46:1080(98)CA - - Customs Service and NTEU - - 1992 FLRAdec CA - - v46 p1080

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46:1080(98)CA
The decision of the Authority follows:


46 FLRA No. 98

FEDERAL LABOR RELATIONS AUTHORITY

WASHINGTON, D.C.

_____

U.S. CUSTOMS SERVICE

(Respondent)

and

NATIONAL TREASURY EMPLOYEES UNION

(Charging Party/Union)

9-CA-90211-002

_____

DECISION AND ORDER ON MOTION

FOR PAYMENT OF ATTORNEY FEES

December 31, 1992

_____

Before Chairman McKee and Members Talkin and Armendariz.

I. Statement of the Case

This unfair labor practice case is before the Authority on exceptions to the attached decision of the Administrative Law Judge filed by both the Respondent and the Union. Each party filed an opposition to the other party's exceptions. In addition, the Union filed a supplemental submission.(1)

The Judge found that under the Back Pay Act, 5 U.S.C. § 5596, the Respondent was required to pay attorney fees to two attorneys in connection with a previously decided unfair labor practice case.(2) The Judge applied the cost-plus formula in calculating the award.(3)

As explained below, we adopt the Judge's findings, conclusions, and recommendations, except to the extent that he calculated the fee award on a cost-plus basis. We find that the award should be calculated using a market-rate basis instead.(4) Accordingly, we will remand this case to the Chief Judge(5) so that the appropriate findings can be made consistent with our decision.

II. Background

The facts relating to the underlying unfair labor practice proceeding for which attorney fees and costs are sought are set forth in detail in U.S. Customs Service, Washington, D.C., 39 FLRA 749 (1991) (Customs, Washington). In that decision, we found that the Respondent committed an unfair labor practice under the Federal Service Labor-Management Relations Statute (the Statute) by refusing to comply with an arbitrator's clarified award. That award, among other things, required the Respondent to restore a grievant to the position and duties of Canine Enforcement Officer at the GS-7, Step 10 level and to pay him all backpay to which he was entitled.(6) Because the Respondent reinstated the grievant to the GS-7, Step 1 level, rather than the step 10 level, we ordered the Respondent to comply with the award, and to make the grievant whole.

Following the issuance of the Authority's decision, the Union filed a motion for attorney fees with the Authority pursuant to the Back Pay Act and 5 C.F.R. § 550.807.(7) The Union sought fees only in connection with the unfair labor practice proceeding and not in connection with the underlying arbitration proceeding. The Union also requested that the fees be calculated on a market-rate basis, rather than the cost-plus approach. Attached to the motion were affidavits of attorneys Lorrie A. Gray and Andrew R. Krakoff. In their affidavits, the attorneys described their experience and qualifications and provided a description of the work performed in the case, the dates on which that work was performed, and the amount of time spent on each of those dates. Based on the Union's brief in support of the motion, the Union requested attorney fees in the amount of $12,250 for 98 hours worked by Gray and $1,650 for 10.5 hours worked by Krakoff.

Subsequently, the Authority issued an Order to the parties outlining the procedures that would be followed in the processing of the Union's motion. The procedures provided, among other things, for the filing of responses to the Union's motion by both the Respondent and the General Counsel. In addition, the Union and the Respondent were advised that they could request further proceedings with respect to the motion, such as an informal conference, oral argument, additional written submissions, or an evidentiary hearing. The Judge was vested with the responsibility for replying to such requests, as well as with preparing a recommended decision on the motion.

In response to the Authority' Order, the Respondent filed an objection to the Union's motion for attorney fees and a request for further proceedings. In its objection to the motion for attorney fees, the Respondent argued that there had been no determination by the Authority in Customs, Washington that an unjustified or unwarranted personnel action had resulted in a withdrawal or reduction in the grievant's pay. The Respondent argued that such a finding was necessary to support an attorney fee award. The Respondent also argued that the Union had not met the standards that would support a finding that the fee award was warranted in the interest of justice. Finally, the Respondent asserted that the Union's request for attorney fees was not reasonable. With regard to this contention, the Respondent argued, among other things, that the Union did not submit a detailed, particularized statement of the work performed, and that the Union did not explain how it arrived at a customary billing rate. The Respondent also contended that any award of attorney fees must be calculated on a cost-plus, rather than a market-rate, basis.

