The Supreme Court Limits Attorneys' Fee Awards

The public interest suffered a major judicial setback on May 12, when the Supreme Court announced its decision in Alyeska Pipeline Service Co. v. Wilderness Society¹ declaring erroneous a line of decisions awarding attorneys' fees to environmental and other public interest plaintiffs.² The five-justice majority held that only Congress, not the courts, can authorize an exception to the "American rule" that attorneys' fees cannot ordinarily be recovered by a prevailing party from a losing party. In so holding, the Court reversed a United States Court of Appeals decision that such awards are within the equitable powers of the federal courts when plaintiffs have served as private attorneys general by enforcing an important public policy.³ Justices Marshall and Brennan agreed with the Court of Appeals, and reasoned that the case was a proper one for the exercise of the court's power in equity to award attorney's fees to plaintiffs. Justices Douglas and Powell did not take part in the case.

Justice White, writing for the majority, offered no assessment of the American rule itself, limiting the decision to a holding that establishing an exception to the American rule for plaintiffs serving as private attorneys general is properly a matter for the Conress and not the courts.⁴ Thus the majority never reached the merits of the plaintiffs claim for an award of attorneys' fees. In effect, however, the result was to deny the request, since the basis on which it was granted in the Court of Appeals was struck down by the high court.

The "American rule," simply stated, is that a prevailing litigant is not ordinarily entitled to collect attorneys' fees from the loser. It is called the American rule because in England, by contrast, the rule is that the winning litigant is routinely awarded counsel fees. The pros and cons of the two systems have long been debated. The rationale for the American system is that the imposition of attorneys' fees on the losing party would raise the stakes of litigation, and thereby discourage individuals from submitting their rights to judicial determination. Conversely, the English system is thought to discourage would-be plaintiffs from bringing frivolous actions. While the American rule may stand as an encouragement to plaintiffs generally, it creates a severe disadvantage to public interest plaintiffs seeking injunctive relief rather than monetary damages, since the remedy does not produce a dollar award from which attorneys may be paid for their efforts.

An exception to the usual rule designed for plaintiffs serving as "private attorneys general" has been accorded increasing judicial recognition. It seeks to reduce the disadvantage to public interest plaintiffs created by the American rule, and is based on the equitable powers of the court to award attorneys' fees when the interests of justice so require. A plaintiff serves as a private attorney general when he brings a suit to enforce the validity of an important statutory policy or right established by Congress. The rationale for the exception is that if successful plaintiffs were routinely forced to bear their own attorney costs, few aggrieved parties would be in a position to vindicate their rights by making use of the injunctive powers of the federal courts.

The Alyeska case brought these competing policies sharply into focus. Plaintiffs in the action, the Wilderness Society, the Environmental Defense Fund and Friends of the Earth, brought suit initially in March 1970 to prevent the issuance of permits by the Secretary of Interior for construction of the trans-Alaska oil pipeline. The District Court for the District of Columbia granted a preliminary injunction on the ground that the permits would violate the Mineral Leasing Act of 1920 and the National Environmental Policy Act of 1969.⁵ The State of Alaska and Alyeska (petitioner before the Supeme Court) were then permitted to intervene.

After a hearing on the merits, the District Court dissolved its injunction.⁶ Upon appeal the Court of Appeals reversed, enjoining the construction as a violation of the right-of-way requirements of the Mineral Leasing Act.⁷ The Appeals Court did not reach the merits of the plaintiffs' NEPA contentions. A writ of certiorari to the Supreme Court was denied.⁸

[5 ELR 10096]

Pipeline proponents then took their case to Congress, which in November 1973 amended the Mineral Leasing Act to allow the granting of the permits sought by Alyeska, and declared that no further action under NEPA was necessary before construction of the pipeline could proceed.

The Court of Appeals, foreclosed by this congressional action from further consideration of the merits of the environmentalist plaintiffs' claims, then addressed itself to their request for an award of attorneys' fees. Sitting en banc, a sharply divided Court of Appeals ruled in 1974 that plaintiffs had acted to vindicate important statutory rights of all citizens, had insured that the governmental system functioned properly, and were thus entitled to fees for having performed the functions of a private attorney general.⁹ However, the Court limited the award to half the full amount, payable by intervenor Alyeska, citing 28 U.S.C. § 2412, which bars taxing attorneys' fees against the United States as a defendant.

