Attempts to award fees directly against individual governmental official defendants also pose considerable problems, since a finding of international or malicious conduct may be required under the recent Supreme Court decision in Scheuer v, Rhoads, 416 U.S. 232 (1974). A graphic example of the difficulties of a successful plaintiff in a public interest case seeking such a fee award is provided by the recent decision of the United States Court of Appeals for the Third Circuit in Goode v. Rizzo, 506 F.2d 542 (1974), which the Supreme Court has recently agreed to review. There the court pointed out, inter alia, that any award against officials of the city of Philadelphia, in a police misconduct case, would require a detailed record considering a number of specific items, including the questions of official immunity, vicarious liability, and identification of the specfic indivduals who might, in equity, be held liable. The court also pointed out that: "[T]he equities involved in a private attorney general or spreading-the-cost theory are less apparent if individuals are being ordered to reimburse the plaintiffs than if a large entity in which all claims membership is to pay the assessment. Correspondingly, the traditional test of obduracy and intransigence may have far more significance if individual liability is involved."

It is clear that the statutory immunity of federal officials, the Eleventh Amendment, and concepts of individual responsibility will combine in many cases to preclude any award of fees to a successful plaintiff who has vindicated an important public interest, even if the private attorney general doctrine is revived by legislation. Such a result will have the negative impact of foreclosing many of these suits and depriving those whose interests would be vindicated of effective legal services. Imaginative congressional and state legislative action on these problems is particularly appropriate, since many cases do in fact implement important public objectives and should be encouraged. This legislative action appears to represent the most promising solution here. Since both federal and state immunity may be waived, repeal of Section 2412 as part of any private attorney general legislation at the federal level, and enactment of appropriate legislation at the state level permitting an award of fees from the state treasury in "public interest" cases, offers a sensible way out of the dilemma now posed by Section 2412 and the Eleventh Amendment.

6

C. Amount of Fee Awarded. As Mary Frances Derfner has perceptively noted, fee shifting will never operate sufficiently to encourage the litigation of public interest cases unless courts grant generous fees. The method of calculating fees in public interest cases should be no different than that now being utilized in the fields of antitrust and securities regulation litigation. Thus, the approach adopted in the widely-cited Lindy case seems equally appropriate in the public interest area. The court indicated that the first step in setting the amount of fee to be awarded is to establish how many hours were spent by each attorney who worked on the case and what was done. After establishing the amount of time spent, the court then is to determine an appropriate hourly rate to be applied against the time involved. That hourly rate, in turn, should be adjusted either up or down. depending on two other factors: (1) the contingent nature of success, a significant factor when there is no substantial retainer being paid to the plaintiff's attorney, and (2) the quality of the work performed. When the case has been difficult, and the attorneys' work exceptional, the basic hourly rate should be adjusted significantly upward. In Arenson v. Board of Trade, 372 F. Supp. 1349 (N.D. Ill. 1974), for example, the court awarded twenty-two attorneys in an antitrust case more than one million, three hundred thousand dollars in attorneys' fees for a settlement involving a phase out of fixed commission rates on commodities exchanges during a four-year period. The court found this award was justified because of an estimated future savings of eight hundred million dollars for the 400,000 class members resulting from the settlement. After establishing the reasonable hourly charge to be assessed on behalf of each attorney, the court went on to award four times this basic hourly amount so as to compensate the attorneys for the quality of their work in effectuating the settlement.

Judge Robert F. Peckham's recent decision in The Stanford Daily v. Zurcher, 64 F.R.D. 680 (N.D. Cal. 1974), demonstrates that this approach is equally suitable for establishing fees in public interest cases. There the court established

Derfner. supra note 1, at 8-12.

Lindy Bros. Builders v. American Radiator & Standard Sanitary Corp., 487 F. 2d 161 (3d Cir. 1973), on remand, 382 F. Supp. 999 (E. D. Pa. 1974).

a reasonable hourly rate of fifty dollars for 750 hours of work performed in securing declaratory relief which established the right of individuals not suspected of any crime to be free from unwarranted police searches and seizures. It is significant that Judge Peckham adopted a liberal approach in setting the fee award by recognizing that the time for which reimbursement could be sought was that spent on work "reasonably calculated to advance their clients' interests," thus including time spent on an injunction hearing. Thus, rather than attempting to remove, with surgical precision, "unnecessary" work from the time to be compensated, the only work that should not be compensated is that performed in advancing "elearly meritless claims." Judge Peckham also added $10,000 to the amount that would have been generated by the fifty dollars-an-hour rate to recognize the excellent of the work performed by the attorneys in question. Thus, rather than penalizing attorneys representing public interest groups by setting low rates, the effect of the ruling in The Stanford Daily case is to award fees on an hourly basis competitive with ordinary commercial work.

