Not to exceed 25%

Supreme Court will hear a math case!

At issue in Murphy v. Smith:  the amount of a judgment that a court can apply to covering attorney’s fees.  Here’s the relevant statute:

Whenever a monetary judgment is awarded in an action described in paragraph (1), a portion of the judgment (not to exceed 25 percent) shall be applied to satisfy the amount of attorney’s fees awarded against the defendant.

To be clear: there are two amounts of money here.  The first is the amount of attorney’s fees awarded against the defendant; the second is the portion of the judgment which the court applies towards that first amount.  This case concerns the discretion of the court to decide on the second number.

In Murphy’s case, the court decided to apply just 10% of the judgment to attorney’s fees.  Other circuit courts have licensed this practice, interpreting the law to allow the court discretion to apply any portion between 0 and 25% of the judgement to attorney’s fees.  The 7th circuit disagreed, saying that, given that the amount of attorney’s fees awarded exceeded 25% of the judgment, the court was obligated to apply the full 25% maximum.

The cert petition to the Supreme Court hammers this view, which it calls “non-literal”:

The Seventh Circuit is simply wrong in interpreting this language to mean “exactly 25 percent.” “Statutory interpretation, as we always say, begins with the text.” Ross v. Blake, 136 S. Ct. 1850, 1856 (2016). Here, the text is so clear that interpretation should end with the text as well. “Not to exceed” does not mean “exactly.”

This seems pretty clearly correct:  “not to exceed 25%” means what it means, not “exactly 25%.”  So the 7th circuit just blew it, right?

Nope!  The 7th circuit is right, the other circuits and the cert are wrong, and the Supreme Court should affirm.  At least that’s what I say.  Here’s why.

I can imagine at least three interpretations of the statuye.

  1.  The court has to apply exactly 25% of the judgment to attorney’s fees.
  2.  The court has to apply the smaller of the following numbers:  the total amount awarded in attorney’s fees, or 25% of the judgment.
  3.  The court has full discretion to apply any nonnegative amount of the judgment to attorney’s fees.

Cert holds that 3 is correct, that the 7th circuit applied 1, and that 1 is absurdly wrong.  In fact, the 7th circuit applied 2, which is correct, and 1 and 3 are both wrong.

1 is wrong:  1 is wrong for two reasons.  One is pointed out by the cert petition:  “Not to exceed 25%” doesn’t mean “Exactly 25%.”  Another reason is that “Exactly 25%” might be more than the amount awarded in attorney’s fees, in which case it would be ridiculous to apply more money than was actually owed.

7th circuit applied 2, not 1:  The opinion reads:

In Johnson v. Daley, 339 F.3d 582, 585 (7th Cir. 2003) (en banc), we explained that § 1997e(d)(2) required that “attorneys’ compensation come[] first from the damages.” “[O]nly  if 25% of the award is inadequate to compensate counsel fully” does the defendant contribute more to the fees. Id. We continue to believe that is the most natural reading of the statutory text. We do not think the statute contemplated a discretionary decision by the district court. The statute neither uses discretionary language nor provides any guidance for such discretion.

The attorney’s compensation comes first out of the damages, but if that compensation is less than 25% of the damages, then less than 25% of the damages will be applied.  This is interpretation 2.  In the case at hand, 25% of the damages was $76,933.46 , while the attorney’s fees awarded were $108,446.54.   So, in this case, the results of applying 1 and 2 are the same; but the court’s interpretation is clearly 2, not the absurd 1.

3 is wrong:  Interpretation 3 is on first glance appealing.  Why shouldn’t “a portion of the judgment (not to exceed 25%)” mean any portion satisfying that inequality?  The reason comes later in the statute; that portion is required to “satisfy the amount of attorney’s fees awarded against the defendant.”  To “satisfy” a claim is to pay it in full, not in part.  Circuits that have adopted interpretation 3, as the 8th did in Boesing v. Spiess, are adopting a reading at least as non-literal as the one cert accuses the 7th of.

Of course, in cases like Murphy v. Smith, the two clauses are in conflict:  25% of the judgment is insufficient to satisfy the amount awarded.  In this case, one requirement must bend.  Under interpretation 2, when the two clauses are in conflict, “satisfy” is the one to give way.  The 7th circuit recognizes this, correctly describing the 25% awarded as ” toward satisfying the attorney fee the court awarded,” not “satisfying” it.

Under interpretation 3, on the other hand, the requirement to “satisfy” has no force even when it is not in conflict with the first clause.  In other words, they interpret the law as if the word “satisfy” were absent, and the clause read “shall be applied to the amount of attorney’s fees.”

Suppose the attorney’s fees awarded in Murphy had been $60,000.  Under interpretation 3, the court would be free to ignore the requirement to satisfy entirely, and apply only 10% of the judgment to the attorneys, despite the fact that satisfaction was achievable within the statutory 25% limit.

Even worse:  imagine that the statute didn’t have the parenthetical, and said just

Whenever a monetary judgment is awarded in an action described in paragraph (1), a portion of the judgment shall be applied to satisfy the amount of attorney’s fees awarded against the defendant.

It would be crystal clear that the court was required to apply $60,000, the amount necessary to satisfy the award.  On interpretation 3, the further constraint imposed by the statute gives the court more discretion rather than less in a case like this one!  This can’t be right.

You could imagine switching to an interpretation 3′, in which the court is required to satisfy the amount awarded if it can do so without breaking the 25% limit, but is otherwise totally unconstrained.  Under this theory, an increase in award from $60,000 to $100,000 lessens the amount the court is required to contribute — indeed, lessens it to essentially zero.  This also can’t be right.

