21:0918(107)AR - IRS, Baltimore District Office and NTEU and NTEU Chapter 62 -- 1986 FLRAdec AR



[ v21 p918 ]
21:0918(107)AR
The decision of the Authority follows:


 21 FLRA No. 107
 
 INTERNAL REVENUE SERVICE, 
 BALTIMORE DISTRICT OFFICE
 Activity
 
 and
 
 NATIONAL TREASURY EMPLOYEES 
 UNION AND NTEU CHAPTER 62
 Union
 
                                            Case No. 0-AR-822
 
                                 DECISION
 
                         I.  STATEMENT OF THE CASE
 
    This matter is before the Authority on exceptions to the supplemental
 award of attorney fees by Arbitrator Clair V. Duff filed by the Activity
 under section 7122(a) of the Federal Service Labor-Management Relations
 Statute and part 2425 of the Authority's Rules and Regulations.
 
                  II.  BACKGROUND AND ARBITRATOR's AWARD
 
    The underlying grievance in this case concerned the 10-day suspension
 of the grievant for alleged failure to process tax remittances and tax
 returns in a timely manner.  The Activity's charges or reasons for the
 action were based on a number of specifications of unprocessed checks,
 tax returns and other documents found in or around the grievant's desk
 and in a file cabinet in the collection division office area.  The
 Arbitrator separated the evidence presented into two parts:  the items
 found in the file cabinet and the items found in the grievant's desk and
 adjacent work area.  As to the specifications concerning the items
 discovered in the file cabinet, the Arbitrator found that no culpable
 conduct on the part of the grievant was established, but rather, that at
 most the evidence indicated inefficiency on the part of management.  The
 Arbitrator concluded that the evidence presented as to those items did
 not constitute substantial evidence of an infraction, as required by a
 provision in the parties' collective bargaining agreement establishing
 the burden of proof for disciplinary actions.  As to the items found in
 the grievant's desk and adjacent work area, the Arbitrator found that
 there was no substantial evidence proving that the grievant was in any
 way at fault or connected with the documents.  The Arbitrator further
 found that the location of the documents in the grievant's work area was
 sufficient to create suspicion, but that upon careful examination of the
 documents and consideration of the other facts and circumstances
 involved, the evidence was more consistent with the grievant's innocence
 than with her guilt.  The Arbitrator concluded that the Activity's proof
 concerning the items in and around the grievant's desk was inadequate to
 meet the required standard of substantial evidence.
 
    Accordingly, as his award, the Arbitrator set aside the suspension,
 directed the Activity to expunge from the grievant's personnel file all
 references to the charges against her, and to reimburse the grievant for
 all wages, leave and other benefits lost as a result of the suspension.
 At the request of the Union, the Arbitrator also left the record in the
 proceeding open to permit the parties to file briefs on the issue of
 whether reasonable attorney fees should be granted pursuant to the Back
 Pay Act, 5 U.S.C. Section 5596.  /1/ The Union subsequently filed an
 application for an award of fees in the amount of $6090 for the legal
 services provided the grievant by two of its staff attorneys.  The
 Union's application and supporting brief claimed that it was entitled to
 compensation for the services of one of the attorneys for 87 hours at
 $75 per hour and for the services of the second attorney for 5 hours at
 $85 per hour based upon the market value of similar legal services in
 the locality.
 
    In his supplemental opinion and award, the Arbitrator identified the
 issue as whether the Union, as counsel for the grievant, was entitled to
 an award of reasonable attorney fees pursuant to 5 U.S.C. Section 5596,
 5 U.S.C. Section 7701(g), /2/ and the relevant provision of the parties'
 collective bargaining agreement.  The Arbitrator found that the first
 two requirements of 5 U.S.C. Section 7701(g)(1), i.e., that the fees
 claimed be incurred by the employee and that the employee must be
 prevailing party, were satisfied and not in dispute.  The Arbitrator
 further found that the focal point of the case was whether the payment
 of fees by the Activity was warranted in the interest of justice.  As to
 this requirement, the Arbitrator found that two of the examples set
 forth in the decision of the Merit Systems Protection Board (MSPB) in
 Allen v. U.S. Postal Service, 2 MSPB 582 (1980), to illustrate "interest
 of justice" were applicable:
 
          - Where the agency's action was "clearly without merit"
       (Section 7701(g)(1)), or was "wholly unfounded," or the employee
       is "substantially innocent" of the charges brought by the agency;
       and
 
          - Where the agency "knew or should have known that it would not
       prevail on the merits" when it brought the proceeding.
 
