9.4 Attorney Fees

Updated 2013 by Richard Rothschild, 2016 by Jeffrey S. Gutman

Court-awarded attorney fees are critical in preserving access to the courts for poor people. Some legal aid programs depend on fee awards for their very survival.1 Without attorney fees, numerous federal laws protecting rights to housing, health care, and other necessities would remain unenforced. The risk of having to pay plaintiffs’ attorney fees frequently induces settlement and deters illegal governmental and corporate conduct. Therefore, legal aid advocates need to have a working knowledge of fee issues.

The subject of court-awarded attorney fees has inspired books, even multivolume treatises.2 This section instead focuses chiefly on the major issues presented in fee litigation: how a plaintiff qualifies as a prevailing party; entitlement to fees; how to calculate a reasonable fee; timing of fee motions and the “Jeff D. problem” of defendants forcing plaintiffs’ counsel to waive fees as a condition of achieving a settlement on the merits.

9.4.A. Prevailing Party Standard After Buckhannon

To qualify for a fee award under most federal fee-shifting statutes, a litigant must be a “prevailing party.”3 Two issues that often arise are (1) how much the litigant has to win and (2) what form the victory must take.4

As for the first question, the Supreme Court has held that a plaintiff need not win every single issue or even the “central issue” in order to obtain prevailing party status. A prevailing party is “one who has succeeded on any significant claim affording it some of the relief sought . . . .”5 Losing on some issues may or may not result in a reduced fee-award amount.6 It does not affect “the availability of a fee award vel non.”7

In CRST Van Expedited, Inc. v. EEOC,8 the Supreme Court considered the circumstances under which the defendant was deemed to be a prevailing party. In that case, the defendant company prevailed in a Title VII sexual harassment case on grounds that did not reach the merits of the EEOC's claims. The Court held the defendant may nevertheless be a prevailing party "even if the court's final judgment rejects the plaintiff's claim for a nonmerits reason."9 As noted below, the defendant prevails for merits or nonmerits reasons if the plaintiff's "claim was frivolous, unreasonable, or groundless."10 It would make little sense if Congress' policy of "sparing defendants from the costs of frivolous litigation,"11 depended on the distinction between merits-based and non-merits-based frivolity. Congress must have intended that a defendant could recover fees expended in frivolous, unreasonable, or groundless litigation when the case is resolved in the defendant's favor, whether on the merits or not. Imposing an on-the-merits requirement for a defendant to obtain prevailing party status would undermine that congressional policy by blocking a whole category of defendants for whom Congress wished to make fee awards available.

The second question—what form the victory must take for the plaintiff—became problematic after Buckhannon Board v. West Virginia Department of Health and Human Resources.12 In Buckhannon, the Supreme Court held that voluntary change in behavior by a defendant caused by a pending lawsuit did not qualify the plaintiff as a prevailing party for fee purposes. After Buckhannon, whether a plaintiff who is victorious in a practical sense is a prevailing party for fee purposes depends roughly on how much judicial involvement was involved in the victory.

At one end of the spectrum, winning a judgment obviously qualifies a plaintiff as a prevailing party in most cases. The major qualification is that the judgment must require “some action (or cessation of action) by the defendant.”13 The relief awarded must "materially alter the legal relationship between the parties."14 An injunction or declaratory judgment typically does so.15 The judicial declaration alone does not suffice. The judgment may be for nominal relief, although in such cases a court may deny fees altogether to the prevailing plaintiff.16

At the other end of the spectrum, under Buckhannon, simply filing a lawsuit that prompts defendants to change illegal behavior voluntarily (i.e., acting as a “catalyst”) does not qualify the plaintiffs as prevailing parties. The Buckhannon Court disapproved the catalyst theory of recovery because it permitted an award “where there is no judicially sanctioned change in the legal relationship of the parties.”17 Even in such situations, however, plaintiffs’ counsel may still seek a final judgment if the interests and desires of the clients permit. Defendants are likely to claim that their voluntary changes in policy render the case moot. As the Buckhannon Court noted, however, mootness is to be found only when “it is clear that the allegedly wrongful behavior could not reasonably be expected to recur.”18