In its assessment of the award to plaintiff-respondent environmental groups, the Supreme Court majority noted that at common law, prevailing plaintiffs were not allowed to recover attorneys' fees; but recovery of such fees by statute has been allowed for centuries in England. The majority placed great weight on a United States statute, the Act of 26th February 1853, which the court states was intended in part to eliminate excessive awards of attorneys' fees which, prior to that time, had been charged to the losing party. That act terminated the fee practices existing in federal courts up to that time, fixed a schedule of fees not providing for such attorneys costs; and stated that no other compensation should be taxed or allowed as an incident to a judgement, save normal attorneys' fees charged by attorneys to their own clients. It was this Act, which in the view of the court, statutorily established the American rule.

The majority recognized the validity of two exceptions to the rule appearing in the case law. These are cases of "obdurate behavior," such as willful disobedience of a court order, and cases in which the successful litigant has made a "common fund" available to a group similarily situated to the plaintiff, or has conferred a "common benefit" on it, and an award of attorneys' fees against the defendant is the best means of spreading the cost of litigation among the benefitted group. The Court, however, chose to characterize both exceptions as construction of the 1853 statute by the courts, rather than as judicially created limitations or exceptions to the rule, and concluded that in any event, neither was applicable in the Alyeska case.¹⁰

Thus, the majority's review of the origin and development of the American rule led it to the conclusion that judge-made exceptions were not the practice in the past. It concluded further that this case was particularly illsuited for judicial creation of a private attorney general exception in any event. The court described such an exception as "far-reaching" and "drastic," and directed that only to the extent allowed in specific statutes enacted by Congress should it be used by the courts as a basis for awarding attorney's fees.

The Court identified numerous congressionally created instances in which attorneys' fees are to be awarded or may be awarded to prevailing plaintiffs serving that function. A number of statutes make an award of attorneys' fees to a prevailing plaintiff mandatory, including anti-trust laws, the Fair Labor Standards Act, the Truth-in-Lending Act, and the Merchant Marine Act. Others make such an award discretionary with the Court, including the patent laws, the Civil Rights Act of 1964, (Title VII), the Clean Air Amendments of 1970, and the Federal Water Pollution Control Act Amendments of 1972. Finally, at least one act extends the exception to an entire class, those persons economically unable to retain a private attorney who resort to a legal services attorney under the Legal Services Corporation Act of 1974. However, in each of these instances, the exception is expressly authorized by Congress, evidencing a congressional decision to place heavy reliance on private enforcement of the rights each of these statutes seeks to preserve.

In his dissent, Justice Marshall contended that the various exceptions to the American rule in the cases are not merely exercises in construing the 1853 Act, but instead are court-created exceptions, based on the court's inherent and independent equitable power, described in previous cases as "part of the original authority of the chancellor to do equity in a particular situation."¹¹ Marshall cited a number of Supreme Court cases to support his view of the court's power. The most recent of these decisions came but two years ago, in Hall v. Cole.¹² While none of these cases expressly discusses the private attorney general rationale, they nonetheless indicate that the Supreme Court has not in the past regarded the award of attorney's fees to successful plaintiffs as a matter reserved for the Congress. Addressing the majority's reliance on the 1853 Act, Marshall pointed out that the language on which the court relies was eliminated in 1948 as a part of judicial code revisions. Even if the language still has force, as the majority contended, a number of cases have construed the language narrowly when applying it to the court's equitable powers. Marshall also pointed out that [5 ELR 10097] implied restrictions on the equity power have always been viewed with disfavor.It is a serious misstep, he concluded "to abdicate equitable authority in the name of statutory construction."

