JAMES T. GILES, UNITED STATES DISTRICT JUDGE.
This memorandum determines attorneys' fees in an employment discrimination case following remand from the United States Supreme Court and the United States Court of Appeals for the Third Circuit. A brief account of the facts follows. A more complete discussion of the underlying case is reported at Black Grievance Committee v. Philadelphia Electric Co., 615 F. Supp. 1069 (E.D. Pa. 1985), and 802 F.2d 648 (3d Cir. 1986).
The underlying action was filed by the Black Grievance Committee (BGC) and seven individual employees of the Philadelphia Electric Company (PECO) in November, 1975. The complaint asserted claims under 42 U.S.C. § 1981 (1982) and was amended to add claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e - 2000e-17 (1982). A class of employees was certified in 1978 and trial was set for July, 1983. The case settled on the eve of trial.
The litigation came on the heels of a 1973 Consent Decree issued in a race discrimination suit instituted against PECO by the United States Justice Department. See United States v. Philadelphia Electric Co., 351 F. Supp. 1394 (E.D. Pa. 1972). Under the decree, PECO had agreed to affirmative action retention and promotion of minority applicants and employees. That 1973 Consent Decree remained in effect at the time of settlement of this case. Plaintiffs had attempted to obtain relief not allegedly afforded by the existing decree.
The settlement of this case also took the form of a consent decree following approval of the settlement agreement by this court in December, 1984. However, the consent decree did not address the issue of attorneys' fees. Thereafter, plaintiffs' counsel filed a joint petition for attorneys' fees under Title VII and 42 U.S.C. § 1988.
On August 13, 1985, this court ordered PECO to pay the attorneys for the plaintiffs $ 424,535.25 in attorneys fees, $ 7,672.50 for time spent on the fee petition, and $ 43,730.43 in costs. Defendant appealed this award and plaintiffs cross-appealed. On September 22, 1986, the third circuit held that this court had been correct in some aspects of its analysis and incorrect in others. The court of appeals vacated the original fee award and remanded for reconsideration in light of its rulings.
PECO filed a petition for writ of certiorari in the Supreme Court challenging this court's decision to (1) increase the award by 50 percent to compensate for the fact that the case was taken on a contingency basis and (2) decrease the award by only 25 percent because the plaintiffs were not successful on all their claims. The Supreme Court vacated and remanded for reconsideration of the contingency enhancer in light of Pennsylvania v. Delaware Valley Citizens' Counsel for Clean Air, 483 U.S. 711, 107 S. Ct. 3078, 97 L. Ed. 2d 585 (1987) (Delaware Valley II). The Court did not address the issue of reducing the award on the grounds of plaintiffs' success. The third circuit then remanded the matter to this court for proceedings consistent with Delaware Valley II and with its original opinion of September 22, 1986. The third circuit also directed this court to consider the effect of Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 107 S. Ct. 2494, 96 L. Ed. 2d 385 (1987), on the issue of expert witness fees.
I. THE LODESTAR
The third circuit held on appeal that this court erred in its calculation of the lodestar because it reduced certain undisputed hourly rates. The third circuit remanded and directed this court to recalculate the lodestar according to the rates set out in the uncontested affidavits.
The court of appeals summarized the rates to be used as follows:
Time Rate to be
Used on Remand
Newberg 9/75 - 8/78 $ 135.00/hour
9/78 - 8/80 $ 150.00/hour
9/80 - 12/81 $ 175.00/hour
1/82 - 12/83 $ 175.00/hour
1/84 - 8/85 $ 225.00/hour
Ballard 1/79 - 10/80 $ 90.00/hour
10/80 - 12/82 $ 90.00/hour
1/83 - 12/83 $ 125.00/hour
1/84 - 7/84 $ 125.00/hour
8/84 - 8/85 $ 150.00/hour
Trent 1979 - 1980 $ 100.00/hour
1981 - 1982 $ 115.00/hour
1983 - 1984 $ 125.00/hour
802 F.2d at 653.
The third circuit instructed, however, that this court should consider any testimony PECO may offer that these rates were unreasonable. 802 F.2d at 657. Therefore, upon remand defendant had the burden of presenting evidence on this point.
PECO challenges the rates offered in the affidavits by attorneys Trent and Newberg on the grounds that both attorneys failed to provide sufficient evidence in support of their proposed billing rates. It contends that Trent did not supply any evidence of non-contingent billing paid by clients in the relevant period and that he relied on a market rate standard for the Philadelphia area. PECO further contends that Newberg produced only a few non-contingent billings for the relevant period and that those were bills submitted to other counsel for consulting work. Defendant's Response, Ex. A, Maris Aff. PECO argues that, because it has offered "countervailing evidence," this court is free to exercise its discretion and reduce the hourly rates.
