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SALAZAR v. DISTRICT OF COLUMBIA

October 30, 2000

OSCAR SALAZAR, JR. ET AL., ON BEHALF OF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
V.
DISTRICT OF COLUMBIA ET AL., DEFENDANTS.



The opinion of the court was delivered by: Kessler, District Judge.

MEMORANDUM — OPINION

Plaintiffs have filed a Motion for An Award of Litigation Costs, Including Attorneys' Fees and Out-of-Pocket Expenses, for 1998. Defendants do not contest Plaintiffs' entitlement to an award of fees and costs but strongly oppose the actual amounts sought, which total $434,009.83. Upon consideration of the Motion, the Opposition, the Reply, the Supplemental Opposition, the numerous exhibits submitted by the parties, the applicable case law, and this Court's knowledge of the long history of this case, the Court concludes that Plaintiffs' Motion should be granted in part and denied in part for the following reasons.

I. Factual Background

In 1993, Plaintiffs filed this class action, pursuant to 42 U.S.C. § 1983, on behalf of themselves and impoverished children and adults seeking Medicaid coverage and services in the District of Columbia. After a seven-day bench trial, in April of 1996, this Court issued a comprehensive opinion on liability on October 16, 1996, in Salazar v. District of Columbia, 954 F. Supp. 278 (D.D.C. 1996). A Remedial Order was entered on January 21, 1997, and an Amended Remedial Order was entered on May 6, 1997. Both parties filed timely appeals with the United States Court of Appeals for the District of Columbia Circuit.

Ultimately, after lengthy settlement discussions and on the eve of oral argument in the Court of Appeals, the parties were able to reach a settlement on September 24, 1998, and presented an Order Modifying the Amended Remedial Order of May 6, 1997, and Vacating the Order of March 27, 1997. See Order of September 28, 1998. ("Settlement Order" or "Order"). After public notice and a hearing, the final Settlement Order was entered on January 25, 1999. The Settlement Order provided for the payment of $1,600,000 to cover all attorneys' fees and expenses incurred through December 31, 1997 (¶ 69).*fn1 The parties agree that the Plaintiffs' claims for appellate, settlement, and attorneys' fees work were specifically exempted from the Settlement Order.

Plaintiffs presented the present fee petition to Defendants on May 7, 1999, in an effort to settle the issue without involving the Court. As of the formal filing date of the Motion, December 9, 1999, Defendants had still not provided any response to Plaintiffs' settlement proposal.

II. Does the Settlement Order Govern the Hourly Rates At Which Plaintiffs Are To Be Paid?

Defendants argue, as a threshold matter, that Paragraphs 64 and 65 of the Settlement Order provide the standard for determining the hourly rates at which the lawyers representing Plaintiffs should be paid. In the Order, the parties agreed that the hourly rate for all attorneys handling claims of individual class members would be $75.00 per hour, regardless of the experience level of the lawyer performing the services; and they agreed that for attorney time spent monitoring compliance with the Settlement Order, Bruce Terris and Lynn Cunningham would be compensated at $315.00 per hour, Kathleen Millian and Jane Perkins would be compensated at $265 per hour, paralegals would be compensated at $75 per hour, and all other attorney time would not exceed $200 per hour.

Defendants make two arguments. First, they contend that the Settlement Order should be interpreted, as a matter of contract construction, to apply to the 1998 fee request; and second, that the Settlement Order, based as it is on arms-length bargaining between the parties, provides the best evidence of what constitutes a reasonable hourly rate for attorneys fees in this jurisdiction. Neither argument proves persuasive.

First, as to the meaning of the Settlement Order itself, Defendants concede that fees sought for the work of Plaintiffs' counsel on the cross-appeals, settlement, and prior attorneys' fees litigation over "are not specifically covered by the settlement order." Del's Opp'n at 6.

Therefore, the only issue is whether the Settlement Order applies to the hourly rates for work spent on monitoring Defendants' compliance with its substantive provisions. As to that point, the Order clearly states in Paragraph 69 that the agreement between the parties covers only "claims by Plaintiffs for attorneys' fees and expenses through December 31, 1997," subject to the two exceptions explained in footnote 1. The Order does not purport to settle claims for any period extending past December 31, 1997, i.e., the 1998 legal services covered by the pending fee petition. Moreover, the Order also clearly states in Paragraph 66 that the "rates set forth in Paragraphs 64 and 65 above for Plaintiffs' monitoring of Defendants' compliance with this order were based on compromise and the parties do not intend these rates to apply for any purpose other than those set forth in Paragraphs 64 and 65." The language is crystal clear as to the inapplicability of the rates set forth in Paragraphs 64 and 65 to the present fee dispute.

What Defendants are really asking is that the Settlement Order be applied retroactively, in other words to work performed in 1998 even though the Order was not entered until January 25, 1999. That is not what the parties agreed to, nor is there any such provision in the Settlement Order. Clearly both parties knew that 1998 fees were being incurred during the hiatus between the December 31, 1997, closure date provided in Paragraph 69 and the presentation of the Order for approval on September 24, 1998. What is more, the parties also knew that even after filing of the Settlement Order, some type of public notice would be required because the interests of the class were substantially affected by the settlement; in fact, despite cooperation by the parties and an expedited schedule, final approval could not be granted until January, 25, 1999, some four months after the parties' initial request for Court approval.

Thus, the parties, both represented by very experienced and knowledgeable counsel,*fn2 had to know that legal representation was being provided to and for class members during 1988, while they were hammering out the details of their settlement and while the Court provided notice and an opportunity to be heard to class members. They also had to know that no Settlement Order could be approved and signed until those steps in the process were completed. Despite that certain knowledge, the Order clearly states that it only settles claims through December 31, 1997, and contains no provisions for retroactive application. Given this analysis, Defendants' arguments in favor of retroactivity lack persuasiveness.

With regard to Defendants' second argument (that the hourly rates contained in the Settlement Order provide the best evidence of what constitutes a reasonable hourly rate in this jurisdiction), Defendants are simply wrong. First, as noted above, Paragraph 66 of the Settlement Order explicitly notes that "these rates were based on compromise and the parties do not intend these rates to apply for any purpose other than those set forth in Paragraphs 64 and 65." Defendants' argument is flatly inconsistent with this language to which they have agreed. Second, rates which are the product of compromise and settlement, by definition, cannot represent an objectively reasonable market rate for similar work in this jurisdiction. It is the very nature of compromise and settlement for each party to give up something and therefore the rates contained in Paragraphs 64 and 65 are, of necessity, more than the Defendants would like to pay and less than the Plaintiffs would like to be paid.

For these-reasons, the Court concludes that the hourly rates set forth in Paragraphs 64 and 65 of the Settlement Order do not provide the standard for determining the hourly rates at which the lawyers representing Plaintiffs should be paid.

III. At What Hourly Rates Are Plaintiffs Entitled to be Paid?

In Blum v. Stenson, 465 U.S. 886, 895, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984), the Supreme Court determined ...


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