Conflict and Solidarity: The Legacy of Evans v. Jeff D.
Suppose that you are a lawyer for a small public interest organization. You have just defeated a summary judgment motion in your biggest case and you think that your opponent will finally be interested in negotiating a good settlement. Soon your opponent makes an offer that includes all the injunctive relief your clients sought. There is a problem, however. The offer is conditioned on your client waiving any claim to statutory attorney’s fees. You have been working on this case for two years and a fee award could provide much needed financial relief for your cash-strapped employer. Do you advise your clients to accept the offer?
Suppose instead that the case involved monetary damages. Rather than conditioning settlement on a complete fee waiver, the defendant offers to pay $400,000 dollars to settle the case. The defendant tells you that he doesn’t care how you divide the money between fees and relief for your clients. How should you respond to this offer?
After the Supreme Court’s decision in Evans v. JeJfD., public interest lawyers must be prepared to face situations such as these.1 In Jeff’D., the Supreme Court held that defendants may ask a plaintiff to waive his or her right to statutory attorney’s fees as a condition of a settlement offer.2 The Court also concluded that it is acceptable to conduct simultaneous negotiation of attorney’s fees and liability on the merits.3 This leaves plaintiffs’ lawyers vulnerable to fee-related conflicts of interest. The attorney’s duty to her client suggests that she should counsel him to accept any offer that includes sufficient relief on the merits. If the offer is conditioned on a fee waiver then the attorney will miss out on a fee award if the client follows her advice. Moreover, even without a fee waiver request, if the defendant is solely concerned with minimizing overall liability, then any increase in a fee agreement may come at the cost of decreasing the damages for the client.4
Many commentators have argued that Jeff D. would frustrate the policy of the Civil Rights Attorney’s Fees Awards Act of 1976 (“Fees Act”).5 In particular, commentators have claimed that Jeff D. will discourage attorneys from accepting civil rights cases and will cause plaintiffs’ attorneys to regularly miss out on collecting statutory attorney’s fees.6 Empirical research, however, suggests that Jeff D. did not have as dire an effect as was anticipated.7
This Note considers the practical and ethical consequences of Jeff D. I focus on the challenges faced by public interest attorneys in the non-profit sector. As they are usually unable to charge fees, these attorneys are most vulnerable to fee waiver requests.8 The Note is divided into three parts. Part I reviews Jeff D. in detail. Part II considers the options that Jeff D. left open for public interest lawyers. I argue that some of these options are in tension with ethical rules protecting the client’s control of litigation. Thus, lawyers pursuing these strategies must exercise considerable care to avoid breaching ethical duties to their clients. I consider ways in which bar associations and courts can regulate attorney behavior to ensure ethical conduct while protecting lawyers’ ability to pursue statutory fees.
Part III reviews the results of structured interviews conducted with ten public interest lawyers in the non-profit sector. These lawyers are from diverse regions and practice areas.9 The interviews examined how public interest lawyers actually respond to fee-related conflicts and whether such conflicts cause public interest lawyers significant ethical and financial difficulties. I found that public interest lawyers have developed some common techniques for responding to fee related conflicts. The main strategies are careful client selection and “client education.” First, the attorney selects clients who are sympathetic to the overall goals of the attorney’s organization. second, the attorney explains how important fee awards are to the continuing success (or even existence) of the lawyer’s organization. Clients will then be sympathetic to the pursuit of fee awards. This approach has mitigated the worst effects of Jeff D.
I. EVANS v. JEFF D.
In the United States, the default rule is that the prevailing party in not entitled to collect attorney’s fees from the loser.10 Exceptions to this default rule were virtually non-existent until the late 1960s.” Since then, Congress has included fee-shifting provisions in a variety of statutes. Such provisions are found in civil rights laws, employment laws and environmental laws, among others.12 Fee awards are intended to promote the practice of law in the public interest. ‘3
When a case goes to judgment, the court will calculate the attorney fee award.14 This means that a lawyer is unlikely to face any difficult ethical questions after judgment is entered. After judgment, the attorney can advocate vigorously for a large fee award without endangering the relief that has already been awarded to his or her client. Fee-related conflicts might arise in settlement negotiations, however. Prior to judgment, the parties usually try to settle both the issue of relief for the plaintiff as well as the fee award.l5 Defendants pursue this strategy because they are concerned with their total liability and fees can be a significant component of liability.16 Plaintiffs’ lawyers can ask the defendant to leave the fee award to the court, but in practice defendants are very reluctant to do this.17 Thus, settlement usually requires that parties simultaneously negotiate both fees and relief. This generates potential conflicts of interest between plaintiffs and their counsel. If defendants are concerned with total liability then any increase in fees may come at the expense of reduced relief on the merits. Similarly, improvements in relief on the merits may come at the expense of a lower fee offer. This leads to a conflict of interest as clients do not necessarily share their attorneys’ interest in maximizing the fee award.
Prior to Jeff D., the United States Courts of Appeals were divided on how to approach these fee-related conflicts of interest. The Ninth and Third Circuits disapproved of the simultaneous negotiation of fees and merits.18 Other Courts of Appeals allowed parties to negotiate fees and merits together.19 In Prandini v. National Tea Co., the Third Circuit expressly prohibited simultaneous negotiation.20 The court stated that “[t]his would eliminate the situation . . . having, in practical effect, one fund divided between the attorney and client.”21 The court hoped that this would reduce the conflict between attorney and client and help prevent “sweetheart” contracts.22 In contrast, the District of Columbia Circuit allowed at least some simultaneous negotiation of fees and merits.23 The court noted the importance of encouraging settlement and the difficulty of monitoring settlement negotiations between private parties.24
The issue of fee-related conflicts also divided bar association ethics committees. The Association of the Bar of the City of New York (“NYC Bar”) prohibited simultaneous negotiation of relief on the merits and fees.25 The District of Columbia Bar (“D.C. Bar”) allowed some simultaneous negotiation but prohibited defendants from asking plaintiffs to completely waive their rights to statutory fees.26 The State Bar of Georgia (“Georgia Bar”) rejected both positions and allowed all simultaneous negotiation of fees and relief on the merits.27
The bar associations, like the courts of appeals, were divided over how to resolve the tension between encouraging settlement and reducing the potential for conflicts of interest. The NYC Bar emphasized the link between fee waivers and conflicts of interest.28 The NYC Bar argued that fee waiver requests have “the effect of placing the plaintiff’s lawyers in conflict with their clients and undercutting the policies of the civil rights statutes which provided for fees and that accordingly the demands were prejudicial to the administration of justice.” Accordingly, the NYC Bar reached the same result as the Prandini Court, and prohibited fee waiver requests.
The Georgia Bar emphasized the importance of settlement.30 The Georgia Bar claimed that “[t]o force a defendant into proposing a settlement offer wherein plaintiffs [sic] statutory attorney fees are not negotiated . . . leaves a defendant in a position of exposure that is at best, uncertain, and at worst so tenuous that meaningful settlement proposals might never be made.”31 On this basis, the Georgia Bar declined to prohibit the simultaneous negotiation of fees and merits.
B. THE MAJORITY OPINION
Evans v. Jeff D. resolved the split within the courts of appeals. In Jeff D., the Supreme Court considered a Ninth Circuit decision that had invalidated a fee waiver contained in a settlement of a class action.32 Jeff D. was a class action brought on behalf of disabled children in the care of public entities in Idaho.33 The plaintiffs sought injunctive relief intended to improve conditions of care, but they did not seek damages.34 During settlement negotiations the defendants offered almost all of the injunctive relief sought by the plaintiffs.35 The Ninth Circuit noted that this offer was “more than the district court in earlier hearings had indicated it was willing to grant.”36 Clearly, the plaintiffs’ lawyer would wish to accept such an offer. The problem, however, was that the defendants made their offer conditional on a complete waiver of statutory attorney’s fees and costs.37
The plaintiffs’ lawyer signed the settlement agreement but filed a motion asking the district court not to approve the agreement’s provision on costs and fees.38 The district court denied this motion and the plaintiffs appealed.39 The Ninth Circuit invalidated the fee waiver and left the remainder of the settlement agreement standing.40 The court of appeals remanded to the district court for the purpose of the determination of a reasonable fee.41
The Ninth Circuit held that the defendants’ settlement offer had created a “particularly severe conflict when important interests of class members are at stake.”42 The court noted that conflicts between clients and class counsel more commonly involve allegations that counsel has obtained a large fee at the expense of adequate relief for his or her clients.43 The court held that there is also a conflict of interest when counsel is “asked to choose between forgoing any compensation while obtaining a favorable settlement on behalf of the class, or declining the benefit for the class in hope of eventually receiving a fee award.”44 The court held that, absent special circumstances, defendants should not be able to place lawyers in such a position.45
The Supreme Court began its analysis by holding that the Ninth Circuit should not have accepted some elements of a settlement agreement while rejecting others.46 The Court noted that the result might be a settlement package to which the parties would not have agreed.47 Thus, the Court concluded that the settlement should have been upheld or rejected as a whole.48 Next, the Court turned to the issue of whether the fee waiver provision provided cause for invalidating the settlement.
