Albion Pacific Property Resources, LLC v. Seligman

ORDER

Plaintiff seeks attorney fees after prevailing on a motion to remand this action to state court under a federal fee-shifting statute. Because 28 USC § 1447(c) provides for recovery of such fees, the court must decide whether and what to award. The latter calls upon the court to figure the amount of a “reasonable attorney fee.”

Defendants removed this case to federal court July 23, 2003. Doc # 1. On November 25, 2003, the court remanded the case and granted plaintiffs motion for costs and fees, with the amount of the cost and fee award to be determined after further submissions from the parties. Plaintiff submitted a request for costs and attorney fees in the amount of $81,288.96. PI Memo (Doc # 49). According to the analysis below, the court awards plaintiff costs and attorney fees in the amount of $27,956.36.

*1165 I

Plaintiffs request for attorney fees results from its successful motion to remand, in which plaintiff argued that the notice of removal was defective and untimely. See PI Mot (Doc # 15). Plaintiff subsequently filed a letter requesting leave to obtain discovery on the issue of the parties’ citizenship to determine whether a lack of federal subject matter jurisdiction also required remand. Letter, William Huckins to Vaughn Walker, October 21, 2003 (Doc # 36). Defendants opposed plaintiffs request for discovery and proposed, quite reasonably, that the court first consider the simple procedural arguments in plaintiffs filed motion before the parties researched and briefed the more complicated jurisdictional matters. Letter, Michael Kirby to William Huckins, October 10, 2003 (Doc # 56, Exh A) at 2-3. Plaintiff declined to follow defendants’ suggestion and spent a considerable amount of unnecessary time and effort researching and briefing the jurisdictional issue.

The court granted plaintiffs motion to remand on the procedural ground that removal was untimely. Order (Doc #47). The court noted that deciding the jurisdictional issue was unnecessary because the procedural ground sufficed to remand. Id. The court also granted plaintiffs request for costs and attorney fees with the amount to be determined after submission of supplemental memoranda.

Plaintiff submitted a request for costs and attorney fees in the amount of $81,288.96. PI Memo (Doc # 49). Broken down more specifically, plaintiff requests the following for the work of its attorneys on the case: 79.1 hours at $450 per hour (“/hr”) for Nicholas Waranoff, 52.3 hours at $335/hr for William Huckins and 71.5 hours at $240/hr for Kathryn Perko. Plaintiff requests the following for the work of the legal assistants: 20.7 hours at $160/hr for Delia Cuenca and 1.1 hours for Anita Manfreda at $95/hr. Finally, plaintiff requests $7,596.96 in internet-based legal research costs.

II

A

Under 28 USC § 1447(c), the court may award “just costs and any actual expenses, including attorney fees, incurred as a result of the removal.”

Read narrowly, section 1447(c) could bar many plaintiffs who successfully move for remand from recovering their attorney fees. For example, a plaintiff who is represented on a contingent fee basis does not incur an incremental expense for attorney services in moving for remand.

The Ninth Circuit has rejected such a narrow interpretation of section 1447(c). In Gotro v. R & B Realty Group, 69 F.3d 1485 (9th Cir.1995), the Ninth Circuit held that a plaintiff who is represented on a contingent fee basis may recover attorney fees under section 1447(c). The Ninth Circuit concluded that Congress could have had “two possible reasons” for choosing the language “actual expenses * * * incurred.” First, this language distinguishes an award under section 1447(c) “from a punitive award which was associated with the formerly required bad faith finding.” Id. at 1487. Second, this language distinguishes an award under section 1447(c) “from the former requirement of a bond upon removal.” Id. at 1488. Accordingly, the Ninth Circuit upheld the district court’s $13,564.05 award, an amount presumably based on a lodestar calculation.

