A lawyer who takes a case on a bet that she will win a judgment or settlement risks more than do colleagues who bet nothing on the outcome. We call the latter hourly lawyers. And, more than ever after today, we may deem the former gougers or worse.
For on yesterday the U.S. Supreme Court ruled, 5-4, that a trial judge errs when he awards class action lawyers a bump over their "lodestar" — hours x hourly rate — for simply doing a great job. Perdue v. Kenny A., No. 08-970 (U.S. Apr. 21, 2010).
The judge in Perdue cut the class lawyers' lodestar by half for travel time and 15 percent for non-travel hours but then enhanced the much-lower lodestar by 75 percent. The Eleventh Circuit affirmed the $10.5 million award, holding that its old decisions forced it to accept the bump.
The Perdue majority on the Supreme Court felt less restraint. It held that, under the Court's own precedents, the district judge went so far out of line that he abused his discretion.
Blawgletter can't say whether we would've awarded a different fee. But we can observe that the Court showed more than a little disdain for class action lawyers on the plaintiff side and that it removed any economic incentive for hourly lawyers to serve as class counsel in fee-shifting cases.
Justice Alito's opinion notes three situations that might justify a lodestar enhancement. The first requires proof that the lodestar underpays "the rate that the attorney would receive in cases not governed by the federal fee-shifting statutes." Id., slip op. at 10. A lawyer who earns $X an hour in hourly cases may thus forget about winning more just because she achieves an extraordinary result. The lodestar, the Court holds, means all; it needn't — mustn't — compensate for the risk of losing and, therefore, non-payment.
Second, an "extraordinary outlay of expenses" plus "exceptionally protracted" litigation may warrant an increase over lodestar. Id. at 11. But hourly lawyers seldom lay out any expenses, and the protraction of a case rewards rather than penalizes them. And yet the Court limits any enhancement to "a standard rate of interest" on "the qualifying outlays of expenses." Id.
The third factor — "exceptional delay in the payment of fees" — likewise ignores reality. Id. Every class action involves a big delay in compensation, while for the hourly lawyer a check usually arrives within 30-60 days. Contrast that with the eight years the Perdue plaintiffs' lawyers have waited for their payment.
So why did the Court conflate an hourly lodestar with a class action lodestar? We may surmise that most of the majority dislikes class actions — even ones that, like Perdue, aim to protect foster children from savage beatings. But we suspect that at least one of Their Honors simply assumes that no sensible lawyer who must forego an hourly fee to represent a civil rights class would sign on for such a case. Because in that instance none of the Court's enhancement factors makes sense.
No, we imagine, the majority believes that your normal every-day class action lawyer already inflates his or her hourly rate and thus builds into it a capacious profit margin. Which may be true. But that's not what the Court said. It hung on a "don't bother" sign for many of the most capable lawyers in the country. Which can only degrade the quality of class representation.