Traditionally, the practice of law has been divided into two unofficial
areas; transactional law or litigation. While transactional lawyers
will probably bill on a fixed fee or an hourly basis, the litigation attorney's
compensation will likely be contingent on the outcome of a trial that she
litigates. Further, if the attorney prevails at trial, but wins a
small damage award for her client, then the attorney's share of the damages
may not adequately compensate her for the effort she expended in preparing
for and litigating the case. Also, the attorney will know that even
if she is victorious, her fees must be paid by her client, not the losing
party. This "income uncertainty" could dissuade a reasonable young
lawyer from venturing into litigation.
However, the young trial attorney should take heart, for today there
are several statutory causes of action that, if the attorney is successful
at trial, may allow her to recover a "reasonable fee" from the opposing
party. Therefore, the only uncertainty remaining is whether the attorney
feels she can win the case. If a victory is expected, the young attorney
can sleep well, assured that she will get paid.
The above scenario is based on the "American Rule." The American
Rule requires that each party to a litigation matter pay his own attorney's
fees, unless there is a statutory authorization otherwise.1 This
paper discusses the American Rule, describes how and when the rule is applied,
and considers the policies surrounding the rule.
I. History of the American Rule.
A brief history will help the young attorney understand the degree
to which the American rule is engrained in society today. The American
Rule has essentially been in place for the entire history of the United
States.2 This may seem curious, since England's tradition of awarding
the prevailing party attorney's fees from the losing party can be traced
back to the year 1278.3
In 1853 Congress digressed partially from the American Rule by implementing
a fee schedule dictating specific amounts taxable to the various parties
involved in litigation.4 This act was primarily intended to provide
uniformity in court awarded costs and to limit the amount that the losing
party was taxed for the prevailing party's attorney's fees.5 This
1853 statute is no longer in effect today, but its main thrust still exists;
absent a legislative directive, the court will not allow the prevailing
party to recover its attorney's fees from the losing party.6
Over the years, the Supreme Court has consistently shown a great deal
of deference toward legislatures regarding the American Rule. This
is revealed by the Supreme Court's statement; "... even if [the American
Rule is] not strictly correct in principle, it is entitled to the respect
of the court, till it is changed ... by statute."7 The court has
also recognized that the American Rule has been subject to a great deal
of criticism, but still the court has refused to analyze the rule's positive
and negative effects.8 However the strength of this presumption has
been substantially weakened in modern society because federal and state
legislatures have provided a great deal of statutory authority allowing
a prevailing party to recover attorney fees.
II. How the American Rule Works.
1. Whether an attorney's fee award is authorized by a statute.
Before an attorney decides to pursue a client's claim, he should determine
whether the applicable statutory cause of action would allow him to recover
his fees from the opposing party if he is victorious. This requires
the attorney to look to the court's interpretation of the statute.
Sometimes the court recognizes that a statute expressly dictates that attorney's
fees should be awarded.9 In other cases, the court will use the discretion
which the applicable statute grants in deciding whether to award attorney's
fees. This discretion is evident in the words "may award attorney's
fees."10
Also, the court's authority to award attorney's fees may be implied
from the statutory language.11 However, the court will not base such
an implication on the "mere generalized commands" of a statute.12
There is no "precise rule or formula" the court may use to determine whether
an implied award attorney's fees is proper; the matter is within the court's
equitable discretion.13 In assessing whether to award attorney's
fees, the evidence must be viewed in light of the strong presumption favoring
the American Rule.14 This is true even if an award of fees would
promote an important public policy objective.15 A statutory phrase
granting the court the power to "furnish suitable remedies" will not suffice.16
Nor will authority to award the "costs of the action ... subject to the
principles of equity," grant the court implied authority to award attorney's
fees.17
A rational person might think that a statutory award of "costs" to
a prevailing litigant would include attorney's fees. However, the
court feels that "costs" is not a clear enough mandate, and believes that
legislators know the American Rule and will expressly trump it by stating
"attorney's fees" if they so desire.18
The most notable effect of this interpretation of "costs" is on Rule
68 of the Federal Rules of Civil Procedure. Rule 68 states that if
a settlement offer is made by an offeror in the course of litigation, but
refused by the offeree, and the offeree later obtains a judgment against
the offeror, but such judgment is less than the amount of the previous
settlement offer, then the offeree must pay the costs incurred after the
offer was made.19 However, since Rule 68 does not expressly include
attorney's fees in the costs it awards, the court held that such fees can
not be awarded, unless the underlying statutory cause of action expressly
provides for attorney's fees.20
This is a very plaintiff-friendly interpretation of Rule 68.
