brought that appeal.

In 1976, the district court held that TWA's policy was indeed illegal and that all plaintiffs had timely claims for the reason that TWA had engaged in the so-called continuing violation.

The Seventh Circuit reversed again in 1978, holding that while the policy was illegal, TWA had not engaged in a continuing violation, and that the claims of 92 percent of the plaintiffs were therefore time-barred.

In response to a secondary argument made by plaintiffs to the effect that TWA had waived its timeliness defense, the Seventh Circuit said that it need not address that issue because the Title VII time limit was a jurisdictional prerequisite which could not be waived.

The plaintiff sought certiorari on the jurisdictional issue only.

TWA cross-petitioned, but consideration of those petitions was deferred when the parties announced yet another settlement.

Pursuant to this new settlement, the class was divided into two subclasses; Subclass A consisting of the approximately 30 women with timely claims, and Subclass B consisting of the approximately 400 women with untimely claims.

TWA was to pay $3 million, one half to each subclass.

Counsel fees were to be deducted from the settlement fund.

Plaintiffs were to be able to regain their jobs and obtain a grant of retroactive competitive seniority from original date of hire through the date the settlement agreement was signed in 1979.

And, last but not least, the settlement agreement specifically purported to supersede prior, current, and future collective bargaining agreements.

At that point, in 1979, IFFA, which had come into existence in 1977, intervened to contest the grant of seniority to the class members because of the effect we believed that seniority would have upon the incumbents.

As part of our arguments, we contended that if in fact there was no subject matter jurisdiction over the claims of Subclass B, as the Seventh Circuit had already held, then the district court had no power to grant seniority to those individuals and override the collective bargaining agreement on behalf of those plaintiffs with jurisdictionally defective claims.

The district court overruled that argument, saying that it need not heed the opinion of the Seventh Circuit finding a lack of jurisdiction for the reason that it was not final.

The Seventh Circuit overruled us for an entirely different reason, holding that a district court need not have subject matter jurisdiction to issue orders pursuant to a settlement agreement.

IFFA petitioned for certiorari, and in March of 1981 our petition was granted on two issues, including the question of whether a district court had power to issue orders pursuant to a settlement agreement in the face of a holding by its court of appeals that jurisdiction was lacking.

At the same time, however, the court granted the petitions of TWA and plaintiffs which had been held in abeyance since 1978.

In the Zipes opinion in 1982, the Court chose not to decide the jurisdictional issue we had framed in No. 80-951 but, instead, decided that the Seventh Circuit had been wrong when it had previously held that the Title VII time limit was a jurisdictional prerequisite which could not under any circumstances be waived.

The Court went on to affirm the orders approving the settlement and granting seniority to the plaintiffs.

Now, the primary reason IFFA had fought the grant of seniority was that it feared that the TWA flight attendant work force was about to enter a period where it would not only not expand but actually significantly shrink.

As it happened, from mid-1979 when the settlement was announced, until mid-1983, TWA furloughed several hundred flight attendants and hired none.

When expansion finally came, those openings went not to the incumbent furloughees, but to the plaintiffs because of the seniority granted to them.

The reentry of hundreds of plaintiffs into the work force blocked the recall of 159 furloughees who eventually dropped off the employment rolls due to a five-year contractual limitation on furlough status.

And, finally, we get to the subject of attorney's fees.

In 1982 plaintiff's counsel sought and were awarded nearly $1.4 million from the $3 million settlement fund.

Of that amount, $1,250,000 was paid for pre-settlement work at a multiplier of two.

Meanwhile, the typical Subclass B member who had been away from her job as a flight attendant for 13 to 18 years, received approximately $2,000 in back pay.

Counsel also sought fees against TWA and IFFA for the litigation in regard to the settlement, and in 1986 the district court denied the request for further fees against TWA, holding that plaintiffs had waived any further fees from TWA in the settlement agreement.

However, the district court assessed fees against IFFA in an amount exceeding $180,000 because, in the view of the district court, prevailing plaintiffs are almost automatically entitled to an award of attorney's fees.

Last year, a divided Seventh Circuit panel affirmed.

All of this Court's decisions regarding civil rights attorney's fees from Piggle Park, to Christiansburg, to Garland last month, make it clear that equitable considerations are paramount.

As Justice Stewart said in Christiansburg, 706(k) does not even invite, much less require, a mechanical construction.

Accordingly, we believe it appropriate to consider the very difficult, perhaps nearly impossible, quandary which IFFA faced when it intervened in 1979.

And that dilemma was brought about not just by the facts I've outlined, but also by the changing state of the law, as best demonstrated by the then very recent decisions of this Court in the Franks case in 1976 and the Teamsters case in 1977.

In Franks, the Court held that successful Title VII plaintiffs are ordinarily entitled to a grant of retroactive competitive seniority unless that seniority will have unusual adverse impact upon the incumbents.

Now, Franks gave us some problems.

First, Franks was decided against the background of a final determination of liability.

The timeliness and violation issues had been finally determined in favor of plaintiff's, as emphasized in Justice Steven's opinion in the Evans case the next year.

So, arguably, the Franks standard did not even apply to our situation.

Second problem.

What is unusual adverse impact?

Well, we thought the seniority would affect peoples' ability to hold their jobs.

Surely, that is adverse.

Arguably, it is the most adverse affect an employee can feel in a Title VII case.

Is it unusual?

We would certainly hope so.

And, thus, we thought we could meet the Franks standard even if it applied.

But our third problem was the most difficult.

How do you prove it?

The standard requires the union or the incumbent employees to present evidence looking forward, evidence which is necessarily speculative and conjectural.

And, in retrospect, I must say that no one took our speculation seriously.

In fact, the Seventh Circuit, one year after IFFA's intervention, despite the fact that during that year TWA had furloughed hundreds of flight attendants and hired none... a fact of which the court was aware... overruled our arguments in significant part in reliance upon previous testimony before the district court to the effect that this settlement is no problem, it will not affect the incumbents, as a result of normal expansion and attrition, we can absorb all of these class members in less than one-half year.

Unfortunately, it did not happen.

Looking back, obviously, our arguments have more force than they had looking forward.

To use the language in Christiansburg, although we may have presented facts that appeared questionable or unfavorable at the outset, clearly IFFA had an entirely reasonable ground for bringing its claims.

This, alone, provides a strong equitable reason for denying fees.

Unidentified Justice: Mr. Fehr, does it make any difference under your equitable theory if an intervenor comes in and substantially, by virtue of the intervention, prolongs the litigation and delays relief to the plaintiffs in the case?

Should that be a consideration in the ultimate award of fees?

Mr. Fehr: I don't think so.

I think the more appropriate consideration is why is the party there, what are its interests, and does it have a legally cognizable right that is being affected.

Unidentified Justice: But I thought you were urging some equitable discretion on the part of the trial court in awarding fees.

Mr. Fehr: Well, I think--

Unidentified Justice: Even if you're asserting the intervenor's own rights, are there circumstances which might justify the award of fees?

Suppose the intervenor has a legitimate claim but, nonetheless, deliberately prolongs and extends the litigation and deprives the plaintiff of early relief.

Mr. Fehr: --Well, if the intervenor is extending... I don't what you mean by deliberately... but if the intervenor is only extending the litigation in order to have its claim litigated, I don't think that's an equitable basis upon which to subject that intervenor to an almost automatic award of attorney's fees.

If, on the other hand, there is some bad faith involved or the intervenor does not have a legally cognizable claim that it's asserting, such as in the Sixth Circuit case in the Haycraft decision, I think it might be very different.

I would also point out--

Unidentified Justice: Well, maybe it's a weak claim but not frivolous.

Mr. Fehr: --It's an awfully difficult judgment to draw, as the government indicated in its amicus brief.

Unidentified Justice: Should there be discretion in the district court to consider those factors?

Mr. Fehr: Perhaps there should be some discretion, but I don't think any such discretion was exercised here.

Unidentified Justice: They--

--What if--

--Excuse me.

Go ahead.

What if the intervenor intervenes not to assert its own right but, rather, as is sometimes the case, for instance, in a challenge to a state criminal statute... intervenes on the state's side to defend the statute, for example, but not in its own right.

Mr. Fehr: Well, that's--

Unidentified Justice: Do you think that that intervenor could be treated like a defendant for attorney's fees?

Mr. Fehr: --In essence, I think you're posing the facts of the Charles case which is pending on certiorari.

And I'm not sure I feel competent to answer it.

I think a starting point for this analysis might be Rule 24 regarding whether a party has a right to intervene, and perhaps Rule 19, whether the party must be in the litigation so that full relief may be accorded.

Whether in the situation you pose, individuals actually have a cognizable interest and rights that are being affected, I do not feel qualified to make that judgment.

Unidentified Justice: Well, but you must have a position, I assume, on my proposition, which is that the intervenor is permitted lawfully to intervene but not to assert any right of its own as such.

Mr. Fehr: I can see drawing a distinction between individuals that have a right to intervene and permissive intervention where an individual is just assisting the state, though that person's rights are not affected.

If that's what you're asking, I think that would be a valid ground on which to perhaps draw a distinction.

In the Teamsters case, the Court said that the union will remain in the litigation, though innocent of wrongdoing, to participate in remedial proceedings.

This was a proposition restated in the Zipes opinion itself.

And, indeed, both opinions seemed to make it clear that had IFFA not intervened, it should have enjoined as a Rule 19 defendant here.

And I'd like to consider what the Court said in Teamsters about Title VII remedial--

Unidentified Justice: Opposing... you are opposing in this case the plaintiffs in a lawsuit?

Mr. Fehr: --We were opposing only the grant of seniority to the plaintiffs because of the effect we believe that would have upon our members.

Unidentified Justice: So you sought to defeat a claim that the plaintiffs had been making throughout the lawsuit.

Mr. Fehr: We sought to defeat their attempt to get seniority through the settlement.

Unidentified Justice: And up... up to a point, TWA was making the same claim, wasn't it?

Mr. Fehr: Certainly.

TWA--

Unidentified Justice: Until they settled.

Mr. Fehr: --was saying that the plaintiffs were entitled to no relief.

And then TWA--

Unidentified Justice: And so--

Mr. Fehr: --settled--

Unidentified Justice: --why shouldn't we treat you as a defendant.

Mr. Fehr: --Because--

Unidentified Justice: Like the TWA?

Mr. Fehr: --Because we didn't do anything wrong, Justice White.

Unidentified Justice: Uh-huh.

Mr. Fehr: And... there's something--

Unidentified Justice: Well, that may... that may be so, but you sought to defeat these plaintiffs' claim and you lost.

Mr. Fehr: --But there's something fundamentally wrong here where both back pay and seniority--

Unidentified Justice: Right.

Mr. Fehr: --are ordinarily awarded to successful plaintiffs absent compelling equitable reasons to the contrary.

Now, TWA got to take full advantage of the weakness of the plaintiffs' claims by settling for two cents on the dollar, while the incumbent employees, who did nothing wrong, are paying full fare, and now the court wants them to pay attorney's fees to boot.

I just don't think that's very accurate.

Unidentified Justice: IFFA took no position on the claim of the female flight attendants against TWA that they'd been unlawfully discriminated against?

Mr. Fehr: No, we did not.

And, of course, the former union filed the lawsuit, and we said time and time again that our only concern was the seniority.

Just look at--

Unidentified Justice: If the remedy of discrimination were found?

Mr. Fehr: --Right.

And... but for the seniority, we would have had no interest, and we said that over and over again.

Unidentified Justice: Now, presumably you weren't bound by the settlement agreement?

The union wasn't?

The union could have sat back, let the settlement agreement be entered, and then challenged it in a separate suit.

Mr. Fehr: Well, I think that's arguable, depending upon the Martin decision that's pending, if I understand what's going on there.

Unidentified Justice: Would it be your position that you could do that?

Mr. Fehr: I haven't really studied that question, and there was really--

Unidentified Justice: But what if that were the situation and you then... the union filed a separate suit?

Presumably, under those circumstances, the union would not have attorney's fees assessed against it even if it lost.

Mr. Fehr: --Only because the union was a plaintiff in this--

Unidentified Justice: Right.

Mr. Fehr: --instance, it is different for plaintiffs?

Unidentified Justice: Right.

Mr. Fehr: I suppose that is arguably true, and we pointed that out in our briefs.

But it doesn't seem to make sense to me and it doesn't seem to be very consistent with any notion of judicial economy when we were invited to come into this lawsuit, give a notice of it, and the settlement agreement specifically contemplates our intervention, for us to sit back and then try and do something later.

And, obviously, there is a danger, depending upon the state of the law, which may be clarified soon, that we would not have even been able to do that.

Unidentified Justice: We would certainly rather, you would think, favor a rule that would induce you to come in as soon as possible and get the whole thing resolved in one fell swoop, right?

Mr. Fehr: I would certainly agree with that.

Unidentified Justice: Yeah.

Mr. Fehr: In Teamsters, the Court talked about remedial proceedings which involve imprecision and approximation, and the delicate task of adjusting the interest between the discriminatees and the legitimate expectations of the incumbents.

The district court must draw upon qualities of mercy and practicality.

And, especially when immediate implementation of an equitable remedy threatens to impinge upon the expectations of innocent parties, the court must look to the realities and necessities inescapably involved in reconciling competing interests in order to determine the special blend of what is fair, necessary, and workable.

And, perhaps most interestingly, the Court in Teamsters said, that until evidentiary hearings were held, it was not possible to evaluate abstract claims concerning the equitable balance that should be struck in these proceedings.

Now, I must confess that I do not know what all that means.

And with respect... I'm not sure that anyone does know what that means, except that the plaintiffs and the incumbent employees, nearly always represented by their unions, are going to have to slug it out in complex remedial proceedings and let the district courts carve out the law on a case-by-case basis.

And we believe that to say that the union must participate in this extremely difficult process, where it cannot possibly be predicted what claims will bring about what results, and yet to say the union shall be subjected to an almost automatic award of attorney's fees if it should not prevail, is simply unjust.

And it would also... it will also unquestionably cause a severe chilling effect upon the rights of innocent incumbent employees affected as a collateral consequence of Title VII litigation.

We should also discuss why it is the Court said in Teamsters that the union will remain for the remedy phase.

It is, I believe, because in most instances it is only the union which is capable of raising the rights of the incumbent employees, for those claims, most often, are based on a collective bargaining agreement.

It is the duty of the union to enforce that agreement.

And the issue is whether the contract can be overridden.

Which brings us straight to the union's duty of fair representation.

Now, If I may, I would like to talk about how, if IFFA had not intervened, a claim for the duty of fair representation against it might have been structured to simply establish the following.

One, the Plaintiffs and Defendant obviously thought it necessary to override the collective bargaining agreement in the settlement to obtain the relief they sought.

Two, the union was invited to participate.

Three, part of the duty of fair representation is a duty to enforce rights contained in a collective bargaining agreement.

Four, the Seventh Circuit was already on record in this case in 1973 lecturing the union about its obligations to the incumbents.

Fifth, you establish that there are damages generally throughout the bargaining unit from the relief granted.

And Justice O'Connor's recent opinion in Case 87-548 establishes that with its discussion of how seniority simply dominates the working lives of these flight attendants.

And, also, that the very job security of the junior incumbents was at stake.

And with hindsight, in this case, it would have been very easy to do.

And, Sixth, that the Seventh Circuit had held that 92 percent of these plaintiffs had untimely claims which were, for that reason, lacking in merit and also lacking in subject matter jurisdiction.

And then the next question is: where did the union's lawyers go to law school?

Don't they know that a federal district court lacking subject matter jurisdiction has no power to do anything but dismiss those claims?

Why did you not even try to save these peoples' jobs?

Would it have been successful?

What would the damages have been?

I can't say that, of course.

But I do know that a compelling argument could have been made that the union abused whatever discretionary powers it had and arbitrarily refused to process the seemingly meritorious claims which involved the very job security of its members.

But, of course, the duty of fair representation is not just a question of can the union be successfully sued?

The union has an affirmative obligation to exercise its best efforts to serve its members' interests.

A union's raison d'etre... excuse the pronunciation... is to represent, after all.

And if a union has the legal obligation to ensure that its members' interests and rights are asserted, and if the courts are to consider the interests of affected innocent incumbents, again, we believe it is manifestly unjust to punish a union by assessing an automatic award of attorney's fees against the union should it not prevail.

It would, as the Ninth Circuit said in Richardson, simply punish the union for performing an act which it was under a legal duty to do.

Plaintiffs will argue, of course, that fee awards are compensatory and not punitive, but that argument bears a closer analysis for where innocent bystanders are deprived of legitimate rights though they did no wrong, and where the courts compound that injury by saying that if you dare to raise your voice, you will be socked with an additional award of attorney's fees to boot, that award certainly seems punitive in nature.

And, I would add, that there is no legal basis for the punishment.

Indeed, the entire concept of fee-shifting is rooted in the principle of shifting fees to the party who violated the law.

Even the private attorney's general concept is based upon the notion that those private attorneys generally will prosecute those who violate the law.

We believe the fact that the party against whom fees are sought did not violate the law, by itself constitutes a special circumstance which should dismantle the presumption of a fee award in favor of prevailing plaintiffs, and at least three circuits have specifically so held.

Our position is also very much in harmony with, and supported, by this Court's decision in the General Building Contractors case.

I will not repeat here the language from Chief Justice Rehnquist which we quoted and discussed in our brief.

But, in that opinion, the Court also said that there are fundamental limitations on the remedial power of the federal courts, that those powers can be exercised only on the basis of a violation, and extend no farther than required by that violation.

This principle is not limited to civil rights, but is a controlling principle governing the scope of federal judicial power.

The Court... the Court there held that treating an innocent party, for the purposes of injunctive relief, as if that party had been found liable on the merits was beyond the traditional equitable limitations upon the authority of federal courts.

Similarly, here, the Court should not... we believe cannot... for attorney's fees purposes treat innocent parties in the same fashion as defendants found guilty of violating the federal law.

I'd like to reserve the rest of my time.

Unidentified Justice: Thank you, Mr. Fehr.

Mr. Hartunian.

ORAL ARGUMENT OF ARAM A. HARTUNIAN ON BEHALF OF RESPONDENTS

Mr. Hartunian: Mr. Chief Justice, may it please the Court:

The union and the government seek from this Court the announcement of a rule forbidding district courts from imposing attorney's fees under 706(k) against intervenors.

Or, to put it another way, as they do in some instances, against an intervenor who is innocent of the violation out of which the lawsuit arose.

And the union and the government present certain views that they think justify that result and that rule because they think that these matters are matters of sound fairness and considerations of policy.

They're wrong about that.

But, what is more important, the question is what does the statute say because the issue here is what did Congress intend.

And we must start by examining the statute to answer the question what did Congress intend.

There are three explicit matters contained in 706(k) which bear on this question, each of which shows that Congress had no intention to exempt intervenors from the fee-shifting provision, irrespective of whether the intervenor was guilty of a violation of the law or not.

The first of those is the provision of prevailing party.

Congress said that fees are authorized to be awarded to the prevailing party.

There is no question that in this case... nobody disputes that in this case the plaintiffs were the prevailing party.

Not only in the liability phase of the case against TWA, but against the union.

There is no dispute about that.

Unidentified Justice: But, Mr. Hartunian, certainly the Christiansburg decision suggests that the term "prevailing party" may be read one way in one case and another way in another, depending on the circumstances.

Mr. Hartunian: Indeed.

It has two different... the word "prevailing party" doesn't have any different meaning whether you're a plaintiff or a defendant.

It's the implications of that--

Unidentified Justice: Whether you will get... the standard for awarding--

Mr. Hartunian: --Yes.

Unidentified Justice: --an attorney's fee.

Mr. Hartunian: Yes.

The second significance of the phrase "prevailing party" has to do with what one has in mind when one contemplates that there be a prevailing party.

You can prevail only... in a lawsuit only when you prevail against somebody else.

So, for every time there's a prevailing party, there's somebody who lost.

And Congress knew that.

And that image of there being a party opposite the prevailing party is very important because the obvious and logical suggestion is that the person who has to pay the fees of the prevailing party is the person against whom the prevailing party prevailed against.

Unidentified Justice: That's reasonable enough.

But maybe that's why... that may be why Congress said "may allow" instead of shall allow.

Mr. Hartunian: Indeed.

And that is the second of the matters which are... or, the third of the three matters which I think are important.

Congress did not make this fee-shifting mandatory, nor did it prevent it.

It left it up to the discretion of the court.

But I would like to proceed to the next of the three items and then come back to the discretion, which I think is very important.

The second is... the second part of the statute that we think is very relevant and bears on this point is, the language of the statute that says that the court may allow the prevailing party a reasonable attorney's fee as part of the costs.

The reason why that's so important is because costs are awarded to the winning party irrespective of whether the losing party did something wrong.

In fact... indeed... the statute that governs the costs in this case, 28 U.S.C. 1911 and 1912, deals with the subject of costs that are awarded in proceedings in this Court.

Unidentified Justice: Yeah, but, of course, this Court has read a limitation into that statute as far as limiting the award of attorney's fees to prevailing defendants.

Mr. Hartunian: That's correct, Justice O'Connor.

Unidentified Justice: So, you can't just rely on the literal language of the statute, it seems to me.

Mr. Hartunian: There... we're relying on the literal language of the statute to the extent of really a different point.

And that is the question whether an intervenor should be carved out as an exemption.

Did Congress intend such a thing?

Unidentified Justice: Let me ask you this.

Suppose the union here had brought a separate suit against the plaintiff class in TWA rather than intervening in the ongoing suit... brought its own separate suit and eventually lost... there wouldn't have been attorney's fees, would there?

Mr. Hartunian: There would... there would be attorney's fees to the same extent, as far as I'm concerned.

Unidentified Justice: Assuming it's not frivolous.

Mr. Hartunian: Yes, assuming it's not frivolous, I would say that the result ought to be not whether a party is named as a plaintiff under the federal rules or a defendant or--

Unidentified Justice: But the result, in fact, under existing precedence would be no attorney's fees in that situation?

Mr. Hartunian: --I don't think that the union could even bring a case like that because I think it would be unfounded.

Unidentified Justice: Well, let's assume it could.

And It seems to me if it could, it would be very strange to say that because they intervened in the ongoing suit to get an earlier resolution of the claim, that they wouldn't be treated the same way.

Mr. Hartunian: I have to picture such a case as involving exactly the same issues in exactly the same kind of proceeding that we had in this case.

The only difference being that it was initiated by them.

Everything else was the same.

In that case, they should be imposed with fees in exactly the same way as in this case because of the fact that the parties that they were suing in this hypothetical second lawsuit are my clients, the class members, who are really the plaintiffs because they're the ones upon whom--

Unidentified Justice: Can you cite any case that would have so determined?

Mr. Hartunian: --The statute says that in any proceeding--

Unidentified Justice: Can you cite any case that has interpreted the statute that way?

Mr. Hartunian: --I don't believe that any case has ever occurred in which a union became a plaintiff under the federal rules and sued some victim of Title VII, asserting that the benefits about to be given to them exceeded what the statute authorized.

But the importance of the phrase as part of the costs is that costs are never awarded on the basis of a violation of law.

Costs are awarded based upon who won and who lost.

And attorneys' fees being part of the cost, it's not determined by that.

And let's take this case as an example.

Suppose the union were to win this case.

If the union won this case, we would have to pay the costs as a matter of course.

We didn't violate any law.

So, it's not the violation of law that imposes costs.

Unidentified Justice: But you wouldn't have to pay the fees.

Mr. Hartunian: We wouldn't have to pay fees.

That's because there is no provision that authorizes the imposition of fees upon us under these circumstances, absolute groundlessness.

But the union--

Unidentified Justice: Well, then we're back to where we started.

You say costs plus fees can be conjoined if it's to your advantage, but not if it isn't.

I just don't see that as a helpful statutory construction of principle.

Mr. Hartunian: --Well, what... Justice Kennedy, what I'm saying is that the statute says that attorney's fees are awarded as part of the costs.

Historically the... since the beginning of this nation... at first, attorney's fees were in some small measure awarded as part of the costs.

And then the statute eroded to where costs no longer included attorney's fees, and that's what the American rule... that's how the American rule came about.

And, by this statute, Congress has stuck fees back into costs.

So, we're back to a position in which we no longer have the American rule to that extent.

And since costs are imposed not on somebody who violated the law but, rather, on somebody who simply should pay the costs because he lost, that means that whether there was a violation of law is absolutely irrelevant to the question of whether these costs should be imposed upon the union.

Unidentified Justice: But isn't... Mr. Hartunian, isn't there a provision even in the standard cost statute that costs shall be awarded as a matter of course to the prevailing party unless the court otherwise directs?

Mr. Hartunian: That's correct, Mr. Chief Justice.

Unidentified Justice: So there's discretion even in that area.

Mr. Hartunian: Absolutely there is discretion, and we don't say there is not discretion.

As a matter of fact, our argument in this case is that there is discretion, which is the third thing in the statute that we find militates against the idea of having a blunderbuss exemption for intervenors.

Indeed, the statute says the court in its discretion may allow the prevailing party a reasonable attorney's fee, which means that it's up to the court's discretion that every district court should take into account those factors which should militate one way or another.

And, of course, the discretion is somewhat constrained by... by the legislative history as recognized in Christiansburg.

Unidentified Justice: Do you... Do you feel that the Seventh Circuit recognized this as a matter where the district court had discretion to award or not award fees against the union?

And do you feel that the district court thought it had discretion?

Mr. Hartunian: Oh, the district court not only thought it had discretion, but the district court exercised it.

And I think, Mr. Chief Justice, you can find the district court's findings in the appendix to the certiorari petition at page 35(a).