The Maris affidavit does not contain any evidence sufficient to change the rates set by the third circuit. The affidavit does not challenge the reasonableness of the rates; it simply challenges the sufficiency of the original rate affidavits. The burden was on PECO to show the rates to be unreasonable and not on the plaintiffs to show the rates to be reasonable. Defendant has not carried that burden.
The reasonable value of an attorney's time is the price that time normally commands in the marketplace and is normally reflected in the attorney's billing rate. 802 F.2d at 652 (citing In re Fine Paper Antitrust Litigation, 751 F.2d 562, 590-91 (3d Cir. 1984)). Defendant has not shown that either Trent's or Newberg's rates were (1) not the price normally commanded in the marketplace or (2) not the attorney's actual billing rate. Thus, defendants have not presented this court with any evidence as to the reasonableness of the rates set by the third circuit and the lodestar is set at $ 293,728, as shown in Table 1.
II. THE LODESTAR ADJUSTMENTS
The third circuit held in Black Grievance Committee that a district court should first apply the result-obtained adjustment, or the " Hensley reducer," to the lodestar. The court should then make the contingency and delay adjustments, multiplying these factors by the result-obtained-adjusted lodestar. 802 F.2d at 656.
A. The Hensley Reducer
In Hensley v. Eckerhart, 461 U.S. 424, 76 L. Ed. 2d 40, 103 S. Ct. 1933 (1983), the Supreme Court held that "where the plaintiff achieved only limited success, the district court should award only that amount of fees that is reasonable in relation to the result obtained." 461 U.S. at 440. This is a matter of discretion and there is no precise formula for making such a determination. Id. at 436-37.
This court originally adjusted plaintiff's lodestar downward by 25% because plaintiffs were not completely successful in obtaining the relief sought. PECO appealed that ruling on the grounds that (1) the district court should have used a mechanical comparison of plaintiffs' claims against relief obtained and (2) the court erred in adding a 50% "value to the class" factor to its Hensley adjustment. The third circuit held that the Hensley court had rejected the mechanical method of comparison suggested by defendant. In addition, the court of appeals held that the "value to the class" factor considered by this court was not inconsistent with the overall result analysis of Hensley and concluded that this court did not abuse its discretion in making the 25% downward adjustment. 802 F.2d at 654.
Plaintiffs contend that this court cannot revise the 25% Hensley reducer because it was affirmed by the third circuit and was not considered by the Supreme Court. However, the Court vacated the entire third circuit order and decision and remanded. This court is thus free to reconsider its original Hensley analysis.
In Hensley, the Court established two methods of fee reduction. The first method was to reduce the lodestar "where the plaintiff has failed to prevail on a claim that is distinct in all respects from his successful claims." 461 U.S. at 440. See also Institutionalized Juveniles v. Secretary of Public Welfare, 758 F.2d 897, 919 (3d Cir. 1985). The second method was a general reduction of the lodestar, " i.e., of the net lodestar amount, taking into account any reduction in the initial lodestar for litigating wholly unsuccessful claims, so that the award provides 'only that amount of fees that is reasonable in relation to the results obtained.'" Institutionalized Juveniles, 758 F.2d at 919 (quoting Hensley, 461 U.S. at 440).
This court concluded in its original opinion that:
it is my belief that the value to the class of the affirmative action steps included are of immediate and long range significance and benefit to the class and warrants an added factor of 50%.
615 F. Supp. at 1079.
Hensley does not provide for a manipulation of the reducer because of "value to the class." The third circuit stated that this approach was not inconsistent with Hensley because, under Hensley, it was the overall result of the litigation that mattered. 802 F.2d at 654, citing ( Hensley, 461 U.S. at 440). However, I believe that my original analysis took factors other than the "overall result of the litigation" into account. The phrase "value to the class" more accurately reflected compensation to plaintiffs' counsel for the risk of taking on this particular case. The desire to compensate plaintiffs' counsel for this risk is more properly addressed in determining a contingency enhancer and for that reason, I must recalculate the Hensley reducer.
Further, defendant argued on appeal that this court considered the success factor twice, once in determining the Hensley reducer and again in calculating the contingency enhancer. The court of appeals held that it was "unable to say with confidence whether or not the relief obtained played any role in [the] assessment of the contingency adjustment." 802 F.2d at 655. The court specifically requested that this court clarify the rationale behind its contingency award and, if relief obtained played any role, reconsider the award without reference to the relief obtained. 802 F.2d at 655.
I conclude that my original analysis of the contingency enhancer balanced the risks faced by counsel against the results obtained. See 615 F. Supp. at 1077. In light of the third circuit's instructions and the Supreme Court's later decision in Delaware Valley II, it is now apparent that no weight should have been given to the results obtained in determining contingency, but should have been left for the Hensley analysis. My original consideration intertwined the two factors. Accordingly, reconsideration of both is now appropriate.