Obviously, if "post-offer" attorney's fees are recoverable under Rule 68,
a plaintiff whose expected recovery at trial is not substantially greater
than the settlement offer will have a strong incentive to accept the settlement
offer. Moreover, if the claim is not very large to begin with, these
post-offer attorney fees could eat up most, if not all, of the plaintiff's
eventual recovery, and eliminate any recovery the prevailing attorney would
otherwise receive.
2. Whether a statute authorizes attorney's fees in the case before
the court.
If the court determines that a statute permits attorney's fees to be
awarded, the question remains whether it is appropriate to award fees in
the specific case before the court. This question will be collateral
to the case in chief.21 Several issues are presented here.
First, the court must determine which type of statute it is dealing
with. Some statutes only permit a prevailing plaintiff to recover
attorney's fees, while other statutes allow either a prevailing plaintiff
or a prevailing defendant to recover attorney's fees. The former
is referred to as "one-way fee shifting," while later is "two-way fee shifting."22
Even though a statute may appear to authorize two-way fee shifting,
some courts will interpret it as only allowing recovery by the prevailing
plaintiff. This has been especially true in Title VII Civil Rights
Actions.23 The Supreme court has noted that there are two strong
policy considerations which mitigate against awarding attorney's fees to
a prevailing Civil Rights Act defendant: A) civil rights plaintiffs are
attempting to vindicate an important wrong, and, B) when fees are awarded
to a successful civil rights plaintiff, they are being awarded against
a violator of federal law.24
Second, assuming a party is eligible to receive attorney's fees if
the party prevails, the court must still determine whether an individual
party has "prevailed" within the meaning of the statute.25 If the
litigant did not prevail, she can not be awarded attorney's fees.26
Generally, a party is considered to have prevailed in a case if she has
succeeded on a "significant" or "central" issue and has achieved relief
which she sought.27 The court also has held that a party may be said
to have prevailed if she has achieved "relief on the merits of the claim
and materially altered the legal relationship between the parties by modifying
the [other party]'s behavior in a way that directly benefits [herself]."28
However, if a prevailing party is only awarded nominal damages, a court
will most likely not authorize the award of attorney's fees which the applicable
statute otherwise would allow.29
Third, the court must determine on exactly which issues a party has
prevailed. This is a crucial step, because attorney's fees can only
be awarded for successful claims.30 If several claims were advanced,
this may be a complex issue. The court addresses this problem by
determining which claims were successful and whether or not any of the
other claims were related to the successful ones.31 A claim is "unrelated"
to a successful claim if it is based on different facts and legal theories.32
Determining whether a claim is related to another is very difficult, and
if necessary, a court may view the case as a whole and award fees accordingly.33
3. The court's inherent power to award attorney's fees absent a statutory
authorization.
Notwithstanding the American Rule, there are certain circumstances under
which the court may use its inherent power to award attorney's fees.34
Judges are vested with a range of inherent powers in order to control the
courtroom and ensure the proper disposition of cases.35 These inherent
powers are deeply ingrained in the court, are necessary to preserve judicial
integrity, and will not easily be displaced.36
There are three circumstances that may justify a court's use of its
inherent power to award attorney's fees.37 The first is the "Common
Fund" rule.38 The Common Fund rule allows a petitioner attorney's
fees if the petitioner has sued to recover a fund or property in which
others will share.39 It is irrelevant whether the petitioner purports
to sue only for himself, or, for himself and other parties.40 The
primary rationale for this judicial exception is to ensure equity between
the party suing and the parties who directly benefit from the litigation.41
Simply put, equity demands that a party who successfully brought and litigated
a suit, and thereby established a stare decisis effect that other affected
people will be able to use in order to reach the common fund, should be
rewarded with attorney's fees.42 Otherwise, the other beneficiaries
of the common fund would be unjustly enriched because they did not have
to expend any resources in establishing the common fund from which they
will benefit.43
Even though a court may use its inherent authority to award attorney's
fees under the Common Fund rule, the Supreme Court has refused to create
an exception for a similar rule; the "Private Attorney General" doctrine.44
The Private Attorney General doctrine would allow attorney's fees to a
prevailing litigant if "private enforcement was necessary to defend important
rights benefiting large numbers of people, and cost barriers might otherwise
preclude private suits."45 Most attempts to have the court recognize
this rule have been in civil rights litigation and environmental litigation.