1. ETHICAL CONSIDERATIONS
The Court held that the “strictures of professional ethics” do not create a duty to invalidate negotiated fee waivers.49 The majority stated that it did “not believe that the ‘dilemma’ was an ‘ethical’ one in the sense that Johnson [the plaintiffs’ attorney] had to choose between conflicting duties under the prevailing norms of professional conduct.”50 The Court claimed that there was no “dilemma” because Johnson had an ethical duty to serve the interests of his clients but had no “ethical” duty to seek attorney’s fees.51 This conclusion is based on a very narrow, and unsympathetic, understanding of what can constitute an “ethical” dilemma. The Court assumed that an ethical conflict only arises when there is a direct conflict between courses of action required by the rules or duties of legal ethics. For example, the Court would probably accept that a lawyer faced an “ethical” conflict if one rule of ethics directed her to withdraw from representation and another rule directed her not to withdraw. In Jeff D., however, the plaintiffs’ attorney could only obey an ethical rule at great financial cost to himself. Here the “dilemma” was between the attorney’s self-interest and following an ethical rule. The Court would not consider this an “ethical” dilemma.
The Court’s analysis is inadequate. The dilemma of choosing between self-interest and a client’s interest is certainly “ethical” in a non-technical sense. Moreover, attorneys are much more likely to have to choose between self-interest and obeying an ethical rule than they are to come face to face with two directly conflicting rules. Most importantly, “the prevailing norms of professional conduct” do address this kind of ethical conflict. Model Rule 1.7 of the Model Rules of Professional Conduct (“Model Rules”) addresses situations where there is a conflict between a client’s interest and the lawyer’s interest. Under Rule 1.7, the attorney must reasonably believe that representation will not be affected by any conflicts of interest.52 The attorney must also get client consent to continue representation.53
The Court’s analysis brushes over the fact that Johnson did face a conflict of interest. The conflict is between his interest in securing a fee and his duty to his clients. Two ethically proper courses of action appear to be open to Johnson. First, he could advise his clients to accept the settlement offer and forgo a fee award. Second, if he determined that he was no longer able to offer impartial advice, he could withdraw from representation. The Supreme Court only considers the first option. Moreover, the Court simplistically ignores the danger that, unlike Johnson, other lawyers will be tempted to do the wrong thing and put their own interest above their clients. By ignoring these issues, the Court misses an opportunity to apply the Model Rules to the case.
Model Rule 1.7 can be extended to situations where one party causes the other to face a conflict of interest. If it is inappropriate to create a conflict by accepting representation it may also be inappropriate to create a conflict for other lawyers. This is the basic reasoning behind the decision from the Ninth Circuit.54 The Supreme Court was too hasty in dismissing the possibility of an ethically based decision in Jeff D.
2. A NEW VISION OF FEE-SHIFTING POLICY: FEE-SHIFTING AS A “WEAPON”
Having rejected the idea that legal ethics could be dispositive, the Court turned to the Civil Rights Attorney’s Fees Awards Act of 1976.55 The Court found that the Act provided no support for overturning the fee waiver. First, the Court noted that the text of the statute does not support a prohibition on fee waivers.56 The statute merely states that the trial court “in its discretion, may allow the prevailing party … a reasonable attorney’s fee.”57 The statutory text gives little guidance on the extent of the trial court’s discretion and it does not address the issue of whether the prevailing party can waive eligibility for a fee award.
Finding no guidance from the statutory text, the Court turned to the purpose of the Fees Act.58 The Court stated that, by passing the Fees Act, Congress added “to the arsenal of remedies available to combat violations of civil rights.”59 The Court stated that “the Fees Act has given victims of civil rights violations a powerful weapon that improves their ability to employ counsel, to obtain access to courts, and thereafter to vindicate their rights by means of settlement or trial.”60 This broad understanding of the Fees Act forms the basis of the Court’s decision. Of particular importance is the Court’s view that the Fees Act is intended to help plaintiffs secure favorable settlements. The Court correctly noted that a plaintiff might be able to secure a better settlement by agreeing to forgo a fee award.61 Consequently, the Court upheld fee waivers as a valid use of a “weapon” provided by the Fees Act.62
By permitting fee waiver requests, the Court also upheld the simultaneous negotiation of relief and fee awards.63 The Court upheld simultaneous negotiation for the same reason that it supported the fee waiver. The Court argued that simultaneous negotiation could allow plaintiffs to achieve better settlement results.64 Plaintiffs can use simultaneous negotiation as a “weapon” because defendants have an interest in controlling their total liability. The Court assumed that, by allowing a defendant to establish his or her total liability, a plaintiff makes settlement more attractive.65 Moreover, facilitating settlement has the added benefit of reducing pressure on judicial resources.66
It is important to note that the majority’s opinion has a very wide scope. Although the Court based its decision, at least in part, on the statutory language and history of the Fees Act, this has not meant that the holding of Jeff D. is limited to the Fees Act. First, the Court rejected all ethical arguments against fee waivers.67 This part of the holding effectively overrules cases involving other fee-shifting statutes, such as Prandini, which were based on ethical considerations.68 Thus, Jeff D. undercuts the main basis for prohibiting fee waiver requests and simultaneous negotiation of fees and merits. Second, the language of the Fees Act is very similar to that of many other fee-shifting statutes.69 Thus, Jeff D. can be applied directly to most, if not all, federal statutes allowing for fee-shifting.70
C. THE DISSENT
Justice Brennan, joined by Justices Marshall and Blackmun, wrote a dissenting opinion arguing that the majority reached the wrong result because they mischaracterized the purpose of the Fees Act.71 Justice Brennan claimed that the primary purpose of the Fees Act was “to ensure that there would be lawyers available to plaintiffs who could not otherwise afford counsel, so that these plaintiffs could fulfill their role in the federal enforcement scheme as ‘private attorneys general,’ vindicating the public interest.”72 Unlike the majority, Justice Brennan did not see fee awards as a “weapon” for individual plaintiffs to use to secure better settlements.73
Justice Brennan argued that, as fee waivers will discourage lawyers from representing plaintiffs in civil rights cases, they conflict with the primary purpose of the Fees Act.74 The court was sharply divided over this prediction. The dissent claimed that “[t]he conclusion that permitting fee waivers will seriously impair the ability of civil rights plaintiffs to obtain legal assistance is embarrassingly obvious.”75 The majority claimed that, in the absence of any documentation to support such a view, this conclusion was premature.76 Moreover, the majority believed that it was unlikely that fee waivers would impair the ability of civil rights plaintiffs to obtain legal assistance.77
Justice Brennan supported his view with a story about how the Court’s holding would influence future settlement negotiations. Justice Brennan’s horror story runs as follows. “[OJnce fee waivers are permitted, defendants will seek them as a matter of course, since this is a logical way to minimize liability.”78 Such an offer is not less attractive to the plaintiff and it reduces the exposure of the defendant.79 Moreover, plaintiffs’ lawyers must place the interests of their clients first and will advise their clients to accept fee waiver offers.80 Thus, we can expect settlement offers to routinely contain fee waiver demands.81 This will make it harder for plaintiff’s lawyers to secure fee awards. Thus, they will be much more reluctant to take civil rights cases.82
In response to this story, the majority claimed that there was no “reason or documentation to support such a concern at the present time.”83 In support, the majority simply cited a footnote from Judge Wald’s concurrence in Moore v. National Ass’n of Security Dealers, Inc.84 In this footnote, Judge Wald claimed that:[M]y belief is that most public interest counsel explain the financial details of the litigation well in advance to their clients, and that few clients will against the advice of counsel leap to accept a settlement that deprives counsel of fair compensation and themselves of any provision for costs. In my experience, respected counsel do not and should not undertake public interest representation until an understanding is had with clients as to the range of appropriate settlements. On balance, I do not believe the likelihood that irresolvable problems between counsel and clients may occur is high enough to justify so broad-ranging a rule as would cover the present case.85
Unlike Justice Brennan, Judge Wald assumes that it is acceptable to advise clients to reject an otherwise advantageous offer if the offer does not include a fee award. Justice Brennan assumed that counsel must “render . . . advice free from the influence of his or his organization’s interest in a fee.”86 This lead him to conclude that “counsel must advise a client to accept an offer which includes waiver of the plaintiff’s right to recover attorney’s fees if, on the whole, the offer is an advantageous one.”87 Judge Wald assumes that, when advising clients whether to accept an offer, counsel may take the fact that a settlement offer deprives them of fair compensation into account. Moreover, Judge Wald suggests that clients will be sympathetic to their lawyers’ need for a fee.
