Relationship Between Contingency and §1988 Statutory Fees

, New York Law Journal

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Martin A. Schwartz

The civil rights fee statute applicable to §1983 actions authorizes a court to award the "prevailing party" a "reasonable attorney's fee." (42 U.S.C. §1988(b)).1 This fee shifting statute is designed to insure that competent counsel will be available for civil rights plaintiffs.2

The great majority of §1983 plaintiffs do not have the means to retain counsel on an hourly basis. They must, therefore, attempt to work out other types of fee arrangements. Some §1983 plaintiffs assign their right to §1988 fees to their attorneys. Many §1983 plaintiffs and their attorneys enter into contingency agreements. And, some retainer agreements provide for both an assignment of §1988 fees and a contingency fee. When, as is frequently the case, there is a contingency agreement, questions arise as to the relationship between the statutory §1988 fee and the contingency fee.

Fortunately, two U.S. Supreme Court decisions provide substantial guidance on the issue. In Blanchard v. Bergeron,3 the Supreme Court held that the amount of the contingency fee does not limit the amount of the §1988 fee award. In other words, the §1988 fee award may exceed the contingency fee. In Venegas v. Mitchell,4 the Supreme Court decided the converse issue, and held that the statutory §1988 fee award does not limit the amount that an attorney is entitled to collect under a contingency agreement. Thus, the contingency fee may exceed the §1988 statutory fee.

Distinctions Between Fees

Before embarking on an analysis of Blanchard and Venegas, it is important to spell out the basic distinctions between the statutory fee and the contingency fee. The statutory §1988 fee is awarded to the prevailing party. Section 1988 expressly provides that the court may award the "prevailing party" a reasonable fee. The Supreme Court has emphasized that "Section 1988 makes the prevailing party eligible for a discretionary award of attorney's fees."5 In fact, the court considers §1988 fees to be part of the "arsenal of remedies available to combat violations of civil rights…."6 And, the court has specifically "rejected the argument that the entitlement to a fee award belongs to the attorney rather than the plaintiff."7

A "reasonable" §1988 attorney fee is normally computed pursuant to the lodestar method of multiplying the reasonable hours expended on the litigation by the reasonable hourly rates.8 If the plaintiff has prevailed and is awarded §1988 fees, unless the plaintiff assigned her §1988 fees to her attorney, the §1988 fees are payable by the defendant to the plaintiff. "In sum, §1988 controls what the losing defendant must pay, not what the prevailing plaintiff must pay his lawyer."9

In contrast to the §1988 statutory fee, a contingency arrangement arises out of the retainer agreement between the plaintiff and her attorney pursuant to which the attorney fee the plaintiff agrees to pay her attorney consists of a percentage of plaintiff's monetary recovery, usually one third to 40 percent. This arrangement is common in tort cases. Since §1983 constitutional damages claims are referred to as "constitutional tort" claims, it is not surprising that contingency fee arrangements are common in these cases as well. The contingency fee recovered by plaintiff's attorney effectively reduces the plaintiff's monetary recovery. In other words the plaintiff is paying for legal representation out of her monetary recovery.

'Blanchard'

In Blanchard v. Bergeron, Arthur Blanchard entered into a contingency fee agreement with his attorney pursuant to which the attorney was to receive 40 percent of any damages awarded in his §1983 excessive force suit. The jury returned a verdict for Blanchard awarding him $5,000 compensatory damages and $5,000 punitive damages. Plaintiff sought statutory §1988 attorney fees of approximately $40,000, but defendant argued that the §1988 fees should be limited to the contingency fee, that is, $4,000 (40 percent of the $10,000 recovery).

The district court found that a reasonable fee under §1988 was $7,500, but the U.S. Court of appeals for the Fourth Circuit reversed, holding that the §1988 fee award was limited to the $4,000 contingency fee. The U.S. Supreme Court reversed.

The Supreme Court in Blanchard held that a contingency fee agreement does not impose an "automatic ceiling" on the §1988 fee award.10 A reasonable fee under §1988 is one that provides compensation for the time and effort expended by plaintiff's counsel or, in other words, an award which represents "the reasonable work for the services rendered in vindication" of plaintiff's §1983 claim.11 It is well established that in §1983 actions the §1988 fees need not be proportionate to plaintiff's monetary recovery. For example, in City of Riverside v. Rivera,12 a police misconduct case, the Supreme Court upheld a §1988 fee award of approximately $245,000, even though the plaintiff recovered damages of $33,500. The court reasoned that "damages do not reflect fully the public benefit advanced by civil rights litigation…."13

The court in Blanchard ruled that if the contingency fee is less than the §1988 statutory fee, "the defendant should be required to pay the higher amount."14 The court was concerned that if the contingency fee operated as a maximum on the §1988 fee, it might place "an undesirable emphasis" on the amount of damages recovered in a §1983 suit, in conflict with City of Riverside.15 The fact that a §1988 fees award may exceed the contingency fee does not result "in a 'windfall' to attorneys who accept §1983 actions," because the §1988 fee award is designed to provide compensation for the reasonable value of the legal services rendered.16

Although not specifically ruling on the issue, there is language in Blanchard supporting the position that while the contingency fee is not an "automatic ceiling" on the statutory fee, it is a "factor" the district court may consider as an "aid" in determining a "reasonable" §1988 fee.17 This is because the percentage of recovery may demonstrate "attorney's fees expectations" when counsel accepted the case.18

Fees for Whom?

Assume that following the Supreme Court's decision in Blanchard the district court awarded the plaintiff §1988 fees of $10,000.19 That $10,000 figure is the amount the defendant cares about because it is the amount of §1988 fees defendant will have to pay. But pay to whom, the plaintiff or plaintiff's counsel? The defendant is not likely to be concerned with that issue, i.e., where the $10,000 goes, but plaintiff and her attorney will be quite concerned.

Unless the plaintiff has assigned her §1988 fees to her attorney, the fees, remember, belong to the plaintiff. The plaintiff can effectively reimburse herself from the §1988 fees for the contingency fee she effectively paid her attorney. True, the incremental §1988 fees operate as a "windfall" for the prevailing plaintiff, but if the plaintiff didn't receive this windfall, and the §1988 fees were limited by the contingency fee, the losing defendant would effectively obtain a windfall by paying less than the "reasonable" fee for the legal services provided to the plaintiff.

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