While commending the Private Attorney General rule, the court feels it
is the legislature's prerogative to implement such a rule where it sees
fit.46 Also, the court is fearful that it would be difficult to consistently
determine when it is proper to implement the Private Attorney General doctrine.47
The second reason a court may use its inherent power to award attorney's
fees is if a litigant willfully disobeys a court order, (ie. contempt).48
This long-standing rule allows the court to force the disobedient party
to pay the entire cost of the litigation.49
Third, the court's inherent power may be invoked to award attorney's
fees when one of the litigants has acted in bad faith.50 Bad faith
includes instances where a party has worked fraud upon the court, delayed
or disrupted litigation, or instituted litigation for improper reasons.51
The court concedes that this is a punitive power that is geared more toward
allowing the court to "police itself" than to benefit the other litigants.52
However, an award of attorney's fees due to of bad faith is not seen as
an award of punitive damages.53 Therefore, an award of attorney's
fees may be proper even if punitive damages are not among the approved
remedies for the underlying cause of action.54 This holds true even
if a case is in federal court on a diversity basis and the applicable state
law does not authorize punitive damages.55
The position has been advanced that Rule 11 of the Federal Rules of
Civil Procedure overrides the court's inherent power to punish bad faith
actions.56 Section (c)(2) of Rule 11 allows the court to impose reasonable
attorney's fees if the standards of Rule 11 (a) or (b) are breached, (various
types of bad faith actions).57 However, the Supreme Court has clearly
held that Rule 11 does not displace the court's inherent power to award
attorney's fees.58 Rather, Rule 11 only supplements the court's inherent
power.59 If Rule 11 sanctions adequately deal with the wrongdoer's
conduct, they should be used, otherwise the court's inherent power may
be invoked.60
2. Calculation of the attorney's fee to be awarded.
After the court determines that an award of attorney's fees is proper,
the court must then calculate the fees to be awarded. Unless the
applicable statute specifies otherwise, a reasonable attorney's fee is
to be awarded. This reasonable fee is to be determined by use of
the "lodestar method."61 The lodestar method sets the reasonable
fee as the "product of reasonable hours times a reasonable rate."62
No exact definition of "reasonable" exists, however, the court has approved
some general factors which may play a role in the determination.63
Once determined, the lodestar amount carries a strong presumption of reasonableness.64
If a party disputes the lodestar amount, they carry the burden to show
that an adjustment is necessary to reach a reasonable amount.65
In recent years the Supreme Court has placed some restrictions on how
the lodestar method is calculated. First, the lodestar amount cannot
be increased because of the "superior performance" of the prevailing attorney.66
Second, the lodestar amount may not be increased merely because the attorney
was retained on a contingency fee basis, and therefore, would have received
more compensation for the case than the lodestar amount awards.67
Third, the award of reasonable attorney's fees can not include the cost
of experts that the attorney retained to assist with the case.68
Lastly, the court has clearly reaffirmed its narrow interpretation of attorney's
fees by holding that they are just that, and should not be interpreted
as being costs or other similar items.69
Conversely, the court has also expanded the ways in which attorney's
fees may be awarded. Of greatest importance may be City of Riverside
v. Rivera.70 In Rivera, a 5-4 split majority of the Supreme Court
held that a statutory award of attorney's fees, under a civil rights statute,
could exceed the amount of damages awarded to the plaintiff.71 While
Rivera dealt only with a civil rights claim, the court seemed to approve
the general proposition that reasonable attorney's fees could exceed the
damage award. The Supreme Court has not addressed this issue since
Rivera. However, the Farrar opinion may show that the court has moderated
since Rivera. Also, the court may be reluctant to approve such an
award in a case not involving an issue as important as civil rights.