If Judge WaId is correct, Justice Brennan’s horror story may not come true. Justice Brennan assumed that plaintiffs’ lawyers would be forced to counsel their clients to accept an offer conditioned on a fee waiver. This could encourage defendants to make such offers. This would decrease recovery for plaintiffs’ lawyers and make them less likely to take civil rights cases. However, if attorneys can ask clients to reject such offers and clients agree, then Jeff D. may not depress the availability of plaintiffs’ lawyers in fee-shifting cases.
In Part III infra, the prophecies offered by the majority and the dissent are compared with the real world experience of public interest lawyers. Although neither prophecy was fully accurate, my interviews with practitioners suggested that, overall, Judge WaId was more prescient than Justice Brennan.
D. THE RESPONSE FROM BAR ASSOCIATIONS
Before discussing the options available to public interest lawyers, it is worth investigating the response to Jeff D. from bar associations. Jeff D. would be far less important if bar associations had maintained their ban on defendant initiated fee waiver requests. In Jeff D., the Court rejected ethical arguments against fee waivers.88 It is not clear, however, that bar ethics opinions had to be withdrawn in light of Jeff D. In his dissent, Justice Brennan encouraged bar associations to maintain their opposition to defendant-initiated fee waivers.89 He stated that “[s]ince Congress has not sought to regulate ethical concerns either in the Fees Act or elsewhere, the legality of [ethical] arguments is purely a matter of local law.”90 This means that, to the extent that ethics opinions are based on interpretations of state ethical rules, they can be maintained in the face of disagreement from the Supreme Court.91
The bar associations did not follow Justice Brennan’s advice, however. In response to Jeff D., both the D.C. Bar and the NYC Bar withdrew their rulings on fee awards.92 The NYC Bar withdrew its opinion sua sponte while the D.C. Bar waited until the issue was brought before it.93 Both associations decided that Jeff D. had overruled their prior decisions.
The D.C. Bar stated simply that “Jeff D. in essence overruled” its prior opinion.94 The NYC Bar considered the issue in more detail.95 The NYC Bar noted that their prior opinion had been based on the Fees Act as well as ethical concerns.96 The Bar claimed that the “principal underpinning” of its decision was the view that fee waivers were inconsistent with the Fees Act.97 As Jeff D. undercut this basis, the NYC Bar withdrew its opinion. These actions left all public interest attorneys vulnerable to fee waiver requests.
II. OPTIONS AVAILABLE TO PUBLIC INTEREST LAWYERS IN THE AFTERMATH OF JEFF D.
Many commentators feared that Jeff D. would encourage defendants to use aggressive tactics against the plaintiffs’ bar.98 At the very least, the decision raised the possibility of more settlement offers being conditioned on fee waivers and more frequent simultaneous negotiation of fees and merits. This Part considers ways in which public interest lawyers can work around the harsh results of Jeff D. The most promising options are discussed in detail with an emphasis on whether these options are consistent with the directives of legal ethics.
Attorneys who are prepared to charge clients are able to avoid the more difficult ethical challenges posed by Jeff D. This is because they can give the client a financial incentive to pursue statutory attorney’s fees. Julie Davies’ empirical research suggests that this is how most attorneys have responded to Jeff D.99 She writes that attorneys “very quickly developed fee agreements with clients which offer some protection from [fee] waivers in the form of financial disincentives.”100 These agreements include charging contingent fees and requiring clients to pay hourly fees if statutory attorney’s fees are waived.101 Once the client and the attorney share an interest in securing a fee, the ethical conflict of interest should disappear.
Davies’ research focused on attorneys working in the for-profit setting.102 Public interest attorneys in the non-profit sector are less able to protect themselves with agreements that require charging fees. Indigent clients, for example, cannot afford to pay hourly rates in the event of a fee waiver. Also, lawyers working for non-profits rarely charge contingent fees (although perhaps they should consider this option).103 This means that public interest lawyers working in the non-profit sector are much less likely to use strategies that remove fee-related conflicts of interest. Thus, the strategies they develop are more likely to raise ethical issues. In this Part, I discuss these strategies in detail and investigate how they can be pursued without violating ethical norms. I also consider how bar associations and courts should respond to the ethical issues raised by these responses to Jeff D.
The three main options for public interest lawyers in the non-profit sector are as follows. First, these attorneys can break with tradition and charge contingent fees. Second, lawyers can follow Judge Wald’s advice and encourage their clients to pursue attorney’s fees even when the settlement offer is otherwise adequate. Davies’ research suggests that some lawyers do pursue this option.104 My research suggests that this is by far the most popular strategy for lawyers in the non-profit sector.105 Third, lawyers can simply ask their clients to sign retainer agreements conditioning representation on the non-waiver of fees.106 I shall call this the “limited retainer” solution. Davies’ research did not uncover usage of this strategy. A recent ethics opinion, along with other evidence, suggests that at least some public interest lawyers have considered this option, however.107
A. CONTINGENT FEES
Fee-related conflicts emerge when a lawyer has an incentive to pursue a fee award even though this pursuit clashes with the clients’ interest. In Jeff D., the plaintiffs would have received no extra benefit if their attorney had refused the settlement offer and pursued fees. Contingent fees provide an effective solution to this problem because they can give clients a financial incentive to pursue a statutory fee award. Attorneys can do this by offering to subtract any statutory fee award from the contingent fee.108 Once the client and the attorney share an interest in securing a fee, most conflicts should disappear. The contingent fee solution does not raise difficult ethical problems apart from those ethical issues raised by contingent fees in general.109
Although contingent fees are a good solution to fee-related conflicts, this option is often not available. There are two main reasons for this. First, contingent fees are not an option when only injunctive relief is sought. 110 Second, many public interest lawyers are unable, or very reluctant, to charge contingent fees. Many lawyers are employed by organizations, such as law school clinics, non-LSC funded legal services organizations and other non-profits that have not traditionally accepted contingency fees. 111 Of course, it would beg the question to end the analysis there. Perhaps these organizations should change their practice and begin charging contingent fees.
There are number of reasons why non-profit public interest organizations are reluctant to enter into contingent fee agreements. An amicus in Jeff D. argued that its potential clients “many of whom have already suffered from harassment by legal or governmental authorities, are often reluctant to sign such agreements.”112 Thus, public interest lawyers may wish to distinguish themselves from profitseeking attorneys as a way to build client trust. Contingent fees are also unhelpful in cases where the monetary damages will be small. 113
Internal Revenue Service regulations are probably responsible for much of the reluctance to charge contingent fees. Tax-exempt public interest organizations risk losing their tax-exempt status if they collect contingent fees. From 1975 until 1992, the IRS narrowly limited tax-exempt organizations’ ability to collect fees from clients. 114 IRS guidance suggested that an organization could be tax-exempt only if it did not “seek or accept attorneys’ fees from its clients as compensation for the provision of legal services.”115 This restrictive regime forced all tax-exempt public interest organizations to rely on alternatives to contingent fees.
In 1992, the IRS moderated its regulations. The IRS now allows tax-exempt organizations to “accept attorneys’ fees in public interest cases if such fees are paid directly by its clients.”116 However, “[t]he total amount of all attorneys’ fees (court awarded and received from clients) must not exceed 50 percent of the total cost of operation of the organization’s legal functions.”117 Thus, if an organization already has a significant income from statutory attorney’s fees then it can only add contingent fee income if this does not exceed the 50 percent threshold. This means that contingent fees are unlikely to be a large additional source of income for organizations that already collect statutory fees.
The new regulations may still help lawyers deal with the problem of fee-related conflicts, however. A small contingent fee may be a significant amount to the client. If the lawyer agrees to deduct any statutory fee recovery from the contingent fee then the client will have an incentive to pursue the statutory fee award. Thus, even where the contingent fee is small, it can still motivate the client to refuse a defendant’s request that statutory fees be waived.