    Applying those standards to the Activity's charges against the
 grievant, the Arbitrator found with regard to the allegations concerning
 the items found in the office file cabinet that based on the various
 facts and circumstances involved the Activity knew or should have known
 that it would not prevail on the merits.  The Arbitrator therefore
 concluded that attorney fees were warranted in the interest of justice
 for the legal services related to those allegations.  In that regard,
 the Arbitrator essentially found that approximately half of the time
 claimed by the attorneys was devoted to this aspect of the case.  As to
 the Activity's allegations concerning the items found in and around the
 grievant's desk, however, the Arbitrator found that while the evidence
 was insufficient to sustain the charges against the grievant, the
 charges were not wholly unfounded and this part of the case was not so
 clear that the Activity knew or should have known that it would not
 prevail on the merits.  The Arbitrator therefore concluded that counsel
 fees were not warranted for the legal services related to those
 allegations.  For the legal services for which fees were found to be
 warranted, the Arbitrator ruled that the compensation claimed by the
 Union was based on a reasonable allocation of time and an amount per
 hour that was reasonable but below the prevailing rate of legal
 compensation in the locality.  As his award the Arbitrator provided:
 
          The Union's Application for Award of Attorney's Fees is granted
       to the extent that a total of $3,000 is warranted and the Agency
       is directed to reimburse the Union in said amount.
 
                           III.  FIRST EXCEPTION
 
                              A.  Contentions
 
    In its first exception, the Activity contends that the Arbitrator's
 award of fees is contrary to law.  Specifically, the Activity contends
 that under MSPB's decision in the Allen case and 5 U.S.C. Section
 7701(g), a determination as to whether attorney fees are warranted in a
 case such as this requires that an agency's reasons for initiating a
 disciplinary action must be viewed as a totality and not separately.
 The Activity similarly argues that an arbitrator may only find either
 that there was a reasonable basis for the action or find that there was
 not such a basis, and that an issue-by-issue analysis and determination
 is not permitted.  Thus, the Activity concludes, an award of attorney
 fees in a case such as this would be warranted only if an agency's
 reasons for the action were determined to be "wholly unfounded."
 
                       B.  Analysis and Conclusions
 
    The Authority finds that the Activity has failed to establish that
 the Arbitrator's award of attorney fees is contrary to law as alleged in
 this exception.  Neither the decision of the MSPB in Allen nor 5 U.S.C.
 Section 7701(g) precludes an arbitrator from granting part of a request
 for attorney fees based on a determination that only that part was
 warranted under applicable legal requirements.  In this regard, the U.S.
 Court of Appeals for the Federal Circuit has clearly indicated in two
 decisions that an award of less than the full amount of fees claimed can
 be appropriate.  In Thomson v. Merit Systems Protection Board, 772 F.2d
 879, 882 (Fed. Cir. 1985), the court held in remanding the case to MSPB
 for correction of certain errors that "the Board should have the
 opportunity initially to determine whether full fees, no fees, or
 partial fees should be allowed." In Van Fossen v. Merit Systems
 Protection Board, No. 86-536, slip op. at 7-8 (Fed. cir. April 10,
 1986), the court held that because the charges against the employee that
 were sustained were technical and very minor and because the original
 drastic penalty of removal was significantly mitigated to a 30-day
 suspension, not only did the employee prevail in the proceeding but he
 had also shown himself to be substantially innocent of the charges so as
 to be entitled to attorney fees.  In remanding the case to the MSPB for
 determination of an appropriate award, the court directed that "(t)he
 Board will have to decide whether to allow full attorney fees or to make
 some deduction for the fact that these minor and technical charges were
 sustained."
 
