OPINION OF THE COURT
VAN DUSEN, Circuit Judge.
This appeal raises diverse issues resulting from a district court award of back pay, liquidated damages and attorneys' fees to a plaintiff who successfully proved that the City of Philadelphia violated the Age Discrimination in Employment Act of 1967, 29 U.S.C. §§ 621-634 (1970 & Supp. IV 1974) (ADEA). We affirm in part and reverse in part the district court's award of monetary relief and attorneys' fees.
Plaintiff, Luis Rodriguez, then age 46, applied on December 23, 1974, to the City of Philadelphia to take the competitive Civil Service examination for the position of Security Officer I. One month later, the City's Personnel Department informed Mr. Rodriguez that he could not sit for the examination because he was overage. Since 1966, the City of Philadelphia had adhered to a personnel policy requiring that applicants for the position of Security Officer I be less than 41 years of age in order to be eligible to take the requisite competitive examination.
The district court certified the class pursuant to Rule 23(b)(2), and, after a non-jury trial, concluded that the City's policy of barring persons over the age of 41 from taking the competitive examination for the job of Security Officer I violated § 4(a)(1) of the ADEA, 29 U.S.C. § 623(a)(1), and was not a bona fide occupational qualification, see 29 U.S.C. § 623(f)(1). Accordingly, the district court ordered the requested class injunctive relief
The City has taken no appeal from the district court's conclusions of law that the personnel policy erecting age as a barrier to application for the position of Security Officer I willfully violated the ADEA and was not saved as a bona fide occupational qualification. Thus, for purposes of this appeal, the City stands as an undisputed willful violator of the ADEA, both with respect to the plaintiff, Luis Rodriguez, and the class of persons over age 41 which he represented. The City in this appeal challenges only certain aspects of the individual relief ordered by the district court.
Furthermore, the City also appeals that portion of the district court's order entitling Mr. Rodriguez to be hired as a Security Officer I solely on the basis of his written examination performance. The City urges that the plaintiff's hiring should have been made contingent on his satisfaction of preexisting physical requirements for employment as a Security Officer I. Finally, the City maintains that the district court erred in awarding attorneys' fees under the ADEA to plaintiff's counsel, Community Legal Services. The plaintiff, while disputing all the grounds of appeal advanced by the City, has cross-appealed the calculation of attorneys' fees. The plaintiff contends that the district court employed incorrect standards in calculating the reasonable value of his attorneys' time devoted to this litigation.
At oral argument it was revealed that pursuant to the district court's order, Mr. Rodriguez was administered the competitive written examination for the job of Security Officer I, but that he failed to score high enough to have been hired during the time between rejection of his application and trial.
The Age Discrimination in Employment Act of 1967 was enacted to ensure that employers base their hiring decisions on expectations of individuals' job performance rather than on unwarranted irrebuttable presumptions that all persons of a certain age less than 65 would be unable to satisfactorily perform a given job. Age became a proscribed basis for employment decisions in much the same manner as Title VII of the 1964 Civil Rights Act, 42 U.S.C. §§ 2000e et seq. (1970 & Supp. IV 1974), had earlier prohibited employment discrimination on the basis of other immutable personal characteristics such as race, color, religion, sex or national origin. Age concededly differs from the Title VII classifications in that, for some jobs, statistically significant correlations might demonstrate that
At trial, the plaintiff presented uncontroverted evidence that the City had established an absolute age limit of 41 for applicants for the position of Security Officer I. The plaintiff's evidence conclusively proved that his application for such a job had been rejected solely on the basis of his overage. Moreover, the City presented at trial no evidence indicating that Mr. Rodriguez was in any way unqualified for a job as a security guard or that there had not been vacancies which he might have filled. The City's evidence that its maximum age limit was a bona fide occupational qualification was found wanting by the district court and is not reiterated on appeal. Thus, the posture of plaintiff's suit as it stands before this court is that the City has committed a willful per se violation of the ADEA, see Houghton v. McDonnell Douglas Corp., 533 F.2d 561 (8th Cir.) cert. denied, ___ U.S. ___, 98 S.Ct. 506, 54 L.Ed.2d 451 (1977). Notwithstanding its indisputable liability, the City now claims that the district court's grant of legal relief to Mr. Rodriguez was unauthorized by statute.