In its request for further proceedings, the Respondent sought either an informal conference, an evidentiary hearing, additional submissions by the Union to establish the reasonableness of the fees requested, or documentation by the Union to verify the time spent on the unfair labor practice proceeding. The Respondent claimed that the Union failed to submit any proof that the claimed expenses were reasonable. Specifically, the Respondent asserted that the Union failed to demonstrate that the fees expended were directly related to or significantly contributed to the result reached; that the Union's efforts were not duplicative but were necessary to the General Counsel's efforts; that all of the hours claimed by the Union were reasonably expended; that the hourly fee claimed was its customary hourly rate; and what the hourly market-rate was for similarly situated public interest law firms. Finally, the Respondent claimed that the Union did not provide it with certain exhibits concerning the Union's legal services program and did not articulate how the fees claimed by one of the attorneys was for work of more than a ministerial or supervisory nature.

The Judge granted the Respondent's request for further proceedings insofar as it related to the submission of additional documentation to verify the time spent by the Union on the unfair labor practice proceeding. The Judge denied the remainder of the Respondent's request, stating that the record was sufficient to rule on the motion for attorney fees. Thereafter, the Judge ordered the Union to submit affidavits by Gray and Krakoff setting forth their annual salaries before taxes and the total number of hours worked for which those salaries were paid. The attorneys responded to the Judge's order and submitted the affidavits requested.

III. Administrative Law Judge's Decision

The Judge addressed the following issues: (1) whether the Authority found that the grievant had been affected by an unwarranted or unjustified personnel action; (2) whether an award of attorney fees is in the interest of justice; and (3) whether the fee request was reasonable, including what the appropriate method of calculation should be.

First, the Judge rejected the Respondent's contention that the Authority failed to determine that the grievant had been affected by an unwarranted or unjustified personnel action that resulted in a loss of pay. The Judge stated that by finding a violation of the Statute, it was "quite evident" that the Authority had made such a determination and that "[n]o other reasonable inference [was] warranted." Judge's Decision at 3. In support of his finding, the Judge relied on United States Department of Housing and Urban Development, Region VI and United States Department of Housing and Urban Development, Region VI, San Antonio Area Office, 24 FLRA 885 (1986) (HUD, San Antonio).

With respect to whether a fee award is in the interest of justice, the Judge noted that the Merit Systems Protection Board (MSPB) developed several criteria under that standard in Allen v. U.S. Postal Service, 2 MSPR 420 (1980) (Allen), including whether an agency's action is "clearly without merit." Relying, in part, on Department of the Air Force Headquarters, 832d Combat Support Group DPCE, Luke Air Force Base, Arizona, 32 FLRA 1084 (1988) (Luke AFB), the Judge found that the Respondent's refusal to comply with the clarified arbitration award was an action clearly without merit and thus satisfied a finding that the award of attorney fees was in the interest of justice. The Judge also responded to the Respondent's arguments concerning why it failed to comply with the clarified award. The Judge noted that issues pertaining to the validity and effect of the clarified award had been raised by the Respondent in the unfair labor practice proceeding and rejected by the Authority. The Judge stated that the Authority found that such matters went to the substance of the award and, therefore, were not litigable in the unfair labor practice proceeding.

