A.  For Protection and Advocacy (P&A) agencies, other public interest law offices, and some private attorneys involved in a disability and civil rights-type practice, fee-shifting statutes have come to provide an important source of revenue.

1. For example, the Individuals with Disabilities Education Act (IDEA), the Americans with Disabilities Act (ADA), and section 504 of the Rehabilitation Act all provide a basis for allowing the plaintiffs' attorneys to obtain fees from the defendant when the plaintiff is a prevailing party in litigation.¹ There are more than 60 federal fee-shifting statues. See generally Marek v. Chesny, 473 U.S. 1, 43-51, 105 S.Ct. 3012 (1985) (Appendix to opinion of Brennan, J., dissenting - listing 63 statutes).
   
2. Additionally, when 42 U.S.C. § 1983 is used to enforced certain federal laws (e.g., Medicaid) or provisions of the U.S. Constitution, 42 U.S.C. § 1988 is available to provide fees to the prevailing party.
   
3. When litigation is pursued against an agency of the federal government, such as the Social Security Administration, fees are available to prevailing plaintiffs, under the federal Equal Access to Justice Act, when the agency's position in the litigation was not substantially justified.
   
4. P&As and others have routinely obtained fees for successful work in these and other areas of practice. Until the recent holding in Buckhannon, the threat of a potentially large fee award often lead defendants to settle cases early so as to minimize, but not eliminate the right to collect a fee.
   
5. The U.S. Supreme Court has long recognized the right to fees in settled cases, see Maher v. Gagne, 448 U.S. 122, 129, 100 S.Ct. 2570, 2574 (1980), as quoted in Jeff D., 106 S.Ct. at 1536, and the right of publicly- funded agencies, such as P&As, to obtain fees under fee shifting statutes. Id. See also Blum v. Stenson, 465 U.S. 886 (1984), explicitly recognizing the right of publicly funded legal services organizations to receive attorney fees at prevailing market rates under fee shifting statutes.

II.     The Jeff D. and Buckhannon Holdings

A.  Evans v. Jeff D., 475 U.S. 717, 106 S.Ct. 1531 (1986):

1. Class action against state of Idaho, challenging alleged deficiencies in educational programs and health care services provided children with emotional and mental disabilities.
   
2. Plaintiffs represented by Idaho Legal Aid Society, a private not-for-profit which received funding through the Legal Services Corporation to represent individuals who could not afford to pay attorney's fees. As the Court pointed out, Idaho Legal Aid "is not allowed to represent clients who are capable of paying their own legal fees." Id. 106 S.Ct. at 1534, note 3
   .
3. The Court pointed out that Idaho Legal Aid made no agreement requiring any of the plaintiffs to pay for the costs of litigation or the legal services provided through its attorneys. Id.
   
4. Following extensive discovery and preparation for trial on the treatment issues of the case, and one week before trial, the defendants offered plaintiffs a settlement proposal that offered virtually all of the injunctive relief that plaintiffs had sought in their complaint. This offer, however, included a provision for a waiver by plaintiffs of any claim to fees or costs.
   
5. The plaintiffs' attorneys signed the stipulation and, subsequently, filed a motion with the District Court to approve the settlement except for the provision on costs and attorney's fees, and to allow plaintiffs to present a bill of costs and fees for consideration by the court.
   
1. The attorney for Idaho Legal Aid claimed, in essence, that the defendant's offer of settlement unlawfully created an ethical conflict between the obligation to his client to pursue the best result available and the obligation to his organization to pursue the fees available under 42 U.S.C. § 1988.
   
2. Originally, this waiver was unacceptable to the Idaho Legal Aid Society, which had instructed Johnson (its attorney) to reject any settlement offer conditioned upon a waiver of fees, but Johnson ultimately determined that his ethical obligation to his clients mandated acceptance of the proposal.
6. The District Court rejected the ethical underpinnings of plaintiffs' argument and upheld the fee waiver.
   
7. On appeal to the Ninth Circuit Court of Appeals, the court invalidated the fee waiver and left standing the remainder of the settlement, instructing the District Court on remand to award reasonable attorney's fees. 743 F.2d 648, 652 (9^th Cir. 1984).
   
