The opinion of the court was delivered by: BRODERICK
On August 25, 1981, this Court found defendants Commonwealth of Pennsylvania Department of Public Welfare (DPW) and its secretary, the Honorable Helen O'Bannon, (hereinafter Commonwealth defendants) in contempt of court. Contempt proceedings against the Commonwealth defendants were initiated by plaintiffs, who filed a petition for a finding of contempt and levy of civil fine against the Commonwealth defendants with this Court on July 1, 1981. On July 24, 1981, a hearing was held, pursuant to this Court's Order of July 7, 1981, ordering the hearing to show cause why the Commonwealth defendants should not be held in civil contempt in connection with their failure to comply with this Court's Orders of June 4, 1981.
On August 25, 1981, this Court found the Commonwealth defendants were in civil contempt because of their failure to comply with this Court's Orders of June 4, 1981 to pay into the Registry of this Court $ 67,746.08 by July 1, 1981 for the purpose of defraying the expenses of the Special Master and the Hearing Master, and the Order of July 14, 1981 to pay $ 67,746.08 into the Court Registry by August 1, 1981 for the same purpose.
As is well-known to the litigants, the Commonwealth defendants had been ordered (Orders of March 17, 1978, July 27, 1978, and April 24, 1980) to fund the Master's offices and, pursuant to monthly orders, pay into the Registry of this Court the amounts budgeted each month for the payment of the salaries, wages, and other expenses of both the Hearing Master's office and the Special Master's office. On June 4, 1981, this Court signed, and on June 5, 1981, the Clerk entered two Orders for payment of the costs of the Special Master and the Hearing Master for the month of July, 1981, in the amounts, respectively, of $ 59,152.74 and $ 8,593.34, a total of $ 67,746.08. These Orders specified that payment was to be made "on or before the first day of July, 1981." The Commonwealth defendants made no payment pursuant to the Order of June 4, 1981 on or before July 1, 1981. At a conference on July 6, 1981, the Commonwealth defendants advised the Court that they would soon be paying $ 35,000.00 into the Registry of the Court for the purpose of closing the Office of the Special Master and that no additional sums would be paid unless the Legislature passed a supplemental appropriation.
On July 7, 1981, this Court issued an Order to show cause why the Commonwealth defendants should not be held in civil contempt in connection with their failure to comply with the Court's Order of June 4, 1981 to pay $ 67,746.08 into the Registry of the Court on or before July 1, 1981 for the purpose of defraying the costs of the Special Master and the Hearing Master. On or about July 13, 1981, the Commonwealth defendants paid into the Registry of the Court the sum of $ 35,000.00. On July 16, 1981, this Court entered an Order directing that the $ 35,000.00 be paid to the Office of the Special Master and made a finding that the Commonwealth defendants were in default in the amount of $ 32,746.08. Since that time, the Commonwealth defendants have failed to comply with eight subsequent funding Orders of this Court. The Commonwealth defendants' default now exceeds $ 371,478.27. On July 24, 1981, at the hearing on the Order to show cause why the Commonwealth defendants should not be held in civil contempt, the Commonwealth defendants again advised the Court that they did not intend to comply with the Court's Orders concerning the expenses of the Masters.
Based on these events and evidence adduced at the July 24 hearing, the Court concluded that the Department of Public Welfare and its Secretary, Helen O'Bannon, were in contempt of Court (Memorandum of August 25, 1981). Specifically, the Court found that as a result of the actions of the Secretary and the Department the Legislature did not make an appropriation for the continued functioning of the Masters' offices (Memorandum of August 25, 1981 at 14-18). This Court's Order of August 25, 1981 directed the Department to fund the Master's offices on or before September 2, 1981 or commence paying into the Registry of this Court $ 10,000.00 per day as a civil contempt fine. Rather than fund the Masters' offices, the Commonwealth defendants determined to remain in contempt of this Court's Orders but did, however, pay the civil fine of $ 10,000.00 per day. As of this date, the total amount of the civil fines paid into the Registry of this Court exceeds $ 1,200,000.00.
On October 21, 1981, the Court transferred $ 87,314.30 of the sum resulting from the Commonwealth defendants' payments of civil contempt fines to the Special Master and $ 13,695.60 to the Hearing Master. On December 11, 1981, the Court ordered further transfer of the sum resulting from the payment of civil contempt fines, $ 80,371.12 to the Special Master and $ 13,588.14 to the Hearing Master. More than $ 1,000,000.00 of the fund generated by the fine payments remains subject to Court Order.
