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Student Pub. Interest Research Group of N.J. v. AT&T Bell Labs.

ELR Citation: 18 ELR 20758
Nos. Nos. 86-5895, -5927, 842 F.2d 1436/27 ERC 1409/(3d Cir., 03/24/1988) Aff'd in part, rev'd in part

The court rules that in awarding attorney fees pursuant to Federal Water Pollution Control Act (FWPCA) §505 to for-profit public interest law firms that customarily bill less than the market rate, the lodestar should be calculated according to community market rates. The court first rejects three approaches sometimes used to determine the lodestar: the billing rate rule, the micro-market rule, and the billing rate rule modified by an enhancement for contingency. Application of the billing rate rule to this case would contravene the reasoning of Blum v. Stenson, where the Supreme Court held that a nonprofit legal aid organization could obtain legal fees based on market rates pursuant to the fee-shifting provisions of the statute under which they prevailed. Billing rates do not reflect the market value of an attorney's services where the billing rate anticipates the availability of larger fees under fee-shifting statutes. In such cases, the billing rate alone would probably not be sufficient to attract competent counsel. In addition, to view fee-shifting statutes merely as replacements for lost opportunity costs ignores the result in Blum. The micro-market rule, which looks to the market for public interest work, fallaciously assumes that an independent public interest market exists, that the market generates reasonable fees, and that courts can rely on this market in granting fees pursuant to fee-shifting statutes. Since an actual public interest market rate would be virtually impossible to establish, the adoption of the micro-market approach would cause courts to recast fees awarded by previous courts into "market" rates. The modified billing rate rule contravenes the assumption that the lodestar already represents a reasonable fee in most cases, and it would be cumbersome to apply.

The court then rules that the community market rule is the most appropriate way of calculating the lodestar for a for-profit public interest firm under a fee-shifting statute. The facts here are very similar to those of Blum. Any "windfall" received by this law firm would be relatively small, especially since its low customary billing rate reflects the possibility that higher rates will be awarded when the firm prevails under fee-shifting statutes. In addition, the community market rate will further the congressional policy of attracting competent counsel to public interest litigation, and is workable and easy to apply.

The court holds that a contingency multiplier is inappropriate, since the risk involved here was not great enough to make a multiplier necessary in order to attract competent counsel. Assessing and applying a contingency multiplier would also pose difficult administrative problems. The court also holds that a quality enhancement was not appropriate, since counsel's work here was not so extraordinary as to exceed the expectations of clients and normal levels of competence. The court holds that although an enhancement for delay is sometimes allowable, plaintiffs here failed to present carefully developed evidence of the costs of the three-year delay in receiving payment. The court remands to the district court for factual findings the question of whether billing for the firm's fee litigation research should be distributed among various of the firm's other FWPCA citizen suit cases. The court also remands the question of whether the lodestar should be reduced because counsel prevailed only on the issue of community market rate billing, and was not successful on its arguments for fee enhancement.

[The district court's opinion in this case is published at 17 ELR 20103. The decision on the merits is published at 15 ELR 21057.]

Counsel for Appellants
Bruce J. Terris
Terris, Edgecombe, Hecker & Wayne
1121 12th St. NW, Washington DC 20005
(202) 682-2100
Michael Gordon
Gordon & Gordon
80 Main St., West Orange NJ 07052
(201) 736-0094

Counsel for Appellees
Joseph A. Hoffman, Ass't General Counsel
American Telephone & Telegraph Co.
One Oak Way, Berkeley Heights NJ 07922-2727
(201) 771-2000
Steven A. Tasher, Joseph P. Dean
Donovan, Leisure, Newton & Irvine
1850 K St. NW, Washington DC 20006
(202) 862-4700

Before Scirica and Farnan[*], JJ.