Gonter v. Hunt Valve Company ( 2007 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 07a0490p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
bringing this action on behalf of the United States of -
TINA MARIE GONTER; CHARLES WILLIAM GONTER,
-
-
America, as relators,
Plaintiffs-Appellants (06-4184)/ -
Nos. 06-4184/4256/4266
,
Cross-Appellees, >
-
-
Interested Party, -
UNITED STATES OF AMERICA,
-
-
-
v.
-
HUNT VALVE COMPANY, INC., et al., -
Defendants, -
-
-
-
GENERAL DYNAMICS, MARINE SYSTEMS DIVISION,
-
ELECTRIC BOAT,
Defendant-Appellee/ -
Cross-Appellant (06-4256), -
-
-
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NORTHRUP GRUMMAN NEWPORT NEWS, formerly
Defendant-Appellee/ -
known as Newport News Shipbuilding,
-
Cross-Appellant (06-4266). -
N
Appeal from the United States District Court
for the Northern District of Ohio at Youngstown.
No. 01-00634—Dan A. Polster, District Judge.
Argued: October 24, 2007
Decided and Filed: December 18, 2007
Before: MERRITT and CLAY, Circuit Judges; COX, District Judge.*
*
The Honorable Sean F. Cox, United States District Judge for the Eastern District of Michigan, sitting by
designation.
1
Nos. 06-4184/4256/4266 Gonter, et al. v. Hunt Valve Co., et al. Page 2
_________________
COUNSEL
ARGUED: James B. Helmer, Jr., HELMER, MARTINS, RICE & POPHAM, Cincinnati, Ohio, for
Appellants. Michael L. Waldman, ROBBINS, RUSSELL, ENGLERT, ORSECK, UNTEREINER
& SAUBER, Washington, D.C., for Appellees. ON BRIEF: James B. Helmer, Jr., Robert M. Rice,
HELMER, MARTINS, RICE & POPHAM, Cincinnati, Ohio, for Appellants. Michael L. Waldman,
ROBBINS, RUSSELL, ENGLERT, ORSECK, UNTEREINER & SAUBER, Washington, D.C.,
Kali N. Bracey, JENNER & BLOCK, Washington, D.C., Charles B. Sklarsky, JENNER & BLOCK,
Chicago, Illinois, for Appellees.
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OPINION
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I.
MERRITT, Circuit Judge. This appeal, arising from a dispute between a law firm that
represented qui tam plaintiffs and the defendant shipbuilders, raises the issue of whether the district
court exceeded its discretion in awarding attorneys’ fees of $1,749,245 under the False Claims Act.
The Plaintiff, a Cincinnati law firm, contends that the amount was unjustifiably low, while the
Defendants urge this Court in a cross-appeal to find the lower court’s award excessive. Two
additional issues are before us: first, the Defendants challenge the Plaintiff’s standing to bring this
suit; and second, the Plaintiff argues that portions of the Defendants’ reply brief for the cross-appeal
contravene Fed. R. App. P. 28.1(c)(4).
The Plaintiff has standing to appeal the lower court’s decision, while the Plaintiff’s motion
to strike portions of the reply brief is denied for failing to show prejudice. Turning to the
substantive issues raised by both parties, we hold that, with the exception of the exclusion of fees
related to the fee litigation, the district court’s calculation of attorneys’ fees falls within the broad
discretion afforded under the statutory scheme. Consequently, with the exception of its ruling on
the fee litigation issue, the district court’s decision is AFFIRMED.
II.
The law firm of Helmer, Martins, Rice & Popham Co., L.P.A. (“HMRP”) represented
Relators Tina and William Gonter from 2001 until March 25, 2005, in an investigation of faulty
valves produced by Hunt Valve Company for use in submarines and ships built for the U.S. Navy
by Northrop Grunman Newport News and General Dynamics Electric Boat (collectively
“Shipbuilders”). In March 2001, the Relators filed a False Claims Act (“FCA”) action against Hunt
Valve Company and the Shipbuilders. The Department of Justice intervened in the Hunt Valve case
– its prerogative under the FCA – and ultimately announced a $666,000 settlement with the
company in the spring of 2005. This settlement resulted from a collaboration between the
Department of Justice and the private attorneys representing the Relators. The Department of Justice
did not, however, choose to intervene in the suit against the Shipbuilders, which allowed the
Relators to prosecute the case as qui tam plaintiffs on the taxpayers’ behalf.