With respect to the amount of an award under section 1447(c), the Tenth Circuit has concluded that section 1447(c) requires courts to determine whether the requested *1166 fee is reasonable. See Huffman v. Saul Holdings Limited Partnership, 262 F.3d 1128 (10th Cir.2001). The Tenth Circuit noted that district courts have long presumed that an attorney fee award under section 1447(c) must be reasonable. Id. at 1134 (collecting cases). Pointing to the section 1447(c) language “incurred as a result of removal,” the court observed that “unreasonably high fees are not ‘incurred’ as a result of removal; rather, excessive fee requests flow from, and accumulate by means of, improper billing practices * * Id. at 1135. Nothing in section 1447(c) requires courts to award unreasonable, even if actually incurred, fees. Ibid. The Tenth Circuit stated: “Our holding is that the statute’s limit on actual fees to those ‘incurred as a result of removal’ requires the district court to conduct some sort of reasonableness inquiry.” Id. If courts must conduct “some sort of reasonableness inquiry,” a lodestar analysis would appear to be appropriate.

The Seventh Circuit has rejected reasonableness in determining attorney fees under section 1447(c). See Wisconsin v. Hotline Indus., Inc., 236 F.3d 363 (7th Cir.2000). The Seventh Circuit focused on the “actually * * * incurred” language in concluding that a court must award the “actual amount of fees incurred,” whether reasonable or not. Id at 368.

But the Seventh Circuit’s decision in Wisconsin appears to conflict with Ninth Circuit law. First, in Gotro, the Ninth Circuit rejected the type of strict construction given section 1447(c) by Wisconsin. The dissent spells out this holding even more clearly than the majority opinion. 69 F.3d at 1489-90 (O’Scannlain, J). The dissenting judge argued that under section 1447(c) plaintiffs who “actually incur litigation costs should be reimbursed while those who have not incurred any costs should have no such claim.” Id. at 1490. The majority’s rejection oí this proposition signals plainly that whether the plaintiff has or has not paid the attorney and, if so, how much, does not determine whether the court should make an award under section 1447(c). Second, in the Ninth Circuit, “[ujnder a fee-shifting statute, the court must calculate awards for attorneys’ fees using the lodestar method.” Staton v. Boeing Co., 327 F.3d 938, 965 (9th Cir. 2003) (internal quotation omitted). Wisconsin recognizes that section 1447(c) is a fee-shifting statute. Id. at 366. This points to a “reasonable fee,” as that term is widely interpreted.

Furthermore, the Ninth Circuit’s approach makes sense. An overemphasis on the “actual expenses” phrase in section 1447(c) would, as Gotro noted, deny to a contingent fee plaintiff recovery for an improper removal. That same overemphasis might also permit a fee-paying (and presumably deep pocket) plaintiff to run the attorney clock and hence impose an undue fee award on a defendant that incorrectly, but with a plausible basis, removed to federal court. Section 1447(c) is best read as calling for the award of reasonable attorney fees incurred as a result of removal.

In the Ninth Circuit, courts use the lodestar method to calculate reasonable attorney fee awards under fee-shifting statutes and the court will do so here.

B

As detailed in the Supreme Court’s recent decision in Gisbrecht v. Barnhart, 535 U.S. 789, 122 S.Ct. 1817, 152 L.Ed.2d 996 (2002), courts’ acceptance of the lodestar method dates from the mid-1970s. See id. at 801 (collecting cases). The lodestar method “achieved dominance in the federal courts” after three Supreme Court decisions in the 1980s, Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983), Blum v. Stenson, 465 U.S. 886, 104 *1167 S.Ct. 1541, 79 L.Ed.2d 891 (1984), and Pennsylvania v. Delaware Valley Citizens’ Council for Clean Air, 478 U.S. 546, 106 S.Ct. 3088, 92 L.Ed.2d 439 (1986). See Gisbrecht, 535 U.S. at 801, 122 S.Ct. 1817.