The district court did indeed take up the questions of how much delay was occasioned, what the matters were, whether they were relatively meritorious, and so on, and did indeed exercise his discretion.

He did not simply say, whenever the plaintiff wins against an intervenor you get attorney's fees.

But the--

Unidentified Justice: But did he take... did the district court take into consideration, as a special factor, that this was an intervenor and not a defendant?

Mr. Hartunian: --He... no.

He regarded the fact that the union is an intervenor as being no different and worthy of no special consideration.

And in that--

Unidentified Justice: So then you say, oh, sure, the court has discretion, but it should not make any special allowance for the fact that the intervenor... that it was an intervenor here rather than a defendant, or that the intervenor had not violated the law?

Mr. Hartunian: --That's right.

He should not.

But there may be circumstances where because somebody is an intervenor that may put him in a different position than if he were a defendant.

That's not this case.

As a matter of fact, this case is as far as one can get from the best case an intervenor can present in order to show the special circumstances in which discretion should that into account, because here, the intervenor acted like a defendant in that it interposed the very same defense which had been the touchstone of TWA's defense.

Namely, the failure to file timely charges and the assertion that that was jurisdictional.

And so the union took as its main point of defense in this case the very thing which not only the TWA had used as its defense, but that argument which would have destroyed the entire case of the plaintiffs, not just going to the question of remedy.

The important thing here is that the government and the union seek a rule that would forbid district courts everywhere, for all time, from imposing a plaintiff's attorney's fees upon an intervenor, and that sort of rule simply cannot be squared with Congress' use of the word discretion.

Unidentified Justice: I don't think they go quite that far.

They say upon an intervenor who is not guilty of the wrong doing that was the subject of the suit.

Mr. Hartunian: Yes, that's... Justice Scalia, that's right.

But they do say that that rule should be that whenever an intervenor is not guilty of the underlying violation, that there should never be imposed fees.

And, of course, there's no support for that in the statue and each of the provisions of the statute goes in the opposite direction.

And, the question of the legislative history now, if we need to go into that, also stands for the proposition that there is no justification for an exemption like that.

Unidentified Justice: Is there any support for the proposition that you cannot impose fees upon an intervenor whose intervention has in no way prolonged the suit or caused any additional expenses?

Mr. Hartunian: Well, of course, this case is on in which they did prolong it.

Unidentified Justice: I understand it.

But... but it seems to me that... that one might adopt under this statute an absolute rule that where an intervenor... as opposed to the defendant... hasn't prolonged the suit at all... he just happens to be another party, he hasn't caused any additional expense... no costs can be asserted against an individual... against an intervenor.

I think you could adopt that absolute control of the district court's discretion, couldn't you?

Mr. Hartunian: I don't even think you need to.

It's inherent in the very nature--

Unidentified Justice: Okay.

Mr. Hartunian: --of the fee-shifting, statute that it's only when fees are incurred that there be anything awarded--

Unidentified Justice: Oh, expenses have been incurred in the suit.

I'm not saying that the plaintiff didn't have any expenses.

But they were no greater expenses because of the intervenor than they would have been had the intervenor not been in the case.

Mr. Hartunian: --Well, then I don't see how a plaintiff could complain or could... could ask for any fee award under those circumstances.

Unidentified Justice: He could... well--

Mr. Hartunian: And I think the answer is, yes, I agree entirely.

Unidentified Justice: --Can a court split the fee award between the defendant and the intervenor?

Say, the defendant pays half and the intervenor pays half.

Mr. Hartunian: I'm trying to imagine a set of... I understand the concept.

I'm trying to imagine a set of circumstances--

Unidentified Justice: Well, you'd say no, I think.

I think anybody would say no.

And I think we would reverse, as an abusive discretion, any award because of the word "may" here... it does say may... but it would be abusive discretion to allow an award against an intervenor in that situation.

Mr. Hartunian: --Right.

Unidentified Justice: So, you have to acknowledge that there is room under this statute to have some absolutes.

Even though it says discretion, it means reasonable discretion.

Mr. Hartunian: I... I think the answer to the question whether the marginal costs imposed by an intervenor should be taken into account, or where the marginal extra costs imposed by the intervenor are zero, namely that it would have been the same amount of effort and work by the plaintiff irrespective of the intervenor's presence.

I think that the answer is clearly that there should be no fees awarded against the intervenor because the intervenor did not cause any work or expense to the plaintiff.

Unidentified Justice: But why is that?

You come here and you say the statute says against the... the prevailing party is entitled to award.

You say it's treated like costs.

Costs are paid by parties, whether the party is blameworthy or not.

Why... why wouldn't you split it between the intervenor and the defendant?

You've told us that blame doesn't make any difference.

Mr. Hartunian: Because in that instance, Justice Scalia, in the hypothetical we just talked about, the plaintiff did not prevail against the intervenor.

There was no battle between the plaintiff and the intervenor in which the plaintiff could say, I prevailed against the intervenor and, therefore, shift my fees.

Unidentified Justice: Why not?

The intervenor made the same argument the defendant did.

It just didn't cause the litigation to drag on any longer.

That's all.

Mr. Hartunian: The... the intervenor made the same argument that the defendant did?

Unidentified Justice: The same argument.

Yes.

Mr. Hartunian: So he just uttered redundant things?

Unidentified Justice: Yes.

Absolutely.

Mr. Hartunian: Well, if they literally both occupied the same position--

Unidentified Justice: You'd award the fee against both of them?

Is that right?

Mr. Hartunian: --I might very well.

Yes.

Because in that case you can't blame one... it's not a question of blame.

You can't attribute to the one any more than you can to the other the work that was imposed upon the plaintiff.

Because, the important thing about this statute is, that the Congress wanted to make sure that the plaintiff would be equipped with a lawyer.

And in order to do that, it wanted to make sure that the fees be shifted from the plaintiff's shoulders to the side which caused those fees to become necessary.

Where you create a hypothetical in which you cannot distinguish between two parties to the case, as to which caused--

Unidentified Justice: One of them was guilty of a violation of law--

Mr. Hartunian: --Yes.

Unidentified Justice: --and the other one wasn't.

You're just unwilling to take that distinction into account.

That's--

Mr. Hartunian: Because Congress made no such distinction.

That distinction is completely inapposite.

Unidentified Justice: --The question is whether Congress meant to exclude the courts from taking that distinction into account within the word may, whether that's one of the discretionary factors the courts can consider.

Mr. Hartunian: Well, since the court... since Congress used the language it did, without bringing about any special exemptions, I think it follows from that that Congress cannot be taken to have intended any blunderbuss categorical exemption.

It is true that the... that Congress' choice of the expression "in its discretion" allows quite a bit of room for a district court to take into account the very kinds of things that should go into the question, a la Christiansburg, whether the costs should be shifted and how much.

But I don't think it's ever a question of turning a plaintiff away simply because a person is an intervenor.

And that's exactly what the union and the government seek in this case.

Unidentified Justice: Well, certainly, in Newman v. Piggy Park, the Court interpreted the statute somewhat differently than it was written.

It said ordinarily... in spite of the fact the statute says "may in its discretion", ordinarily an award goes to the prevailing plaintiff.

Now, that is putting a gloss on the literal language of the statute.

It's controlling the court's discretion in some way.

Mr. Hartunian: In so doing, this Court was being faithful to Congress' expressed intentions.

Unidentified Justice: Well, it certainly wasn't necessarily being faithful to the statutory language.

Mr. Hartunian: In a sense it was because the question of discretion is always one in which this Court sets standards.

Unidentified Justice: Well, then... okay, then if the question of discretion is always one in which this Court sets standards, why the standard in Piggy Park but not the standard in this case?

Mr. Hartunian: The standard being sought in this case is hardly a standard, but rather a categorical exemption.

--That's the--

Unidentified Justice: It certainly... it's no more categorical than the rule in Newman v. Piggy Park.

Mr. Hartunian: --Yes, it is.

Mr. Chief Justice, the rule being sought by the union and the government here says, if you identify the party against whom fees are sought as an intervenor who wasn't guilty of a violation of the law, then you may never grant fees to the plaintiff for the work made necessary by that party.

They... in other words, they describe... attributes, once described, exempt that party from consideration--

Unidentified Justice: Well, what... what if we tailor that a little bit and said, just like in Newman v. Piggy Park, that ordinarily in a situation like that you would not award a fee against the defendant?

Does that meet with your approval?

Mr. Hartunian: --Not at all because that doesn't meet with with Congress' approval.

Congress never said any such thing.

Unidentified Justice: Well, Congress never said what we said in Piggy Park.

Mr. Hartunian: Yes, they did.

Congress did.

Unidentified Justice: Congress in this statute did not say it.

Mr. Hartunian: Not in the statute.

That's correct.

Unidentified Justice: No.

Mr. Hartunian: But, Mr. Chief Justice, what Congress intended was very clear, as was gleaned from... as Piggy Park gleaned from the Congressional expression, that under ordinary circumstances a plaintiff should get its fees because of the underlying Congressional purpose.

That's clear.

And Piggy Park did not torture the words of the statute in order to arrive at that conclusion.

Unidentified Justice: --simply read something into the statute that was not on the face of the statute?

Mr. Hartunian: I agree with that.

Yes, Mr. Chief Justice.

But there is no call... no cause to read into this statute what the union and the government seek to read into it, like there was in the case of Piggy Park.

Because Piggy--

Unidentified Justice: Well, Mr. Hartunian, there is only one wrongdoer here, isn't there?

Mr. Hartunian: --That's correct, Justice O'Connor.

Yes.

TWA.

Unidentified Justice: And the problem wouldn't have existed but for the rules that TWA adopted here.

Mr. Hartunian: Yes, that's correct.

Unidentified Justice: And, surely, the discretion of the district court should extend, and ordinarily would extend to take that into account, I would think.

Mr. Hartunian: In order to take into account the fact that the entire lawsuit was made necessary only because of the wrong of TWA, and laying the blame at TWA's feet for everything that happened thereafter, has some logical appeal to it.

However, any rule which caused the shifting of fees only to the original wrongdoing defendant would have some very untoward effects, which we describe in Part Four of our brief.

Unidentified Justice: Well, if you... if you reserved, perhaps, some room for discretion nonetheless.

But... but to think that ordinarily that would be the concept, it seems to me not to stray particularly from the language in the statute or from ordinary concepts of jurisprudence.

Mr. Hartunian: Justice O'Connor, it makes sense to require a defendant to pay a plaintiff's fees for all of the litigation that a defendant can reasonably anticipate at the moment it commits the wrong.

And so, in the case in this setting... the typical Title VII case... you might easily attribute to the defendant the reasonable anticipation that there will be not only litigation about liability but about relief.

But the only kind of litigation that you can attribute to a defendant in this case would be that over unusual adverse impact a la Franks v. Bowman.

And although the union would have you believe that's what the litigation was about here, this--

Unidentified Justice: Well, but I would... I would think it would be completely foreseeable by the employer that a union would want to, or feel it had to, defend the seniority rights of... of the non-class plaintiffs here.

I mean, that... it just seems to me that that--

Mr. Hartunian: --I agree with that.

Unidentified Justice: --was completely foreseeable at the outset.

Mr. Hartunian: I agree with that.

But I don't think you can expect that TWA would have looked forward to and expect that the union would come in and make arguments about the question of jurisdiction, or that the union would make arguments that had become oeclasse six years earlier in Franks v. Bowman.

What the union came and argued in this case... and what they argued is clear from the Zipes opinion... it's not what the union says they argued.

They did not argue unusual adverse impact.

They spent two minutes on that.

What they argued, and the two things clear from Zipes, are the jurisdictional question... and you can't expect TWA to look forward to that once TWA dropped that cudgel.

And, second, it argued as though Franks v. Bowman had never been decided.

Argued that, gee, this is going to have an impact on us.

Well, of course, it will.

It's an unusual adverse impact that counts.

Not just some impact.

Seniority is important, and it's as important to the incumbents as it was... and to the victims... as it was to the incumbents.

So, when the union argues that what it did was reasonable under these circumstances, they're really missing the point.

And the question whether the defendant should be imposed... whether the fee should be imposed on the defendant I think should go to the question of foreseeability, which is inapposite to this case because of the particular facts of this case.

And the particular facts of this case are important with respect to this question of discretion and forsee ability to the defendant.

The union filed this case originally in 1970 at a time when the union contract was about to expire, and one of the things the union wanted for its incumbents was to end TWA's no-mothers policy.

They filed this lawsuit to bring pressure on TWA, but filed it not only on behalf of the incumbents in order to try and stop a practice from continuing... which, of course, the incumbents had an interest in... but filed to as the purported class representative on behalf of all previously fired stewardesses, stewardesses who were no longer members of the union.

And, the complaint prayed... among its prayers to relief was back pay.

The way the union settled the case with TWA was they eliminated the policy for the future and got virtually nothing for the class members whose claims they had used in the bargaining process.

So, they brought the threat of back pay claims and the other kinds of equitable relief that the prior stewardesses might have enjoyed, used that as a threat.

Once they got what they wanted, virtually abandoned the class members in a settlement in which the class members would... the previous stewardesses would have gotten no back pay, would not even have had a right to get their jobs back except as openings occurred, and would get not only no retroactive competitive seniority, but, to the delight of TWA, no retroactive company seniority.

And it was with that, and the fact that, as the Seventh Circuit noted, that they didn't... they being TWA and the union... did not even give the right to opt out to the previously-fired stewardesses.

They wanted to run this settlement through in a way so that there wasn't even any opt-out provision.

That's why the Seventh Circuit vacated the order approving that settlement and remanded with instructions to remove the union as a class representative.

And then the union was not heard from again until five or six years later, 1979, when after we had obtained summary judgment and we had brought TWA to the bargaining table while cross-petitions for certiorari were--

Unidentified Justice: Have... could you have brought the union in the case?

Mr. Hartunian: --Could we have?

Unidentified Justice: Yes.

Mr. Hartunian: We had no... we had no complaint against the union, Justice White.

Unidentified Justice: Well, you knew that... you certainly knew... I thought said a while ago that the union would probably defend the seniority.

Mr. Hartunian: Oh, we... oh, Justice White, when the settlement was entered into... and, by the way, the settlement did not purport to give any retroactive seniority--

Unidentified Justice: Yes.

Yes.

Mr. Hartunian: --we invited... we went before the court and said as we--

Unidentified Justice: How do you invite?

You invited them.

Mr. Hartunian: --Yes.

Unidentified Justice: But could you have made them a party?

Mr. Hartunian: Well, I don't see where the distinction is important.

The important thing was to get them the opportunity to be heard on the question of unusual adverse impact because that's what this Court said is required in Franks v. Bowman.

So, whether we made them a party... we simply went before the court--

Unidentified Justice: Well, what if you... what if you had tried?

What if you had thought, well, we don't want them attacking this settlement later, let's get them now?

So you... I assume you'd have tried to make them a party.

What would you have done with them?

Made them a defendant or a--

Mr. Hartunian: --If we had thought it necessary... and we didn't... we would have served them with a summons and made them a defendant.

Yes.

As it was, it didn't become necessary because we invited them.

The court... we suggested that the court invite them, and they were invited, and they declined the invitation.

Instead, filed a full-blown petition to intervene so that they could get the rights, I suppose, of the intervenor.

I don't see what distinction they obtained.

In any event, with that record, with that history of the litigation, the union can hardly complain that it was mistreated in the case or take credit for anything that it did for the plaintiffs.

I do also want to mention that the settlement agreement did not, as the union would have you believe, give away the rights of retroactive seniority.

The settlement agreement was absolutely neutral on it.

The settlement agreement said that TWA would take no position on it, that whatever the plaintiffs' petitioned for, it would be up to the court, and if any interested party comes before the court, that TWA will stand aside.

All of that is in the Joint Appendix at pages 13 and 27 to 28.

This Court announced in Alyeska that it is not up to this Court to reallocate the burdens of litigation in the absence of legislative guidance.

Here, there has been legislative guidance.

And, the same thing that was said in Alyeska can be said here with a corollary to it, being that where Congress has allocated the burdens of litigation, it is not for this Court to take into account so-called policy or equitable matters to change what Congress has clearly done or to insert things that Congress left out.

Unidentified Justice: --Thank you, Mr. Hartunian.

Mr. Fehr, do you have rebuttal?

REBUTTAL ARGUMENT OF STEVEN A. FEHR ON BEHALF OF PETITIONER

Mr. Fehr: I do.

In Christiansburg the defendant argued that under the so-called plain language of the statute it was entitled to fees as a prevailing defendant under the same standard accorded to prevailing plaintiffs.

The Court rejected that argument.

Justice Stewart noted that 706(k) is more flexible than other fee-shifting statutes and said that decisions under 706(k) must be decided under traditional considerations of equity and that Congress entrusted the courts to do so.

And accordingly, the Court in Christiansburg set forth standards which apply to plaintiffs and which apply to defendants, and this case calls upon the Court to set forth standards which apply to innocent third parties.

We believe the Christiansburg standard which is applied to unsuccessful plaintiffs should apply to IFFA.

Unidentified Justice: Mr. Fehr, how does... I'm not sure this... this works, but I think it works.

Suppose the stewardesses bring... bring suit here and... and TWA comes in and says,

"You got us, we're guilty. "

but your union intervenes and says,

"no, you're not. "

"We don't think you're guilty. "

"We think everything's all right. "

Okay?

And it's only because of... of your union that the suit goes forward at all.

Then, what happens?

The plaintiff in that case just doesn't get any fees?

Mr. Fehr: I'm not sure I totally understand the question--

Unidentified Justice: Or does it--

Mr. Fehr: --but I would think--

Unidentified Justice: --get all the fees against TWA who wanted to get out of this--

Mr. Fehr: --I think--

Unidentified Justice: --thing by pleading guilty?

Mr. Fehr: --wherever possible, it is appropriate to shift the requirement for fees to the wrongdoer, which is the party who injured the plaintiffs and the party who injured the innocent third parties only slightly less directly.

Unidentified Justice: Yeah, but TWA says, "I'm guilty".

You know, "enter the judgment against me".

Mr. Fehr: Well, I think--

Unidentified Justice: But the union says,

"No, don't do that. "

"We don't think you're guilty. "

And three years worth of litigation ensues.

Mr. Fehr: --But TWA could certainly stipulate to facts which would demonstrate its guilt, and the union would be limited into objecting to whatever its legally cognizable interests were.

The union could not object, and did not object here, to TWA paying money to the plaintiffs.

Unidentified Justice: But, yet, the union could argue, even if TWA decides not to, that there's no violation of the statute.

Mr. Fehr: I suppose so.

Unidentified Justice: And there... there, certainly their equitable position is regarding an award of fee... in that situation... would be somewhat less appealing than one where... which has not prolonged the litigation on... on the merit.

Mr. Fehr: Sure.

We just think that where there is some question as to the validity of the claims that it's the wrongdoing party that should bear the burden for fees, and, to the extent possible, for the relief encompassed in the settlement agreement.

There is nothing in the legislative history that requires the result here.

The only thing in the legislative history about 706(k) is the brief statement by Senator Humphrey that we want to make it easier for plaintiffs of limited means to bring suit.

That has certainly happened here.

That certainly cannot be a basis for finding that intervenors whose rights are abridged, even though they did not violate the law, should be automatically assessed attorney's fees.

And, of course, as you indicated, Mr. Chief Justice, there is a problem with saying the Court exercised discretion because in case after case, from Christiansburg to Piggy Park to Garland to Bergeron, the Court has told the district courts how they are to exercise their discretion.

And if the fact that the party did not violate the law is to be a factor to be considered, there has to be a reversal because I think it is clear from both lower court opinions that that was not considered to be an appropriate factor here.

As to whether the union was a plaintiff or defendant, look at Rule 24 which says a party who intervenes shall present a short pleading presenting either its claim or defense, and then look at our petition for intervention in the Joint Appendix, and see whether it represents a claim or a defense.

I think it clearly is a claim.

We were setting forth the fact that we believed the incumbent employees were being victimized and that that should not happen.

As to our opposing complete relief, the only sense in which we did that is in an effort to save the junior incumbents' jobs.

We pointed out to the district court that there had been a finding that there was no jurisdiction.

It was the duty of the court, I always understood, to inquire into whether he had subject matter jurisdiction and the duties of officers of the court to insist in that endeavor.

I take it Mr. Hartunian is not grateful to the former union for setting events in motion which eventually allowed plaintiffs' counsel to receive the $1.4 million in fees, but I do disagree as to whether the parties were better off under the second settlement than they would have if the first settlement had been consummated.

And I have no quarrel with the 1973 Seventh Circuit opinion, but the fact is that the parties waited an additional 12 years to regain their jobs and the average Subclass B, you'll remember, received the grand sum of $2,000 in back pay.

The average class member received just about the same seniority she would have had if the first settlement had been consummated because of the limitation upon the accrual of seniority in the settlement agreement.

It is true that the first settlement required that the plaintiffs only be reemployed when openings occurred, as old the second settlement.

However, the difference is that settlements were plentiful in 1971 and nonexistent in 1979.

As to the settlement agreement... or, the district court granting the seniority, but for the settlement agreement, obviously the district court could not have granted the seniority because the law of the case was and is that there was a finding that Subclass B members had untimely claims.

And, but for the settlement agreement, he would not possibly have been empowered to issue that grant of seniority.

I think that's all I have.

I thank you.

Chief Justice William H. Rehnquist: Thank you, Mr. Fehr.

The case is submitted.

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Featured:

Sullivan v. Hudson - Oral Argument

Sun, 06 Feb 2011 03:47:14 +0000

Case:

Sullivan v. Hudson

Media File:

88-616_19890417-argument.mp3

Related Transcript:

88-616_19890417-argument.xml

Transcript:

ORAL ARGUMENT OF EDWIN S. KNEEDLER ON BEHALF OF PETITIONER

Chief Justice William H. Rehnquist: We'll hear argument first this morning in No. 88-616, Louis W. Sullivan, Secretary of Health and Human Services v. Elmer Hudson.

Mr. Kneedler.

Mr. Kneedler: Thank you.

Mr. Chief Justice, and may it please the Court:

The question presented in this case is whether a Social Security claimant has a right under the Equal Access to Justice Act to recover from the United States the attorney's fees and expenses she incurred in administrative proceedings following a remand from a federal district court.

Before summarizing the facts in this case, I will briefly describe the two provisions of each of the Equal Access to Justice Act that have been discussed in connection with the fee award in this case.

EAJA waives the sovereign immunity of the United States to fees and expenses in certain circumstances specified in the Act itself.

EAJA contains two basic provisions, one applicable to administrative proceedings, the other to judicial proceedings.

The provision of EAJA applicable to administrative proceedings is contained in Section 504 of Title 5 of the United States Code.

It provides that an agency that conducts what the Act refers to as an adversary adjudication shall award to the prevailing party in such an adjudication the fees and expenses that were incurred unless the adjudicative officer of the agency finds that the position of the United States was substantially justified or special circumstances would make an award unjust.

The term adversary adjudication is precisely defined in EAJA to mean circumstances in which the position of the government is represented by counsel or otherwise in the adjudication.

The other provision of EAJA concerning the award of attorney's fees and expenses in court is contained in Section 2412(d) of Title 28.

It authorizes a court to award a prevailing party fees and expenses incurred by that party

"in any civil action, including proceedings for judicial review of agency action, brought by or against the United States in any court having jurisdiction of the action. "

It is the position of the United States in this case that neither of these provisions of EAJA waives the sovereign immunity of the United States to the award of fees and expenses on remand in this case.

Section 504 is inapplicable because administrative proceedings under the Social Security Act are non-adversarial.

The government does not take a position in those hearings and is not represented by counsel or otherwise in them.

Unidentified Justice: Mr. Kneedler, what does the phrase "or otherwise" mean?

Mr. Kneedler: Well, the model rules promulgated by the Administrative Conference of the United States and followed by federal agencies, including HHS, have given content to that.

Those model rules defined "represented by counsel or otherwise" to refer to situations in which there is another sort of representative, such as a paralegal, who might represent the government in the proceedings.

The model rules define the phrase "represented by counsel or otherwise" to refer to situations in which the position of the United States is presented by an attorney or other representative who enters an appearance and then actually participates in the administrative proceedings.

The Administrative Conference was given authority to coordinate the implementation of EAJA in the administrative context under Section 504(c)(1) of the Act, and these model rules were in effect... were promulgated in 1981 and have been in effect ever since, and were in effect when Congress reenacted EAJA in 1985.

Unidentified Justice: Has that ever happened, Mr. Kneedler?

I'm unfamiliar with proceedings where there is somebody representing the government who is not counsel?

What kind of proceedings would they be?

Mr. Kneedler: Well, I'm informed, for example, as particularly relevant here, the legislative history of the 1985 Reenactment refers to a special experimental program set up by HHS in the Social Security context in five regional offices whereby the Agency was represented in ALJ hearings.

I'm informed that in a number of occasions in those hearings non-lawyers appeared to represent the government in those proceedings.

These were program officers who were very familiar with the way in which the Social Security program operated but were not lawyers.

Unidentified Justice: How come you can say the United States doesn't take a position in passing on the claim?

Mr. Kneedler: Well, there is no advocate for the government, from the perspective of the government seeking to deny a claim in an administrative hearing.

The only government official, the only SSA official, present at a hearing is the ALJ.

Unidentified Justice: And you don't think... you don't think in denying a claim the United States has taken a position?

Mr. Kneedler: Well, I suppose that the ALJ as a judicial officer could be said to be rendering a decision that the claimant is not entitled.

But EAJA refers to the... to advocacy before the decision-maker.

The advocates for the claimant, and if there should be one for the government.

Someone advocating that the claim should be denied.

The ALJ does not, as this Court recognized in Richardson v. Perales, does not act as an advocate or an adversary.