It appears that most public interest lawyers do not use contingent fees as a strategy for dealing with fee-related conflicts.118 This may be because lawyers see charging fees as fundamentally inconsistent with a public interest mission. Alternatively, it may be because IRS regulations were once so restrictive that they forced public interest organizations to adopt a culture of refusing such fees. Now that the IRS has moderated its stance, public interest lawyers should at least consider using contingent fees. They should investigate whether contingent fees would impair client trust. If contingent fees are not a significant barrier for clients then attorneys could use contingent fees as a means of avoiding fee-related conflicts.
B. ATTORNEY-CLIENT SOLIDARITY
Judge Wald suggested that fee waivers should not be a significant problem for plaintiffs’ lawyers in fee-shifting cases.119 She believed that lawyers would ask clients to refuse settlement offers that did not include fees and that clients would support their lawyers’ need for a fee award.120 Attorneys can respond to Jeff D. by taking Judge Wald’s advice and educating clients about the importance of attorney’s fees and then asking for client support. I shall call this the “attorney-client solidarity” strategy. This is the most common strategy employed by non-profit lawyers.121 Thus, it is worth outlining the ethically acceptable parameters of this approach.
The use of the attorney-client solidarity approach raises a number of ethical questions. In particular, this practice is in tension with the principal of client control and with the duty to show undivided loyalty to the client. It may be unethical to ask clients to support the pursuit of a fee award if this will not help, and may even harm, the interests of the client. There is also a danger that the client may feel unduly pressured into sharing the lawyer’s desire for fees.
1. ASKING CLIENTS FOR ASSISTANCE
Justice Brennan suggested that “the lawyer’s duty of undivided loyalty requires that he render. . . advice [about settlement offers) free from the influence of his or his organization’s interest in a fee.”122 This lead him to conclude that public interest lawyers cannot ethically ask their clients to support them in their pursuit of fees.123 There are three reasons for resisting this analysis. First, the organization’s interest in a fee may be coextensive with some interests of the client. This will be especially true when the client is a member of the organization’s target client base. Many organizations offer legal services to a targeted group of clients. Typically, this group is underrepresented within the justice system.124 A client might support the services supplied by the lawyer’s organization on the basis of his or her own loyalty to the community. It is reasonable to ask a client to help ensure that the lawyer’s organization can continue to provide services to her and her community.
A second reason for rejecting Justice Brennan’s view is that it diminishes clients by assuming that lawyers should expect, or even encourage them, to be selfish. It is important to remember that clients can share the policy goals of a legal organization. Contrary to public opinion, lawyers do not have a monopoly on altruistic motivation. Attorneys should be alert to the wide range of clients’ “interests.” If the lawyer restricts advice to factors effecting the narrow self-interest of the client then the lawyer appears to assume that the client is only motivated by such factors. A lawyer should explain all of the implications of a settlement offer including the financial impact on the lawyer’s own organization. This enables the client to consider the broader consequences of his or her decision as well as its specific personal impact.
The third reason for rejecting Justice Brennan’s view is that clients may have an interest in the symbolic value of fee-shifting. Clients can be motivated to make an “example” of a defendant.125 Fee-shifting statutes provide the possibility of additional vindication for plaintiffs. The default rule is that parties pay their own costs.126 Fee-shifting sends a strong message that the defendant’s actions were contrary to public policy. Thus, there are three good reasons to ask clients to support the pursuit of a fee award. These reasons can be significant even if all other elements of the settlement offer are satisfactory for the client. This shows that asking clients to support the pursuit of fees is consistent with a lawyer’s duty of loyalty. In fact, the lawyer respects the autonomy of the client by assuming that the client may be motivated by altruism.
2. AVOIDING COERCION
It is legitimate to ask clients to support the pursuit of attorney’s fees. Lawyers must still take care, however, to ensure that they do not pressure clients to make an “altruistic” decision. It is only legitimate to pursue fees with genuine support from the client. Otherwise, the attorney will be acting against the interests the client in violation of Model Rule 1.7(b)(1).127 This raises two closely related questions. First, how much “encouragement” can public interest lawyers apply to their clients? Second, how can attorneys ensure that clients genuinely support their pursuit of fees?
A correct answer to the first question provides the best solution to the second. The best way to ensure that client support is genuine is to take care not to apply too much pressure on clients. If clients have not been pressured then lawyers can feel confident that their support is genuine. If clients are overly pressured then lawyers will not be able to trust expressions of support. Thus, the most important issue is how public interest lawyers inform and advise clients about fees.
How much persuasion is acceptable will vary. It will vary depending on how important fees are in a particular case and it will vary depending on how sympathetic particular clients are toward the wider policy goals of the lawyer’s organization. Early in litigation, particularly in a small case, the potential fee award will not be significant. If the fee involved is not significant for the attorney’s organization then lawyers shouldn’t recommend pursuing a fee award if this may harm the interests of the client. Other cases, however, may have significant financial implications for the lawyer. In these cases the lawyer will be eager for the client to support the pursuit of fees.
Lawyers should try to get some idea of how important wider policy goals are to a client. If the client has shown a strong interest in the policy goals of the lawyer’s organization then the lawyer can place emphasis on a settlement offer’s significance with respect to these goals. On the other hand, if clients suggest that they just want the money they are owed, then the lawyer may be interfering by placing an emphasis on fees. If public interest lawyers take care to ensure that they only ask for significant support from clients whom they know to be sympathetic, then improper coercion is unlikely to occur.
This approach can be contrasted with more radical tactics such as encouraging a client to refuse a settlement offer by actively misrepresenting the offer. David Luban has suggested that a radical tactic like this may be acceptable in some circumstances.128 he bases this conclusion on his view that public interest lawyers engaged in cause-lawyering have a unique kind of relationship with their clients. Luban acknowledges that, ordinarily, lawyers are agents of their clients. he suggests that public interest lawyers, however, may not have a simple agent-principal relationship with their clients. When lawyers and clients join together to pursue a policy goal they can be seen as having a relationship of “mutual political commitment.”129 Luban argues that people who enter into close political relationships understand that their allies may place the cause above the needs of an individual. I3° he claims that the public interest lawyer’s “relationship with her [client] is not an ordinary lawyer-client relationship based on agency conceptions of fiduciary responsibility, rather, it is a relationship of comradeship, of primary commitment to the cause and only secondary commitment to [the client].”131 Luban concludes that clients who enter into close political relationships with lawyers can be manipulated if this is sufficiently important to the cause.132
Luban’s radical conclusion is not consistent with standard legal ethics and Luban accepts this.133 His view is that standard legal ethics is too inflexible too accommodate political lawyering. Thus, unless public interest lawyers are willing to risk sanctions, they should take no more than an academic interest in Luban’s argument.
Moreover, Luban asks for attorney-client solidarity to support more weight than it can bear. Although clients and lawyers may often feel mutual solidarity, public interest lawyers typically represent clients of lower socio-economic status with little formal education. This hierarchy suggests that any manipulation by the public interest lawyer would only add to the disempowerment felt and experienced by their clients. Many academic commentators caution that public interest lawyers tend to dominate their clients.134 Lawyers should not make this problem worse by manipulating their clients into rejecting settlement offers.
As long as it is done carefully, asking clients to support the pursuit of attorney’s fees need not lead to lawyer domination. Much of the literature on lawyer domination focuses on the problem of lawyers characterizing their clients as helpless victims.135 Public interest lawyers who ask clients for support may actually help counter this problem. Practitioners should only “pressure” clients by asking clients to refuse offers on the grounds that the offer conflicts with the policy goals shared by the lawyer and the client. Mutual political commitment can bear this modest burden because the partnership between lawyer and client remains open and forthright. The client is allowed to consider his or her narrow interests along with the broader political goals. This takes clients out of the passive role of someone who simply needs to be saved by the lawyer.
3. SCREENING CLIENTS
Lawyers can only get genuine client support for pursuing fee awards if the client is supportive of the wider political goals of the lawyer’s organization. This gives lawyers an incentive to seek out and select clients who are sympathetic to their goals. In cases where the lawyer anticipates a need for client support the lawyer might consider selecting clients especially carefully.