On January 6, 1978, this Court held a hearing to determine the injunctive remedy necessary. The parties were asked to attempt to agree on the terms of the Court's Orders, but no agreement was forthcoming. The Court requested that they submit separate proposed orders. On March 17, 1978, the Court issued an injunction which, among other things, created the Office of the Special Master. The Special Master was appointed to monitor defendants' planning for and the providing of community living arrangements and services. In addition, the Special Master has been directed to monitor living conditions at Pennhurst, as well as in the community facilities to which Pennhurst residents have been transferred. The Commonwealth defendants, when not faced with contempt proceedings during a two and a-half year period from the entry of this Court's Order of March 17, 1978 through the end of August, 1980, transferred only 122 of approximately 1,200 Pennhurst residents to community living arrangements. The Commonwealth defendants' failure to comply with this Court's Orders during that period underscored the need for the Masters' offices.
On December 13, 1979, the Court of Appeals approved this Court's appointment of the Special Master, and its "determination that, for the retarded class members as a whole, Pennhurst cannot be an appropriate setting in which to provide habilitation." (612 F.2d at 114). In remanding to this Court, the Court of Appeals directed that an individual hearing should be held for any Pennhurst resident who contends that the living arrangements and services available at Pennhurst are more beneficial to his or her habilitation than those made available in the community.
In light of the Third Circuit's opinion, this Court established an impartial hearing procedure and appointed a Hearing-Master who was directed to provide an individual hearing for any Pennhurst resident who contended that his or her habilitation at Pennhurst would be more beneficial than that proposed in the community living arrangement. (Order of April 24, 1980).
This Court's Orders provide that the Special Master and the Hearing Master shall be compensated by the Commonwealth defendants (Orders of March 17, 1978; July 27, 1978; April 24, 1980; and June 10, 1980). The funds required for the operation of the Master's offices are costs of litigation under Federal Rules of Civil Procedure 53 and 54 and were assessed against one of the losing parties by this Court. The Commonwealth defendants did not appeal these Orders. They complied with these Orders and paid the Masters' costs during fiscal years 1978-79, 1979-80, and 1980-81. Funds for those payments were included in the Commonwealth's budget for Pennhurst. In fiscal year 1981-82, however, the Department of Public Welfare and Secretary Helen O'Bannon took steps which this Court found to have been designed to thwart the Court's Orders mandating funding for the Masters' offices. As heretofore discussed in greater detail, the Court found the Department and Secretary O'Bannon in contempt of court and imposed a compensatory coercive civil contempt fine upon the Commonwealth defendants for each day that the Masters' offices remained unfunded after September 2, 1981 (Order of August 25, 1981).
On September 3, 1981, United States Supreme Court Justice William J. Brennan, acting as Circuit Justice for the Third Circuit, issued a temporary stay of this Court's contempt Order pending full review of the Commonwealth defendants' application for a permanent stay pending appeal to the Third Circuit. The Third Circuit had already denied a stay. On September 17, 1981, Circuit Justice Brennan denied the application for a stay and vacated his temporary stay Order. The Commonwealth defendants, pursuant to Supreme Court rules, resubmitted the matter to Justice Rehnquist, who referred the application to the full Court, which denied the application for a stay on October 5, 1981.
As this Court has found, the continued operation of the Office of the Special Master and the fulfillment of her duties on behalf of the retarded residents is necessary for the purpose of monitoring the defendants' compliance with this Court's Orders and is essential for the purpose of assuring that the retarded residents of Pennhurst are being transferred to community facilities that are safe, sanitary and beneficial to their habilitation. The Hearing Master conducts hearings for each Pennhurst resident for whom a community living arrangement has been prepared for the purpose of determining whether the proposed transfer from Pennhurst to the community is "voluntary", as well as for the purpose of determining whether the proposed community living arrangement will be beneficial to his or her habilitation. The Court is vitally concerned that no retarded resident of Pennhurst or any other member of the plaintiff class be transferred to any community living arrangement that is not beneficial to his or her habilitation. The Masters' offices ensure that the poor sanitation, safety, habilitation, and training conditions found to exist at Pennhurst are not duplicated on a smaller scale in community living arrangements.
For the reasons set forth in its Memorandum of January 6, 1982, the Court found the Commonwealth defendants likewise in contempt for their failure to comply with the Court's Orders of August, September, October, and November. In its Memorandum of August 25, 1981, the Court detailed its reasons for holding the Commonwealth defendants in contempt. Essentially, the Court found that Secretary O'Bannon and the Department had failed to act with due diligence and steadfast purpose to comply with the valid Orders of this Court. As a result, the Masters' offices were without funding.