The ALJ is an adjudicator.

And, in fact, under governing regulations, the Administrative Law Judge has an obligation to inquire fully into all the circumstances and facts of the case.

Unidentified Justice: And so the proceeding really isn't adversary unless the United States is separately represented?

Mr. Kneedler: That's correct.

Through a lawyer or otherwise.

Unidentified Justice: Mr. Kneedler, the adjudicative agency proceeding that is being considered here for purposes of attorney's fees is one that occurred on remand as a result of the civil litigation.

Is that correct?

Mr. Kneedler: That's... that's right.

Unidentified Justice: And I take it there is no final judgment for purposes of determining the attorney's fees under EAJA until the district court finally enters the judgment at the conclusion of the proceedings on remand?

Mr. Kneedler: Yes.

Well--

Unidentified Justice: Is that right?

Mr. Kneedler: --A final judgment for purposes of awarding the fees.

Unidentified Justice: Yes?

Mr. Kneedler: Not a final judgment for purposes of appeal.

We believe the remand order was appealable at the time that it was sent back to the Secretary.

Unidentified Justice: But for purposes of awarding fees, am I correct?

Mr. Kneedler: That's correct.

But that's only for fees in the judicial proceedings.

Unidentified Justice: Well, why... why isn't it the case then that the court in the civil action retains jurisdiction and why isn't this remand proceeding in essence part of the civil action?

I think that point troubles me most.

Mr. Kneedler: Okay.

Two separate answers.

The district court can retain jurisdiction for purposes of awarding attorney's fees.

But the... when the claimant first seeks judicial review, the question before the court is whether the Secretary's decision denying the claim for benefits is correct or not.

In this case, the district court affirmed the Secretary's decision, but the Eleventh Circuit reversed and said the Secretary should... and remanded back to the Secretary to consider other circumstances.

When the case was sent back to the Secretary, the district court's review of that decision was completed.

The court of appeals had concluded that that decision was erroneous.

The district court could retain jurisdiction for purposes of awarding fees if the claimant should ultimately prevail on remand.

Unidentified Justice: Oh, and presumably to make sure that the proceedings on remand were in accordance with the court's view of the overall relief that should be granted.

Mr. Kneedler: But the way the procedure operates is that when the case goes back to the agency... for example, what happened in this case.

The Appeals Council receives the remand from the court and then the Appeals Council, in this case, vacated its prior decision denying the claim for benefits.

From that point on there was no outstanding position of the Agency that Respondent should be denied benefits.

And then there was the... the Appeals Council ordered a hearing.

There was no representative of the government at that hearing.

The government did not take a position before the Appeals Council or the ALJ.

Unidentified Justice: Yes, but it's very easy to consider this thing as just part of the civil action.

Mr. Kneedler: But both EAJA and the Social Security Act clearly distinguish between civil actions and proceedings before the Secretary.

EAJA itself carefully divides the circumstances for the award of attorney's fees into two categories.

One under Section 504 for fees performed for services before an agency.

That's only when the proceedings are an adversary adjudication.

Section 2412 governs... requires that the fees be incurred in the civil action in court.

Now, a remand proceeding is not part of the civil action.

The Social Security Act itself divides the responsibilities in a directly parallel fashion between the Agency and the court.

Under Title II, for example, Section 405(b) specifically directs the Secretary to conduct hearings and to find facts.

Section 405(b) applies both in the initial hearings and on any hearings on remand.

The same standards, the same procedures apply, and they are non-adversarial in the same way as before.

Section 405(g), on the other hand, is the provision of the Social Security Act that deals with judicial review, and it deals with the responsibilities of the court, not the Secretary.

In fact, 405(g) uses the same phrase, civil action, that EAJA does.

So, the attorney's fees that are authorized under Section 2412 under EAJA in a civil action are only those fees incurred in the action for a judicial review.

If the court concludes that the case should go back to the Secretary, it is then returning the matter back to the officer of the government having primary and distinct responsibility for the claim, which is the Secretary of HHS.

Unidentified Justice: Mr. Kneedler, did the Eleventh Circuit here, when it remanded to the Agency, make any special statement saying this Court is retaining jurisdiction over this case, or is whatever retention of jurisdiction it had simply the normal retention of jurisdiction that occurs by operation of law, if any?

Mr. Kneedler: The latter.

There was no specific reservation of jurisdiction in this case.

Unidentified Justice: So this is no different from a court of appeals, let's say the D.C. Circuit remanding an agency rulemaking, reversing the rule and remanding for further proceedings before the agency?

Mr. Kneedler: I think that's essentially correct.

And the proceedings back before the Agency then are within the primary jurisdiction of the Agency and, therefore, within the ambit of Section 504 and fees can be awarded only if Section 504 applies to them.

Unidentified Justice: Are there... are there any instances to your knowledge... I seem to recollect some... in which a court doesn't just remand, but remands with some special indication that it intends to oversee further developments in the case?

Mr. Kneedler: I suppose that could happen.

There have been... there have been district court decisions under the Social Security Act where the court sends the case back to the Agency and purports to retain jurisdiction.

I mean, in particular for the award of attorney's fees.

But I think that doesn't render the court's review non-final, as is true in an appeal under 1291 if there is still an outstanding attorney fee question, as there might be here.

That doesn't render the court's review non-final.

Unidentified Justice: Do you think courts can retain jurisdiction and in effect have the Executive Branch operate under the court's supervision thereafter?

Mr. Kneedler: I think not.

And, in fact, I think when you read Section 405(g) closely... and we discuss this at the conclusion of our reply brief... Section 405(g) makes it pretty clear that that's not supposed to happen here.

Section 405(g) addresses the question of remands in circumstances such as this where the court reverses the Secretary's decision on the merits and sends it back to the agency for what the statute refers to as a rehearing under what the court regarded to be the proper standards.

Section 405(g) provides that that's a judgment, when the court reverses the Secretary's decision and sends it back for a rehearing.

That is a judgment even though there will be further proceedings before the Agency.

And Section 405(g)... sentence eight of Section 405(g) in fact designates that as a final judgment.

So, it seems to us to be particularly clear under Section 405(g) that the court's reviewing job is completed when the case is sent back to the Secretary.

And at that point, once the Appeals Council vacates its prior decision denying the claim for benefits, the claimant is back exactly where she was during the time of her first hearing.

Unidentified Justice: Well, certainly her attorney was needed on remand to accomplish the ultimate goal of the litigation.

Mr. Kneedler: First of all, in this case it's not at all clear that an attorney was required because it's particularly vivid that the proceedings on remand in this case were non-adversarial.

Not only did the Appeals Council vacate the ALJ's prior decision, but the Appeals Council took note of the fact that after the time the ALJ rendered her decision the first time around Congress had ordered the Secretary to revise the standards for mental impairments.

The Appeals Council ordered the ALJ to review Respondent's case under the new standards and suggested that the ALJ receive the advise of a medical advisor.

All of those are clearly non-adversarial undertakings by the government, and in fact were for the benefit of the claimant.

And it was in response to those actions taken by the Appeals Council on its own that Respondent was awarded benefits.

So, it seems to us to be particularly vivid in this case that the proceedings were non-adversarial.

The only... the only thing that counsel did in this case that Respondent has pointed to is to correct the typographical error at the conclusion of the ALJ's decision identifying the onset date of the period of disability as May 15th, 1982 rather than 1981.

But it was perfectly evident from the prior portions of the ALJ's decision that that was an error, and there is no reason to think that the Appeals Council would have overlooked that onset date on its own.

But, more importantly, that error was not in any way due to adversarial representation by the government.

Once again, whatever one might think should be the proper rule here, Congress has specified that before an agency, fees may be awarded only when the agency proceedings themselves satisfy the statutory definition of being an adversary adjudication.

Unidentified Justice: Mr. Kneedler, could I interrupt to get your help on one part of the 2412(d)(3).

The government agrees, does it not, that there are fees payable for the proceedings in court?

Mr. Kneedler: Yes.

Unidentified Justice: But those proceedings, under the statute, had to be judicial review of an adversary adjudication, did they not?

Mr. Kneedler: No, No. 2412(d)(3) refers to circumstances in which a court may award fees for services performed before the agency; 2412(d)(1)(A) is the section that provides for fees awarded in the judicial proceedings themselves.

Unidentified Justice: Oh, I see.

Because in your brief... or, your petition, rather... you quoted 2412(d)(3).

But you really should have quoted 2412(d)(1).

Mr. Kneedler: Yes.

Well, in our brief we add 2412(d)(1)(A).

This is on page 2 of our brief.

Unidentified Justice: Oh, I see.

Mr. Kneedler: But 2412(d)(3) is significant in our view because it is a provision of the Act that specifically addresses the circumstances in which a court may award fees... in which a court may award fees for services performed before an agency.

And 2412(d)(3) is specifically limited to those cases in which the party seeks judicial review of an adversary adjudication.

In other words, the only case in which a court may award fees for work done before an agency, the very relief that Respondent seeks in this case, is, once again, when the agency itself has conducted an adversary adjudication in which the agency is represented by counsel.

Unidentified Justice: In the program, the pilot program that you described to Justice Scalia, would the attorney's fees... could attorney's fees be awarded in that instance, where these representatives of the government weren't present assuming other conditions are satisfied that the government's position is not substantially justified?

Mr. Kneedler: If there had been an attorney present in the experimental program?

Unidentified Justice: Well, yes.

Or one of these non-attorneys--

Mr. Kneedler: Non-attorneys.

Unidentified Justice: --representing the government.

Mr. Kneedler: Well, there is a separate threshold question which we identify in a footnote in our brief.

And that is whether... the definition of adversary adjudication is not only where the government is represented by counsel, but also another requirement is that the adjudication be undertaken under Section 554 of Title 5, which is the APA.

And it's been the position of the government for many years that the APA does not apply of its own force to Social Security proceedings.

And this Court left that question open in Richardson v. Perales.

So, there is that threshold question.

But here there is no need to reach that because we think it's so clear from the statutory text that absent the sort of experimental program to which you're referring these are simply not adversary proceedings because the government doesn't take a position before the ALJ on the claim, and what's more, it does not appear through counsel or other representative.

Unidentified Justice: Although the government does use ALJs in all those proceedings, it's not confident enough about its position on that point that it doesn't decline to use ALJs who are usable only for 554 proceedings.

Mr. Kneedler: Well, at least for the--

Unidentified Justice: If it was not a 554 proceeding, you could have any agency officer conduct the hearing, right?

Mr. Kneedler: --Yes.

But I believe there is--

Unidentified Justice: And the government always uses ALJs.

Mr. Kneedler: --I believe there is separate statutory authorization for the use of Administrative Law Judges in Social Security programs.

Congress converted prior hearing examiners under Title 16.

I'm not sure about Title 2.

Unidentified Justice: Mr. Kneedler, going back to the text... and I thank you for calling my attention to the right provision on page 2 of your brief... 2412(d)(1)(A), including proceedings for a judicial review of agency action.

In the government's submission, when did the proceedings for judicial review of the Agency action in this case terminate?

Mr. Kneedler: They terminated when the case was remanded back to the Secretary.

Unidentified Justice: And the... and the filing the order later on and getting fees for the work during the judicial, that was not part of the judicial proceeding?

Mr. Kneedler: Well, it was part of the judicial proceedings only for purposes of the award of--

Unidentified Justice: Well--

Mr. Kneedler: --attorney's fees.

Unidentified Justice: --when did they terminate for all purposes?

Mr. Kneedler: Well, for all purposes, including attorney's fees, it terminated when the fees were awarded.

But--

Unidentified Justice: Which was after the remand proceedings had taken place?

Mr. Kneedler: --Yes.

Unidentified Justice: But you say that part of the proceeding is kind of carved out because it was before the Agency rather than before a court?

Mr. Kneedler: The proceedings on remand, yes.

Unidentified Justice: Yes.

Mr. Kneedler: Not... not carved out.

They're just separately dealt with under both the EAJA and the Social Security Act.

Unidentified Justice: Well, that's the issue, I guess.

Mr. Kneedler: Right.

But... but it... there's no suggestion whatever in the text or legislative history of this Act that proceedings on remand before the Agency are somehow part of the civil action in court.

Congress, again, quite separately dealt with the two different types of proceedings.

And, again, in the administrative proceedings, the purposes that Congress was trying to serve by making attorney's fees available in certain adversary adjudications, again, demonstrate why attorney's fees should not be available.

And Congress didn't contemplate that they would be in proceedings on remand.

What Congress was trying to do, as the word equal access to justice suggests, was to level the playing field.

Where the government is represented by a lawyer in an administrative proceeding, or other representative, Congress determined that attorney's fees should be available for the claimant in appropriate circumstances.

And by the same token, the legislative history of the 1980 Act makes it particularly clear that it would be unfair to award the... to require the government to pay for the claimant's attorney when the government itself wasn't represented by an attorney.

Unidentified Justice: Well, there is no claim in this case for a fee on the initial administrative proceeding.

Mr. Kneedler: That's... that's correct.

But the same rule... the same rule applies to the proceedings on remand because they... because those proceedings on remand are governed by exactly the same regulations, the same standards.

And, in fact, after the remand, as I mentioned earlier, the claimant is in exactly the same position as she was in before.

Unidentified Justice: Well, really... really, the claimant is in a much stronger position.

The United States' position, if it ever had one, had been overruled.

Mr. Kneedler: Yes.

Whatever... whatever--

Unidentified Justice: So, the result is preordained.

Mr. Kneedler: --It's not preordained because--

Unidentified Justice: Well, it's close.

[Laughter]

Mr. Kneedler: --The court... the court may have... the court may have disagreed with the Secretary on certain legal issues--

Unidentified Justice: Yes.

Mr. Kneedler: --as was true here in considering several impairments.

But the court sends it back to the ALJ for a fresh adjudication under the correct legal standards.

And then the parties start all over again, with the government not represented by counsel.

And the purposes of the Act that are reflected both in the statement of purposes in Section 202 of EAJA, plus the legislative history, indicate that Congress didn't intend the fees to be available there because there is no disparate... if there is any disparity in the representation, it's in favor of the claimant since the claimant has a lawyer and the government does not.

And it would, in the judgment of Congress in 1980, be unfair to require the government to pay the claimant's attorney's fees when the government itself is not represented by counsel.

Unidentified Justice: Well, the claimant has got a judgment too.

Mr. Kneedler: The claimant has a judgment and the issues have been narrowed on remand.

As this case demonstrates, the adjudication on remand was facilitated.

Unidentified Justice: But the way the issues have been narrowed is they have to... further proceedings have to be in accordance with the opinion of the court of appeals or the district court.

So, there is... you've got a little different set of ground-rules.

Mr. Kneedler: They are, but that's no different from the fact that the ALJ has to conduct the hearing under certain legal rules at--

Unidentified Justice: Yes, but the difference, I suppose, is that the... I think if you were a lawyer representing a client in that position, you'd really have a professional duty to be sure that the standards that you fought for in the litigation were carried out and were interpreted properly.

Mr. Kneedler: --Well, and--

Unidentified Justice: It's kind of strange for the lawyer to just go home and sit around.

Mr. Kneedler: --No, no one is suggesting that.

But a lawyer would have the same sort of duty in an initial proceeding before the case had ever gotten to court to make sure that the ALJ obeyed whatever legal standards governed that proceeding.

Whether it be regulations or a prior court of appeals decision that didn't apply to the claimant's case.

Unidentified Justice: But are the claimants in all these proceedings, these vast number of proceedings, in the initial stages typically represented by counsel?

Mr. Kneedler: The figures that the Social Security Administration gave me is that in about 65 percent of hearings the claimant is represented by counsel, and about another 18 percent represented by some other form of representative other than counsel.

Unidentified Justice: Those are in claims that go to hearing, of course.

Mr. Kneedler: Claims that go to hearings, yes.

Unidentified Justice: Before an ALJ?

Mr. Kneedler: Before an ALJ.

Unidentified Justice: So there would be an awful lot of them denied before that, or granted before that, and I suppose that in most of those there probably would not be counsel.

Those that are just processed at the administrative level.

Mr. Kneedler: Before the ALJ, yes.

Unidentified Justice: Yes.

Mr. Kneedler: A lot of them are not represented by counsel--

Unidentified Justice: Yes.

Mr. Kneedler: --in that.

Again, Respondent bases her entire submission in this case on a supposed distinction between administrative proceedings that precede judicial review and proceedings on remand from the court.

But, there is nothing in the Act and nothing in the legislative history of the Act that draws such a distinction or furnishes any statutory or textual basis for the award of a claim.

Administrative proceedings before the Secretary are just that, whether they're in the initial proceedings or on remand.

But if there were any question about it, I would like to refer the Court's attention to the legislative history on page 26 of our opening brief, where Congress was specifically addressing the question of the award of attorney's fees in the context of where a case is remanded by the district court back to the Secretary.

Congress was there discussing, in the indented quote, the arrangements that certain courts had made to provide for the award of attorney's fees in those cases before--

Unidentified Justice: So, this was a House Committee discussing it?

Mr. Kneedler: --Yes.

The... when a case is sent back to the Secretary, the claimant is not yet a prevailing party and so the arrangement several courts arrived at was that the district court could retain jurisdiction over the attorney's fee question to see whether the claimant prevailed on remand.

If she did, then the court could award fees for what occurred in the judicial proceedings.

But, as the italicized sentence says, as the courts have found, the only fees which will be available will be for those activities undertaken in connection with the initial or judicial proceedings, and not those associated with the administrative proceeding.

And since this quotation was in the specific context of remands, we think it's quite clear from the legislative history that Congress intended the text of the Act to mean what it said.

Unidentified Justice: Let me just make sure I understand one other thing, Mr. Kneedler, about the scheme.

Supposing the claimant wins in the judicial proceeding in the sense that he or she gets a new hearing but ultimately does not get any money out of the case because on remand they decide the claim is no good for some other reason; that person is not a prevailing party within the meaning of the statute?

Mr. Kneedler: That's correct.

There were judicial decisions to that effect and Congress ratified those when it passed the--

Unidentified Justice: So that the status of the claimant as a prevailing party in the last analysis depends on what happens in the administrative proceedings on remand?

Mr. Kneedler: --That's correct.

Unidentified Justice: Yeah.

Mr. Kneedler: But that's just to determine whether he's a prevailing party for fees in the judicial proceedings themselves.

Unidentified Justice: Yes, but that is not part of the judicial proceeding in which--

Mr. Kneedler: That is... what happens on remand is not part of the judicial proceeding.

Unidentified Justice: --in which they become a prevailing party.

Okay.

Chief Justice William H. Rehnquist: Thank you, Mr. Kneedler.

Mr. Coleman.

ORAL ARGUMENT OF JAMES E. COLEMAN, JR. ON BEHALF OF RESPONDENT

Mr. Coleman: Mr. Chief Justice, may it please the Court:

Mr. Kneedler referred to the purpose of the Equal Access to Justice Act as leveling the playing field.

But there is another equally important purpose of the Act, and that was to shift to the Federal Government the cost of litigation caused by a federal agency or official that took a position against a person such as Mrs. Hudson without substantial justification.

In this case, the government does not contest that the position it took in 1982 when it initially denied the benefits to Mrs. Hudson was without substantial justification.

Unidentified Justice: Excuse me, but the Act does not provide compensation in that situation so long as there is no attorney.

It's clear that for the initial Social Security determination, even though the ALJ who is an employee of the Agency and a government official, wrongly decides against an applicant... arbitrarily takes an unreasonable position... there would be no fees available for that--

Mr. Coleman: That's correct, and we don't dispute that at all.

I--

Unidentified Justice: --Well, but doesn't that cast some doubt on... on what you're saying?

Mr. Coleman: --No.

Because the Equal Access to Justice Act is really two statutes.

One statute is a provision in which the government is permitted to pay attorney's fees in adversarial adjudicatory proceedings.

And we don't contest that.

The second part of the Act is where the government is involved in civil proceedings, in court proceedings, and takes a position that's not substantially justified.

Fees are also available in that circumstance.

And it's our position in this case that it is Title 28 that governs, and not Title 5.

There is no dispute in terms of what happens in the initial proceedings.

That the government can take any position it likes.

It can be arbitrary, it can protract the proceedings, and when the Secretary makes a final decision the claimant is not entitled to attorney fees.

But, what the Act says is, that if there is a civil action initiated to review that, the government gets only one chance to do that.

It's already had its chance in a case such as this.

Then we have a civil proceeding and we never go back to the administrative proceedings that are governed by Section 504 of Title 5.

Unidentified Justice: Mr. Coleman, the court below relied instead on the Agency adversary adjudication section.

But you don't seem to be defending that now.

You are urging us to affirm, but on a different ground, that it is part of the civil action.

Is that basically right?

Mr. Coleman: That's correct, Justice O'Connor.

Unidentified Justice: So, you agree essentially with Mr. Kneedler, then, that the United States was not represented otherwise within the meaning of the adversary adjudication provision before the Agency?

Mr. Coleman: Well, not exactly because our position is that Section 504 is not relevant to the remand proceedings.

If it is relevant, if this Court determines that Section 504 and Section 2412 together... determine whether a fee is awarded in a case to review a decision of the Secretary, then the Eleventh Circuit's decision would be correct and we would defend it on that basis.

But, in our view, the way in which the statute was enacted makes it very clear that the administrative proceedings are what precedes the judicial review, and that after the final Agency decision in the administrative proceedings, the only thing that you have left is a judicial proceeding.

And that's true whether it was an adversarial proceeding below or whether it was a non-adversarial proceeding.

Unidentified Justice: And how do you respond to the language in the House report that is cited on page 26 of the government's opening brief?

Mr. Coleman: That report is cited... first of all, it's edited in the government's brief in a way that distorts the meaning.

For example, the portion of the report that is emphasized in the government's brief refers to "as the courts" and they replace "these" with "the".

This sentence referred to cases that were cited in the Brown v. Secretary of HEW case which they deleted right before the sentence that they emphasized.

In Brown, the court noted that there were a number of decisions in which courts had awarded fees for obtaining a remand, without waiting to see what happened in the remand proceedings.

And what the Congressional Report, what the House Report says, is that as these courts found in those cases where the remand proceedings had not even occurred... and none of the cases reflect what happened on remand... that the judges awarded fees for the judicial portion leading up to the remand but not for the administrative proceedings, which--

Unidentified Justice: Mr.--

Mr. Coleman: --can only refer to the administrative proceedings that--

Unidentified Justice: --Mr. Coleman--

Mr. Coleman: --came first.

Unidentified Justice: --Mr. Coleman, are you paraphrasing now the language of a House Report or are you quoting directly?

Mr. Coleman: Well, I can quote it directly.

I was--

Unidentified Justice: No, I was just curious.

Mr. Coleman: --I was paraphrasing.

Unidentified Justice: You were paraphrasing.

Mr. Coleman: I was paraphrasing.

But what the government also did in its brief was to... there was a typographical error in the original House Report which said "initial".

It should have been "judicial".

And that was corrected in a supplemental report.

But, because it said i.e., judicial proceedings> ["] when in fact all it referred to were the judicial proceedings that led to the remand, and not... it did not intend to indicate any relationship in time between the administrative proceedings and the judicial proceedings.

Unidentified Justice: How do we know that was a typographical error in the House Report?

Mr. Coleman: We... we cite in our brief the supplemental House Report which makes the correction.

Unidentified Justice: Oh.

That proves that it was a typographical error?

Mr. Coleman: Well, I assume what it proves is that the initial word... that the word "initial" was intended to be judicial.

Unidentified Justice: Or, at least, the later House Committee thought it should have been "judicial".

Mr. Coleman: No, it was... I'm sorry... it was the same committee.

Unidentified Justice: The same committee--

Mr. Coleman: It was a supplemental--

Unidentified Justice: --later?

Mr. Coleman: --Yes.

It was simply issued a few weeks, I think, later.

Unidentified Justice: Uh-huh.

Mr. Coleman: Section 504 of Title--

Unidentified Justice: Mr. Coleman, can I ask you about the... what seems to me to be the logical basis for your case is that everything that happens until the judicial proceeding is terminated, is part of the judicial proceeding.

Since the case was not over until the remanded proceedings were completed, everything that occurred had to be part of the judicial proceeding.

But it seems to me those are two different questions: when the proceeding ends and what constitutes part of the proceeding while it is still continuing.

When we remand something to a lower court or when a court of appeals remands something to the district court, you may well say... and explicitly says, "we retain jurisdiction" or something of that sort... you may well say that the case doesn't end until it's completed below.

But you would not say that the proceedings below are part of the court of appeals proceeding.

That seems to me a very strange way to think.

And that's what you're saying here.

You're saying the proceedings below are part of the judicial proceeding.

They're not.

They haven't been completed yet, but that doesn't make them part of the judicial proceeding.

Mr. Coleman: --Well, that is what we're saying, but I don't think the analogy with what happens when this court or a court of appeals remands a case.

There are some circumstances where there is a limited remand by a court of appeals, for example, in which the court of appeals retains jurisdiction in order to enter an order pending further proceedings in the district court.

That is more analogous.

But in this case, Section 405 of the Social Security Act itself makes the remand proceedings a part of the judicial proceedings because the Secretary does not have the authority in the remand proceedings to issue a final decision that would terminate the proceedings.

It's very clear.

And the government took the position in this case and has taken the position in all of these cases.

And that also is reflected in the House Report that the government cites on page 26, that a remand, a limited remand in a Social Security case is for the purpose of the Secretary to take some action in accordance with the court's decision.

The Secretary then files the transcript, to the extent that there was a transcript developed in the remand proceedings, plus any new decision or modified decision that the Secretary makes on the basis of the remand proceedings.

All of that is then filed in the federal district court, and the district court then, upon review of that, issues a final decision... the final decision... either affirming, reversing, or modifying.