In January 2005, two attorneys, Frederick Morgan and Jennifer Verkamp, and one paralegal,
Mary Jones, left HMPR to join another firm, Volkema, Thomas, Miller, Scott & Merry L.P.A.
(“Volkema”). Because Morgan and Verkamp had spearheaded the work on the FCA claims, the
Relators chose to conclude HMRP’s representation in March 2005 and continue with Volkema.
Nos. 06-4184/4256/4266 Gonter, et al. v. Hunt Valve Co., et al. Page 3
That fall, the Relators – represented by Volkema – reached a $12.5 million settlement with the
Shipbuilders, the details of which were finalized in March 2006.
On December 23, 2005, HMRP filed a motion for an award of attorneys’ fees and expenses
for the considerable work it performed from 2001 until early 2005 in preparing and settling the FCA
claims against both Hunt Valve and the Shipbuilders. The district court denied the initial petition
on two grounds: first, the request was premature, and second, the FCA statute only permits Relators
to file attorneys’ fee petitions. Shortly thereafter, the Relators – acting through Volkema – filed
another petition on behalf of HMRP1 for attorneys’ fees and expenses. In the petition, HMRP sought
$2,758,748.12 in attorneys’ fees and $124,498.29 in reimbursable expenses, for a total of
$2,883,246.41. The Shipbuilders allowed that they owed fees and expenses, but argued that the
amount should total $1,110,789.85, representing $1,019,953.71 in attorneys’ fees and $90,836.14
in expenses. After considering the evidence offered by both parties, the district court ultimately
awarded HMRP fees of $1,749,245.80 and expenses of $122,500.60, for a total amount of
$1,871,746.40.
In this appeal, the Plaintiff, HMRP, argues that the district court abused its discretion in the
following three ways: (1) by using allegedly unsubstantiated 2004 billing rates instead of current,
2005 rates; (2) by refusing to award attorneys’ fees for litigation related to the fee petition itself; and
(3) by refusing to enhance the award by 25% for “exceptional” results. The defendant Shipbuilders
filed a cross-appeal, contending that the district court failed to exercise appropriate discretion in
calculating the number of hours billed by the defendants; specifically, they fault the lower court for
including – without sufficient explanation – hours in the lodestar valuation that were allegedly
duplicative, unrelated to the litigation, or wasteful.
III. Jurisdiction over the appeal
The district court exercised subject matter jurisdiction over the federal question involved in
this case – namely, the False Claims Act. See 31 U.S.C. § 3732(a). Appellate jurisdiction exists
under 28 U.S.C. § 1291, as the district court issued a final order in this case. The Shipbuilders
contend, however, that only the Relators could bring this appeal and that the case should thus be
dismissed because HMRP is an improper party. For the reasons discussed below, the Plaintiff does
have standing to proceed.
The False Claims Act, 31 U.S.C. § 3730(d), provides for fee-shifting and includes both
attorneys’ fees and expenses as part of the award to a successful qui tam plaintiff. The FCA reads
in relevant part: “Such person [qui tam plaintiff] shall also receive an amount for reasonable
expenses which the court finds to have been necessarily incurred, plus reasonable attorneys’ fees
and costs. All such expenses, fees, and costs shall be awarded against the defendant.” 31 U.S.C.
§ 3730(d)(2). Notably, “only the plaintiff has the power to demand that the defendant pay the fees
of the plaintiff's attorney” under the FCA; without such a demand, the defendant is under no
obligation to pay. United States ex rel. Virani v. Jerry M. Lewis Truck Parts & Equip., 89 F.3d 574,
578 (9th Cir. 1996), cert. denied, 519 U.S. 1109 (1997). “Once the power is exercised, however,
the attorneys’ right vests, and the defendant’s duty becomes fixed.” Id. at 578. Because the
Relators, through a motion filed by Volkema, did seek attorneys’ fees on behalf of HMRP, the
Defendants’ duty to pay such fees vested.
The Defendants point to several instances where courts have denied requests for attorneys’
fees to support their argument. But in each of the cases the Defendants cite, the court refused
1
The fee value comprises a lodestar amount of $2,221,509.75 ($2,148,953.50 for work done prior to December
15, 2005, and an additional $72,556.25 for work preparing and litigating the fee petition) plus a 25% enhancement for
work performed before December 15, 2005.
