Last week, the Ninth Circuit issued a new attorney fee decision that is sure to have a ripple effect throughout the Longshore and Defense Base Act community. It’s so important that I might have to amend my Year in Review post. The decision is Shirrod v. Director, OWCP.
Attorney’s Fees Under the Longshore Act:
Attorney’s fees are controlled by Section 28 of the Longshore and Harbor Workers’ Compensation Act. See 33 U.S.C. § 928 (1984). If an employer and carrier denies liability for indemnity or medical benefits, and they are subsequently found liable, then they must pay fees.
It should come as no surprise that parties often debate the amount owed in attorney’s fees. According to Section 28(a), fees must be “reasonable.” Reasonableness starts with an equation called the “lodestar method.” The equation seems simple enough: multiply a reasonable hourly rate by the number of hours reasonably expended on a case.
Difficulties arise, however, when trying to estimate a “reasonable” hourly rate. Employers and carriers want to pay lower hourly rates than the attorney will accept; and attorneys want a higher hourly rate than employers and carriers are willing to pay. Consequently, when a fee dispute arises, courts must analyze the “prevailing market rate” for the petitioning attorney (or law firm).
The “Relevant Community”:
The Ninth Circuit accepted the locale used by the Office of Administrative Law Judge and the Benefits Review Board. Specifically, Portland, Oregon, was the appropriate community to analyze to determine reasonableness of the attorney’s hourly rate. The Ninth Circuit noted that the lawyer maintained an office in Portland and the administrative hearing took place in Portland.
I was also impressed by the language used by the court, some of which appears as parentheticals to case citations. This language could be considered legal guideposts for future courts:
- “[T]he ‘relevant community’ in Longshore Act cases should focus on the location where the litigation took place.”
- “[T]he ‘relevant community’ should “turn on inquiries about the lawyer and client[.]”
- “The rate awarded by the [BRB] shall be based on what is reasonable and customary in the area where the services are rendered for a person of that particular professional status.”
- “We acknowledge that the ‘relevant community’ may depend on the facts of specific cases, and we decline to construct a bright-line rule.”
Improper Use of a “Proxy Market Rate”:
The Ninth Circuit disagreed with the Office of Administrative Law Judges’ and the Benefits Review Board’s use of a “proxy market rate.” Essentially, the proxy market rate is a combination and averaging of various hourly rates reported in the 2007 Survey of Law Firm Economics by Altman Weil Publications. The problem was that the rate did not apply to the relevant community in this case:
The proxy market rate adopted by [the administrative law judge] is based on five constituent rates from the Altman Weil Survey: the 75th-percentile rates for lawyers practicing employment, maritime, personal-injury, and workers’-compensation law, and the 75th-percentile rate for Oregon lawyers with over 30 years of experience. … The constituent rates do not relate specifically to Portland, Oregon, the “relevant community”; one of the rates is expressly geographically limited–but encompasses the entire state of Oregon–and, although it is not entirely clear from the record, the practice-area rates appear to be national in scope. We hold that it was error for [the administrative law judge] to apply a rate bearing no direct nexus to the “relevant community.”
But the Ninth Circuit did not completely abolish use of a proxy market rate. If the relevant community were defined differently–perhaps nationally–or if reliable data did not exist, then a proxy market rate “could be permissible.” It’s just that, in this case, the proxy market rate had nothing to do with Portland:
Because the lodestar method requires a “reasonable attorney’s fee” to be based on market rates in the “relevant community,” we hold that the BRB erred in affirming an attorney’s-fee award based on a proxy market rate not tailored to the “relevant community,” which, in this case, [the administrative law judge] found to be Portland.
Use Market Rates to Determine a Reasonable Rate:
Another issue was that the administrative law judge included the rates for attorneys practicing workers’-compensation law within the proxy market rate calculation. The problem with using work comp rates is that “billing rates reported by workers’-compensation lawyers do not necessarily represent market rates that are usable in a lodestar calculation.”
The equation for the lodestar method requires a reviewing to court to multiply a reasonable hourly rate by the number of hours reasonably expended on a case. Reasonableness in the hourly rate is based on the market rate in the relevant community. But sometimes fees paid to workers’-compensation claimant’s attorneys are not based on the market, but instead on outside considerations. Consequently, “[i]f reported rates for [state] workers’-compensation practices do not reflect market rates in the ‘relevant community,’ they cannot be used in a lodestar calculation, no matter how similar the skills involved are.”
Photo from Flickr user Pictures of Money.