Relief available to victims of unlawful age discrimination is governed by § 7 of the ADEA, 29 U.S.C. § 626 (1970), in conjunction with its incorporated enforcement provisions of the Fair Labor Standards Act (FLSA). See 29 U.S.C. § 626(b), incorporating 29 U.S.C. §§ 211(b), 216(b), 216(c), 217, 626(b), 626(c). The FLSA makes actionable employer violations of minimum wage and maximum hour laws and entitles aggrieved employees to recover "unpaid minimum wages" or "unpaid overtime compensation," as well as an equal amount of mandatory "liquidated damages." 29 U.S.C. § 216(b) (1970). Violations of the ADEA do not typically involve an employer's failure to pay minimum or overtime wages. A discriminatory refusal to hire or promote workers on the basis of age is likely to result in monetary damages less precisely measurable. Section 7(b) of the ADEA defines available monetary relief only in terms of "amounts owing to a person as a result of a violation of this chapter." Such amounts "shall be enforced" as are unpaid minimum wages and unpaid overtime compensation under the FLSA enforcement provisions incorporated by reference. See 29 U.S.C. § 626(b). Liquidated damages under the ADEA are available only in case of "willful violations" of the statute. In addition, § 7(b) empowers the courts to grant such "legal or equitable relief as may be appropriate to effectuate the purposes of this chapter, including without limitation judgments compelling employment, reinstatement or promotion, or enforcing the liability for amounts deemed to be unpaid minimum wages or unpaid overtime compensation under this section."
The "amounts owing" to a victim of age discrimination are not further defined by statute. Thus, the scope of pecuniary relief available under the ADEA must be ascertained from examination of the whole statutory scheme. Damage standards should effectuate the purposes of anti-discrimination statutes. See generally Rogers v. Exxon Research & Engineering Co., 550 F.2d 834, 839-42 (3d Cir. 1977).
Monetary awards exacted from employers who practice unlawful discrimination serve two primary functions. First, the prospect of economic penalties more certainly deters illegal employment practice than does exposure to injunctive relief or prospective equitable remedies such as reinstatement. Second, economic exactions recompense individuals for injuries inflicted by employers' discriminatory conduct. These prophylactic and compensatory purposes are the basis of most recent anti-employment discrimination legislation, including the
422 U.S. at 421, 95 S.Ct. at 2373.
The make whole standard of relief should be the touchstone for the district courts in fashioning both legal and equitable remedies in age discrimination cases. Victims of discrimination are entitled to be restored to the economic position they would have occupied but for the intervening unlawful conduct of employers. See Franks v. Bowman Transportation Co., 424 U.S. 747, 763-64, 96 S.Ct. 1251, 47 L.Ed.2d 444 (1976) (Title VII standard). The difficulty arises in applying the concepts of a make whole restorative remedy and, but for causation, to facts developed in particular cases. Trial courts and the parties themselves invariably lack perfect hindsight to forecast what would have happened had there been no unlawful acts. Even in those cases where a retrospective fact finder can confidently determine where a plaintiff would have stood had there been no discrimination, the plaintiff is subjected, for often long periods of time prior to trial, to burdensome uncertainty.
For example, in the case at hand, Mr. Rodriguez did not and could not have known at the time of his application whether he would have obtained a job as Security Officer I had the City not unlawfully rejected his application. The City might have immediately discovered Mr. Rodriguez's true qualifications had they simply administered the examination prior to trial, thereby adducing direct evidence on Mr. Rodriguez's ability to perform the job of a security guard. Even by the time of trial, the parties had no evidence that Mr. Rodriguez was unqualified on grounds other than age. Given what the trial court did know on the basis of evidence introduced at trial, a dispositive issue on appeal is whether the trial court erred in awarding Mr. Rodriguez back pay unconditioned by his future performance on a competitive, written examination.
Resolution of this focal issue requires examination of the substantive and evidentiary rules governing retrospective compensatory relief. A substantive rule requiring recipients of back pay to have been able to satisfy all prior job qualifications except unlawful age standards is consistent with commonly understood meanings of make whole relief and but for causation. If an applicant would not have been hired because of a legitimate disqualification, then any lost wages are not properly attributable to unlawful age discrimination.
In civil litigation generally, the plaintiff must present a quantum of evidence sufficient to withstand a defense motion for a directed verdict.
