decided as amended october 20 1983: October 14, 1983.
On Appeal from United States District Court, Eastern District of Pennsylvania
Adams and Higginbotham, Circuit Judges, and Teitelbaum, District Judge*fn*
This appeal arises out of a successful claim brought under the Age Discrimination in Employment Act (ADEA), 29 U.S.C. § 621 et seq. (1976). Following a jury verdict in favor of appellee James Sullivan, the district court awarded $116,000 in compensatory and liquidated damages and ordered that Sullivan be reinstated. The district court further awarded plaintiff's counsel $41,287 in attorney's fees under the procedure set forth in Lindy Bros. Builders, Inc. v. American Radiator and Standard Sanitary Corp., 487 F.2d 161 (3d Cir. 1973). The issue before us is whether the district court erred in not considering a private contingency fee arrangement in fashioning the statutory fee award. Because this is an inappropriate case for a dual fee recovery, we vacate the district court's award and remand for reevaluation of a fee consistent with this opinion.
The contingent nature of an attorney's fee recovery is a valid factor in the determination of court awarded fees. The legislative history of the Civil Rights Attorney's Fee Awards Act of 1976 specifically endorses the standard devised in Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir. 1974).*fn1 S. Rep. No. 1011, 94th Cong., 2d Sess. 6 (1976), reprinted in 1976 U.S. Code Cong. & Ad. News 5908, 5913. Johnson focuses on whether the fee is fixed or contingent as one relevant factor, but contains the admonition that "such arrangements should not determine the court's decision." 488 F.2d at 718, quoting Clark v. American Marine Corp., 320 F. Supp. 709, 711 (E.D. La. 1970), aff'd, 437 F.2d 959 (5th Cir. 1971). Johnson immediately qualifies this statement:
In no event, however, should the litigant be awarded a fee greater than he is contractually bound to pay. . . ."
488 F.2d at 718. This can be read as either fixing the maximum attorney's fee award at the contractual ceiling or cautioning against a plaintiff windfall by releasing more funds into his/her hands than he/she is required to pay. Nothing in the legislative history or the case law supports the former interpretation. *fn2 In fact, limitation of fee awards to a contingency agreement would vitiate Congressional intent to make "fee awards . . . an integral part of the remedies necessary to obtain . . . compliance [with the appropriate statutes]" and to insure that fees "are adequate to attract competent counsel. . . ." S. Rep. No. 1011, supra at 5, reprinted in 1976 U.S. Code Cong. & Ad. News at 5913. At its clearest, the legislative mandate would therefore have courts consider the existence of a contingency arrangement, while not allowing this to thwart the enforcement of the substantive statutory rights that gave rise to the fee award provision.
This Court has yet to determine the procedure by which district courts are to incorporate private fee arrangements into a statutory fee award. As a practical matter, in cases where the statutory fees exceed the private contingent fee arrangements, three distinct orders are possible:
(1) Defendant can be ordered to pay only the difference between the statutory award and the contingent fee the plaintiff had agreed to pay. This is an inequitable solution that would give a windfall to the defendant despite the finding of liability. Such a result would also frustrate the legislative policy objective that the fee itself serve as a disincentive to future discriminatory conduct.
(2) The statutory fee should be paid to plaintiff's attorney with any lesser contingency fee considered satisfied. This is the accepted standard in most circuits that have addressed this question:
We reiterate that a fee agreement is irrelevant to the issue of entitlement and should not enter into the determination of the amount of a reasonable fee. . . . The better route would be to order that the award reimburse the plaintiff, with any ...