JUSTICE ALBRIGHT delivered the Opinion of the Court.
CHIEF JUSTICE DAVIS and JUSTICE BENJAMIN concur and reserve the right to file
concurring opinions.
JUSTICE MAYNARD concurs, in part, and dissents, in
part, and reserves the right to file a separate opinion.
4. “When the relief sought in a human
rights action is primarily equitable, “reasonable attorneys' fees” should
be determined by (1) multiplying the number of hours reasonably expended on the
litigation times a reasonable hourly rate _ the lodestar calculation _ and (2)
allowing, if appropriate, a contingency enhancement. The general factors outlined
in Syllabus Point 4 [of] Aetna Cas. & Sur. Co. v. Pitrolo, 176 W.Va.
190, 342 S.E.2d 156 (1986) should be considered to determine: (1) the reasonableness
of both time expended and hourly rate charged; and, (2) the allowance and amount
of a contingency enhancement.” Syl. Pt. 3, Bishop Coal v. Salyers,
181 W.Va. 71, 380 S.E.2d 238 (1989).
5. “Where attorney's fees are sought
against a third party, the test of what should be considered a reasonable fee
is determined not solely by the fee arrangement between the attorney and his
client. The reasonableness of attorney's fees is generally based on broader factors
such as: (1) the time and labor required; (2) the novelty and difficulty of the
questions; (3) the skill requisite to perform the legal service properly; (4)
the preclusion of other employment by the attorney due to acceptance of the case;
(5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations
imposed by the client or the circumstances; (8) the amount involved and the results
obtained; (9) the experience, reputation, and ability of the attorneys; (10)
the undesirability of the case; (11) the nature and length of the professional
relationship with the client; and (12) awards in
similar cases.” Syl. Pt. 4, Aetna Cas. & Sur. Co. v. Pitrolo,
176 W.Va. 190, 342 S.E.2d 156 (1986).
6. While fee structures that involve a contingent-fee
arrangement are clearly enforceable despite the existence of a fee-shifting statute,
attorneys are not entitled to receive both the statutory fee award and the full
amount of the contingent fee.
Albright, Justice:
Appellant Holly D. Heldreth appeals from
the November 16, 2004, order of the Circuit Court of Kanawha County through which
the trial court made a reduced award of attorney's fees that are statutorily
authorized (See footnote
1) in connection with a successful result in a sexual harassment
action. Upon its review and hearing of Appellant's counsel's motion for cumulative
attorney's fees in the amount of $43,085, the trial court awarded twenty percent
of the fees requested for the amount of $8,617. (See
footnote 2) In justification of this fee reduction, the trial court
explained that the fees submitted were not capable of being readily divided based
on the differing theories originally advanced by Ms. Heldreth and accordingly
required an across-the-board eighty percent deduction because Appellant succeeded
on only one of her five original theories of recovery. (See
footnote 3) Upon our review of this issue, we conclude that the trial
court committed error by arriving at the award of attorney's fees through application
of a straight percentage formula of reduction. Accordingly, we reverse and remand
to permit the trial court to make an award of reasonable attorney's fees by applying
factors appropriate
for calculation of a reasonable fee award. In addition, on remand the lower
court should consider the additional guidance offered by this Court with regard
to making a statutory fee award where the complainant and her counsel have
previously entered into a contingency fee agreement.
The
hourly rate of $175 is an appropriate rate based on prevailing market rates of
other similar attorneys in this area. However, the total number of hours expended
(246.90 hours) should not be used, as the Plaintiff only prevailed as to one
count which provided for the recovery of attorney fees. It is impossible to discern
from the detailed invoice which Plaintiff's counsel has submitted how many hours
were devoted to each distinct cause. Therefore, the Court will use a percentage
basis. Since only one of the causes of action allowed for the recovery of attorneys'
fees and the Plaintiff prevailed on that one cause of action, then 20 percent
of the total attorneys' fees or the sum of $8,617.00 should be awarded to Plaintiff's
counsel, in addition to the forty (40) percent of the total verdict he will receive
from the Plaintiff under their contingency fee arrangement.
The underlying basis for an award of fees
pursuant to the fee shifting statute at issue was articulated in Bishop Coal Company
v. Salyers, 181 W.Va. 71, 380 S.E.2d 238 (1989):
The
goal of the West Virginia human rights law is to protect the most basic, cherished
rights and liberties of the citizens of West Virginia. Effective enforcement
of the human rights law depends upon the action of private citizens who, from
our observations of these matters, usually lack the resources to retain the legal
counsel necessary to vindicate their rights. Full enforcement of the civil rights
act requires adequate fee awards.
