A recent ABA Journal story, “This City Has the Highest Billing Rates for Litigators, Survey Shows,” by Amanda Robert reports on NALFA’s 2023 Litigation Hourly Rate Survey & Report.  The story reads:

Litigators in the national’s capital outpaced all other litigators on billing rates in 2023, according to a recent survey from the National Association of Legal Fee Analysis.

A quarter of full-time litigators in Washington, D.C., who responded to the survey reported billing rates of $951 to more than $1,300, which is the highest tier tracked by the association. In comparison, only 13% of litigators fell into the highest tier in San Francisco, the city with the second highest billing rates last year.

“It’s top [litigation] billing city, and it’ll probably be so for the next several years,” Terry Jesse, executive director of the National Association of Legal Fee Analysis, told Law.com.  “I mean, no one comes close to Washington in terms of billing and litigation.”

More than 24,000 litigators in 24 cities participated in the National Association of Legal Fee Analysis’ annual survey of hourly billing rates, according to Law.com.

More than 2,000 litigators from D.C. responded to the survey. Nearly 200 of them reported billing rates of at least $1,201 an hour, Law.com says.

In addition to those in the highest tier, 51% of D.C. litigators reported billing rates between $701 and $950. Another 22% reported billing rates between $451 and $700.

Jesse told Law.com that the large presence of large law firms in D.C., and higher starting salaries for associates could be two factors influencing the city’s high billing rates.

A recent NLJ story by Abigail Adcox, “DC Litigators Outpaced All Other Cities on Billing Rates in 2023” reports on NALFA’s 2023 Litigation Hourly Rate Survey & Report.  The story reads:

Washington, D.C., ranked as the city with the highest billing rates for litigation in 2023, according to a new survey from the National Association of Legal Fee Analysis.

A quarter of survey respondents in D.C., which included full-time equivalent litigators, both defense and plaintiffs counsel, fell within the highest tier, tier 4, with billing rates in the range of $951 to over $1,300, the highest percentage out of the 24 cities tracked.

Comparatively, in San Francisco, which had the second highest litigation billing rates last year, only 13% of respondents fell in tier 4, according to the survey.

“It’s top [litigation] billing city, and it’ll probably be so for the next several years. I mean, no one comes close to Washington in terms of billing and litigation,” said Terry Jesse, executive director of the National Association of Legal Fee Analysis, a nonprofit that undertakes fee analyses for courts and private clients.

A little over 2,000 attorneys in D.C. responded to the survey, including litigators practicing at large law firms, midsized law firms and solo practitioners. Overall, roughly 24,000 litigators participated in the survey across the U.S.

In D.C., of the 2,000 respondents, 101 reported billing rates between $1,201 to $1,300 and 97 reported billing rates over $1,300.

Overall, 2% of D.C. litigators fell within tier 1 billing rates (less than $450); 22% fell within tier 2 billing rates ($451-$700); and 51% fell within tier 3 rates ($701-$950).

Jesse indicated that the large presence of major law firms in D.C. was likely one reason for the region’s high billing rates. And the small percentage of billers in tier one may be attributed to higher associate starting salaries.

“Starting salaries have gone up. And thus there’s a correlation between compensation and rates. So what I think is going on is that first-year associates are starting their rates higher, more on the second tier,” said Jesse.

Overall in 2023, billing rate increases and demand helped D.C. firms end the year with a strong financial performance.

Average billing rates in the D.C. region rose 8.8% compared with the industry average of 8.3%, according to Wells Fargo’s Legal Specialty Group’s year-end survey results. Those results included eight firms headquartered in the D.C. region. That came as demand picked up in litigation and regulatory practices in the region.

Billing rate hikes aren’t expected to slow down in the near-future either. A recent survey showed that 86% of large firms in the U.S. and U.K. expect to increase billing rates over the next 12 months, with nearly a fifth of respondents expecting them to increase between 41% and 60%, according to reporting from The American Lawyer.