In order to establish an employer's liability, Title VII plaintiffs, as an initial matter, need only present a prima facie case of employment discrimination. Plaintiffs satisfy their burden of production if they show that they are members of a protected class and that they were rejected for job vacancies for which they were qualified. Plaintiffs need not submit proof that a discriminatory motive underlay an employer's decisions. The burden of production then shifts to the defendant to adduce evidence of non-discriminatory motivation. See McDonnell Douglas Corp. v. Green, 411 U.S. 792, 800-03, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973); Ostapowicz v. Johnson Bronze Co., 541 F.2d 394, 399-400 (3d Cir. 1976); Baxter v. Savannah Sugar Refining Corp., 495 F.2d 437, 443-45 (5th Cir.), cert. denied, 419 U.S. 1033, 95 S.Ct. 515, 42 L.Ed.2d 308 (1974). Absent such rebuttal evidence, courts presume unlawful discriminatory purpose. Moreover, if an employer produces evidence of a non-discriminatory reason for an employment decision, he may bear the burden of persuasion on that ultimate issue.
Under the ADEA also plaintiffs are held to a production burden of presenting only a prima facie case of age discrimination. See, e. g., Hodgson v. First Federal Sav. & Loan Ass'n, 455 F.2d 818 (5th Cir. 1972). On presentation of a prima facie case, the burden of production shifts to the employer to justify differential treatment of older workers on a basis other than age.
The case at hand advances us beyond proven liability to the matter of evidentiary rules for the individualized relief phase of ADEA actions. Just as with the underlying liability determination, the twin objectives of monetary relief—deterring discrimination and making victims of discrimination whole—are furthered by judicial recognition of evidentiary presumptions and burdens of proof designed to resolve uncertainties in favor of the aggrieved employee or applicant. Thus, we hold, in view of this record which inter alia awards back pay only to an individual plaintiff, not to a class of numerous applicants, that an employee who has prevailed in proving that an employer committed a per se violation of the ADEA shoulders the initial burden of
Mr. Rodriguez presented evidence at trial of existing vacancies for the job of Security Officer I that were filled by other applicants hired subsequent to his rejection. Mr. Rodriguez was also portrayed to the district court as a man generally qualified to perform security guard tasks. He had occupied similar positions both before and after his rejected application to the City. The trial court found Mr. Rodriguez sound of body and mind. Findings of Fact # 9, district court opinion reprinted at 115a. On the trial record as a whole, we conclude that Mr. Rodriguez satisfied his burden of production and proved a prima facie case of entitlement to damages. Moreover, there is no evidence on the record that the City rebutted plaintiff's prima facie case with proof of either Mr. Rodriguez's disqualifying mental attributes or his inability to pass any City examination. The City, with its silence in the face of plaintiff's prima facie case, simply did not meet its burden of rebuttal on the issue of whether Mr. Rodriguez would have been hired as a Security Officer but for the unlawful age discrimination. Thus, the district court did not err in its allocation of evidentiary burdens, nor did it err in concluding that plaintiff had proven his entitlement to a back pay award.
The City might well have satisfied its burden of production and conclusively settled the ultimate issue of Mr. Rodriguez's qualifications had they only administered to him the written civil service exam prior to trial. Instead, the City failed to promptly administer the written exam precluding development of material evidence on this issue until after trial. The importance of requiring employers to adhere to their evidentiary burdens at trial is underscored by consideration of the consequences of delaying final determinations of Mr. Rodriguez's back pay award until the exam was taken.
During the period between the discriminatory employment decision and trial, Mr. Rodriguez faced considerable uncertainty as to whether he would eventually be adjudged entitled to back pay and/or future employment. Where a rejected job applicant, such as Mr. Rodriguez, was reasonably certain that an employer discriminated against him or her on the basis of age alone, that employee would have a reasonable expectation of subsequent vindication and relief. The applicant would be deterred from seeking interim employment or a more permanent position lest it interfere with his opportunity to gain the preferred job from which he was unlawfully rejected. Significantly,
We do not advocate that courts attempt to measure the emotional costs of the uncertainty faced by a rejected applicant such as Mr. Rodriguez. We have previously rejected claims that ADEA authorizes recompense for psychic distress attributable to unlawful age discrimination. Rogers v. Exxon Research & Engineering Co., 550 F.2d 834, 839-42 (3d Cir. 1977). However, compensatory relief as measured solely by lost wages should be awarded pursuant to rules and procedures which reflect and minimize the burdens of uncertainty. On the facts of this case, involving a damage award to an individual applicant, rather than to a class, requiring the defendant employer to come forward with evidence at trial of specific factors, such as low test scores, which would have disqualified an applicant irrespective of discrimination best effectuates the restorative principle of make whole relief.