Nos. 06-4184/4256/4266 Gonter, et al. v. Hunt Valve Co., et al. Page 4
attorneys’ fees because the Relators never sought them. See, e.g., United States ex rel. Thornton v.
Science Applications Int’l Corp., 79 F. Supp. 2d 655, 659 (N.D. Tex. 1988) (noting that because the
Relators did not request attorneys’ fees, their counsel lacked standing). These cases are thus
inapposite to our case, where the Relators filed a fee petition on behalf of the Plaintiff. Moreover,
the cases do not address the question before us regarding standing on appeal, but instead discuss the
ability to recover an award in district court.
Whether HMRP has standing to appeal the district court’s ruling is an issue of first
impression in the Sixth Circuit. Other circuits have addresses this issue, but have reached different
results. Compare Mathur v. Board of Trustees of Southern Illinois University, 317 F.3d 738 (7th
Cir. 2003) (finding standing), and Lipscomb v. Wise,643 F.2d 319 (5th Cir. 1981) (finding standing),
with Willis v. Government Accountability Office, 448 F.3d 1341, 1349 n.7 (Fed. Cir. 2006) (denying
standing). In Mathur, a case involving the 1964 Civil Rights Act, the plaintiff employee won a
discrimination suit against a university that included an award of attorneys’ fees. The attorneys –
and not the plaintiff – appealed the district court’s choice of rates in determining the award. While
the Seventh Circuit noted that the right to fees belonged to the “prevailing party” and not his
counsel, it did not find that this fact precluded counsel from having standing. Mathur, 317 F.3d at
741; see also Devlin v. Scardaletti, 536 U.S. 1, 7 (2002) (the Supreme Court has “never restricted
the right to appeal to named parties to the litigation”). Instead, the Seventh Circuit applied the
following reasoning in determining that Mathur’s attorneys did have standing to appeal the award:
Since an attorneys’ fee award is considered part of the costs of litigation . . . the
award goes straight from the plaintiff to counsel and is not intended to serve as
additional compensation for plaintiffs. This means that ‘the question whether the
motion for fees is in the name of the party or his attorney is a technicality,’ because
‘it would exalt form over substance to deny the motion for fees’ if an attorney, and
not the plaintiff, is the named party.
Mathur, 317 F.3d at 741 (quoting Lawrence v. Hacker, 966 F.2d 1153 (7th Cir. 1992) (emphasis
added). The Fifth Circuit addressed a similar question in Lipscomb v. Wise, 643 F.2d 319 (5th Cir.
1981). There, several attorneys involved in a class action lawsuit appealed a lower court ruling
denying them standing to seek attorneys’ fees. The Fifth Circuit found that the attorneys did have
standing because they had alleged a “personal stake in the outcome” and would potentially “suffer
an economic injury in fact.” Lipscomb, 643 F.2d at 320 (denying the request for attorneys’ fees on
other grounds).
The Federal Circuit reached a different result in Willis v. Government Accountability Office,
where, again, an attorney – and not the “prevailing party” (i.e., plaintiff) – appealed a GAO decision
denying additional attorneys’ fees under 5 U.S.C.S. § 7701(g). The Willis Court held that because
the plaintiff did not file the appeal, the attorney lacked standing. 448 F.3d at 1346. Notably,
however, the plaintiff in Willis specifically refused to request the entire amount of fees sought by
the attorney when he filed the initial petition seeking fees. Id. at 1342-43. Willis is thus
distinguishable from the instant case where the Relators’ fee petition did include the entire amount
sought by HMRP. Consequently, in our case, but not in Willis, the right to larger amount vested in
counsel.
The Fifth and Seventh Circuits’ treatment of the issue is persuasive. As an initial
observation, both the Relators and Volkema had fully resolved their FCA claims to contingency fees
and attorneys’ fees, respectively, prior to this appeal; consequently, as in Mathur, the district court’s
ruling – and any additional award – would only affect HMRP’s interests. See also Lipscomb, 643
F.2d at 320 (“[A]s a practical matter, the lawyer is frequently the only person adversely affected
when attorney's fees are denied.”). Because the district court awarded HMRP fees lower than the
amount sought in the petition, the firm has suffered a putative injury in fact. Additionally, unlike
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the situation in Willis, the Relators in the instant case did implicitly approve the entire amount
sought by HMRP when it filed the original fee petition for the full amount. To refuse standing,
therefore, would be to tantamount to “exalt[ing] form over substance.” Mathur, 317 F.3d at 741.