181 W.Va. at 80, 380 S.E.2d at 247. Thus, inherent in any statutory fee award
made pursuant to West Virginia Code § 5-11-13(c) is a recognition that
the economic incentive provided by such a fee-shifting mechanism is necessary
to attract competent counsel for the purpose of enforcing civil rights laws
that serve to protect the interests of this state's citizenry.
The calculation of attorney's fees in a human
rights action requires, as this Court has previously recognized, the exclusion
of hours spent on unsuccessful claims. In explaining in Bishop Coal that
a fee reduction is warranted when a plaintiff is only partially successful in
pursuing various theories of recovery, this Court stated:
In
the case before us the appellant argues that Ms. Salyers did not prevail on all
counts of her complaint and therefore, the attorney's fees should be reduced
to the extent that hours were devoted to issues on which Ms. Salyers did not
prevail. We agree with appellant's general principle, but we
find that in Ms. Salyers' case the appellant failed to refine its general argument
to apply to the specific facts before us.
181 W.Va. at 82-83, 380 S.E.2d at 249-250. In explaining, however, that the
hours spent preparing a case are not always capable of being categorized according
to the theories pursued in developing the case, we opined:
As
we review the record, we find that the gravamen of Ms. Salyers['] complaint was
that she should have been made a scoop operator and would have been promoted
to that position had she not been a woman. On this issue she prevailed entirely
and the other allegations of sexual harassment were simply part and parcel of
her basic complaint. Often plaintiffs will have one basic problem which, in a
complaint, they express in numerous alternative ways, each corresponding to a
slightly different legal theory. When this occurs, as it did in the case before
us, the fact that the commission or court selects one of the theories upon which
to award relief does not necessarily mean that the plaintiff has not substantially
prevailed. However, when a complainant sets forth distinct causes of action so
that the facts supporting one are entirely different from the facts supporting
another, and then fails to prevail on one or more such distinct causes of action,
the appellant is correct that attorneys' fees for the unsuccessful causes of
action should not be awarded. However, Ms. Salyers' third issue, namely, pattern
discrimination, was an extension of her other issues and not a distinct cause
of action. Further, limited effort was expended to develop additional facts beyond
the facts alleged under her prevailing theory.
Id. at 83, 380 S.E.2d at 250 (footnote omitted).
What is critical in parsing out fees for
unsuccessful claims, as Bishop Coal makes clear, is determining whether
a separate and distinct factual development was
required to support those alternate theories of recovery upon which recovery
was not obtained. If this is the case, then those fees arising in connection
with the unsuccessful claims are to be culled out. When, however, the plaintiff's
counsel relies on the same factual pattern to assert different types of potential
recovery, the fee sifting process becomes more difficult. The United States
Supreme Court (See footnote
9) discussed the inherent difficulty presented by the need to make
statutory fee awards based on the degree of the plaintiff's success in Hensley
v. Eckerhart, 461 U.S. 424 (1983):
[T]he plaintiff's claims for
relief will involve a common core of facts or will be based on related legal
theories. Much of counsel's time will be devoted generally to the litigation
as a whole, making it difficult to divide the hours expended on a claim-by-claim
basis. Such a lawsuit cannot be viewed as a series of discrete claims. Instead,
the district court should focus on the significance of the overall relief obtained
by the plaintiff in relation to the hours reasonably expended on the litigation.Id. at
435; (See footnote 10) see
also Johnson v. Hugo's Skateway, 974 F.2d 1408, 1419 (4th Cir.
1992) (remanding fee award based on district court's reduction of counsel's fee
request after recognizing that the plaintiff “received a sizable verdict
and that all three counts arose from a 'common core of facts'”) (citing Hensley, 461
U.S. 424 [, 435]).
While properly recognizing the need to reduce
the submitted attorney's fees based on Appellant's partial success at trial,
the circuit court applied a misguided approach
in making the fee reduction. In this case, the circuit court concluded that
it could not identify which of the submitted time descriptions corresponded
to the successful theory upon which Appellant prevailed. Rather than requesting
a revised time report from Appellant's counsel with hours spent on the unsuccessful
theories redacted or attempting to identify a reasonable fee based on the hours
submitted, the trial court opted to apply a twenty percent multiplier to arrive
at the hours that were reasonably spent on advancing Appellant's case. This
methodology of calculating attorney's fees has been expressly rejected by other
courts.