Our recognition of a prima facie case for entitlement to back pay conforms to the Supreme Court's recent explications of evidentiary presumptions and burdens of proof governing individual claims for retroactive seniority relief in Title VII actions. In Franks v. Bowman Transportation Co., 424 U.S. 747, 96 S.Ct. 1251, 47 L.Ed.2d 444 (1976), the Court considered whether individual unnamed members of the class of black non-employee applicants for positions as over-the-road (OTR) truck drivers could be awarded retroactive seniority on proof that the employer engaged in a pattern of discriminatory hiring practices violative of Title VII.
Id. at 772, 96 S.Ct. at 1268 (citations omitted).
Finally, the Court emphasized that the employer, to defeat individual claims for relief, would bear the burden of proof on the lack of vacancies and an "individual's lack of qualification . . . under nondiscriminatory standards actually applied to individuals who were in fact hired." Id. at 773 n. 32, 96 S.Ct. at 1268 (emphasis in original).
In International Brotherhood of Teamsters v. United States, 431 U.S. 324, 357-62, 97 S.Ct. 1843, 52 L.Ed.2d 396 (1977), the Supreme Court reiterated that the evidentiary rules prescribed in Franks created a rebuttable presumption that individual members of a class subjected to a pattern of discriminatory hiring practices are entitled to relief. In Teamsters, the Court justified the presumption in favor of individual relief on the ground that the employer stood as a "proven wrongdoer" and controlled access to proof of matters such as an applicant's qualifications. See id. at 359 n. 45, 97 S.Ct. 1843. Thus, the thrust of the Supreme Court's Title VII cases is to shift the burden of production to defendants-employers on the issue of what would have happened to job applicants had there been no discriminatory employment practices. Our holding, applicable in ADEA actions, creates a similar rebuttable presumption by shifting to employers the burden of production of evidence of an individual's lack of qualifications in cases where victims of proven discrimination seek retroactive relief.
Having determined that Mr. Rodriguez is entitled to a back pay award, it is necessary to consider a further objection raised by the City to the manner in which the award was calculated. The City contends that the district court erred in not setting off against unpaid wages amounts Mr. Rodriguez earned from other employment. The district court's findings of fact and trial testimony indicate that Mr. Rodriguez
Reiterating the principle of make-whole relief, a victim of employment discrimination is entitled to be restored to the economic position he would have occupied but for the unlawful discrimination. The only provision in ADEA authorizing more favorable pecuniary relief stipulates liquidated damages be calculated on the basis of the underlying compensatory award in the event of a willful violation. By not setting off Mr. Rodriguez's earnings during the interim period, the district court's order affords him income from two jobs that he could not have simultaneously performed. Thus, the plaintiff was placed in a better economic position than he would have achieved had he not been discriminated against in the first place.
Plaintiff contends that Congress did not contemplate set-offs to ADEA back pay awards. He points to Title VII's back pay provision, which expressly requires that interim earnings be set off against back pay otherwise owing. 42 U.S.C. § 2000e-5(g) (1970). By contrast, the ADEA enforcement provisions do not explicitly mandate such a set-off. It is true that we have stated that the ADEA and Title VII are not to be read as providing wholly consistent enforcement provisions. Rogers v. Exxon Research & Engineering Co., 550 F.2d 834, 840 n. 10 (1977). However, the absence of express set-off language in the ADEA enforcement provisions does not compel the inference that Congress intended to preclude set-offs. The make-whole relief objective is common to both Title VII and ADEA and will be effectuated only if back pay awards are reduced to reflect alternate source earnings.
We hold that rejected job applicants who prevail under ADEA are entitled to back pay in the amounts they would have earned but for the discrimination, less wages actually earned from other employment that could not have been simultaneously performed with the jobs to which they aspired. Defendant-employers must assume the burdens of production and persuasion on the issue of set-offs. Thus, on remand, the district court must consider whether the City proved by a preponderance of the evidence that Mr. Rodriguez's part-time and irregular employment could not have been undertaken had the City hired him as a Security Officer I.
The City also takes exception to the district court's award of liquidated damages on the ground that if no compensatory relief is owing, as they contend, liquidated
Both parties appeal from the district court's order of October 5, 1976, awarding attorneys' fees to plaintiff's counsel, Community Legal Services, Inc. (CLS). The City contends that CLS, a non-profit, federally-funded, legal services organization is barred by federal law and its own charter from receiving court-awarded attorneys' fees. Plaintiff appeals the calculation of the amount of the award. Specifically, plaintiff contends that the district court's use of a $30.00 per hour rate of compensation based on fee rates in the Criminal Justice Act, 18 U.S.C. § 3006A(d)(1) (1974), constitutes reversible error.
