By Christopher Dunn — Civil rights suits often are possible only because of statutory provisions authorizing courts to award attorney's fees to prevailing plaintiffs. In two recent decisions, however, the U.S. Court of Appeals for the Second Circuit, led by former Chief Judge John Walker and current Chief Judge Dennis Jacobs, has substantially reduced the fees available to Manhattan civil rights lawyers who file cases outside the U.S. District Court for the Southern District of New York. Even more troubling, the court did so in terms that threaten to undermine fee awards more broadly. A Fundamental Shift The first sign of a significant shift in the Second Circuit's approach to attorney's fees in civil rights cases came in Arbor Hill Concerned Citizens Neighborhood Ass'n v. County of Albany, first decided in April 2007 and amended twice over the following year. As noted in an earlier column, Arbor Hill was a voting rights case brought in the Northern District of New York in which the plaintiffs were represented by a Manhattan-based private law firm and a public-interest organization from Washington, D.C. The primary question in the Second Circuit concerned application of the so-called "forum rule," which stands for the general proposition that fee awards should be based on local prevailing rates even when plaintiffs' counsel come from outside the district in which the case is brought. In an opinion written by Judge Walker and joined by Judge Jacobs (as well as former Supreme Court Justice Sandra Day O'Connor), the Court of Appeals, however, did not limit itself to the forum issue in the case but addressed the much broader issue of the role of "the market" in setting all hourly rates in civil rights cases: Moreover, this dispute concerning the "forum rule" is but a symptom of a more serious illness: Our fee-setting jurisprudence has become needlessly confused—it has become untethered from the free market it is meant to approximate. We therefore suggest that the district court consider, in setting the reasonable hourly rate it uses to calculate [a presumptively reasonable fee award], what a reasonable, paying client would be willing to pay. "Bearing these principles in mind," Judge Walker then identified various factors that would affect an appropriate hourly rate, including "whether the attorney had an interest (independent of that of the client) in achieving the ends of the litigation or initiated the representation himself, whether the attorney was initially acting pro bono (such that a client might be aware that the attorney expected low or non-existent remuneration), and other returns (such as reputation, etc.) the attorney expected from the representation." Though not even part of the case, the court came back to the point twice again. Later observing that "[b]y asking what a reasonable, paying client would do, a district court best approximates the workings of today's market for legal services," the court noted that "a reasonable, paying client might consider whether a lawyer is willing to offer his services in whole or in part pro bono, or to promote the lawyer's own reputations or societal goals." Finally, invoking this market view of fees, the court rejected the claim for a fee award based on Southern District rates: We are confident that a reasonable, paying client would have known that law firms undertaking representation such as that of plaintiff's often obtain considerable non-monetary returns—in experience, reputation, or achievement of the attorney's own interests and agenda—and would have insisted on paying his attorneys at a rate no higher than that charged by Albany attorneys…. This approach, which suggested that pro bono counsel were entitled to reduced or even no fee awards because they were prepared to work for free, marked a radical departure from long-standing jurisprudence that held that fee awards in civil rights actions were to be based on the rates charged to paying clients by similarly qualified private counsel doing similarly complex and difficult work. Not surprisingly, the Arbor Hill decision prompted alarm in the civil rights community and led to a vigorous rehearing petition. In response the panel, though denying the petition, issued a revised opinion in July 2007 with a new footnote in which it disclaimed any intention of barring pro bono counsel from recovering attorney's fees: Our decision today in no way suggests that attorneys from non-profit organizations or attorneys from private law firms engaged in pro bono work are excluded from the usual approach to determining attorney's fees. We hold only that in calculating the reasonable hourly rate for particular legal services, a district court should consider what a reasonable paying client would expect to pay. The court did not, however, otherwise change any of the market discussion in the body of the opinion. Then, in a highly unusual move, the panel nearly a year later in April 2008 issued yet another revised opinion, once again attempting to address concerns about the implications of its market-based reformulation of attorney's fees for pro bono counsel. Proving the importance some jurists assign to footnotes, the panel further revised its opinion by rewriting the footnote it had added to the first revised opinion. After repeating the first sentence about not meaning to suggest pro bono counsel are excluded from the "usual approach to determining attorney's fees," the court offered this further gloss on its opinion: The reasonableness of a fee award does not depend on whether the attorney works at a private law firm or a public interest organization nor is the award necessarily limited because the attorney has agreed to undertake the case for a reduced fee compared to a customary market rate…. All we are holding is that in calculating