The issue Rivera raises is extremely pertinent in today's legal world.
It is not hard to imagine that in a case that goes to trial, an attorney
could easily spend in excess of 100 hours in billable time. Factor
in a medium range hourly rate of $200 - $300, and an attorney fee in excess
of $50,000 is clearly possible. If the attorney's client prevails,
but is only awarded $50,000 in damages, should the attorney also receive
her full statutory award of $50,000 from the losing party for a total pay
out of $100,000 by the losing party? The attorney's answer is obvious.
The court's opinion in Venegas v. Mitchell is also of interest.72
In Venegas, also a civil rights case, the court held that a contingency
fee contract executed by the prevailing plaintiff and his attorney was
valid and enforceable between the parties, despite the fact that the court
approved an award of attorney's fees to the plaintiff under the applicable
statute.73 This issue was relevant because the attorney's fee under
the contingency contract was much larger than the fee awarded by the court
under the statute.74 The court made it clear that a statutory award
of attorney's fees is awarded to the plaintiff, not his lawyer, and therefore
any contractual fee arrangements that the client and lawyer make will govern
the compensation of the lawyer.75 The implications of this are twofold.
First, a person who can afford to pay for a high-priced lawyer, or is willing
to sacrifice a percentage of his damage award, may make such an agreement
with the lawyer. This may allow the person to obtain higher quality
representation because the attorney's fee will not be limited to the statutory
award. Second, an indigent person is able to contract with a lawyer
to pay the lawyer the statutory award of attorney's fees, therefore will
not have to sacrifice any damages he or she may receive.
III. Statutes Authorizing Recovery of Attorney's Fees.
Congress has seen fit to authorize attorney's fee awards for a great
many causes of action. This section gives a brief overview of four
main types of the these statutes.
The prototypical statute authorizing attorney's fees is found in the
Civil Rights Act at 42 U.S.C.S. § 1988(b). This statute states:
In any action or proceeding to enforce a provision of sections 1977,
1977A, 1978, 1979, 1980, and 1981 of the Revised Statutes [42 USCS 1981-1983,
1985, 1986], title IX of Public Law 92-318 [ 20 USCS §§ 1681
et seq.], the Religious Freedom Restoration Act of 1993, title VI of the
Civil Rights Act of 1964 [42 USCS §§ 2000d et seq.], or section
40302 of the Violence Against Women Act of 1994[,], the court, in its discretion,
may allow the prevailing party, other than the United States, a reasonable
attorney's fee as part of the costs, ... [emphasis added].
The Supreme Court has stated that the primary purpose of this
statute is to allow, [assumedly indigent], civil rights plaintiffs to secure
"competent counsel."76 However, the Court did hold that Congress
intended § 1988(b) to have a very broad sweep, including allowing
plaintiffs who would be able to pay for their own lawyer to be awarded
fees.77 Two statutes which use the same language as § 1988(b)
to authorize an award of attorney's fees are 42 U.S.C.S. § 12205 of
the Americans With Disabilities Act, and, 42 U.S.C.S. § 2000e-5(k)
involving sexual harassment. Obviously Congress is attempting to
give a strong incentive to lawyers to engage in litigation of civil rights,
disability, and sexual harassment claims. Note however, that these
statutes do not require a mandatory fee award to either party, but allow
the court to award fees to the prevailing party in its discretion.
A prevailing plaintiff will almost always receive attorney's fees under
these statutes, while such an award is more uncertain for a prevailing
Civil Rights defendant.78
While civil rights causes of action may be very popular in today's
society, other, more economic based claims should not be overlooked by
attorneys. Anti-trust litigation, for example, could be a very lucrative
area of law for attorneys. Section 15 U.S.C.S. § 15 (a), has
been held to require an award of attorney's fees to the prevailing litigant
for a violation of any of the anti-trust laws, 15 U.S.C.S. § 12.
In other words, the court has no discretion to award attorney's fees, it
must do so. This statute was interpreted and applied quite broadly
in United States Football League v. NFL.79 In USFL, the NFL was found
to be in violation of the anti-trust laws, but the jury only awarded the
USFL one dollar in nominal damages and three dollars in treble damages.
