53:1688(150)AR - - Agriculture, Animal and Plant Health Inspection Service, Plant Protection Quarantine and NAGE - - 1998 FLRAdec AR - - v53 p1688
[ v53 p1688 ]
The decision of the Authority follows:
53 FLRA No. 150
FEDERAL LABOR RELATIONS AUTHORITY
U.S. DEPARTMENT OF AGRICULTURE
ANIMAL AND PLANT HEALTH INSPECTION SERVICE
PLANT PROTECTION AND QUARANTINE
NATIONAL ASSOCIATION OF AGRICULTURE EMPLOYEES
March 31, 1998
Before the Authority: Phyllis N. Segal, Chair; Donald S. Wasserman and Dale Cabaniss, Members.
I. Statement of the Case
This matter is before the Authority on an exception to an award of Arbitrator Aaron S. Wolff filed by the Agency under section 7122(a) of the Federal Service Labor-Management Relations Statute (the Statute) and part 2425 of the Authority's Regulations. The Union filed an opposition to the Agency's exception.
The Arbitrator awarded the Union attorney fees and expenses, including hearing expenses of $1,149.57. For the reasons that follow, we remand for further proceedings on the Union's request for recovery of hearing expenses. In all other respects, we deny the Agency's exception. In remanding for further proceedings, we have set forth the approach we will now follow for awards of attorney fees that are deficient because the arbitrator has not sufficiently articulated his determination concerning a pertinent statutory requirement.
II. Background and Arbitrator's Awards
In his initial award, the Arbitrator concluded that the grievants were entitled to retroactive temporary promotions with backpay. The Authority denied the Agency's exceptions to the award. 51 FLRA 1210 (1996). Thereafter, the Union filed a motion for attorney fees in the amount of $88,550, calculated in accordance with its fee agreement with its attorneys. The fee agreement provided that the attorneys would represent the Union and the grievants at a reduced rate of $90 per hour, but with a provision for a "success fee" if the proceedings resulted in a favorable outcome. The success fee was calculated at the higher hourly rates the attorneys charged their clients who were not on retainer. The Union also requested expenses of $5,991.90.
In opposition, the Agency maintained that the amount of fees the Union actually paid its attorneys was calculated on the basis of the reduced billing rate of $90 per hour. The Agency argued that this was the amount of fees "incurred" by the Union and that the law firm's established billing rate for purposes of calculating the attorney fee award under the Back Pay Act, 5 U.S.C. § 5596, must be that reduced rate and not the firm's non-retainer billing rates.
In addition, the Agency contested certain expenses requested by the Union. The Agency disputed expenses of $1,590 for two plane tickets to Chicago in June 1993, asserting that the Union charged only $378 for two tickets to Chicago in October 1993. The Agency also disputed hearing expenses in the amount of $1,149.56, which, according to the Agency, had not been documented by the Union in its motion.
The Arbitrator rejected the Agency's argument that the Union had not incurred the success fee in accordance with the fee agreement. He found that the non-retainer billing rates applied under the fee agreement and that these rates were reasonable and consistent with prevailing market rates.
The Arbitrator also rejected the Agency's objections to the airfare and hearing expenses. With respect to the June 1993 airfare, the Arbitrator ruled that the expense was incurred and paid and that there was no evidence that the attorneys deliberately paid a fare higher than the lowest available. In granting the full amount of expenses, the Arbitrator did not specifically address the hearing expenses disputed by the Agency.
III. Positions of the Parties
A. Agency's Exception
The Agency contends that the award is contrary to law. The Agency asserts that the rate at which the Arbitrator awarded fees is deficient and that the award of airfare and hearing expenses is deficient.
The Agency argues that under Authority case law, attorney fees must have been incurred by the Union and that the reasonable hourly rate for a fee award to a law firm is the firm's established billing rate. The Agency maintains that in this case, the law firm's established billing rate under the fee agreement is $90 per hour and that the actual fees incurred by the Union were calculated on the basis of this rate.
With respect to the airfare expense in June 1993, the Agency argues that the $795 fare "appears [to be] an overcharge." Exception at 18. With respect to the hearing expenses, the Agency maintains that the Union has never documented or explained the expenses and that the Arbitrator never specifically addressed the issue.