A recent Law 360 article by Hugh Marbury and Molly Shaffer, “A Defense Strategy For Addressing Copyright Fee-Shifting”, reports on case strategy in copyright fee-shifting litigation.  This article was posted with permission.  The article reads:

Unlike in Europe, litigants in the U.S. are generally responsible for paying their own attorney fees. Limited exceptions to the American rule exist.  For example, subject to the court's discretion, prevailing parties in Section 1983 patent and copyright litigation are eligible to recover attorney fees.

Although permissive fee-shifting is not isolated to copyright matters, copyright defendants face unique challenges because of the outsized impact Section 505 of the Copyright Act has on the economic incentive structure in all copyright litigation.  Federal Rules of Civil Procedure, Rule 68 could neutralize the omnipresent threat of Section 505 and serve as a mechanism for copyright defendants to recover post-offer attorney fees incurred.

In 2014, the American Law Institute launched a project for developing the first Restatement of the Law, Copyright.  More than 175 elected American Law Institute members — consisting of judges, law professors and experienced copyright practitioners — have spent several years drafting the restatement.  The restatement surveys copyright law as it is applied today, including the conflicting case law regarding fee-shifting and Rule 68.  In addition to the impending restatement, the U.S. Supreme Court has demonstrated some interest in copyright issues.

In Warner Chappell Music Inc. v. Sherman Nealy, the U.S. Supreme Court heard oral argument Feb. 21 to determine the relationship between the discovery accrual rule and the statute of limitations provision contained in Title 17 of the U.S. Code, Section 507(b).  The intersection between Rule 68 and Section 505 is another unclear area of copyright law where copyright lawyers could benefit from the Supreme Court's guidance.

The Intersection Between Rule 68 and Section 505

The U.S. Congress and courts have struggled with economic drivers in copyright cases, the subject matter of which can range anywhere from a single infringing photograph to massive copyright disputes regarding new and emerging software algorithms.  In December 2020, Congress addressed one end of the economic spectrum in the copyright ecosystem by establishing the Copyright Claims Board.

The CCB is a three-member tribunal, which serves as an alternative forum for smaller copyright disputes up to $30,000.  The CCB, while still in its infancy, does nothing to address the pressures associated with fee-shifting in all federal copyright cases, however.  Section 505 permits the "prevailing party" to recover its reasonable attorney fees as part of costs incurred. Unlike in patent cases, where fee-shifting is limited to exceptional cases, there is no such statutory limitation in Section 505.

Without any guidance as to when attorney fees may be awarded under Section 505, copyright plaintiffs threaten attorney fees early and often in settlement negotiations.  The threat of fee-shifting significantly affects the alleged infringer's bargaining power and resolve in defending the case.  Regardless of whether Congress intended Section 505 to provide significant leverage to plaintiffs and shift the focus from the merits of the litigation to the costs associated therewith, the reality is that Section 505 heavily affects settlement negotiations.

Rule 68 was designed to encourage settlement.  Enacted in 1946, Rule 68 permits a defendant to serve an offer of judgment on an opposing party at any point until 14 days before the trial date.  The offeree then has 14 days to accept the offer. If the offeree does not accept the offer within 14 days, the offer is considered withdrawn.  If the final judgment is not more favorable than the unaccepted offer, the offeree must pay the defendant's costs incurred after the offer was made.

Rule 68 is overlooked and underutilized because costs are often insubstantial in most litigation. However, where costs may be inclusive of attorney fees — in Section 505 — Rule 68 is a powerful tool that could minimize the threat of Section 505 in settlement negotiations by weakening the copyright holder's claim to its fees and allow defendants to collect attorney fees incurred after the offer.

In Marek v. Chesny in 1985, the Supreme Court interpreted Rule 68 in connection with a Section 1983 fee-shifting claim.  In Marek, the Supreme Court confirmed that all costs "properly awardable under the relevant substantive statute" fall within the scope of Rule 68.  Where the underlying statute includes attorney fees in its definition of costs, attorney fees are properly awardable under Rule 68.  Section 505 expressly provides that "the court may also award a reasonable attorney's fee to the prevailing party as part of the costs."