8. The U.S. Supreme Court reversed. In doing so, the Court squarely defined the issue it was deciding: "Whether the District Court had a duty to reject the proposed settlement because it included a waiver of statutorily authorized attorney's fees." 106 S.Ct. at 1537.
   
1. The Court pointed out that the dilemma faced by Idaho Legal Aid's attorney was not an "ethical" one, as he "had no ethical obligation to seek a statutory fee award. His ethical duty was to serve his clients loyally and competently." Id. (emphasis in original).
   
2. The Court went on to suggest that the acceptance of the settlement, including the fee waiver, was mandated by ethical rules: "Since the proposal to settle the merits was more favorable than the probable outcome of the trial, [the attorney's] decision to recommend acceptance was consistent with the highest standards of our profession." Id.
   
3. The Court, in a footnote, specifically referenced the American Bar Association's (ABA's) Model Code and Rules that would support the obligation to accept, in some circumstances, a settlement offer that includes a fee waiver:

"Generally speaking, a lawyer is under an ethical obligation to exercise independent professional judgment on behalf of his client; he must not allow his own interests, financial or otherwise, to influence his professional advice. ABA, Model Code of Professional Responsibility EC 5-1, 5-2 (as amended 1980); ABA, Model Rules of Professional Conduct 1.7(b), 2.1 (as amended 1984). Accordingly, it is argued that an attorney is required to evaluate a settlement offer on the basis of his client's interest, without considering his own interest in obtaining a fee; upon recommending settlement, he must abide by the client's decision whether or not to accept the offer, see Model Code of Professional Responsibility EC 7-7 to EC 7-9; Model Code of Professional Conduct 1.2(a)." 106 S.Ct. at 1537, note 14.

9. The Court left open the question of whether a settlement offer which includes a fee waiver request would be precluded, as contrary to the Fees Act (i.e., 42 U.S.C. § 1988) if the state defendant imposed this as part of a state-wide policy, or if the waiver request was part of a vindictive effort to teach counsel not to bring such cases. Id. at 1544. (On this point, see holding of District Court in Johnson v. District of Columbia, at section II.C, below.
   
10. The dissent commented on the viability of fee arrangements tailored to deal with the fee waiver dilemma:
    
1. "In addition, it may be that civil rights attorneys can obtain agreements from their clients not to waive attorney's fees. Such agreements simply replicate the private market for legal services (in which attorneys are not ordinarily required to contribute to their client's recovery) ... and thus will enable civil rights practitioners to make it economically feasible--as Congress hoped--to expend time and effort litigating civil rights claims." 106 S.Ct. 1557 (Brennan, J. dissenting)(footnotes omitted).
   
2. However, the dissent also points out that the publicly-funded attorneys who were before the court could not protect themselves by requiring plaintiffs to sign contingency agreements or retainers at the outset of the representation. "Amici legal aid societies inform us that they are prohibited by statute, court rule, or Internal Revenue Service regulation from entering into fee agreements with their clients. Brief for NAACP Legal Defense and Educational Fund, Inc., et al. as Amici Curiae 10-11; Brief for Committee on Legal Assistance of the Association of the Bar of the City of New York as Amicus Curiae 12-13. Moreover, even if such agreements could be negotiated, the possibility of obtaining protection through contingency fee arrangements is unavailable in the very large proportion of civil rights cases which, like this case, seek only injunctive relief. In addition, the Court's misconceived doctrine of state sovereign immunity, see Atascadero State Hospital v. Scanlon, 473 U.S. 234, 247, 105 S.Ct. 3142, 3150, 87 L.Ed.2d 171 (1985) (BRENNAN, J., dissenting), precludes damages suits against governmental bodies, the most frequent civil rights defendants. Finally, even when a suit is for damages, many civil rights actions concern amounts that are too small to provide real compensation through a contingency fee arrangement. Of course, none of the parties has seriously suggested that civil rights attorneys can protect themselves through private arrangements. After all, Congress enacted the Fees Act because, after Alyeska, it found such arrangements wholly inadequate. Supra, at 1548-1550." 106 S.Ct. 1553, note 10 (Brennan, J. dissenting).