the reasonable hourly rate for particular legal services, a district court should consider all relevant circumstances in concluding what a reasonable client would expect to pay. Thus, attorneys—regardless of whether they are pursing litigation on behalf of a paying client or a non-paying client—should receive out-of-district fees only if a reasonable, paying client would have retained out-of-district counsel. Clarification of 'Arbor Hill' Against the backdrop of Arbor Hill, the Second Circuit issued Simmons v. New York City Transit earlier this month. Simmons was an employment discrimination case litigated in the U.S. District Court for the Eastern District of New York (in Brooklyn) by a Manhattan-based attorney. After the plaintiff prevailed at trial and was awarded $150,000 in damages, the district court awarded her attorney fees totaling $213,085. Consistent with many rulings from the Eastern District, the lower court based this award on Southern District rates. The Second Circuit reversed, adhering to the market-based approach of Arbor Hill. Again written by Judge Walker and joined by Judge Jacobs (and Judge Pierre Leval), the opinion opens with the comment, "Once again, we are called upon to clarify the boundaries of the attorney's fees award." Turning to Arbor Hill, Judge Walker explained that the case established that the fee to be awarded in civil rights cases "boils down to what a reasonable, paying client would be willing to pay given that such a party wishes to spend the minimum necessary to litigate the case effectively." Apparently dissatisfied with some decisions that followed Arbor Hill, Judge Walker declared that the court needed to provide district courts with "further guidance" about when they were allowed to rely on out-of-district rates. That guidance consisted first of an affirmation that a presumption favored in-district rates and that the party seeking fees bears the burden of overcoming that presumption. And to overcome that presumption, Judge Walker set out the following standard: The party seeking the award must make a particularized showing, not only that the selection of out-of-district counsel was predicated on experience-based, objective factors, but also of the likelihood that use of in-district counsel would produce a substantially inferior result. Unless these limitations are observed, the award of attorney's fees would not respect what we described in Arbor Hill as the touchstone of the doctrine, that district courts should award fees just high enough to attract competent counsel. (emphasis in opinion). In light of this "clarification," Judge Walker concluded that the plaintiff had failed to overcome the presumption against out-of-district rates because she had presented no evidence that "she would have received a substantially inferior result to that provided by her selected counsel." And as a result, the court reduced the $213,000 fee award by 21 percent—a $45,000 loss for the lawyer. Looking Forward Arbor Hill and Simmons spell trouble for civil rights litigators. As an initial matter, they will make it very difficult for Manhattan-based lawyers to obtain fees based on Manhattan rates when they successfully litigate cases outside the Southern District, even when the lawyer has done nothing more than cross the Brooklyn Bridge to file in the Eastern District courthouse. To do so, the lawyer now has to prove that his or her client would have ended up with a "substantially inferior result" if an in-district lawyer had been retained. The court, however, does not explain how one might prove this, and it is hard to see how one would do so. In theory, one could imagine an affidavit in Ms. Simmons' case contending that she would have obtained a jury verdict of only $100,000 had she retained a competent Eastern District attorney, but this would be an entirely speculative assessment. Moreover, the court offers no guidance as to how inferior a result need be to qualify as "substantially inferior" so as to overcome the presumption against out-of-district rates. Beyond these proof problems are larger issues about the Second Circuit's basic views about attorney's fees and the quality of representation to which civil rights plaintiffs are entitled. Starting with the new standard articulated in Simmons, it is troubling that the court adopts the view that it is acceptable for plaintiffs to be saddled with inferior results, as the presumption can only be overcome by a showing of "substantially inferior" results. Thus, to go back to Ms. Simmons, there apparently are a range of outcomes below her $150,000 jury verdict—perhaps $140,000, perhaps $110,000—that would not be sufficiently inferior to overcome the presumption. More generally, the suggestion that fee awards should be based on what the client would actually pay the lawyer, taking into account issues like the lawyer's willingness to work pro bono or the nonmonetary benefits that the case might yield (such as enhanced reputation), poses a substantial threat to fees awards in cases brought by public-interest organizations and private lawyers with pro bono practices. These organizations and practitioners always are prepared to represent clients for free, but this cannot be a basis for reducing or eliminating their fee awards. Indeed, the very purpose of statutes authorizing the award of attorney's fees is to encourage exactly this type of representation. Given the sweeping changes suggested by Arbor Hill and Simmons, the next few years may be difficult ones for civil rights litigators practicing within the Second Circuit. How district courts construe these cases will bear close watching, and there undoubtedly will be more developments in the Court of Appeals. Christopher Dunn is the associate legal director of the New York Civil Liberties Union.