People Who Care v. Rockford Bd 205 ( 2001 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 01-1784
People Who Care, et al.,
Plaintiffs-Appellees,
v.
Rockford Board of Education,
School District No. 205,
Defendant-Appellant,
Appeal from the United States District Court for the
Northern District of Illinois, Western Division.
No 89 C 20168--P. Michael Mahoney, Magistrate Judge.
Submitted April 3, 2001--Decided November 29, 2001
Before Bauer, Posner, and Kanne, Circuit
Judges.
Posner, Circuit Judge. The defendant, a
school district, in this long-running
school desegregation case (see,
e.g.,People Who Care v. Rockford Board of
Education, 246 F.3d 1073 (7th Cir. 2001),
171 F.3d 1083 (7th Cir. 1999), 153 F.3d
834 (7th Cir. 1998) (per curiam), 90 F.3d
1307 (7th Cir. 1996), 921 F.2d 132 (7th
Cir. 1991)) appeals from an order
awarding the plaintiffs some $800,000 in
fees for services performed by their
lawyers in 1997. The threshold question
is whether we have jurisdiction of this
appeal, which is interlocutory because
the underlying litigation has not yet
concluded. Although an award of
attorneys’ fees is appealable separately
from the decision on the merits, Budinich
v. Becton Dickinson & Co., 486 U.S. 196
(1988), this case involves an interim
award of fees, and so is not the final
order in the proceeding to obtain
attorneys’ fees. We (and other courts as
well) have held, however, that where the
fees might not be recoverable by the
defendant from the plaintiff if the award
were reversed at the end of the
litigation, so that refusal of an
immediate appeal might inflict
irreparable harm on the defendant, the
award is appealable immediately as a
collateral order. E.g., People Who Care
v. Rockford Board of Education, supra,
171 F.3d at 1086; Construction Industry
Retirement Fund v. Kasper Trucking, Inc.,
10 F.3d 465, 468 (7th Cir. 1993); People
Who Care v. Rockford Board of Education,
supra, 921 F.3d at 134-35; Richardson v.
Penfold, 900 F.2d 116 (7th Cir. 1990);
Palmer v. City of Chicago, 806 F.2d 1316
(7th Cir. 1986); Law v. National
Collegiate Athletic Ass’n, 134 F.3d 1025,
1027 (10th Cir. 1998); Riverhead Savings
Bank v. National Mortgage Equity Corp.,
893 F.2d 1109, 1113-15 (9th Cir. 1990);
Webster v. Sowders, 846 F.2d 1032, 1035
(6th Cir. 1988); cf. Walker v. HUD, 99
F.3d 761, 766 (5th Cir. 1996). For it is
final in the practical sense that it may
well be the last opportunity the
defendant has to obtain relief from the
order from the appellate court. That is
the situation here. The defendant
contends that the plaintiffs’ law firm is
small and fragile--and the plaintiffs do
not contest the contention, and so we
accept it as true and proceed to the
merits.
The principal challenge is to an award
of almost $90,000 in prejudgment interest
on attorneys’ fees, that is, interest on
the fees before any award is entered. The
district court directed that interest
would accrue (and be compounded) from the
thirtieth day after the services
generating a claim for fees were
rendered. Bearing in mind that the
purpose of a fee award is to reimburse
the plaintiff for the cost he would
reasonably incur if he purchased legal
assistance in the market, Blum v.
Stenson, 465 U.S. 886, 894 (1984); In re
Synthroid Marketing Litigation, 264 F.3d
712, 718-19 (7th Cir. 2001); Gaskill v.
Gordon, 160 F.3d 361, 363 (7th Cir. 1998)
("When a fee is set by a court rather
than by contract, the object is to set it
at a level that will approximate what the
market would set. The judge, in other
words, is trying to mimic the market in
legal services" (citations omitted));
People Who Care v. Rockford Board of
Education, supra, 90 F.3d at 1310, we
think the proper approach to the
calculation of interest requires
consideration of prevailing practices in
the legal-services market. This follows
from the "market mimicking" approach,
orthodox in this circuit, to computing
the fee award. The idea is to "estimate
the terms of the contract that private
plaintiffs would have negotiated with
their lawyers," In re Synthroid Marketing
Litigation, supra, 264 F.3d at 718
(emphasis added), and if such a contract,
express or implied, would provide for
interest, the fee award should include
interest, or some equivalent adjustment,
as in Ohio-Sealy Mattress Mfg. Co. v.
Sealy Inc., 776 F.2d 646, 662-63 (7th
Cir. 1985). So if the prevailing practice
is that lawyers either are paid on the
thirtieth day after rendering their
services or charge interest beginning on
the thirty-first day, then the district
court’s order was proper. But not only is
there no evidence of this; it obviously
is incorrect. Lawyers rarely bill their
clients within days of rendering services
in an ongoing suit, receive payment
within thirty days of that rendition, or
charge interest for payment after thirty
days. Institutionalized Juveniles v.
Secretary of Public Welfare, 758 F.2d
897, 923 (3d Cir. 1985); Reid F. Trautz &
Paul McLaughlin, "How to Get Paid," 27-1
Law Practice Management 30, 31 (2001). No
doubt if the client refused to pay or
delayed unreasonably in paying, the
lawyer might decide to charge interest;
and if he had to sue to get paid, he
would certainly do this, and would thus
seek an award of prejudgment interest.
But the plaintiffs here are seeking
interest as a matter of course rather
than as a penalty for bad faith,
obduracy, or foot-dragging.
The award of interest was especially
unjustifiable because the plaintiffs did
not bill the defendant for their 1997
attorneys’ fees until 1999. Imagine the
response of a client in the market who
received a bill more than a year after
the rendition of the services covered by
it and was told that he owed not only the
amount of the bill but compound interest
for every month but one since the
services were rendered.
The defendant’s other challenges to the
order do not have sufficient merit to
warrant a reversal of any portions of it
other than the award of interest. The
order is affirmed in part, reversed in
part, and remanded.