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Reversing awards of attorneys’ fees in two discrimination cases, the 3rd U.S. Circuit Court of Appeals is sending a message to trial judges that could be summed up by a phrase often used by high school mathematics teachers — “show your work.” “We have difficulty effectively reviewing a grant of attorneys’ fees for abuse of discretion without findings of fact and a clear explanation of the reasons the district court granted the fee,” Senior U.S. Circuit Judge Max Rosenn wrote in Loughner v. University of Pittsburgh. A similar sentiment was echoed by Senior U.S. Circuit Judge Walter K. Stapleton in Lanni v. State of New Jersey: “While our jurisprudence affords great latitude to a district court’s decision on attorneys’ fees, it also constrains such decisions by requiring particularized findings or statements of reasons for significant reductions on costs and fees.” The two unpublished opinions are also chock-full of important holdings on a variety of thorny issues that often arise during fee disputes, including who bears the burden of proof when a fee request is challenged; what to do about excessive charges for faxing and copying; when is it appropriate to award a “multiplier” under the New Jersey Law Against Discrimination; and how to calculate a lawyer’s hourly fee as well as the hourly rates of paralegals and associates. Nonetheless, both decisions are labeled: “Unreported — Not Precedential.” In Lanni, plaintiff Philip Lanni filed suit under the Americans with Disabilities Act and the LAD claiming that his supervisors and co-workers at the New Jersey Department of Environmental Protection made him the butt of jokes and verbally abused him due to his learning disabilities. A jury awarded Lanni more than $225,000, mostly in noneconomic damages, after a 19-day trial federal Judge Anne E. Thompson of the U.S. District Court for the District of New Jersey. Lanni’s lawyers — Linda Wong and Daniel C. Fleming of Wong & Fleming in Edison, N.J. — then asked for more than $1.1 million in fees and nearly $50,000 in costs. Judge Thompson slashed the fees down to $277,723 and awarded only half of the costs. On appeal, Lanni’s lawyers raised five challenges to Thompson’s decision. First, they argued that she made fundamental errors in calculating their hourly rates and the rates of their associates and paralegals. Wong and Fleming both asked for $325 per hour as their “current market rate,” but Thompson ruled that their rates should be calculated on a graduated scale, varying according to the time period when the services were performed. Thompson concluded that over the four years of litigation, the two partners deserved to be paid $175 per hour for work in the first year, with $10 increases each year, resulting in a rate of $205 for work in the final year. Now the 3rd Circuit has ruled that Thompson erred when she set out to establish the historic rates. “When attorney’s fees are awarded, the current market rate must be used,” Stapleton wrote. “The current market rate is the rate at the time of the fee petition, not the rate at the time the services were performed.” Thompson said she was using the graduated scale because it would “offset the costs of the delay in payment to the plaintiff’s counsel, while still avoiding a windfall to counsel beyond their reasonable rate.” But Stapleton said, “A current market rate is exactly that — a reasonable rate based on the currently prevailing rates in the community for comparable legal services. It is not a graduated schedule of past rates.” Thompson also found that the requested $180 rates for associates and $70 rates for paralegals at Wong & Fleming were unreasonable. To fix the overcharging, Thompson looked to the partners’ rates and concluded that the court-awarded rates were just 63 percent of the requested rates. She therefore cut the associates’ rates by the same percentage. But Stapleton found that Thompson should have focused on the market rates for associates and paralegals and that her novel method of slashing the rates by the same percentage as the partners was legally unsound. “This method of calculation seems less oriented towards making a proper determination of a reasonable rate than towards punishing overreaching,” Stapleton wrote. TWO PARTNERS, ONE TRIAL The second issue on appeal was Thompson’s decision to slash 138 hours from the bill because both partners had attended the trial. Stapleton affirmed the ruling, saying Thompson did not abuse her discretion even though he might have simply cut Fleming’s rate to that of an associate for sitting second chair. “Given Wong’s professed expertise in this area, it would not have been unreasonable to expect her to conduct the trial alone or with the help of an associate,” Stapleton wrote. Similarly, Stapleton rejected the third issue on appeal, saying Thompson did not abuse her discretion in cutting the fees by 25 percent due to the plaintiff’s lack of success on eight of his 10 claims. But on the fourth issue — whether Lanni was entitled to a 75 percent multiplier under the LAD due to the contingent nature of the case — Stapleton found that Thompson failed to make essential findings before denying it. Lanni had paid Wong & Fleming $32,000 during the litigation and was required to pay at least $125 per hour whether he won or lost at trial. Thompson rejected the enhancement request by saying that while the lawyers had argued the case well, their performance did not warrant any multiplier. On appeal, Wong and Fleming argued that Thompson misunderstood their request since they were asking for an enhancement due to the contingent nature of the case — a practice authorized by the New Jersey Supreme Court in Rendine v. Pantzer. Stapleton agreed, saying that Thompson must address whether, under Rendine, the case was a “substantially contingent” case, and, if so, whether a multiplier is warranted for that reason. FAX AND COPY CHARGES Finally, Stapleton found that Thompson went overboard when she slashed the requested costs in half due to what she perceived to be unreasonable charges — 25 cents for each photocopy and $1 per page for faxes. Defense lawyers argued that copies actually cost between 2 cents and 6 cents and that faxes should be charged at just 50 cents per page. Thompson agreed and called the requested charges “excessive and extreme.” As a result, she awarded only half the costs requested. But Stapleton said it was impossible for the appellate court to see how Thompson arrived at her decision to cut a full 50 percent. “We understand the district court’s indignation at what it understandably perceived to be overreaching with respect to faxing and photocopying, and we acknowledge that district courts have broad discretion in the imposition of costs. Nevertheless, without more explanation than we have been given, we can only characterize the court’s 50 percent reduction as arbitrary,” Stapleton wrote. Thompson, he said, did not make any finding of a “pattern of overreaching,” and never made a “reasoned estimate” of the overcharges. As a result, Stapleton said, “we find ourselves simply unable to tell from when the district court’s 50 percent figure came.” Stapleton was joined in the opinion by Chief 3rd Circuit Judge Edward R. Becker and 3rd Circuit Judge Thomas L. Ambro. The state of New Jersey was represented on appeal by attorneys Allison E. Accurso, Mary C. Jacobson, Steven L. Scher and Barbara Berreski of the New Jersey Attorney General’s Office. THE LOUGHNER CASE In Loughner, a divided appellate panel found that the trial judge improperly rejected the defense objections to a fee petition because the defense lawyers themselves had not turned over documents showing how much time they had spent on the case. But a dissenting judge said the trial judge was right to punish the defense since its refusal to disclose its own hours made it impossible for the judge to weigh the objections in context. The plaintiff, Catherine M. Loughner, filed suit under the Fair Labor Standards Act against Presbyterian Hospital and the University of Pittsburgh for payment of more than $3,000 in unpaid wages and $25,000 in overtime. On the eve of trial, the case settled for $27,000 with an agreement that said Loughner was the “prevailing party” and was therefore entitled to attorneys’ fees. But when attorney Michael E. Hoover of Diefenderfer Hoover Boyle & Wood in Pittsburgh asked for more than $118,000 in fees, the defense cried foul and objected, saying he couldn’t justify the number of hours he claimed to have worked. Hoover claimed he had spent nearly 475 hours on the case and that he charges $250 per hour. But Presbyterian’s lawyer, Lawrence J. Baldasare of Pietrogallo Busick & Gordon in Pittsburgh, argued that Hoover should not have performed all of the work himself since many of the tasks could have been handled by a paralegal or an associate. Hoover responded by demanding that Baldasare’s firm turn over its records of how much time was spent defending the case, but the defense said it didn’t keep such records. U.S. District Judge William L. Standish at one point seemed to tell Hoover not to expect anything when he told Baldasare “if you don’t have separate billings, just tell him that.” Later, however, Standish said he was awarding Hoover all of his claimed hours — which by then had swelled to 506 hours due to the battling over the fees — because the defense had failed to respond to his request. “I’ve never had anybody ask for the number of hours a defendant has spent, but if you can’t even come up with a ballpark figure and say we only spent half as many hours as he spent, I have to infer that the defendant spent a lot of hours also,” Standish said in a ruling from the bench. But Standish cut Hoover’s hourly rate to $175, saying he believed that a wage and overtime case is not as complex as an employment discrimination case, and that Hoover hadn’t adjusted his rates to reflect “the type of work he was performing.” As a result, Standish awarded Hoover $88,655 in fees and $2,875 in costs. Now the 3rd Circuit has ruled that Standish erred by dismissing the defense objections without ever examining the plaintiff’s claimed hours and by failing to explain how he arrived at the $175 figure for Hoover’s current market rate. Writing for the majority, Rosenn said that Standish “did not explain how defense counsel’s inability or failure to provide the hours they charged on this case, alone, supports the conclusion that 506 attorney hours is reasonable to settle, without a trial, a simple wage and hour case.” Rosenn, who was joined by 3rd Circuit Judge Carol Los Mansmann, said that once the defense raised objections to the fees, Standish had a duty to evaluate the fee petition in light of the objections. Instead, Rosenn said, Standish apparently “accepted carte blanche the plaintiff’s claim for expended time.” But in dissent, 3rd Circuit Judge Richard L. Nygaard said he believed Standish acted properly since his ruling was based on a refusal to accept the defense explanation for why it could not produce time records. “The defendants refused to cooperate. They failed even to attempt to calculate the number of hours they spent … even when directed by the court to do so,” Nygaard wrote. “Regardless of the defendants’ billing system, they cannot simply thumb their nose at the court’s request. When they refused, the district court merely accepted and deemed admitted the allegations of the plaintiff,” Nygaard wrote. But Nygaard said he agreed with Rosenn’s ruling that Standish had failed to explain how he arrived at the $175 hourly rate. Rosenn found that Standish was correct in holding that Hoover was not entitled to $250 per hour due to his charging a partner’s rate for every task. But Rosenn said Standish erred because he “failed to reach a reasonable rate for the separate tasks performed.” Although Rosenn said $175 would not be an unreasonable rate for the “wide range” of tasks that Hoover performed, he ruled that on remand, Standish “should reach a reasoned conclusion as to the prevailing market rate for the type of tasks delineated in Hoover’s petition.”

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