Public interest lawyers confront more potential clients than they are able to serve. Thus, all organizations need to develop policies for distributing their scarce resources. This has been called the “strategy of legal service triage.”136 It is widely accepted that lawyers can base case selection decisions on broad utilitarian considerations such as how many people are affected or the relative seriousness of the potential clients’ problems.137
These utilitarian considerations can be extended to cover attorney-client solidarity and clients’ willingness to support the pursuit of fees. This is because the financial health of an organization is highly relevant to how many cases it can take. Having clients who support the pursuit of fees should allow an organization to help more people. This means that preferring supportive clients is similar to preferring cases where a legal victory will have a wider impact. Thus, it is legitimate for a public interest organization to seek supportive clients.
C. LIMITED RETAINERS
Justice Brennan suggested that “it may be that civil rights attorneys can obtain agreements from their clients not to waive attorney’s fees.”138 I shall refer to this idea as the “limited retainer” solution. Limited retainers can put clients and defendants on notice that settlement offers must include attorney’s fees. In this way, the plaintiff’s lawyer hopes to avoid conflicts of interest and ensure that success on the merits will lead to a fee award. At least one author has encouraged attorneys to use limited retainers.139 Another commentator suggested that limited retainers are the best, and most common, way to deal with conflicts related to the simultaneous negotiation of fees and merits.140
Unfortunately, limited retainers conflict with the basic tenet of legal ethics that clients should control settlement decisions.141 Commentators recommending limited retainers have completely ignored this ethical issue.142 This is a serious oversight. In the last decade, five bar associations have considered the ethical propriety of limited retainers.143 Four of these bar associations ruled that the “limited retainer” solution is unethical.144 Thus, attorneys in four states cannot use limited retainers at all without defying their state bar association. Bar association commentary on limited retainers has not been unanimous, however. The opinion from the California State Bar provides an alternative view.145
1. ETHICAL OBJECTIONS TO THE LIMITED RETAINER
The main objection to limited retainers is that they interfere with the client’s right to control settlement decisions. A limited retainer “specifically commits the client, as a condition of representation, not to accept a settlement offer conditioned on the client’s waiver of his or her right to pursue court-awarded attorneys’ fees.”146 Thus, the client agrees to limit his or her discretion to accept or reject any settlement offers.
In holding this retainer unethical, bar associations have mechanically applied ethical rules granting clients control over settlement decisions. For example, the State Bar Association of North Dakota noted that “Rule 1.2 makes it clear that a lawyer must abide by the client’s decision whether to accept a settlement offer.”147 Thus, a retainer “agreement may not restrict the client’s right to receive and accept settlement offers.”148 The Utah State Bar claimed that “[a]n attorney must convey all offers of settlement to a client, and the client must always have the final say . . . [t]his ultimate client authority cannot be contracted away.”149
The inquirer to the D.C. Bar claimed that the limited retainer is only a “slight impingement” on the client’s control of settlement and that this impingement “is justified by fee-shifting statutes and by the public interest served by providing financing for further cause litigation.”150 The D.C. Bar rejected this rationalization stating that “[t]he Committee, like other jurisdictions that have faced this issue, recognizes that a client’s right to accept or reject a settlement offer is absolute, as confirmed by our Rule 1.2(a).”151
Both the D.C. Bar and State Bar of North Dakota also make the serious charge that limited retainers actually create a conflict of interest between the client and the lawyer. The D.C. Bar claimed that:[A]n advance waiver of this right [to control settlement] in the context of a fee award waiver would create an actual conflict [of interest] between the lawyer and client when and if the client were called upon to honor the settlement restriction, seriously impairing the lawyer’s ability to render full and candid advice regarding the propriety of accepting the settlement offer and raising serious issues regarding the client’s ability to provide a voluntary consent to the lawyer’s continued representation.152
The State Bar of North Dakota similarly claimed that limited retainers, “rather than the settlement offer [conditioned on a fee waiver], create a conflict of interest between the attorney and the clients.”153
These claims are simply not correct. It is more accurate to say that the limited retainers resolve a conflict of interest in favor of the lawyer. If a defendant requests a fee waiver then a conflict of interest will exist regardless of whether the client has signed a limited retainer. The lawyer would still have an interest in rejecting the offer while the client has an interest in accepting the offer.154 For example, in Jeff D. the plaintiff’s attorney believed that his loyalty to his clients required him to accept the offer and forgo a fee award.155 Thus, the conflict was resolved in favor of the client. Alternatively, if a client honors a limited retainer then the conflict is resolved in favor of the lawyer. The conflict exists independently of the limited retainer.
Although the D.C. Bar and the State Bar of North Dakota are incorrect in claiming that limited retainers create a conflict of interest, this does not undercut the main basis for their decision. The main basis of their holding is the tenet of client control of settlement. By automatically resolving a conflict of interest in favor of the lawyer, limited retainers reduce client control of settlement. Accordingly, this interferes with an “absolute right” of the client and provides a basis for rejecting limited retainers.156 Thus, the crucial question for limited retainers is whether they impermissibly interfere with client control.
2. RESPONDING TO THE ETHICAL OBJECTIONS
The ethical objections to limited retainers do not support the wholesale rejection of their use. Although limited retainers have some costs for clients, these costs do not justify banning limited retainers. More importantly, if client autonomy is considered broadly, then limited retainers do not impermissibly interfere with this autonomy. Thus, in an at least some situations, these contracts are ethical.
The bar associations that rejected limited retainers did not consider, from the perspective of clients, the likely costs and benefits of limited retainers. This is worth doing. The main advantage of limited retainers is that they can assist potential plaintiffs to find competent counsel. Although it is not clear how powerful limited retainers are for this purpose, it cannot be disputed that lawyers are more likely to take cases if they know that litigation success will lead to a fee. Only the extent of the benefit is open to question.157 Any assistance in securing counsel should be valued highly. Potential clients are unlikely to have their rights vindicated at all without representation. We should only reject limited retainers if the costs of these contracts clearly outweigh this benefit. Otherwise, we would be denying plaintiffs a potentially useful tool.
There are two main costs of limited retainers. First, by reducing the range of settlement offers, limited retainers may lengthen litigation and increase the probability that a case will go to trial. This can delay relief and make litigation more expensive. second, a limited retainer may reduce the client’s eventual recovery. Neither drawback provides a basis for rejecting limited retainers.
Limited retainers should not be rejected just because they make settlement more difficult, as other methods of delivering legal services have similar downsides. For example, lawyers hired on a contingency basis have a financial incentive to do little preparation and settle early.158 Lawyers paid by the hour have an economic incentive to maximize the time they spend on a case.159 This means that hourly billing can require expensive and near constant monitoring by clients to ensure that legal services are not over-delivered.160 Over-delivery of legal services is not just more expensive, it can result in settlements being unnecessarily delayed.161 As other methods of delivering legal services have a similar effect, limited retainers cannot be rejected on ethical grounds just because they may delay settlement.
Nor should limited retainers be rejected because they may reduce the client’s recovery. It is true that, by agreeing to a fee waiver, a plaintiff who hasn’t signed a limited retainer should be able to secure a better settlement.l62 This is not a strong objection to limited retainers, however. Contingent fees have exactly the same drawback. Obviously, a plaintiff will get a better deal if he can keep his lawyer’s contingent fee. Client control over settlement does not give plaintiffs the power to insist that their lawyers waive their contingency fees. More simply, contingent fee contracts are enforceable even when they frustrate financial interests of the client. Thus, limited retainers should be enforceable even though they may have similar negative consequence for clients.
The costs and benefits of limited retainers are not lopsided enough to warrant the prohibition of this kind of contract. The defense of limited retainers requires one more step, however. It remains to be shown that limited retainers do not impermissibly interfere with client autonomy. This can be done by considering the ways in which limited retainers widen and limit client autonomy. If autonomy is conceived broadly, the freedom to sign a limited retainer may improve client autonomy. Thus, these retainers should be permitted.
Limited retainers infringe on client autonomy by restricting the client’s freedom to negotiate with the defendant. This infringement is quite narrow, however. Clients maintain most of their power over settlement decisions. For example, clients cannot be forced to accept an offer, as they remain free to reject any settlement offer. They remain free to accept any settlement offer that includes attorney’s fees. By signing the limited retainer a client only decides, in advance, to reject offers conditioned on a fee waiver. Thus, limited retainers only change the time at which a limited range of settlement decisions are made.