Community Legal Services, Inc. was chartered under the provisions of Pennsylvania's Non-Profit Corporation Law. According to its charter, CLS may provide legal services to persons financially unable to secure counsel except in matters of a contingent nature or which may yield "a recovery sufficient to interest a private attorney in accepting such a case." Art. IX, Articles of Incorporation of Community Legal Services, Inc., June 23, 1966, reprinted in appellants' reply brief at p. 29. CLS receives funds from the federal Legal Services Corporation and, therefore, operates subject to the restriction of the Legal Services Corporation Act of 1974, which prohibits recipient legal services organizations from using federal funds in fee generating cases, 42 U.S.C. § 2996f(b)(1) (1974).
The ADEA enforcement provision, 29 U.S.C. § 626(b), incorporates that part of the Fair Labor Standards Act which provides: "The court . . . shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney's fee to be paid by the defendant . . . ." 29 U.S.C. § 216(b) (1970). Given this mandatory language without apparent exception, the district court had to determine whether CLS was implicitly barred by either the Legal Services Corporation Act or other federal law from receiving attorneys' fees awards. In its memorandum opinion the district court found no reason to spare the City an assessment of fees to reimburse CLS (126a). We agree with the district court's conclusion and hold that publicly funded legal services organizations, such as CLS, are not absolutely barred from receiving mandatory ADEA attorneys' fee awards by virtue of the legal limitations on their authority to handle fee generating or contingent fee cases.
The attorneys' fee provisions in the Fair Labor Standards Act have been construed to mandate awards to successful plaintiffs. Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 261 n. 34, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975) (dictum); Wright v. Carrigg, 275 F.2d 448, 449 (4th Cir. 1960); Whittington v. Roberts, 360 F.Supp. 335, 338 (N.D.Miss.1973). This court has previously stated that "[c]onsequently, attorneys' fees are to be awarded in age discrimination suits in which the employee prevails." Rogers v. Exxon Research & Engineering Co., 550 F.2d 834, 842 (1977). In spite of this unqualified legislative and judicial authority for an award of fees to all successful plaintiffs, the City urges this court to judicially except those
As a general matter, awards of attorneys' fees where otherwise authorized are not obviated by the fact that individual plaintiffs are not obligated to compensate their counsel. The presence of an attorney-client relationship suffices to entitle prevailing litigants to receive fee awards. Torres v. Sachs, 538 F.2d 10, 13 (2d Cir.1976); Brandenburger v. Thompson, 494 F.2d 885, 889 (9th Cir. 1974); Miller v. Amusement Enterprises, Inc., 426 F.2d 534, 538-39 (5th Cir. 1970). Of course, since the object of fee awards is not to provide a windfall to individual plaintiffs, fee awards must accrue to counsel. Hairston v. R & R Apartments, 510 F.2d 1090, 1093 (7th Cir.1975).
The statutory policies underlying the award of fees justify such shifting without regard to whether the individual plaintiff initially assumed the financial burdens of representation. The traditional, and generally applicable, "American Rule" denies successful litigants the possibility of recovering fees from their opponents. Beyond the applicability of several narrow judicially recognized exceptions to the American Rule, the Supreme Court insists that Congress must affirmatively authorize fee awards. Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). Congress, in fact, has often taken up the cudgel and authorized or mandated fee awards in suits brought under diverse statutes. See id. at 260 n. 33, 95 S.Ct. 1612. Typically, congressionally approved awards are designed to encourage private enforcement of individual rights and to deter socially harmful conduct. For example, Congress, in passing the Civil Rights Act of 1964, authorized fee awards for "private attorneys general" who might otherwise be deterred from bringing suit because of the burdensome costs of litigation. Newman v. Piggie Park Enterprises, Inc., 390 U.S. 400, 401-02, 88 S.Ct. 964, 19 L.Ed.2d 1263 (1968) (per curiam). More recently, Congress responded to the Supreme Court's decision in Alyeska Pipeline by closing "gaps" left in other civil rights laws and authorized the award of attorneys' fees in actions brought under several provisions, including 42 U.S.C. §§ 1981, 1982, 1983 and 1985. Civil Rights Attorney's Fees Awards Act of 1976, amending 42 U.S.C. § 1988 (1976). See Sen.Rep.No. 94-1011, 94th Cong., 2d Sess., U.S.Code Cong. & Admin.News 1976, p. 5908. The award of fees to legal aid offices and other groups furnishing pro bono publico representation promotes the enforcement of the underlying statutes as much as an award to privately retained counsel. Legal services organizations often must ration their limited financial and manpower resources. Allowing them to recover fees enhances their capabilities to assist in the enforcement of congressionally favored individual rights. See Hairston v. R & R Apartments, 510 F.2d 1090, 1092-93 (7th Cir. 1975); Palmer v. Columbia Gas of Ohio, Inc., 375 F.Supp. 634, 636 (N.D.Ohio 1974); Jones v. Seldon's Furniture Warehouse, Inc., 357 F.Supp. 886, 887-88 (E.D.Va.1973); Note, Awards of Attorney's Fees to Legal Aid Offices, 87 Harv.L.Rev. 411, 413-14 (1973). Moreover, assessing fees against defendants in all circumstances may deter wrongdoing in the first place. See Jones v. Seldon's Furniture Warehouse, Inc., supra.