However, the trial court awarded $5.5 million in attorney's fees to the
prevailing attorneys. On appeal, the Second Circuit held this award
to be proper.80 Also, the court held that an award of attorney's
fees may include amounts for paralegals and for the attorney's out of pocket
expenses.81 Obviously this is a decision that may interest the young
anti-trust attorney.
In contrast to anti-trust claims, actions for trademark infringement
under the Lanham Act may not be so lucrative for attorneys. Section
15 U.S.C.S. § 1117(a) provides that "The court in exceptional cases
may award reasonable attorney fees to the prevailing party" for a trademark
infringement. (emphasis added). The term "exceptional" is not defined
in the statute and the Supreme Court has not defined the term either.
The Ninth Circuit did offer some insight into § 1117(a) in Stephen
W. Boney, Inc. v. Boney Servs..82 While no exact definition was promulgated,
the court did demand that a relatively strict element be satisfied in saying
that "Bad faith [is one] of those exceptional circumstances," and, where
"a plaintiff's case is groundless, unreasonable, vexatious, or pursued
in bad faith, it is exceptional, and the district court may award attorney's
fees."83 However, the court did hold that a showing of bad faith
is not required to recover attorney's fees under §1117(a).84
Possibly the most surprising statutory authorization of an attorney's
fee award is 5 U.S.C.S. § 504. This statute states that if a
United States agency is not victorious in an adversary proceeding it conducts
against a person, and such proceeding was not "substantially justified,"
then the prevailing party may be awarded fees and expenses, including an
attorney's fee of up to $125 per hour. The government agency's position
will be substantially justified if it is found to have a reasonable basis
in fact and law.85 While $125 per hour may not seem very appealing
to most attorneys, this statute none the less, offers some consolation
to the young attorney, and may dissuade federal agencies from harassing
people.
IV. Policy Considerations and Implications Surrounding the American
Rule.
After roughly two hundred years of litigation and many treatises delineating
how the American Rule works, the questions still remain; Is the American
Rule the proper route for our courts to follow? Would the United
States be better off using the British Rule? Is the answer a mixture
of both methods? Obviously, these are not questions that may be answered
by empirical data. Consequently, each person's resolution will turn
on how the individual views the legal system's role in our society.
This point can be illustrated by examining the policy considerations underlying
the American Rule.
1. Risk shifting effects of awarding attorney's fees.
Regardless of how society allocates the burden of attorney's fees between
the litigants of a case, the decision will have a substantial "risk-shifting"
component. In the current "pay your own" system, a litigant has a
great deal of control over the attorney's fees which he will be required
to pay. A plaintiff can hire a cheap lawyer or an expensive one.
The attorney may be paid by a contingency fee or on an hourly basis, etc...
The resulting risk is very small for the plaintiff. Of course the
plaintiff knows that attorney's fees will be incurred if he pursues the
claim. However, such fees can be reasonably estimated before hand
and balanced against the expected recovery at trial.
The result is not the same under a two-way fee shifting structure.
Here, the plaintiff will have a very strong incentive to pursue only claims
that he believes are highly likely to be successful. This is because
if the plaintiff loses the case, he will receive no recovery and be liable
for his own attorney's fees plus those of the defendant, (a true lose-lose
outcome). Clearly such a possibility will dissuade risk-averse plaintiffs
from going to court. Whether an individual is risk-averse or risk-loving
is a function of the individual's personality. However, it is safe
to assume that people with fewer financial resources are likely to be more
risk-averse when it comes to litigation. Conversely, plaintiffs with
greater financial resources will be better able to sustain the burden of
paying both litigants' attorney's fees, and, will therefore be more apt
to take on the risk of litigation.
A simple example illustrates how risk-averse people may react differently
under the "two-way fee shifting" structure versus the "pay your own attorney's
fee" method. Assume that Plaintiff has suffered 100 in damages and
that Plaintiff's attorney is hired on a contingency fee basis with a 30
percent fee. Also, assume that Plaintiff estimates that Defendant's
attorney's fees will be 20. In a pay your own system, if Plaintiff's
claim is unsuccessful, he will receive no recovery and sustain no out-of-pocket
cost, (net cost of pursuing claim is zero). If Plaintiff is successful,
he will have a net recovery of 70. Note that this amount only partially
compensates Plaintiff for his damages of 100. Despite this partial
compensation, a reasonable person will likely pursue this claim because
there is no risk of suffering any out-of-pocket cost, and, partial compensation
for the harm suffered is better than none at all.