What happened in this court and what the Eleventh Circuit did... what happened in this case and what the Eleventh Circuit did was to say that in the initial proceedings, which we acknowledge... we concede... Mrs. Hudson was not entitled to claim attorney's fees for.

But in those proceedings the government took a position that was contrary to its regulations, which was that Mrs. Hudson suffered from various impairments, none of which taken alone was sufficient to render her disabled.

But the Eleventh Circuit had decided in a number of cases, going back to 1980, that in a situation like that, the Agency is to consider the impairments in combination.

And that's what the Agency failed to do in this case, and it litigated that position in the judicial action to review its decision.

The Eleventh Circuit said... you should have done it that way, now do it that way.

And then under 405 you file the transcript and any decision, and the district court enters the final judgment.

The--

Unidentified Justice: Mr. Coleman, I'm a little troubled by the consequences of the rule that you're urging for as far as the governmental fiske is concerned.

Let's assume a lot of Social Security attorneys realize that the Agency has been taking a position that things in combination don't count, that it has to be individually.

They figure this is wrong on the law and they figure they can win that on an appeal.

Even those who have clients who... even though they know that their clients can't prove a disability even in combination, those attorneys could bring a suit on behalf of those clients before the Social Security Administration, lose there, go up on appeal, win on appeal on the issue of law, get remanded to the Agency.

Fight before the Agency on the issue of fact, whether there is any disability even in combination, on the issue of fact that they know they can't win on.

And then they can go home with attorney's fees for both their work in the court of appeals and their work before the Agency.

Wouldn't they be able to?

Mr. Coleman: --That's not the case.

And that's a very significant point because in order to obtain attorney fees in these cases, the claimant must receive benefits.

Unidentified Justice: You acknowledge that they have to win when they get back?

Mr. Coleman: Yes.

And that is why it is important that the remand proceedings be considered a part of the judicial proceeding.

Because in order to get attorney fees under 2412 the claimant must win in the remand proceedings or must establish a record that will permit him or her to win in the judicial proceedings.

So, the case that you suggest would--

Unidentified Justice: Couldn't happen.

Mr. Coleman: --not result in attorney's fees.

Section 504 of Title 5... I think by its terms it's clear that it was intended to deal with administrative proceedings that occurred prior to judicial review and that were concluded prior to judicial review.

There are three provisions of Section 504, I think, that are relevant in that respect.

First, the party must prevail in the adversary adjudication, and that's Section 504(a).

Second, the fee sought must be sought within 30 days of a final disposition in the adversary adjudication.

Then, finally, Section 504(c) provides that if there is judicial review sought of the final decision following the adversary adjudication, then fees can be awarded only by the court that reviews the final action.

That is Section 504(c), and fees in that case would be awarded under Section 2412(d)(3).

There is no other circumstance, even in Section 504, where the Agency makes a final decision, a final determination, and then that is reviewed by a court in which you go back to the Agency to recover fees.

The notion is that the action is terminated on judicial review for purposes of the administrative proceeding as well.

In this... In this case, the government for the first time in its reply brief takes the position that the... that the judicial proceeding terminated with the remand order.

That is contrary to the position that it took earlier in the case and is contrary to the position that it has taken in all of these cases.

And, it's contrary to the house report that specifically referred to cases decided in the Fourth Circuit and the Third Circuit dealing with this issue.

The remand proceedings... first of all, in order to recover attorney fees the party must prevail.

In other words, in a Social Security case, the party must obtain benefits.

That happens only after the remand proceedings have been concluded and the findings of the Secretary and a decision is filed back with the court which has jurisdiction under Section 405(g) to enter the final order.

In addition, the 30-day time period for filing the application begins to run from the time of a final judgment.

And the cases have consistently interpreted that requirement to mean the time that the district court enters an order terminating the proceeding, the judicial proceeding.

In the section of the legislative history cited by the government at page 26 of its brief that talks about remand proceedings, first of all, it's important to note that that section of the legislative history dealt only with whether or not fees would be available at the point that a remand order is obtained, as opposed to whether they are available as cases have held following the receipt of benefits on remand.

But in that section of the legislative history, the House Report says that the remand decision is not a final judgment nor is the Agency decision after remand.

Instead, the district court should enter an order affirming, modifying, or reversing the final Agency decision, and this will usually be the final judgment that starts your 30 days for filing the EAJA petition.

That is the position that the government has taken throughout in this case until the reply brief.

For the first time in the reply brief the government suggests that the final judgment in this case came at the time that a remand order issued, as opposed to the time, December 1, 1987, when the district court entered an order dismissing this case but retaining jurisdiction to entertain a petition for attorney fees.

Unidentified Justice: If the government had given up after the... after the decision on appeal and just paid the claim, they could have done that.

Mr. Coleman: They could have done that.

Unidentified Justice: And there would have been a final judgment.

Mr. Coleman: There would have been a final judgment in that instance and we wouldn't have this case.

And that is the... that is the point of the--

Unidentified Justice: Well, there was a final judgment of the court of appeals on the law.

Mr. Coleman: --That's correct.

But what the court of appeals finally determined... the effect of the Secretary's regulations.

And that was final.

But what the Eleventh Circuit did not finally determine was whether or not the respondent was entitled to--

Unidentified Justice: Was entitled to benefits.

Mr. Coleman: --benefits.

And that was the point of the complaint in the first instance, was to reverse the Secretary's decision that she was not disabled and not entitled to benefits.

Unidentified Justice: Could the government, in your view of the thing, have taken an appeal on the merits from the court of appeals immediately without--

Mr. Coleman: I'm not--

Unidentified Justice: --going through the remand?

Mr. Coleman: --I'm not sure that the government could have.

In other words, whether the government could have sought cert in this court following the decision in the Eleventh Circuit... I'm not sure whether the government could have done that from the Eleventh Circuit.

But I don't think--

Unidentified Justice: A court of appeals judgment doesn't have to be a final judgment.

Mr. Coleman: --Yes.

I'm--

Unidentified Justice: I mean, it's appealable.

They can seek cert from a court of appeals judgment.

Mr. Coleman: --That's correct.

And that's why I'm not sure that it's relevant to this issue.

Because at that point, just as they did here where the Eleventh Circuit determined that the government's position had been without substantial justification and remanded to the district court, the government sought cert in this case.

And so the civil case, obviously, continues in that circumstance.

The remand would then have waited until this court either denied cert or granted cert and reviewed and issued a decision.

So, there is no circumstance where if an appeal had been taken, the remand proceedings would have gone on simultaneously.

This Court... or, at least Justice Brennan in a concurrent opinion in the case of Webb v. Dyer County Board of Educations referred in interpreting Section 1988 of Title 42 of the U.S. Code... referred to an analogous situation in which the district court in a civil rights case abstains in order to permit the parties to litigate a state law issue in a civil rights action.

And then, once the state law issue is litigated, then the district court proceeds with a determination of the civil rights claim.

Justice Brennan referred to that as a taking the ancillary proceedings and making them a part of the civil rights litigation for purposes of Section 1988.

I think that what happened in this case is analogous to that situation where the remand proceedings were for purposes of establishing a record on which the district court could then make a determination of whether Mrs. Hudson was entitled to benefits whether or not the Secretary issued a decision that she was.

Unidentified Justice: But the district court doesn't make the initial determination of whether she's entitled to benefits.

That's for the Secretary, is it not?

Mr. Coleman: That's correct.

Unidentified Justice: And what's the standard of review in the district court?

Mr. Coleman: Whether or not it's supported by substantial evidence.

And that's also... that also is the standard with respect to what happens in the remand proceedings as well.

But the remand proceedings are limited remand proceedings only for the purpose of the Secretary taking an action that she should have taken in the initial proceedings.

Unidentified Justice: Well, you use the term "limited remand".

Are you suggesting that there are some remands involved in Social Security cases which are not limited remands?

Mr. Coleman: Yes.

Unidentified Justice: What would be an example of one of those?

Mr. Coleman: For example, where the Secretary makes a ruling of law that terminates the proceeding prior to a final decision.

In other words, terminates it and says that the claimant, for example, does not qualify under the statute without regard to what the facts are.

That is litigated; The Secretary has reversed.

Then that would terminate the judicial review.

The proceedings would then resume before the Secretary to a conclusion.

But that's not what happened in this case.

In this case there was a final decision by the Secretary.

The administrative proceedings went through to their conclusion.

And the only thing that happened following the Eleventh Circuit's decision was that the court decided that the Secretary had failed without substantial justification to consider the impairments in combination.

Unidentified Justice: So, in your first example of the unlimited remand... there, would the decision of the Secretary have been final on remand?

Mr. Coleman: It would be a... It would be a final decision, but it would not be a final decision with respect to the claim that the claimant is disabled.

The Secretary doesn't reach that decision because she rules on an issue of law that she doesn't have to reach that decision.

If she's wrong about that, I think that the party who seeks judicial review is the prevailing party under the Equal Access to Justice Act, and the administrative proceeding simply continues.

In this case, the remand was solely for the purpose of the Secretary considering the impairments in combination.

That's reflected in the recommended decision of the Administrative Law Judge on remand, which is a part of the appendix to the petition for cert in this case, beginning at page 21 of the Appendix.

Unidentified Justice: Mr. Coleman, may I interrupt you because I'm not sure I follow part of your argument?

You say there are two kinds of proceedings.

One where there is a threshold legal objection that is sustained by the Secretary, and no facts.

And the other, the case like this.

In the threshold legal determination kind of case, supposing you went on appeal and the court says, go ahead and have a full hearing.

Do you take the position that before that hearing you would become a prevailing party?

Mr. Coleman: I think so, because the relief that you... the relief that you sought--

Unidentified Justice: But now would the district judge be allowed to give you that award of fees without waiting to see if you prevail at the actual hearing?

Mr. Coleman: --Yes.

And that has been done.

That was one of the decisions that was cited in the Brown v. Secretary of HEW case cited in the House Report.

One of the cases involved just that, where the administrative proceedings were terminated because the Secretary determined that the claimant had not met a requirement for seeking an appeal to the Appeals Council.

Unidentified Justice: But then, conversely, you are agreeing with the government, I guess, that in that sort of case you would not be entitled to fees in the remand proceedings before the Agency?

Mr. Coleman: That's correct because the remand proceeding then is simply a continuation of the one that had begun but in which the Secretary had not reached a final decision on the question of whether the person was disabled.

Unidentified Justice: And then one other question.

Do you think all of these cases fall neatly into one or the other of these two categories?

Mr. Coleman: I think that they probably fall neatly within one or the other.

I think that there may be some circumstances where... in the instance that I've just described, where there's sort of an interlocutory appeal or interlocutory review in federal court under... in an administrative proceeding that would be governed by Section 504 where the remand proceedings would continue and they would be governed by Section 504.

It's simply that the two ends would be put together.

In this case, what the government, by its position, is attempting to do is to carve out the remand proceedings and treat them as if they sort of exist out in space independently of anything.

The remand proceedings exist only for purposes of the further consideration ordered by the district court to permit the district court to issue a final judgment in the case.

And that's without regard to the Equal Access to Justice Act.

That's the purpose of it.

It simply is a part of the judicial proceedings that the district court has ordered in order to give the Secretary an opportunity first to, as in this case, consider the impairments in combination.

Once that was done, then the judicial proceedings will continue.

Unidentified Justice: Do you think it's critical that we consider the proceedings that went on after remand to be part of the judicial proceedings?

Mr. Coleman: Well, it's--

Unidentified Justice: Or are you... I understood your brief to say that once the government has ever taken a legal position, then any administrative proceeding that occurs after that, whether the government is represented or not, is... is subject to a fee award.

That's... That's the alternative ground that we argue.

And that is the... that's the ground on which the Eleventh Circuit awarded fees in this case, which was, the Eleventh Circuit determined that the remand proceedings were proceedings in which the government had taken a position because of its relationship to the civil case.

But you are defending that decision on that ground, I guess.

Mr. Coleman: --Well, we think the--

Unidentified Justice: But you think you have a better ground?

Mr. Coleman: --That's correct.

We think the better ground is to view the remand proceedings as part of the civil action and... and not have to reach the question of whether 504 applies at all.

Unidentified Justice: Mr. Coleman, all of this argument has assumed that you can't get fees just from the court... just for the court proceeding until you get your award.

Have we said anything that makes that clear?

I mean, it seems to me... let's assume the government takes on the appeal, on your appeal, a position that is not substantially justified.

And you win the appeal, ever though you later lose back in the court.

The government has still made you jump over a lot of obstacles that you shouldn't have had to jump over.

Have we ever said whether... whether you can get your court attorney's fees?

Mr. Coleman: This... This Court has not addressed the question of at what point do you become a prevailing party in a Social Security case.

Unidentified Justice: Well, how we come out in this case very much depends on how we would come out in the other one, doesn't it?

I mean, if we were to say that you are entitled to your attorney's fees in the court right away, as soon as you won the appeal, then there would be less reason to say that you're entitled to attorney's fees back at the Agency, wouldn't there?

Mr. Coleman: Well, there wouldn't be less reason.

That portion of the fees are not in dispute in any event.

The government doesn't contest that for the work done to obtain the remand order we're entitled to fees.

Unidentified Justice: Well, the appeal wouldn't be over.

The appeal wouldn't be over.

You wouldn't have to await the remand in order to determine whether you could award attorney's fees.

Mr. Coleman: That's correct.

That's correct.

And that still would not... that still would not foreclose the argument, the position that we take in this case.

Although, we--

Unidentified Justice: It would make it a lot weaker.

Mr. Coleman: --In effect it would... it would be in the nature of interim award of fees, such as is done under the Civil Rights Act where fees can be obtained on an interim basis for significant successes short of actually winning on the merits.

Chief Justice William H. Rehnquist: Thank you, Mr. Coleman.

Mr. Kneedler, do you have rebuttal?

REBUTTAL ARGUMENT OF EDWIN S. KNEEDLER ON BEHALF OF PETITIONER

Mr. Kneedler: Thank you, Mr. Chief Justice.

Respondent's primary submission here is that the proceedings before the Agency on remand are somehow part of the judicial proceeding.

First of all, we think that stretches the common sense notion of what a civil action is beyond recognition.

But there is not... there is not a need to focus just on the word "civil action" here.

The whole structure of EAJA is to treat administrative proceedings separately from judicial proceedings.

When a case is remanded back to the Agency, they are, again, Agency, or administrative proceedings--

Unidentified Justice: Mr. Kneedler--

Mr. Kneedler: --not judicial proceedings.

Unidentified Justice: --would you respond to Justice Scalia's question about... would it be open to this Court, given the statutory scheme, to hold that your opponent became a prevailing party when the case was remanded?

Mr. Kneedler: No, it would not.

The legislative history on page 26 of our brief that we cite discusses--

Unidentified Justice: Say, if we don't... if we don't look at legislative history, as some of us don't like to, and just looked at the text of the statute.

Is there anything that would prohibit us from doing that?

Mr. Kneedler: --Yes, there--

Unidentified Justice: You say--

Mr. Kneedler: --is the statutory phrase "prevailing party".

The person may have prevailed on one issue, but until you know whether he prevails in any substantial way in terms of his entitlement--

Unidentified Justice: --But he's prevailed on the only issue that was adjudicated in the judicial proceeding.

Mr. Kneedler: --But he has filed a claim for benefits and he hasn't prevailed on his claim for benefits.

And the legislative history on page 26... I'm sorry to refer to it, but it's discussing cases that have construed the language "prevailing party", and Congress is essentially saying,

"We agree with those cases that give meaning to prevailing party as not including the situation where the party simply prevails in one legal issue in the case and gets sent back to the Agency. "

Unidentified Justice: Well, that's sort of an argument that the judicial proceedings are part of the administrative proceeding.

Mr. Kneedler: No, it's not.

Because it's a condition subsequent to the entitlement to benefits for the judicial proceedings.

That the person not only prevail on his legal issue, but also prevail on his overall claim for benefits.

Section 2412(d)(1)(A) itself distinguishes between judicial and administrative proceedings, and I think it's important to focus on that language.

It refers to the authorization for a court to award fees in any civil action, including proceedings for judicial review of agency action.

What's encompassed in the term "civil action" is only the judicial review of the agency action.

The agency action is something else.

And when a case gets remanded back to the Secretary, in this case the Secretary vacated the first administrative decision denying the claim, held further proceedings, and then entered a new decision on the remand.

That new decision on remand was Agency action, taken by the Secretary pursuant to statutory authority.

Unidentified Justice: I agree with all that.

But somebody who talks that way, when he says "prevailing party" probably means prevailing party in the separate civil action.

I mean, you ask us to regard them as separate for one purpose and not to regard them as separate for another purpose.

Mr. Kneedler: Well, Congress, in our view, did precisely that because the administrative proceedings are separately dealt with in Section 504, and the word "prevailing" carries two meanings here.

Prevailing on the particular issue in court and on the overall claim for benefits.

And, as I said, it's a condition subsequent, that you not only have to prevail on the legal issue the first time around in court, but also have to prevail on the claim for benefits in the main to be entitled to benefits.

Also, I'd like to point out that in Section 405(g), it does not require that the record get sent back to the court in all proceedings as if the Secretary were just a special master for the court.

The provision for certifying the record back to the court is only in a narrow sort of pre-judgment remand by the court where the case gets sent back to the Secretary to receive new evidence.

And, far from making the Secretary an agent of the court in those circumstances, that provision for sending it back to the Secretary demonstrates that the Secretary is a separate entity, not part of the court.

Chief Justice William H. Rehnquist: Thank you, Mr. Kneedler.

The case is submitted.

Attribution:

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Featured:

Texas Teachers Assn. v. Garland School Dist. - Oral Argument

Sun, 06 Feb 2011 03:45:45 +0000

Case:

Texas Teachers Assn. v. Garland School Dist.

Media File:

87-1759_19890301-argument.mp3

Related Transcript:

87-1759_19890301-argument.xml

Transcript:

ORAL ARGUMENT OF ROBERT H. CHANIN ON BEHALF OF THE PETITIONERS

Chief Justice William H. Rehnquist: We'll hear argument first this morning in No. 87-1759, Texas State Teachers Association v. Garland Independent School District.

Mr. Chanin?

Mr. Chanin: Mr. Chief Justice, and may it please the Court.

The question presented by this case concerns the standard to be used in determining whether a plaintiff is a prevailing party for purposes of the Civil Rights Attorney's Fee Awards Act, Section 1988.

The parties urge two alternative standards.

The Respondents contend that the correct standard is the one used by the Fifth and Eleventh Circuits.

It is referred to as the central issue standard under which a plaintiff must prevail on the central issue by acquiring the primary relief sought.

On the basis of this standard, the court below held the Petitioners in this case were not prevailing parties and, therefore, ineligible for any fee award.

The standard urged by Petitioners was initially articulated by the First Circuit in Nadeau v. Heigemoe in 1978.

It is currently used by courts of appeal in 11 circuits, and it was characterized by this Court as a typical formulation in Hensley v. Eckerhart in 1983.

It is referred to as the significant issue standard which establishes plaintiffs as prevailing parties if they succeed on any significant issue in litigation which achieves some of the benefits the parties sought in bringing suit.

Let me note at the outset that the question as to the correct standard for prevailing party status does not in and of itself relate directly to the amount of fees that ultimately should be awarded to a plaintiff.

The standard at issue here is only the first stage of a two-stage process.

It is a threshold standard to establish an eligibility for fees.

If a plaintiff succeeds in crossing that threshold, the actual amount of fees to which he is entitled is determined by the district court after considering various factors, particularly the degree of success.

To put this another way, there is no dispute here about the fact that the results obtained is a crucial factor in the application of Section 1988.

The dispute concerns the stage of the process at which this factor should have its primary impact.

Should it be at the threshold eligibility stage to deny prevailing party status to a partially prevailing plaintiff and totally preclude any fee award, which is the Respondents' position?

Or should it have its primary impact at the second stage after prevailing party status has been achieved in determining the amount of reasonable fees in light of the results obtained?

This is the Petitioners' position.

In order to establish a framework for addressing this question, it is appropriate to begin with a brief review of the facts in this case, particularly since the briefs of the Respondents and their supporting amici present such a distorted picture of the merits outcome.

This case involves a regulation adopted by a public school district in Texas, the Garland Independent School District... I'll refer to it as GISD... which prohibited all communications regarding employee organizations on school grounds at any time during the school day, including teachers' lunch break, non-class periods and other free time.

The regulation covered face-to-face discussions and also prohibited any use of the school district's communications facilities, bulletin boards, teachers' mailboxes, PA systems.

Those were all precluded to disseminate any information regarding employee organizations.

This prohibition applied to communications by and among the teachers themselves, as well as the communications by outside representatives of employee organizations.

The Petitioners filed a 1983 action and succeeded in having the regulation struck down as it applied to teacher-to-teacher communications and as it applied to the GISD's communications facilities by the teachers themselves.

We were unsuccessful in regard to the prohibition against communications by outside representatives.

We considered this to be a significant victory, and judging by the vigorous efforts of the Respondents to overturn the ruling, so did they.

They left no stone unchallenged in seeking to reverse this ruling, including ultimately an appeal to this Court which summarily affirmed the Fifth Circuit on the merits in 1986.

In the course of its efforts to reverse, the Respondents did something else.

They also made clear what this ruling meant in practical terms.

They repeatedly emphasized before the lower courts and, indeed, before this Court that invalidation of the teacher portion of the regulation would require substantial modification on the school district's policies and procedures.

And that is, in fact, what happened.

Unidentified Justice: Mr.--

Mr. Chanin: As a result of this ruling, teachers now have the right to discuss and promote employee organizations during their free time.

Unidentified Justice: --Mr. Chanin, I wanted to ask about this point.

As you say, you prevailed on one issue in the district court concerning the use of school premises during non-school hours.

Now, the district court termed that issue minor since it said there was no evidence that union representatives were ever denied access to teachers during non-school hours.

Now, if we were to agree with you on the appropriate test, that any significant issue test that you propose, do you think that that degree of success would entitle you to fees under that test?

Mr. Chanin: Well, Your Honor, I think you're referring to a... a minor point of victory in this case, and the answer to your question is it would fall below the threshold.

But let me clarify what I am talking about as our victory and what I think you are referring to.

Unidentified Justice: All right, okay.

Mr. Chanin: In the course of this broad-based regulation that we challenged, there was a provision that said meetings could be held before school opened, 8:00 a.m. In the morning, and after school at 3:45.

And it said that it would be up to the school principal to determine whether or not to grant access for those meetings.

That was the only thing struck down by the district court as too vague because there were no standards.

That was not appealed.

It had no practical impact because the record indicates we never had been denied a pre-school or post-school meeting.

If I had to pick a threshold, that falls below it.

Unidentified Justice: Mr. Chanin, is... is that before us here?

I... I didn't--

Mr. Chanin: No.

Unidentified Justice: --understand that... that we took this case in order to decide whether you had substantially prevailed or not.

The question you presented in your petition for cert is... is simply whether a plaintiff who obtains judgment in his favor on a significant claim... whether he is precluded from recovering attorney's fees if the Court determines that the claim on which he prevailed was not the central issue--

Mr. Chanin: Absolutely.

Unidentified Justice: --not the factual question of whether this was a central issue or wasn't a central issue--

Mr. Chanin: We come--

Unidentified Justice: --whether it was significant or wasn't significant.

Right?

Mr. Chanin: --We... we come--

Unidentified Justice: That's not before us, is it?

Mr. Chanin: --before this Court in this posture.

We have prevailed, according to the Fifth Circuit, on a secondary issues of significance.

The Fifth Circuit has said that ain't good enough.

It was not the central issue.

Unidentified Justice: And we're not going to debate whether it was or wasn't.

The--

Mr. Chanin: I certainly hope not, Your Honor--

Unidentified Justice: --It's just question of law.

Right?

Mr. Chanin: --because we are satisfied with that.

Unidentified Justice: Good.

Mr. Chanin: The reason we present it is because it does tie into our analysis and the Respondents go out of their way to downplay the significance of what we won.

But let me accept that we did win on a significant issue, the court held it was not central, and move on.

Unidentified Justice: May I ask you this about the statute under which you're... you're seeking fees?

The way it reads, it says that... that a court may allow the prevailing party a reasonable attorney's fee as part of the costs.

The prevailing party.

On its face, it seems to say either the plaintiff or the defendant.

You have to pick who is the prevailing party.

Now, under your theory you can have two prevailing parties.

One party wins some significant issue, another party wins another significant issue.

How can we possibly interpret the statutory language that way?

Now--

Mr. Chanin: Because if you focused on the word "the" and you said there can only be one prevailing party, I suggest it would be a far too rigid and wooden reading of the statute inconsistent with numerous prior holdings of this Court, inconsistent with the legislative history as well.

Let me give you just one example.

Both this Court and the legislative history have made it clear that fee awards are appropriate pendente lite, at an interim stage.

And they made those references in the course of complex institutional civil rights cases which are ongoing, where issues change, where... where objectives and goals change as the litigation goes on.

It is quite impossible at that point to know if a plaintiff who has won on an interim matter, when all the smoke clears, will ultimately be the prevailing plaintiff in the entire lawsuit.

The cases that this Court has decided, including the ones that pick up that language from the legislative history, make it clear that there can be multiple prevailing parties in a case, and it has never focused on the word 1988 format or in connection with other statutes that similarly use the word "the".

After this Court's summary affirmance--

Unidentified Justice: --So, you agree that the defendant could be the prevailing party and get fees under the standard you propose.

Mr. Chanin: --I think once the standard is established, if the plaintiff fails to meet that standard, the defendant could be the prevailing party.

You threw in the question of fees, and I do want to just clarify that.