By contrast, the recent decision in Natural Resources Defense Counsel v. Fri, 7 E.R.C. 1346 (D.D.C. 1974), although it awarded fees on an hourly basis of thirty and forty dollars an hours, showed a reluctance to award these competitive fees based on its observations that (a) the fees permitted were "above those normally allowed in other areas such as the representation of indigent criminal defendants," and (b) "members of the legal profession have an obligation to represent clients who are unable to pay for counsel and also to bring suits in the public interest." While the latter comment recognizes what all too many lawyers have forgotten, these factors should not serve to reduce the amount of an otherwise justified fee. As such, the approach of The Stanford Daily case seems highly preferable to assure the representation of individuals whose rights to effective legal services would otherwise be jeopardized, and legislative recognition of the need for equal awards in public interest cases would be most appropriate.

[From Trial magazine, November-December 1975]

ATTORNEYS' FEES: A TWO-PRONGED PROBLEM

(By The Honorable Charles R. Richey 1)

The awarding of attorneys' fees must be viewed as a two-pronged problem: First, we must ask which way the prevailing wind is blowing. Second, in the limited situations in which attorneys' fees are available, under what conditions and standards are they awarded?

The bar, the courts, and the Congress, as well as state legislatures and administrative agencies, must develop acceptable means for obtaining counsel fees in order to insure access to the courts on the part of everyone, and particularly the poor and disadvantaged. This demands a creative effort on the part of all of us in the legal system; we must make certain that opportunities for payment of counsel fees to vindicate public rights are encouraged in order to correct some of our country's major social problems.

In discussing attorneys' fee applications, we must recognize that at the heart of this issue lies a fundamental policy decision. Those who sanction the award of attorneys' fees state that such fees are necessary because a party who recovers an award for an injury is not really made whole unless his attorneys' fees are added to the recovery. Those in opposition argue that parties should not be penalized for seeking to prosecute or defend their rights, and that the prospect of paying for their opponents' attorneys' fees may be an inhibitor to many members of our society, especially the poor, or even the middle class. Faced with these divergent views, what is the solution? I am of the opinion that there is no simple answer.

In the recent decision of the Supreme Court in Alyeska Pipeline Service Co. v. Wilderness Society, 95 S.Ct. 1612, decided May 12, 1975, Justice White, speaking for a five-to-two majority, held that under the "American Rules," attorneys' fees are not ordinarily recoverable by the prevailing litigant in federal litigation in the absence of specific statutory authorization. In the latter part of the majority

7 See also the approach utilized in Souza v. Travisono, 43 U.S.L.W. 2402 (1st Cir. 1975). 1 The Honorable Charles R. Richey is judge of the United States District Court for the District of Columbia. (Write TRIAL for list of federal laws awarding fees compiled by Judge Richey.)

opinion, Justice White, identifying the basic rationale for the decision of the Court, stated:

congressional utilization of the private attorney general concept can in no sense be construed as a grant of authority to the Judiciary to jettison the traditional rule against nonstatutory allowances to the prevailing party and to award attorneys' fees whenever the courts deem the public policy furthered by a particular statute important enough to warrant the award." [95 S.Ct. at 162425.] The message of the Court in Alyeska is clear. Faced with the fundamental policy question I referred to earlier, the Court chose to defer to Congress.

I do not think the decision in Alyeska was or should have been unexpected, and the Court, in the first part of its opinion, took great pains to make this apparent. At the heart of the Court's decision, in footnote 33 and the accompanying text, the Court sets forth numerous instances in which Congress has specifically permitted the award of attorneys' fees. In displaying these numerous legislative permits, Justice White noted-and this was the critical portion of the opinion that it is within Congress' sole discretion to determine when feeshifting should be permitted to further the public policy of a statute.

I think that the understated thrust of the majority opinion was that Congress is better able to ascertain in which instances attorneys' fees should be awarded; I don't believe that the Court meant to rely merely upon a recognition that Congress has on numerous occasions acted in this area.

Alyeska is a recognizable signpost for the future. On a broad scale, the battle is going to be waged in Congress and, in fact, it has already begun. For example, the new amendments to the Freedom of Information Act specifically provide for attorneys' fees. [Pub. L. 93-502, 88 Stat. 1561, § (b) (2) (Nov. 21, 1974).] But, I do not think that this is the true wave of the future, for these amendments involve litigation against the government. When it comes to the question of attorneys' fees where the litigation is between private parties, the battle will be more vigorous with lobbying on both sides and with more emphasis on the fundamental questions involved in fee shifting. It is not at all clear, at least to this jurist, whether Congress will really be better equipped to make these choices, and I fear that special interests, considering their resources and lobbying expertise, may have the upper hand. I am not encouraged when Congress, in enacting the Legal Services Act of 1974, 42 U.S.C. § 2996 et seq., only saw fit in the area of attorneys' fees to include a provision shifting fees when a poor person has sought the aid of Legal Services to bring a suit for the purpose of harassment. Congress failed to address those instances where the poor person's opponent, in prosecuting or defending a case, has similarly misused the legal process. As a jurist with some experience in the workings of Congress, I am not surprised by such legislation, but I can say that I find it offensive and not in the public interest.