The forthcoming restatement of the law copyright has addressed this topic.  Although not yet published, the American Law Institute has approved various chapters of the restatement, including the chapter discussing remedies. Comment (h) to the restatement's chapter on remedies acknowledges that Rule 68 affects Section 505.  The restatement discusses the Supreme Court's decision in Marek and presents the competing case law regarding when a copyright defendant is eligible to collect its post-offer attorney fees under Rule 68.

Defensive Strategy: Reining in Overly Aggressive Copyright Plaintiffs

Rule 68 can prevent plaintiffs from recovering attorney fees under Section 505.  Neutralizing the threat of Section 505 shifts the economic structure of the litigation and refocuses the parties' attention on the merits of the action.

Courts are granted broad discretion to award attorney fees under Section 505 and should engage in a "particularized, case-by-case assessment."  Nonexclusive factors for consideration include frivolousness, motivation, objective unreasonableness, and the need in particular circumstances to advance considerations of compensation and deterrence.  Courts should give substantial weight to the objective reasonableness of the losing party's position, while still giving "due consideration to all other circumstances relevant to granting fees."

Unfortunately, the Supreme Court recently rejected the opportunity to clarify further the appropriate standard for awarding attorney fees under Section 505 in Hasbro Inc., et al. v. Markham Concepts Inc.  A reasonable but unaccepted Rule 68 offer does not operate a wholesale bar to a plaintiff's recovery of fees, but defendants should urge courts to consider an offer of judgment as a "circumstance relevant to granting fees."

An unaccepted offer of judgment may trigger several of the nonexclusive factors.  For example, failing to accept a reasonable Rule 68 offer could indicate that a plaintiff's motivation in the litigation is to obtain a windfall.

Relatedly, a plaintiff's failure to come down to a realistic settlement figure could show that the plaintiff presented an unreasonable litigation position.  Moreover, prolonged litigation — a result of an unaccepted Rule 68 offer — could reflect a plaintiff's intent to rack up attorney fees for both parties.  Each of these arguments could serve as a basis for the court to reject a plaintiff's Section 505 request.

Although the exact impact of Rule 68 is unclear in the copyright fee-shifting context, defendants could benefit from making creative arguments grounded in Rule 68 principles in attempt to equalize the bargaining power in copyright infringement negotiations.

Offensive Strategy: Maximize Recovery Opportunity

Circuits are split on the more difficult questions regarding when a defendant may recover attorney fees after an unaccepted offer of judgment.

The U.S. Court of Appeals for the Eleventh Circuit held in Jordan v. Time Inc. in 1997 that the copyright defendant was entitled to costs, including attorney fees, following an unaccepted offer of judgment that was more favorable than the damages awarded.  The court relied upon the mandatory language in Rule 68 and determined that the mandatory costs included attorney fees incurred after the Rule 68 offer.

Other circuits, however, have rejected Jordan, and require that the defendant also be the prevailing party to earn attorney fees incurred after the Rule 68 offer.  Applying Marek, those circuits have generally concluded that attorney fees must be properly awardable under the substantive statute to fall within Rule 68.

Under Section 505, attorney fees are only available to the prevailing party, and therefore, some courts have held that the defendant must be the prevailing party to recover post-offer attorney fees.  What exactly a prevailing party is remains elusive.  Because of the interplay between Rule 68 and Section 505, it seems possible that a defendant could recover post-offer attorney fees.  The Eleventh Circuit considered this argument in February in Affordable Aerial Photography Inc. v. Trends Realty USA Corp.

In that case, the defendant served an offer of judgment, which was not accepted, and the plaintiff later voluntarily dismissed the case without prejudice pursuant to Federal Rule of Civil Procedure 41(a)(2).  Although the court held that Rule 68 was inapplicable, it is conceivable that a copyright defendant could recover post-offer attorney fees under different facts.