I think the defendant could be the prevailing party certainly for cost purposes.

Whether or not the defendant would be the prevailing party for fee purposes brings in an entirely different standard as this Court has developed under Christiansburg.

He would only be the prevailing party if what we had presented as the plaintiffs was frivolous, groundless or without merit.

Unidentified Justice: Well, was Christiansburg in Section 1988?

Mr. Chanin: It was not, but the doctrine of Christiansburg has been applied to 1988.

Unidentified Justice: By this Court?

Mr. Chanin: By this Court in Hensley, yes.

Unidentified Justice: It has.

Mr. Chanin: In a footnote in Hensley, it specifically applied it.

Unidentified Justice: But you... you would say that... that we would apply Christiansburg issue by issue, that if... if you brought... if you brought up one frivolous issue, that fees... fees could be awarded to the defendant on that frivolous issue even though you might get fees an some other issue.

Mr. Chanin: Yes.

I think that is the extension of Hensley.

All the Court said in Hensley--

Unidentified Justice: Well, it's a kind of extension you're... you're arguing for here.

Mr. Chanin: --Yes.

I think... I think it is--

Unidentified Justice: I mean, what's sauce for the goose is sauce for the gander.

You want to us split up issue by issue.

Mr. Chanin: --I think it is... it is where I am... I am prepared to go.

What the Court said in hensley was that when you have one lawsuit with legally distinct claims that can be separated, that are unrelated, you can have a prevailing plaintiff and a prevailing defendant on frivolous, groundless issues.

I would concede that even if they are related issues, conceptually you could have a prevailing plaintiff on a significant issue and a defendant if included with those are related frivolous, groundless issues.

Yes.

Unidentified Justice: Counsel, suppose you had two lawsuits, two different school districts.

One was the lawsuit we rave before us.

The second hypothetical case is a lawsuit in which the teachers bring suit on just the claim that you brought here where you prevailed.

And assume the hours spent on just the prevailing claim are the same.

Is the fee same?

Mr. Chanin: Could I... the answer on that would be it would have to be determined by the district court in its discretion.

But if I may, Your Honor, you've put your finger on what is the ultimate absurdity of the central issue rule.

And if I may just take your example and run with it a little bit.

After extensive litigation here, we succeeded in having the regulation declared unconstitutional in significant respects.

And in that sense, we vindicated important congressional policies under the civil rights laws.

Had that been the only issue in this case, there is no dispute that we would have been a prevailing plaintiff even in the Fifth Circuit entitled to an attorney's fee.

Now, what... the amount of the attorney's would be determined in the second stage of the process at the discretion of the district court.

However, because we chose to include a second related issue, which I might note the district court specifically found was certainly not frivolous or brought in bad faith, and because we failed to prevail on that second issue, we were denied any fees even for the issue on which we succeeded.

Unidentified Justice: Well, under... but I want to know the answer to my question.

Under your theory... under your theory, assume the discretionary factors are all the same except for the fact that in case number one, your case, there were claims on which you did not prevail.

Should the fee be the same?

Mr. Chanin: We--

Unidentified Justice: Another way of saying... another way of saying it is can the judge discount for the fact that you had some claims on which you did not prevail.

Mr. Chanin: --I think under Hensley the judge certainly has the authority to discount for that and, applying the Hensley factors, might well do so.

It is our position that these were closely related issues and that the work put in on the one impacted and led to the success on the other.

So, we would certainly argue before the district court that it should exercise its discretion to give us a full amount of our fee award.

But the district court certainly has discretion and might well discount it.

Unidentified Justice: Mr. Chanin, may I... may I suggest that it... it doesn't strike me as utterly absurd... the hypothetical you gave us... that had you brought this one claim alone, you would have gotten all your fees, but when you bring it with another one, you... you don't get fees.

It may well be that had you brought this claim alone, the school district here would have said, oh, heck, that's no problem for us.

We'll settle this one.

This isn't worth going to litigation on.

But by combining it with another one, you... you compelled the school district to go to... to litigation anyway.

So, they said, well, while we're at it, let's litigate the whole thing.

It seems to me quite reasonable to say that in... in one of the situations, had you prevailed, you get all your fees.

In this one, you don't.

I don't see why it's absurd--

Mr. Chanin: Well, Your Honor, I think it's absurd because I think it's directly contrary... what you suggest is directly contrary to the intent of Congress in passing Section 1988.

As this Court observed very recently, last week, in Blanchard, in order to advance Congress' purpose under... enacting Section 1988 civil rights attorneys should be encouraged to explore all possible avenues of relief in their efforts to vindicate the high priority policies of Congress.

And the Court cautioned.

It cautioned against artificial incentives that could skew the way civil rights cases are structured and put forth.

We submit that based upon what you have said, the central issue standard would create an economic disincentive which could have precisely that effect.

It could cause and deter civil rights attorneys from providing the type of effective representation that this Court called for in Blanchard.

Because of the inherent difficulty in determining what is the central issue and the uncertainty as to what some courts may hold in that regard, the economic self-interest of the attorneys could motivate them to press only those claims which look like sure-fire winners or have a strong likelihood of success and abandon issues that are somewhat more problematic even though they are bona fide, can be supported by a good faith argument for an extension or modification or even a reversal of the law.

If you included those issues in your hypothetical, we run the risk that we wilt lose all fees even for those issues on which we are successful.

I think this possibility is not a positive.

I think it distorts artificially the way civil rights attorneys would prepare, present and handle cases, be contrary to this Court's admonition in the Blanchard case and be contrary to the legislative history.

The significant issue standard avoids that problem and would not, as your question may also imply, encourage the inclusion of non-meritorious or insubstantial claims in civil rights lawsuits.

I think the framework that this Court has established for applying Section 1988 provides ample safeguards against that possibility.

Thus, for example, if we assert issues and include issues that are unreasonable or groundless, we may be required under Christiansburg to pay the fees to the defendants.

I submit to you that is a powerful deterrent.

Moreover, under Hensley, even as prevailing plaintiffs, we may be denied fees for time spent on non-frivolous issues raised in good faith, but we did not succeed.

This is a further incentive for plaintiffs attorneys to consider very carefully the kinds of issues they include.

But there is a major difference between the concepts embodied in Christiansburg and the concepts embodied in Hensley which are designed to motivate responsible action by attorneys for civil rights plaintiffs and the central issue standard which threatens to impose a financial penalty for providing precisely the type of effective representation that Congress intended and this Court has called for.

Let me, if I may, pick up on Hensley v. Eckerhart because we believe and most courts of appeals believe that that case resolved this question and put to bed the question of the standard to be applied in determining who was a prevailing party for purposes of 1988.

The issue in Hensley was whether prevailing... a party who had prevailed in part could recover legal fees for the services rendered on unsuccessful claims.

In answering that question, Hensley established a comprehensive analytical framework to assure that civil rights plaintiffs obtain fee awards that are reasonable in relation to the results obtained.

The framework involved a two-stage process.

A plaintiff who achieves only partial or limited success must first cross what this Court termed the generous eligibility threshold to become a prevailing party.

And it is appropriate for that threshold to be generous because it is only the first stage.

The determination of what amount is reasonable is made by the district court, taking into account relevant factors including particularly the level of success achieved.

There are several examples in Hensley itself which illustrate the application of that analytical approach.

Take Hensley.

Hensley was a broad-based challenge to the constitutionality of treatment and conditions at a state mental hospital involving six general areas.

The Court indicated hypothetically that even if the plaintiffs prevailed in regard to only one of those areas, visitation, mail and telephone policies, which hardly would seem to constitute the central issue in the case, that those plaintiffs would have been prevailing parties eligible for a fee award, although the Court did say that the amount would be reduced at the second stage to reflect the work done on unsuccessful claims.

Hensley's discussion of the Eighth Circuit's decision in Brown v. Bathke is equally explicit.

There you had a discharged school teacher, sought reinstatement, lost wages, damages, and expungement from her record of the negative material.

She achieved only lost wages and expungement, lost on the reinstatement, lost on the damages.

But this Court said that that plaintiff was the prevailing party eligible for a fee even though... and I quote from the Court's opinion in Hensley...

"she had lost on the major issue of reinstatement and obtained only a minor part of the relief she sought. "

And these examples come as no surprise.

They are the natural outgrowth of what Hensley establishes for assuring that civil rights plaintiffs receive reasonable fees in light of the results obtained.

And as this case illustrates, the central issue standard simply does not fit within that framework.

If we are to obtain reasonable fees for the significant results we obtained, having the GISD regulation declared unconstitutional as to teachers, we must in the first instance be allowed to cross over that eligibility threshold.

That would allow the district court to have an opportunity to do, as the Justice suggests, to calculate under Hensley the amount of fees that are reasonable in light of what we achieved.

The use of the central issue test has foreclosed that.

It has foreclosed the discretion of the district court, and it has denied us the opportunity to recover any fees even though we have vindicated the policies of Congress by achieving substantial secondary success.

The Respondents, we would submit to you, entirely missed the point of Hensley.

Instead of looking at the reasoning and the analysis, which clearly preclude the central issue test, they focus instead on the opening paragraph where the Court refers to significant issue standard as "typical and generous".

But admittedly, it does not say in so many words this is the only standard that can be used.

Limiting themselves to that one isolated paragraph, Respondents suggest that even if the Court accepts the significant issue standard, that does not preclude the use of others.

The Fifth Circuit would be free, while some use significant issue, to continue to use central issue.

But this argument is wrong even on its own terms.

The definition of prevailing party is a matter of statutory interpretation.

There can be only one standard.

The question is what did Congress intend.

And it is not to be left to the discretion of each court of appeals to answer that question.

If the significant issue standard accurately reflects the intent of Congress, which we submit is the teaching of Hensley, it cannot be that the Fifth or the Tenth or the Ninth or any other circuit is free to adopt a markedly narrower, less generous standard.

Let me pick up one other point, another teaching of Hensley and of other cases, and that is that fee applications should not result in a second major litigation.

Ideally, once the merits are determined, the parties should settle without further burden on Judicial resources.

I submit to you that the central issue test cuts against both points.

It encourages further litigation and it deters settlements.

The basic reason for this is the inherent difficulty involved in many cases in determining what is the central issue.

By its very nature that is a complex inquiry that requires the court to determine post hoc the goals and the motives of plaintiffs in initially bringing a lawsuit, to arrange in some type of hierarchical order the relative importance of the issues which the plaintiff has brought.

This case proves the point.

This is a relatively straightforward and simple case, but the fee application spawned further litigation.

Petitioners contended in district court that we did prevail on the central issue.

We said the central issue was can this school district preclude all communication, we lost.

We briefed it.

We argued it.

When the district court ruled against us, we appealed to the Fifth Circuit.

We briefed it.

We argued it.

So, it spawned further litigation.

Consider how much more difficult the problem would be of identifying the central issue in complex institutional civil rights cases.

Take Hensley, for example, which involves six related issues involving treatment and conditions at a state mental hospital.

What was the central issue?

And how much Judicial time and resources would have been necessary to make that determination?

Suppose four of the issues in Hensley were of equal centrality.

What's the formula?

Do we have to win on two plus to meet the central issue test?

There is no need to belabor the point.

Unidentified Justice: --Well, you're... you're inviting the same kind of... I mean, you can't have it both ways.

If... if you don't like that issue-by-issue inquiry to be conducted, then you have to tell us.

Moreover, the fees that you get on the issue you win on should not be reduced by the issues you lost on.

You said earlier, well, you can take those other issues into account by... by chopping your fees down some.

I mean--

Mr. Chanin: But that, Your Honor, gets us--

Unidentified Justice: --So, that same problem arises under your theory as well.

Mr. Chanin: --Not really.

It gets us to the second point.

First of all, that is a much more objective analysis where you look at records.

You look at outcome.

You look at issues in the objective sense rather than the motives and the... the thoughts of the plaintiff.

But let me tell you why it isn't the same because the second objective that this Court hoped for was that these cases would settle.

And the central issue case ceters settlement.

There is virtually no incentive for me as a defendant to settle under the central issue test.

I try it.

I go for broke.

If I win, I'm off the hook completely.

And if I lose on the central issue test, the work hasn't been in vain.

I'll throw it in at the second stage, or I'll use it as the basis for a favorable settlement.

I tell you about this case.

If we were not... if we were, in fact, declared to be the prevailing party, we would not burden the district court with stage two.

I have every confidence that this case would have settled, which is exactly what this Court has hoped would be the case with fee applications.

I would like to reserve any remaining time.

Unidentified Justice: Thank you, Mr. Chanin.

Mr. Luna?

ORAL ARGUMENT OF EARL LUNA ON BEHALF OF THE RESPONDENTS

Mr. Luna: Mr. Chief Justice, and may it please the Court.

I think it would be helpful for us to look at some of the facts that counsel didn't cover here and that is that the Texas legislature had passed a statute that... 21.904 of the Texas Education Code... that said no school district, board of education, superintendent, assistant superintendent, principal or other administrator benefiting by funds provided for in this code shall directly or indirectly require or coerce any teacher to join any group, club, committee, organization or... or association.

As a result of that, the school board passed this regulation which simply said that you won't promote these organizations during school hours.

And the reason for that is that there are administrators... there are administrators who belong to the organization, just like there are other people.

So, if we had a policy that said administrators can call meetings and talk to people about joining the association and... and recruiting members, we'd be in violation of state law.

Now, they didn't attack the state law.

The state law is not attacked in this lawsuit at all.

So, as the law was passed and the regulations begin to be established this case... he says it was one that could be settled.

This was brought as a test case.

They brought in... and the record here shows nine of their... what they call uniserve people from all over the state and descended upon 46 schools in this school district and covered most of them in a period of two days in groups of one and two.

And they made demands during the school day to talk to the teachers, said they had a First Amendment right of assembly and speech.

And we took many depositions.

He talks about the amount of work.

All of these people were outside association members except one of these nine people that made this trip.

One of them was one of our teachers, but we took depositions of all of the eight others and of many, many principals in preparing for this case.

Now, none at those... if he had brought... if he had brought a lawsuit just for the part that he's talking about, those... eight of those nine wouldn't have been there because that wouldn't have been important to this case to begin with.

But by bringing it this way, it's an attempt to build a great fee perhaps like the one in the Riverside case.

And we believe that that's not the intent of the legislation in this case.

Now, as they... as they went to the... as the depositions showed they were asked is there anything else that you claim.

Now, they set out some specific things in their complaint that they complained about, but they didn't set out... and it didn't show up until summary judgment... this portion about the discussion of teacher to teacher.

Now, and even in their motion for summary judgment, they said it wasn't clear what the school's position was on that.

Now, the only information they have... and we think, by the way, there is a question as to whether there could be a prevailing party in this case under any circumstances because this is little more than what this Court has referred to as an advisory opinion because we were talking about things in the future.

None of these things had happened, and they arose in a deposition.

What if somebody said so and so?

So, there had been no dispute.

There was no case in controversy between the parties on this issue.

And these what-if questions were asked of some down-the-totem-pole administrators who were not policy makers of the school district.

And, of course, this Court has recently held that it's... it has got to be something... it has got to be a policy maker that makes the decision.

Therefore, there couldn't have been any liability on the school district for the mistaken belief, if it was mistaken belief, of some of these administrators.

And under McCluskey, of course, the... the school board itself is the one who would interpret its regulation.

They really didn't take the school board's deposition, but they did take the superintendent's.

And they asked him.

In his deposition, he said that we don't have any regulation that keeps teachers from talking to each other about TSTA at lunch.

We don't have any regulation that keeps them from talking about it on their break.

Now, as I say, they did ask in deposition some of the other principals, well, what if this happened.

Well, I don't know, but I guess it would be a violation.

And that speculation is the only thing that is in this record that they claim to have gotten relief on.

Unidentified Justice: Mr. Luna, do you defend the central issue test used by the court of appeals here?

Mr. Luna: Yes.

Unidentified Justice: Do you think that that's consistent with the language that this Court included in the Hensley case?

Mr. Luna: Yes, I do.

The reason--

Unidentified Justice: Do you think it's consistent with the holdings of the majority of other courts of appeal?

Mr. Luna: --No.

I think there probably are a majority of the other courts of appeals that have said otherwise.

But let me just move, if I might, then to that central issue case.

And the reason we think that the... first of all, in Ruckelshaus, we think this Court didn't adopt the First Circuit's rule.

The Court simply referred to that First Circuit rule as a very generous rule.

And the Court also referred to a number of other rules that were in use in the circuit including the Fifth Circuit rule of the central issue.

And I think it might be well to look at where that Fifth Circuit rule came from.

It came right out of the congressional history of this very statute.

In the congressional history in this statute when Dorothy Parker... Parker v. Matthews... brought a suit in district court in the District of Columbia, the case was settled.

And then in the district court's opinion, it discussed, first, what's a prevailing party and... and what's the criteria for it.

And the district court in that case said... they brought up the central issue, said the central issue is the way you tell a prevailing party, and had a good deal of discussion on it, but noted there are no cases.

And they came up with... from... and took it from a Black Law Dictionary.

Now, the committee in the congressional history mentioned that case when they talked about the prevailing party and the central issue and how you set attorney fee.

Now, the Petitioners here say, oh, but they only mentioned... they only cited that case because it was settled to show that there could be a recovery for settlement.

That's not the reason they mentioned that case.

That case went up on appeal and was affirmed in Parker v. Califano.

Now, if the Court had just been wanting to note that it mentioned the settlement, they could have cited the court of appeals case.

They cited three cases in... in the congressional history on... at that point including another circuit court case which also talked about settlement, but did not discuss central issue.

The only one of them that cited... that discussed the central issue was the district court case in Parker v. Matthews, which was later Parker v. Califano.

And the... we think that the reason they didn't cite the court of appeals is, as I say, on appeal they didn't discuss the central issue.

But the... the committee was well aware of the central issue and talked in terms of it's something to protect people who have a valid civil rights case, and... and it is not something to build attorney fees for attorneys.

Unidentified Justice: Mr. Luna, I guess you would apply the same test then to the defendant, and if there were several frivolous claims made on which the defendant prevailed, no recovery of attorney's fees unless there was a central issue on which they prevailed as a frivolous claim.

Mr. Luna: Yes.

I think it would not be material if... if a plaintiff had a central issue, a main civil rights suit, but had something... added something to it--

Unidentified Justice: Added some frivolous claims.

Mr. Luna: --Yes.

Unidentified Justice: No recovery to the defendant for those.

Mr. Luna: I don't... I don't think that the defendant is going to recover in that kind of case.

If so, the plaintiff is going to recover, and it would be at most some offset under... under this Court's decisions where we said that you've got to... you can only recover for the work that you've done.

It might be an offset, but certainly no recovery for the defendant if the plaintiff recovered on the central issue.

I see no reason for the plaintiff to recover.

Now, if we take a look then at why would the Court in a case like this now say that Hensley v. Eckerhart did not foreclose the issue and decide it... that's what Petitioners claim.

Yet, this Court two or three months later, that... after deciding Hensley v. Eckerhart on May 16, 1983, decided Ruckelshaus v. Sierra Club.

And in that case where the statute was different and said that the Court could set attorney fees where appropriate, they... the Court said that that is different.

This Court said that is different from the standard that is used in the prevailing issue case.

But even then the Court says there has to be some recovery.

There has to be some prevailing in order... in order for them to recover it, but not as much as in a statute with the prevailing party.

So, if this was a suit that was brought under the EPA statute, the plaintiffs might be in a different position that they're in here because this Court noticed that there was a difference in those.

And those... and if the prevailing issue was decided, there wouldn't have been any need for the distinction that was mace in the Ruckelshaus case.

Now, we think also that there is... another very, very important thing has developed in this case or failed to developed.

After the Fifth Circuit made its decision on the merits of this case the first time, the Fifth Circuit said that if that statute... if that regulation was decided as... as somebody might say that in the future.

If it was decided that way, it was unconstitutional.

Now, they reversed then in part and remanded for... for further proceedings and not inconsistent with the Court's opinion.

They did... on the holding then that if it was done that way, it would be unconstitutional.

Now, it was reversed for further proceedings.

And that's the time when it was appealed.

It was rather suspected that the Petitioners in this case would, when it got back to the district court, ask as they had in their... in their petition originally maybe for nominal damages or for an injunction to keep it from being enforced that way.

Now, the plaintiffs, though, apparently recognized that there was really no merit and that they had really gotten nothing from the court of appeals.

So, when we got back to the district court, they don't ask for anything.

They didn't ask for any further relief except attorney fees.

Unidentified Justice: Had the regulation been declared facially overbroad and invalid or invalid as applied, or was the opinion not clear on the point?

Mr. Luna: Well, the... the district court opinion held that it was... that it was overbroad only in that one little area that they admit doesn't amount to anything.

Now, the... the Fifth Circuit held that it was unconstitutional in a very limited way, that if it kept... where it kept the teachers from talking to each other about organizations, time off and so forth, that under those circumstances, the Fifth Circuit said it was unconstitutional.

Now, the Fifth Circuit disagreed--

Unidentified Justice: On its face.

Mr. Luna: --Well, not on its... I don't believe on its face.

They said that there was no testimony to show.

They said there was no testimony to show that the administrators would not enforce it that way.

So, I don't believe they said it was unconstitutional on its face, only as applied... if applied in that hypothetical manner.

There was... there was no holding that it was unconstitutional on its face.

Now, so based on the... see, the... the Fifth Circuit applied the summary judgment rule most favorable to them, and... and then still affirmed the summary judgment except in that narrow area, and then turned around, using the same standard, and granted a partial summary judgment for them on that as applied theory.

But when we got back, after it was appealed to this Court, they didn't ask for any more relief, only for attorney fees.

And the court again found that they didn't recover anything, and that they were not entitled to attorney fees and the... the court costs were attacked... were taxed against the Petitioners.

And on appeal, they didn't at that time challenge that portion of the court's decision.

So, we think then that that brings it very close to the facts of Hewitt v. Helms where the plaintiff didn't recover anything.

Now, the difference in... in this one and Helms, of course, was that in the Helms case, the Court had instructed them to enter a summary judgment on damages unless there has some immunity.

Now, they didn't get that summary judgment entered when it went back.

And this Court pointed out in that case that at the end of the rainbow lies not a judgment, but some action for... or cessation of action by the defendant that the judgment produces the payment of damages or some specific performance or the termination of some conduct.

Now, we had even applied to stay that first order while we appealed up here to this Court so it wouldn't go back to the district court and... what we feared... ask for some affirmative relief.

And then after this Court denied the appeal and it got back to the district court, they still didn't ask for any affirmative relief.

So, we believe that this case comes right in the decision of the Hewitt case because there is no dispute.

There wasn't any dispute between the parties on this.

This has something that had not happened, but the Fifth Circuit says, if it does, there's no evidence that you wouldn't enforce it this way.

So, there really had never been a dispute on that.

Therefore, it... they... there was no dispute which affects the behavior of the defendant toward the plaintiff.

Now, there would have been while this case was being appealed had they applied to the district court for injunctive relief and gotten it.

We would have had to change the policy.

But they didn't do that, and they didn't do it after the appeal is over.

So, as the posture of the case is before this Court, they received no judgment that affected any action that any of the parties to this case have to take... or that is, that the defendant has to take.

No action at all.

No order was entered by the trial court.

And it's not a place to complain about here, but the interesting thing about it was the... the circuit court disagreed with the findings of fact of the trial court and made some findings notwithstanding--

Unidentified Justice: But that really doesn't have anything to do with the question before us, does it?

Mr. Luna: --Yes, all right.

It does not, Your Honor.

In the case now where he's... they're continuing to ask for attorney fees, and the main thing they're asking... they're complaining about is... or one of the things they're complaining about, of course, is the mail.

Under this regulation, they could... could put a stamp on it and send anything they wanted to to the teachers through the intra-school mail.

Now, they don't want to do that.

They wanted to take it all to the superintendent's office and have it delivered through the intra-school mail to the teachers.

Now, of course, since then, this Court has heard the... and decided the case of Regents versus... California v. the Public Employment Relations Board, and that now is not even something that they would be permitted to do... use that intra-school mail.

So, part of their case of what they claimed to win is out the window because of the University of California case.

So, we think that the Petitioners have not shown that they have made any recovery in this case that changed any conduct of... or required the change of any conduct of the defendant that the defendant was carrying on.

Now, they will say, yes, you can't stop the teachers from talking to each other at lunch about this.

Now, the testimony showed we never tried to stop them.

That had never been done.

And you can't stop them from talking and... during the classroom... or during their off-period when they're not working.

And the testimony showed that had never been done.

The most it showed was there was no affirmative testimony saying we wouldn't do it if, in fact, it had happened.

Thank you very much.

Appreciate it.

Chief Justice William H. Rehnquist: Thank you, Mr. Luna.

The case is submitted.

Attribution:

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Featured:

Missouri v. Jenkins - Oral Argument

Sun, 06 Feb 2011 03:47:15 +0000

Case:

Missouri v. Jenkins

Media File:

88-64_19890221-argument.mp3

Related Transcript:

88-64_19890221-argument.xml

Transcript:

ORAL ARGUMENT OF BRUCE FARMER ON BEHALF OF THE PETITIONERS

Chief Justice William H. Rehnquist: We'll hear argument now in No. 88-64, Missouri v. Kalima Jenkins.

Mr. Farmer, you may proceed whenever you're ready.

Mr. Farmer: Mr. Chief Justice, and may it please the Court.

This case is here in certiorari to the United States Court of Appeals for the 8th Circuit.

Petitioners are the State of Missouri and its officials found liable in their official capacity.

We present two issues involving the attorney's field ward arising out of the Kansas City, Mo., desegregation case.

The first is an 11th Amendment immunity issue, this time as it pertains to a Section 1988 fee award that includes prejudgment interest or compensation for delay in payment.

