devoted to a case in light of the anticipated recovery. While that approach would place heavy emphasis on the amount of the potential recovery in cases where the action was brought solely to recover damages sustained by an individual, it is flexible enough to provide reasonable guidance in the "infinitely variable" facts and circumstances alluded to by Justice Powell in Rivera. 477 U.S. at 585, 106 S. Ct. at 2700.
For example, in a case where a new legal principle of importance in the field of civil rights is involved, the appropriate billing judgment might be that of a public interest institution, such as the American Civil Liberties Union, and the question would be how much of the time of its lawyers would such an institution reasonably commit to a case brought to establish that principle. Public service institutions are always faced with the question of how much of their limited resources they can commit to a particular issue. In addition, the willingness of a private attorney to commit her time to a case where little monetary recovery may be expected may itself reflect a reasonable billing judgment that the issues presented are of overarching societal importance. The question whether the establishment of a particular rule of law is important enough to justify a substantial commitment of lawyers' time is one which the district courts are well-qualified to decide. See Cabrera v. Jakabovitz, 24 F.3d 372, 393 (2d Cir. 1994).
In cases such as the present, the issue will be much more straight forward -- what is a reasonable amount of time for a lawyer to spend at a given hourly rate in order to obtain the monetary award that one could reasonably anticipate.
Despite some dicta to the contrary in both Supreme Court and Circuit Court opinions, see, e.g., Rivera, 477 U.S. at 585, 106 S. Ct. at 2700; Hetzel v. County of Prince William, 89 F.3d 169, 173 (4th Cir. 1996); Corder v. Brown, 25 F.3d 833, 837 (9th Cir. 1994), I do not believe that in resolving the reasonableness of the fee award any weight should be given to the amount demanded in the complaint. Trial judges and lawyers are well aware that it is not uncommon for a complaint to contain an ad damnum clause that asks for an amount of damages well in excess of the amount that counsel might reasonably expect to recover. However, in the course of discovery and at trial, a plaintiff will have to present damage calculations that can serve as a starting point to determine what amount of damages the plaintiff could reasonably hope to recover.
A rational billing judgment would attempt to weigh the likely amount of any recovery against the risk of litigation. As Justice Rehnquist noted in Rivera, no rational lawyer would devote $ 25,000 of billable time to a matter where the potential recovery was only $ 10,000. See 477 U.S. at 592-93, 106 S. Ct. at 2703. Indeed, except in exceptional circumstances, no rational lawyer or client would commit to any case an amount for lawyer's fees that approaches the amount of the total recovery.
A client hiring a lawyer does so with the hope that he will get more out of the lawsuit than will the lawyer. Obviously as the probability of success increases, so might the willingness of a client to commit funds for necessary attorney's fees. But necessary is a key word.
An honorable lawyer must constantly ask, "Is the amount of my charge for this particular piece of trial preparation justified in light of the contribution it will make to the likelihood of a recovery of a particular amount?" Every lawyer recognizes that it may be reasonable to do certain things to enforce a note for $ 1,000,000 that would not be appropriate in an attempt to collect a $ 10,000 note.
The use of a "billing judgment" approach in awarding attorney's fees should have the salutary effect of encouraging lawyers in cases such as this to limit pretrial discovery to that which is reasonable in light of the expected recovery. This Court has seen too many cases in which attorneys engage in excessive discovery in the apparent hope that if liability is established they will be compensated for the total time expended even though the resulting fee award is out of all proportion to the amount of the damages recovered.
In awarding fees on the "billing judgment" basis, it must be recognized that in some cases it is difficult for attorneys and clients to predict, at the outset, how much billable time it will take to obtain a particular result. In such circumstances, clients are often unwilling to make an open-ended commitment to fund the total costs of the litigation. The result may be a totally contingent fee arrangement or a retainer that provides a cap on the time charges and some contingent share by the lawyer in the recovery by plaintiff. Each of these varied situations involves a billing judgment with which the courts are familiar and which the courts can apply in determining a reasonable fee for a prevailing party in litigation such as this.
Turning to the facts of this case, it appears that a reasonable billing judgment would have placed a limit on the willingness of plaintiff to make an open-ended funding commitment to this case. First, a large compensatory damage award for lost wages could not have been anticipated. Plaintiff remained in defendant's employ throughout the period of the lawsuit and thus her damages were limited to the difference between the amount she was being paid and the higher rate of pay for the job she claimed she should have had. Plaintiff's damage expert -- with the usual generosity one might anticipate from the plaintiff's expert -- estimated the total damages for lost wages from 1992 to 1998 as $ 73,108. Although plaintiff had a claim for emotional distress and punitive damages, neither was so strong as to provide a reasonable expectation of a substantial award. A very generous evaluation of the case would have placed the maximum possible recovery at no more than $ 200,000. But then counsel and client would have had to factor in the risk that there might be no recovery at all -- a substantial risk in this case. In these circumstances it appears that one of a number of reasonable billing judgments that an attorney and client would make is the one that, in fact, plaintiff and her attorney did make, i.e., an agreement that plaintiff's time charges would be capped at 50% of the recovery.
While the percentage recovery is higher than one would expect in a typical tort case, it is not unreasonable in a case where the parties reasonably anticipate a relatively low recovery. Of course, the courts should be alert to the possibility that attorney and client might structure their retainer agreement with an eye to securing the maximum possible award of attorney's fees', but there is nothing to suggest that the 50% provision was adopted for that purpose in this case.
Thus, the Court concludes that in this case it is reasonable to award counsel fees equal to 50% of the total recovery, to wit, $ 79,072.50.
Dated: New York, New York
December 18, 1996
JOHN S. MARTIN JR., U.S.D.J.