What's Next?

Rule 68 and Section 505 certainly overlap, but exactly how they interact is less than clear.

Copyright practitioners would benefit from the Supreme Court's guidance on if and how Rule 68 affects permissive fee-shifting.  The Supreme Court has shown renewed interest in copyright cases generally, having reviewed fair use in Andy Warhol Foundation for the Visual Arts v. Goldsmith last May and the timing of damages in Warner Chappell Music Inc. v. Sherman Nealy in February.

Given the Supreme Court's recent interest in copyright issues and the many billions of dollars potentially at stake in attorney fees — particularly in the massive artificial intelligence copyright cases being filed in all circuits — the Supreme Court should give guidance on the relationship between Rule 68 and Section 505.  But all copyright defendants should seriously consider the role of Rule 68 in their litigation strategy.

Hugh Marbury is a partner and co-chair of the copyright practice at Cozen O'Connor.  Molly Shaffer is an associate at the firm.

A recent Law.com article by Adam J. Levitt, “Arguing Class Actions: Why the Catalyst Theory Matters”, examines the catalyst theory in class action litigation.  This article was posted with permission.  The article reads:

The story presents a conundrum.  Plaintiffs file a class action, which the defendant initially resists.  Plaintiffs counsel spends hundreds of thousands of dollars (or more) in lodestar and costs prosecuting the case, but after potentially years of hotly contested litigation, the defendant issues a recall or announces a refund program that fixes the problem and then argues that the case is moot.  The question: Should those who filed this case, and consequently induced (or “catalyzed”) the defendant to fix the problem, be paid?

The right answer is obvious.  Of course the plaintiffs lawyers should be paid.  Without plaintiffs counsel’s actions and active litigation threat, the defendant would have never changed its behavior, ultimately for consumers’ benefit.  The law routinely rewards those who confer benefits on others, even in the absence of, say, a contractual guarantee (as with the doctrine of quantum meruit).  In short, nobody works for free.  Nobody, as some would have it, except plaintiffs lawyers.

The Rise and Fall of the Catalyst Theory

Rewarding lawyers for catalyzing a change used to be noncontroversial. See, e.g., Marbley v. Bane, 57 F.3d 224 (2d Cir. 1995) (“a plaintiff whose lawsuit has been the catalyst in bringing about a goal sought in litigation, by threat of victory … has prevailed for purposes of an attorney’s fee claim…”); Pembroke v. Wood Cnty., Texas, 981 F.2d 225, 231 (5th Cir. 1993) (recognizing viability of catalyst theory); Wheeler v. Towanda Area Sch. Dist., 950 F.2d 128, 132 (3d Cir. 1991) (same).

But the law became murkier in May 2001, with the U.S. Supreme Court’s decision in Buckhannon Bd. & Care Home v. W. Virginia Dep’t of Health & Hum. Res., 532 U.S. 598 (2001).  There, an assisted living facility sued West Virginia, arguing that a regulation violated the Fair Housing Amendments Act.  After the suit was filed, the Legislature removed the regulation, mooting the case.

In a 5-4 decision, the Supreme Court ruled that the plaintiff was not a “prevailing party” for purposes of the applicable fee-shifting statute.  Discarding the “catalyst theory,” it ruled that: “A defendant’s voluntary change in conduct, although perhaps accomplishing what the plaintiff sought to achieve by the lawsuit, lacks the necessary judicial imprimatur on the change” sufficient to make the plaintiff a “prevailing party.” Id. at 605.  As Justice Ruth Bader Ginsburg explained in her dissent, the Buckhannon decision frustrates the goals of the catalyst theory because it “allows a defendant to escape a statutory obligation to pay a plaintiff’s counsel fees, even though the suit’s merit led the defendant to abandon the fray, to switch rather than fight on, to accord plaintiff sooner rather than later the principal redress sought in the complaint.” Id. at 622 (Ginsburg, J., dissenting).