Somewhere in the middle of the spectrum are victories achieved either by interlocutory orders or by settlement. Even in pre-Buckhannon jurisprudence, winning an interlocutory order that merely kept a suit alive did not transform litigants into prevailing parties.19 Preliminary injunctions, however, are a different matter because, as with final judgments, they order defendants to act or to refrain from acting. Most lower courts have held that a preliminary injunction based on a finding that the plaintiff is likely to prevail on the merits can qualify the plaintiff as a prevailing party.20 By contrast, where an injunction merely preserves the status quo without reaching the merits, the plaintiff's victory may lack sufficient "judicial imprimatur" to qualify the plaintiff as a prevailing party.21 While expressly declining to decide whether a preliminary injunction victory can qualify a plaintiff as a prevailing party, the Supreme Court has held that plaintiffs who obtain preliminary injunctions but ultimately lose on the merits are not entitled to fees.22

Another difficult question is how much “judicial imprimatur” for the change of the legal relationship between the parties is needed for a settlement agreement to qualify a plaintiff as a prevailing party.23 Buckhannon states that a plaintiff who secures a court-ordered consent decree is a prevailing party.24 However, a litigant who achieves success through a “private settlement” is not.25 Private settlements lack the “judicial approval and oversight involved in consent decrees” and often cannot be enforced in federal court.26 In a case where the claim to prevailing party status is based entirely on a settlement agreement, the court must determine whether a particular agreement is closer to a consent decree or to a private settlement.27 The major factors that the courts have looked at are the extent to which the district court was involved in approval of the settlement terms and whether the district court retains jurisdiction to enforce the agreement.28

In response to Buckhannon, Congress restored the ability to recover fees as a catalyst in Freedom of Information Act (FOIA) cases. An FOIA complainant has "substantially prevailed" and is eligible for fees if the complainant has obtained relief through "a voluntary or unilateral change in position by the agency, if the complainant's claim is not insubstantial.”29

9.4.B. Entitlement to Fees Under Major Fee-Shifting Statutes

Once a plaintiff demonstrates that she is a prevailing party, showing entitlement to fees usually is not difficult under most federal fee-shifting statutes.

9.4.B.1. Civil Rights Attorney Fees Awards Act and Other Statutes: Double Standard for Plaintiffs and Defendants

Some statutes, such as the Fair Labor Standards Act, provide that a prevailing plaintiff “shall” be entitled to fees.30 Other statutes, such as the Civil Rights Attorney’s Fees Awards Act of 1976, 42 U.S.C. § 1988, specify that a court “may” award fees to the prevailing party.31 Recognizing, however, that statutes such as Section 1988 are private attorney general measures intended to encourage litigation enforcing important rights, the courts employ a double standard. A prevailing plaintiff "'should ordinarily recover an attorney’s fee unless special circumstances would render such an award unjust.'"32 By contrast, a prevailing defendant may recover an attorney fee only where the suit was "frivolous, unreasonable, or without foundation.”33

Section 1988, the most widely used fee-shifting statute, authorizes fee awards in actions to enforce civil rights laws, including 42 U.S.C. § 1983. A lawsuit that redresses a state or local government violation of rights guaranteed by federal statute is a Section 1983 action within the meaning of Section 1988 and may thus qualify for a fee award.34 State governments do not enjoy Eleventh Amendment immunity against Section 1988 fee awards.35

9.4.B.2. Equal Access to Justice Act—Substantial Justification Standard

The Equal Access to Justice Act (EAJA) presents different entitlement questions. Under the EAJA a party who prevails in litigation against the federal government “shall” be awarded fees “unless the court finds that the position of the United States was substantially justified . . . .”36  If either the government’s prelitigation position or its litigation position lacks substantial justification in both law and fact, the court shall award fees.37

While the government is not automatically assessed fees merely because it loses a case, neither does it escape a fee award just because its position is not frivolous. To meet the substantial justification test, the government’s position must be “justified to a degree that could satisfy a reasonable person,” which requires the government to carry its burden to demonstrate “a reasonable basis both in law and fact.”38