In Hensley, the United States Supreme
Court “agree[d] with the District Court's rejection of 'a mathematical approach
comparing the total number of issues in the case with those actually prevailed
upon.'” 461 U.S. at 435-36 n.11. As the high court commented, “[s]uch
a ratio provides little aid in determining what is a reasonable fee in light
of all the relevant factors.” Id. at 436 n.11. In an apposite decision,
the Fourth Circuit Court of Appeals in Brodziak v. Runyon, 145 F.3d 194
(4th Cir. 1998), vacated an award of attorney's fees where the district
court awarded 40% of requested fees and costs based on the fact that the plaintiff
prevailed on only 40% of his claims. Observing that “the Hensley Court
explicitly rejected the notion that a court may calculate an award of attorneys'
fees by means of a purely mathematical comparison between the number of claims
pressed and the number prevailed upon,” the appellate court in Brodziak found
the 60% fee reduction to be in contravention of the principles announced in Hensley.
145 F.3d at 197.
While a trial court cannot calculate what
constitutes a reasonable award of attorney's fees by utilizing a mathematical
formula that compares the successful to the unsuccessful claims, as the high
court announced in Hensley, we acknowledge that “[t]here is no precise
rule or formula for making these [fee] determinations.” 461 U.S. at 436.
In making a reduction based on the limited success of a plaintiff in pursuing
his/her statutory claims, the United States Supreme Court offered the suggestion
in Hensley that “the district court may attempt to identify specific
hours that should be eliminated, or it may simply reduce the award to account
for the limited success.” Id. at 436-37. Accordingly, we hold that
although a circuit court has discretion in setting an award of reasonable attorney's
fees and expenses that are authorized in connection with the successful pursuit
of a claim under the West Virginia Human Rights Act, the trial court is not permitted
to apply a percentage reduction based on the ratio of claims pursued to claims
prevailed upon when making such an award.
The calculation of reasonable fees must be
made pursuant to standards which are well-established for awarding attorney's
fees in cases that involve the protection of human rights. In syllabus point
three of Bishop Coal, we held that:
When
the relief sought in a human rights action is primarily equitable, “reasonable
attorneys' fees” should be determined by (1) multiplying the number of hours
reasonably expended on the litigation times a reasonable hourly rate _ the lodestar
calculation _ and (2) allowing, if appropriate, a contingency enhancement. The
general factors outlined in
Syllabus Point 4 [of] Aetna Cas. & Sur. Co. v. Pitrolo, 176 W.Va.
190, 342 S.E.2d 156 (1986) should be considered to determine: (1) the reasonableness
of both time expended and hourly rate charged; and, (2) the allowance and amount
of a contingency enhancement.
181 W.Va. at 72, 380 S.E.2d at 239. In this case, Appellant did not seek a
contingency enhancement (See
footnote 11) so the issue of fee calculation is centered solely
on arriving at an award based on the standards for determining a reasonable
fee where a third party is required to pay under a fee-shifting mechanism,
such as that presented by West Virginia Code § 5-11-13(c).
Those standards were delineated in syllabus
point four of Aetna Casualty & Surety Co. v. Pitrolo, 176 W.Va. 190,
342 S.E.2d 156 (1986):
Where
attorney's fees are sought against a third party, the test of what should be
considered a reasonable fee is determined not solely by the fee arrangement between
the attorney and his client. The reasonableness of attorney's fees is generally
based on broader factors such as: (1) the time and labor required; (2)
the novelty and difficulty of the questions; (3) the skill requisite to perform
the legal service properly; (4) the preclusion of other employment by the attorney
due to acceptance of the case; (5) the customary fee; (6) whether the fee is
fixed or contingent; (7) time limitations imposed by the client or the circumstances;
(8) the amount involved and the results obtained; (9) the experience, reputation,
and ability of the attorneys; (10) the undesirability of the case; (11) the
nature and length of the professional relationship with the client; and (12)
awards in similar cases.
176 W.Va. at 191-92, 342 S.E.2d at 157. In its order, the circuit recognized
the applicability of these factors and further observed that “Bishop does
not contemplate that every factor listed in Aetna be considered in determining
the reasonableness of attorneys' fees.” Casteel v. Consolidation Coal
Co., 181 W.Va. 501, 508, 383 S.E.2d 305, 312 (1989).