Before the lodestar method was developed, the Ninth Circuit applied the twelve-factor test set forth in Kerr v. Screen Extras Guild, Inc., 526 F.2d 67, 70 (9th Cir.1975), to determine attorney fee awards in fee-shifting cases. The lodestar method greatly simplified this analysis by limiting the court’s consideration to two factors: the reasonableness of the number of hours and the reasonableness of the hourly rate. In sifting through the remains of the Kerr factors, courts have determined that at least five of the Kerr factors have been deemed “subsumed in the initial lodestar calculation.” Morales, 96 F.3d at 363-64. These factors include “(1) the novelty and complexity of the issues, (2) the special skill and experience of counsel, (3) the quality of representation, * * * (4) the results obtained, and (5) the contingent nature of the fee agreement.” Id. at 364 n. 9 (internal quotation and citations omitted; alteration in original). Although the subsumed Kerr factors might be helpful in analyzing reasonableness under the lodestar method, the analysis must now focus on what constitutes a reasonable attorney fee in light of case law subsequent to Kerr. See Fischer v. SJB-P.D., Inc., 214 F.3d 1115, 1119 n. 3 (9th Cir.2000). Indeed, at least one of the “subsumed” Kerr factors, “the contingent nature of the fee agreement,” has been flatly rejected by the Supreme Court. See City of Burlington v. Dague, 505 U.S. 557, 112 S.Ct. 2638, 120 L.Ed.2d 449 (1992). Furthermore, other “subsumed” Kerr factors have been narrowed by Supreme Court precedent subsequent to Kerr, as the court explains more fully below.

The lodestar method is a two-step procedure for determining a “reasonable attorney fee.” After the court calculates the “lodestar figure” by “multiplying the number of hours the prevailing party reasonably expended on the litigation by a reasonable hourly rate,” Morales v. City of San Rafael, 96 F.3d 359, 363 (9th Cir.1996), the court then considers whether “it is necessary to adjust the presumptively reasonable lodestar figure on the basis of the Kerr factors that are not already subsumed in the initial lodestar calculation.” Id. Because the lodestar figure is presumptively reasonable, adjustments should be made only in rare cases. Pennsylvania, 478 U.S. at 565, 106 S.Ct. 3088. As plaintiff has provided no justification for adjusting the lodestar figure, the court need not reach the second step.

A reasonable attorney fee is the number of hours and the hourly rate that would be billed by “reasonably competent counsel.” Venegas v. Mitchell, 495 U.S. 82, 86, 110 S.Ct. 1679, 109 L.Ed.2d 74 (1990); Blanchard v. Bergeron, 489 U.S. 87, 109 S.Ct. 939, 103 L.Ed.2d 67 (1989). In Venegas and Blanchard, the reasonable fee awarded by the district court differed from the fee due under the agreement between the fee applicant and the attorney. In each case, the party entered into a contingent fee agreement, prevailed on the merits and obtained an award of reasonable attorney fees. In Blanchard, the court-awarded fees were greater than the amount due under the fee agreement, whereas, in Venegas, the court-awarded fees were less than the amount due under the fee agreement. In each case, the Supreme Court concluded that the fee agreement was enforceable and did not alter the amount awardable as a reasonable attorney fee. Blanchard, 489 U.S. at 96, 109 S.Ct. 939 (concluding that the “trial judge should not be limited by the contractual *1168 fee agreement between plaintiff and counsel”); Venegas, 495 U.S. at 90, 110 S.Ct. 1679 (holding that “ § 1988 controls what the losing defendant must pay, not what the prevailing party must pay his lawyer”).

Under Venegas and Blanchard, fee applicants are entitled to an award sufficient to “enable them to secure reasonably competent counsel,” but are not entitled to an award “necessary to secure counsel of their choice.” Venegas, 495 U.S. at 89-90, 110 S.Ct. 1679. Accordingly, courts award the fee that would be charged by reasonably competent counsel, not the fee due under the particular agreement between the fee applicant and its attorneys. Limiting the award to the fee charged by reasonably competent counsel fulfills the aim of fee-shifting provisions, which is to allow parties to employ reasonably competent counsel “without cost to themselves if they prevail.” 495 U.S. at 86, 110 S.Ct. 1679. Thus, even if a party chooses to employ counsel of unusual skill and experience, the court awards only the fee necessary to secure reasonably competent counsel.