Although parties often argue that EAJA motions should be controlled by “objective factors” such as the number of times the issue on the merits was litigated previously, the Supreme Court has stated that none of these factors is dispositive in itself.39 Most district courts decide substantial justification questions on an “I know it when I see it” basis. Once the district court grants or denies a motion, the court of appeals is required to use a deferential abuse-of-discretion standard on appeal.40

Another practical hurdle EAJA litigants may have to surmount is the Supreme Court's decision in Astrue v. Ratliff that attorney fees belong to the litigant rather than counsel and therefore are subject to offsets when the prevailing plaintiff owes money to the federal government.41 When there is no preexisting debt, however, courts generally have honored retainer agreements assigning the right to plaintiff's counsel to collect attorney fees.42

9.4.C. Calculation of Reasonable Fees: The Lodestar Calculation

Under the leading case of Hensley v. Eckerhart, the amount of a statutory fee award is determined by the lodestar method: “the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate.”43

9.4.C.1. Reasonable Number of Hours

What constitutes “hours reasonably expended” is the most frequently debated question in fee litigation.

9.4.C.1.a. Documentation Requirements

Courts and opposing counsel examine whether the hours are well documented. Some courts permit attorneys to reconstruct hours.44 However, inadequate documentation may result in a reduced fee award.45 Attorneys, paralegals, and law clerks should begin keeping contemporaneous time records as soon as they realize that a matter may become a case, erring on the side of overinclusiveness. They should record the date, the time spent to complete a task broken down into six-minute increments, and, most important, a sufficiently detailed description of what was done. As one court stated, records should give “enough information as to what hours were devoted to various activities and by whom for the district court to determine if the claimed fees are reasonable.”46 For example, “telephone call” or “research” are inadequate entries, but a court will approve “telephone call with Smith re failure to produce administrative record” or “research re summary judgment motion.”47 Ideally, there should be a separate entry for each telephone call, research project, or other activity. Bundling several activities into one entry, which is known as block billing, can be costly.  One circuit court has approved a 20% reduction in compensation for the block-billed hours.48 Block-billing makes it difficult for courts to assess the number and reasonableness of the hours billed for each task. 

9.4.C.1.b. Overall Billing Judgment Decisions

Hensley states that,“[w]here a plaintiff has obtained excellent results, his attorney should recover a fully compensatory fee. Normally this will encompass all hours reasonably expended on the litigation . . . .”49 However, attorneys seeking court-awarded fees are expected to exercise voluntary “billing judgment,” excluding from a fee request “hours that are excessive, redundant, or otherwise unnecessary . . . .”50 In lengthy, multi-counsel litigation, where justifying every time entry or use of personnel would be difficult, some plaintiffs’ attorneys propose a voluntary across-the-board billing judgment reduction, which courts often appreciate.51 In other instances, where particular recorded activity seems vulnerable, plaintiffs’ counsel should consider making discrete reductions.

Where counsel has exercised appropriate billing judgment, district courts do not have unlimited discretion to reduce fees.  At least one Court of Appeals has held that while the district court "can impose a small reduction, no greater than 10 percent-a 'haircut'-based on its exercise of discretion and without a more specific explanation," greater reductions require clear explanations.52   

 9.4.C.1.c. Compensable Phases of Litigation

A court may award fees for work on all phases of a lawsuit from prelitigation work,53 through postjudgment monitoring,54 including time spent on the fee issue itself.55 There are some limits, however, on awards for prelitigation services. Time spent “years before the complaint was filed” is unlikely to be compensated.56 Time spent in administrative proceedings must be “both useful and of a type ordinarily necessary to advance the . . . litigation . . . .”57 When a plaintiff can make that showing, however, a court may award fees for administrative advocacy even when that advocacy was directed at third parties.58

9.4.C.1.d. Compensable Activities

Space does not permit a discussion of which litigation activities are compensable and which are not. When a fee opponent challenges a particular activity, such as attorney travel time, a good place to start researching is one of the fee treatises.59

Perhaps the most frequently occurring challenge is to time spent by co-counsel communicating with each other. The Supreme Court has held that district courts have discretion to include conferencing time in a fee award.60 No court, to our knowledge, has denied compensation altogether for conferences.61

A subsidiary issue in some cases is the number of hours spent on counsel communications. Plaintiffs may need to demonstrate to a district court, through copies of agendas or through lead counsel’s declarations, why the number of meetings held was necessary and how the meetings actually contributed to the efficiency of the litigation. When counsel do so, some courts award fully compensatory fees even when large numbers of conferencing hours are at issue.62

9.4.C.1.e. Compensation for Less than Complete Success

Fee opponents often seek reductions based on the argument that the plaintiffs were only partly successful. Plaintiffs rarely win all conceivable relief while prevailing along the way at every stage on all legal theories advanced. Courts do not, however, require that level of success to award fully compensatory fees.

