In an April 24, 2007 opinion written by Chief Judge Walker of the United States Court of Appeals for the Second Circuit in Arbor Hills Concerned Citizens Neighborhood Assoc. v. Cty of Albany, et al., the Court agreed that the District Court placed undue reliance on the “forum rule” for determining attorneys’ fee awards on Federal statutory claims. Under the forum rule, an attorney whose client prevailed on a statutory claim would have his or her rates set not based upon what the market would be willing to pay for such services or upon their market rate to paying clients but rather based upon the Court’s reference to fee ranges approved in prior cases in that District The result of using the forum rule was a different range of hourly rates for the same type of litigation in the Second Circuit, depending on where the case was venued, with cases in the Southern District of New York (New York City) having the highest rates, those in the Eastern District (Long Island, Brooklyn, Queens, Staten Island) having lesser rates and the upstate Districts (Northern and Western Districts) having the lowest rates. It was not uncommon for the rate differentials for the same work to command rates 25+% higher in the Southern District.
In Arbor Hills, the Second Circuit admitted that its “fee-setting jurisprudence has become needlessly confused-untethered from the free market it is meant to approximate.” It therefore clarified that the District Court is to consider all of the factors that would be relevant in the free market, such as the reputation of the attorney or firm, the complexity of the case, the resources required to handle the matter aggressively and effectively and any professional benefits which would independently motivate counsel to pursue the litigation. The Court concluded that the fee award should compensate counsel in an amount equal to what a reasonable paying client would pay for that same representation.