An alternate holding would, moreover, potentially jeopardize the availability of sufficiently
“reasonable” fees to attract competent representation and, by extension, the ability to vindicate the
goals of the FCA. See S. Rep.No. 99-345, 99th Cong., 2d Sess. 23-23 (1986) (“The Committee’s
intent in amending the qui tam section of the False Claims Act is to encourage more private
enforcement suits.”). Consequently, in concluding that HMRP does have standing to bring this
appeal, we reiterate our earlier observation that “[w]hen they are the real parties in interest, attorneys
are entitled to their day in court.” Price v. Pelka, 690 F.2d 98, 102 n.3 (6th Cir. 1982) (quoting
Lipscomb, 643 F.2d at 320).
IV. Calculation of fee award
Standard of review
The district court’s award of $1,871,746.40 in attorneys’ fees and expenses covered work
performed by HMRP over a four-year period. In seeking additional fees, the Plaintiff argues that
the district court should have applied the firm’s then-current, 2005 rates instead of allegedly
unsubstantiated “historic” rates from 2004. Additionally, the Plaintiff urges this Court to find that
the district court’s refusal to include fee-related litigation in the award and to apply a 25%
enhancement for “exceptional success” constituted abuses of discretion. Conversely, the
Shipbuilders contend that numerous hours submitted for compensation were either unrelated to the
underlying FCA claim, duplicative, or wasteful, and that the district court exceeded its discretion
by failing to adequately address these issues.
This Court reviews a district court’s award of attorneys’ fees and expenses for abuse of
discretion. Geier v. Sundquist, 372 F.3d 784, 789 (6th Cir. 2004) (citing Perotti v. Seiter, 935 F.2d
761, 763 (6th Cir. 1991). “An abuse of discretion exists when the district court applies the wrong
legal standard, misapplies the correct legal standard, or relies on clearly erroneous findings of fact.”
First Tech. Safety Sys., Inc. v. Depinet, 11 F.3d 641, 647 (6th Cir. 1993).
“Reasonable” fees
In an attorneys’ fee case, the primary concern is that the fee awarded be “reasonable.” Reed
v. Rhodes, 179 F.3d 453, 471 (6th Cir. 1999) (citing Blum v. Stenson, 465 U.S. 886, 893 (1984)).
A reasonable fee is “adequately compensatory to attract competent counsel yet which avoids
producing a windfall for lawyers.” Geier, 372 F.3d at 791 (emphasis added); see also Coulter v.
Tennessee, 805 F.2d 146, 149 (6th Cir. 1986) (“[H]ourly rates for fee awards should not exceed the
market rates necessary to encourage competent lawyers to undertake the representation in
question.”). The starting point for determining a reasonable fee is the lodestar, which is the product
of the number of hours billed and a reasonable hourly rate. See Hensley v. Eckerhart, 461 U.S. 424,
434 (1983). The district 2court’s calculation of the lodestar value, as well as any justifiable upward
or downward departures, deserves substantial deference, but only when the court provides “a clear
and concise explanation of its reasons for the fee award.” Eckerhart, 461 U.S. at 438; Hadix v.
Johnson, 65 F.3d 532, 535 (6th Cir. 1995).
HMRP objects to the lower court’s use of 2004 billing rates in three ways. First, the firm
contends that the district court’s award applied a twenty percent reduction that was unsupported by
the evidence in the case. Second, the firm suggests that the district court erred as a matter of law
2
See part IV, infra, for a discussion of the 12-factor test for enhancements and reductions elaborated in Johnson
v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974).
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by using 2004 rates instead of the current, 2005 billing rates. And third, the Plaintiff argues that the
2004 rates used by the district court were unsubstantiated and thus based on clearly erroneous
findings of fact.