Less than Complete Relief. Frequently plaintiffs win some, but not all, of the equitable relief prayed for, or relatively small amounts of money in damage cases. In neither event is a reduction in fees necessarily warranted. The Hensley Court deemed it insignificant that a prevailing plaintiff did not receive all the relief requested. For example, a plaintiff who failed to recover damages but obtained injunctive relief, or vice versa, may recover a fee award based on all hours reasonably expended if the relief obtained justified that expenditure of attorney time.63 Lawsuits seeking only damages present different issues. The Supreme Court in Farrar v. Hobby held that if a plaintiff wins only nominal damages, a court “usually” denies fees altogether.64 Even in nominal damage cases, however, as suggested by Justice O’Connor’s concurring opinion, a court may award higher fees. Whether it does depends on factors such as the difference between the damage amounts sought and awarded, the significance of the legal issue on which the plaintiff prevailed, and whether the litigation vindicated a public purpose.65 Several circuit courts have adopted Justice O’Connor’s analysis as the rule for nominal-damages cases.66

The Court has rejected limiting the amount of fees in a civil rights damages suit to the same percentage that a personal injury lawyer would receive and affirmed a fee award that was nearly eight times the damages recovery.67 Limiting fees to a percentage of the damages recovery would be inconsistent with the purpose of Section 1988, which “was enacted because existing fee arrangements were thought not to provide an adequate incentive to lawyers particularly to represent plaintiffs in unpopular civil rights cases.”68

Unsuccessful Proceedings. A prevailing plaintiff need not prevail at every stage in a suit to receive fully compensatory fees. As the Ninth Circuit recognized in refusing to reduce fees for time spent unsuccessfully defending against a writ of certiorari: “Rare, indeed, is the litigant who doesn’t lose some skirmishes on the way to winning the war.”69 Relying on Hensley, the Ninth Circuit analogized unsuccessful claims to unsuccessful proceedings where the plaintiff ultimately prevailed.70

Unsuccessful Issues. Neither does a plaintiff need to win every issue raised in the complaint. Rather, fees for time spent litigating an unsuccessful claim are denied only where that claim “is distinct in all respects from . . . successful claims . . . .”71 By contrast, where “a lawsuit consists of related claims, a plaintiff who has won substantial relief should not have his attorney’s fee reduced simply because the district court did not adopt each contention raised.”72 Claims are “related” under this analysis when they arise from the same facts or related legal theories.73

9.4.C.2. Reasonable Hourly Rates

In Blum v. Stenson the Supreme Court held that Section 1988 fees awarded to legal aid programs that do not charge their clients fees should be calculated at rates comparable to those charged by private attorneys in the community with comparable experience.74 The Court rejected as inconsistent with the legislative history of Section 1988 the argument that fees should be limited to the internal costs of the relatively low salaries paid by legal aid programs.

9.4.C.2.a. Market Rates and How to Prove Them

The Blum Court noted Congress’ direction that “‘the amount of fees awarded under [Section 1988] be governed by the same standards which prevail in other types of equally complex Federal litigation, such as antitrust cases . . . .’”75 The fee applicant has the burden of proving relevant market rates through evidence “in addition to the attorney’s own affidavits . . . .”76 This evidence often includes:

  • declarations from attorneys in a range of private law firms in the relevant community reporting hourly rates charged by those firms for attorneys with the same law school graduation date as the fee applicant;77
  • excerpts from hourly rate surveys;78
  • fee award orders specifying past hourly rates awarded for the work of attorneys in the case; and
  • other fee award orders in the jurisdiction stating hourly rates for attorneys of comparable experience.
9.4.C.2.b. Frequently Occurring Hourly Rate Issues