The second issue concerns an issue that was also involved in the Blanchard v. Bergeron case, and that concerns the proper method of compensation for paralegal services.

I would like to briefly address the 11th Amendment issue first, and while the underlying facts in this case have been complex, only a few facts are relevant now.

The Kansas City desegregation case began in 1977.

The fee award, however, went to two groups of attorneys who entered the case later.

Kansas City attorney Arthur Benson and his staff entered the case in 1979 and was awarded $1.7 million in fees and expenses for the period through June of 1986.

The NAACP Legal Defense Fund entered the case in 1982 and were awarded $2.4 million.

The plaintiffs became prevailing parties in September of 1984.

The fee applications were filed in February of 1986.

The fee awards were based on current rather than historical hourly rates.

This was expressly done to compensate for delay in payment.

Out of approximately 18,000 attorney hours compensated, about 85 % were incurred in the years 1983 and 1984.

The record shows that the current hourly rates used were approximately $15 to $20 higher than the historical rates for this period.

Now, the 11th Amendment and the current status of the 11th Amendment is involved in at least two other cases before this Court this term.

Pennsylvania v. Union Gas argued last October and Gilhool v. Muth scheduled to be argued next week.

The issue was also touched on briefly in Wheel v. Michigan State Department of State Police argued in December.

The 11th Amendment has been explored in great detail in previous recent opinions of this Court.

I'm not sure that I can add much to the detailed historical argument.

In this case, it is the State's position that compensation for delay in payment or prejudgment interest is barred by the 11th Amendment, and we submit that the principles set forth in this Court's Library of Congress v. Shaw decision can be extended to an 11th Amendment context.

Now, Library of Congress dealt with the fee-shifting provision of Title VII and the federal government's sovereign immunity In the long-standing no-interest rule.

Sovereign immunity was expressly waived concerning attorneys' fees and costs, but this Court found that it was not waived concerning the sovereign's immunity from interest.

We believe it can be extended to the 11th Amendment context because of the numerous similarities between the fee-shifting provision of Title VII and Section 1988.

First, Section 1988, when enacted by Congress, Congress specifically relied on the language of Title VII, the fee-shifting provision of Title VII.

The identical relevant phrase is found in both fee-shifting provisions, that is,

"a reasonable attorney's fee as part of costs. "

In analyzing these words, this Court has already determined that they do not include prejudgment interest or compensation for delay.

More Importantly, the standard for finding a Congressional abrogation of the 11th Amendment immunity is just as strict, if not more so, as the standard for finding a Congressional waiver of the United States sovereign immunity.

Unidentified Justice: But one of your problems, it seems to me, is to show that this no-interest rule attaches to state sovereign immunity under the 11th Amendment.

You don't get to whether there's a clear statement or something like that until you find that that's an incident of the state sovereign immunity, it seems to me.

Mr. Farmer: That's correct.

And we believe It can be extended to the 11th Amendment because of the character of the element we're talking about here.

Prejudgment interest, or compensation for delay, or whatever term is used to describe the time value of money, is traditionally an element of damages, not cost.

And the 11th Amendment immunity is protective of the state's liability from elements of damages.

And that's, the character of prejudgment interest is one of damages.

We do not believe it's relevant that the Missouri has a general stare statute that has been Interpreted by stare courts to allow prejudgment interest against the state.

This is--

Unidentified Justice: Of course, Mr. Farmer, this is not really strictly prejudgment interest, is it?

Couldn't one argue that what's at stake here is that there's no sovereign immunity that's been decided for the liability for fees themselves, and the question is just how one measures the fee that's due, given the delay in payment?

There's no separately calculated item of prejudgment, it's just somehow, it's mixed up in the Judge's calculation.

Mr. Farmer: --Well, it is mixed up in the Judge's calculation, but it was separately calculated in terms of a, he specifically found that current hourly rates used were $15 or $20 higher than the historical rates, and that was done to compensate for delay.

And compensation for delay is the same as prejudgment interest.

Unidentified Justice: Except you don't have an interest rate factor.

He doesn't say the interest rate is 6 % or something like that.

He just sort of uses a rough method, what he thinks is a reasonable way to come up with a fair fee.

Mr. Farmer: That's correct.

It Is a rough method, but It's a method nonetheless to compensate for the time value of money, and it's to compensate for a period before the Judgment, so therefore it takes the character of retroactive liability, in that sense.

Because this--

Unidentified Justice: Well, it's retroactive just since, until the suit was filed.

Mr. Farmer: --Well, it's retroactive in the sense, to the time the attorneys' fees were incurred, and attorneys' fees could be incurred before the suit was filed--

Unidentified Justice: I see.

Your position is that the attorney is fully compensated In economic terms when just the bare fee, without any addition for delay In payment, is the award?

Mr. Farmer: --Obviously, the fee is going to be a little bit less.

The question under Section 1988 is a reasonable attorney's fee and does a reasonable attorney's fee include prejudgment Interest or compensation for delay--

Unidentified Justice: Well, another way of saying it is a reasonable attorney's fee, in your view, is less than full compensation for the attorney's time reasonably expended.

Mr. Farmer: --But under fee-shifting statutes, attorneys are typically, the standard is not fully compensated.

It's a reasonable attorney's fee.

Attorneys and fee-shifting litigation--

Unidentified Justice: So your position Is that a reasonable fee is less than full and fair compensation.

Mr. Farmer: --No, your Honor.

That's... our position Is that a reasonable attorney's fee, under the statute, would not include prejudgment interest or compensation for delay.

The policy reasons for including prejudgment interest or compensation for delay are reasonable.

I concede that.

They may be persuasive if addressed to Congress.

Those policy reasons apply equally as strong in the Title VII fee-shifting statute, which this Court found that reasonable attorneys' fees, that also does not include prejudgment interest or compensation for delay.

Unidentified Justice: Mr. Farmer, if you prevail In this case, do you think it would be permissible for a judge to follow a practice that sometimes Masters would follow, to say require the parties to make a deposit to cover future liability for cost, and then stick the money into an interest-bearing account to earn interest, and then If the State prevailed they get the money back plus Interest, whereas if the plaintiff prevailed they could get their interest in that manner?

Would that violate the 11th Amendment?

Mr. Farmer: I think there would be serious questions involved in whether you could require the State, prior to any Judgment, to deposit a certain amount in escrow to satisfy any future liability for attorneys' fees.

I don't think that would be proper.

I don't think the 11th Amendment would allow for that.

You're already requiring the state to commit funds it otherwise would have available for other reasons and to lock them away so they can't be--

Unidentified Justice: What if the State at the outset admitted liability and said,

"The only thing we want to fight about is the nature of the decree. "

which is, I guess, what happened here in 1984.

It was pretty clear that there was going to be liability, but there was further litigation.

What if, at that point, in '84, they had said,

"We now know the plaintiff is going to be a prevailing party and so there's going to be some liability for fees, so we'll ask the State to put up $500,000 in an interest-bearing account. "

What would be wrong with that?

Mr. Farmer: --Certainly the statute, I think, Section 1988 allows for interim fees.

That has been done in this case.

Unidentified Justice: No, no, I say put in on new ground knowing that there was going to be a lot of litigation over the form of the decree and things of that kind, and which end that the plaintiff is ultimately going to prevail, because it's been determined that it's the prevailing party.

What would be wrong with saying that,

"We know you're going to have to pay these fees, so we don't want the lawyer to work, just wait for the money when he, all this time, so we'll require you to make a deposit. "

Why would that violate the 11th Amendment?

And why is that really in substance any different from what's done here?

Mr. Farmer: Well, in substance, it's different than what's done here because here there was no judgment on the attorneys' fees until long after the liability order had been issued and the judgment took into account the delay in payment.

If, immediately after the liability order, interim fees had been requested, certainly things may have proceeded differently in the District Court.

Requiring a deposit, I think, is no different than allowing for an award of interim fees, depending on the specific factual circumstances of the case.

So, since an interim fee award would not be barred by the 11th Amendment, requiring a deposit probably would not be, either.

But, I think the better practice would be to provide for an interim fee award, pending resolution of the fees or the remedy, the scope of the remedy.

In this case, this action arose under federal law, and we contend that the payability of prejudgment interest is governed by federal law.

Just last term, in West Virginia v. United States, this Court unanimously held that the question of prejudgment Interest is not controlled by stare statute or local common law.

A single nationwide rule is preferable to one turning on state law.

Now, that case dealt with a claim by the federal government against a state and whether prejudgment interest could be awarded as part of damages on a contractual obligation.

There, the states had no sovereign immunity as against the federal government, but the state is protected by sovereign immunity, the 11th Amendment Immunity, as against private parties.

We submit that this is simply a straightforward application of the principles in Shaw, and that the 11th Amendment prohibits prejudgment Interest as a delay, or, a delay-in-payment factor.

I'd like to turn now to the paralegal issue.

The paralegal hours, in this case, were compensated at a market-based rate, and, again, current hourly rates were used for delay in payment.

Unidentified Justice: Mr. Farmer, may I ask whether you concede that recovery for paralegal services is Included In attorneys' fees recovery?

Mr. Farmer: It's not necessary for me to concede that in this case.

I recognize that--

Unidentified Justice: Well, you didn't challenge that.

Mr. Farmer: --We did not challenge that in this case.

Unidentified Justice: You just want to quibble over actual costs or market.

So, I take it that you must accept the fact that recovery may be obtained.

Mr. Farmer: Well, to be honest, your Honor, In looking at this issue in front of the District Court, we litigated the issue that we felt we could win on.

We did not think we could win on saying that paralegal fees were not separately compensable at all.

I think a reasonable argument could be made to that effect.

We are not making that here because, I think, the record shows--

Unidentified Justice: Well, what is your position?

Suppose the local market indicates that, generally, paralegal services are billed separately for legal services rendered in cases.

Mr. Farmer: --And I think that's what has been shown here.

The record shows that the local market typically bills separately for paralegal services.

So it's not included in the hourly rate awarded to the attorney.

Unidentified Justice: So you do concede, in effect, that they are recoverable under those circumstances as a separate item on the bill for attorneys' fees.

Mr. Farmer: Under those circumstances, they could--

Unidentified Justice: Why do you concede that?

Mr. Farmer: --Well, in this case, the attorney's fee, the market rate--

Unidentified Justice: You're conceding the fact that when it says, when the statute provides for the award of a reasonable attorney's fee, it includes not only a fee for attorneys but for paralegals, too?

Mr. Farmer: --No.

Unidentified Justice: Well, then what are you conceding?

Mr. Farmer: I think I'm... the statute includes attorneys' fees, includes compensable items in two separate categories: attorneys' fees and costs.

If an item, if it is not an attorney doing work, then it's in the second category.

If it's not included in the attorney's hourly rate, then it's in the second category, the category of costs or expenses.

Unidentified Justice: And you're conceding that costs and expenses, as used in Section 1988, includes charges for paralegal time?

Mr. Farmer: We didn't raise that issue in this case--

Unidentified Justice: Well, but are you conceding it?

Mr. Farmer: --Well, I will not concede it as a matter of law.

I think a reasonable argument could be made that it does not--

Unidentified Justice: Well, why don't you make it?

Mr. Farmer: --Because, in this case, we felt the equitable resolution, and under the particular--

Unidentified Justice: Well, why don't you make it in this Court?

Mr. Farmer: --Well, in this Court, I will make the argument.

The cost and expenses back in 1976, when Section 1988 was enacted, compensation, separate compensation or separate billing for paralegals was not a widespread practice.

Therefore, an argument could be made, I think, that Congress did not consider--

Unidentified Justice: But, Mr. Farmer, could that argument be made in this case when it wasn't made in the lower court and you're seeking a reversal of the judgment?

Mr. Farmer: --That's why we are not making it in this Court, your Honor.

We took the position in the lower courts what we felt was fair and equitable under the specific circumstances of this case.

And that is that the reimbursement of paralegal services should be under the actual cost method, not at a market-based rate.

Unidentified Justice: What's the practice, generally, around the country, do you think?

Are paralegal fees billed as attorneys' fees--

Mr. Farmer: Well, I think the practice varies.

I think the prevalent practice is to bill separately.

Mr. Topkis may ba able to answer to answer that better than I can, because I've spent my entire career in government service.

Some attorneys do not, for example, the plaintiff's expert in the attorney fee litigation in this case testified that he did not bill separately for paralegal time.

So I think the practice varies.

The State of Missouri, we've looked at this issue very carefully and do not believe that using the actual cost method will increase fees or increase fee litigation.

To begin with, law firms normally are not guaranteed an award of fees in any fee-shifting litigation.

Therefore, they cannot afford to assign attorneys to do paralegal work just on the mere possibility that they will prevail and receive fees.

Likewise, the most senior attorney in the firm is not going to be doing simple, basic legal research that a first-year associate can do, on the chance that the higher rate can be recovered some time down the road if they prevail.

The law firm is going to continue to staff a particular case in the most cost-effective manner, the most efficient manner.

We do not think that this will result in additional fee litigation because scrutiny of attorney hours and paralegal hours already exists.

Courts routinely reduce the hourly rate of eliminate the hours entirely if, for example, senior attorneys are doing work that should have been done by junior attorneys.

If junior attorneys are doing paralegal work, courts routinely reduce the hours or reduce--

Unidentified Justice: --Mr. Farmer, can I ask a factual question?

The district Court referred to the paralegals at $40 an hour and to law clerks at $35 an hour.

What exactly is a law clerk that he's talking about, do you know?

Is this a person not admitted to the bar and doing summer work, or is this a junior lawyer or what, do you know?

Mr. Farmer: --well, the record isn't clear on that, your Honor.

A law clerk may be, in this case, someone who is not trained as a paralegal.

The district Court also included fees for recent law graduates who are not yet admitted to the bar who also worked on the case.

The whole range of paraprofessionals that were not attorneys, basically, I've lumped into one category of paralegals because that's what they are.

They're not attorneys, they can't receive attorneys' fees, so therefore the fee comes under the paralegal.

Courts also routinely reduce hours or eliminate the hours if paralegals are doing clerical work that should be considered normal office overhead.

We also take the position that fee litigation may actually be reduced, because the dollars at stake are less.

And that thereby reduces the incentive to litigate the fees, particularly when everything you do in fee litigation just generates more fees for the prevailing party.

Now, we concede that Congress was concerned about providing for reasonable attorneys' fees, but there was also a concern in Congress that Section 1988 not result in windfall to attorneys or become a relief fund for lawyers.

Compensating paralegals at a market-based rate does result in a windfall, particularly in this case, where the paralegals were hired specifically to work on this case.

Unidentified Justice: Should this be any more so than compensating attorneys at a market-based rate?

Mr. Farmer: We believe that the attorneys are treated differently under the statute.

It specifically refers to attorneys' fees and, therefore, the attorneys' fees get the market-based rate because that also includes overhead and a profit figure.

The other category in the statute, cost or expenses, is treated differently.

I'd like to explore--

Unidentified Justice: So it depends on whether we treat the paralegal fees as attorneys' fees or separately as costs, under your argument.

Mr. Farmer: --Separately as cost or expenses, that's correct.

Unidentified Justice: Well, let me simply say it can't be an attorney's fee, under the statute, if it's work done by non-attorneys.

Mr. Farmer: That's correct, your Honor.

It therefore falls into the second category.

I'd like to explore this rationale--

Unidentified Justice: But doesn't work by attorneys normally include an amount of overhead for secretarial services and all kinds of things that aren't "work by attorneys", that's incorporated in attorneys' fees.

What is this?

Is it part of costs or part of attorneys' fees?

Mr. Farmer: --Well, we believe it's part of costs and expenses, an expense to the lawyer that he has to pay for, In, concerning the particular case.

If I can give you an example, let's just take it one tiny step further.

A legal secretary, like a paralegal, has specialized training, In some cases a college program.

Is that also the type of expense that can be separated out and billed separately?

And we're talking about billing separately here, not at an actual cost method, but at a rate four or five times the actual cost to the attorney.

Now, again, this does not appear to be a widespread practice now; maybe Mr. Topkis can address that.

But the day may come when that happens.

We don't believe that that kind of concept was considered by Congress in allowing a reasonable attorneys' fees and cost and expenses under Section 1988.

We recognize that it is one thing for a law firm to bill separately for those items on the basis of a contractual agreement with the client's consent.

But we're talking about fee-shifting statutes, which Congress has allowed the prevailing party to pass attorneys' fees and costs and expenses on to one's opponent.

With the concerns that Congress had about windfall, about providing for reasonable attorneys' fees, we do not believe there--

Unidentified Justice: Mr. Farmer, can I interrupt you a second?

The judge in this case treated the paralegal time as part of the fee award.

Were not the costs separately itemized and allowed things like transcripts and so forth, and the paralegal time was not included in what the judge called "costs"?

Mr. Farmer: --Well, yeah, it was not included in what the judge called "costs", but it was included separately from the award that concerned fees.

The interesting thing about that--

Unidentified Justice: I thought the judgment gave a big lump sum for fees which had, as a part of it, all the paralegal hours and law clerk hours and attorney hours.

Mr. Farmer: --Pardon me?

Unidentified Justice: Well, I thought there was one figure for fees for each of the two firms which included the paralegal time and all that, and that the costs were a separate item, covering things like transcripts and witness fees--

Mr. Farmer: Oh.

In the final recalculation, or the summary, that's correct.

But, in listing that way, they were listed separately.

Unidentified Justice: --I see.

Mr. Farmer: The interesting thing about that is the cases relied on by Congress in enacting Section 1988, the one case... and only one case even referred to law clerk fees or paralegal fees... that is listed in a whole string of items, of costs.

It's listed separately from attorneys' fees and it's not in its own separate category; it's listed, including in the whole string of items of costs.

So that's why we believe that in treating paralegal fees, under the statute, it should be at an actual cost method.

Unidentified Justice: Your position is that our decision will not affect the way attorneys use paralegals in their practice, in these cases?

Mr. Farmer: We do not believe it will, your Honor.

Unidentified Justice: If you're wrong about that, then your position means that the cost, or the legal bill may ultimately be more because attorneys will be used instead of paralegals.

Mr. Farmer: That is certainly a possibility, but I think it's--

Unidentified Justice: So a large part of your argument seems to rest on a judgment as to whether or not what we say makes any difference to the practice of law in these cases.

Mr. Farmer: --Well, one would hope that what you do say makes a difference in the practice of law.

[Laughter]

We do not believe that law firms are going to be treating paralegals any differently or staffing cases differently.

To speculate that, ultimately, fee awards may increase, I think, just cannot be shown from the record in this case and would be speculation at best.

Unidentified Justice: Well, if attorney are used in lieu of paralegals, then it clearly will increase the size of the awards.

Mr. Farmer: Yes, but, even now, those kinds of hours are scrutinized by District Courts in fee litigations, so if attorneys are doing paralegal work, the hours, District Courts now typically reduce or eliminate the hours entirely.

That's--

Unidentified Justice: So you think there should be a legal requirement that paralegals be used?

Mr. Farmer: --Well, I think there's a, in determining whether to use paralegals or an attorney, the law firm must staff the case as efficiently as possible.

In deciding what compensation to require one's opponent to pay, if a work could have been done by a paralegal but was instead done by a lawyer, then District Courts should reduce the fee award appropriately.

Just as now, if work is done by a junior associate, or if work is done by a senior attorney that could have been done by a junior associate, courts routinely reduce those fee awards on that basis.

Unless there are any further questions, I'll reserve the balance of my time for rebuttal.

Unidentified Justice: Thank you, Mr. Farmer.

Mr. Topkis?

ORAL ARGUMENT OF JAY TOPKIS ON BEHALF OF RESPONDENTS

Mr. Topkis: Mr. Chief Justice, and may it please the Court.

I'd like to begin, if I may, with some comments on questions that were put to my friend, Mr. Farmer, in the course of his argument.

First, in connection with a question that Justice Stevens put, I must advise the Court that there is no reference whatsoever in the trial court's opinion, or in the record, to any $15 or $20 differential between historic and current market rates for lawyers.

That's, I don't know where Mr. Farmer got that from, but he certainly didn't get it from the record here.

The fact is that the State chose to offer no proof whatsoever as to historical rates, and now comes before this Court and says,

"We want historical rates to govern. "

It seems to me that the State should have made up its mind some time ago.

Justice Kennedy--

Unidentified Justice: There was such mention of compensating for delay, wasn't there?

Mr. Topkis: --There was, indeed, your Honor.

Unidentified Justice: And the judge did compensate for delay.

Mr. Topkis: He said that he was taking, actually, he divided his treatment between the way he treated Mr. Benson and the way he treated everybody else.

In both situations, in varying ways, he did say that he was using current market rates and, in consideration of the fact that there had been delay in com, in payment--

Unidentified Justice: Joe, we just don't know how much compensation there was for delay.

Mr. Topkis: --That is exactly the situation, your Honor.

If I may, there is a sharp distinction between what the Court did here, where he said, looking at everything, I think I have to take the fact that there has been delay into account, without specifying what account he gave it, and what happened in Library of Congress against Shaw, on which my friend relies, where the District Court very deliberately set out to award 10 % per annum by way of interest on--

Unidentified Justice: It's better or worse?

Mr. Topkis: --Better or worse for whom?

Unidentified Justice: Do you prefer the courts to say,

"Well, I'm giving some indeterminate amount of interest here, I don't know quite how much it is? "

You think that's good, although, if you said,

"I'm giving exactly 10 % interest. "

it's bad.

Mr. Topkis: Well, I think I've got a two-pronged argument.

As I'm sure your Honor knows from our brief, we take the position that the 11th Amendment has no application here and so on.

But I think that it is perfectly reasonable to say, to draw the dividing line that Judge Ginsberg drew in Library of Congress against Shaw, where she said that if a Court, where she said that she thought interest is bad.

A flat award of 10 % per annum or whatever is forbidden by the 11th Amendment.

But, taking the fact of delay in payment into account, along with all of the other factors appropriate for setting a fee, is permissible under the, under, there she was speaking not of the 11th Amendment, of course.

But we also see a difference between the 11th Amendment and the common-law immunity of the states.

The 11th Amendment... pardon me, of the sovereign... the 11th Amendment, of course, derives from one source, and the no-interest rule derives from a very different one.

Now, the, there's another point that I wanted to make in response to a question from Justice Kennedy.

Your Honor asked Mr. Farmer what his position was, I'll make bold to tell the Court what our position is.

Our position is that reasonable compensation means reasonable compensation.

We don't know, as I said, what the difference is between, was, historical and market rates.

But let's suppose we were still in a time of 17 %, 18 % annual inflation, which we saw some years ago.

Now let's suppose that this went on for years.

Would anyone call an award whose value was devalued by 40 % or 50 % or 60 % because of delay "reasonable compensation"?

I can't imagine it.

Unidentified Justice: Yes, we would, it the suit were against the United States.

We have held that.

Mr. Topkis: Held that it would be "reasonable compensation", your Honor?

Unidentified Justice: Well, the same provisions at issue here, if applied against the United States, would, according to our decision in Library of Congress, be held to preclude an award of interest.

Mr. Topkis: That is true.

In that context, I certainly must agree with you.

Unidentified Justice: So that must mean that we're willing to swallow that very large camel, at least in the context where the United States is the defendant.

Mr. Topkis: Well, I think, perhaps, if it came up before the Court in those circumstances, the situation might be different.

But I don't know.

I don't attempt to forecast what this Court will do.

I just try in my humble way to influence it.

Unidentified Justice: I'm just going by what we said in Library of Congress anyway.

And holding there certainly does have that bizarre consequence that you just described.

Mr. Topkis: And I suggest, with all respect, that Library of Congress is not determinative here and that its rule, whatever its merits in that context, calls for no particular attention in this context.

Unidentified Justice: Its principles may be exactly the same, if we recognize state sovereign immunity.

Mr. Topkis: Yes.

Unidentified Justice: Yes.

Mr. Topkis: I'm forced to agree with that.

But if you recognize state sovereign immunity, you would have to recognize that you were departing from the roots, the bases of the 11th Amendment.

The 11th Amendment didn't come out of a concern--

Unidentified Justice: Well, is that so?

I think the 11th Amendment may have arisen out of a concern for state sovereign immunity, don't you?

Mr. Topkis: --With all respect, your Honor, I would suggest that the 11th Amendment arose more out of a concern for the federalist system, a concern for the proposition that the states should not be called to account for anything in the federal courts.

Unidentified Justice: Because the states were sovereign.

Mr. Topkis: Your Honor may hold that view, and I certainly am not going to attempt to do other than put forward the view that it was not because the states were sovereign, having the mystical attributes of the sovereign, the king, the almighty, but because the states were federated, that they were independent entities coming together by consensus to form these United States of America.

Unidentified Justice: They were sovereign states coming together in a federation.

Mr. Topkis: Sovereign, yes, but not sovereign in the sense of necessarily possessing immunity.

It was because the federal system would work best.

And I think that was Justice Holmes' phrase, it won't come to me quite... but it's important that the system work, we all know that.

And I submit that the 11th Amendment was adopted in order to help attain that objective... not because of any mystical concern with the integrity of the king or anything of the kind, but because it was a deal.

And the deal would never have been made, as so many historians have pointed out.

The deal that was the Constitution of the United States would never have been made had the states not believed that they would never be amenable to suit in the courts of the United States.

Now, there was, if I may pass to another point, there was lurking in the conversation, while Mr. Farmer was up, some reference to the time period that elapsed between the decision on liability and the application for fees.

I would accept no penalty for that, certainly, because the fact is that, after the decision on liability was announced by Judge Clark, he said he was going to hold up on any fee award pending appeal of that liability decision, because, until then, he wouldn't know who was the prevailing party and it would be a futile exercise to attempt to award fees.