Finally, the Judge addressed the reasonableness of the fees requested in terms of both the method of calculation and the actual components of the fee request. First, the Judge considered whether the award of fees should be based on the cost-plus formula or the market-rate basis. The Judge found that Authority precedent dictated that attorney fees be awarded based on the cost-plus formula. In reaching that result, the Judge relied on the Authority's decisions in United States Department of Justice, Bureau of Prisons, Washington, D.C. and Bureau of Prisons, Federal Correctional Institution, Ray Brook, New York, 32 FLRA 20, 29 (1988) (FCI, Ray Brook)(8) and Department of Health and Human Services, Health Care Financing Administration, Region IV, Atlanta, Georgia, 21 FLRA 910 (1986) (HHS, Atlanta). Second, the Judge examined the components of the fee request. Rejecting the Respondent's arguments to the contrary, the Judge found that the Union had sufficiently detailed the dates, the time spent, and the nature of the work performed. The Judge also found that there was no evidence on which to conclude that the services of the Union's attorneys were duplicative of, or failed to contribute substantially to, the General Counsel's efforts in prosecuting the unfair labor practice case. In support of this latter finding, and relying on HUD, San Antonio, the Judge stated that the mere presence of an administrative prosecutor does not per se preclude an award for contributions to the proceedings by outside counsel.

Based on his findings, the Judge concluded that a fee award to both Gray and Krakoff was warranted. In applying the cost-plus formula, the Judge found that the Union had improperly deducted holiday time, annual leave, and sick leave from paid work hours to arrive at the attorneys' hourly rates. Accordingly, based on his calculations, the Judge found that the proper fee award for Gray should be in the amount of $4,165.24 for 98 hours worked and that the proper fee award for Krakoff should be in the amount of $789.30 for 10.5 hours worked. Accordingly, the Judge ordered the Respondent to remit the sum of $4,954.54 to the Union's Legal Services Program Fund.

IV. Positions of the Parties

A. The Respondent's Exceptions

The Respondent contends that the Judge erroneously concluded that in Customs, Washington, the Authority made a determination that the grievant was affected by an unjustified or unwarranted personnel action. The Respondent argues that the Authority did not articulate the requisite finding but, rather, concluded that the Respondent's noncompliance with the arbitration award violated section 7116(a)(1) and (8) of the Statute. More particularly, the Respondent argues that the Authority never ruled on the merits of the clarified arbitration award "with respect to the pay question," but simply found that an unfair labor practice had been committed. Exception at 7. The Respondent adds that the Authority's cease and desist order was not issued to correct an unjustified or unwarranted personnel action and that, in the absence of a finding of an unjustified or unwarranted personnel action, there is no entitlement to reasonable attorney fees.

The Respondent next excepts to the Judge's finding that the award of attorney fees is warranted in the interest of justice. The Respondent argues that the Judge did not provide a fully articulated, reasoned decision to support his conclusion that the Respondent's refusal to comply with the arbitration award was an action clearly without merit. The Respondent claims that because the Judge did not provide such a decision, the entire arbitration award must be examined to determine whether there are sufficient findings to support a conclusion that an award of attorney fees is warranted in the interest of justice.

The Respondent also maintains that the Judge should have granted the Respondent's motion for further proceedings to examine the reasonableness of the fee request. The Respondent argues that the Judge should have permitted it an opportunity to "take discovery on the fee amounts claimed by the [Union]." Id. at 9. In the alternative, the Respondent asserts that the Union should have presented a more detailed, particularized statement of the legal services performed and the nature of those services. The Respondent claims that the affidavits submitted by the Union's attorneys did not contain: (1) a statement that the attorneys provided necessary and independent legal work separate from the General Counsel; (2) a statement that the attorneys' work contributed significantly to the Authority's decision; (3) justification for the hours spent preparing its brief in the unfair labor practice proceeding, considering the nature of the issue presented and the legal research required; and (4) the attorneys' time logs and billings to the Union's legal services program for the time expended pursuing the unfair labor practice. The Respondent also raises specific questions concerning the accuracy and justification of the hours claimed in the affidavits and notes that there are discrepancies in the hours claimed by the attorneys. In addition, the Respondent claims that the submissions of the Union's attorneys were deficient in comparison with the documentation submitted by the attorneys who requested and were awarded fees in Luke AFB.