On the plus side, limited retainers improve clients’ freedom to bargain with their attorneys. While other bar associations focused solely on the client’s right to control settlement, the California Bar also considered the client’s right to contract with counsel at the inception of the attorney-client relationship.l63 The California Bar cited Vene gas v. Mitchell in support of the view that civil rights plaintiffs should be given flexibility when negotiating with their attorneys.164 In Venegas, the Supreme Court held that a contingent fee contract was enforceable even though the contingent fee exceeded the statutory fee awarded under the Fees Act.165 The Court noted that refusing to allow contingency agreements in civil rights actions would place plaintiffs “in the peculiar position of being freer to negotiate with their adversaries than with their own attorneys.”166
Similar considerations apply to limited retainers. Refusing to allow limited retainers would place plaintiffs in the situation of being freer to negotiate with defendants than with their own lawyers. Thus, allowing limited retainers improves clients’ freedom to negotiate with their lawyers at a cost to their freedom to negotiate with defendants. Allowing clients to choose which freedom is most important is the best way to respect client autonomy.
Overall, limited retainers can involve a sensible bargain. The client agrees to exchange the “weapon” of a fee waiver to improve her prospects of finding representation. This deal does not come at an intolerable practical or financial cost to the client. Also, a limited retainer does not have an intolerable effect on the client’s autonomy. Limited retainers only restrict a small aspect of the clients’ right to control settlement. Importantly, they do not force the client to accept any offer. They only require the client to decide in advance to reject a certain type of settlement offers. These points strongly support the view that clients should be allowed to sign limited retainers.
These detailed considerations can be contrasted with the simplistic position that clients have an “absolute” right to control settlement.167 This right should not be invoked at a cost to clients. Traditionally, a strong showing is required to establish that a contract is unconscionable.168 Even if we assume that clients deserve extra protection from savvy lawyers, bar associations should engage in deeper analysis before prohibiting limited retainers. Applying strict construction-ism to ethical rules may not always be the best way to help clients. In this case, a deeper analysis suggests that, from the perspective of the client, the benefits of limited retainers justify the cost.
3. PROBLEMS WITH ENFORCEABILITY
I have argued that bar associations should allow attorneys to use limited retainers. Unfortunately, a complication remains. Even if bar associations reach the correct ethical conclusion and allow limited retainers, they do not get the last word. Retainers are contracts. As such, their usefulness is dependent on the willingness of courts to enforce them. Like the majority of bar associations, courts generally assign an “absolute” value to the client’s right to control settlement decisions.169 Thus, it is possible that courts will hold that limited retainers are invalid. Bar ethics opinions may influence courts to support limited retainers but these opinions are not binding. Thus, bar associations and courts need to act together.
Consider the example of California. California case law, like that of other states, strongly supports client control of settlement decisions.170 The California Bar realized that limited retainers might not be enforceable.171 The Bar concluded that “[tjhe client always has the right to determine whether or not to accept a settlement offer.”172 The Bar emphasized that any lawyer must disclose and explain the terms of the retainer, including the possibility that the retainer is unenforceable.173 The recommended disclosure:
should include a discussion that the lawyer may attempt to override the client’s desire to settle the case by accepting the injunctive relief requested, if the settlement offer depends upon a waiver of some or all of the attorney’s fees, and that the lawyer’s right to do so may not be enforceable. The client must be informed that the defendant may offer the full injunctive relief requested in exchange for a waiver of attorney’s fees and that, in this event, the attorney’s interest and the client’s interest in settling the case would differ, with the possible result that the attorney must withdraw.174
If the lawyer cannot accept or refuse a settlement offer without the client’s consent then, even if the client has signed a limited retainer, the client can accept an offer conditioned on fee. The lawyer may then withdraw and seek to enforce the retainer agreement.175 However, the lawyer may arrive in court only to find the agreement declared unenforceable.176
Thus, even if their local bar permits limited retainers, attorneys may be reluctant to ask clients to sign a contract that may be unenforceable. Limited retainers could still assist in two ways, however. First, the client may feel a moral obligation to honor the contract, even though the client understands that the retainer may be unenforceable. The retainer would serve as an informal agreement whereby the client agrees to assist the lawyer to secure a fee. This is an acceptable reason to want an unenforceable contract. Limited retainers could also help the attorney in an objectionable way, however. Clients could honor the retainer because they don’t understand that they maintain the power to accept settlements conditioned on fee waivers. This could happen with or without deliberate pressure from the attorney. The California Bar attempts to prevent this by requiring attorneys to disclose the possibility that the retainer is unenforceable.177 Nevertheless, many clients will lack the legal sophistication to appreciate the significance of this. The California Bar does not address this danger.
At a minimum, clients should be able to understand the implications of any contract they sign. Thus, limited retainers are only ethical if the client is sophisticated enough to understand the implications of signing a contract that may be unenforceable.178 Unfortunately, the indigent clients that fee-shifting provisions are intended to help are especially likely to be confused by a request to sign a potentially unenforceable contract. This suggests that limited retainers will only be ethical in a narrow range of cases. Thus, until bar associations and courts accept limited retainers, plaintiff’s attorneys may have to rely on alternative strategies for dealing with fee-related conflicts of interest.
The tension between the California Bar’s opinion and the likely response from the courts provides support for a thesis advanced by Peter Joy. Joy argues that state supreme courts should establish procedures allowing them to review bar association ethics opinions.179 Ethics opinions could then be a source of precedential authority.180 This would make it less likely that the bar and the courts will end up working at cross-purposes.181 Under the current system, attorneys can not be sure that courts will respect the California Bar’s decision that limited retainers are ethical. Thus, public interest lawyers will have to proceed with caution if they use these retainers.
III. JEFF D. IN PRACTICE: PERSPECTIVES FROM THE FIELD
It is difficult to determine the impact of Jeff D. simply by considering the options available to attorneys or by looking at subsequent ethics opinions. A more empirical approach is required. In an attempt to gauge the effects of Jeff D., I conducted structured interviews with ten public interest practitioners. These interviews addressed the following topics. Do defendants regularly create fee-related conflicts for public interest lawyers? If so, do public interest attorneys regularly find themselves forced to miss out on fee awards because of these conflicts? What strategies do plaintiffs’ lawyers use to deal with fee waiver requests or the simultaneous negotiation of fees and merits? How effective are these strategies? Do practices differ in California where the bar allows the “limited retainer” solution?
I interviewed attorneys who work for non-profit organizations that focus on plaintiff-side litigation and regularly seek attorney fee awards.182 The attorneys’ practice areas included environmental law, immigrants’ rights, employment discrimination, prisoners’ rights and general civil rights.183 The interview sample is fairly small and was not selected via any rigid and scientific randomization process. Nevertheless, I attempted to interview lawyers from diverse regions within the U.S. and with diverse public interest experience. Thus, the interviews should at least uncover general trends and reveal the most common tactics employed by public interest lawyers. The sample reflects my own biases as to what constitutes “public interest” practice. This is largely unavoidable. I hope that my choices reflect a fairly conventional view of progressive public interest lawyering.184
My empirical work overlaps with ju lie Davies’ study. Davies engaged in a broad study of the effects of Supreme Court decisions in statutory fee cases.185 Davies interviewed 35 lawyers.186 Most of these attorneys were practicing in the San Francisco Bay Area and most were in private practice.187 Davies’ study was focused on the financial impact of Supreme Court decisions on plaintiff-side civil rights practice.188 My interviews also covered this topic although I focused exclusively on non-profit practice. The results of my interviews were consistent with Davies’ results wherever our work overlapped. Thus, my interviews provide good confirmation of the accuracy of Davies’ research.189 My interviews expand on Davies’ study by covering the ethical challenges of Jeff D. in detail.
A. JUSTICE BRANNAN’S HORROR STORY
Justice Brennan predicted that, in the wake of Jeff D., defendants would seek fee waivers as a matter of course.100 he also predicted that lawyers would advise their clients to accept these fee waiver offers.191 This would make it harder for plaintiffs’ attorneys to secure fees and will make attorneys far more reluctant to take plaintiff-side civil rights cases.192 justice Brennan’s prophecy involves three independent claims. First, defendants will routinely make settlement offers conditioned on fee waivers. second, plaintiffs will accept these offers. Third, the first two factors will combine to reduce the supply of plaintiffs’ lawyers.