After concluding that the full amount of
the requested fee award “should not be used, as the Plaintiff only prevailed
as to one count which provided for the recovery of attorney fees,” the trial
court referenced the factors approved by this Court for determining a reasonable
award of attorney's fees. It did not, however, make specific findings of fact
with regard to these factors, other than finding that the hourly rate of $175 “is
an appropriate rate based on prevailing market rates of other similar attorneys
in this area.” The only other findings made by the trial court were more
typical of the considerations employed when applying a contingency enhancement,
which was not at issue in this case. (See
footnote 12)
While the trial court's findings relative to the fee award in this case amount to more than the summary conclusion of a specific fee award that this Court found deficient in Shafer v. Kings Tire Service, Inc., 215 W.Va. 169, 597 S.E.2d 302 (2004), the findings made in this case do not fully comport with what is required under both Bishop Coal and Pitrolo. In Shafer, the trial court referenced its discretion to set attorney's fees, noted that the plaintiff's partial success warranted “some award of a portion of a attorney's fees [sic],” and then announced a seemingly arbitrary fee amount. 215 W.Va. at 178, 597 S.E.2d at 311. As we reasoned in reversing and remanding the fee award in Shafer, “an award of a portion of the requested fees is allowable [only] if such reduction is supported by application of the Bishop and Pitrolo factors.” 215 W.Va. at 178, 597 S.E.2d at 311.
Given the trial court's improper use of a
mathematical reducer in setting the award of fees and the lack of factual findings
as required by this Court's decisions in Bishop Coal and Pitrolo,
this matter must be reversed and remanded to permit the trial court to recalculate
an award of reasonable attorney's fees. In arriving at that figure, the existence
of a contingency fee agreement should not be relied upon to affect the amount
of the award, as it clearly was when the trial court made its initial award of
statutory fees. (See footnote
13) On remand, the trial court is to determine an award by applying
the factors set forth in Bishop Coal and Pitrolo. (See
footnote 14)
To assist the trial court in making its
determination on remand, we offer the following guidance for consideration in
making the fee award. The trial court needs to be mindful of the fact that the
fee-shifting statute at issue contemplates that the fee award belongs to the
successful complainant. See W.Va. Code § 5-11-13(c); see also
Stair v. Turtzo, Spry, Sbrocchi, Faul & Labarre, 768 A.2d 299, 305 (Pa.
2001) (recognizing that “'it is the party, rather than the lawyer who is
. . . eligible [to obtain statutory fee recovery]'”)
(citing Venegas v. Mitchell, 495 U.S. 82, 87 (1990)). Thus, in making
a new fee award on remand, the trial court should make the statutory fee award
to the plaintiff, rather than to her counsel. The purpose of fee-shifting statutes,
such as that involved here, is to “'benefit the employee, who would otherwise
have to pay the contractual attorney fees out of his or her benefits recovered
in the litigation,'” and not to serve as a fee enhancement mechanism for
attorneys representing complainants in human rights actions. Duhon v. Trend
Serv., Inc., 809 So.2d 1222, 1227 (3rd Cir. 2002) (quoting McCarroll
v. Airport Shuttle, Inc., 773 So.2d 694, 700 (La. 2000) and emphasis omitted).
Having recognized that fee-shifting statutes
are intended to benefit the complainant by not reducing the value of their verdicts,
any amount of a statutory fee award that is over and above the amount of the
contractual obligation to remunerate counsel is properly an amount that can ultimately
be awarded to the attorney. (See
footnote 15) A contingency fee arrangement is not a ceiling with
regard to the fee awards that an attorney can receive where statutory fee-shifting
is involved. In rejecting the notion that a contingent-fee agreement should limit
the amount of fees recoverable in a federal civil rights action, the United States
Supreme Court in Blanchard v. Bergeron, 489 U.S. 87 (1989), reasoned:
Respondent cautions us that refusing to limit recovery to the amount of the contingency agreement will result in a “windfall” to attorneys who accept § 1983 actions. Yet the very nature of recovery . . . is designed to prevent any such “windfall.” Fee awards are to be reasonable, reasonable as to billing rates and reasonable as to the number of hours spent in advancing the successful claims. Accordingly, fee awards, properly calculated, by definition will represent the reasonable worth of the services rendered in vindication of a plaintiff's civil rights claim. It is central to the awarding of attorney's fees . . . that the district court judge, in his or her good judgment, make the assessment of what is a reasonable fee under the circumstances of the case. The trial judge should not be limited by the contractual fee agreement between plaintiff and counsel.
.
. . .The attorney's fee provided for in a contingent-fee agreement is not a ceiling
upon the fees recoverable under § 1988.
489 U.S. at 96; accord Venegas, 495 U.S. 82 (upholding plaintiff's counsel's
right to collect reasonable contingent fee that exceeded statutory fee award
on grounds that civil rights fee- shifting statute controls only what losing
party must pay, not what the prevailing plaintiff must pay his lawyer); Commonwealth
v. PBS Coals, Inc., 677 A.2d 868 (Pa. 1996) (holding that contingency fee
agreement did not preclude attorney from receiving award of statutory attorney's
fees).