B.  Buckhannon Bd. & Care Home v. West Virginia Dep't of Health & Human Servs., 532 U.S. 598, 121 S.Ct. 1835 (2001):

1. Background: The "catalyst theory" had long been used by plaintiffs' attorneys, including the P&As, to obtain attorney's fees when defendants make voluntary changes in response to the filing of litigation. Under fee-shifting statutes like 42 U.S.C. § 1988, the theory was that the lawsuit was a catalyst for achieving an outcome that was the basis for the litigation, making the plaintiff a prevailing party under the fee-shifting statute.
   
2. This holding eliminated the "catalyst theory" as a basis for obtaining attorney's fees as a prevailing party in a case brought under the ADA and the Fair Housing Amendments Act (FHAA).
   
3. The plaintiffs' claims: Corporation that operated assisted living residences sued state seeking declaration that a state law requiring assisted living residents to be capable of "self preservation" violated the ADA and the FHAA. They also sought an injunction permitting plaintiff to operate residences with individuals who did not meet the requirement.
   
4. After the lawsuit was filed, the Virginia state legislature passed legislation which eliminated the self preservation requirement. The lawsuit was then dismissed as moot (i.e., with the change in the law, plaintiff had obtained everything that was sought through the lawsuit). Since the legislation provided everything sought by plaintiff, no further agreements between the parties or court orders were deemed necessary.
   
5. The Supreme Court's holding: Plaintiffs were not a prevailing party because a prevailing party must have been awarded some relief by a court. Id. at 1839. The Court rejected the longstanding catalyst theory as a basis for finding that plaintiffs are a prevailing party.
   
6. Does Buckhannon apply to cases other than those filed under the ADA and FHAA?
   
1. Arguably, the holding is limited to those two statutes since no other provisions were before the Court. E.g., many attorneys have argued that Buckhannon does not apply to cases enforcing the Individuals with Disabilities Education Act (IDEA) since IDEA's provisions seem to permit fees in situations that go beyond the holding in Buckhannon.²
   
2. However, since much of the Court's discussion references fee-shifting statutes generally, not only the ADA and FHAA (e.g., the Court specifically references the Civil Rights Attorney's Fees Award Act, 42 U.S.C. § 1988), we can assume that lower courts are likely to apply the holding to all fee-shifting statutes that use prevailing party language similar to that employed in the statutes before the Court in Buckhannon.
7. When is a plaintiff in a "settled" case a prevailing party under Buckhannon?
   
1. A starting place for analysis is the specific situations mentioned by the Court as either justifying or not justifying an award of fees as a prevailing party:
   
1. Settlement agreements enforced through a consent decree, as it is "a court-ordered ‘chang[e] [in] the relationship between [the plaintiff] and the defendant.'" 121 S.Ct. at 1840 (citations omitted).
   
2. "Private settlements do not entail the judicial approval and oversight involved in consent decrees. And federal jurisdiction to enforce a private contractual settlement will often be lacking unless the terms of the agreement are incorporated into to order of dismissal." Id. See Johnson v. District of Columbia, below, suggesting that fees may be available in certain "private settlements" (i.e., settlements that are not court-sanctioned).
2. The Court's language suggests that the surest cases, in which prevailing party status is locked in, will be those settlements that either become reduced to consent decrees, or those stipulations that are approved or "so ordered" by the court. This would include any partial consent decrees or stipulations that settle some issues and leave others to be negotiated or litigated.
   
1. Court approval is required for the settlement of class actions under Federal Rules of Civil Procedure 23(e): "Dismissal or Compromise. A class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the class in such manner as the court directs." http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=1004365&DocName=USFRCPR23&FindType=L
   
2. It should be noted, however, that merely filing as a class may lead to the Jeff D. waiver problem.
3. The discussion paper prepared by Mark Murphy, et al. (see note 2 above) contains a discussion of some of the early litigation, post-Buckhannon, in which courts have interpreted the Supreme Court's language broadly to include court-approved settlement agreements that are not formal consent decrees, mediation agreements that have been read into the record before an administrative hearing officer, and other similar scenarios.³

C.  Johnson v. District of Columbia, No. CIV. 01-0518, 2002 WL 480518 (D.D.C. 3/28/02): Where Jeff D. and Buckhannon collide.