Finally, the Respondent contends that the Judge's award of attorney fees is not supported by a fully articulated, reasoned decision setting forth the specific findings justifying the determination that the time and nature of the work performed by the Union's attorneys was reasonable. Specifically, the Respondent questions the reasonableness of the hours claimed by Gray for work performed in the unfair labor practice proceeding in light of the fact that the case involved only a stipulated record. The Respondent argues, by way of contrast, that the hours billed in HUD, San Antonio were significantly fewer, even though that case involved preparation for a hearing and the submission of a post-hearing brief. The Respondent notes also that there was no affirmative finding by the Judge in this case that the Union's attorneys substantially contributed to the General Counsel's efforts in prosecuting the unfair labor practice case. Instead, the Respondent asserts that the briefs submitted by the Union and the General Counsel raised substantially similar arguments. The Respondent further argues that the review by Krakoff of Gray's work was of a supervisory or ministerial nature and that the Judge made no finding that Krakoff provided legal analysis to Gray. Finally, the Respondent contends that the Judge improperly awarded overhead costs to both Union attorneys despite the fact that they share the same offices and, presumably, the same costs of operation.

B. The Union's Opposition

The Union contends that the Judge properly concluded that the grievant had been affected by an unjustified or unwarranted personnel action. The Union claims that an award of attorney fees is appropriate where it pursues an unfair labor practice for an agency's failure to comply with an arbitration award that involved a loss of employee pay. In support, the Union cites Luke AFB and FCI, Ray Brook. The Union also maintains that the award of attorney fees is warranted in the interest of justice. The Union states that the Judge set forth a fully articulated, reasoned decision to support his conclusion that the Respondent's refusal to comply with the clarified award constituted an action clearly without merit under 5 U.S.C. § 7701(g)(1).

The Union further argues that the Judge properly exercised his discretion in rejecting the Respondent's motion for further proceedings regarding the reasonableness of the fees requested. The Union also claims that a sufficient amount of information was provided to enable the Judge to rule on the fee request and that there is no basis on which to conclude that further proceedings were necessary. However, the Union agrees with the Respondent that there is a discrepancy in the affidavit submitted by Krakoff. According to the Union, there was an understatement as to the amount of time spent in a meeting with Gray. The Union maintains that the time claimed by Krakoff should accord with that spent by Gray and that the fee request for Krakoff should be adjusted accordingly.

Finally, the Union claims that the Judge properly determined that the hours requested by the Union were reasonable. The Union maintains that the services provided by its attorneys substantially contributed to and were not duplicative of the General Counsel's efforts. In this regard, the Union contends that it advanced arguments that went beyond those set forth by the General Counsel.

C. The Union's Exception

The Union excepts solely to the Judge's failure to award fees at a market-rate. The Union disagrees with the Authority's practice of limiting attorney fees for union-salaried attorneys to the cost-plus formula and urges the Authority to adopt a market-rate approach. The Union claims that use of the cost-plus approach is at odds with various court decisions, including that of the Ninth Circuit in Curran v. Department of Treasury, 805 F.2d 1406 (9th Cir. 1986) (Curran). In Curran, the court held that market-rate fees for legal services provided by union-employed attorneys are appropriate when there is a showing that the fees recovered do not directly benefit the union and do not result in unethical fee-splitting. The Union notes that the Authority has not previously undertaken its own independent analysis of whether attorney fees should be based on market rates or the cost-plus formula but, rather, has adopted in full the reasoning of the MSPB and the Federal Circuit. In light of the importance of the issue, the Union urges the Authority to reconsider its position on the calculation of attorney fees, as set forth in FCI, Ray Brook, and provide a fully articulated, reasoned decision on this issue.

The Union further argues that the provision for reasonable attorney fees in the Back Pay Act requires that such fees be paid on a market-rate basis. In support, the Union asserts that the term "reasonable attorney fees" has been interpreted in fee-authorizing statutes to signify fees computed at the prevailing market rate. The Union adds that there is no indication that Congress intended the attorney fee provision of the Act to be construed differently. Thus, the Union concludes that "there is simply no sound legal basis for refusing to grant an award of market rate fees under the circumstances presented here." Exception at 11.

Finally, the Union contends that the Authority is obliged to follow the precedent of the regional courts of appeals rather than that of the Federal Circuit. Citing the provision of the Statute authorizing judicial review, the Union notes that Authority decisions in unfair labor practice cases are appealable to the regional circuit courts of appeals and not to the Federal Circuit.