I asked interviewees if they had ever received an offer that included adequate relief for their clients but was conditioned on a waiver of fees. The responses indicate that justice Brennan was overly pessimistic. Five attorneys reported having never received such an offer.193 Three lawyers had encountered fee waivers infrequently.194 One lawyer noted that, while he did frequently receive settlement offers that did not include fees, these fee waivers were usually tied to early “trial balloon” offers that were clearly unacceptable to the client.195 Only one attorney stated that he frequently received fee waiver requests tied to offers of adequate relief on the merits. ’96
Some interviewees speculated as to why they do not face fee waivers more frequently. One lawyer suggested that there “may be a lack of knowledge within the defense bar” about Jeff D. and the potential for reducing exposure via fee waiver requests.197 Another interviewee suggested that defense lawyers could be motivated by concerns about mutual cooperation.198 She noted that litigators are sometimes reluctant to use hard-nosed tactics for fear of retaliation. Preventing your opponent from getting paid is likely to create antipathy and impede cooperation.199
This Note focuses on fee-related conflicts faced by plaintiffs’ attorneys. It is worth noting, however, that defense lawyers also have a potential conflict of interest. Outside defense counsel have no interest in securing fee waivers as they are generally paid by the hour. Defense lawyers have an interest in the health of the plaintiffs’ bar that is not shared by defendants. The lawyers do not want the opposition to go out of business. Moreover, the defendants are probably not aware of the power of settlement offers conditioned on fee waivers. Thus, defense counsel would need to disregard his or her own interest and suggest the fee waiver. This conflict may partially explain why fee waiver requests are less frequent than was anticipated.200
Although my sample size is not large, the interviews strongly indicate that the crucial first element of justice Brennan’s prediction was inaccurate.201 Defendants do not seek fee waivers as a matter of course.202 This does not mean, however, that Jeff D. has not had a negative impact on the plaintiffs’ bar. A single fee waiver can have a devastating effect on a small public interest office.203 The mere possibility of a fee waiver request may influence settlement negotiations. Moreover, plaintiffs’ attorneys still face conflicts related to the simultaneous negotiation of fees and merits.
B. SIMULTANEOUS NEGOTIATION: LUMP SUM OFFERS
I asked interviewees if they had received settlement offers of a single lump sum intended to cover both fees and damages. Two attorneys reported that, as they focus on injunctive relief, defendants could not offer to settle fees and merits with a single lump sum.204 The remaining interviewees all regularly receive lump-sum offers.205 Some interviewees receive lump sum offers in the majority of their cases.206
Defendants “never seem to care” how the lump sum is divided.207 Thus, attorneys regularly face the exact situation the Third Circuit had hoped to prevent. The Prandini Court hoped that prohibiting simultaneous negotiation would prevent a situation “having, in practical effect, one fund divided between the attorney and client.”208 I asked interviewees how they respond to this difficult situation.
When faced with a lump-sum offer (or any offer), all interviewees ask defendants to separate the negotiation of relief on the merits and fees. This usually involves asking the defendant to negotiate relief on the merits first and then allow a petition to the court for attorney’s fees. all of the interviewees employ this tactic, although it is spectacularly unsuccessful. Only one lawyer had succeeded with this tactic on more than an occasional basis.209 In fact, many interviewees reported that, after Jeff D., no defendants were willing to settle on the merits first and then allow the court to determine fees.210
It may appear that the lump sum offer leaves the plaintiff’s attorney in an untenable position. The attorney cannot subtract a portion of the lump sum for fees without prejudicing the interest of the client. The ethical challenge of this situation is not as acute as it may seem, however. This is because the first lump-sum offer is usually inadequate for the client even if no money is deducted for a fee.2″ Thus, the lawyer can refuse the offer and attempt to negotiate a new offer that includes more money for the client as well as a separate fee award.
Attorneys can try to get the defendant to separate future offers into separate amounts by asking the defendant “how they are coming up with their numbers.”212 The defendant may be calculating the lump sum by adding damages to a fee award. A more common method is to make a counter offer.213 The counter offer will include a damages award larger than the total amount of the first offer plus a separate fee award. This means that the lawyer improves the result for the client while still getting fees into the equation. The final series of offers and counter offers will usually involve separate sums for fees and damages. Thus, public interest lawyers are usually able to avoid finishing with a lump sum.
There is an important exception to this pattern. This is when the early lump-sum offer seems adequate for the client. In this situation, attorneys will often recommend that the client accept the offer, requiring the lawyer to forgo a fee.214 Attorneys are reluctant to ask a client to support the pursuit of fees in the early stages of litigation because the cost to the client could be very high compared to the benefit to the attorney’s organization. Thus, public interest lawyers can miss out on recovering fees due to lump-sum offers that, at least in some circuits, were prohibited before Jeff D.
C. SIMULTANEOUS NEGOTIATION: RELYING ON ATTORNEY-CLIENT SOLIDARITY
The interviewees do not usually find themselves in a situation where the end result of settlement negotiations is a single sum to divide between fees and damages. This does not end the ethical difficulties, however. Although defendants eventually separate offers into two amounts, the defendants are probably more concerned with overall liability. Defendants may still be willing to increase one part of the offer at the expense of the other.215 Thus, any increase in fees may come at the expense of the client. This is the most common form of fee-related conflict faced by the interviewees.
Although perspectives on this problem varied, one tactic was employed by almost all of the interviewees. The majority of interviewees focused on the “attorney-client” solidarity tactic outlined in Part U(B), supra. The interviewees described this strategy in terms of careful client selection and client education.216 These lawyers try to select clients who have an interest in the broader policy issues behind any litigation and are sympathetic to the overall mission of the legal organization. They then educate clients about the importance of attorneys’ fees to the lawyers’ organization and mission.217 Attorneys hope that, given that clients have ultimate control over settlement decisions, sympathetic clients are more likely to be supportive of the lawyers’ interest in securing fee awards.
One lawyer explained his organization’s strategy as follows. he said that “we look carefully at who we choose as clients.”218 They explain to clients “that we are a non-profit and we want to establish good law and policy.”219 They try to ensure that clients understand that it can be difficult and time consuming to recover damages. Clients are also informed that fee awards are important for the financial viability of the organization. he feels that “we’ve been blessed with clients who understand how we stay afloat and the public importance of what we do.”220 Although this attorney had never received a fee waiver request, he believed that most of his clients would refuse such an offer.
Other interviewees shared these sentiments. One attorney had “always been impressed by how supportive clients are of our desire for attorneys’ fees.”221 Another attorney reported an occasion where clients placed a higher priority on fees than the attorneys.222 The attorney had recommended that a matter be settled without fees but the clients held out. The clients hoped a fee award would act as a deterrent and make an example of the defendant. This illustrates the symbolic value that fee-shifting can have for clients.223
Interviewees were alert to the danger that clients will give insufficient weight to their own interests or will feel pressured into sharing the lawyer’s desire for fees. One attorney noted that this risk is amplified by the fact that clients almost always follow their attorney’s advice.224 In response to this problem, attorneys take extra care to ensure that they find highly supportive clients for cases where they anticipate high costs and a greater need for fees. For example, one lawyer reported that her organization takes a different approach to large cases with wide importance.225 Sometimes, her organization will face “bad actors” that cause significant problems.226 In these cases, her organization wants litigation to have a lasting impact on the behavior of the defendants. This means that early settlement is unlikely. Thus, fees are likely to be large. Her organization will want clients “who buy into these goals at the start of the process.”227 They make sure to discuss the significance of the lawsuit, fees and the kinds of remedies they would like to pursue.228 This attorney’s organization also handles cases “where we have a new defendant and the clients just want their money.”229 These cases are more likely to settle early and involve a small fee award. As client solidarity and support are not as important for these cases, the organization will not select these clients as carefully. It appears that public interest lawyers take care to ensure that they only ask for significant support from clients they know to be sympathetic. This may help to minimize the danger of client coercion.
Client selection and education is clearly an important aspect of the practice of many public interest lawyers. judge WaId suggested that “most public interest counsel explain the financial details of the litigation well in advance to their clients, and that few clients will against the advice of counsel leap to accept a settlement that deprives counsel of fair compensation.”230 This appears to be an accurate description of subsequent public interest practice within the non-profit sector.
D. LIMITED RETAINERS
I asked interviewees if they use limited retainers. I also asked interviewees if they are familiar with any of the bar ethics opinions on this topic and if they would consider using a limited retainer if they were approved by their local bar association. One commentator has suggested that limited retainers are the most common way to deal with fee-related conflicts.231 Thus, it might have been expected that interviewees ask their clients to sign limited retainers. Surprisingly, my interviews strongly suggested that public interest attorneys do not frequently use limited retainers.
Only one interviewee uses a limited retainer.232 This attorney works as in-house counsel for a community group and usually represents the client in any litigation. His organization always agrees not to waive statutory attorney’s fees whenever they hire outside counsel. None of the remaining attorneys use limited retainers.233 Thus, no interviewees ask clients to sign limited retainers.