Under a two-way fee shifting system, if Plaintiff is successful he
will recover the full 100 in damages from Defendant (total compensation
for harm done). Additionally, Defendant will be liable for her own
attorney's fees of 20 plus the 30 of Plaintiff, for a total cost to Defendant
of 150 for a wrong of 100. However, if Plaintiff is unsuccessful,
he will recover no damages, (ie. a loss of 100), and be liable for Defendant's
attorney's fee of 20 (net loss of 20 for pursing claim). The threat
of having to pay Defendant's attorney's fees forces Plaintiff to analyze
several factors; the probability of success for the claim, whether Plaintiff
actually has the 20 which he will have to pay if the claim is unsuccessful,
and the individual Plaintiff's attitude toward risk. It is impossible
to say what a rational person will do in this position. For example,
if the likelihood of success is 80 percent, but Plaintiff is indigent and
has no resources with which to pay the 20 if the claim is unsuccessful,
what is the proper choice? Keep in mind that Plaintiff has already
suffered damages of 100. It is very foreseeable that a person in
this situation would choose not to pursue the claim despite the high chance
of success.
2. Policy questions presented by risk-shifting effects.
The above mentioned risk-shifting effects of each system present three
policy questions. First, whether the benefits of a two-way fee shifting
system outweigh its potential drawbacks. One benefit of the two-way
fee system is that the plaintiff is totally compensated for the wrong he
has suffered because no attorney's fees need be taken from his damage award.
A second benefit is that the defendant suffers an extra punishment for
having committed the wrong by having to pay all of the attorney's fees
in the case. The drawback of the two-way system is that its inherent
risk may have the consequence of dissuading risk averse plaintiffs, and/or
plaintiffs with few financial resources, from pursuing their claims in
court.
Second, society must determine whether the two-way fee shifting system
acts properly by dissuading individuals with marginal claims from coming
to court. If the likelihood of success on a claim is low or marginal,
a plaintiff may chose not to pursue the claim even though she has sufficient
resources to pay the defendant's fees if the claim is unsuccessful.
Is this a good thing? Clearly it is a positive result where the plaintiff's
claim is frivolous. However, if the plaintiff's claim deals with
an area of law that is unclear or is in need of modification, then the
plaintiff should pursue the claim. In such a case, litigation of
the claim will clarify the law and offer an opportunity to change the law
so as to stay in step with society's values. Also, the court system
is designed to discover the truth and compensate for wrongs. If a
person fails to bring a claim because the probability of success is too
small, the court system will not get a chance to do its job.
Third, regardless of what the current law dictates, how the court system
will react to a specific claim is inherently unpredictable. Even
if the claim has merit, a judge or jury may rule against it for whatever
reason, (jury nullification, prejudice, misunderstanding of the law or
the facts, etc...). When this unpredictability is coupled with the
risk associated with a two-way fee shifting system, a plaintiff may elect
not to pursue a claim that objectively has a relatively high chance of
success. Is it proper to shift the burden of the court's unpredictability
to the plaintiff?
3. Administrative efficiency.
Under the American Rule, each litigant negotiates with her own attorney
regarding the fee to be paid. The court does not to concern itself
with the amount of each party's attorney's fees or how the burden of paying
the fees is allocated. Conversely, under a two-way fee shifting system,
the court must determine the proper fee to be paid to the prevailing party's
attorney. Requiring the court to make this determination raises two
issues.
A. The method of calculation.
The obvious first choice is to use the lodestar method. The lodestar
method offers an easily understandable, objective calculation, has been
around for some time, and has been clarified by recent litigation.