I realize that what is of most interest today is the meaning of Alyeska in the area of commercial litigation. There is a general misapprehension that the question of attorneys' fees has focused on the area of public interest litigation, and that fees are not recoverable in commercial litigation. But, this error is understandable, particularly in light of certain opinions of the Supreme Court. For example, consider the relatively recent case of F. D. Rich Co. v. United States ex rel Industrial Lumber Co., Inc. [417 U.S. 116 (1974)], which involved a suit by a subcontractor against a contractor for payment pursuant to a claim under a Miller Act bond. The Court, while finding the contractor liable, stated that: "Miller Act suits are plain and simple commercial litigation" and, therefore, attorneys' fees are not recoverable. [417 U.S. at 130-31.] This implies that it is well settled that in cases which involve commercial litigation, no fees can be recovered. But, a closer look at the Rich case reveals that the Court declined to award fees because there was nothing in the statute on which the Court could hang an award of fees. While it may be true that fees are generally not recover able in commercial litigation, the same is true in other areas of the law. And, in fact, case law demonstrates that the major inroads into the "American Rule" have come in the area of commercial litigation..

There are basically three exceptions to the "American Rule." Fees may be recovered when (1) the losing party has "acted in bad faith, vexatiously, wantonly, or for oppressive reasons.... ." Vaughn v. Atkinson, [369 U.S. 527 (1962)]; (2) the litigation has established what is known as a "common fund", Sprague v. Ticonic National Bank, [307 U.S. 161 (1939)]; and (3) a party has

willfully disobeyed a court order, Toledo Scales Co. v. Computing Sale Co., [261 U.S. 399 (1923)].

Although the second exception-fees for bad faith, vexatious, wanton, or oppressive conduct-has not arisen often in the area of commercial litigation, I am frankly surprised that it has not, and I suggest to you that this might be a ripe area for exploration.

An example of the use of this exception is the recent case of Doe v. Poelker, [515 F.2d 541 (8th Cir. 1975) ]. There, the plaintiff brought suit seeking a declaration and injunction against the policy and practice of the local hospitals which refused to perform abortions. The Eighth Circuit Court of Appeals, in determining whether attorneys' fees should be awarded, found that the case fell within the bad faith exception. The court noted that the defendants, and particularly the Mayor of the city, had refused to permit abortions, despite the clear pronouncements of the Supreme Court in Roe v. Wade, [410 U.S. 113 (1973)] and Doe v. Bolton, [410 U.S. 179 (1973)]. Therefore, the court, finding that the action of the defendants was not only in bad faith, but was oppressive considering that the injured class "was such as to leave them relatively defenseless against this violation of their rights," awarded attorneys' fees.

Transplanting this exception into the commercial sector, it seems that it might be successfully raised in a variety of cases. For example, let us suppose that Mr. X. enters into a contract with Ms. Y, and that the contract is clearly one of adhesion. Mr. X persists in asserting the terms of the contract necessitating that Ms. Y bring a lawsuit to enjoin the enforcement of the contract by Mr. X. Ms. Y wins on summary judgment, the court finding that the cases are legion where such clauses have been held to be unenforceable. It would appear, since this is an action in equity, that the same exception as used in Poelker might be applied upon a finding of vexatious conduct. And, if the plaintiff was in the same position as the plaintiff in that case, then there might be an added incentive to award fees. In this regard, I recommend that you take a second look at the unconscionability cases and such cases as Williams v. Walker Thomas Furniture, [350 F.2d 445 (D.C. Cir. 1965)].

Now I do not want you to get the impression that I am recommending that this exception will be applicable to many cases, or that it may be widely used; however, there are instances where it seems feasible, and those of us in commercial litigation will have to educate ourselves to them. I would only add that the exception is rooted in equity, and that your purpose is therefore to do equity, and not seek fees when they are unwarranted. And, I would further add that, given the tone of the decision in Alyeska, the court will be on guard to prevent the exceptions from swallowing the rule; in fact, this concern may even result in a narrowing of the exceptions, which to this date have been rather loosely articulated. Furthermore, where it appears even to a small degree that the suit was either brought or defended in the belief that a position was at least arguable, courts will not be receptive to an application for attorneys' fees. And, finally, courts may also be reluctant to invoke this exception since, to a certain extent, it reflects upon losing counsel.