Justice Marshall's dissent provoked a lengthy response from the majority, set forth in footnote 39 to the opinion. The response took Marshall to task on his effort to delineate a set of factors to guide the courts in awarding attorney's fees on the private attorney general rationale, factors which the majority suggested would emasculate the rationale. But Marshall succeeded in eliciting from the majority, in its rebuttal, an expression of the concern which may well have been at the root of the Court's reluctance to approve a court-created private attorney general exception. Justice White's footnote seized on Justice Marshall's statement that there is "hardly any room for doubt" that respondents' litigation has protected an important public right, and suggested "at the very least that, as in any instance of conflicting public views, there is room for doubt on each side." As evidence of this doubt, Justice White cited the dissenting opinions in the Court of Appeals of Judges MacKinnon and Wilkey. The MacKinnon dissent had bitterly charged that "when we subsidize law-yers to bring such suits against our national interests we promote our own destruction."¹³ The Wilkey dissent included the statement:

… the hope of attorney' fees spawned by this ill-advised decision may be just the stimulus needed to launch [other attorneys and potential plaintiffs] in the direction of the courthouse, unembarassed by any humility as to their knowledge of where the public interest lies. The flood of "public interest" litigation, particularly in the environmental field is given new impetus by the majority decision.¹⁴

The dissent emphasized that each week's delay in constructing the pipeline imposed an additional $3.5 million in costs.

Thus the high court, showing clearly the influence of its recent appointees, seemed to be moving against what it sensed as a threat to the orderly development and implementation of the national interest. The majority apparently felt that placing the stamp of approval on the private attorney general rationale might significantly expand the litigation capabilities of those critical of current corporate and government policies, an alteration of traditional power relationships so basic as to be a political question properly left to the Congress. While Justice White did not articulate these precise thoughts, he came close when he concluded his lengthy rebuttal of Marshall's dissent with these words:

It is that unavoidable doubt [as to whether the pipeline challengers had protected an important right] which calls for specific authority from Congress before courts apply a private attorney general rule in awarding attorneys' fees.¹⁵

The decision is already having a dampening effect on attorneys' fees decision in lower courts. In two Seventh Circuit cases decided after Alyeska, on appeal from federal district courts in Illinois¹⁶ and Indiana,¹⁷ plaintiffs sought recovery of attorneys' fees based on the common benefit and obdurate behavior exceptions, respectively, to the American rule. Citing language from a footnote in the Alyeska decision, the Court refused to grant attorneys fees in both cases to plaintiffs who had succeeded in asserting the validity of rights benefitting large classes of people. In each case, the Seventh Circuit read the Alyeska decision as limiting awards under the common benefit theory to cases where the class of beneficiaries is small and easily identifiable, so that the benefits can be traced with some accuracy and with confidence that the costs can indeed be shifted with some exactitude to those benefitting. Thus the Alyeska decision is also already affecting the outcome of cases involving attorneys' fees awards that are based not at all or only in part on a private attorney general rationale.

Moreover, the decision has serious implications for federal agencies such as the Nuclear Regulatory Commission and the Consumer Product Safety Commission which, without express statutory authority, are considering subsidies to public interest intervenors in agency proceedings.¹⁸ While there is some doubt that the reach of Alyeska extends to the notion that any tinkering with the balance of power in legal proceedings without congressional authorization is subject to judicial invalidation if challenged, the growth of this new administrative practice may nonetheless be stunted as a result of regulatory agency cautiousness engendered by the decision.

Finally, the decision confirms an unwelcome trend in recent Supreme Court decisions aiming to stem what Justice Rehnquist has called "the litigation explosion," and to reduce litigation against corporate and governmental defendants, by making it more difficult for environmentalists, consumers, shareholders, and others to press litigation in the federal courts. Other recent decisions have all but eliminated the usefulness of federal court class suits for such plaintiffs,¹⁹ restricted [5 ELR 10098] the number of activities that can be challenged under federal anti-trust laws as illegal monopolies,²⁰ and left in a weak state the right of stock-fraud victims to sue for damages under federal securities laws.²¹