 

2 is right:  When two clauses of a statute can’t simultaneously be satisfied, the court’s job is to find some balance which satisfies each requirement to the greatest extent possible in a range of possible cases.  Interpretation 2 seems the most reasonable choice.  The Supreme Court should recognize that, contra the cert petition, this is the interpretation actually adopted by the 7th Circuit, and should go along with it.

 

 

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6 thoughts on “Not to exceed 25%

  1. JSE says:

    Commenting on myself: as you know, I’m not a lawyer. It’s possible that “satisfy” is customarily used non-literally in the relevant case law to mean “contribute to.” If that’s the case, then that’s what the cert petition should say, rather than deriding the 7th circuit for what petitioners characterize as a rejection of the plain-language meaning of the statue.

    It’s also possible that, even though interpretation 3 is wrong, the fact that it’s been used a lot by lots of other circuits in lots of other cases means we have to just go along with it in order to avoid disruption. I get that.

  2. Alice says:

    Jordan, I haven’t read your post carefully, but I think I’m reading the case differently from you. My reading of the relevant portions of the texts you link to is that the Seventh Circuit decided that the plaintiff should pay $76,933.46 towards the attorney’s fees, and the defendants should pay the remaining $31,513.08. The cert petition, in agreement with the District Court, wants the plaintiff to pay only $30,773.48 of the attorney’s fees, with the defendants paying the remaining $77,673.06. I’m surprised that you read the statutes as requiring that Murphy pay more, and therefore keep less. Do you really think that’s fair to Murphy, and that such an outcome was intended by the statutes?

  3. Jordan — you are misreading the petition (and the law). Petitioner (Murphy, the prisoner who won the underlying civil rights lawsuit) is calling for an interpretation you haven’t enumerated at all. First, the statute (42 USC §1997e (d)(2) reads:

    Whenever a monetary judgment is awarded in an action described in paragraph (1), a portion of the judgment (not to exceed 25 percent) shall be applied to satisfy the amount of attorney’s fees awarded against the defendant. If the award of attorney’s fees is not greater than 150 percent of the judgment, the excess shall be paid by the defendant.

    Petitioner is therefore calling for the following interpretation:
    4. A portion of the judgement shall be given to the prevailing plaintiff’s attorneys. That portion must be non-negative and may not exceed 25% of the judgement (and the total fees). If that portion is not sufficient to cover the fees then the (losing) defendant will pay the difference (but the total payment of fees may not add up to more than 150% of the judgement).

    In other words, both petitioner and respondent agree that the “portion” of the judgement that will be applied toward the attorneys fees (and costs) need not “satisfy in full” the total fees and costs. The disagreement is whether “applied to satisfy” means “applied toward satisfying” (i.e. any positive progress toward satisfying is permissible) to “as much as possible applied toward satisfying” (i.e. the court must choose the largest amount [up to 25%] which can be applied).

  4. It’s also worth noting that the usual fee-shifting rule for civil rights lawsuits (42 USC § 1988 (b)) simply says the court has discretion to require a (losing) defendant to pay any portion of the prevailing plaintiff’s fees:

    In any action or proceeding to enforce a provision of sections 1981, 1981a, 1982, 1983, 1985, and 1986 of this title, title IX of Public Law 92–318 [20 U.S.C. 1681 et seq.], the Religious Freedom Restoration Act of 1993 [42 U.S.C. 2000bb et seq.], the Religious Land Use and Institutionalized Persons Act of 2000 [42 U.S.C. 2000cc et seq.], title VI of the Civil Rights Act of 1964 [42 U.S.C. 2000d et seq.], or section 13981 of this title, the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney’s fee as part of the costs, except that in any action brought against a judicial officer for an act or omission taken in such officer’s judicial capacity such officer shall not be held liable for any costs, including attorney’s fees, unless such action was clearly in excess of such officer’s jurisdiction.

    The provision at stake in the current litigation modifies this for prisoners’ lawsuits: their fees are capped at 150% of the judgement, and the court may assign up to 25% of the judgement toward the fees. Do you think Congress really intended to put them at the worst possible position (fees are paid from the judgement first, only then from defendant) relative to non-prisoners?

  5. JSE says:

    Lior, these points are very good! I think what you’re saying is that “to satisfy” should be read as “toward satisfying” and there are two justifications for this reading. First: because the question of whether the amount awarded is satisfied in full is unaffected by allowing the court the discretion to choose a number between 0 and 25, so “to satisfy” should not be read as constraining that discretion. In particular, your read would be that, in the version of the statute without the parenthetical, the court still WOULD have the discretion to apply only a negligible portion of the judgment, and the word “satisfy” is simply doing no work in the statute. (Or rather: the only work it’s doing is the very modest one of capping the applied portion by the amount awarded; that the work is nonzero is important because it answers the objection “why is the word satisfy even in there?”) I think that’s a legit reading!

    I don’t see how your 4 is different from my 3 though! (Except concerning the requirement that portion < amount awarded, which I should have included.) I would say you are making a good argument for 3=4.

    What Congress intended is a good question! I don't have any feeling for it.

    Re 42 USC § 1988 (b): the 7th Circuit decision is certainly taking note of the discretionary language in that statute which is absent from 42 USC §1997e (d)(2). Their read is "they changed may to shall and took out "at its discretion" and added “satisfy” for a reason," your read is "the discretion should be understood to remain in force unless it's crystal clear that Congress intended a carve-out," which is not unreasonable. As should be clear, I don't know how this kind of thing is usually interpreted.

  6. JSE says:

    Basically I think the cert petition should have said what you said instead of what it said!

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