The City concedes that the purpose in funding legal services organizations and in authorizing awards of fees are in part identical—removing financial barriers to access to the courts. The City contends, however, that the separate congressional initiatives are mutually exclusive solutions to the problem of enhancing access to the courts. There are no persuasive logical or policy reasons why awards of fees to legal services organizations in particular cases cannot complement the base funding of such groups. Nor have we been referred to any expressions of congressional intent to exclude legal aid offices from receipt of attorneys' fees awards. The City instead presses a construction of the Legal Services Corporation Act's prohibition of the use of federal funds for fee generating cases as covering
The Legal Services Corporation Act bars recipient organizations from using federal funds "to provide legal assistance with respect to any fee-generating case (except in accordance with guidelines promulgated by the Corporation) . . . ." 42 U.S.C. § 2996f(b)(1) (1974). The Legal Services Corporation has adopted implementing regulations which do not flatly prohibit legal services organizations from maintaining fee-generating cases in all situations. 45 C.F.R. §§ 1609 et seq. (1976). The regulations qualify the statutory bar by permitting legal services organizations to provide counsel in fee-generating cases as a matter of last resort if no other adequate private representation is available. Id. § 1609.3. The thrust of the enabling regulations is that legal services organizations should not compete with private practitioners but that if no private attorneys were willing to accept a particular fee-generating case, then legal aid offices may furnish counsel. With this policy rationale as a backdrop, the Corporations' guidelines expressly permit recipient organizations to accept court-awarded fees if there are certain assurances that private counsel is unavailable.
The district court found nothing on the record to suggest that CLS failed to follow its routine procedures to determine whether there might have been private counsel available to accept Mr. Rodriguez's suit (126a). Nor is there any suggestion on the record that CLS's internal procedures are deficient in identifying those cases where private attorneys might be available to accept a case on the contingency of a fee award. The City contends that CLS should bear the burden of introducing evidence that this particular case was indeed one in which private representation was unavailable and that, absent such affirmative evidence, a violation of federal regulations must be presumed. If a legal services organization's routine procedures comply with Legal Services Corporation regulations on fee-generating cases, 45 C.F.R. § 1609.4, as CLS's apparently do, we see no reason to establish a presumption that the organization circumvents its own procedures. Thus, as to this particular request for attorney's fees we perceive no basis for disturbing the district court's finding that "[p]rivate attorneys apparently lacked interest." (126a) Given such a finding that CLS's acceptance of Mr. Rodriguez's suit in no way competed with the private bar, CLS may be awarded attorney's fees in accord with the enabling regulation, 45 C.F.R. § 1609.5.
We have consistently deferred to the informed discretion of the district court in calculating an award of attorneys' fees. Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 540 F.2d 102, 115 (3d Cir. 1976) (Lindy II); Merola v. Atlantic Richfield Co., 493 F.2d 292, 295 (3d Cir. 1974) (Merola I); Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 487 F.2d 161, 166 (3d Cir. 1973) (Lindy I). The exercise of such discretion must, however, conform to proper standards and procedures. The failure of a trial court to adhere to generally applicable rules and criteria may constitute a "misuse" of discretion unentitled to the appellate court deference generally accorded factually oriented calculations by a trial judge. Lindy II, supra at 116; Merola I, supra at 295. On this appeal we are confronted with plaintiff's argument that the district court misused its discretion by relying on impermissible criteria in formulating its award of fees.