Reasonably competent counsel bill a reasonable number of hours. Reasonably competent counsel do not bill hours that are “excessive, redundant, or otherwise unnecessary.” See Hensley, 461 U.S. at 434, 103 S.Ct. 1933. Additionally, the court must take into consideration discounts commonly given to clients and an attorney’s ability to collect fees from its client. As emphasized by the Supreme Court in Hensley:

In the private sector, “billing judgment” is an important component in fee setting. It is no less important here. Hours that are not properly billed to one’s client also are not properly billed to one’s adversary pursuant to statutory authority.

Hensley, 461 U.S. at 434, 103 S.Ct. 1933 (internal quotation omitted; emphasis omitted).

Reasonably competent counsel bill at a reasonable hourly rate based on the local legal community as a whole. The Supreme Court’s decision in Blum v. Stenson, 465 U.S. 886, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984), is instructive. In Blum, the prevailing parties were represented by attorneys from “The Legal Aid Society of New York.” 465 U.S. at 891, 104 S.Ct. 1541. The prevailing parties sought attorney fees at hourly rates equivalent to those charged by private counsel. The defendants argued to the Supreme Court that “market rates reflect the level of compensation necessary to attract profit making attorneys, but that such rates provide excessive fees to nonprofit counsel.” Id at 893, 104 S.Ct. 1541. The Supreme Court rejected this argument, concluding that a court should not vary its calculation of a reasonable hourly rate whether the “plaintiff was represented by private counsel or by a nonprofit legal services organization.” Id at 894, 104 S.Ct. 1541. The Supreme Court also discouraged the use of an attorney’s practice area as a basis for distinguishing an attorney fee award. Id at 893, 104 S.Ct. 1541 (requiring that “the amount of fees awarded under [section 1988] be governed by the same standards which prevail in other types of equally complex Federal litigation, such as antitrust cases”) (internal quotation omitted; alteration in original).

Thus, under Blum, courts are discouraged from using either an attorney’s status as a non-profit, government or private attorney or an attorney’s practice area to justify high hourly rates.

Although the cases cited above arise primarily in the context of contingent fee agreements in civil rights litigation, “the definition of what is a reasonable fee *1169 applies uniformly to all federal fee-shifting statutes.” Anderson v. Director, Office Workers Compensation Programs, 91 F.3d 1322, 1325 (9th Cir.1996). The lodestar analysis is applied to attorney fee provisions contained in a large number of statutes covering a broad range of subject areas. See, e g, Solid Waste Disposal Act, § 7002(e), 42 USC § 6972(e); Civil Rights Attorney’s Fees Awards Act of 1976, 42 USC § 1988; Lanham Act, 15 USC § 1117(a); see also Federal Judicial Center, Awarding Attorneys’ Fees and Managing Fee Litigation 1 (1994) (noting that by 1994 nearly 200 civil statutes authorized the award of attorney fees). The court has been provided no evidence that Congress intended “reasonable” fees under one statute to exceed “reasonable” fees under another statute. Indeed, a court-ordered award of attorney fees at an above-average rate would send an improper expressive message in that the court would essentially be finding that certain types of cases are more valuable than others.

In sum, a reasonable attorney fee is the fee that would be charged by reasonably competent counsel, not counsel of unusual skill and experience. Reasonably competent counsel bill a reasonable number of hours at a reasonable hourly rate. A reasonable hourly rate is based on rates charged in the local legal community as a whole, not particular segments of the bar.

C

In the previous subsection, the court demonstrated that a reasonable attorney fee is the fee billed by reasonably competent counsel, not the fee a particular attorney bills a particular client. In almost all cases, including this one, fee applicants provide data about fees charged by a particular attorney, as well as a general statement that such a rate is similar to the rates charged by some subset of attorneys in the area. The court considers how to convert the data typically provided by fee applicants to the data necessary to calculate a reasonable attorney fee.