In its supplemental submission, the Union urges the Authority to reexamine its policy of applying a cost-plus formula in calculating fees for union-employed attorneys in light of the D.C. Circuit's decision in AFGE Local 3882. The Union argues, for a variety of reasons, that adoption of the market-rate formula is appropriate.

D. The Respondent's Opposition

The Respondent contends that the Judge properly rejected the Union's request for attorney fees based on market rates. The Respondent argues that the Judge could not disregard precedent and principles established by the Authority that fee awards to union-employed attorneys would be made on a cost-plus basis. The Respondent maintains that, consistent with Authority precedent, establishment of a special fund by the Union into which attorney fee awards are placed does not warrant an award based on market rates. Finally, the Respondent argues that an award of fees at market rates would create a windfall to the Union's legal services program. The Respondent explains that the Union's attorneys bill the program only for the actual expenses of providing attorney services to the program, rather than billing at market rates. Consequently, the Respondent asserts that an award at market rates would result in the Union's legal services program receiving payment in excess of the actual expenses incurred.

V. Analysis and Conclusions

This case presents the following issues: (1) whether the Judge properly denied the Respondent's motion for certain further proceedings; (2) whether the grievant was affected by an unjustified or unwarranted personnel action; (3) whether an award of attorney fees is warranted in the interest of justice; (4) whether the award of attorney fees is supported by a fully articulated, reasoned decision; and (5) whether the award of attorney fees should be calculated on a market-rate or cost-plus basis.

For the reasons discussed below, we conclude that the Judge properly exercised his discretion to deny further proceedings in this case. We also conclude that the Judge correctly found that the grievant had been affected by an unwarranted or unjustified personnel action, that the award of attorney fees is in the interest of justice, and that the time and nature of the work performed by the Union's attorneys was reasonable. Contrary to the Judge, however, we find that the fee award should be calculated using a market-rate basis. Accordingly, we will remand this case to the Chief Judge for appropriate action consistent with our decision.

A. The Judge Properly Denied the Motion for Certain Further Proceedings

The Respondent contends that the Judge should have granted its motion for further proceedings and permitted the Respondent an opportunity to take discovery on the fee amounts claimed by the Union's attorneys. In the alternative, the Respondent argues that the Union's attorneys should have presented a more detailed, particularized statement of the legal services performed and the nature of those services.

As we stated earlier, the Authority's Order, outlining the procedures that would be followed in addressing the Union's motion for attorney fees, provided that either party could request further proceedings, and that the Judge was authorized to respond to such requests. The Judge found that the evidence was sufficient to respond to the Union's motion, with one exception. As to that exception, the Judge ordered the attorneys to submit affidavits setting forth certain information. The attorneys complied with the Judge's Order. In our view, the Respondent has presented no evidence on which to conclude that the Judge erred in failing to direct the requested proceedings.

We also reject the Respondent's contention that the attorneys should have presented a more detailed and particularized statement. As noted, the Judge directed the attorneys to provide additional information to supplement the evidence that he correctly found was otherwise sufficient to support the award of fees.

B. The Grievant Was Affected by an Unjustified or Unwarranted Personnel Action

The Respondent excepts to the Judge's finding that in effect the Authority determined in Customs, Washington that the grievant had been affected by an unjustified or unwarranted personnel action. The Respondent reiterates its view that the Authority failed to make the requisite affirmative finding that the grievant had in fact been affected by an unjustified or unwarranted personnel action. The Respondent maintains that such a finding is necessary to support an award of attorney fees under the Back Pay Act.

We find no merit to the Respondent's arguments. In HUD, San Antonio, on which the Judge relied, as well as in other cases, the Authority stated that a final Authority order finding a violation of the Statute for failing to award backpay to an employee is effectively a determination that the employee has been affected by an unjustified or unwarranted personnel action that resulted in the loss of pay. See also Luke AFB, 32 FLRA at 1095; FCI, Ray Brook, 32 FLRA at 39-40. As the Judge noted, the Authority found in Customs, Washington that the Respondent violated the Statute by failing to comply with a final and binding award. The Judge correctly concluded that the effect of the Authority's order was a determination that the grievant had been affected by an unjustified or unwarranted action that resulted in the loss of pay.

