Calculating Awards of Attorney Fees

Economists Ink: A Brief Analysis of Policy and Litigation


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Laura A. Malowane, an EI Vice President, has extensive experience in analyzing and testifying on issues relating to the awarding of attorney fees. She also specializes in assessing damages in commercial and personal litigation matters, including wrongful termination, defamation and loss of business opportunity

When a court awards attorney fees, it must determine the appropriate rate to use in measuring the cost of the attorney’s services. Counsel’s billing rates often cannot be used because pro bono work, contingency fees, discount rates and other non-traditional forms of billing may render the nominal billing rate meaningless as a tool for measuring the actual value of the attorney’s services. Often the court will look to outside sources for estimates of appropriate rates. These sources include fee matrixes, which set out rates that depend on the attorney’s years of experience. One such matrix is produced by the United States Attorney’s Office (USAO) for the District of Columbia.

The USAO’s matrix was first introduced by the U.S. District Court for the District of Columbia to determine reasonable attorney’s fees for work performed in Laffey v. Northwest Airlines, Inc. The attorney fees awarded in that case were for work done primarily in 1981 and 1982. To determine reasonable attorney rates for later periods, the USAO adjusted these original rates in accordance with changes in the Bureau of Labor Statistics Consumer Price Index for All Urban Consumers for the Washington-Baltimore area (“CPI-Washington”). The USAO continues annually to update this matrix to produce a table that provides hourly rates, based on years of experience, for attorneys, paralegals and law clerks in the Washington, D.C. area. This table is known as the USAO Laffey Matrix.

An alternative to the USAO Laffey Matrix is the Salazar Matrix, named after the case that first accepted it (Salazar v. District of Columbia). The Salazar Matrix begins with a 1989 template of hourly billing rates for legal services and then proposes to use a national index, the U.S. City Average of the Consumer Price Index for Legal Services (“US Legal Index”), to update these hourly billing rates. Several court decisions have accepted the Salazar Matrix as a basis for determining attorney fees, and its proponents claim this matrix has significant advantages, particularly its more recent base year and its use of an inflation index specific to legal services. Nevertheless, in cases involving complex federal litigation in the D.C. area, the USAO Laffey Matrix is the superior matrix to use to determine attorney fees.

The purpose of using a matrix for determining attorney fees is to approximate the actual hourly rates collected in the local community by attorneys with similar qualifications working on comparable cases, (i.e., the “market rate”). The Salazar Matrix falls short of this goal when assessing attorney fees in complex federal litigation in DC. The Salazar matrix, and its use of the US Legal Index, have several major flaws: a) the US Legal Index measures price changes in basic, consumer-oriented legal services and not complex federal litigation; b) the US Legal Index does not routinely take into account reasons why actual collected rates may differ from hourly billing rates, such as discount rates and contingency fees; c) the US Legal Index is a nationwide average index and not specific to the Washington, D.C. metropolitan region; and d) actual hourly billing rates of attorneys in the Washington, D.C. area are, according to published survey data, closer to rates outlined in the USAO Laffey Matrix than those in the Salazar Matrix.

Because the US Legal Index is based on the prices for some legal services, proponents of the Salazar Matrix assume that is the appropriate price index to use when adjusting legal fees. But given the nature of the services whose prices are considered when computing the US Legal Index, this assumption is incorrect. The US Legal Index measures price changes for personal legal services used by household consumers, such as basic wills, uncontested divorces, powers of attorney, and traffic violations. It does not include hourly billing rates for complex litigation. The demand for personal legal services is independent of the demand for complex litigation legal services. Moreover, because of legal specialization and differences in the skills necessary to supply specific legal services, the lawyers who provide personal legal services generally are different from those who engage in complex litigation. Thus, there is no advantage in using the US Legal Index, rather than the CPI, to measure price changes for legal services in complex litigation.

Moreover, the US Legal Index cannot reliably track changes in the fees charged in complex litigation, because those fees are often structured very differently from the fees for personal legal services. The US Legal Index is based on standard flat-fee rates, which are commonly charged for basic, personal legal services but are much less common in complex litigation. The US Legal Index excludes contingency fees, as they are not generally relevant to personal legal services. Moreover, the US Legal Index ignores discounts from standard fees unless the attorney routinely gives a discount for a specific service. Surveys of law firms reveal that contingency fees and other alternative fee arrangements are common practice in complex litigation. There is no basis for assuming that changes in flat-fee legal services, as measured by the US Legal Index, accurately capture changes in fees under these alternative billing mechanisms.

The USAO Laffey Matrix is superior to the Salazar Matrix in its geographic focus. The USAO Laffey Matrix uses the CPI-Washington (a regional, Washington area, price index) to adjust for changes in attorney fees in the Washington area. In contrast, the Salazar Matrix uses a nationwide index that is not specific to the region at issue. Due to the importance of local laws and regulations as well as the need for many clients to have local counsel, the demand and supply of legal services differ across areas. Nevertheless, the US Legal Index, and thus the Salazar Matrix, ignores the regional variation in attorney fees.

Finally, survey data support the use of the USAO Laffey Matrix over the Salazar Matrix. These data show that Laffey Matrix rates are approximately the same or slightly lower than the actual billing rates of firms in the greater D.C. area, while Salazar Matrix rates are consistently higher than these billing rates. Given the limitations of the Salazar Matrix, it is not surprising that actual attorney rates are more closely mirrored by the USAO Laffey Matrix.

Two matrixes have been proposed for use in awarding attorney fees. The Salazar Matrix fails to properly address the types of legal services, alternative billing methods, and geographic features applicable to complex federal litigation in Washington, D.C. The USAO Laffey Matrix is the superior matrix to use to determine attorney fees in such cases.