First, the court must determine whether the requested number of hours is greater than, less than or the same number of hours that reasonably competent counsel would have billed. If the requested number of hours is greater than the number of hours reasonably competent counsel would have billed, then the court should reduce the requested number of hours accordingly. See Hensley, 461 U.S. at 434, 103 S.Ct. 1933 (describing the court’s duty to eliminate hours that are “excessive, redundant, or otherwise unnecessary”). If the requested number of hours is less than the number of hours reasonably competent counsel would have billed, the court should compensate the fee applicant at an above-average hourly rate. If the requested number of hours is the same as the number of hours reasonably competent counsel would have billed, the court should use the number of hours requested.

Second, the court must determine a reasonable hourly rate. Cases describing the lodestar calculation provide little guidance in determining an appropriate hourly rate. Courts are directed to compare the requested rates with the “prevailing market rate,” which is the rate “prevailing in the community for similar services of lawyers with reasonably comparable skill, experience, and reputation.” Blum, 465 U.S. at 895 n. 11, 104 S.Ct. 1541.

Most courts applying this standard come to the general conclusion that a particular attorney’s billing rate is relevant, but not dispositive, evidence of a reasonable hourly rate. See, e g, Guam Society of Obstetricians and Gynecologists v. Ada, 100 F.3d 691, 702 (9th Cir.1996); United Steelwork *1170 ers of America v. Phelps Dodge Corp., 896 F.2d 403, 407 (9th Cir.1990); Moore v. Jas. H Matthews & Co., 682 F.2d 830, 840 (9th Cir.1982); see also Gay Officers Action League v. Puerto Rico, 247 F.3d 288, 296 (1st Cir.2001) (“[T]he court may take guidance from, but is not bound by, an attorney’s standard billing rate.”); Crescent Publishing Group, Inc. v. Playboy Enterprises, Inc., 246 F.3d 142, 151 (2d Cir.2001); Public Interest Research Group of New Jersey, Inc. v. Windall, 51 F.3d 1179, 1185 (3d Cir.1995); Louisiana Power & Light Co. v. Kellstrom, 50 F.3d 319, 328 (5th Cir.1995); Pinkham v. Camex, Inc., 84 F.3d 292, 294 (8th Cir.1996); Tire Kingdom, Inc. v. Morgan Tire & Auto, Inc., 253 F.3d 1332, 1337 (11th Cir.2001) (per curiam); Covington v. District of Columbia, 57 F.3d 1101 (D.C.Cir.1995); but see Mathur v. Bd. of Trustees of Southern Illinois Univ., 317 F.3d 738, 743 (7th Cir.2003) (holding that “[o]nly if an attorney is unable to provide evidence of her actual billing rates should a district court look to other evidence, including rates similar experienced attorneys in the community charge paying clients for similar work.”).

Case law provides little guidance in determining what constitutes the “prevailing market rate.” Blum discourages use of two of the categories most often cited in support of an above-average attorney fee award. These categories are an attorney’s status as a private, non-profit or government attorney and an attorney’s practice area. For example, fee applicants often attempt to describe the prevailing market rate as the rate charged by attorneys who work for large and prestigious private law firms. This is exactly what plaintiff has done here. See Rosen Decl (Doc # 50). Plaintiff submits the hourly charges claimed by large, well known and highly regarded law firms. Id. The prevailing market rate, however, is based on rates charged in the local legal community as a whole, not particular segments of the bar.

Additionally, the purpose of using the prevailing market standard can be misunderstood. The purpose of using prevailing market rates is to estimate the hourly rate reasonably competent counsel would charge. The purpose is not to determine whether or not a specific attorney could command a specific hourly rate in the market. In performing a lodestar calculation, the court ensures that the fee applicant receives, and the losing party pays, a reasonable attorney fee; the court need not ensure that the agreement between the fee applicant and its attorneys provides a fair market rate for the attorneys’ services. As stated in Venegas, a court’s determination of a reasonable attorney fee “controls what the losing defendant must pay, not what the prevailing party must pay his lawyer.” Venegas, 495 U.S. at 90, 110 S.Ct. 1679.