Five frequently recurring issues concerning reasonable hourly rates follow:

First, the parties may disagree on which city’s prevailing rates apply when plaintiff’s counsel practices outside the forum jurisdiction. While this issue can cut both ways, it appears to occur most frequently when an out-of-town big-city lawyer wins in a jurisdiction where prevailing rates are relatively low. Generally the forum community’s rates are applicable unless the plaintiff can show that “local counsel was unavailable, either because they are unwilling or unable to perform because they lack the degree of experience, expertise, or specialization required to handle properly the case.’”79 A declaration from the director of the legal services program serving the forum community sometimes can help prove this point.

Second, in suits lasting many years, the defendants may argue that compensation must be limited to “historical rates”: the market rates prevailing for each of the years the suit was litigated. The Supreme Court has held, however, that “an appropriate adjustment for delay in payment—whether by the application of current rather than historic hourly rates or otherwise—is within the contemplation of [Section 1988].”80 Thus, in multiyear litigation against a defendant other than the federal government, a court should either award current rates for the entire case—the easiest solution—or award historical rates augmented by a multiplier to compensate for delay in payment.81

Third, if the defendants are represented by law firms charging relatively low hourly rates, they may argue that plaintiffs’ counsel should be limited to those same rates. Noting that firms representing large institutional defendants such as governments and insurance companies charge low rates to keep repeat business, the courts have rejected these arguments. These firms are “not in the same legal market as private plaintiff’s attorneys who litigate civil rights cases.”82

Fourth, defendants often seek reduction in hourly rates or an overall fee reduction by contending that too much of the work on behalf of the plaintiffs was done by experienced attorneys at the high end of the hourly rate scale. Fee opponents often argue that plaintiffs’ counsel should not be awarded “big firm rates” because a large firm would have litigated the case differently, assigning most of the work to associates. Some courts have accepted this argument.83 Most have rejected it for two reasons. First, small firms and legal aid programs do not have the same luxury as do big firms in choosing to throw armies of associates into the fray.84 More important, the reason experienced attorneys command higher hourly rates, the courts have realized, is that they are often much more efficient: “Presumably, the skill and experience of the partners places them further along the learning curve and enhances their ability to operate efficiently so that the higher partner rate is likely to be offset, at least in part, by a reduction in the number of hours multiplying that rate.”85

Fifth, defendants may argue that compensation for the work of paralegals and law clerks should be limited to the amounts that plaintiffs’ counsel paid them rather than market rates. The Supreme Court, however, has held that courts should compensate paralegal and law clerk time at market rates if the prevailing practice in the relevant community was to bill that time separately.86

9.4.C.2.c. Equal Access to Justice Act Hourly Rate Issues—Statutory Cap and Exceptions

The Equal Access to Justice Act (EAJA) presents an entirely different framework for computing hourly rates. Under the EAJA attorney fees are limited to $125 per hour, subject to certain exceptions.87

Inflation Adjustment. Hourly rates may be adjusted to account for increases in the cost of living since March 1996, when Congress set the EAJA hourly rate limit at $125.88 Although an inflation increase is not automatic, in practice most courts award it, usually unopposed. The adjusted hourly rate equals $125 per hour increased by the percentage increase in the consumer price index for urban consumers (CPI-U).89 Unlike with other fee statutes, courts must use historical rather than current rates in awarding EAJA fees because of sovereign immunity concerns.90 Thus, in multiyear litigation the rate for each year is $125 increased by the percentage CPI-U hike from March 1996 through that year.91

Market Rates for Special Expertise and in Other Situations. An EAJA fee applicant may be awarded higher market rates if “the court determines that . . . a special factor, such as the limited availability of qualified attorneys for the proceedings involved, justifies a higher fee.”92 This requires an extensive showing that (1) the prevailing attorneys possessed specialized expertise; (2) the expertise was needed in the litigation; and (3) the skills needed could not have been obtained at the normal EAJA rates.93

As for the first factor, the Supreme Court held that possessing exceptional litigation skills is not good enough. The prevailing attorney must have “distinctive knowledge or specialized skill . . . .”94 The circuit courts have taken different approaches in construing the Underwood requirements. The First, Seventh, Ninth, and Eleventh Circuits have interpreted Underwood to allow an enhancement in situations where the attorneys had specialized expertise in a particular area of law.95 By contrast, the D.C., Fourth, and Fifth Circuits have construed Underwood quite narrowly.96 Most other circuit courts have not squarely addressed this issue.