1. Lawsuit was brought under IDEA and 42 U.S.C. § 1983 seeking a preliminary injunction to enjoin the District of Columbia Public Schools (DCPS) policy of not paying attorney's fees in the course of executing settlement agreements for IDEA claims, unless payment of fees was a negotiated term of the settlement agreement.
   
2. A decision was rendered in the context of cross motions to dismiss and for summary judgment. The court held:
   
1. First, that the plaintiffs survived the motion to dismiss because they sufficiently stated claims: that the defendant violated IDEA's right to counsel provision; that defendant violated IDEA's attorney's fees provision; and, stated a claim pursuant to § 1983 arising out of the defendant's alleged custom, practice, and policy of violating IDEA's right to counsel provision.
   
2. Second, plaintiffs' motion for preliminary injunction was denied as they failed to establish that the would suffer imminent and irreparable harm without it.
3. Background on DCPS's sweeping policy to avoid attorney's fees in IDEA cases:
   
1. The "Perlman Memo" stated that pursuant to DCPS's interpretation of the Supreme Court's May 29, 2001 decision in Buckhannon:

"effective September 1, 2001, DCPS will not pay attorney's fees incurred in the course of executing a settlement agreement with an attorney representing a parent who alleges a DCPS violation of IDEA unless the payment of those fees is a negotiated term of the settlement in question."

4. The settlement offer in plaintiffs' case:
   
1. DCPS's settlement offer agreed to much more than the relief plaintiffs were seeking at the requested hearing.
   
2. DCPS conditioned the settlement offer on the following terms: "The parent waives any right to prevailing party status and will not seek legal fees and associated costs in regard to this matter."
5. The District Court noted that plaintiffs' claims associated with the right to counsel and attorney's fees were predicated on specific language in IDEA that outlines the right to be represented by counsel in IDEA administrative hearings. See, e.g., 20 U.S.C. § 1415(h).
   
1. The court pointed out that § 1415(h) goes beyond 42 U.S.C. § 1988, involved in Jeff D., which only creates a right to fees but no right to counsel:

"The Fees Act at issue in Jeff D. contains no explicit right to counsel provision. The fee waiver offer made by DCPS could violate § 1415(h)(1) if that offer undermined plaintiffs' ability to receive the unconflicted representation by their attorney. Furthermore, the conduct of the DCPS during the administrative hearing requested by plaintiffs to challenge the fee waiver provision also raises serious questions about DCPS' intent to interfere with plaintiffs' legal representation."

6. The District Court zeroed in on certain dicta from the Jeff D. decision with respect to the uniform policy of demanding fee waivers (see section III.A.9, above).
   
1. In ruling that plaintiffs survived the motion to dismiss and had stated claims for violations of IDEA, the court held:
   
1. "If plaintiffs in this case can demonstrate after discovery that DCPS has a consistent policy or practice of conditioning settlement offers on fee waivers in IDEA cases, defendant will be hard-pressed to argue that it has not violated the fee provision of IDEA."
   
2. "As suggested by the Supreme Court, proof of a vindictive intent by DCPS, which includes but is not limited to the waiver offer, can constitute a violation of IDEA's attorney's fees provision."

III.     Attempts to Structure a Practice to Avoid the Pitfalls of Jeff D. and Buckhannon

A. Use of language in a retainer agreement to avoid Jeff D. waiver of fee settlements:

1. Example from a private law firm with significant fee-shifting practice: "Retainer Agreement Not Explicitly Obligating Client to Pay" (attached as Appendix-A)
   
1. The retainer specifies that the client is responsible for filing fees and other "costs," but not attorney's fees.
   
2. On the issue of not charging for attorney's fees it further provides: "In consideration thereof, I agree not to waive or otherwise impair your ability to pursue recovery of the total fees and costs incurred in connection herein from a defendant on the basis of my being a prevailing party. However, I further understand that if I should decide to waive or otherwise impair the ability to pursue recovery of fees and costs from a defendant, including doing so as part of a settlement, I shall be personally responsible for the full payment of all fees and costs incurred in connection herein and not limited to the fees and costs set forth above."
2. Example from a P&A agency: "Massachusetts Disability Law Center Retainer Agreement" (attached as Appendix-B)
   