To justify any award of attorneys’ fees, the party seeking compensation bears the burden of
documenting its work. Reed, 179 F.3d at 472 (citing Webb v. County Bd. of Educ., 471 U.S. 234,
242 (1985)). In the instant case, the Plaintiff submitted considerable evidence – based on its 2005
billing rates – supporting its claim for a lodestar amount of $2,221,509. The district court reasoned,
however, that to award such an amount would be tantamount to a “windfall” for counsel, as the bulk
of the legal work occurred from 2001-2003.3 Dist. Ct. Op. at 4-5. At the same time, the court noted
that in order to ensure adequate compensation for the Plaintiff it “would compensate [HMRP] for
waiting several years for payment, by awarding [] 2004 rates for the work done in 2001, 2002, and
2003.” Id. at 5. The court then applied the 2004 rate to the number of hours, 8600, supported by
HMRP’s fee petition.4 Having provided a “clear and concise” explanation for its fee award, the
lower court did not exceed its discretion; in fact, the district court appropriately balanced the twin
goals of ensuring adequate compensation for counsel who take on FCA cases and preventing a
windfall for lawyers.
The decision to apply historic, 2004 rates was similarly within the district court’s discretion.
We have occasionally approved the application of current billing rates when doing so was
appropriate in reaching a reasonable fee. See, e.g., Barnes v. City of Cincinnati, 401 F.3d 729, 745
(6th Cir. 2005) (finding the current market rates reasonable because the litigation “had been ongoing
for nearly six years”); Arthur S. Langenderfer, Inc. v. S.E. Johnson Co., 684 F. Supp. 953, 958 (6th
Cir. 1988) (noting that current rates were appropriate to counterbalance a delay in payment)
(reversed on other grounds). But Barnes does not stand for the proposition that this Court mandates
– or even prefers – application of current rates; rather, as the Barnes Court itself stated, the
application of current rates was “within the contemplation of the attorneys fees statute.” 401 F.3d
at 745; see also Louisville Black Police Officers Organization, Inc. v. Louisville, 700 F.2d 268, 278
(6th Cir. 1983) (“[W]e reiterate today that the district courts retain their discretion in such matters
constrained only by their duty to achieve the goal enunciated in Northcross: to make an award of
fees which is ‘adequate to attract competent counsel, but which does not produce windfalls to
attorneys.’”) (citing Northcross, 611 F.2d at 633). Accordingly, the district court has the discretion
to choose either current or historical rates so long as it explains how the decision comports with the
ultimate goals of awarding reasonable fees. Here, the district court appropriately justified how its
award balanced the competing goals at issue in calculating reasonable fees: “The Court believes that
while HMRP is entitled to some adjustments for waiting several years for compensation, the use of
current rates would produce a windfall.” Dist. Ct. Op. at 4-5.
And finally, the district court did not abuse its discretion in determining the 2004 rates,
which it then used in the lodestar calculation. As we described in Geier v. Sundquist, “[t]o arrive
at a reasonable hourly rate, courts use as a guideline the prevailing market rate, defined as the rate
that lawyers of comparable skill and experience can reasonably expect to command within the venue
of the court of record.” 372 F.3d at 791 (citing Adcock-Ladd v. Secretary of Treasury, 227 F.3d 343,
350 (6th Cir. 2000)). The appropriate rate, therefore, is not necessarily the exact value sought by
a particular firm, but is rather the market rate in the venue sufficient to encourage competent
representation. See Lamar Adver. Co. v. Charter Twp. of Van Buren, 178 Fed. Appx. 498 (6th Cir.
2006) (“Even if it would be reasonable to award [plaintiff] $370 per hour, the record supports the
3
In fact, more than 50% of the 8600 billable hours occurred in 2001 and 2002.
4
The district court did apply current rates to the work on HMRP’s fee petition, as that work began on December
15, 2005. This decision reflects the careful consideration that the district court gave to its decisions.
Nos. 06-4184/4256/4266 Gonter, et al. v. Hunt Valve Co., et al. Page 7
district court's conclusion that $200 per hour is sufficient to encourage competent lawyers in the
relevant community to undertake legal representation.”); see also Auto Alliance v. U.S. Customs
Service, 155 Fed. Appx. 226, 228 (6th Cir. 2005) (awarding a $ 200 per hour flat rate in the eastern
district of Michigan where the lead attorney’s billing rate was $ 400 per hour).
HMRP submitted evidence with its fee petition showing that Mr. Morgan and Ms. Verkamp
were compensated at $425 and $340, respectively, in 2005. As noted above, however, these data
are not controlling, as the district court reasonably decided to use 2004 rates. To support their
argument for lower rates, the Shipbuilders provided an affidavit submitted by HMRP in a 2002 case
that included the firm’s 2001 rates.5 See Pepsico, Inc. v. Central Investment Corp., No.C-1-98-389
(S.D. Ohio 2002). More importantly, the Shipbuilders cited a district court order from the U.S.