C. Attorney Fees Are Warranted in the Interest of Justice

The Respondent contends that the Judge did not provide a fully articulated, reasoned decision to support his conclusion that the Respondent's refusal to comply with the arbitration award was an action clearly without merit. As a result, the Respondent asserts that the entire arbitration award must be examined to determine whether an award of attorney fees is warranted in the interest of justice. We disagree.

Relying in part on Luke AFB, the Judge found that the Respondent's refusal to comply with the clarified arbitration award was an action "clearly without merit," as that term is defined in 5 U.S.C. § 7701(g)(1) and, therefore, that the award of attorney fees is in the interest of justice. Contrary to the Respondent's argument, we conclude that the Judge's finding on this issue was consistent with Luke AFB and other Authority precedent. We further conclude that the Judge's finding was supported by a fully articulated and reasoned decision. See, for example, United States Department of the Navy, Norfolk Naval Shipyard and American Federation of Government Employees, Local 4015, 34 FLRA 725, 730 (1990) (an award of attorney fees is warranted in the interest of justice if any of the Allen criteria, including a finding that an agency action was clearly without merit, is met). Thus, having found that the Respondent's refusal to comply with the award was an action clearly without merit, the Judge was not required to set forth his findings with any greater degree of specificity. Moreover, to the extent the Respondent argues that the Authority must examine the entire award, we find, for the reasons more fully discussed in Customs, Washington, that the merits of the clarified award were neither litigable in the unfair labor practice proceeding nor reviewable in the instant motion for attorney fees.

D. The Time and Nature of Work Performed by the Union's Attorneys Was Reasonable

The Respondent argues that the award of attorney fees is not supported by a fully articulated, reasoned decision setting forth the specific findings justifying the determination that the time and nature of the work performed were reasonable. The Respondent states, specifically, that there was no affirmative finding by the Judge that the Union's attorneys contributed substantially to the General Counsel's efforts or that the review conducted by Krakoff of Gray's work was more than merely supervisory or ministerial in nature. The Respondent also claims that the Judge improperly awarded overhead costs to both Union attorneys even though they share the same offices and, presumably, the same costs of operation.

The Authority previously has described the requirements that are necessary for determining the reasonableness of fee awards under the Back Pay Act. See Luke AFB, 32 FLRA at 1098-1101. See also Overseas Education Association and U.S. Department of Defense, Dependents Schools, 39 FLRA 1261, 1267 (1991) (Overseas Education). Generally speaking, fee requests must be closely examined to ensure that the number of hours expended were reasonable. Further, any reduction in fees must be clearly explained. Id. at 1267. Also, as here relevant, the Authority stated in HUD, San Antonio that requests for attorney fees must be carefully scrutinized to determine whether, and to what extent, participation by outside counsel contributed to the General Counsel's efforts in prosecuting a case. For the following reasons, we conclude that the Judge properly found that the fees requested were reasonable.

First, with respect to the hours of work performed by the Union's attorneys, the Judge reviewed the information provided and found that the attorneys had sufficiently detailed the dates, time spent, and the nature of the work performed in connection with the unfair labor practice proceeding. The Judge further noted that there was no factual information presented in the record to dispute the particularized time spent by each attorney. While the Respondent disagrees with these findings in its exceptions, there is no basis on which to conclude that the hours expended were unreasonable. For example, the Respondent questions Gray's request for fees in connection with nearly 2 hours spent on arranging for, preparing, and completing a motion to postpone the scheduled unfair labor practice hearing on the basis that such time was not spent on substantive legal analysis. However, the Authority's Rules and Regulations permits the filing of motions by parties, and we are unwilling to find that the time spent on that activity was not reasonably expended.(9)

