A recent Legal Intelligencer story, “Third Circuit Sets New Precedent on Attorney Fees,” reports that setting new precedent on attorney fee recovery in the Third Circuit, the appeals court has ruled offers of judgment in fee disputes that would preclude some recovery in certain circumstances are valid in environmental suits brought by citizens.  In so ruling, the court endorsed the Legal Services Index (LSI) adjusted Laffey Matrix for calculating appropriate rates for Washington, D.C. area lawyers practicing in the circuit.

In the underlying case, Interfaith Community Organization v. Honeywell International Inc., Honeywell was ordered to conduct an extensive cleanup of industrial waste that had been left by a now-defunct company that had occupied a plant on the Hackensack River in Jersey City after neighborhood residents brought a suit under the federal Resource Conservation and Recovery Act (RCRA).

The fees at issue in this action top $3 million and are related to Honeywell’s agreement to pay reasonable future fees and expenses for the monitoring of its cleanup.  Honeywell has paid more than $5 million in attorney fees for work leading up to the resolution of the case.  Beginning in 2009, Honeywell began to dispute the fee requests for the monitoring work and ultimately issued a Rule 68 offer of judgment to resolve the fee issue.  Rule 68 specifies that if a plaintiff rejects an offer of judgment made under the rule and the case goes to trial, resulting in an outcome less favorable to the plaintiff, he or she has to pay the costs from the time the offer was made.

The U.S. Court of Appeals for the Third Circuit remanded the case after it issued an opinion reversing the U.S. District Court for the District of New Jersey on that court’s holding that offers of judgment made under the Rule 68 of the Federal Rules of Civil Procedure are null and void in the context of citizens’ RCRA suits.  The appeals court, however, agreed with the district court’s application of the LSI-updated Laffey Matrix for calculating the plaintiffs’ attorney fees.

The Third Circuit read the law plainly and likened the difficulty faced by plaintiffs weighting Rule 68 offers to the typically difficult decision about settlement in any case.  “Settlements offers often present difficult choices for a plaintiff, but that fact neither abridges nor modifies the substantive rights at issue,” Third Circuit Judge Thomas Vanaskie said.  “Speculation as to the potential ‘chilling’ effect of allowing Rule 68 offers of judgment in citizen suits under RCRA, advanced in Struthers-Dunn and embraced by the District Court in this case, is simply irrelevant to the pertinent inquiry: whether the rules of decision are altered by the offer of judgment,” he said, referring to the 1988 opinion from the New Jersey District Court in Public Interest Research Group of New Jersey v. Struthers-Dunn. 

Vanaskie summed up the effect on the decision this way: “The only impact that Rule 68 has on the ultimate outcome of the attorney’s fee dispute is to require appellees to bear their own post-offer cost, including counsel fees, if the fee award is less favorable than the offer of judgment.”  The Third Circuit emphasized Rule 68’s merit in encouraging settlement, especially meritorious with regard to settling attorney fee disputes, Vanaskie said.

The Third Circuit also decided that the district court has been correct to allow the public interest law firm of Terris Pravlik Millian, based in Washington, DC, to be paid according to DC rates, rather than New Jersey rates, as Honeywell had advocated.  More importantly, it agreed that the district had chosen the correct method for determining what those rates are.  The district court wasn’t persuaded by Honeywell’s argument that it should apply an updated version of the Laffey Matrix, named for the 1983 case in which it was first used for determining the hourly rates of DC lawyers, that would be pegged to the Consumer Price Index.  Rather, it chose to update the Laffey Matrix with the LSI.

The two methods resulted in vastly different rates.  The choice favored by Honeywell would mean that DC lawyers with 20 years or more experience would be paid only $475 per hour, while the method favored by the plaintiffs would pay the same lawyers $709 per hour.  The Third Circuit agreed that the LSI-adjusted Laffey Matrix is the best option.  “The district court, recognizing that ‘our circuit has yet to specifically approve either version of updating the Laffey Matrix,’ was persuaded by the methodology in Salazar,” Vanaskie said, referring to the U.S. District Court for the District of Columbia decision in 2011 in Salazar v. District of Columbia.