The leading case governing calculation of attorneys' fees awards in this circuit is Lindy I. There Chief Judge Seitz prescribed generally applicable standards to guide district courts in measuring reasonable attorneys' fees. The focal point of the Lindy I standards is the purpose of fee awards—compensation of attorneys for the reasonable value of services benefiting the plaintiffs. Lindy I at 167. The "lodestar" for an objective calculation of the reasonable value of attorneys' services involves determining the number of compensable hours and multiplying those hours by a reasonable hourly rate. Id. at 167-68. The resulting product constitutes an expected market value of attorneys' services. Merola I, supra at 298. The objective market value figure is then adjusted to reflect more subjective factors indicative of the value of the delivered performance such as the quality of work, the contingency of success and the benefit conferred. Merola v. Atlantic Richfield Co., 515 F.2d 165, 173 (3d Cir. 1975) (Merola II); Merola I, supra at 298; Lindy I, supra at 168-69.
The instant appeal concerns the criteria employed by the district court in fixing a reasonable hourly rate for legal services organization attorneys. In Lindy I we noted that "[t]he value of an attorney's time generally is reflected in his normal billing rate." Lindy I, supra at 167 (emphasis added). An obvious difficulty arises when the attorneys entitled to fees do not have a normal billing rate and, instead, are salaried employees of a publicly-funded legal services organization. Lacking a precise referent for deriving a reasonable hourly rate for CLS employees, the district court seized upon three factors—the attorneys' experience, their annual salaries, and compensation for lawyers appointed under the Criminal Justice Act, 18 U.S.C. § 3006A (1970). We are called upon to determine whether reliance on any of these factors in estimating a reasonable hourly rate may constitute a misuse of discretion in calculating an amount of a fees award.
The absolute levels of billing rates for attorneys in a private firm depend in large measure on the financial stakes clients have in particular matters. While partnership shares and associates' salaries may vary on the basis of relative experience and responsibility, the structure of a firm's billing rates is generally a function of the type of work performed and the affluence of its clients. Whether the practitioners be top flight antitrust or securities litigators or contingent fee tort lawyers, billing rates reflect their clients' monetary stakes,
Legal services attorneys and other public interest lawyers do not have normal billing rates because they have no "market" for their skills. These attorneys typically do not bill their clients at all. As a result, the reasonable value of these attorneys' time cannot be simply measured by observing their market rates. Moreover, legal services attorneys' work cannot be valued by comparing the pecuniary benefits conferred on their clients to the larger financial stakes in matters handled by the private bar.
As we have observed above, CLS cannot generally represent clients, however impecunious, if substantial monetary benefits might be won. Thus, legal services organizations may win only modest cash awards or nonmonetized equitable relief for their clients. Despite the often insignificant potential monetary benefits in individual cases, legal services organizations render valuable services to their clients and their communities. Legal aid organizations often are the sole representatives of the economically, socially and culturally deprived in their disputes with landlords, government welfare agencies, employers and creditors. The cumulative value to society, and hence the derivative value of individual attorney's time, from legal services representation of the needy is substantial, albeit not easily monetized. The only fair conclusion that can be reached is that, with the present structure for the delivery of legal services, relative compensation of private firm attorneys and legal aid lawyers does not entirely reflect differences in the reasonable value of their respective professional time. Courts, in awarding attorneys' fees, are not empowered to rectify this general disparity. However, they may properly take account of these market disparities in fixing reasonable hourly rates for particular awards. We believe that excessive consideration to either legal aid salaries or to Criminal Justice Act (CJA) fee scales deflects calculation of a reasonable hourly rate of compensation for legal services attorneys.
Legal services salaries are generally considerably lower than salaries paid associates in private firms who have comparable experience and credentials. This salary differential need bear no relation to the quality of representation, in general or in a particular case, or to the benefits received by clients. Compensation disparities usually reflect the relative poverty of legal services funding. While a CLS attorney's salary need not be ignored by the trial court, neither should it serve as the polestar for fixing a reasonable hourly rate of compensation. Relative salaries within the legal services unit reflect relative expertise and responsibility and, therefore, provide an objective guide to setting relative hourly rates.
The Criminal Justice Act fee rates apply by force of statute only to court-appointed counsel for indigent criminal defendants. Congress has not explicitly incorporated these fee rates in the ADEA. Instead, Congress incorporated the more flexible standard from the Fair Labor Standards Act, which provides for a judicially calculated award of "a reasonable attorney's fee." 29 U.S.C. § 216(b) (1974). The district court judge in this case deemed the non-incorporated CJA fee rates a suitable guide for determining a reasonable hourly rate. We believe that CJA fees rates are a product of several factors unique to the criminal defense context which militate against their application in employment discrimination suits.
