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The U.S. Supreme Court’s new standard for awarding attorney fees to successful civil rights plaintiffs will get one of its first tests in the Atlanta case that was the basis for last year’s 5-4 high court ruling. Children’s rights advocates, whose suit forced major reforms in Georgia’s foster care system, and their Atlanta counsel are seeking as much as $5.8 million in additional fees—on top of $6.7 million in fees based on hourly rates, and expenses, they already have been paid by the state. The additional sum would be an enhancement similar to one the high court’s conservative majority reversed and remanded last year with instructions that such bonuses should be limited to “extraordinary circumstances.” U.S. District Senior Judge Marvin H. Shoob, who presided over the foster care case, justified the enhancement in a 2006 order. He said that the value of the services provided by the lawyers for a class of more than 3,000 children consigned to Georgia’s crisis-ridden foster care system—”in light of the result achieved, difficulties encountered, capital resources required, and protracted delay caused by state defendants —’far exceeded what could reasonably be expected for the standard hourly rates’” used to calculate the fees. But for Shoob to grant the renewed fee request by the class counsel, he will have to follow the high court’s new rules for enhancements. They include a requirement that enhancements not be based on factors implicitly covered by an hourly rate, such as the case’s novelty and complexity or the quality of an attorney’s performance. Four Atlanta attorneys have filed statements arguing that the plaintiffs’ lawyers’ work in the foster care case meets the court’s new standards. But lawyers for the state have derided the request, saying that plaintiffs’ counsel are returning “to this court with their outstretched hands, asking, ‘more, please’ from the taxpayers of Georgia.” Foster care reforms Lawyers from Bondurant, Mixson & Elmore and Children’s Rights Inc., a New York-based nonprofit organization that advocates for abused and neglected children, brought the suit in 2002 against then-Gov. Roy E. Barnes. Their intent was to reform a foster care system that the state’s own Office of the Child Advocate found regularly exposed children to physical abuse, held them in dangerous, unsanitary and dilapidated shelters, placed them in the care of criminals and deprived them of essential medical care. In 2005, after three-and-a half years of litigation, the state settled the case by agreeing to institute sweeping, systemic reforms to be monitored by Shoob. As part of the deal, the state also agreed to pay “reasonable legal fees” to the plaintiffs’ attorneys. Shoob awarded plaintiffs’ counsel, who had originally sought more than $14 million, a total of $11.2 million in legal fees and expenses. For five years, the state challenged the award, especially the $4.5 million enhancement that Shoob attached to the $6.1 million “lodestar”—the number of hours of worked on the case by attorneys and their staffs multiplied by prevailing hourly rates. A panel of the 11th U.S. Circuit Court of Appeals upheld the award, including the enhancement, and the full court rejected a move to reconsider the matter. But strongly-worded dissents by Judges Edward E. Carnes and Gerald B. Tjoflat—who adamantly objected to enhancements in general and Shoob’s fee award in particular—helped propel the case to the U.S. Supreme Court. Last year the high court upheld the use of fee enhancements to a lodestar “due to superior performance, but only in extraordinary circumstances.” But it reversed the 11th Circuit’s decision affirming enhancements in the foster care case, remanding it with instructions to reconsider the fee issue in light of new standards spelled out in the 5-4 majority opinion penned by Justice Samuel Alito. The new standards Joined by Chief Justice John Roberts and Justices Antonin Scalia, Anthony Kennedy and Clarence Thomas, Alito held that Shoob “did not provide proper justification” for what amounted to a 75 percent enhancement to the lodestar. Justice Stephen Breyer, in a dissenting opinion, pointed out, “The Court does not purport to prohibit the district court from awarding an enhanced fee on remand if that court provides more detailed reasoning supporting its decision … We did not grant certiorari in this case to consider the fact-intensive dispute over whether this is, in fact, an exceptional case that merits a lodestar enhancement. The district court has already resolved that question, and the Court of Appeals affirmed its judgment having found no abuse of discretion.” Nonetheless, any enhancement Shoob chooses to award in the next round of litigation will be subjected to the Supreme Court’s definition of a “reasonable fee”: “one that is sufficient to induce a capable attorney to undertake the representation of a meritorious civil rights case but that does not provide a form of economic relief to improve the financial lot of attorneys.” The court held that “The ‘strong presumption’ that the lodestar is reasonable may be overcome in those rare circumstances in which the lodestar does not adequately account for a factor that may properly be considered in determining a reasonable fee.” Enhancements, the court said, may be appropriate where “the method used to determine the hourly rate does not adequately measure the attorney’s true market value” (in which case the high court said that the trial judge should adjust the hourly rate, with specific proof, to the prevailing market rate). The court also said enhanced fees might be warranted where an attorney’s performance included “an extraordinary outlay” of expenses, where the litigation is exceptionally protracted; and in cases where there is “an exceptional delay” in the payment of legal fees. But enhancements should not “be based on a flawed analogy to the increasingly popular practice of paying attorneys a reduced hourly rate with a bonus for obtaining specified results,” the court said. Following the Supreme Court ruling, the state—which had withheld payment of any of the awarded fees and expenses while it appealed—paid plaintiffs’ counsel the $6.1 million lodestar and more than $700,00 in expenses that Shoob had awarded in 2006, plus an additional $1.4 million in post-judgment interest that had accrued while the state appealed. The fees to the plaintiffs’ lawyers