While I believe that there is a future in applying the exceptions to the "American Rule" to the area of commercial litigation, particularly the "common fund" theory, I think the road is more clearly marked for development by Congressional action. Many attorneys are probably unaware that there are provisions for attorneys' fees in many statutes already in existence. Allow me to summarize some of the most significant provisions authorizing attorneys' fees, in statutes as well as rules of procedure and before the administrative agencies:

A. STATUTES

The Wire Interception Act, 18 U.S.C. §2520: any person whose wire or oral. communication is intercepted in violation of this statute has a civil cause of action for damages equal to one hundred dollars a day for each day of viola- . tion, plus punitive damages, plus a reasonable attorney's fee. This is especially interesting in light of recent revelations of wrongdoing in the intelligence field. The Interstate Commerce Act, 49 U.S.C. §16(2): this is part of the oldest Act (1887) authorizing attorney's fees. The plaintiff who successfully sues a carrier for failure to comply with an order for the payment of money is allowed a reasonable attorney's fee as part of the costs of the suit.

The Unfair Competition Act, 15 U.S.C. § 72: this act punishes the importation or sale of articles within the United States at less than market value or whole

sale price. The plaintiff who is injured by such an act can sue and recover, inter alia, a reasonable attorney's fee.

The Norris Laguardia Act, 29 U.S.C. § 107 (e): the party which requests a temporary restraining order or injunction must provide security to cover his opponent's expenses, including the expense of reasonable attorney's fee should the party requesting the order fail.

The Bankruptcy Act (as amended 1952), 11 U.S.C. § 104 (a): Attorneys' fees are among the highest-priority debts from bankrupt estates, taking precedence over the payment of dividends to creditors.

The Civil Rights Act of 1964, Title VII, 42 U.S.C. § 2000e-5 (k): under this statute aimed at employment discrimination, it is within the court's discretion to award attorneys' fees to the prevailing party (unless the prevailing party is the Equal Employment Opportunity Commission. Title II of the Act, 42 U.S.C. § 2000a-3 (b), also includes a provision for the awarding of fees on a mandatory basis. See Aleyska, supra, 95 S.Ct. at 1624.

B. RULES OF PROCEDURE

The Federal Rules of Civil Procedure provide for attorneys' fees to the prevailing party in a discovery dispute. The circumstances in which fees may be awarded by the Court are spelled out in Fed.R.Civ.P. 37.

C. ADMINISTRATIVE AGENCIES

The Magnuson-Moss Warranty Federal Trade Commission Act, [Pub. L. No. 93– 637, 88 Stat. 2183 (U.S. Code Cong, and Ad. News, 93rd Cong., 2d Sess. 2534) (1975)]: This is the first effort in the administrative field to provide financing for intervenors in rulemaking proceedings. Any person who represents an otherwise unspoken-for interest is entitled to fees if that interest should be represented for a fair determination in the rule-making proceeding and if the intervenor can demonstrate need. The FTC has promulgated proposed rules to implement the mandate of the statute. See 40 Fed. Reg. 15238 (1975). The Nuclear Regulatory Commission is currently considering providing financial assistance for intervenors. Other federal statutes which provide for attorneys' fees are compiled in the Appendix to this article.

A number of the statutes are not automatic, but rather discretionary. For example, the Securities Act of 1933 and the Securities Exchange Act of 1934 both provide that fees may be recovered, not that they shall be recovered. Where the statute is discretionary, I would recommend that you prepare early in litigation to establish a basis for recovery. Secondly, not all actions should be brought in federal court. Many states have statutes providing for attorneys' fees which are not found on the federal level. Therefore, look to your state remedies, which may be just as adequate as the federal remedies. This is also important in diversity cases, where state law may be applied.

In Citizens Association of Georgetown, et al. v. Washington, a case before me, the plaintiffs relied on the Clean Air Act in an attempt to block the construction of two buildings on the Georgetown waterfront area. The financial impact upon the defendants, if the plaintiffs were successful, would have been in the millions. The plaintiffs failed, however. Nevertheless, I still awarded them attorneys' fees. The basis for this was that the Act contained a provision permitting attorneys' fees. [42 U.S.C. 1857th-2(d)]. In light of the language of the statute and the legislative history indicating that an award of fees did not depend upon success in the action, and since the plaintiffs had done a public service by bringing the action, I awarded the losing party's attorney counsel fees. This case is an example of the impact of environmental and other legislation in the commercial area, and an example of the possibility of awarding attorneys' fees even to the unsuccessful litigant.

Attorney fee applications in the area of the common fund has been left untouched in Alyeska, and is very important to the litigating attorney.

The "common fund" theory, which I noted earlier in discussing the Greenough case, achieved wide acceptance as an exception to the "American Rule" because the fees, at least ostensibly, do not come out of the opponent's pocket. Rather, the award is described as monies that are due to others who are benefiting from the action of the plaintiff, often class action member, and who must pay for their benefit. However, the monies are not taken from each person who has benefited, which is often totally impractical, but from the fund itself. Therefore,