1. The retainer first states: "except for the specific exceptions set forth below in the "Settlement" section, I am not required to pay any attorney's fees to the DLC." (emphasis in original)
   
2. The retainer provides: "I understand that I alone have the right to accept or reject any settlement offer. If, however, I accept a settlement which does not include reimbursement of DLC's costs and reasonable attorney's fees for DLC, then I agree to pay DLC a reasonable attorney's fee for its work on my case at a rate of $_____ per hour, (____ Initial), and to reimburse DLC for its costs." (emphasis in original)

"If DLC recommends that I accept a settlement of my case as a fair and reasonable resolution of my case, I am free to accept or reject the offer of settlement. If, however, I decide to reject a settlement offer against the advice of DLC that:

1. the settlement is fair and reasonable; and

2. the resources required to further pursue the matter exceed the relief I am likely to obtain;

then I agree to pay DLC a reasonable attorney's fee for its work done on my case from that point in time forward according to the fee schedule of the agency, unless such fees are recovered in full from the opposing party."

3. NOTE: Neither retainer agreement eliminates the potential of the Buckhannon problem - - that is, the defendant can still voluntarily provide relief, without a court order or approval, and the plaintiff will not be prevailing at least as to the relief afforded by the voluntary action.
   
1. Query: At that point, if the relief is substantial but does not provide everything sought in the complaint, what is the attorney ethically required to convey to the client?
   
2. Full disclosure principles would dictate that, pursuant to Buckhannon, the client be informed that he or she as the plaintiff cannot be a prevailing party with regard to the voluntary relief afforded.
   
3. If the client then says he or she is satisfied with the voluntary relief (i.e., will forego any additional relief requested in the complaint), can the attorney, acting pursuant to one of the referenced retainers, bill the client for at least that legal work that is related to the unresolved claims?

IV.     Balancing the Attorney's Code of Ethics Against the Law Firm or Agency's Need to Obtain Revenue Through Fee-Shifting Statutes

1. Selected canons, ethical considerations, disciplinary rules from the ABA Model Code of Professional Responsibility:
   
1. Obligation to do your best for client, when considering settlement strategy in cases:
   
1. Canon 6: "A lawyer should represent a client competently."
   
2. Canon 7: "A lawyer should represent a client zealously within the bounds of the law."
   
3. EC 5-1: "The professional judgment of a lawyer should be exercised, within the bounds of the law, solely for the benefit of his client and free of compromising influences and loyalties...."
   
4. EC 7-7: "In certain areas of legal representation not affecting the merits of the cause or substantially prejudicing the rights of a client, a lawyer is entitled to make decisions on his own. But otherwise the authority to make decisions is exclusively that of the client and, if made within the framework of this law, such decisions are binding on his lawyer. ..."
   
5. EC 7-8: "A lawyer should exert his best efforts to insure that the decisions of his client are made only after the client has been informed of relevant considerations. ..."
   
6. EC 7-9: "... a lawyer should always act in a manner consistent with the best interests of his client. ..."
   
7. DR 7-101 (A): "A lawyer shall not intentionally: (1) Fail to seek the lawful objectives of his client through reasonably available means ...."
2. Rule impacting on contingent fee agreements (see above) for fee-shifting cases:
   
1. Ethical Consideration (EC) 2-17 "... A lawyer should not charge more than a reasonable fee ...."; see Rule 1.5.
   
2. EC 2-19: "As soon as feasible after a lawyer has been employed, it is desirable that he reach a clear agreement with his client as to the basis of the fee charges to be made. ..."
   
3. EC 2-23 "A lawyer should be zealous in his efforts to avoid any controversies over fees with clients and should attempt to resolve amicably any differences on the subject. ..."
   
4. EC 5-7: Suggests that it is inappropriate for a lawyer to have a financial interest in the outcome of the litigation.
3. What if client is under a disability?⁴
   
1. EC 7-11: "The responsibilities of a lawyer may vary according to the intelligence, experience, mental condition or age of a client ...."
   