B. Union's Opposition
The Union contends that it incurred the amount of fees awarded and that the Arbitrator properly used its law firm's non-retainer billing rates, as provided by the fee agreement, in calculating the fee award. With respect to the disputed airfare expense, the Union contends that the Arbitrator properly awarded expenses for the airfare on the basis of a receipt showing that $795 was the round-trip coach airfare to Chicago paid by its attorneys in June 1993. Without specifically mentioning the disputed hearing expenses, the Union asserts that the Arbitrator properly found that "all of the firm's expenses were incurred, appropriate, reasonable, and subject to reimbursement as part of his award of attorneys fees." Opposition at 8 (emphasis in original).
IV. Analysis and Conclusions
The Agency's exception involves the consistency of the arbitration award with law. We review the questions of law raised by the Agency's exception and the Arbitrator's award de novo. See National Treasury Employees Union, Chapter 24 and U.S. Department of the Treasury, Internal Revenue Service, 50 FLRA 330, 332 (1995).
A. Statutory Requirements for Entitlement to Attorney Fees
The threshold requirement for entitlement to attorney fees under the Back Pay Act, 5 U.S.C. § 5596, is a finding that the grievant was affected by an unjustified or unwarranted personnel action, which resulted in the withdrawal or reduction of the grievant's pay, allowances, or differentials. See U.S. Department of Defense, Defense Distribution Region East, New Cumberland, Pennsylvania and American Federation of Government Employees, Local 2004, 51 FLRA 155, 158 (1995) (DDRE). Once such a finding is made, the Act further requires that an award of fees must be: (1) in conjunction with an award of backpay to the grievant on correction of the personnel action; (2) reasonable and related to the personnel action; and (3) in accordance with the standards established under 5 U.S.C. § 7701(g), which pertains to attorney fee awards by the Merit Systems Protection Board (MSPB). See id.
Section 7701(g)(1) applies to all cases except those involving allegations of employment discrimination and applies in this case. The prerequisites for an award of attorney fees under section 7701(g)(1) are as follows: (1) the employee must be the prevailing party; (2) the award of fees must be warranted in the interest of justice; (3) the amount of the fees must be reasonable; and (4) the fees must have been incurred by the employee. See id. The standards established under section 7701(g) further require a fully articulated, reasoned decision setting forth the arbitrator's specific findings supporting the determination on each pertinent statutory requirement, including the basis on which the reasonableness of the amount was determined when fees are awarded. See id. When exceptions concern the attorney fee standards established under section 7701(g)(1), the Authority looks to the decisions of the MSPB and the U.S. Court of Appeals for the Federal Circuit for guidance. See id. at 160 n.5.
Because the Agency challenges only the Arbitrator's determinations on whether the fees were incurred, the propriety of the rate, and the amount of expenses, we need not consider the other requirements of the Back Pay Act. See U.S. Department of Veterans Affairs Medical Center, North Chicago, Illinois and American Federation of Government Employees, Local 2107, 52 FLRA 387, 398 n.9 (1996).
B. The Union Incurred the Fees
Attorney fees are incurred by an employee within the meaning of section 7701(g)(1) when an attorney-client relationship exists and the attorney has rendered legal services on behalf of the employee. See U.S. Department of Health and Human Services, Social Security Administration and American Federation of Government Employees, Local 1923, 48 FLRA 1040, 1047 (1993) (SSA). The necessary attorney-client relationship exists when, as here, the attorney represents the employee on behalf of a union. See id.
In this case, it is evident from the record, and the Arbitrator specifically found, that an attorney-client relationship existed, legal services were rendered, and the Union incurred an obligation to pay attorney fees on behalf of the grievants. Thus, the fees that resulted from the law firm's representation of the grievants in the initial arbitration were incurred by the grievants within the meaning of section 7701(g)(1). See id. at 1047-48. Furthermore, the fee agreement clearly obligated the Union to pay the success fee on a favorable outcome. As there was a favorable outcome here, the success fee was incurred within the meaning of section 7701(g)(1).