The Catalyst Theory Today

Notwithstanding the Buckhannon decision, the catalyst theory remains a powerful tool outside of Buckhannon’s specific context.

First, Buckhannon has no bearing on state causes of action.  In California, Cal. Code Civ. Proc. §1021.5 allows a court to award fees to a “successful” party.  The California Supreme Court has explained it takes a “broad, pragmatic view of what constitutes a ‘successful party,’” Graham v. DaimlerChrysler, 34 Cal. 4th 553, 565 (2004), and explicitly endorsed the “catalyst theory [as] an application of the … principle that courts look to the practical impact of the public interest litigation in order to determine whether the party was successful.” Id. at 566.  In short, it disagreed with the U.S. Supreme Court regarding what it means to “prevail” or “succeed” in a litigation.

The catalyst theory has also largely survived in the context of favorable settlements.  For example, in Mady v. DaimlerChrysler, 59 So.3d 1129 (Fla. 2011), the Supreme Court of Florida considered an award of attorney fees to a consumer who accepted defendant’s offer of judgment, an offer that neither conceded liability nor plaintiff’s entitlement to fees, in a case filed under the Magnuson Moss Warranty Act (MMWA), which guarantees fees to a “prevailing party.” Id. at 1131.  Explicitly considering and distinguishing Buckhannon, the court found that a party may “prevail” with a settlement.  In doing so, it rearticulated the logic underpinning the catalyst theory:

[The plaintiff] achieved the same result with a monetary settlement only after being forced to bear all of the costs and expenses associated with litigation and facing the statutory penalty if the offer of judgment had not been accepted. DaimlerChrysler could have resolved this dispute during the “informal dispute settlement” phase, but instead waited until after [plaintiff] was forced to commence this action and incur the expenses of this litigation. Id. at 1133.

Further, even in federal court, attorney fees may be awarded under statutes other than those limiting such awards to “prevailing” parties.  For example, in Templin v. Indep. Blue Cross, 785 F.3d 861 (3d Cir. 2015), the Third Circuit explained that a fee may be awarded for an Employee Retirement Income Security Act claim under the catalyst theory, because ERISA does not limit fee awards to the “prevailing party.” 785 F.3d at 865.  Including the Third Circuit, at least five circuits have endorsed the catalyst theory under such statutes: Scarangella v. Group Health, 731 F.3d 146, 154–55 (2d Cir. 2013); Ohio River Valley Env’l Coalition v. Green Valley Coal, 511 F.3d 407, 414 (4th Cir. 2007); Sierra Club v. Env’l Protection Agency, 322 F.3d 718, 726 (D.C. Cir. 2003); Loggerhead Turtle v. Cty. Council, 307 F.3d 1318, 1325 (11th Cir. 2002).

Despite the ongoing recognition of the catalyst theory in many contexts, there remains the risk that courts may apply the catalyst theory narrowly, or that defendants may find a way around it. Consider Gordon v. Tootsie Roll Indus., 810 F. App’x 495, 496 (9th Cir. 2020), a “slack-fill” case in which the plaintiff alleged that the defendant’s boxes of Junior Mints were mostly air.  After the plaintiff moved for class certification, the defendant changed the box’s label.  The plaintiffs dismissed and moved for fees.

The fee application was denied because “Gordon’s theory of the case was that the size of the box was itself misleading, and that Tootsie Roll should either fill the Products’ box with more candy to account for the size of the box … or shrink the box to accurately represent the amount of the candy product therein[, and] Tootsie Roll did not make either of these changes.” Id. at 497 (internal quotation omitted).  Considering the disincentives (or, conversely, the moral hazards) that arise from this type of narrow application of the catalyst theory, courts should take a decidedly more equitable view when adjudicating this important issue.