District Court in the District of Columbia where HMRP – in a motion uncontested by the opposing
party – claimed that its 2004 rates for Morgan and Verkamp were $375 and $275, respectively. See
United States ex rel. Pogue v. Diabetes Treatment Centers of America, Civ. No. 99-3298 (D.D.C.
May 17, 2004). Relying on Pogue, the district court concluded that the billings rates in 2004 were
$375 and $255 for the same two lawyers and noted that these rates were 88% and 75%, respectively,
of the amount sought in the fee petition.6 By applying these rates, the district court effectively
reduced the lodestar by twenty percent. The district court’s treatment in the instant case is thus
distinguishable from Geier, where we disapproved of the hourly rate used by the lower court
because the order “contain[ed] no explanation of how . . . it accounted for [Plaintiff’s] competing
information concerning the prevailing market rate.” Id. at 792. Because the district court noted that
the 2004 rates were provided by HMRP in an earlier case – and that such values were sufficient to
attract counsel but avoided a windfall – its choice of hourly rates was within its discretion.
The Plaintiff’s contention that the district court exceeded its discretion by using an Ohio
State Bar survey of paralegal rates is similarly unconvincing. HMRP argues that by relying on these
data, the district court reduced Ms. Jones’ salary below 2001 levels and thus committed reversible
error. In Auto Alliance Int’l Inc. v. United States Customs Serv., 155 Fed. Appx. 226, 228 (6th Cir.
2005), however, we approved a district court’s use of a state bar survey in determining a reasonable
rate for compensating attorneys. In Auto Alliance, this Court noted that the district court’s use of
a flat rate of $200 per hour – slightly below the mean of $238 in the 2003 Michigan Bar survey –
was “both reasonable and justified” in determining the applicable market rate. Id. We can think of
no reason why application of the same methodology to determine the hourly rate for a paralegal
would be problematic. Hence, the district court’s decision to reduce Ms. Jones’ rates by
approximately twenty percent – which, according to the survey, still yielded a billing rate in the top
ten percent for paralegals in Cincinnati – cannot be said to be an abuse of discretion.
Defendants’ cross-appeal
The “reasonable” fee analysis also controls the Shipbuilders’ cross-appeal, in which they
argue that the district court’s failure to respond with specificity to contested billable hours
constituted an abuse of discretion. The district court’s order did acknowledge the Shipbuilder’s
evidence in opposition to the number of hours used in the lodestar valuation – noting that some
5
The rates were $295/hour for Morgan and $210 for Verkamp. HMRP challenges this figure, arguing that they
reflected discounts for a long-term client. Because the rates applied in the instant case are substantially higher than the
allegedly discounted rates, this issue is not central to our holding.
6
As a point of reference, the Ohio State Bar Association survey of 2004 hourly billing rates in the state
(submitted by the Shipbuilders as an exhibit) found that the median rate for partners in firms with eight or more partners
was $240/hour, while the 95th percent was $381/hour. See 2004 Economics of Law Practice in Ohio Survey, Ohio State
Bar Assoc., Fall 2004, at 27; J. Apx. p. 663. The rates submitted by HMRP in the Pogue case and relied upon by the
district court in the instant case comport with these values.
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issues were “well-taken” – but concluded that the Plaintiff had supported its hours with affidavits
and that the application of the 2004 fees achieved a fair result. Again, it is imperative to reiterate
that we review a district court’s calculation in light of the twin goals driving reasonableness –
namely, ensuring adequate representation for qui tam plaintiffs and preventing a windfall for
attorneys. See Louisville Black Police Officers Organization, Inc., 700 F.2d at 278.