Second, the Judge found that there was no evidence to support the Respondent's claim that the legal services provided by the Union's attorneys were unnecessary or duplicative of the General Counsel's efforts in prosecuting the unfair labor practice case. The Judge relied on HUD, San Antonio, in which the Authority held that "the mere presence of an administrative prosecutor does not per se preclude an award for contributions to the proceedings made by outside counsel." 24 FLRA at 891. The Judge also noted the Authority's finding in that case that, absent a specific showing, the Authority would not conclude that participation by outside counsel was either duplicative of or failed to make a substantial contribution to the General Counsel's efforts. The Respondent essentially argues that the post-hearing brief submitted by the Union was substantially similar to that provided by the General Counsel. However, the Respondent also acknowledges that additional arguments were made by the Union. Under these circumstances, we find, in agreement with the Judge, that there is no basis on which to conclude that the participation of the Union's attorneys in this case was duplicative of, or failed to make a substantial contribution to, the General Counsel's efforts.

We also find that there is no merit to the Respondent's claim that the review of Gray's work by Krakoff should not be compensated because there was no finding that such review involved legal analysis that was more than supervisory or ministerial in nature. As we stated in Overseas Education, 39 FLRA at 1268-69, the denial of fees to an attorney whose participation is limited to administrative or supervisory functions must be based on a finding that the functions performed by that attorney were either insufficiently related to the case or were duplicative of work performed by the principal counsel. In this case, there was no showing that the activities of Krakoff were unrelated to the case or were duplicative of the work performed by Gray.

Finally, the Respondent claims that the Judge's award of overhead costs to both attorneys is not warranted. The calculation of overhead is part of the cost-plus formula. Because we find that attorney fees should be awarded based on a market-rate basis, in which overhead is not a separate calculation, we need not address the Respondent's contention further.

E. The Award of Attorney Fees Should Be Calculated on a Market-Rate Basis

The Judge found that an award of fees based on the cost-plus formula was consistent with Authority precedent, notably FCI, Ray Brook. In so finding, the Judge rejected the Union's request that fees be calculated on a market-rate basis. In its exception, the Union requests that the Authority reconsider its position with respect to awards of attorney fees and direct that such fees be calculated on a market-rate basis.

Subsequent to the issuance of the Judge's decision in this case, the D.C. Circuit Court of Appeals reversed and remanded FCI, Ray Brook. In its decision, the court held that, under the Back Pay Act, the sole limit on fee awards to attorneys is that the awards be reasonable. The court stated that it was "constrained to follow [its] earlier decisions equating 'reasonable' with market-rate fees." AFGE, Local 3882, 944 F.2d at 937. The court also found that although ethical concerns regarding the practice of law by an entity that is not a law firm are raised when organizations conduct other activities as well as furnish legal services, market-rate fees are appropriate when the organization places the fees in a legal representation fund. In so finding, the court disagreed with decisions of the MSPB and the Federal Circuit that held that, despite the existence of legal representation funds, attorney fee awards to unions must be limited to costs so that unions will not profit from litigation and, thereby, violate ethical principles.

With respect to the specific request for attorney fees at issue in FCI, Ray Brook, the court found that the fees would be placed in a suitable legal representation fund and, therefore, that there was no impediment to compensation at market rates. Consequently, the court remanded the case to the Authority for an appropriate fee determination.

On December 18, 1992, the Authority issued its decision on remand. United States Department of Justice, Bureau of Prisons, Washington, D.C. and Bureau of Prisons Federal Correctional Institution, Ray Brook, New York, 46 FLRA No. 89 (1992) (Bureau of Prisons). We agreed with the reasoning of the court with respect to the use of market rates and stated, as here relevant, that in future case "where attorney fees are awarded under the Back Pay Act to successful employees represented by union attorneys, we will use market-rate fees to calculate the payment of those attorney fees." Id., slip op. at 6. We also indicated that we would no longer follow previous decisions that applied the cost-plus formula for determining awards of attorney fees. In the present case, the Union asserts, without contradiction, that at all times pertinent to this case it maintained a separate account for legal services, entitled NTEU Legal Services Program, which is used solely to pay the litigation expenses of the Union's attorneys. Consistent with our decision in Bureau of Prisons, we find that an award of attorney fees to the Union on a market-rate basis is appropriate. However, because the documentation submitted by Gray and Krakoff was based on the then prevailing cost-plus formula, there is insufficient evidence in the record to enable the Authority to make a market-rate determination. Consequently, we will remand this case to the Chief Judge for that purpose.