The Supreme Court in Hensley rejected a mathematical comparison of the total number of issues in the case with those actually prevailed upon. 461 U.S. at 435 n.11. I agree that a mechanical comparison would not be helpful to the analysis. I now believe, however, that this court must look at the general areas in which relief was sought, the relief requested, and the relief achieved in the Consent Decree. The court can then better judge the plaintiffs' degree of success in each category and arrive at a fair assessment of plaintiffs' total degree of success. This is not a mechanical approach. It is simply a way for this court to map out plaintiffs' successes and failures so it can meaningfully exercise its discretion in its results-obtained analysis.
Moreover, this method of analysis is in keeping with the second method suggested in Hensley, that of a general reduction of the lodestar. Rather than putting an arbitrary number on the case, I choose to break my analysis down in order to arrive at a number which is better grounded in fact.
Plaintiffs' claim - an order requiring hiring at a level
of 33 1/3% minority workforce
Consent Decree - Company agreed not to move for
dissolution of the 1973 Consent
Decree for a period of 3 - 5 years;
hiring goals for a 15% floor for 5
Degree of Success - 10%
BACKPAY AND PUNITIVE DAMAGES
Plaintiffs' claim - $ 7.2 million
Consent Decree - total fund of $ 500,000; $ 120,000
of which was set aside for named
individuals and the contingent
work force and $ 300,000 of which
went to minorities employed from
1969 - 1983.
Degree of Success - 12%
Plaintiffs' claim - Preparatory classes; disparate
impact tests; 6 month on-job
training program prior to any
testing, complete suspension of
Consent Decree - Training program to prepare employees
for examination which is
to last for five years; supplemental
training and retests for those
Degree successful - 30%
Plaintiffs' claim - Targets and timetables for promotion
of minorities to supervisory
positions; new procedures
for making decisions which circumvent
of eight named individuals.
Consent Decree - No dissolution of 1973 Consent
Decree for three years; career
counseling program established;
sensitivity training program established;
company review of terminations.
Degree of success - 50%
Plaintiffs' claim - Reemployment of all former contingent
constructions workers at
PECO with full back -- pay, benefits,
Consent Decree - $ 60,000 settlement fund; no equitable
Degree of Success - 22%
Plaintiffs' claim - Backpay and injunctive relief for
54 named individuals.
Consent Decree - $ 60,000 for 10 named individuals;
no equitable relief.
Degree of success - 20%
Plaintiffs' claim - [not specifically sought]
Consent Decree - Creation of a nine-member Affirmative
chaired by the Manager of Personnel;
class given one seat on panel.
Degree of success - 30% success in achievement of
plaintiff's overall goals.
Average Rate of Success - 25%. The total lodestar for each year will be multiplied by 25% to arrive at the adjusted lodestar. See Table 2.
B. Contingency Enhancer
This court originally awarded the plaintiffs an upward adjustment of 50% based upon an analysis of the risk of loss balanced against the scope of relief obtained. 615 F. Supp. at 1077. The third circuit held on appeal that this court's findings were not clearly erroneous. 802 F.2d at 655. On appeal to the Supreme Court, the Court vacated and remanded the matter for reconsideration in light of Delaware Valley II.
The third circuit has interpreted the Supreme Court's 4-1-4 decision in Delaware Valley II as upholding the availability of contingency multipliers but refusing to apply one in that case. Four justices would have held such multipliers to be "impermissible under the usual fee-shifting statutes." See 107 S. Ct. at 3087 (White, J., joined by Rehnquist, C. J., Powell, J., and Scalia, J.). Four justices would have permitted them. See 107 S. Ct. at 3091 (Blackmun, J., and Stevens, J., dissenting). Justice O'Connor concurred with the White plurality that an enhancer was not appropriate in Delaware Valley II but agreed with the dissenters that contingency fee enhancers might be appropriate in certain cases. Because the four dissenters would allow contingency multipliers in all cases in which Justice O'Connor would allow them, her position commands a majority of the court. Student Public Interest Research Group of New Jersey, Inc. et al. v. AT&T Bell Laboratories, (SPIRG) 842 F.2d 1436, 1451 (3d Cir. 1988). See also Blum v. Witco, 829 F.2d 367, 379-82 (3d Cir. 1987).
The third circuit has read Delaware Valley II as holding that a contingency enhancer may be available where there is a risk of non-payment. The panel in SPIRG stated that it was their belief that Justice O'Connor would agree with the four dissenters that "it is the fact of contingency, not the likelihood of success in any particular case, that mandates an increase in an attorney's fee . . . ." SPIRG, 842 F.2d at 1451 (quoting Delaware Valley II, 107 S. Ct. at 3098 (Blackmun, J., dissenting)).