In the instant case, the Plaintiff submitted considerable evidence - more than 150 pages, in
fact – supporting its claim of 8600 hours billable to the FCA actions, time which included substantial
work supporting the Department of Justice in the claim against Hunt Valve. The court reviewed this
evidence and, in reaching a lodestar valuation using the 2004 rates, noted that the resulting award
was 80% of the lodestar requested by the Plaintiff. We have previously condoned such an across-
the-board reduction. See, e.g., Tinch v. City of Dayton, 199 F. Supp. 2d 758, 764 (6th Cir. 2002)
(citing Meijer, Inc. v. NLRB, 130 F.3d 1209 (6th Cir. 1997) (finding that a 25% across-the-board
reduction was not an abuse of discretion). Although the district court did not engage each of the
Defendants’ specific arguments, it did provide a clear and concise statement that its use of 2004 rates
effectively achieved the same results. We cannot say, therefore, that either the methodology or the
award was an abuse of discretion.
The difficulty of determining the precise number of hours spent during trial preparation
supports the district court’s approach. Whereas courts can easily verify the time lawyers spend at
trial and in depositions, the same is not true for trial preparation. See Coulter v. Tennessee, 805 F.2d
146, 150 (6th Cir. 1986) (noting that the hours spent reviewing records, speaking to other lawyers
and experts, and preparing documents “cannot be fully verified”). In the instant case, all of the time
that the Defendants challenge occurred during preparation for a settlement. Such a situation
increases the justification for treating a trial court’s decision deferentially. Otherwise, as we
discussed in Coulter, the burden on district courts could become undue: “When the issue is a
question of the lawyer's judgment in billing for a particular number of hours on a piece of work, we
must depend in larger measure on the fairness of the District Court in assessing the needs of the
case.” Coulter, 805 F.2d at 152.
Equitable principles also support a decision to deny the cross-appeal, for the Shipbuilders
repeatedly urge this Court to affirm the district court’s other determinations, emphasizing the wide
discretion enjoyed by district courts in the attorneys’ fee context. Applying a more stringent
standard of review only for the issues raised in the cross-appeal would, therefore, produce an
unbalanced result. Regardless, the district court appropriately considered the evidence submitted
by both parties in reaching an award that fairly balanced the factors at stake in determining a
“reasonable fee.”
V. Fees for the fee-related litigation
In its fee petition, HMRP sought $72,556 in compensation for the preparation and resolution
of the dispute over the attorneys’ fee award. The district court awarded only $30,083 for work
preparing the fee petition and negotiating a possible settlement of the fees, both of which took place
from December 15, 2005 until June 22, 2006. The court, noting that HMRP had refused to accept
an earlier offer by the Shipbuilders to pay 80% of the requested lodestar amount, refused to grant
any additional fees for the period after June 22 spent litigating the fee petition.
We addressed the issue of fee-related litigation in the context of Title VII in Coulter v.
Tennessee, 805 F.2d 146 (6th Cir. 1986), cert. denied, 482 U.S. 914 (1987). In Coulter, this Court
observed that “time spent in preparing, presenting, and trying attorney fee applications is
compensable” as part of the reasonable fee. Id. at 151 (emphasis added). At the same time,
however, we cautioned that “the prospect of large fees later on may discourage early settlement of
cases by rewarding protracted litigation of both the civil rights case and the attorney fee case.” Id.;
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see also Hensley v. Eckerhart, 461 U.S. 424, 437 (1983) (warning that a “request for attorney’s fees
should not result in a second major litigation”). Consequently, in the absence of unusual
circumstances, the Coulter Court limited the compensable hours for preparing and “successfully”
litigating a fee petition to three percent of the hours in the main case. Id. (noting that five percent
would be the maximum where the main case involved a trial); see also Auto Alliance Int’l, Inc. V.
United States Customs Serv., 155 Fed. Appx. 226, *8 (6th Cir. 2005) (applying the 3% rule). The
district court’s decision to exclude altogether the time spent litigating the fee petition thus
contradicts Sixth Circuit precedent.
The Shipbuilders, however, make two arguments in urging us to affirm the district court’s
ruling. First, they seize upon the Coulter Court’s use of “successfully litigate” and suggest that
HMRP was somehow not successful in litigating its fee petition because the award was less than the
amount sought. This assertion is inaccurate, for HMRP was awarded attorneys’ fees precisely
because their petition was successful. The Plaintiff’s contention on appeal is merely that their
success was inadequately compensated. Second, and more importantly, the Defendants argue that
the decision to decline attorneys’ fees is within a district court’s discretion when the party seeking
fees declines a substantial settlement offer. In support of this argument, they point to the following
language from the Seventh Circuit: “We reasoned that ‘attorney’s fees accumulated after a party
rejects a substantial offer provide minimal benefit to the prevailing party’ and thus may not warrant
being included in the fee award as a ‘reasonable attorney’s fee.’” Shott v. Rush-Presbyterian-St.