In addressing the issue on remand, the Judge should be guided by the principles set forth in Luke AFB, 32 FLRA at 1109. We note particularly that where a fee applicant has a prior billing history, the reasonable hourly rate will be counsel's established billing rate. See also Blum v. Stenson, 465 U.S. 886, 896, n.11 (1984) ("the rates charged in private representations may afford relevant comparisons[]" in determining the market-rate). In addition, as we stated in Bureau of Prisons, to obtain an award at a customary billing rate, an applicant must furnish precise information concerning billing rates during the relevant time periods. Sources of information include contemporaneous retainer agreements, awards from courts and arbitrators, and fees agreed to through settlements. See Bureau of Prisons, 46 FLRA No. 89, slip op. at 7; Luke AFB, 32 FLRA at 1111-12.

We note in this case that both attorneys stated in their motion for attorney fees that their customary billing rates were based on reduced market values. In Luke AFB, the Authority addressed a similar situation in which a fee applicant's established billing rates were higher than the rates billed to a union. The Authority discussed Laffey v. Northwest Airlines, Inc., 746 F.2d 4 (D.C. Cir. 1984), cert. den'd, 472 U.S. 1021 (1985) (Laffey), in which the court held that the prevailing market-rate for a firm's services "is presumptively found in the firm's customary billing rates." Id. at 24. Subsequent to the Authority's decision in Luke AFB, the portion of Laffey on which the Authority had relied was reversed. See Save Our Cumberland Mountains, Inc. v. Hodel, 857 F.2d 1516 (D.C. Cir. 1988) (en banc) (SOCM). SOCM essentially provides that attorneys may recover the prevailing market-rate for their services notwithstanding the fact that they offered their clients reduced rates. 857 F.2d at 1524. Consequently, in assessing the appropriate market- rate, it is no longer necessary to rely on an attorney's customary billing rate that is lower than the prevailing market-rate.

We also remand this case to enable the Judge to determine the attorneys' costs attributable to the unfair labor practice proceeding and the motion for attorney fees. In making this determination, the Judge should also consult Luke AFB, 32 FLRA at 1113-14, for guidance.

VI. Order

The Motion for Attorney Fees is remanded for action consistent with our decision.




FOOTNOTES:
(If blank, the decision does not have footnotes.)
 

1. The Union's supplemental submission addressed the applicability of a decision of the United States Court of Appeals for the District of Columbia Circuit that was issued after the Union filed its exceptions. Pursuant to section 2429.26 of the Authority's Rules and Regulations, we will consider the submission.

2. In addition, one of the attorneys sought fees in connection with the instant motion.

3. Under the cost-plus formula, actual costs are awarded, including compensation paid to the union-employed attorney, out-of-pocket expenses related to the case, and overhead costs. See generally, Department of Health and Human Services, Health Care Financing Administration, Region IV, Atlanta, Georgia and National Treasury Employees Union, Chapter 210, 21 FLRA 910, 915 (1986).

4. Under the market-rate approach, fees are generally calculated on the basis of the prevailing market rates for the kind and quality of services rendered.

5. The Judge who decided this case is no longer with the Authority.

6. In the original award, the arbitrator failed to specify the step level at which the grievant was to be placed and from which the backpay calculation was to be made. Subsequently, the arbitrator clarified the award to reflect placement at the step 10 level.

7. 5 C.F.R. § 550.807 provides in part:

(a) An employee or an employee's personal representative may request payment of reasonable attorney fees related to an unjustified or unwarranted personnel action that resulted in the withdrawal, reduction, or denial of all or part of the pay, allowances, and differentials otherwise due the employee. Such a request may be presented only to the appropriate authority that corrected or directed the correction of the unj