As recognized by the Arbitrator, the Agency does not dispute that a fee was incurred by the Union, but objects only to whether the Union actually paid the success fee. The matter of fee payments between client and attorney is not a consideration in determining the propriety of attorney fee awards under the Act. The Agency's focus on the amount of fees allegedly paid, rather than owed, provides no basis for finding the arbitration award deficient. In resolving disputes over attorney fees, both the Federal Circuit and the MSPB refuse to consider the mechanics of fee payments between counsel and client. See Jensen v. Department of Transportation, 858 F.2d 721, 724 (Fed. Cir. 1988); Mercer v. Department of Health and Human Services, 42 MSPR 115, 119 n.7 (1989). Similarly, in reviewing the amount of fees awarded, we will not address whether, or how much, employees or unions have actually paid their attorneys.
C. The Rate Is Proper
The reasonable rate for an award of attorney fees to a private attorney is generally the attorney's established billing rate. See SSA, 48 FLRA at 1053. The Agency has misconstrued this standard in asserting that the established billing rate of the Union's attorneys must be the $90 per hour rate provided for an unsuccessful outcome. The Agency's argument is similar to the position asserted by the agency in Francois v. Office of Personnel Management, 64 MSPR 191 (1994) (OPM). In OPM, the fee agreement limited the employee's liability to $3,000 if the appeal was unsuccessful. See 64 MSPR at 196. The appeal was successful, and the administrative judge awarded the employee attorney fees in excess of $3,000 calculated on the basis of the attorney's hourly billing rate, as set forth in the fee agreement. The MSPB rejected OPM's argument that any award of attorney fees in excess of $3,000 was unreasonable because the employee's liability was limited to $3,000. The MSPB ruled that "[t]he administrative judge . . . correctly interpreted the agreement as limiting the appellant's liability to $3,000 in the event his appeal was unsuccessful, but not limiting on its face OPM's liability for attorney fees in the event the appellant prevailed in his appeal." Id. (footnote omitted).
The fee agreement in this case is even more explicit than the agreement in OPM. This fee agreement expressly obligated the Union to pay the success fee if the result was favorable. Moreover, the Arbitrator specifically found, and the Agency does not dispute, that the law firm's non-retainer, billing rates were reasonable and consistent with prevailing market rates. Accordingly, the Agency provides no basis for finding deficient the Arbitrator's use of the firm's non-retainer billing rates in calculating the fee award.
D. The Arbitrator Properly Awarded Airfare Expenses
Awards of attorney fees under section 7701(g)(1) encompass
those reasonable and necessary out-of-pocket expenses of providing a lawyer's services that are not covered by the hourly rate . . ., that are routinely paid by counsel and billed to the client for services rendered, that are not taxable costs or prohibited by statute or authorized regulation, and that are not expenses incurred for the mere convenience of counsel.
U.S. Department of Defense, Defense Mapping Agency, Hydrographic/Topographic Center, Washington, D.C. and American Federation of Government Employees, Local 3407, 47 FLRA 1187, 1199-1200 (1993) (quoting Bennett v. Navy, 699 F.2d 1140, 1145 (Fed. Cir. 1983) (footnote omitted)). Recoverable expenses include travel expenses. See American Federation of Government Employees, AFL-CIO and U.S. Department of Health and Human Services, Social Security Administration, Baltimore Maryland, 49 FLRA 1666, 1670 (1994).
With respect to the June 1993 airfare expense, the Arbitrator in a fully articulated, reasoned decision explained the grant of such expenses. The Agency provides no basis for finding the award of these expenses deficient. See id.
E. The Award of Hearing Expenses is Deficient
Unlike the Arbitrator's treatment of the airfare expense, the Arbitrator failed to provide a "clear and reasoned explanation" of why the expenses were recoverable. See National Association of Government Employees, Local R5-188 and U.S. Department of the Air Force, Seymour Johnson Air Force Base, North Carolina, 46 FLRA 458, 469 (1992) (Seymour Johnson AFB). In addition, the record contains no documentation that would allow us to determine that the expenses are recoverable and the amount is reasonable. Thus, the Arbitrator's granting of these expenses is deficient as contrary to the Back Pay Act because the award fails to explain the grant of expenses.