And it's significant to note that both sides consented to that treatment.

Now, Mr. Farmer said that plaintiff's expert testified, and this is on the subject of paralegals, he said that plaintiff's expert... and he was referring to one of our experts, a personal injury lawyer from Kansas City named Max Foust.

He said that our expert, Mr. Foust, testified that he didn't bill separately for paralegals.

And that is the way the record reads.

What Mr. Foust said was,

"I don't have any truck with that kind of fancy nonsense. "

"I make contingency arrangements with my clients, 33-1/3 % if I settle, and 40 % if I go to trial. "

"That's enough for me. "

Mr. Foust said.

It would be enough for most of us, I respectfully suggest.

But in any event, he said also that whatever the practice of personal injury lawyers in Kansas City, he knew very well that the Kansas City law firms that bill on an hourly basis uniformly bill paralegals at $40 to $50 an hour, not at cost, but the $40 to $50 an hour was the market in Kansas City.

The District Court here awarded us the low end of that range.

Another--

Unidentified Justice: Mr. Topkis, do you think paralegals come under the head of 1988?

Mr. Topkis: --If I may, your Honor, I would answer that question by saying that the overall thrust of 1988 is to put civil rights plaintiffs on a par with all other plaintiffs in competing for legal services.

And that, in consequence, their lawyers, if they are to have equal access to lawyers, their lawyers must be compensated as lawyers in other cases are compensated--

Unidentified Justice: Are you going to answer the question?

Mr. Topkis: --Yes, I will, and I will say, in consequence, it appears to me that market should determine because market is what determines in all other contexts.

Unidentified Justice: But I asked you a question which I don't believe you've answered.

Mr. Topkis: I apologize.

Unidentified Justice: My question was, do you think attorneys' fees are recoverable, rather, paralegal fees are recoverable as a part of a reasonable attorney's fee or as a part of other costs?

Mr. Topkis: I would say, I would say with all respect that I don't think it makes a great deal of difference--

Unidentified Justice: Let's take reasonable attorney's fee.

Now, you think that, in addition to all the hours that the attorneys put in and their hourly rate, under the heading "reasonable attorney's fee", one can then add paralegal charges.

Mr. Topkis: --I would be quite content to see that--

Unidentified Justice: Then you add secretarial charges, too?

Mr. Topkis: --No, because that's not the way the profession behaves.

It seems to me that when Congress said

"award reasonable attorneys' fees as part of costs. "

Congress said the legislative history is perfectly plain--

Unidentified Justice: Well, Congress said

"reasonable attorney's fee as part of costs. "

it didn't say any more, did it?

Mr. Topkis: --That is correct.

That is correct.

Nor did it specify costs, item by item.

Unidentified Justice: And you feel that a reasonable attorney's fee should include a fee not only for attorneys, but for paralegals?

Mr. Topkis: I'll take it there or I'll take it as part of costs, but in either event, I want paralegals to be compensated on a par so that the plaintiffs, the civil rights plaintiffs, are not disadvantaged.

Because putting them on a par was exactly where the Congress meant to go.

Unidentified Justice: Mr. Topkis, it does make a difference to me whether you put it under attorneys' fees or costs, because you, it is an impossible job to persuade me that you get costs awarded on some basis other than costs.

I mean, it, I cannot go that far.

When you, when I ask you to submit your costs, I mean you submit your costs.

Mr. Topkis: You mean out-of-pocket expenses.

Unidentified Justice: That's what "costs" means.

Mr. Topkis: That's what it does to me, too, your Honor.

Unidentified Justice: Well, so, you really think it has to be under attorneys' fees if it's going to be anywhere.

Mr. Topkis: Well, I would submit again that--

Unidentified Justice: That is to say, if it's going to be compensated on market basis.

And that's all we're fighting about here.

I can understand your putting it under "costs" if all you're asking for is out-of-pocket.

But if you want market, then I don't see how you can possibly get it under "costs".

So you're really left with getting it under attorneys' fees.

Mr. Topkis: --As a logical matter, I am, of course, in total accord with your Honor.

But the reality sometimes is a little different from logic.

And the reality here is that you've got to put it somewhere, and if you want me to pick somewhere, all right, I'll pick it as attorneys' fees.

But you could easily come back at me by saying,

"One thing we know about paralegals is that they're not attorneys. "

and--

Unidentified Justice: Well, I don't deal with reality, Mr. Topkis, I deal--

[Laughter]

--I deal with statutes.

Mr. Topkis: --I think better of your Honor than that, with all respect.

[Laughter]

Unidentified Justice: I take it there is no instance, counsel, I take it there's no instance in which costs are billed at anything other than out-of-pocket.

Mr. Topkis: Oh, I think there are many instances, your Honor.

Very frequently, you--

Unidentified Justice: What are those?

Mr. Topkis: --The statute allows you a certain cost regardless of what your actual costs have been.

Usually it's less.

But, but I--

Unidentified Justice: Well, is there any instance in which it's more?

Mr. Topkis: --I can't recall.

I can't think of any.

No.

My argument on this point, to belabor it, is the argument of parity.

And if you want to single out civil rights plaintiffs and their lawyers as bearing, as required to be some kind of lesser citizens, I don't think that's what Congress intended.

Now, the--

Unidentified Justice: You don't, even if the market would say that lawyers in this community do these cases on a contingency, you don't, you aren't required to recognize contingency fee arrangements, are you, under 1988?

Mr. Topkis: --Not required to recognize them.

Unidentified Justice: In one, it says in a 1983 damages suit, and there's a recovery and the contingent fee, the contract is, would give him, would give the attorney twice as much as what hours times a reasonable rate would produce.

Can you make the defendant pay that?

Mr. Topkis: Your Honor has the advantage of me in being familiar with this Court's decision in the Bergeron case, which was announced this morning.

But I would say that I think that a reasonable fee means a reasonable fee.

And I can't really add very much to that--

Unidentified Justice: No matter what the market says.

Mr. Topkis: --I'm sorry?

Unidentified Justice: No matter what the market is in Kansas City.

Mr. Topkis: Well, I'm not sure I agree with that, your Honor, because it seems to me that what economists teach us is that barring collusion, the market produces what is reasonable.

That's what the economists tell us.

But this is an area in which, I confess, I proceed with the greatest hesitancy.

Now, I think it's important to recognize... to keep in mind, if I may alter it... when we're discussing the 11th Amendment, that the first question that was presented here is really a misstatement of the issue, and I mean no disrespect, of course, when I say that.

But the first question presented was whether the 11th Amendment prohibits an award of attorneys' fees against a state based on current hourly rates, which include interest and a delay-in-payment factor.

Well, the current hourly rates here, there's nothing in this record to suggest that they include interest.

I've never heard of a current hourly rate which includes interest.

When your Honors were at the bar, I rather imagine that you didn't have that concept in mind.

Certainly there's nothing in this record on it.

And, equally, current hourly rates do not include a delay-in-payment factor.

Most lawyers like to be paid very, very promptly, and they don't build a delay-in-payment factor into their current hourly rates.

Unidentified Justice: But they don't charge the rates of 10 years from now, either.

Mr. Topkis: Ten years prospectively, you mean?

Unidentified Justice: Right.

I mean, that's what happens, that is what is happening here.

I mean, by the time recovery is obtained, the rates being charged are the rates of five years after the time the services were performed.

Right?

Mr. Topkis: Well, yeah--

Unidentified Justice: Whatever the time--

Mr. Topkis: --Whatever the numbers, that is correct.

That is correct.

And Judge Clark said that he was looking at the delay-in-payment factor.

I said before... if I may interrupt myself, Justice Scalia... I said before that he treated Arthur Benson differently from the rest.

He, what he did with Mr. Benson was to say that, on the basis of skill and experience in the Kansas City current practices, Mr. Benson's current hourly rate ought to be $175, but that he was going to give him an enhancement to $200 an hour because of three factors.

One was the fact that Mr. Benson was precluded during this representation from representing anyone else.

He couldn't accept any other clients for a period of two and a half years or something like that.

In effect, he bet his professional life on this case and, as the record reveals, he went into debt to the extent of 600 and some-odd thousand dollars.

So, all right, Judge Clark thought that that was a factor appropriate to be recognized.

The next was the unpopularity of the case.

And Judge Clark thought, referred to newspaper editorials and newspaper stories and letters to the press and letters to the court denouncing this case.

Mr. Benson became a pariah and Judge Clark thought that that was a factor that might be taken account of in setting a fair rate.

And, finally, he thought that the delay in payment should be considered.

He didn't allocate anything for each of these factors particularly.

He just said, taking everything together, he thought $200 was an appropriate fee.

I don't see that as any award of interest.

If you split the $25, which is 14 % enhancement, three ways to account for the three factors, that would be about 5 % for a delay of several years.

I've never seen an interest table that gave you less than 1 % in interest.

On the subject of being a pariah and proper compensation for that factor, let me call to the Court's attention something that, to me, as a veteran of some class actions, strikes me as significant.

This was a class action.

There were class action plaintiffs available by the, probably, hundreds of thousands, every black school kid in Kansas City was a potential plaintiff.

The extraordinary thing about this litigation is that not one lawyer in Kansas City or anybody else stepped forward to join in this case.

If it had been an antitrust case, or if it had been a, if the Hyatt Hotel had collapsed, if whatever, a Securities Act case, there would have been hoards of lawyers coming in, saying,

"I want a piece of the pie. "

Nobody joined Arthur Benson.

He remained alone until the Legal Defense Fund came to join him.

I think that, too, is worthy of consideration, and so did Judge Clark.

Now, I think that's about, really, all I have to say, or need to say on the question of the way Judge Clark treated this.

Taking everything into account, he thought $200 was fair.

I don't see any reason why the 11th Amendment stands in the way of that kind of setting of a reasonable fee.

It seems to me totally responsive to the statutory command.

Now, I think that it might be appropriate to mention that the use of current rates in billing, in the experience of all of us, conforms to the practice of the profession.

I have never seen, I don't think any member of this Court has ever seen a bill which read something like,

"for services performed in 1987, at 1987 rates, dollars X; for services performed in 1988, at 1988 rates, dollars Y; and for services performed in 1989, at 1989 rates, dollars whatever. "

I might kick myself for having waited so long to render a bill, but I think that the uniform practice of the bar, when it renders bills, is to bill them out at current rates.

Unidentified Justice: --I'm not sure that's right, Mr. Topkis.

Say somebody goes into the office and says,

"what do you charge an hour? "

and the lawyer quotes him an hourly rate and nothing else is said.

And then the matter takes four years to conclude.

Would not the client expect to be billed at the rate he was told when he went into the front door?

Mr. Topkis: I would think, in that case, yes, your Honor.

Absolutely.

Now, one final observation on that point, and that is this.

As I've said, while this date... record contains no data specific to Kansas City, it is clear that in the midwest, generally, market rates in the period with which we are concerned did not keep pace with inflation.

Our expert on rates, Mr. Well, testified to that effect without contradiction.

And I said that the circumstances of this case make it particularly appropriate to recognize the delay in payment.

Mr. Benson went into personal debt to the extent of $633,000 to fund this case.

And he paid $113,000 in interest by December 31, 1986.

And he was continuing to pay interest at the rate of $5,000 a month.

For the Legal Defense Fund, the case was a near disaster.

We... I'm proud to be a member of the board of the organization... we experienced deficits which we had never experienced before in 1983 and 1984 because of the burden of this case.

Now, the State says, of course, that we should be happy with historical rates.

But, as I've mentioned, the state put in no evidence of historical rates, so we don't know whether to be happy or not.

And I may say that, so far as the record reveals, that 1987 current market rates, which Judge Clark used, were the same as or higher than rates in '83 or '84.

I don't know.

We don't know.

There's no evidence.

Now, what the State would apparently like is for this court to remand so that we could have a trial on that issue.

Well, the State had its chance, I respectfully suggest.

This Court has said, and so many of the lower courts have echoed, that we musn't allow these fee controversies to become second Jarndyce against Jarndyce litigation.

That's the very real danger with which we deal.

And so I say, on the 11th Amendment, we wind up like this.

There was no award here of interest.

There was no dollar or percentage award or adjustment for delay in payment.

There was only a recognition by the trial judge that there had been great delay in payment, and an attempt to deal with that by using current rather than historical rates to award reasonable fees.

Now, let me, oh, I don't think I need trouble the Court with a review of the legal authorities.

Your Honors are doubtless infinitely more familiar with them than I am.

Just a final word or two on the question of paralegals.

I, oh, no, if I may stay with the 11th Amendment for just a second.

This Court has often said that the reason for requiring unmistakably clear language, when the Congress sets out to abrogate 11th Amendment protection, is so that enormous fiscal burdens... and I quote...

"shall not be imposed on the states by the Congress without careful thought. "

That's reasonable enough.

But we have here no enormous fiscal burdens.

As I've seen, we don't know the historical rate that the State will employ.

But the total fee award here for services was only around $3.2 million.

So use of historical figures would save the State, what, hundreds of thousands of dollars?

I don't know.

To the State--

Unidentified Justice: A million dollars here, a million... you know, Sen. Dirksen's line.

First thing you know, it adds up to real money.

[Laughter]

Mr. Topkis: --Right.

Right.

Nice to see a devotee of the classics.

[Laughter]

It adds up to real money to two interests, your Honor.

Not to the State of Missouri, with all respect.

This case, at the very least, is going to involve vast expenditure by the State.

The people to whom these hundreds of thousands of dollars, or this million dollars, will make all the difference in the world, are Arthur Benson and the Legal Defense Fund.

Thank you very much.

Unidentified Justice: Thank you, Mr. Topkis.

Mr. Farmer, you have three minutes remaining.

REBUTTAL ARGUMENT OF BRUCE FARMER ON BEHALF OF THE PETITIONERS

Mr. Farmer: Mr. Chief Justice, and may it please the Court.

Just briefly, I'd like to respond to Mr. Topkis' implication that I picked this $15, $20 rate out of the air.

In the District Court's opinion, on page A-28 of the petition, of the appendix to the petition for cert, the Court says,

"the Court notes that the $80 per hour rate is approximately $15 to $20 higher than the average hourly rate for Kansas City associates in 1982 to 1984. "

Now, he's talking there about associates of Mr. Benson, but he did specifically find that the hourly rates for the period we're talking about was $15 to $20 difference.

Other than that, there's nothing else I need to add other than to say that, in terms of a fiscal impact on the State of Missouri, the part of Missouri I come from, a million dollars still means something, so--

Unidentified Justice: Mr. Farmer, could I ask you about where you draw the line with respect to the principle you're talking about, that the 11th Amendment requires us to interpret statutes strictly against state liability.

I mean, I can understand that where the question is, are states covered by this statute or are they not covered.

But once you know that the state is covered, every single issue of law that comes up in the interpretation of that statute we have to, we have to interpret in favor of the state unless Congress has made its intent unalterably clear?

So, for example, we should interpret attorneys' fees not to cover fees for counselors at law in those states where they are not called attorneys?

That can't be right.

I mean--

Mr. Farmer: --Your Honor, it's a difficult analysis--

Unidentified Justice: --So where do you stop?

Why should I go along with you as far as you want to go, to say that you can't get interest?

Mr. Farmer: --Well, we think you should go as far as we want to take you in this case because it is almost identical to the situation in Library of Congress v. Shaw.

In that case, Title VII waived the federal government's sovereign immunity for attorneys' fees and costs, but not for interest.

And, similarly, in this case, while Section 1988 waives 11th Amendment Immunity for attorneys' fees and costs, but also not interest.

And Hutto v. Finney applies Section 1988 to the states, but even Hutto recognizes that if you expand the traditional concept of costs, then that analysis would not apply.

I'm not sure there's any easy answer to your question.

It's a difficult analysis, but I think in this case the principles in Shaw are completely applicable to the 11th Amendment context.

Chief Justice William H. Rehnquist: Thank you, Mr. Farmer.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Blanchard v. Bergeron - Oral Argument

Sun, 06 Feb 2011 03:45:31 +0000

Case:

Blanchard v. Bergeron

Media File:

87-1485_19881128-argument.mp3

Related Transcript:

87-1485_19881128-argument.xml

Transcript:

ORAL ARGUMENT OF WILLIAM W. ROSEN ON BEHALF OF THE PETITIONER

Chief Justice William H. Rehnquist: We'll hear argument next in No. 87-1485, Arthur Blanchard v. James Bergeron.

Mr. Rosen, you may proceed whenever you are ready.

Mr. Rosen: Mr. Chief Justice, may it please the Court:

The Blanchard police brutality case presents two issues.

The first is whether a contingent fee contract forms a cap on section 1988 reasonable fees, and the second is whether paraprofessional time should be included within the auspices of section 1988.

I came to this case after it had already been filed.

A fellow attorney became ill and asked me to take it over.

I reviewed it, decided that it had merit, and after that asked him what sort of fee arrangement he had.

He told me he had a 40 percent contingent fee contract with Mr. Blanchard, but that if I won, or the case was won, there would be fees under the Civil Rights Attorney's Fee Award Act.

Unidentified Justice: Mr. Rosen, tell me how those two work together.

Does the attorney get both fees?

Mr. Rosen: No, sir.

I think you've got to then look at what is meant.

For example, I would say 99 percent of all negligence cases that are taken in the United States are taken when the client comes in, a contingent fee contract is accepted on that sort of basis.

But section 1988 applies to the end of the case, and is not a relationship with the client, it is the implementation of fees against a losing party who has violated a civil rights.

Unidentified Justice: Well, I understand all that.

But I want to know what the, what the attorney gets out of the winning case.

Does he get both fees?

Mr. Rosen: I don't think so.

I think he gets a reasonable fee as determined by the court, after review of the Loadstar method.

Now--

Unidentified Justice: So that the contingent fee then, arrangement, really means nothing?

Mr. Rosen: --It is in, for general purposes, I think, irrelevant as to the implementation of 1988 fees.

May it be a consideration for enhancement for the value of the vindication of a right, over and above what the court may think is a satisfactory fee on an hourly basis times hour... hourly amount, a fee, time number of hours, Loadstar.

Unidentified Justice: Well, then you think the court would fix the reasonable fee loss the contingent fee?

Mr. Rosen: Justice Blackmun, I don't think that the contingent fee per se is a consideration.

I think it is irrelevant in the, in the implementation of 1988.

I do not think that it is, it is a relevant factor, because it is the private agreement between a client and an attorney, whereas the implementation of 1988 comes at the end after all of the work has been done and Congress, the Intent of Congress, as I understand it from the cases, are that this is part of the vindication of the civil right.

Unidentified Justice: I understand all that.

But I can also sense a lot of attorneys taking both fees.

Mr. Rosen: If 1988 is implemented correctly, I do not think that both fees probably are necessary or probably should be taken.

I think then you may get into the possibility of consideration of windfall, but I don't think that's... I think it's a consideration but I think the reasonable fee as instituted, as required by 1988, is the primary consideration, and that primary consideration is Loadstar.

Unidentified Justice: Well, I'm wondering really why, in a case that is subject to 1988, a contingent fee arrangement is at all necessary or indeed indicated.

Mr. Rosen: I think the reason for that, Justice Blackmun, is this.

A client walks into an attorney's office and says, I have--

Unidentified Justice: I know exactly how it happens.

You don't have to tell me that.

But I want to know where--

Mr. Rosen: --He may not know... the attorney may not know what he has.

He may not be aware that it involves a civil right violation when someone comes into his office.

Therefore, if it involves a negligence type of situation, the standard agreement, as I say I think probably 99 percent or more--

Unidentified Justice: --Well, that's a little high, after my old practice days anyway.

Mr. Rosen: --And I think, sir, that the, that the standard before you even know what the investigation will show as to what kind of case you have, is a contingent fee contract.

Now, basically what the Fifth Circuit said to me was that, Mr. Rosen, you didn't take, you didn't adjust the contract, which was not mine to begin with, but you did not go back and adjust the contract to say, I'll take the higher of the 1988 or contingent fee or whatever it was that should be adjusted.

What the Fifth Circuit says, next time you'll know better.

That's precisely what they said in their opinion.

I just don't think that's the correct application of 1988.

Unidentified Justice: Mr. Rosen, do you read the Fifth Circuit opinion as saying that the $4,000 attorney's fee is payable by the defendant over and above the $5,000 actual damages and the $5,000 punitive damages?

Mr. Rosen: Yes sir, Over, over and... yes.

It is a fee on top of the actual damage portion.

Unidentified Justice: So--

Mr. Rosen: Otherwise it would be, it would certainly be a windfall to the defendant.

Unidentified Justice: --Yes.

So the defendant will have to pay $14,000 under the Fifth Circuit's judgment?

Mr. Rosen: The defendant would have to pay $14,000... well, I hope that is what the Fifth Circuit said.

Mr. Chief Justice, I cannot tell from reading the Fifth Circuit opinion whether that is actually what they meant.

I would certainly hope that's what they meant, but they don't say that the defendants shall pay this additional amount, or that it shall come out of Mr. Blanchard's portion.

I certainly hope it's the former of those, and I think that clearly is the intent of this Court and the intent of Congress to do that.

Unidentified Justice: The District Court awarded you $7,500 in attorney's fees.

Mr. Rosen: Yes, sir.

Unidentified Justice: And did you appeal from that?

Mr. Rosen: I appealed from that on two bases--

Unidentified Justice: And those are the two that you raise here?

Mr. Rosen: --Well, the first in the appeal to the Fifth Circuit, the paraprofessional issue, was included within the whole attorney fee issue.

But the second part, which I did not bring to this Court, was the law court awarded me out of some $5,000 out-of-pocket expenses of my own on the case, they awarded me about $800.

The Fifth Circuit reimbursed me almost the whole $5,000 approximately, so I did not bring that issue to this Court.

The issue here involves the cap issue, and obviously I cannot win on the paraprofessional issue unless you reverse on the cap issue.

Unidentified Justice: May I ask you a question about... just following up really on Justice Blackmun's question... supposing you had not appealed, just received the $7,500 fee, and putting the costs to one side for a moment.

Is it your understanding that $4,000 of that $7,500 would have gone to the client and you would have kept $3,500?

Or would it have all gone to you, or all to the client?

Mr. Rosen: Justice Stevens, as a practical matter, I have received no fee at the present time.

So that in answer to your question, my understanding is that I would have received $7,500 from the defendant.

And the client would get the entire $10,000--

Unidentified Justice: Right.

Mr. Rosen: --Which had been awarded, and I hope and I think that's the way the process should work.

Unidentified Justice: Or if the client had paid you the... say they had paid the principal judgment right away while the fees were being debated, $10,000 would have been paid to the client, the client would have paid you $4,000 as the 40 percent contingent fees then if thereafter $7,500 was recovered $4,000 would go to the client and $3,500 would go to you.

Mr. Rosen: I think that's the way the system should work.

That's, that's my opinion, because certainly it would be hoped, under the intent of Congress, under the civil rights statute, what if a judge or a jury declares that Mr. Blanchard in this case was damaged to the degree of $5,000 compensatory and $5,000 punitive damages, it seems to me when you have the Civil Rights Attorney's Fee Award Act, that the reasonable compensation of the attorney should be based on that, and the person who has had his rights damaged should then get whatever the judge or jury has awarded.

Unidentified Justice: Well, what would happen if an attorney spent just a small number of hours on a case and received a huge award, and he had a contingent fee contract?

Mr. Rosen: Justice Kennedy, you mean a huge award under the contingent fee?

Unidentified Justice: Yes.

Mr. Rosen: Under the contingent fee--

Unidentified Justice: And, and suppose that we'd all stipulate that a reasonable fee would be $20,000 but his contingent fee was $100,000, what happens then?

Mr. Rosen: --I think then you get into the area of whether or not the vindication of the particular right was worthy of an enhancement and at that period of time, at that time, then it is a question of looking at what is the relationship and what does the contract call for.

It may well--

Unidentified Justice: Well suppose the, suppose the trial court said a reasonable fee here is $20,000, but the judgment was huge, and under the contingent fee contract the fee award under the contingent contract was $100,000?

Mr. Rosen: --It may well be that a reasonable fee then would be $20,000, in your example, $20,000.

Unidentified Justice: It is.

But does the attorney get to keep the $100,000 enforcing his contract against the client?

Mr. Rosen: I don't think that the attorney keeps the $100,000, except--

Unidentified Justice: You mean the contingency fee contract is just, is just invalidated?

Mr. Rosen: --Except to the degree for 1988 purposes, except to the degree of the value of the enhancement of the right, of the enforcement of the right--

Unidentified Justice: You think 1988 was intended to reduce the contractual entitlement of the lawyer?

Mr. Rosen: --I think--

Unidentified Justice: I mean, here you have a lawyer who struck a deal for, you know, to get $100,000, and you're telling me 1988 was meant to somehow interfere with that contractual agreement?

Mr. Rosen: --I think there are two different issues.

I think the issue of the private contractual relationship between the attorney and client is one controlled by private law of contract and state law.

I think the 1988 issue... and that comes into play as I've mentioned at the very beginning of the relationship.

At the end, 1988 comes into play at the end.

Unidentified Justice: That's fine.

But which one trumps?

Why doesn't he get $100,000?

That's all that I don't understand.

Why doesn't he--

Mr. Rosen: Clearly, from the basis of a civil right litigation, 1988 does, under the supremacy clause of the Constitution.

And this Court basically has said that in--

Unidentified Justice: --Well, the supremacy clause doesn't have anything to do with a private contract.

Mr. Rosen: --No, sir.

It has nothing to do with a private contract.

For example, suppose in the court's wisdom I got $1 worth of fee.

Would I feel justified in the hours and time put in to say to Mr. Blanchard, I think under state law I will enforce this contract for $4,000?

I think I would be justified.