    Based upon the decisions of the Federal Circuit, the Authority
 concludes, contrary to the Activity, that an arbitrator properly can
 award partial attorney fees based upon the Arbitrator's disposition of
 different aspects of a case, if the award of fees otherwise meets the
 requirements of 5 U.S.C. Section 5596 and 5 U.S.C. Section 7701(g)(1).
 
    In this regard, the Authority recently summarized those requirements
 in Naval Air Development Center, Department of the Navy and American
 Federation of Government Employees, Local 1928, AFL-CIO, 21 FLRA NO. 25
 (1986).  In order for an award of attorney fees to be authorized, the
 award of fees first must be in conjunction with an award of backpay to
 the grievant on the correction of an unjustified or unwarranted
 personnel action;  it must be reasonable and related to the personnel
 action;  and it must be in accordance with the standards established
 under 5 U.S.C. Section 7701(g).  Section 7701(g)(1), which applies to
 all cases except those of discrimination, requires that the fees must be
 reasonable and must have been incurred by the employee;  that the
 employee must be the prevailing party in the proceeding;  and that
 payment of the fees by the agency involved must be warranted in the
 interest of justice.  Finally, there must be "fully articulated,
 reasoned decision" setting forth the specific findings supporting the
 determination on each pertinent statutory requirement, including the
 basis upon which the reasonableness of the amount was determined when
 fees are awarded.  In this case, it is clear that the Arbitrator
 properly established in a fully articulated and reasoned decision that
 the Union is entitled to an award of attorney fees.  Thus, the award of
 fees is in conjunction with an award of backpay to the grievant on
 correction of the unwarranted suspension action.  There is no dispute
 that fees were incurred in behalf of the employee and that the grievant
 is the prevailing party.  With regard to the "interest of justice"
 standard, the Arbitrator expressly found, based upon consideration and
 discussion of the various facts and circumstances involved, that the
 Activity knew or should have known that it would not prevail on the
 merits of its allegations against the grievant concerning the documents
 found in the office file cabinet.  The Authority therefore concludes
 that the Arbitrator's determination that the Union is entitled to
 reimbursement for attorney fees incurred in defending the grievant
 against those allegations is fully consistent with applicable legal
 requirements and that the Activity's exception provides no basis for
 finding the award deficient.
 
    The Authority turns now to the question of the reasonableness of the
 amount of fees awarded as raised in the Activity's second exception.
 
                           IV.  SECOND EXCEPTION
 
                              A.  Contentions
 
    In its second exception, the Activity contends that the Arbitrator's
 supplemental award of attorney fees to the Union based on an hourly rate
 at or near the prevailing private practice rate for those hours is
 contrary to law as enunciated by the Federal courts and MSPB.  The
 Activity further contends that salaried union staff attorneys are only
 entitled to fees calculated on a cost-plus basis.
 
                       B.  Analysis and Conclusions
 
    In determining what constitutes reasonable attorney fees, courts have
 applied a variety of methods and analyses.  An example of a method
 acceptable to administrative adjudicatory agencies and most courts is
 the "lodestar" method, where the attorney's customary hourly billing
 rate is multiplied by the number of hours reasonably devoted to the case
 with appropriate adjustments for any special factors.  Naval Air
 Development Center, slip op. at 9.  This is the method ordinarily
 applied by the MSPB in determining reasonable attorney fees under 5
 U.S.C. Section 7701(g)(1) when the attorney involved is in private
 practice, e.g., Kling v. Department of Justice, 2 MSPB 620, 624-28
 (1980), and applied by the Authority in reviewing an arbitrator's award
 of fees to an attorney in private practice.  Naval Air Development
 Center, slip op. at 12.
 
    Where, however, the attorney is an employee of a union, a different
 method must be applied in computing reasonable fees under 5 U.S.C.
 Section 5596 and 5 U.S.C. Section 770