However, the lodestar calculation may not be as simple as it first appears
to be. This is because the lodestar method hinges on the word reasonable,
(reasonable hours multiplied by reasonable rate). Reasonable will
mean different things to different judges. This has the potential
to create a huge uniformity problem. This lack of uniformity may
cause a great deal of forum shopping on the part of lawyers. Obviously,
an attorney will not want to try a case before a judge who has a reputation
for small attorney's fee awards. Also, a lodestar award may over
or under compensate an attorney by disregarding the actual number of hours
spent on a case in favor of what the judge felt was reasonable. This
creates an incentive for an attorney to curtail his efforts when he feels
that a reasonable number of hours of work have been expended.
Another way in which the court could determine an attorney's fee is
by use of a fee schedule. Such schedule could be devised by the courts
or the legislature and award a set fee for a specific type of case.
There may be some difficulty in determining how detailed the schedule should
be. Should all contract cases pay the same rate, all tort cases,
etc... How often should the tables be revised, should they be indexed
to inflation? Also, some attorneys are better than others.
Imposing a fee schedule on all attorneys may not be fair to an attorney
who could otherwise charge a higher rate because she regularly produces
superior results to that other attorneys subject to the schedule.
Further, by limiting an attorney's income potential, some gifted individuals
may be induced to pursue other careers they otherwise would not, in order
to obtain greater financial rewards.
Lastly, the court could award the victorious attorney the amount that
the attorney says she would have otherwise charged for the case.
This is probably the most troubling method. Even assuming most people
are honest, the natural human tendency would be to "pad" the amount, thereby
increasing the fee award.
No matter how the fee would be calculated, the attorneys would essentially
be at the mercy of the court system. Attorneys would almost be de
facto government contractors or public utilities, taking what the government
decided they should receive, all be it from the losing party. This
would devastate the free market of legal services currently in place, where
an attorney can charge more if he is worth it, and a sub par attorney will
not fare as well.
B. The process of calculation.
Requiring the trial court to determine the victorious party's
attorney fee will require more of the court's time and effort. The
Supreme Court has clearly stated that the attorney's fee determination
is a matter that is collateral to the merits of the case in chief, and,
the fee award is not part of the compensation of the plaintiff.86
Nor does the court's determination of the attorney's fee hamper the finality
of the underlying judgment upon which the fee is based.87
Consequently, the court and the litigants are faced with a second
"mini-trial" at the conclusion of the main trial. Even if a simple
fee schedule is used to calculate the attorney's fee, this is another hoop
to jump through which may slow the court system down. Also, if the
Osterneck precedent were to be followed and the attorney's fee determination
would be a separate court ruling, this determination almost assuredly would
have to be appealable to a higher court. This would create a situation
where the main case was finally determined and the appellate courts were
debating the attorney's fee from the finally determined case. This
may be difficult, especially under the lodestar method, because the appellate
judges did not actually participate in the trial, and, therefore could
have some difficulty in assessing what a reasonable fee is under the circumstances.
V. Conclusion.
The American Rule is firmly engrained in this country's legal environment.
The young attorney who wishes to engage in litigation should be aware of
this and the implications it will have on her ability to receive compensation
for her efforts. Despite the American Rule, many statutes do afford
the victorious attorney an opportunity to recover her fees from the losing
party. If fee recovery is a concern of the attorney, she should thoroughly
examine the statutory authority for the proposed cause of action to determine
whether a fee award is authorized, and, assess whether the courts in the
jurisdiction regularly award attorney's fees under such statute.
1 Alyeska Pipeline Co. v. Wilderness Society, 421 U.S. 240, 247 (1975).
2 Id. at 249-250.
3 Id. at 240, n.18.
4 Id. at 251-255 (citing Act of Feb. 26, 1853, 10 Stat. 161-162).
5 Id. at 251-252, n.24.
6 Id. at 255.
7 Id. at 249-250.
8 Id. at 270.
9 Key Tronic Corp. v. United States, 511 U.S. 809, 814-15 (1994).
10 Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994).
11 Id.
12 Id.
13 Fogerty at 534 (citing Hensley v. Eckerhart, 461 U.S. 424, 436-37
(1983)); Alyeska Pipeline at 262.
14 Runyon v. McCrary, 427 U.S. 160, 185 (1976); Key Tronic at
816.
15 Key Tronic at 816.
16 Runyon at 185.
17 Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714,
720 (1967).
