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Pennsylvania v. Delaware Valley Citizens' Council for Clean Air

Citation: 17 ELR 20929
No. No. 85-5, 483 U.S. 711/26 ERC 1091/(U.S., 06/26/1987) Fee award for risk of loss rev'd

The Court holds that a citizens' group that was awarded attorneys fees under Clean Air Act § 304(d) for its participation in litigation over Pennsylvania's implementation of an automobile inspection and maintenance program is not entitled to an enhancement of the fee based on risk of loss. A plurality of four judges rules that enhancement of the lodestar for risk of loss is never appropriate under § 304(d). The plurality first notes that several factors have no bearing on this issue, including adjustments for delay in receiving contingency fee awards, the public importance of the issue or the popularity of plaintiff's position, and cases where plaintiff has agreed to pay its attorney regardless of the outcome. After reviewing the disagreement among the circuits and commentators, the plurality observes that the legislative history is inconclusive. The plurality concludes that enhancement of a reasonable lodestar fee to compensate for risk of loss is impermissible under Clean Air Act § 304(d) and other typical fee-shifting statutes. A contrary decision would force losing defendants to compensate plaintiff's counsel for not prevailing against defendant in other cases and would penalize defendants with the strongest case. Risk enhancement is not necessary to attract competent counsel to cases where damages are low or only injunctive relief is sought, since the fee-shifting statutes guarantee reasonable payment if the case is won.

Even if fee-shifting statutes allow risk enhancement in appropriate cases, the plurality notes that this is not such a case. The risk multiplier adopted by the district court is not warranted, since plaintiff's counsel did not face a substantial risk of loss in persuading the district court to enforce its own consent decree. Even if risk enhancement is appropriate in this case, the district court's doubling of the lodestar for certain phases of the litigation was excessive. If the trial court finds a true risk of loss, any upward adjustment of the lodestar should generally not exceed one third of the lodestar. Further, the district court failed to make the requisite finding that plaintiff would have faced substantial difficulties in finding counsel without risk enhancement.

Justice O'Connor joins the plurality in holding that the risk enhancement is not warranted under the facts of the case. However, she would hold that consideration of contingency in setting fees is not foreclosed under Clean Air Act § 304(d) and other fee-shifting statutes. Justice O'Connor would impose various constraints on a court's discretion in setting attorneys fees, such as requiring courts to treat a determination of how a market compensates for contingency as controlling in future cases in the same market, requiring the fee applicant to bear the burden of proving the degree to which the relevant market compensates for contingency, and precluding enhancement based on risks peculiar to the case.

Four dissenting justices would hold that enhancements for contingency is appropriate when an attorney and client have been unable to mitigate the risk of nonpayment. The dissent observes that an adjustment for contingency is necessary to attract competent counsel. The plurality's policy objections to risk enhancement are based on the erroneous assumption that the appropriate enhancement depends on the degree of risk presented by a particular case. The dissent asserts that risk enhancement is instead designed to place contingent employment as a whole on the same economic footing as noncontingent practice. The dissent would require courts to first determine whether plaintiff's counsel took the case on a contingent basis, whether they were able to mitigate the risks of nonpayment, and whether other economic risks were aggravated by the contingency of payment. The court should then calculate a risk enhancement that approximates the premium for contingency that exists in prevailing market rates.

[The Supreme Court's prior decision in this case appears at 16 ELR 20801. The lower court opinions are published at 15 ELR 20192 and 20475.]

Counsel for Petitioners
Jay C. Waldman
P.O. Box 11775, Harrisburg PA 17108
(717) 783-6563

Counsel for Respondents
James D. Crawford
Schnader, Harrison, Segal & Lewis
Suite 3600, 1600 Market St., Philadelphia PA 19103
(215) 751-2000