A Way Forward

For practitioners, a few lessons come out of this case law and history.  First, in writing their complaint, attorneys must think through the various paths that a company might take to remedy the purported harm.  Recall that in Gordon, the plaintiff focused entirely on the misleading box, but not on the misleading labeling. Second, favorable settlements and offers of judgment remain viable tools, and may support a catalyst theory attorney-fee payment even if the defendant resists paying fees in the settlement itself.  Finally, despite Buckhannon, the catalyst theory remains readily available under a host of statutes (state and federal).  In relying on citing those statutes, plaintiffs should not shy away from the catalyst theory’s compelling logic.  Courts understand that basic fairness requires that attorneys be paid if their lawsuit ultimately confers a significant benefit.  Nobody should work for free.  Not even plaintiffs lawyers.

Adam J. Levitt is a founding partner of DiCello Levitt, where he heads the firm’s class action and public client practice groups.  DiCello Levitt senior counsel Daniel Schwartz also contributed to this article.

A recent Law.com story by Abigail Adcox “ ‘D.C. Was Our Best-Performing Region’: Billing Rate Increases and Demand Growth Drive Strong Year in the Beltway”, reports that law firms based in Washington, D.C., finished out 2023 with a strong financial performance, propelled by billing rate increases, expense control and robust demand within regulatory and litigation practices, according to results from a bank survey.

Among D.C.-based firms, gross revenue was up 7.6% in 2023 over the previous year, higher than the industry average of 6%, as the average billing rates in the region rose 8.8% compared with the industry average of 8.3%, according to Wells Fargo’s Legal Specialty Group’s year-end survey results.  Those results included eight firms headquartered in the D.C. region.

“D.C. was our best-performing region,” said Owen Burman, senior consultant and managing director with the Wells Fargo Legal Specialty Group.  “When talking to firms to really find out what drove it, the regulatory side was on fire for so many firms. And litigation overall has been supporting many firms this past year.”  In average revenue growth, D.C. firms exceeded peers in New York City (7%), California (6.6%), Texas (6.3%), Florida (5.9%), Chicago (5.2%), Philadelphia (4.7%) and Atlanta (4.4%), according to Wells Fargo data.

“The practice mix was very much in favor of D.C.-headquartered firms” in 2023, Burman said, citing robust demand within restructuring, antitrust and litigation practices, as other firms saw the impact of slowdowns in the transactional market.  It follows a lackluster 2022 for D.C. firms, which “underperformed,” as anticipated enforcement activities under the Biden administration didn’t come to fruition as expected, according to Burman.

However, in 2023, as demand picked up within regulatory and litigation practices, D.C. firms were able to control expenses and were less aggressive in hiring, contributing to their revenue growth.  Profits per equity partner were up 10.7%, compared with the industry average of 4.9%.  The number of full-time equivalent lawyers at D.C. firms also grew by 2%, slightly below the industry average of 2.8%. However, productivity at D.C. firms was down 1%, still better than the industry average (down 2.1%).

Demand among all lawyers was also slightly better at D.C. firms (0.9%) than the industry average (0.7%), but fell short of peers in New York City, which saw a 2% increase in demand.

Controlling Expenses

Meanwhile, total expenses grew 4.1%, the best out of all eight regions tracked, and above the industry average of 6%.  “They were able to control the expense growth much better than peers,” Burman said.  “Last year they were able to control the lawyer compensation pressures a bit more than other markets.”

Billing rate increases were in large part able to compensate for increases in lawyer compensation at D.C. firms last year.  “All together the rate increases are covering it.  The problem is that they were hoping it would cover other investments and now they have to redirect that money into supporting the lawyer compensation,” said Burman, adding that artificial intelligence and innovation investments are other top priorities for firm expenses.

Because of these expenses and other priorities, in 2024, D.C.-based firms may see more expense pressure, and they may be more in line with the industry averages in expense growth, he said.  Still, entering the year, D.C. firms are “optimistic,” Burman added, expecting strong demand within litigation and regulatory practices to continue.  “Their growth estimates are quite optimistic,” Burman said.  “Litigation, restructuring practices are still quite strong.  So those haven’t tailed off as we’re anticipating this rebound in transactions.”

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