Even when the prevailing attorney possesses specialized expertise, the attorney must make a strong factual showing that the case could not have been brought by a smart generalist. Lead counsel should demonstrate to the court how the suit could only have been litigated by attorneys with existing contacts in the field or knowledge of hard-to-access rules and authorities. Plaintiffs also need to submit a declaration from a knowledgeable attorney showing the absence of other qualified counsel to litigate such a case.

In addition to authorizing fees generally against the government when no substantial justification can be shown for the government’s position, the EAJA subjects the federal government to fees “to the extent that any other party would be liable under the common law or under the terms of any statute which specially provides for such an award.”97 Under this provision, market rates are awarded under equitable fee doctrines such as when the government acts in bad faith, and under statutes other than the EAJA that both apply to the federal government and have fee-shifting provisions.98

9.4.C.3. Multipliers

Earlier Supreme Court cases such as Hensley contemplated that the lodestar could be augmented by a multiplier in appropriate circumstances.99 Later cases, however, rendered the multiplier rare in federal court. Most prominently, the Court in City of Burlington v. Dague held that courts may not award contingency multipliers to account for either the exceptional riskiness of a particular case or the riskiness of certain kinds of litigation.100 Previously, the Court had discouraged the use of multipliers based on such factors as the novelty and difficulty of the litigation or the exceptional quality of the representation; the Court reasoned that these factors are generally subsumed within the lodestar.101 Post-Dague, two courts have approved multipliers based on the extreme unpopularity of a case.102 Another court ordered a multiplier for exceptional results after a 36-year landmark desegregation lawsuit.103 In addition, where a federal court exercises supplemental jurisdiction over state claims and state law permits multipliers, federal courts are free to augment the lodestar.104

In Perdue v. Kenny A.,105 the Court held that there is a "strong presumption" that the lodestar calculation is reasonable, but that there may be a "few" circumstances in which superior attorney performance is not represented in the lodestar calculation.  In such cases, the lodestar amount would not have been sufficient to attract competent counsel initially.  The Court identified three bases for a possible enhancement: that the hourly rate does not adequately measure the attorney's true market value, such as when the rate is keyed only to the number of years out of law school, 2) the performance involves an "extraordinary" outlay of expenses and litigation is protracted and 3) the performance involves an unanticipated delay in the recovery of fees.106 Any enhancement must be objective, reasonable and subject to meaningful appellate review.

While Perdue left the door slightly ajar for future multipliers, the opinion and its predecessors suggest a more practical approach for fee applicants. The Perdue Court recognized that "'brilliant insights and critical maneuvers sometimes matter far more than hours worked or years of experience.'"107 But "'in those cases, the special skill and experience of counsel should be reflected in the reasonableness of the hourly rates.'"108 Counsel who have performed exceptionally can use this reasoning to justify seeking higher hourly rates than would normally be warranted by their number of years of experience. 

9.4.D. Timing of Fee Petitions

Neither Section 1988 nor most federal fee-shifting statutes specify when the fee motion must be filed.

9.4.D.1. Civil Rights Act and Most Other Cases—Governed by Rule 54 and Local Rules

Rule 54(d)(2)(B) of the Federal Rules of Civil Procedure requires fee motions to be filed no later than 14 days after entry of judgment “[u]nless otherwise provided by statute or order of the court . . . .” For purposes of this rule, a local rule setting a different fee motion deadline is an “order of the court,” and the local rule governs.109

Some local rules, however, also impose short deadlines for fee motions, which may require counsel to seek an order postponing the deadline or to postpone having a judgment entered until fee papers are prepared. Rule 54 requires only that the fee applicant state the basis for an award and either the amount or “fair estimate” of the amount; thus, the rule appears to permit counsel to file placeholder motions with details to be filled in later.