2. EC 7-12: "Any mental or physical condition of a client that renders him incapable of making a considered judgment on his own behalf casts additional responsibilities upon his lawyer. ..."
   
3. ABA Model Rules of Professional Conduct (hereinafter referred to simply a Rules), Rule 1.14: "When a client's ability to make adequately considered judgments decisions ... is impaired [because of mental disability] ... the lawyer shall, as far as reasonably possible, maintain a normal client-lawyer relationship with the client."
4. Canon 9: "A lawyer should avoid even the appearance of professional impropriety."
2. How the attached sample retainers affect the ethical issues which arise in fee-shifting cases:
   
1. Jeff D.'s premise: Plaintiff's attorney has no ethical obligation to seek fees; rather the obligation is to pursue the client's interests. [See references cited in IV.A.1, above.]
   
1. Since the retainer creates a potential liability for fees, the plaintiff's attorney is pursuing a client's interest by seeking fees as part of any settlement.
   
2. Attempting to obtain a good resolution on attorney's fees is consistent with zealously representing a client's interests.
2. Premise that attorney should not have a financial interest in the outcome of a case (see EC 5-7):
   
1. To the extent that this is an issue in fee waiver cases, the conflict is arguably eliminated because the plaintiff's interest is parallel to the attorney's interest.
3. Specific situations
   
1. Using one of the model retainers
   
1. Using it in a P&A or other not-for-profit agency
2. Strategy of going forward (with administrative hearing, with litigation) rather than accepting settlement
   
3. Strategy of settling merits of client's claim and attorney's fee request at same time
   
4. Strategy of settling merits and agreeing to reserve fee settlement or litigation for later proceedings.
   
5. Strategy of not pushing the other side for an early settlement
   
6. Strategy of including a claim for damages in the complaint
   
7. What if you use one of the retainers (see above), but the intent is only to create a justification for insisting that fees be part of any settlement (i.e., you do not intend to bill any clients under the agreement)?
   
8. What is your client/plaintiff is the activist type and fully supports your agency's need to generate revenue through fees?
4. Selected ethical opinions
   
1. Board of Professional Responsibility, Supreme Court of Tennessee, Formal Ethics Opininon # 85-F-96(a), 1986 WL 311107 (9/26/86): Plaintiff can engage in settlement negotiation that includes the right to fees (they are not "inherently improper") so long as the attorney: i) fully advises plaintiff along the way; ii) advises plaintiff that independent legal counsel can be sought; and iii) that the plaintiff/client can approve or disapprove the entire settlement agreement, including those parts relating to fees.
   
2. Association of the Bar of the City of NY, Committee on Professional and Judicial Ethics, Formal Opinion # 1987-4, 1987 WL 346194 (5/13/87): Pursuant to Jeff D. holding of U.S. Supreme Court, it is not unethical per se for defense counsel to propose settlements conditioned on the waiver by plaintiffs of attorney's fees under fee-shifting statutes.
   
3. Calif. State Bar, Standing Committee on Professional Responsibility and Conduct, Formal Opinion # 1989-114, 1989 WL 253262 (1989): In representing a plaintiff in a federal civil rights action or similar action, an attorney is obligated to inform the client that statutory attorney's fees are the client's property which the client may waive as a condition of settlement, even though it may well result in the attorney not being paid for services performed.
   
1. Query: Does the use of one of the model fee retainers (see above) avoid this issue? Is the retainer, when used and enforced in the P&A context, ethical? Is the use of such a retainer consistent with the principles of your P&A agency?
   
2. The Calif. State Bar's Standing Committee, in Formal Opinion # 1994-136, 1994 WL 621614 (1994), answered part of this question by ruling that such agreements are not prohibited so long as the attorney complies with certain state ethics rules. In essence, the opinion says that the fee agreement must be fair and equitable, with sufficient disclosure to the plaintiff.
4. Utah State Bar, Ethics Advisory Opinion Committee, Opinion 3 98-05, 1998 WL 199535 (April 17, 1998): It is not unethical for a defense attorney to offer a "full satisfaction" settlement, conditioned upon plaintiff's waiving a claim for attorney's fees against a defendant.

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