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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We are the 81%

Strange column in the Isthmus this week by conservative columnist Larry Kaufmann, who says people are wrong to think about inequality as a problem when the great purring engine of American productivity is lifting all boats.  (Not a mixed metaphor — in the world of this column the engine is so awesomely strong that it actually lifts up millions of boats on some kind of mechanized platform.)  Oh, and also, Occupy Madison is a bunch of smelly hippies who should shut up already.  Kaufmann:

So is the American dream still alive?  In terms of absolute mobility, the answer is yes.  Between 1968 and 2006, 81% of children had a higher inflation-adjusted family income than their parents did…”

Now, let’s be fair — 81% is pretty good!  And that figure doesn’t sound so implausible:  after all, America is a richer country than it was in 1968, so why wouldn’t most individual Americans be richer?

Still, I wanted to check up.  So I went to the source; Kaufmann ascribes it only to the Pew Economic Mobility Project, which publishes a lot of papers, but after a few misses I found the 81% figure in “Family Structure and the Economic Mobility of Children,” whose lead author is UW-Madison economist Thomas DeLiere.

And the 81% number is right there on page 11.  But there’s a footnote, reminding us that these numbers are “adjusted for family size.”  That is: for the purposes of this computation,  a family with four children counts as lower-income than a family with two children and the same household income; the bigger family has to divvy up those dollars between more people.  Without this adjustment, the proportion of children whose household income as adults exceeds the income of their childhood household drops to 66%.

That’s still a large majority!  But there’s more — you’ve still got to ask why household incomes went up so much between 1968 and 2006.  Another paper from the Economics Mobility Project reveals of a big chunk of the reason; the proportion of women in the workforce went from 40% to 60% over that period.  Median individual income for men actually dropped over this period.  (And no, the figures in DeLiere’s paper aren’t adjusted for this; I asked him.)

So yes:  almost all present adults have more money than their parents did.  And how did they accomplish this?  By having one or two kids instead of three or four, and by sending both parents to work outside the home.  Now it can’t be denied that a society in which most familes have two income-earning parents, and the business-hours care of young children is outsourced to daycare and preschool, is more productive from the economic point of view.   And I, who grew up with a single sibling and two working parents and went to plenty of preschool, find it downright wholesome.  But it is not the kind of development political conservatives typically celebrate.

Further reading:  My guess is that Kaufmann learned about the EMP study from research manager Scott Winship’s article on the research in National Review, since he quotes Winship:  “The finding of pervasive upward absolute mobility flies in the face of liberal accounts of a stagnant middle class.”  Winship’s piece is longer, better written, and more careful than Kaufmann’s;  he doesn’t dodge the fact that the flow of women into the workforce drives a great deal of household income growth, but he doesn’t place a lot of importance on this.  Winship is a Ph.D. economist who does this stuff for a living, so his view must be given a lot of weight.  But I can’t make out what the argument is from the single paragraph in NR.  Is he saying that men’s earnings are decreasing because they’re voluntarily taking on fewer hours of work?

Winship also emphasizes the finding that children in Canada and Western Europe have an easier time moving out of poverty than Americans do.  This part is absent from Kaufmann’s piece.  Maybe he didn’t have the space.  Maybe it’s because a comparison with higher-tax economies would make some trouble for his confident conclusion: “the punitive redistribution policies favored by Occupy Madison will divert capital away from productive initiatives that enhance growth and earnings opportunities for all, while doing nothing to build the stable families and “bottom-up” capabilities that are particularly important for helping the poorest Americans escape poverty.”

When the Isthmus is running a more doctrinaire GOP line on poverty than the National Review, the alternative press has arrived at a very strange place indeed.

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