18 Marek v. Chesny, 473 U.S. 1, 8-9 (1985).
19 F.R.C.P § 68 (1997).
20 Marek at 9.
21 Budinich v. Becton Dickinson & Co., 486 U.S. 196, 201 (1988).
22 Geoffrey C. Haxard, Jr., Susan P. Koniak & Roger C. Crampton,
The Law and Ethics of Lawyering, pg. 523 (3d ed. 1999). See Christianburg
Garment Co. v. EEOC, 434 U.S. 412, 415-16 (1978) (citing several statutes
authorizing various types of awards)).
23 See Christianburg Garment (discussing how prevailing plaintiff under
Civil Rights Act should be awarded attorney's fees, while prevailing defendant
may be awarded fees upon court's discretion).
24 Christianburg Garment at 418.
25 Hensley v. Eckerhart, 461 U.S. 424, 433 (1983).
26 Id.
27 Id.
28 See Generally Farrar v. Hobby, 506 U.S. 103, 111-12 (1991) (discussing
what is required for a civil rights plaintiff to prevail).
29 Id. at 115.
30 Hensley at 434-35.
31 Id.
32 Id.
33 Id.
34 Chambers v. NASCO, Inc., 501 U.S. 30, 45 (1991); Roadway Express,
Inc. v. Piper, 447 U.S. 752, 765 (1990).
35 Chambers at 43 (citing Link v. Wabash R. Co., 370 U.S. 626, 630-31
(1962)).
36 Id.
37 Id. at 45.
38 Id. (citing Sprague v. Ticonic National Bank, 307 U.S. 161 (1939)).
39 Sprague at 166.
40 Id.
41 Id.
42 Fleischmann Distilling Corp. at 719 (discussing Sprauge).
43 Id.
44 Alyeska Pipeline at 263-65; West Virginia University Hospitals v.
Casey, 499 U.S. 83, 97 (1991).
45 Casey at 98.
46 Alyeska Pipeline at 264.
47 Id.
48 Chambers at 45 (citing Fleischmann Distilling Corp at 718).
49 Id. (citing Toledo Scale Co. v. Computing Scale Co., 261 U.S. 399,
426-28 (1923)).
50 Id. at 45-46.
51 Id.
52 Id. at 46, 53.
53 Id. at 54.
54 Id.
55 Id. at 52.
56 Id.
57 F.R.C.P. § 11 (1997).
58 Chambers at 48-49.
59 Id.
60 Id.
61 City of Burlington v. Dague, 505 U.S. 557, 559 (1992) (citing Pennsylvania
v. Delaware Valley Citizens' Council for Clean Air, 478 U.S. 546, 565 (1986)).
62 Id.
63 Delaware Valley at 562, n.7.; The 12 factors are: (1) the time and
labor required; (2) the novelty and difficulty of the question; (3) the
skill requisite to perform the legal service properly; (4) the preclusion
of other employment by the attorney due to acceptance of the case; (5)
the customary fee; (6) whether the fee is fixed or contingent; (7) time
limitations imposed by the client or the circumstances; (8) the amount
involved and the results obtained; (9) the experience, reputation, and
ability of the attorney; (10) the "undesirability" of the case; (11) the
nature and length of the professional relationship with the client; and
(12) awards in similar cases.
64 Dague at 562.
65 Id.
66 Delaware Valley at 566.
67 Dague at 566.
68 Casey at 97.
69 Id. at 88.
70 City of Riverside v. Rivera, 477 U.S. 561 (1986).
71 Rivera at 580 (approving fee award seven times damage award).
72 Venegas v. Mitchell, 495 U.S. 82 (1990).
73 Id. at 89-90.
74 Id.
75 Id.
76 Blanchard v. Bergeron, 489 U.S. 87, 93-94 (1989).
77 Id.
78 Christianburg Garment.
79 United States Football League v. NFL, 887 F.2d 408 (2nd Cir.
1989).
80 Id. at 415.
81 Id. at 415-17.
82 Stephen W. Boney, Inc. v. Boney Servs., 127 F.3d 821 (9th Cir. 1997).
83 Id. at 827.
84 Id.
85 Pierce v. Underwood, 487 U.S. 552, 565 (1988).
86 Osterneck v. Ernst & Whinney, 489 U.S. 169, 175 (1989).
87 Id. at 174.