In Venegas, the United States Supreme
Court addressed how a plaintiff's freedom to contract with his or her attorney
with regard to fee arrangements impacts on the recovery of fees where a fee-shifting
statute is involved. According to the high Court, the intent of the fee-shifting
mechanism incorporated into the federal civil rights act is to assist
potential complainants in securing “reasonably competent lawyers” and
to “avoid having their recovery reduced by contingent-fee agreements.” 495
U.S. at 86, 89. The United States Supreme Court has made clear, however, that
fee-shifting statutes cannot “protect[] plaintiffs from having to pay
what they have contracted to pay, even though their contractual liability is
greater than the statutory award that they may collect from losing opponents.” Id. at
89. Thus, the enforceability of a contingent-fee contract is not affected by
the presence of a fee-shifting statute that imposes responsibility on a third-party
for attorney's fees and expenses. See Venegas, 495 U.S. at 87 (observing
that nothing “in the legislative history . . . persuades us
that Congress intended [42 U.S.C.] § 1988 to limit civil rights plaintiffs'
freedom to contract with their attorneys”)
While fee structures that involve a contingent-fee
arrangement are clearly enforceable despite the existence of a fee-shifting statute,
attorneys are not entitled to receive both the statutory fee award and the full
amount of the contingent fee. (See
footnote 16) Other courts have
recognized that this would amount to either double recovery or a windfall,
and we agree. See State ex rel. Okla. Bar Ass'n v. Weeks, 969 P.2d 347,
356 (Okla. 1998) (observing that “[t]hose federal courts which have considered
the issue of an attorney's recovery of both the court awarded statutory fee
and the entirety of the contingent fee amount, have disallowed the arrangement
as inappropriate and a windfall to the attorney”); Venegas v. Skaggs, 867
F.2d 527, 534 n.7 (9th Cir. 1989) (“Where the district court
concludes that a contingent fee that exceeds the statutory award is reasonable,
the plaintiff may be required to pay the difference between the [§] 1988
award paid by the defendant and the contingent fee. The plaintiff's attorneys
are not entitled to both the statutory award and the full amount of
the contingent fee.”) (citation omitted), aff'd. sub nom. Venegas
v. Mitchell, 495 U.S. 82 (1990).
When this matter is remanded to the circuit
court, the trial court must first determine whether there was a separate and
distinct factual development that was required to support the four additional
theories of recovery originally pursued by Appellant. For
example, the fees associated with the quid pro quo sexual harassment theory
may be recoverable if the same core facts supported that alternate theory of
sexual discrimination. See Plyler v. Evatt, 902 F.2d 273, 280 (4th Cir.
1990) (stating that “where the issues presented . . . in separate claims
involve the same common core of facts or related legal theories, the case 'cannot
be viewed as a series of discrete claims'” and the trial court should “'focus
on the significance of the overall relief obtained by the plaintiff in relation
to the hours reasonably expended on the litigation'”) (quoting Hensley,
461 U.S. at 435). The overarching concern for the trial court is that the fees
awarded must be reasonable. See Blanchard, 489 U.S. at 92 (noting that
the “'criterion for the court is . . . what is reasonable'”) (quoting Johnson
v. Georgia Hwy. Express, Inc., 488 F.2d 714, 718 (5th Cir. 1974));
W.Va. Code § 5-11-13(c) (providing for “reasonable” attorney's
fees and costs); see also Bostic v. American Gen. Fin., Inc.,
87 F.Supp.2d 611 (S.D. W.Va. 2000) (concluding that 15% reduction of statutory
fee award was necessitated by virtue of inadequate documentation of hours and
additional 5% reduction was required with regard to submitted time entries
based on excessive billing and overlap to assure reasonable award). In reviewing
the submitted fees on remand, the trial court should take note that the most
critical of all the factors looked to in determining a statutory award of attorney's
fees is the degree of success obtained. See Hensley, 461 U.S. at 436; Brodziak,
145 F.3d at 196. And, consistent with the previous practice of this Court,
Appellant is entitled to attorney's fees for services rendered in connection
with this appeal because she has substantially prevailed
in this Court in connection with her continued prosecution of a civil rights
action. See Syl. Pt. 2, Orndorff v. West Virginia Dep't of Health,
165 W.Va. 1, 267 S.E.2d 430 (1980).
Based on the foregoing, the decision of the
Circuit Court of Harrison County is reversed and remanded for entry of a statutory
award of attorney's fees pursuant to West Virginia Code § 5-11-13(c) that
takes into consideration the factors identified in this opinion necessary for
making a reasonable award of attorney's fees and which includes specific findings
of fact and conclusions of law to support its determination.