Court Majority Believed "Punishing" Attorneys For An Initial High Demand By Slashing Fees Would Lead To "Perverse Incentives."
A steep 90% discount of a senior litigator's fees led a panel majority of the 9th Circuit to demand further explanation from the trial judge. Vargas v. Howell, No. 18-15513 (9th Cir. 2/5/20) (maj: Miller, Watford; dsst: Benitez). Judge Alex Kozinski wrote in Moreno v. City of Sacramento, 534 F.3d 1106, 1111 (9th Cir. 2008), that "the district court can impose a small reduction, no greater than 10 percent a "haircut" based on its exercise of discretion and without a more specific explanation." In Vargas, the very large discount triggered a demand by the 9th Circuit for more explanation by the trial judge.
The Court of Appeals disapproved of a "mechanical" approach to fees that discounted fees by 90% because the civil rights plaintiff only received 10% in settlement of his original claim. It suggested that such an approach, which "punished" the attorneys for stating a high initial demand, could lead to "perverse incentives" in civil rights cases: encouraging civil rights attorneys to make modest initial demands, and increasing demands as litigation continues, making it harder to settle cases. However, starting high can be a sensible negotiation strategy for plaintiff attorneys, giving them flexibility and the ability to make concessions in order to reach a favorable result. While a significant discount can be justified by poor results, here, the settlement amount of $99,999 was more substantial than nuisance value, and the court had not issued any rulings that doomed a successful outcome for plaintiff.
Two other issues in the case were readily dispatched. First, the trial judge was within his discretion to reduce fees of a PI attorney who had co-counseled. Second, a law firm that sought fees for plaintiff, based on work done earlier by two attorneys who later joined the law firm, could do so, because ultimately fee entitlement belonged to the plaintiff, not to the attorneys.
District Judge Roger Benitez, dissenting, believed the trial judge's explanation for the 90% fee reduction to a senior litigator was adequate, because the trial judge had spent several pages analyzing some but not all of the 12 Kerr factors, named after the case adopting the multi-factor test as guidelines for fee evaluation within the 9th Circuit. Kerr v. Screen Extras Guild, Inc., 526 F.2d 67, 70 (9th Cir. 1975). Judge Benitez worried Vargas will increase the writing burden for trial judges, without clarifying how much they must do to provide an adequate explanation for a fee discount.
Co-contributor Marc has authored an article about Vargas in today's February 7, 2020 Daily Journal, entitled 'Mechanical' analysis of attorney fees award in civil rights case results in partial reversal'. (The Daily Journal is behind a paywall. Oh well). Marc also has a blog post today, 2/7/20, on the California Mediation and Arbitration blog.
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