Section 7122(a) of the Statute provides that on finding an award deficient, the Authority may take such action concerning the award as it considers necessary, consistent with applicable laws and regulations. In the past, the Authority's approach when an arbitration award failed to explain a grant of fees has depended on whether the failure related to the entitlement to attorney fees or to the amount of attorney fees. When the failure related to the underlying entitlement to attorney fees, the Authority has vacated the award and has not remanded the award for further proceedings. See Seymour Johnson AFB, 46 FLRA at 463-64; American Federation of Government Employees, Local 1770 and U.S. Department of the Army, Headquarters, XVIII Airborne Corps, Fort Bragg, North Carolina, 44 FLRA 1287, 1290 (1992) (Ft. Bragg).(*) However, "when an arbitrator [found] entitlement to fees but fail[ed] to provide a reasoned decision as to the reasonable amount of attorney fees[,]" the Authority has either modified the award or remanded the award to the parties for resubmission to the arbitrator to make the required determination. See Seymour Johnson AFB, 46 FLRA at 463-64; accord DDRE, 51 FLRA at 159. In addition, the Authority's approach when the deficiency was a legal error, rather than a failure to explain, has been to remand rather than vacate. See National Association of Government Employees, Local R4-6 and U.S. Department of the Army, Fort Eustis, Virginia, 52 FLRA 1522, 1529 (1997) (arbitrator denied request for attorney fees on basis that his award did not encompass backpay; because that determination was inconsistent with the Back Pay Act, the award was remanded for consideration of the issue of attorney fees).
In this case, the issue of hearing expenses could be considered equally an issue of entitlement to expenses or an issue of the amount of expenses and, consistent with the foregoing, the consequence of the categorization is significant: a vacated award versus a remand for further proceedings. However, current precedent does not provide sufficient reasoning to allow us to resolve the issue presented by the exception. In particular, precedent does not assist in determining whether the failure of the award to explain the reasons for the grant of expenses relates to the underlying entitlement to recover the expenses or to the amount of recoverable expenses. This has caused us to reexamine whether the different categories of deficiencies previously identified by the Authority warrant different actions.
On reexamination, we find no basis in the Statute or the Back Pay Act for taking different action depending on whether the deficiency related to a legal error, entitlement, or amount. In addition, no policy in favor of these divergent actions is explained in case precedent or is apparent. Because of this lack of support for making these distinctions, as well as the difficulty in applying the categories created, we will no longer follow the Authority's prior approach to deficient attorney fee awards. Instead, the Authority's approach to deficient attorney fee awards should be consistent regardless of the type of the deficiency.
In our view, simply vacating awards that are not sufficiently explained, without further action, leaves unresolved the issue of whether the grievant is legally entitled to an award of attorney fees. Thus, our approach to awards that are not sufficiently explained will be to take the action necessary to assure that the award is consistent with applicable statutory standards. See Seymour Johnson AFB, 46 FLRA 458.
In this case and future cases, we will no longer vacate without further proceedings attorney fee arbitration awards that are deficient because the arbitrator has not sufficiently explained the determination of a pertinent statutory requirement. Instead, in cases where the record does not permit the Authority to determine the proper resolution of the matter, we will remand the award for further proceedings to assure that the resolution of a request for attorney fees is consistent with law. In cases where the record permits the appropriate resolution of the disputed matter despite a lack of proper explanation, we will modify the award or deny the exception, as appropriate. Authority cases to the contrary will no longer be followed. We note that this approach is consistent with the approach of the MSPB to such matters. See, e.g., Smit v. Department of the Treasury, 61 MSPB 612, 622, 624 (1994) (judge's decision awarding undocumented travel costs as part of a fee award remanded to require the employee to specifically identify the expenses).
In this case, the record does not indicate either that the requested hearing expenses are recoverable as part of an award of attorney fees under section 7701(g)(1) or that the amount is reasonable. Accordingly, we remand the claim of hearing expenses to the parties for further proceedings. We note that in its exceptions, the Agency has suggested a willingness to pay the expenses if presented with "an acceptable explanation or description[.]" Exception at 20. However, if on remand the parties are unable to settle the dispute, the parties must resubmit the issue to the Arbitrator.
This case is remanded to the parties for resubmission, absent settlement, to the Arbitrator for a fully articulated, reasoned decision on whether the disputed expenses are recoverable and, if so, whether the requested amount is reasonable. In all other respects, the Agency's e