The Court, in its Memorandum of August 25, 1981, concluded that it possessed inherent equitable powers to effectuate compliance with its Orders through the imposition of civil contempt fines. The Court rejected Commonwealth defendants' argument that Secretary O'Bannon had acted in good faith, finding good faith inapplicable to a civil contempt proceeding. Furthermore, the Court found that she had not acted in good faith. The Court also rejected the Commonwealth defendants' contention that the action of the Legislature raised a state law barrier to compliance by the Commonwealth defendants. See Memorandum of August 25, at 13-22. Thus, after various challenges to the Court's contempt Order, the Commonwealth defendants began paying a civil contempt fine of $ 10,000.00 per day.
The Commonwealth defendants, while paying $ 10,000.00 per day in fines, have nevertheless failed to comply with this Court's Orders of June 4, 1981, July 14, 1981, August 20, 1981, September 16, 1981, October 22, 1981, November 18, 1981, and November 24, 1981, ordering them to pay a total of $ 406,478.27 into the Registry of this Court for the purpose of defraying the costs of the Special Master and the Hearing Master. To date, the Commonwealth defendants have paid only $ 35,000.00 of this amount.
Although the Commonwealth defendants have failed to comply with this Court's Orders requiring them to fund the Masters' offices, the Court purged them of contempt in its Order of January 8, 1982 and relieved them of their obligation to continue to pay $ 10,000.00 per day in coercive and compensatory civil contempt fines. The Court noted that the amount of civil contempt fines paid by the Commonwealth exceeded the Masters' budgets for the remainder of the Commonwealth's fiscal year, which ends June 30, 1982. The Court's Order of August 25, 1981 also directed the Commonwealth defendants to appear before this Court at 9:30 a.m. on Thursday, October 15, 1981 to show cause why the Court should not impose on them a compensatory fine in an amount sufficient to compensate the plaintiffs for the costs and counsel fees incurred in the preparation and trial of the contempt proceedings. For the purpose of ascertaining the amount of the compensatory fine sufficient to compensate plaintiffs for costs and counsel fees, plaintiffs' counsel were ordered to submit affidavits on or before October 1, 1981, setting forth in detail the time expended by counsel, the matter in which the time was expended, and the costs incurred in the preparation and trial of the contempt proceedings.
David Ferleger, Esquire, and Penelope Boyd, Esquire, attorneys for plaintiffs Halderman, et al., submitted the required affidavits on October 1, 1981. Plaintiffs' attorneys Thomas K. Gilhool and Frank J. Laski, Esquire, attorneys for plaintiff-intervenor PARC submitted their affidavits on October 16, 1981. At a conference in chambers on the morning of October 15, 1981, counsel for the Commonwealth defendants stated that they did not contest the authority of this Court to require the Commonwealth defendants to pay reasonable counsel fees and costs to plaintiffs' attorneys in connection with the contempt proceedings. Several decisions of the United States Supreme Court authorize fees awards in connection with contempt citations. See, e.g., Hutto v. Finney, 437 U.S. 678, 689-93, 98 S. Ct. 2565, 2572-74, 57 L. Ed. 2d 522 (1978); Roadway Express, Inc. v. Piper, 447 U.S. 752, 100 S. Ct. 2455, 2464, 65 L. Ed. 2d 488 (1980); Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 258-59, 95 S. Ct. 1612, 1622, 44 L. Ed. 2d 141 (1975); Fleischmann-Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 718, 87 S. Ct. 1404, 1407, 18 L. Ed. 2d 475 (1967).
Commonwealth defendants did, however, dispute some of the hours submitted by plaintiffs' counsel. Because of this factual dispute, the Court set the matter for hearing. On Thursday, October 29, 1981, a hearing was held to determine the reasonable attorneys' fees and costs incurred by plaintiffs.
In determining the reasonable counsel fees, this Court is guided by the decisions of the Third Circuit as set down in Lindy Brothers Builders, Inc. of Philadelphia v. American Radiator & Standard Sanitary Corp., et al. (Lindy I ), 487 F.2d 161 (3d Cir. 1973); Lindy Bros. v. American Radiator & Standard Sanitary Corp., et al. (Lindy II ), 540 F.2d 102 (3d Cir. 1976); Rodriguez v. Taylor, et al, 569 F.2d 1231 (3d Cir. 1977), cert. ...