Interviewees suggested that successful client selection and education can preempt the need for a limited retainer. As one attorney put it, you “only need a strong retainer if you don’t have trust and a good working relationship with your client.”234 Many attorneys were concerned about the coercive nature of asserting a contract against a client. One said “the best insurance is having a client you are comfortable with and on the same page with, I would hate to have to assert part of a retainer against a client.”235 Limited retainers could be seen as a threat to the cooperative relationship between the lawyer and client.
Retainers still play a role in dealing with fee-related conflicts, however. A retainer should clearly explain that the attorney will seek attorney’s fees and that any fees awarded should be paid to the attorney.236 The retainer can also be a useful tool for educating the client about what to expect from the litigation.
Interestingly, attorneys were not aware of the split between the California Bar and other bar associations on the issue of limited retainers. The attorney who uses a limited retainer does practice in California. However, he did not know that his local bar is the only one that approves of limited retainers. In fact, interviewees were not aware of any of the ethics opinions.237 Thus, the ethics opinions cannot explain the reluctance to use these retainers. Ethical concerns were still relevant, however. For example, upon being asked if he used a limited retainer, one attorney responded immediately that such a retainer is unethical because clients must control settlement decisions.238
I asked interviewees if they would use a limited retainer if this were permitted in their jurisdiction. Interestingly, this elicited a wide variety of responses.239 One attorney responded to the idea with enthusiasm.240 This lawyer had reported some of the worst experiences with fee-related conflicts.241 Four interviewees also expressed interest in limited retainers but were slightly more cautions. These attorneys said that they would seriously consider using limited retainers if this was permitted in their jurisdiction.242 Four attorneys stated that they would not use a limited retainer.243
Two of the attorneys expressing guarded interest in limited retainers said that these retainers would be helpful if they put defendants on notice that they cannot ask for a fee waiver at all.244 They hoped that a limited retainer would prevent a conflict of interest from arising in the first place. If courts refused to enforce the retainers then they probably would not serve this purpose. One respondent was very sensitive to this issue. he specifically noted that he would not use a limited retainer unless both the bar and the courts recognize such contracts.245
Some interviewees suggested that, even if they used limited retainers, these contracts would probably have a narrow role. These attorneys said that their organizations would consider using limited retainers in a handful of cases.246 They would reserve limited retainers for cases in which they anticipate having to invest a significant amount of money and time. Fee decisions in larger cases can have a long-term impact on the health of a public interest organization.247 Thus, attorneys have a very strong interest in avoiding fee waivers in large cases.
Four attorneys rejected the idea of using limited retainers.248 One lawyer believed clients should always control settlement decisions.249 Another attorney said that, although he thought that limited retainers might be acceptable on some occasions, he preferred to leave settlement decisions to the client.250 he noted that his organization is more financially stable than many legal non-profits. He acknowledged that he might change his mind if he had a greater need for fees. Two attorneys suggested that limited retainers would interfere with their relationships with their clients.251 They preferred to rely on client trust and a relationship of mutual support.252
The interviewee who already uses a limited retainer works as in-house counsel for a coalition of community groups.253 he focuses on environmental litigation. This attorney reported receiving many settlement offers that included inadequate fee relief.254 he said that his organization would never accept such an offer. Moreover, in its retainer it explicitly agrees not to accept any settlement offer that does not include fee award.
This attorney’s testimony and experience provide strong support for allowing limited retainers. he said that “we have to keep in mind that there is a limited number of plaintiffs’ lawyers and our ability to win fees is part of why we can attract good outside counsel.”255 The California Bar argued that allowing clients to sign limited retainers extends the bargaining options for clients prior to initiating representation.256 The client may wish to sign a limited retainer to help secure competent representation. This is exactly how this in-house counsel conceived of the limited retainer. His organization would be deprived of a useful tool if they were prohibited from using a limited retainer.
E. THE LEGACY OF JEFF D.
Jeff D. was not as devastating as many anticipated. This does not mean, however, that it did not have a large negative impact on lawyers in the non-profit sector. Interviews suggest that fee waiver requests are not very common. Attorneys still reported that Jeff D. and simultaneous negotiation make it more difficult for them to collect adequate fees.
One interviewee practiced in the Third Circuit prior to Jeff D. when, under Prandini, simultaneous negotiation was prohibited.257 he stated “we continue to take the position that the Prandini rule was the best way to handle fees.”258 He claimed that there is “no question that how you have to negotiate attorney’s fees now makes it more difficult to pursue fees.”259 The difficulty is caused because “post Evans [v. JeJfD.], it has become more difficult to have an effective position on fees that you adhere to right to the end of the line, unless you have a very strong claim.”260 It is hard to maintain a consistent position because this can drag out negotiations and hold up relief for the client. Then it “becomes an issue how much clients value a quicker settlement.”261 Thus, Jeff D. “has forced us to be far less willing to hold out on fees.”262
Other attorneys agreed that JeJfD., while not devastating, did cause significant problems. In particular, they complained about the uncertainty that the decision creates.263 Under the Prandini rule an attorney has much more control over the fee award. The defendant cannot make relief on the merits conditional on a fee offer. Thus, in theory at least, plaintiffs’ attorneys could counsel against accepting any fee offer they felt was unreasonable without affecting the amount offered to the client. Under Jeff D., attorneys have to consider how refusing a fee offer will affect their clients. Attorneys cannot predict how defendants are going to intertwine offers on fees and merits, nor can they predict how clients will react to an offer.
Uncertainty about fee awards has negative effects as it makes budgeting very difficult.264 This can be a big issue when fees make up as much as 70 percent of an organization’s budget.265 Uncertainty about fees also contributes to a willingness to settle cases early without a fee award.266 This can be true even where clients are supportive of the attorney’s desire to pursue fees. Attorneys were reluctant to ask a client to risk a settlement unless their organization had devoted a significant amount of time to the case.267 The “result is that we often get less fees than we are entitled to, especially in smaller cases.”268
Interviewees reported that clients were generally very supportive of their desire to pursue fees. This does not mean that clients are always supportive, however. One attorney reported that his organization had “taken a bath” in a big case when, against advice of counsel, the client had accepted a settlement offer with a very low fee award.269 he claimed that his organization laid off half of its staff as a result of this settlement. Thus, even if most cases go well, a single bad experience with simultaneous negotiation can have a big effect on a small legal non-profit. Fear of this situation motivated the attorneys who would be willing to use limited retainers. They reported a desire to protect themselves in cases where they invest large amounts of time and resources.270
My interviews focused on public interest practice. Some interviewees suggested that Jeff D. has also had an effect on private practice. One interviewee claimed that Jeff D. has had a severe impact on the willingness of private counsel to take civil rights cases unless these cases involve the possibility of winning significant damages and collecting a good contingency fee.271 he said “we’re left with the situation that if the cop doesn’t beat the guy up enough then no one’s going to bring the case.”272 he said that civil rights cases were not intended to be pro-bono cases but, under Jeff D., they are seen in this way unless large damages are anticipated.273 Thus, Jeff D. may have increased the burden on public interest lawyers by reducing private counsel’s willingness to take cases.
Public interest lawyers, while dedicated to the particular interests of their clients, are also motivated by broader policy aspirations. Moreover, the clients themselves can be interested in broader policy goals. When clients share the policy goals of their lawyers, then clients should be made aware of the policy implications of any settlement decision. This practice respects the autonomy of clients by assuming that they can be motivated by more than narrow self-interest. My interviews suggest that public interest lawyers do ask clients to consider the policy implications of settlement offers. This policy impact can include the financial consequences for the lawyer’s own organization. Within the non-profit sector, this is the main tactic used to avoid the worst consequences of Jeff D. This strategy is usually successful.
Although justice Brennan’s horror story about Jeff D. did not come true, the decision has still had a negative impact on public interest lawyers. After Jeff D., attorneys are willing to counsel clients to accept early offers that include no fee award. Jeff D. has also created a risk that attorneys will miss out on fees in larger cases if the client is not supportive. This could lead to significant financial consequences for a small organization handling a large case. Limited retainers could provide protection for lawyers in the non-profit sector who are vulnerable to these risks. These retainers would also assist clients to find representation. Bar associations should follow California’s lead and permit limited retainers.
* J.D., Yale Law School (expected 2004). I would like to thank Professor Lea Brilmayer for helpful advice and comments. I would also like to thank the busy public interest lawyers who generously participated in this study.
Copyright Georgetown University Law Center Spring 2004
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