9.4.D.2. Equal Access to Justice Act Timing Issues

The Equal Access to Justice Act (EAJA) requires fee motions to be filed within 30 days of “final judgment.”110 This in turn is defined as “a judgment that is final and not appealable, and includes an order of settlement.”111

Fee petitions may also be filed pending appeal; the EAJA merely precludes fee petitions after the 30-day limit.112 Fee claimants and the government argued for years over what starts the EAJA clock running in Social Security Act cases until the Supreme Court decided the issue in Shalala v. Schaeffer.113 A plaintiff is a prevailing party, the Court held, when she obtains a “sentence four remand” under the Social Security Act: “a judgment modifying or reversing the decision of the Secretary . . . .”114 By contrast, a “sentence six remand,” which merely contemplates that new evidence will be introduced is not a judgment for attorney-fee purposes.115 Thus, a sentence four remand has the potential to start the clock running for an EAJA fee motion.

The Schaeffer Court also held, however, that a sentence four remand order merely triggers the duty to enter judgment and is not a judgment itself. For the 30-day clock to begin running, the district court, pursuant to Rule 58, must enter a judgment “on a separate document.”116

9.4.E. The "Jeff D." Problem--Forced Fee Waivers and Lump Sum Settlement Offers

Ordinarily a legal aid organization agrees to represent the client without charging a fee, except for recovering court-awarded fees. There are two potential problems with defense settlement offers in most cases handled by legal aid attorneys: (1) the offer is conditioned upon waiver of attorney fees or (2) in cases seeking monetary relief, the defendant offers a lump-sum inclusive of all damages and attorney fees and does not identify the amount of the award allocated to fees. Simultaneously negotiating the best settlement terms for the client and an award of fees for the legal work can create a conflict of interest between attorney and client.

The Supreme Court has acknowledged this problem, but has decided that encouraging settlements is a more important policy objective than helping plaintiff’s attorneys avoid an ethical challenge. In Evans v. Jeff. D., the Court held that conditioning a settlement offer on the merits on plaintiffs waiving their claim for Section 1988 fees is permissible.117 Jeff D. has made it very difficult to challenge attorney fee waiver settlement offers, but not impossible. At least two courts, relying upon dictum in Jeff D., have held that suits may proceed challenging an alleged wholesale government policy of demanding fee waivers to deny counsel to disfavored classes of litigants.118

Because such suits would not be easy to litigate and win, the goal should be to avoid Jeff D. offers in the first place. Some private attorneys have done so by including a provision in the client retainer agreement stating the attorney’s hourly rate, and specifying that the client owes that amount if the client, against attorney’s advice, accepts a settlement offer that precludes a fee recovery.

This is not a viable option for legal aid programs. For legal aid attorneys, the key to minimizing Jeff D. problems is appropriate communication with opposing counsel and with clients. Some opposing counsel, who would never think to make a Jeff D. offer to a private attorney, might make such an offer to a legal services attorney, seeking to take advantage of the attorney's perceived idealism. Legal services attorneys need to convey to opposing counsel and the entire legal community, through consistent word and action, that of course, in addition to relief for their clients, they expect their programs to be paid no matter what. Consistently conveying this attitude will discourage Jeff D. offers. Client communication is also critical. Clients who are educated on the importance of the case and kept well informed throughout the litigation have been known to reject Jeff D. offers.

Even when there is no demand for waiver of fees, incorporating fees in a lump-sum settlement offer presents a serious challenge to the plaintiff’s attorney. The attorney must negotiate the maximum monetary and non-monetary relief for the client while also trying to recover fees. Because law firms representing indigent civil rights plaintiffs typically limit their requirement for the client to pay attorney fees to what can be recovered from the defendant, there is also an ethical challenge when the lump-sum does not allocate the portion of the award that represents the amount included for the fees of the plaintiff’s attorney. Where damages will be sought, the client retainer agreement needs to address specifically the possibility of a lump-sum settlement offer. The agreement needs to specify that the fees will be calculated in a certain way, and that an accounting of the total fees will be shown to the client at the time a settlement offer is made. Even with full disclosure and agreement from the client, negotiating these lump-sum settlement offers is challenging.

Updated 2013 by Richard Rothschild, 2016 by Jeffrey S. Gutman