The Alyeska decision, and the trend of which it is a part, run against the grain of fundamental notions of fairness. Groups and individuals should not be prevented from challenging illegal acts of government and industry solely because they lack financial resources. The growth of legal services programs across the country has been premised on this notion. While litigation on an ever-increasing range of public issues, including increasingly complex actions under some of the federal environmental statutes, may contribute to the problem of crowded dockets, the Court is not justified in simply choking off much of this new litigation rather than dealing with the valid concerns its raises on the merits. Moreover, if the Court is indeed engaged in an effort to reduce crowding in federal court dockets, its choice of public interest litigation as a target may, according to some evidence, be misguided. A Justice Department study on the need for separate environmental courts showed that less than 1 percent of the problem of overcrowded dockets could be attributed to environmental litigation.²² While the number of environmental actions has accelerated since the study, much of the litigation is initiated by corporations challenging various sections of federal environmental statutes. Only on the issue of standing to sue has the current Supreme Court showed any willingness to come to grips with the interests of previously underrepresented groups.²³ The issue of whether to allow awards of attorneys fees to plaintiffs serving the function of a private attorney general in particular, should not have been one for the Court to duck as it did. Approving such a rule would not have brought about the demise of our corporate system, or even determined the outcome of future litigation. It merely would have allowed previously unrepresented groups and interests their day in court at a more reasonable price. Limits on the applicability of the private attorney general rationale, to prevent its excessive or vexatious use, are not difficult to formulate. In fact, a reasonable set of limitations was proposed three years ago, by a federal district court judge in the Northern District of California in La Raza Unida v. Volpe,²⁴ one of the lower court cases declared erroneous by footnote in Alyeska. This declaration is a noteworthy indication of how serious the court is about choking off further awards under the private attorney general theory, since an appeal in La Raza, is currently pending before the Ninth Circuit.

In several respects, the judicial system needs private attorneys general. United States Attorneys everywhere tend to be overburdened and their focus is usually directed toward the enforcement of federal criminal statutes. More importantly, United States Attorneys may lack the specialized expertise necessary to handle environmental cases, based as they often are on complex statutory provisions, such as those contained in the federal air and water pollution laws. Thus a system which encourages private attorneys general to function will complement the existing efforts of the United States Attorneys' offices across the country.

Public interest groups now face the task of taking their case to Congress. Environmentalists have already had notable successes in securing attorneys fees provisions in recent statutes, including those relating to air, water and noise pollution.²⁵ In response to Alyeska, the Senate is already planning further hearings on extending by statute the rules for awarding attorneys fees, and several bills addressing the problem have been introduced in the House by Rep. John Seiberling (D-Ohio).²⁶ Senator John Tunney's (D-Calif.) subcommittee on constitutional rights is now considering [5 ELR 10099] whether to seek an across-the-board authorization for awards of attorneys' fees to plaintiffs enforcing important congressional policies, or whether to seek amendments to specific statutes such as NEPA, which define such policies but fail to provide for awards of attorneys' fees to prevailing plaintiffs. Early readings of what the Congress will accept indicate that the broad-brush approach faces rough going.

The Council for Public Interest Law, a Washington, D.C.-based group studying ways of institutionalizing the sources of funding for public interest legal representation, is assessing the impact of the decision on public interest litigation groups. It is currently polling public interest attorneys to determine how many of their requests for recovery of attorneys' fees are likely to be affected by the decision. The survey will also identify federal statutes lacking attorneys' fees provisions which are most frequently used by public interest attorneys as a basis for law suits. In addition, the Council is drafting model legislation both of the omnibus type and for insertion in existing legislation for consideration by interested congressional committees.

The hope of public interest groups, who face the prospect of declining foundation support and cannot accept financial aid from government or corporations without compromising their position, is that Congress will now act where the Supreme Court has refused to tread. Only a fraction of all public interest litigation is filed under statutes now providing for awards of attorneys' fees. Without further action by the Congress, a number of critical statutes, including NEPA, now face curtailed private enforcement as public interest attorneys, unable to afford litigation without remuneration, divert their attention to suits under laws where awards are possible.

1. 5 ELR 20286 (U.S. May 12, 1975).

2. The cases declared erroneous are brought together in footnote 46 of the majority's opinion, 5 ELR 20293.

Several previous ELR Comments have analyzed this developing line of cases. See Attorneys' Fees: The Growing Number of Awards to Public Interest Plaintiffs, 4 ELR 10021, (Feb. 1974); Attorneys' Fees Granted to Environmentalists in Alaska Pipeline Litigation, 4 ELR 10066 (June, 1974); More On Attorneys' Fees: Does the Eleventh Amendment Bar Awards Against State Agencies and Officials? 4 ELR 10132 (Sept. 1974); and, Supreme Court Faces Thorny Issue of Attorneys' Fees in Environmental Suits, 4 ELR 10189 (Dec. 1974).