Accordingly, the average market rate in the local legal community as a whole is a better approximation of the hourly rate that would be charged by reasonably competent counsel than the actual billing rate charged by a single attorney. Like the hypothetical “reasonably competent attorney,” attorneys billing at the average rate will not be unusually skilled or experienced but those attorneys typically capable of rendering the required services. Further, an average market rate combines the rates charged by private, non-profit and government attorneys from a variety of practice areas.

While the average market rate normally governs a fee award, an above-average rate may be appropriate in certain situations. A fee applicant should neither be rewarded for hiring expensive legal counsel nor penalized for hiring more efficient legal counsel. Thus, if a fee applicant can demonstrate that its attorneys billed fewer *1171 hours than reasonably competent counsel would have billed, the fee applicant should be reimbursed at an above-average hourly rate. See Blum, 465 U.S. at 898, 104 S.Ct. 1541. For example, consider a situation in which a court determines that reasonably competent counsel would have billed 10 hours at $100/hr. The fee applicant in such a case would be entitled to $1000 in fees. 'If the fee applicant in this example were to submit a request for 8 hours, the court should use an hourly rate of $125/hr so that the total fee awarded equals $1000, which is the “reasonable attorney fee.”

Yet this adjustment to reflect above-average attorney efficiency does not suggest that an attorney who, as a result of unusual skill or experience, achieves an above-average result for the client also justifies an above-average hourly rate. An attorney who obtains an above-average award for the client might deserve reimbursement at an above-average hourly rate. But, as presently explained, such a premium over the reasonable rate should come from the client, not at the expense of the losing party. An award of reasonable attorney fees “controls what the losing defendant must pay, not what the prevailing party must pay his lawyer.” Venegas, 495 U.S. at 90, 110 S.Ct. 1679. The losing party is obligated to pay only the rate charged by reasonably competent counsel. Accordingly, the losing party should not be obligated to pay an above-average attorney fee award simply because the prevailing party obtained an above-average result by employing counsel of unusual skill or experience. Instead, a party that receives an above-average result should be compensated for the work of reasonably competent counsel.

Nor can an above-average hourly rate be warranted on the basis that counsel of unusual skill and experience increase the chance that a party will prevail. The reasoning of the Supreme Court’s decision in City of Burlington v. Dague (“Burling ton”.), 505 U.S. 557, 112 S.Ct. 2638, 120 L.Ed.2d 449 (1992), supports this principle. In Burlington, the Supreme Court held that the lodestar figure- may not be multiplied by a “contingency enhancement,” which is a multiplier based on the ex ante probability that a party will not prevail.

Burlington thus supports limiting the reasonable attorney fee award to the hourly rate charged by reasonably competent counsel in primarily two ways. It bears repeating, as Burlington emphasizes, that a reasonable attorney fee award “controls what the losing defendant must pay, not what the prevailing party must pay his- lawyer.” Venegas, 495 U.S. at 90, 110 S.Ct. 1679. The respondent argued thát the lodestar figure should be enhanced “to reflect the fact that the party’s attorneys were retained on a contingent fee basis and thus assumed the risk of receiving no payment at all.” Burlington, 505 U.S. at 559, 112 S.Ct. 2638 (emphasis added). Such an argument is irrelevant because a contingency fee arrangement governs what the prevailing party must pay the attorney; the contingency arrangement does not govern what the court requires the losing party to pay the prevailing party. Accordingly, the court does not adjust the reasonable attorney fee to be paid by the losing side for the risks in an attorney’s litigation portfolio.

Furthermore, “just as the statutory language limiting fees to prevailing (or substantially prevailing) parties bars a prevailing plaintiff from recovering fees relating to claims on which he lost, so should it bar a prevailing plaintiff from recovering for the risk of loss.” Id. at 564, 112 S.Ct. 2638