Cases by Issue - Attorneys' Fees

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...

Ms Blatt: [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...

Ms Blatt: [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:

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:

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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

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