The Federal Government is obligated, as a matter of constitutional law, to furnish counsel for indigent criminal defendants. Gideon v. Wainwright, 372 U.S. 335, 83 S.Ct. 792, 9 L.Ed.2d 799 (1963). No such obligation extends to civil litigants. Thus, compensation must be accorded court-appointed counsel under the CJA regardless of the outcome of the proceedings. In ADEA suits, only a successful plaintiff may recover fees. In the criminal context, the Federal Government must assume the entire burden of paying court-awarded fees, even where the prosecution prevails in obtaining convictions. In employment discrimination suits, defendants who pay fee awards must have been found liable for unlawful practices. Significantly, the ADEA applies to private and public employers.
In civil rights litigation, closely analogous to ADEA, Congress has directed judges, in calculating attorneys' fee awards, to consider factors other than adoption of CJA fee schedules. The Civil Rights Attorney's Fees Awards Act of 1976 (Fees Act), amending 42 U.S.C. § 1988, applicable to suits brought under 42 U.S.C. § 1983 and companion civil rights provisions, authorizes discretionary awards to prevailing parties of "reasonable" attorneys' fees. The legislative history of the Fees Act makes clear that Congress intended the referent for reasonable fees to be awards in comparable litigation. The Senate Report accompanying the bill enacted into law expresses the congressional directive as follows:
The First Circuit Court of Appeals has recently considered the appropriateness of reliance on CJA fee rates in calculating awards granted under the newly enacted Fees Act. After considering the legislative history cited above, the court concluded that, "[m]echanical application of the Criminal Justice Act fees scale obviously does not meet these criteria . . . ." King v. Greenblatt, 560 F.2d 1024 at 1026 (1st Cir. 1977), overruling Souza v. Travisono, 512 F.2d 1137 (1st Cir.), vacated, 423 U.S. 809, 96 S.Ct. 19, 46 L.Ed.2d 29 (1975). See also Torres v. Sachs, 538 F.2d 10, 12-13 & n. 2 (2d Cir. 1976) (fees in actions under the Voting Rights Act of 1964 are to be measured by same standards as in other complex litigation); Palmer v. Rogers, 10 E.P.D. ¶ 10,499 at p. 6131 (D.D.C.1975) (rejecting application of CJA fee scales in the calculation of awards under Title VII). We agree with the First Circuit and rule that in the analogous context of ADEA suits, district court judges should look to cases of similar complexity, in particular other employment discrimination and related civil rights suits, to determine reasonable hourly rates for counsel who do not have normal private practice billing rates.
We do not hold that awards figured on the basis of a $30.00 per hour rate of compensation are unreasonable or that they are out of line with rates used in calculating awards in comparably complex litigation. Nor do we pass judgment on the reasonableness of the requested $50.00 per hour rate for the senior CLS attorney. We hold only that the district court judge misused his discretion in fixing hourly rates of compensation on the basis of CLS's absolute salary levels and the CJA fee scale. On remand, the district court should undertake appropriate fact finding to apply the criteria discussed in this opinion for determining a reasonable hourly rate of compensation for CLS attorneys.
For the foregoing reasons, paragraph 5 of the district court's order of September 2, 1976, and the district court's order of October 5, 1976, will be vacated and the case will be remanded for further action in accordance with this opinion, including determination of these issues: the recalculation of plaintiff's monetary award to account for necessary set-offs, and the recalculation of the attorneys' fee award to reflect the reasonable value of the CLS attorney's time devoted to this litigation.
Plaintiff relies on a recent Fifth Circuit decision, Marshall v. Goodyear Tire & Rubber Co., 554 F.2d 730 (5th Cir. 1977), that affirmed a district court ADEA award that did not deduct from back wages unemployment compensation benefits received during the interim period. The appeals court reasoned that unemployment compensation was a collateral benefit akin to collateral losses not compensated for in measuring back pay owing to a plaintiff. To not set off such collateral benefits would not, the Marshall court concluded, make the employee more than whole. Without passing judgment on the wisdom of the Marshall decision, we note that alternate employment income is surely a direct benefit compared to unemployment compensation. Thus, on the Fifth Circuit's own logic, an employee is made more than whole if he obtains current back pay for two jobs which he could not have simultaneously performed.