GPSOLO March 2010
Calculating Attorney Fee Awards
Under what is known as the “American rule,” each party to a legal dispute bears its own fees and expenses. However, the American rule does not apply when case law, a contract, or a statute allows a successful litigant to obtain attorney fees and other expenses from the losing party. In this article, we assume that the fee applicant has an underlying statutory, case law, or contractual basis to seek an attorney fee.
The lodestar method. The lodestar method of calculating attorney fees is a two-step process. First, courts multiply the hours an attorney works by the attorney’s hourly rate—this process yields the lodestar—and then courts adjust the lodestar up or down “to reflect the characteristics of a given action.” The lodestar method raises three questions: (1) how do courts determine a reasonable hourly rate? (2) how do courts determine a reasonable number of hours? and (3) once courts come up with the lodestar, on what basis do courts adjust that figure up or down?
Setting a reasonable hourly rate. A reasonable hourly rate must conform to the prevailing market rate for a similar attorney in the “relevant legal community.” Courts assess the fee applicant’s skill and experience and then determine what rate a similar attorney with a similar reputation would charge in the relevant community. What is the relevant community? The overwhelming weight of authority leans toward the “forum rate” rule, which creates a strong presumption that the relevant community is the community where the court sits. The forum rate rule is subject to two exceptions: “first, when the need for the special expertise of counsel from a distant district is shown; and, second, when local counsel are unwilling to handle the case.” In either situation, courts look to the fee applicant’s community to determine a reasonable hourly rate.
Determining a reasonable number of hours. The general rule is that fee applicants can bill their opponents for the same number of hours that fee applicants would be able to bill to their clients. Hours may be excluded from compensation under three circumstances: (1) they are “excessive, redundant, or otherwise unnecessary”; (2) they “relate to distinct claims on which the applicant did not succeed”; and (3) they “are inadequately documented.”
Courts have broad discretion to decide whether the hours claimed by a fee applicant are reasonable and may rely on “its own knowledge” to evaluate a fee request.
Fee applicants “must make every effort to submit time records which specifically allocate the time spent on each claim. [Time records] should attempt to specifically describe the work which the fee applicant allocated to unsuccessful claims so as to assist the district court in determining the reasonableness of the fee request.” Time records must also “fully explain” the individual tasks for which the fee applicant is billing to ensure that the court is not “at a loss to determine the reasonableness of the task.” The general rule is that where a court cannot determine the reasonableness of a task, the fee request for that task is deducted from the overall fee request. Courts also require that billing records be kept contemporaneously with the work done.
Courts generally do not compensate fee applicants for time spent on unsuccessful claims. The issue is how to determine the appropriate award of attorney fees in a case in which the plaintiff does not achieve complete success but does achieve a nominal victory. Whenever a plaintiff recovers only nominal damages because of failure to prove an essential element of the claim, “the only reasonable fee is usually no fee at all.” However, in cases of a nominal award for other reasons, many circuits look to the test proposed by Justice Sandra Day O’Connor’s concurrence in Farrar v. Hobby (506 U.S. 103, 113 (1992)).
Adjusting the lodestar up or down. There is a strong presumption that the lodestar figure is a reasonable fee; courts will adjust the lodestar only in “rare and exceptional cases” when the “lodestar amount is unreasonably low or unreasonably high” in light of the results obtained. In arguing for an adjustment of the lodestar—up or down—the burden is on the party seeking the adjustment to show that the results obtained by the fee applicant do not warrant the fee provided by the lodestar:
Where the plaintiff’s claims involve a common core of facts or will be based on related legal theories, the attorney’s time will be devoted generally to the litigation as a whole, making it difficult to divide the hours expended on a claim-by-claim basis.
In these cases, full compensation is unreasonable, yet reducing the hours expended is artificial because the hours spent on successful and unsuccessful claims are inseparable. In such cases, “[c]ourts may take [a second] look at the billing invoices, excising additional entries, or simply award a lump sum. The latter approach is preferable.” Thus, in cases where there is a common core of facts, courts may reduce the lodestar itself to account for limited success.
Courts tend not to make reductions in direct proportion to the amount awarded; they do not “adjust counsel fees to reflect a certain ratio between the fees and damage awards. . . . [T]he amount awarded in counsel fees should reflect the extent to which the litigant was successful.”
In general, an upward adjustment to the lodestar is allowed for two reasons:
First, the district court can make an appropriate adjustment for delay in payment—whether by application of current rather than historic hourly rates or otherwise. Second, the district court can adjust for quality of representation but only in very rare circumstances where the attorney’s work is so superior and outstanding that it far exceeds the expectations of clients and normal levels of competence.
Determining what else courts will compensate fee applicants for. Parties can be compensated for all the expenses that “are normally charged to a fee-paying client, in the course of providing legal services.” The ability to recover fees such as copying costs, secretarial fees, and online legal research fees depends on the jurisdiction.
A number of courts have addressed whether attorneys can recover fees for secretarial and paralegal time. A Chicago court observed that paralegal work is reasonable for research and other sophisticated tasks. However, “it is unreasonable for such tasks as making flight reservations, confirming court reporters, copying documents and delivering envelopes.” Some courts hold that “support staff” “are customarily not billed to clients at hourly rates.” These costs are rather covered as overhead. In other jurisdictions, courts hold that secretarial costs may be compensated. Neither lawyers nor paralegals can bill at their full hourly rate for clerical tasks. At least in some jurisdictions, paying expert witnesses well above their hourly rates is considered reasonable.
Time spent on research is another area of contention. In the Seventh Circuit, online legal research fees are recoverable attorney expenses. However, courts draw a distinction between two kinds of research, one compensable and the other not. “To the extent that time spent maintaining competency to practice law is part of the cost of doing business,” that time is not compensable. In contrast, lawyers may be compensated for case-specific research as long as the research is relevant and reasonable.