3. Wilderness Society v. Morton, 4 ELR 20279, 495 F.2d 1026 (D.C. Cir. 1974).

4. Previous commentators have described such court decisions as cases of "Legislative remand." See Comment, Alaskan Oil Pipeline Now up to Congress, 3 ELR 10042, (April, 1973).

5. 1 ELR 20042, 325 F. Supp. 422 (D.D.C. 1970).

6. 2 ELR 20583 (D.D.C. 1972).

7. 3 ELR 20085, 479 F.2d 842 (D.C. Cir. 1973).

8. 411 U.S. 917 (1973).

9. See supra, n. 3.

10. At one point in its opinion (5 ELR 20290) the court acknowledges that such exceptions are "unquestionably assertions of inherent power in the courts to allow attorneys' fees in particular situations." However, elsewhere in the same paragraph, the exceptions are described as an exercise in construing the fee statutes. In any event, it is clear that the court will not permit this inherent power to award attorneys' fees, if it exists, to extend to awards based on the private attorney general rationale.

11. See e.g., Sprague v. Ticonic National Bank, 307 U.S. 161, at 164-167 (1939).

12. 3 ELR 20552, 412 U.S. 1 (1973).

13. 4 ELR 20286.

14. 4 ELR 20288.

15. 5 ELR 20292.

16. Townsend v. Edelman, No. 73-1960 (7th Cir. June 2, 1975).

17. Satoskar v. Indiana Real Estate Commission, No. 74-1946 (7th Cir. June 2, 1975).

18. The Federal Trade Commission, with statutory authority under Pub. Law 93-637, has proposed rules for compensating "any person … who represents an interest which would not otherwise be adequately represented in a rulemaking proceeding." 40 Fed. Reg. 15238 (April 4, 1975).

19. Zahn v. International Paper Co., 4 ELR 20100 (U.S. 1973), and Eisen v. Carlyle & Jacquelin, 4 ELR 20513 (U.S. 1974).

20. Gulf Oil Corp. v. Copp Paving Co. 43 U.S.L.W. 4059 (Dec. 17, 1974).

21. Blue Chip Stamps v. Manor Drug Stores, 43 U.S.L.W. 4707 (June 9, 1975). For further discussion of these cases, see Green, "A Pro-Business Tilt in the Courts?" Wall St. Journal, June 10, 1975, p. 20.

22. Kiechel, Environmental Court Vel Non, 3 ELR 50013, at 50015 (May, 1973).

23. U.S. v. SCRAP, 3 ELR 20536, 412 U.S. 669 (1973).

24. 2 ELR 20691 (N.D. Cal. 1972).

25. More than 30 statutes now provide for awards of attorneys' fees. Most of them are brought together in footnote 33 of the majority opinion (5 ELR 20291). See also Legal Fees, Hearings before the Subcommittee on Representation of Citizen Interests (U.S. Senate Committee on the Judiciary, Sept. and Oct. 1973) Parts III and IV at pp. 1267-1278, setting forth 29 provisions for awards of attorneys' fees.

More recently, the Deepwater Port Act of 1974 and the Safe Drinking Water Act have incorporated such provisions. See Comment, Environmental Legislation Passed by the 93rd Congress: A Review, 5 ELR 10020 (Feb. 1975).

26. Congressman Seiberling introduced five attorneys' fees bills on June 11, 1975 (121 Cong. Rec. H 5346, June 11, 1975, Daily Ed.)

H.R. 7825. A bill to authorize the awarding of attorneys' fees in actions brought under the Mineral Leasing Act of 1920, and for other purposes; to the Committee on Interior and Insular Affairs.

H.R. 7826. A bill to amend title 28 of the United States Code to authorize the awarding of attorneys' fees in civil actions before the Federal courts where the interests of justice so require, and for other purposes; to the Committee on the Judiciary.

H.R. 7827. A bill to authorize the awarding of attorneys' fees in actions for injunctive relief under the Clayton Act, and for other purposes; to the Committee on the Judiciary.

H.R. 7828. A bill to authorize the awarding of attorneys' fees to prevailing plaintiffs in actions brought under certain civil rights laws, and for other purposes; to the Committee on the Judiciary.

H.R. 7829. A bill to authorize the awarding of attorneys' fees to prevailing plaintiffs in actions brought under the National Environmental Policy Act of 1969, and for other purposes; to the Committee on Merchant Marine and Fisheries.