Now--

Unidentified Justice: Supposing that a client walk into your office with something that you, being a knowledgable lawyer, know is a civil rights case, and that there will therefore be an award of attorney's fees if you win, and you tell the client, I think we can get a judgment for $100,000 here and if we do I think the court probably is going to award another $50,000 as attorney's fees.

My arrangement with you is, I'm going to take half of whatever the court awards, both as damages and as attorney's fees.

So if we get $100,000 damages and $50,000 attorney's fees I will get $75,000 and you will get $75,000.

Do you think that is a permissible arrangement?

Mr. Rosen: --I think it is permissible.

I think that the question is always in the civil rights area the reasonable fee under 1988.

Unidentified Justice: Well, do you--

Mr. Rosen: Then the question--

Unidentified Justice: --Supposing that you're an attorney, you've negotiated that sort of an arrangement, you come to the court and you say, this is what I want the judgment entered for.

In other words, is the court going to uphold that kind of a fee arrangement?

Mr. Rosen: --Mr. Chief Justice, there are various fee arrangements--

Unidentified Justice: Well, I've given you one fee arrangement.

Will you answer my question?

Mr. Rosen: --The court may uphold that fee arrangement if they find it reasonable.

Yes sir.

Unidentified Justice: Well, what factors would they take into consideration in deciding whether it was reasonable or not?

Mr. Rosen: I think the fact of time spent on the case, of market rate of billing hours, I think the degree of success in the vindication of the civil right.

Somebody can certainly handle a case quicker or achieve a result quicker than someone else, but that still does not mean that a fee is reduced.

So there are a number of factors I think are very valid.

But simply to--

Unidentified Justice: Mr. Rosen, the hypothesis is that after taking into all, account all of those factors the judge concludes that $50,000 is a reasonable fee.

Then the question is if you have a contractual right to another $25,000 can you enforce the contract?

Mr. Rosen: --I would have to say that, if the court said a reasonable fee was $50,000, then under that civil... if the only issue was the civil rights case--

Unidentified Justice: Correct.

Mr. Rosen: --Then I think that $50,000 must be accepted as the reasonable fee.

Unidentified Justice: And that a private contractual arrangement in the civil rights area for a higher fee would be unenforceable as a matter of federal law.

Mr. Rosen: Unless there was an enhancement factor that the court looked at.

Unidentified Justice: No, no.

All these enhancement factors have been taken into account in determining the court-awarded reasonable fee of $50,000.

You're saying, as I understand you, that as a matter of federal law precludes an additional fee, even though the parties had contracted for it.

Mr. Rosen: I think in the civil rights area I have to argue that is, that is the correct fee, if the court says it is the correct fee.

Unidentified Justice: The state court too?

Mr. Rosen: I'm not sure that applies to the state court too, if there is a state, if there is a state issue involved in it.

For example, the court, a couple of recent cases that, Justice Marshall, clearly have said that when it comes to a civil rights case, 1983--

Unidentified Justice: No, that's not my point.

My point is you get the $75,000 from the federal side, and you'd come back to the client and say, I also have one with you for $40,000.

Does the state court enforce that $40,000 one?

Mr. Rosen: --I think under the rulings of this Court in the supremacy area that the federal civil rights acts are supreme to that issue also.

I'm not quite sure I understand the question, but I--

Unidentified Justice: You said in the contract, if I win, if I win I will give you 40 percent of what I make.

And not... the one two words that are not in that contract are civil rights.

Would that be enforceable after you collect the federal money?

Yes or no.

Mr. Rosen: --I do not believe it would be enforceable if the federal court had determined a reasonable fee.

Unidentified Justice: And the state court couldn't enforce a state contract?

Mr. Rosen: The state court could enforce a state contract were it not for the holdings of this Court in the area of supremacy of the civil rights statute.

Now, that my be talking against myself, against my brother lawyers, but I think a reasonable fee is a reasonable fee.

The question is, have I, or what is a reasonable fee for the work performed?

Unidentified Justice: Well, you can get disputes as to what's reasonable fee.

I've seen it run as high as 70 percent, which I didn't think was reasonable, but I found people did think it was.

Mr. Rosen: Well, it's clear that both in state and federal law, clear certainly in Louisiana that cases go back to, I think, 1934--

Unidentified Justice: I'm talking about Louisiana.

Mr. Rosen: --That if I took a 70 percent contingent fee contract the courts are going to review it, because the courts have final jurisdiction to review attorney's fees.

If I took $5,000 an hour as a fee, contract, even if submitted to by the client, he later objected, that is going to be subject to court jurisdiction to review.

So it is going to be a subject which is always, the final arbiter of it is going to be the courts, no matter what court it is.

I would like to talk briefly... one other question, one other issue on the, on the cap, and that is, we have been talking about fees and money and proportions.

But we are really talking there about monetary awards, and certainly it has been shown and held by many courts that the monetary award is not the only factor.

If monetary award were the only factor, then this would be nothing more than a negligence case.

The other factors are the vindication of a right.

And that is, as I read the cases, the principal issue, because many civil rights awards are not large, monetarily, and certainly some ask for injunctive relief.

So there would be no fee then, if you had a contingent fee contract.

Another question is, do I get, or does any attorney get less by having a contingent fee contract than he would be having no contract, nothing that said anything?

And that just doesn't seem the correct application of 1988.

The second issue in this is whether paraprofessional time should be included in 1988 fee, fee award.

It certainly is to be included, it seems to me, under the Loadstar calculation, and that is what I ask the Court to do.

It is to be included because if it is not the cost of legal services will substantially increase.

The work has to be done, the attorney has to do the work or have the work performed, so that the work performed by paraprofessionals, law clerks and paralegals, done under the supervision of an attorney, done subject to his responsibility and his malpractice insurance responsibility, seems to me absolutely valid to have that included--

Unidentified Justice: You're going to add the secretarial time, paper, paper clips?

Mr. Rosen: --No, sir.

Unidentified Justice: Electricity?

Mr. Rosen: No, sir.

And the reason why, Justice White, is this.

Part of it, I suppose, is tradition.

Never that I know about in my practice has secretarial time or the paper clip cost of overhead been included as a billable amount.

Also--

Unidentified Justice: Of course, in my day, we didn't charge for paralegals either.

And now apparently they do.

So maybe ten years hence paper clips will be charged for.

Mr. Rosen: --Well, I, I don't want to use a crystal ball, Justice Blackmun, but--

Unidentified Justice: Anything to increase it.

Mr. Rosen: --I might add that in, since I have been practicing, I do not know of any firm that does not charge a market rate to its clients of paralegals and law clerk time.

I do not know of any firm that simply accepts the expense of those services as simply overhead.

There's another reason.

Paraprofessionals are a profession.

They should be recognized as a profession.

Unidentified Justice: What do you mean when you say they're a profession?

Mr. Rosen: Absolutely--

Unidentified Justice: Well, I said what do you mean when you say they're a profession?

I didn't ask you if you would repeat yourself.

Mr. Rosen: --They are trained, they have a course of study, they are certified.

The American Bar Association has a system of certification of many schools.

They are in the same area as, for example, emergency medical technician.

They require special training in order to perform their special duties.

Unidentified Justice: But are their duties more akin to what a lawyer performs or more akin to what a secretary traditionally performed?

Mr. Rosen: My opinion is they are much more akin to what a lawyer performs than what a secretary performs.

Unidentified Justice: Do you charge for Lexis and Westlaw?

Mr. Rosen: I think there is a... I don't personally have Lexis and Westlaw, but I think there usually is a charge for--

Unidentified Justice: Well, in Louisiana do they usually charge for that as a separate item?

Mr. Rosen: --I think that is charged as a separate item, but I cannot address it because I haven't used that.

Unidentified Justice: Actually, they're a paraprofession, aren't they, they're not really a profession?

Mr. Rosen: Paraprofession, I suppose, is correct.

They are certainly, Justice Scalia, I suppose that they are, in my opinion, and I've been involved in the paralegal area for more than ten years in helping to organize the Tulane program, and have taught in two schools, and I would say that they are much closer to a profession today certainly than would be a legal secretary.

And that's the reason I say to the Court, they should be recognized as such.

If it were not for their work, attorneys would have to do the work.

The contact with witnesses, the law clerk in my particular case accompanied me three days at trial and was a great help.

One of them did the first draft of the fee application and researched the law on it.

These are not areas that a legal secretary does.

These are areas that are much more akin to what a lawyer will have to do.

Unidentified Justice: Now, is this a law clerk or a paralegal that you're talking about who drafted the first application for the fee?

Mr. Rosen: A law clerk.

Unidentified Justice: Who had, who is in law school?

Mr. Rosen: Correct.

Both... there were two at various times, after one graduated he was followed by another.

But both of them were seniors at Tulane University law school.

Unidentified Justice: Well now, would you have had a paralegal possibly draft a fee application like that?

Mr. Rosen: Mr. Chief Justice, my opinion is that, if at all possible, law students or law clerks should do the legal research and paralegals, legal assistants, should do the factual part.

Are paralegals trained to do legal research?

Yes, they are.

Have they had as much experience?

Have they had as much training as the, someone in law school who's a senior in law school?

No, they have not.

So in the way I approach this particular case, and the way I've used both, has simply been that the primary duty of research is the law clerk, the primary duty of the paraprofessional is the contact with the investigation, the witness contact, although that was also--

Unidentified Justice: What does the, what does the paraprofessional do when they're contacting witnesses?

Do they go out and interview the witness?

Mr. Rosen: --Yes, sir.

Unidentified Justice: By themselves?

Mr. Rosen: Yes, sir.

I have had them do that.

As a matter of fact I've--

Unidentified Justice: And Is that a fairly common thing for them to do?

Mr. Rosen: --It's common in my office, Mr. Chief Justice.

As I say, I've taught the legal interviewing course, and my paralegal on this particular case was one of my students.

So I had no question with, with that individual talking to witnesses.

Unidentified Justice: What if you asked your brother-in-law to go out?

He happened to be passing by that way and you asked him to talk to this witness, just to find out if this witness saw anything.

Mr. Rosen: Is he a member of my staff, Justice Scalia?

Is he a hired member under my control and for whom I am responsible?

Unidentified Justice: Oh, well, you offer him 50 bucks if he'll do it.

Mr. Rosen: I don't... I would not consider that a paraprofessional.

No, sir.

Unidentified Justice: And that's, that's the line, you can't bill it because he's not a paraprofessional?

Mr. Rosen: I would say it is not the common practice.

Let me put it the other way.

It is the common practice of billing market rate for paralegals, legal assistants, and law clerks.

It is not the common practice, that I know about, to bill the rate purely of somebody you hire out as an investigator, as a subcontracted event.

That would be something that would have to be a cost but not a market rate bill, and that--

Unidentified Justice: Is all that in the record?

Mr. Rosen: --I'm sorry--

Unidentified Justice: Is that in the record?

Mr. Rosen: --I'm not--

Unidentified Justice: What you've just said, that the custom of billing and all in New Orleans, is that in the record?

Mr. Rosen: --I think it is, Justice Marshall.

Unidentified Justice: You think?

Didn't you try the case?

Mr. Rosen: I tried the case, but whether or not that particular item is in the record, it is certainly in the briefs, but--

Unidentified Justice: Then you should have used a paralegal.

Mr. Rosen: --I would like to reserve the rest of the time at the end.

Chief Justice William H. Rehnquist: Very well, Mr. Rosen.

Mr. Guidry, we'll hear from you now.

ORAL ARGUMENT OF EDMUND L. GUIDRY, III ON BEHALF Of THE RESPONDENTS

Mr. Guidry: Mr. Chief Justice, and may it please the Court:

The Fifth Circuit in this case properly decided to limit the recovery of attorney's fees to the amount which the Appellant had contracted with his attorney to receive.

Any recovery in excess of this amount, of this amount, would provide a windfall either to the Appellant or to his attorney.

The Civil Rights Attorney's Fees--

Unidentified Justice: Well, are you, are you suggesting that if the fee is limited to $4,000 in this case, that it must come out of their damages?

Are you saying the Defendant doesn't have to pay any fee?

Mr. Guidry: --No.

I think that the Defendant does have to pay in addition $4,000 in attorney's fees.

Unidentified Justice: And, so that the Plaintiff is coming out better than his contingent contract--

Mr. Guidry: Certainly.

His obligation to his attorney would be fulfilled by the Defendant's payment of attorney's fees and he would receive the entirety of his judgment.

Unidentified Justice: --Yes.

All right.

Mr. Guidry: The Civil Rights--

Unidentified Justice: But the contract didn't provide for that, did it?

Mr. Guidry: --I'm sorry?

Unidentified Justice: The contract didn't provide for that, did it?

Mr. Guidry: The contract simply provided for attorney's fees and 40 percent of the amount of the recovery.

Unidentified Justice: And the client was liable?

Mr. Guidry: That's correct.

Unidentified Justice: So we are going beyond the contingent fee contract in order to reach the result that you explained to Mr. Justice White?

Mr. Guidry: In fact you are not, because if the payment of attorney's fees under the statute, as the statute indicates, is made payable to the Plaintiff, then the Plaintiff simply under his attorney's fees contract would then turn over the funds, $4,000, to his attorney and his obligation would be completed.

Unidentified Justice: But you're arguing that the court is limited and fixed by the terms of the contract.

In your answer to Mr. Justice White you've just indicated that you can go beyond the contract by at least the contract amount.

Mr. Guidry: The attorney's fees are set by, by the court, is what they are awarded.

They are merely limited by the contract because he had a contract providing for, for a proportion of the recovery.

The Civil Rights Attorney's Fees Award Act is a mechanism that was designed by Congress to provide representation in civil rights cases to less fortunate by shifting the burden of, the economic burden of prosecution from the victim to the violator.

Simply we must look here that what Congress intended to do, and their purpose in passing the Civil Rights Attorney's Fees Award Act, was to provide counsel for people who were less fortunate yet had their civil rights violated.

In this case, Mr. Blanchard was able to obtain counsel by signing a contingency fee contract for 40 percent of the recovery.

Congress' purpose was fulfilled.

Unidentified Justice: Why then should the Defendant have to pay anything?

If the Plaintiff was perfectly capable of getting a lawyer in the marketplace, on ordinary terms, the purpose of the statute isn't triggered at all.

Mr. Guidry: Because the statute provides that the court may award attorney's fees if a prevailing party is successful in a civil rights action.

While Congress fully intended to make the representation of the less fortunate attractive, they certainly did not intend to provide windfalls either to the plaintiffs or to their counsel.

A decision in this case not to allow a recovery in excess of the contract amount would not act as a disincentive in the future to attorneys handling civil rights cases under different contractual bases.

In a recent case decided by the Fifth Circuit in Hernandez versus Hill Country Telephone Cooperative, Inc., the Fifth Circuit approved a contingency fee agreement which was entered into between a counsel and his client where the attorney would receive 50 percent of the recovery if he was successful and no attorney's fees were awarded.

In the event that attorney's fees were awarded but less than 50 percent of the amount of the recovery, then the plaintiff would make up the difference in the attorney's fees.

If the plaintiff, if the plaintiff's counsel received attorney's fees in excess of 50 percent of the amount of the recovery, then the attorney would receive the court-awarded fees and the plaintiff would receive the entirely of his judgment.

Although the court was not excited about the percentage charged by the attorney, they said that the contract was not proscribred either by Johnson v. Georgia highway Express or other of that court's precedents and also that the attorney's fees agreement was not unreasonable.

Unidentified Justice: Have you been involved in other litigation like this?

In 1983 cases?

Mr. Guidry: No, I have not, Your Honor.

Unidentified Justice: I wondered that the practice was.

Are fees awarded paid to the plaintiff, or to his lawyer?

Mr. Guidry: In all of the research that I have done, I have not found any, any statutory or jurisprudence that indicates that it should be paid to one or the other.

Unidentified Justice: Well, if the District Court says, the statute means what it says, I must award a reasonable attorney's fees to the plaintiff, and a reasonable attorney's fee in this case is $10,000, and he says, pay it to the plaintiff, and it's paid to the plaintiff, do you suppose the plaintiff could then say to his lawyer, sorry, I'm only going to pay you $4,000?

Mr. Guidry: I think that he could say that if he had a contingency fee contract that provided for an amount different than the amount awarded by the court.

And that's the problem in this case.

Unidentified Justice: Well, that's this case too.

That's this case.

I would think you would be disagreeing then with the Court of Appeals, in a way.

Mr. Guidry: I think that's exactly what the Court of Appeals said in this case.

It was my understanding of the decision.

Unidentified Justice: Well, your understanding then is in this case, when $7,500 was awarded, the client didn't just keep $4,000, he would keep the whole $7,500 and the lawyer would only get $4,000.

Mr. Guidry: That's correct.

Unidentified Justice: So you two disagree on the meaning of this judgment, if it had just... it says the Plaintiff gets the money.

That's what the judgment says.

The Plaintiff shall recover the reasonable attorney's fee of $7,500.

Mr. Guidry: The judgment says that, the statute says the prevailing party, and then the legislative history to the Civil Rights Attorney's Fees Award Act, it indicates that, you know, if victims are to be able to pursue their civil rights, then they must be able to recover what it costs them to--

Unidentified Justice: Of course, actually, I suppose if you read the contract literally, they'd be entitled to, the lawyer would be entitled to 40 percent of the excess, because the recovery included $10,000 plus $7,500, so his 40 percent ought to be on the total $17,500.

Mr. Guidry: --Depending on whether the contract includes recovery of attorney's fees also.

Unidentified Justice: Whereupon you'd have to reopen the judgment to give that excess too, I, I assume.

Mr. Guidry: Certainly.

Unidentified Justice: No, the judgment is for $17,500.

Put the two together and it's a matter of private contract, he has to pay his debt of 40 percent.

Mr. Guidry: That's correct... whether or not it would be covered by the contract I'm not certain.

By limiting the recovery of attorney's fees in this case neither the Appellant nor Congress' intent to foster the enforcement of civil rights is disserved.

The Appellant's obligation to the attorney is paid and he received a favorable judgment without any cost to himself.

The attorney may not accept another civil rights case under a contingency fee contract providing for a proportion of the damages, but it should not prevent him from handling other civil rights cases under different contractual bases.

The Fifth Circuit in Blanchard does not conflict with this Court's decision in City of Riverside v. Rivera, as had been claimed by the Appellant.

Unidentified Justice: Excuse me.

Can I ask how your theory works to the case where there is no agreed contractual price?

Let's assume the law firm is a public interest law firm, it's provided its services for free.

You've just said that any reasonable attorney's fees awarded go to the plaintiff.

So I assume you would say that in that case, what, either no fees are awarded at all or else the plaintiff gets reasonable attorney's fees, and if he does he can keep them.

Mr. Guidry: I think--

Unidentified Justice: And the lawyer never gets anything.

Mr. Guidry: --In the case of pro bono work and in the case of public service legal corporations, that Congress by approving the method of payment in Stanford Daly and in the Davis case, which was cited in the history--

Unidentified Justice: Where did it prove that?

Mr. Guidry: --In the legislative history--

Unidentified Justice: Oh.

Mr. Guidry: --To the Civil Rights Attorney's Fees Award Act, Congress cited those two cases as being cases where proper awards were made, one of which was to a, in pro bono work, the other was to a non-profit public service legal corporation.

And by approving both of those cases, we can assume that Congress intended that they receive attorney's fees for their work, even though they may be prevented from entering into a contract with the plaintiff to receive fees.

Unidentified Justice: Well, that clear goes... once you concede that you concede the purpose of the act is, goes beyond making the plaintiff whole, once you concede that.

I mean, in that case you don't have to give the plaintiff a penny in order to make the plaintiff whole.

Mr. Guidry: Certainly you have to give, you have to make, to make the plaintiff whole you still have to provide these funds, because without these funds these public service corporations would not be able to represent plaintiff.

So in that respect it makes representation available to less fortunate citizens.

As the Fifth Circuit noted in its case, if plaintiffs such as Arthur Blanchard are able to obtain counsel to represent them under a contingency fee arrangement providing for payment of attorney's fees based on a proportion of the recovery, then in those cases the attorney cannot be said to have relied upon the statutory assurance that he would receive any other fee than that provided in the contract.

Certainly I can tell the Court that when a client comes into my office, before I accept the case on any fee basis, I know what the case is about, and I know what fee I will charge for a particular type case.

Certainly the more risky the case the larger the percentage of attorney's fees which would be charged.

Unidentified Justice: But you don't always know, do you, Mr. Guidry, who all the possible defendants are until you do some investigation or have someone do some investigation for you?

Mr. Guidry: Certainly I think that is true, but you certainly know what you feel is the chance of, of being successful and what type of action you are faced with before you agree to accept the case.

Unidentified Justice: Well, does one invariably know when a client walks in the door saying they've sustained some sort of injury, that this is a 1983 case or this is not a 1983 case?

Mr. Guidry: One may not know from the start whether or not it is a 1983 case, but you would not accept the case until you determined what type of case you were faced with.

Unidentified Justice: You mean you wouldn't accept it until you could tell whether or not it was a 1983 case?

Mr. Guidry: I would not accept it unless I knew what type of case I was--

Unidentified Justice: Well, what do you mean by, what do you mean by the words, "what type of case"?

Mr. Guidry: --Well, certainly they are, they are... I don't do any Sherman anti-trust work.

So if a client came into my office and presented me with facts which I was not sure what type of case, or what law I would be faced with, I would certainly research that prior to agreeing to accept the case.

Unidentified Justice: But a lawyer who, say, specialized in plaintiff's personal injury work might not know just from the client's original recital whether or not there might be some sort of a public defendant that could be joined that would make it, in part, a 1983 case I would think.

Mr. Guidry: That may be true in other cases.

In this case I don't think that was true, because the facts of this case were that the Plaintiff alleged that his jaw was broken by an on-duty police officer in uniform.

Unidentified Justice: Well, that seems pretty clear.

Mr. Guidry: Certainly to the extent that fee awards are intended to reflect fees charged in the marketplace for legal services, enforcement of the contract in this particular case is appropriate.

The Fifth Circuit held that the time billed by law clerks is necessarily included in the contingency fee contract.

The contract does not provide for the additional payment for legal support staff, whether it be law clerks or paralegals.

The attorney under the contingency fee contract is paid attorney's fees in the amount of 40 percent of the amount recovered.

There was no evidence presented at trial that there was any agreement to the contrary, or that there was any other provision of the contract which would require the payment of paralegals and law clerks, in addition to the contingency fee amount.

Unidentified Justice: That's an easy question, if we agree with you that the agreed-upon contingency fee is the limit.

Obviously when a lawyer agrees on a contingency fee that's all he's supposed to get.

But suppose we disagree with you that that's a limit of the award, and we think you can, the court can give an award beyond the contractual limit, would you think the court could allow paralegal time in that award?

Mr. Guidry: I think that the court can award paralegal time in certain circumstances.

The case presented before this Court is that the... rather the decision of the Fifth Circuit is that the paralegal award is included within the contingency fee.

The District Court in this very case found that paralegal and law clerk time was not necessary, that the simplicity of this case prevented it.

So whether or not paralegal time, it may be recoverable under different circumstances is something that is not before the Court at this time.

Certainly if there was evidence presented at the trial that the cost of paralegals and law clerks is paid or billed to clients in that particular marketplace as an addition to the fee charged by the attorney, then I would say yes, it would be recoverable under 1988.

Any recovery of fees in excess of the amount contracted, including paralegal and law clerk time, would provide a windfall to the Plaintiff's attorney, in derogation of Congress' purpose in passing the Civil Rights Attorney's Fees Award Act.

The Fifth Circuit decision should be affirmed.

Thank you.

Chief Justice William H. Rehnquist: Thank you, Mr. Guidry.

Mr. Rosen, you have three minutes remaining.

REBUTTAL ARGUMENT OF WILLIAM W. ROSEN ON BEHALF OF THE PETITIONER

Mr. Rosen: Thank you, Mr. Chief Justice.

Let me try to put to rest the windfall argument.

If 1988 is correctly applied it cannot be a windfall.

They are mutually exclusive.

You can't have a reasonable fee which is a windfall, at least as I see it.

On the issue of what effect does the contingent fee contract have, the contingent fee amount in a contract may in fact be a reasonable fee, so that a court must look, may want to look at the contract, and the amount recovered, and may say that this is reasonable, and therefore one becomes the other.

But I suggest to the Court that it may not be reasonable, and it may be too, it may be too little or it may be too less.

And that is where 1988 comes into play.

The fee itself belongs to the attorney.

There's a 1934 Louisiana Supreme Court case on it, it was used in a 1982 Louisiana appellate case, in 1982.

As to the allegations that this, we all knew that an on-duty police officer broke my client's jaw.

The fact of the matter is that that wasn't known for some... the allegations were in the petition.

The question was, at the very beginning, whether this happened in a... he was in a bar room, he was not in a condition to know exactly who it was who hit him, as I understand it, at the very beginning, and therefore without some investigation that then led to the allegations that it did turn out in fact to be the on-duty, police officer.

As to the simplicity of the case, this is a case against basically the only law officer in this part of a rural Louisiana parish.

There was substantial fear that I found in contacting potential witnesses against testifying against this police officer.

I was faced by two very competent counsel, one for the bar and Mr. Guidry.

And this is not, I don't believe there's any civil rights case which are simple.

I use for the benefit of myself and my client, and in the long run for the benefit, as it turned out, for the Defendant the use of paralegals and law clerks.

Their time is compensable.

That is the system of keeping legal costs to a minimum.

They were very important in this case, and their time and their services should be compensated.

And they should be compensated, I suggest--

Chief Justice William H. Rehnquist: Thank you, Mr. Rosen.

Your time has expired.

Attribution:

The OYEZ Project

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