Seyfarth Synopsis: In a recent ruling out of the U.S. District Court for the District of Columbia, the Court assessed a petition for attorney’s fees filed in conjunction with the settlement of a 43-year old sex discrimination class action. After entering into the largest discrimination settlement in United States history – with each of the over 1,000 class members receiving an average award of $460,000 – class counsel sought a fee award that would raise the total fee award for the case to $75 million, which the Court ultimately denied. Given the eye-popping numbers underlying the fees request, the decision in this case – Hartman, et al. v. Pompeo, et al., No. 77-CV-2019, 2020 WL 6445873 (D.D.C. Nov. 3, 2020) – is a must-read for employers, corporate counsel, and class action practitioners.
Filed over 43 years ago in 1977, the Hartman case was brought by female reporters, editors, announcers, producers, and others against the Voice of America, the government-run radio service that offered news and entertainment programs to listeners outside of the United States, and its former parent agency, the United States Information Agency, components of which are now incorporated into the U.S. Department of State. Plaintiffs alleged that the Defendants refused to hire or promote women, including by taking active steps to commit test fraud against female applicants in the hiring process, such as altering test scores and destroying personnel and test files, in violation of Title VII of the Civil Rights Act of 1964.
Plaintiffs’ counsel worked without any fees for the first 18 years of the litigation and, on July 30, 1993, Plaintiffs submitted their first fee petition, seeking fees incurred from 1977 through August 31, 1992. Plaintiffs submitted 27 additional interim fee petitions throughout the case, resulting in payments totaling $26,570,701.19. On March 24, 2000, the parties entered into a consent decree that provided a settlement fund of $508 million for the class. On the issue of fees, the consent decree provided only that Plaintiffs’ counsel would be entitled to reasonable attorneys’ fees and costs, deferring the resolution of the attorneys’ fees issue until the end of litigation and making clear that Plaintiffs’ counsel was not seeking a percentage of the class recovery.
In 2018, the last portion of the $508 million settlement fund was distributed to class members, leaving attorneys’ fees as the only remaining issue in the case. In their motion for a final determination of attorneys’ fees award filed on October 19, 2019, Plaintiffs sought an additional $34,114,143.52 in fees, for a final total fee recovery of $75 million. Plaintiffs’ counsel argued that the additional amount sought was based on a percentage of the total recovery and that a lodestar method of calculation was not warranted. In the alternative, Plaintiffs’ counsel argued that, if a lodestar method was used, an enhancement calculation was warranted that would result in an adjusted amount equivalent to the amount of fees sought in their motion. Defendants opposed any award of fees beyond what had already been paid to Plaintiffs’ counsel throughout the case, asserting that under a traditional lodestar method, they had already received a reasonable fee award.
The Court’s Opinion
The Court focused analysis of Plaintiffs’ motion for fees by determining the appropriate method for calculating the fees for the case. The Court analyzed whether the case was a “fee-shifting case,” which would necessitate a lodestar method of calculation, or a “fee-spreading case,” which would allow for a percentage-of-the-fund calculation of fees. To assess under which category the case fell, the Court looked to the consent decree to determine the parties’ intent.
Although the consent decree was ambiguous on its face as to which method the parties had agreed, the Court concluded that, because the parties ultimately had agreed that Defendants would make the final fee payments to Plaintiffs, and because Plaintiffs’ counsel intentionally had declined to negotiate a percentage of the fund award for attorneys’ fees, the parties most likely intended for the case to be fee-shifting, thereby necessitating a lodestar method of fees calculation. The Plaintiffs argued that the settlement was actually a “constructive common-fund,” which is an equitable arrangement where, even if attorneys’ fees and class settlements are paid out of separate funds, if the two are negotiated as a “package deal,” common fund principles, including a percentage-of-the-fund fees calculation, should apply. The Court rejected this argument. Instead, it determined that the fees and class fund were not negotiated as a package deal because the parties specifically declined to set a final fee award in the consent decree.
The Court also analyzed Plaintiffs’ argument that, if the fees were to be calculated using the lodestar method, it should include an enhanced calculation. Generally, the lodestar is calculated by multiplying the hours reasonably expended on the litigation multiplied by a reasonable hourly rate. There is traditionally a strong presumption that the lodestar results in sufficient attorneys’ fees for a case, and parties seeking an enhancement have the burden to show specific evidence supporting such a calculation.
In this case, Plaintiffs’ counsel argued that the lodestar calculation did not adequately measure the true market value of the legal work because: (i) junior attorneys on the case performed work at lower rates traditionally done by more senior attorneys; (ii) the rates used to determine the interim payments were not market rates because they were based on the Laffey matrix, a grid that established hourly rates for Washington D.C. lawyers of differing levels of experience engaged in complex litigation; and (iii) there was significant delay in Plaintiffs receiving final payment of their fees.
Although the Court rejected Plaintiffs’ first argument – finding that there was little support for an enhancement based on lower-level attorneys performing more advanced work – it did find their second argument persuasive. Determining that the Laffey matrix failed to keep up with the true rate of inflation, the Court assessed the time period for which Plaintiffs’ counsel was not compensated at their full market value. From the beginning of the case through 1998, Plaintiffs’ counsel represented that the fees they sought in their fee petitions corresponded to their actual billing rates in similar cases. Accordingly, the Court held that Plaintiffs’ counsel was eligible for an enhancement calculation for the fees covering work performed in 1998 through 2018. Relatedly, the Court ruled that, because Plaintiffs’ counsel had received sub-market fee rates for approximately 20 years, they were entitled to some additional fees to make up for the delay in receiving payment.
Turning to the appropriate enhancement calculation for Plaintiffs’ fees, the Court assessed Plaintiffs’ argument that the appropriate enhancement resulted in a fee calculation of $75,232,463.96, which compensated Plaintiffs for 116,783 hours of work at the true market rates for the year 2010. However, the Court rejected this calculation because Plaintiffs did not sufficiently justify using the 2010 rates for the entirety of the case. Accordingly, the Court denied Plaintiffs’ motion and sent them “back to the drawing board” to calculate a more appropriate enhancement. Id. at 19.
Aside from the sheer amount of attorneys’ fees at issue, the Court’s decision in Hartman is notable for multiple reasons. First, it marks the near end of one of the longest-running and highest-value employment discrimination class action in history. Second, the Court’s assessment of Plaintiffs’ request for fees highlights the importance of clearly describing the parties’ intent for fee payment in settlements of class actions in order to avoid future litigation over the issue. Third, the Court’s outline of the stringent requirements for an enhancement to a lodestar calculation, even in the face of exceptional litigation such as Hartman, provides an additional tool to defense counsel opposing requests for an enhancement of fees. The resolution of this issue will be a must-watch for class action practitioners.