The court in SPIRG also stated that Delaware Valley II establishes that the "ultimate inquiry in establishing a reasonable fee must be the rate necessary to attract competent counsel." SPIRG, 842 F.2d at 1452. See Delaware Valley II, 107 S. Ct. at 3091 (White, J. plurality opinion) (O'Connor, J., concurring). However, courts interpreting Delaware Valley II have found that Justice O'Connor's opinion emphasizes that contingency multipliers should be granted only in rare cases. See SPIRG, 842 F.2d at 1452; Coup v. Heckler, 834 F.2d 313, 324 (3d Cir. 1987) (observes that Deleware Valley II "severely limits the occasions in which contingency fee enhancement is appropriate in fee-shifting cases"); Blum v. Witco, 829 F.2d 367, 380 ("at least five justices have indicated through the tenor of their opinions that the plaintiff has a significant burden to carry to justify a contingency multiplier").
In SPIRG, the third circuit held that, although SPIRG's case appeared to qualify for a contingency fee multiplier because plaintiff's counsel faced the risk of nonpayment, it was "not among those rare cases that deserves such enhancement." SPIRG, 842 F.2d at 1452.
The court so found based on its conclusions that the case was not particularly risky, that the administrative problems in determining and applying the multiplier were enormous, and that the lodestar was sufficient to attract competent counsel. SPIRG, 842 F.2d at 1452. On this last and most important factor, the court stated:
In the final analysis, however, we rely on the one clear message that we can derive from Delaware Valley II : contingency multipliers are only available to the extent they are necessary to attract competent counsel. Because we feel that in granting the community market rate we have assured that the fee is sufficient to attract competent counsel, we will not disturb the district court's holding that no contingency enhancement was necessary in this case.
SPIRG, 842 F.2d at 1452.
Plaintiffs argue that SPIRG does not apply to the present case for the following reasons:
(1) SPIRG involved a law firm which intentionally charged at below market rates while the present case involves lawyers who regularly charge full rates or rely on court-ordered fee awards. I fail to see how this makes a difference. SPIRG analyzed whether an enhancer should be added to a lodestar consisting of a reasonable market rate times the hours worked. That situation is identical to the one at hand.
(2) SPIRG was not a "risky" case, while the present case was an extremely difficult one, both in terms of the complex legal issues and in problems of proof. I will not address this issue, since it appears that the riskiness of the particular case should not be considered. In Delaware Valley II, five justices agreed that "compensation for contingency must be based on the difference in market treatment of contingent fee cases as a class, rather than on an assessment of the 'riskiness' of any particular case." 107 S. Ct. at 3089 (O'Connor, J., concurring quoting Justice White at 3087) (emphasis in original). See Blum v. Witco, 829 F.2d at 379-80.
(3) SPIRG plaintiffs presented no evidence on the difficulties of obtaining counsel or on the manner in which contingent fee litigation is compensated in the relevant community. Here, plaintiffs have submitted affidavits on these points.
I agree with plaintiffs that the third circuit's decision not to award a contingency enhancer in SPIRG is not binding on this court. Yet, considering the type of case this was, along with the affidavits submitted by plaintiffs' counsel, I conclude that a contingency enhancer here is appropriate.
PECO claims that because plaintiffs did not appeal this court's original decision to award a 50% contingency enhancer they are now barred from seeking more than the 50% award on the grounds of res judicata. That contention is without merit. The Supreme Court vacated this court's ruling on the issue of a contingency enhancer and remanded for reconsideration in light of Delaware Valley II. BGC, 483 U.S. 1015, 107 S. Ct. 3255, 97 L. Ed. 2d 754 (1987). This requires the development of the record on the issues of contingency and plaintiffs' ability to attract competent counsel, issues not developed in the original fee petition or decision. As discussed in Blum v. Witco, this court must "tackle the task of translating the [Supreme Court's] message into a blueprint for an evidentiary hearing . . . . " 829 F.2d at 380.
Plaintiffs' have submitted affidavits which contend that attorneys in the Philadelphia area will accept contingent cases in this type case only if their recovery would be at least double their normal hourly billing rate. For example, Henry T. Reath, an experienced lawyer and partner in the firm of Duane, Morris & Hecksher, stated in his affidavit:
In order to obtain approval of the [firm's] Contingent Fee Committee [to take the contingent fee case], there must be a strong showing at the outset of litigation that the chances of success are favorable. In addition to this showing, a case will not be approved for contingent representation unless the firm has a reasonable expectation of receiving at least double or triple its normal hourly fees in the event of success.