Takeaway
In short, Blum holds that § 1988 fees for nonprofit and private civil-rights counsel alike use prevailing market rates, while treating the lodestar as presumptively reasonable and allowing enhancements only on a specific, exceptional evidentiary showing.
A New York Medicaid recipient, represented by the nonprofit Legal Aid Society of New York, brought a § 1983 class action challenging New York's practice of automatically ending Medicaid benefits when a recipient lost Supplemental Security Income eligibility. The District Court certified a statewide class and held that the State had to make an independent Medicaid-eligibility determination, provide adequate notice, and offer a hearing before termination. The Second Circuit affirmed.
After prevailing, the class sought attorney's fees under 42 U.S.C. § 1988. Legal Aid lawyers documented 809.75 hours and requested hourly rates of $95 to $105, producing a lodestar of about $79,312. They also requested a 50% upward adjustment based on the case's complexity, novelty, risk, quality of representation, and the substantial benefit secured for the class. The District Court awarded the full $118,968, and the Second Circuit affirmed. The Supreme Court granted review.
Issue #1
Whether attorney's fees awarded under § 1988 to a nonprofit legal-services organization must be based on the organization's actual costs rather than prevailing market rates.
Holding
No. Reasonable § 1988 fees are calculated using prevailing market rates in the relevant community, whether the prevailing party was represented by private counsel or nonprofit counsel.
Reasoning
Section 1988 authorizes a court to award a prevailing civil-rights litigant a “reasonable attorney's fee.” The Court read that phrase in light of Congress's instruction that fees under § 1988 follow the standards used in comparably complex federal litigation, including the cases Congress specifically identified in the statute's legislative history.
Those cited cases used prevailing market rates rather than a cost-of-service method. The legislative history therefore directly contradicted the State's claim that market-based fees necessarily create the improper attorney windfalls Congress sought to prevent.
Congress also did not intend a different rule for nonprofit legal-aid organizations. Two of the cases Congress approvingly cited expressly rejected reducing a fee merely because counsel worked for a nonprofit or public-interest organization. A market-rate rule thus applies without regard to counsel's profit or nonprofit status.
The fee applicant bears the burden of producing satisfactory evidence, beyond counsel's own affidavits, that the requested rate matches rates prevailing in the community for lawyers with reasonably comparable skill, experience, and reputation. Once established, that rate is ordinarily reasonable under § 1988. Arguments favoring a cost-based approach were policy arguments for Congress, not a basis for rewriting the statute.
Issue #2
Whether a district court may ever increase a § 1988 fee above the product of reasonable hours and reasonable market rates.
Holding
Yes, but the reasonable-hours-times-reasonable-rate figure is presumptively reasonable, and an enhancement is appropriate only when the fee applicant proves that it is needed to produce a reasonable fee.
Reasoning
Under Hensley v. Eckerhart, the starting point for a fee award is the lodestar: reasonable hours multiplied by a reasonable hourly rate. That calculation normally produces the fully compensatory fee that § 1988 requires.
The Court rejected the State's categorical argument that upward adjustments are never permitted. In an exceptional-success case, the basic calculation might be unreasonably low, so § 1988's command to award a reasonable fee can permit an enhancement.
But the lodestar carries a strong presumption of reasonableness once the applicant has shown that both the hours and rates are reasonable. The party seeking an upward adjustment has the burden to offer evidence showing why the presumptively reasonable fee does not adequately compensate counsel.
Issue #3
Whether the 50% upward adjustment awarded here was justified by the case's complexity, novelty, quality of representation, benefits obtained, and asserted risk.
Holding
No. The record did not support the enhancement, and the stated reasons largely duplicated factors already reflected in the hours and market rates.
Reasoning
The novelty and complexity of a case ordinarily are reflected in the number of reasonably necessary hours. If an attorney's special skill permits work to be completed in fewer hours, that skill ordinarily is reflected in the reasonable hourly rate. Using those features again to enhance the lodestar would double count them.
Likewise, the quality of representation generally is built into the market rate. A quality-based enhancement is available only in the rare case where the applicant presents specific evidence that the service exceeded the high quality reasonably expected at the awarded rate and produced exceptional success. The respondent offered no such evidence.
The District Court's reliance on the large class benefit did not justify an enhancement. Results obtained are important especially when a prevailing plaintiff succeeded on only some claims, but they are usually subsumed in the lodestar calculation. The number of persons benefited is not independently significant under § 1988 in the way it may be under a common-fund doctrine.
The record also contained no developed claim or evidence that the risk of nonpayment required an adjustment. The Court therefore had no occasion to decide whether litigation risk can ever justify a § 1988 enhancement.
The supported hourly rates and 809.75 hours yielded $79,312, which the Court held fully compensatory. It affirmed the award to that extent but reversed the additional $39,656 enhancement.