were hardly the only money the state has spent fighting the case before it finally agreed in mediation to reform the foster care system. From 2002 through 2006, the state also spent $2.5 million for outside counsel to litigate the case and contributed an additional 5,000 hours from attorneys working for the state’s Law Department, according to case pleadings. After the high court remanded the case, an effort by Carnes at the 11th Circuit to bring about a settlement on the enhancement failed, according to the state’s brief, and the case came back to Shoob. He will preside over what may become a battle involving competing financial experts and some of Atlanta’s most prominent lawyers over what constitutes reasonable attorney fees. Justifying enhancement Counsel for the state’s foster children are seeking to apply the Supreme Court’s new standards to justify a fee enhancement award ranging from $3.1 million to $5.8 million. The added fees, they assert, are what would be “minimally necessary to attract counsel competent to provide the extraordinary level of services required to litigate a case of this magnitude,” one of the Supreme Court’s new standards. Plaintiffs’ counsel noted that they invested more than 30,000 hours and advanced $1.7 million of their own funds to litigate the case—a point echoed by their supporters in affidavits supporting the fee enhancements. King & Spalding’s John A. Chandler wrote that most lawyers who would be qualified to handle a case like the foster care challenge “have made a business decision to practice almost exclusively on the defense side, where the law firm is typically compensated on current hourly rates that assume payment of accrued fees and reimbursement of expenses within 30-90 days.” Such speedy payment, he added, “minimize the demands on a law firm’s working capital, overhead, and the costs associated with extended delays in payment of fees or reimbursement of expenses.” Henry D. Fellows Jr. of the litigation boutique Fellows LaBriola said if a client approached his firm “requesting that we take on a complex civil rights matter against the State of Georgia requiring the firm to advance tens of thousands of hours of legal services and over $1.6 million in litigation expenses over the course of an unknown period of time, it would be difficult, if not impossible, for my law firm to take on such a matter alone in light of the enormous demands such a mater would impose on my firm’s human resources, overhead, and working capital.” Ralph I. Knowles Jr. of Doffermyre, Shields, Canfield & Knowles suggested that a 200 percent increase over standard hourly rates would be required to persuade him to take a such a case, “in light of the opportunity costs and overhead costs associated with accepting the representation in lieu of devoting my law firm’s resources to more remunerative matters.” James C. Rawls of McKenna Long & Aldridge, in his declaration, also suggested, at minimum, a 20 percent premium over the lodestar would be needed in a case where, as in this case, “The district court found that the defendants’ ‘strategy of resistance’ undoubtedly prolonged this litigation and substantially increased the amount of fees and expenses that plaintiffs were required to incur.” The state responds The state, represented by lead counsel Mark H. Cohen of Troutman Sanders, countered in a response filed Jan. 5 that attorneys for the state’s foster children have failed to establish that the foster care case is the rare and extraordinary one that fits the Supreme Court’s fee enhancement criteria. “Nothing in the way this case was handled shocks the conscience, except for the number of hours that plaintiffs’ counsel spent on it and the enhancements to the lodestar they have sought,” the state’s response asserted. “Even assuming arguendo that an enhancement were warranted, which it is not, the amount that plaintiffs seek is greatly exaggerated, as it is with the alleged delay in the payment of fees.” “There is no question that the rates sought and awarded in the lodestar calculation are prevailing market rates” when the case was settled, the state’s brief asserted. In addition, the state’s lawyers argued that any prejudgment delay in paying the plaintiffs’ legal fees was compensated when Shoob ordered fees based on current hourly rates at the time of judgment rather than calculating them over the span of the litigation. The state also claimed that any post-judgment delays were compensated with its payment of more than $1.3 million in post-judgment interest last year. “It should not be forgotten that, in cases such as this one… the feeds are paid by the government defendants and, by extension, the taxpayers,” the state’s brief asserted. “The fees are paid, in effect, by state and local taxpayers, and because state and local governments have limited budgets, money that is used to pay attorneys’ fees is money that cannot be used for programs that provide vital public services.” “This case lasted only two-and-a-half years before mediation was ordered, and the case settled after mediation,” the brief stated. “In short, nothing occurred in this case … which would change the motivation of [Children's Rights Inc.] and its co-counsel to pursue child welfare institutional reform litigation, and they have continued to do so. Indeed, there was nothing groundbreaking about this case.” Marcia Robinson Lowry, the executive director of Children’s Rights, disagreed. “In a system that was generally acknowledged to be a very damaging system, there were extraordinarily long and detailed fights. … I think one of the reasons expenses ran so high was because if you said, ‘The sky is blue,’ they would say, ‘The sky is black.’” Proposals that were made to streamline the litigation but that required joint cooperation were rejected by the state, she said. Meanwhile, “bad things were happening to kids. A lot of those considerations went into a decision to seek an enhancement,” she added. Cohen said Wednesday that the state Department of Human Services has authorized him to continue to challenge the fees and “every indication I’ve gotten” from new Gov. Nathan Deal’s staff and new Georgia Attorney General Sam Olens is that “we are supposed to continue to defend” the state by challenging the requested fee enhancements in the now eight-year-old case. Staff Reporter R. Robin McDonald can be reached at [email protected]

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