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May 29, 2007

Second Circuit Strikes a Blow to the Good Hearted Solo and Small Firm

I'm beginning to sound like a dismal broken record this past week talking about the woes facing solos when it comes to getting awarded fees for prevailing in cases, but for some reason there just is more bad news out there for the good-hearted, benevolent solo and it comes in the form of a recent Second Circut decision called Arbor Hill Concerned Citizens Neighborhood Association v. County of Albany. Thanks to Mark Bennett of Bennett and Bennett in Texas, we get access to most of the full story which was originally printed by subscription only in The Times Select. (Note: the impact of this decision on solos/small firms is profound.  However, it was Big Law whose fees were slashed in this particular decision.  Yet, it is the ruling which will resonate most with solos and small firms.)

In this terrible decision we learn that if you take on a pro bono matter and are victorious, meaning the loser pays your fees, it doesn't matter the fees you submit based upon the work you've done.  It becomes a question of what is the fair market value of your fees.   

[A] reasonable, paying client might consider whether a lawyer is willing to offer his services in whole or in part pro bono, or to promote the lawyer’s own reputational or societal goals. Indeed, by focusing on the hourly rate at which a client who wished to pay no more than necessary would be willing to compensate his attorney, the district court can enforce market discipline, approximating the negotiation that might ensue were the client actually required to pay the attorney’s fees.
. . . .
We are confident that a reasonable, paying client would have known that law firms undertaking representation such as that of plaintiffs often obtain considerable non-monetary returns — in experience, reputation, or achievement of the attorneys’ own interests and agendas — and would have insisted on paying his attorneys at a rate no higher than that charged by Albany attorneys (and there is no cross-appeal).

And one commenter ( I'd give him credit although I can't find where I read it) said in effect...'what is the fair market value of a guaranteed win....certainly considerably more than the fair market value of an unknown ending.'  So, how does this decision make logical sense?  What is especially galling is if the attorney can show he did not take it on for moral reasons but strictly monetary ones, she will get her full fees.

The reason I am especially concerned about this decision is because last year in Illinois, yes, home of the ABA, a new and very disturbing rule was passed that every attorney must disclose at time of annual registration the number of hours she has given pro bono (even if you didn't do any pro bono so you can indicate zero), or in the alternative, given money to recognized organizations that practice pro bono.  Failure to disclose this information may result in suspension of one's license.

So, we have two new rules:  One mandating disclosure of pro bono activities with the presumed goal to increase one's pro bono committment and another which significantly reduces or stops payment of fees based upon the motivations of the attorney performing the services...even when victorious.  Am I being paranoid?  Big Law wins all around.  What about the solo? It's not pretty.

Ironically, I had written a column on the subject of the Illinois requirement for the Connecticut Law Tribune last June but it will first be printed one year later, next Monday.  That column will be posted here on Tuesday.  Once you have read both the recent decision and Mike Bennett's analysis and then my post on the Illinois law, I'd like to know if you agree, disagree or on the fence with my concerns.


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Steven M. Warshawsky

I am going to break the rule about not commenting on cases one hasn't read . . . .

It seems to me that this is much ado about nothing. Courts have always had the power to reduce fee requests in accordance with the results achieved, the quality of the attorney's services, the going rate in the local legal community, and so on. So now this court is saying that in "pro bono" matters, it will also take into consideration that the lawyer was willing to accept the representation for various non-monetary reasons. So?

Moreover, the court is saying that it won't assume that under normal "market conditions" a fancy pants law firm that charges $500 per hour would not be hired for a case in an area where the going rate is $200 per hour. As a result, it won't award that firm $500 per hours in fees. The idea that fee awards are limited by the "fair market value" of the attorney's services is commonplace and hardly controversial.

Susan Cartier Liebel

Steve, I understand how this may strike you as much ado about nothing given 'the un-injured' party was Big Law. However, the ruling is not limited to Big Law. It is a ruling that affects all lawyers. And not all pro bono work is for notoriety or self-promotion. And if it were, Big Law suffers no wounds for taking on these cases. For solos, however, each and every case is a business decisions that impacts their paychecks directly. If they are being 'encouraged' to do pro bono and then being denied fees when winning, or suffering drastically reduced fees when winning, their hit is much harder. And the legislative purpose of awarding fees to discourage future abuses is defeated. It requires everyone to think beyond this case as Big Law is not impacted one iota.

It is the solo and small firm and ultimately the plaintiff and future plaintiffs. What if they are intimidated by Big Law or don't think Big Law will take them on? The case, with merit, could die on the vine impacting other plaintiff's much like themselves. IMHO, it requires thinking globally.

Steven M. Warshawsky

Yes, I understand. But it remains the case that statutory fee awards have *always* been subject to the court's discretion to reduce them in accordance with various factors, including the going rate for legal services in the relevant market. (Employment law practitioners, such as myself, see this happen in every case that prevails at trial.) So the $500 per hour that a firm might charge a large commercial client for securities work, gets reduced to $200 an hour by the court for the "pro bono" Title VII case. This is predictable for large and small/solo firms alike. If doing the work is not worth the amount likely to be recovered, then it is easy enough to find other "pro bono" opportunities to fulfill bar requirements. As you say, this is a business decision.

Frankly, as someone who is preparing to go into solo practice myself, this is a piece of advice that I have come across several times, i.e., be very careful about taking on "pro bono" work because it might not be cost effective and could end up ruining your practice.

As for the meritorious pro bono cases that lack lawyers, well, I'm sure there are lots of them, viewed strictly on the law. But if they are not cost-effective, then maybe it is more "efficient" not to litigate them. Life isn't always fair. But if the harm or injustice is serious enough, I have absolutely no doubt that there will be many lawyers prepared to take the case. After all, a lack of lawsuits is hardly the problem in our society.

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