Luke’s Med. Ctr., 338 F.3d 736, 743 (7th Cir. 2003) (quoting Moriarty v. Svec, 233 F.3d 966, 967
(7th Cir. 2000)). Notably, however, the Seventh Circuit’s Shott decision concerned settlement offers
related to the underlying case and not – as in the instant case – to the amount of attorneys’ fees.
The language from our Coulter decision controls the issue on appeal and warrants an
additional payment for litigation related to the fee issue. Although we are aware of the important
goal of limiting trials-after-trials, the Seventh Circuit authority cited by the Shipbuilders is not
directly on point in this case. Because Coulter controls this situation, we apply the three percent rule
to the district court’s lodestar award of $1,749,245, yielding a product of $52,477, and subtract the
$30,080 already awarded for preparing the fee petition. The Defendants must, therefore, pay an
additional $22,397 in attorneys’ fees, with interest, to the Plaintiff.
VI. Fee enhancements
HMRP sought a 25% enhancement of the lodestar and contends that the district court’s
decision not to apply the multiple constitutes an abuse of discretion. We disagree.
Fee enhancements are permissible in rare cases of “exceptional success.” Barnes v. City of
Cincinnati, 401 F.3d 729, 745 (6th Cir. 2005). The party seeking an enhancement bears the burden
of showing that such an adjustment is “necessary to the determination of a reasonable fee.” Blum
v. Stenson, 465 U.S. 886, 898 (1984). In the majority of cases, however, the quality of
representation is “reflected in the reasonable hourly rate.” Id. The Fifth Circuit, in an approach the
Supreme Court has cited with approval, see, e.g., Hensley, 461 U.S. at 430 n.3, enunciated twelve
factors that a court may consider in determining whether a reasonable fee ought to include an
augmentation. See Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir.
1974).7
7
The twelve factors are: (1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the
skill requisite to perform the legal service properly; (4) the preclusion of other employment by the attorney due to
acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed
by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and
ability of the attorneys; (10) the “undesirability” of the case; (11) the nature and length of the professional relationship
with the client; and (12) awards in similar cases.
Nos. 06-4184/4256/4266 Gonter, et al. v. Hunt Valve Co., et al. Page 10
In its argument for an enhancement, the Plaintiff points to a number of Johnson factors, most
crucially the result obtained. Specifically, HMRP emphasizes the fact that the $12.5 million
settlement with the Shipbuilders comprised over fifty percent of the yearly total for FCA actions
where the Department of Justice did not intervene. While the district court noted that $12.5 million
was a “substantial sum,” it also observed that the Relators had sought $100 million in compensation
and, more importantly, that Morgan and Verkamp – the attorneys most involved in the settlement
– had not sought an enhancement. Consequently, the district court refused to apply an enhancement.
The considerable sum earned in the settlement does represent an important vindication of
the goals underpinning the FCA. But the facts of this case – including, as the district court observed,
Volkema’s more obvious role in the outcome – are distinguishable from examples where courts have
found “exceptional success.” See, e.g., Brotherton v. Cleveland, 141 F. Supp. 2d 907, 913 (S.D.
Ohio 2001) (25% enhancement for a solo practitioner bringing a previously unrecognized cause of
action); McKenzie v. Kennickell 875 F.2d 330, 338-39 (D.C. Cir. 1989) (awarding 25% enhancement
for exceptional results where counsel “remained active in the litigation over a period of fifteen
years”). The amount of the award does not, in our opinion, present the same difficulties as
discovering a novel cause of action or persevering after fifteen years. Furthermore, we review the
lower court’s decision for an abuse of discretion – to find reversible error in its determination that
this case was not “exceptional” would require a compelling factual situation not present here.
Indeed, we are unaware of any case where a decision not to apply an enhancement was overturned
as an abuse of discretion. Because the district court adequately explained why it was refusing an
enhancement, we do not find the decision an abuse of discretion.
VII.
The district court’s decision is thus AFFIRMED, except for its determination that Plaintiffs
were only entitled to $30,080 for the fee-related litigation. The Defendants are instructed to pay an
additional $22,397, with interest from March 21, 2006, to the Plaintiffs for fees related to the fee
litigation.