In a decision handed down on August 30 (Trs. of the Constr. Indus. & Laborers Health & Welfare Trust v. Redland Ins. Co.), a panel of the 9th Circuit Court of Appeals awarded litigation expenses for computer-based legal research to plaintiffs in the case. This decision puts the 9th Circuit and others in conflict with the 8th Circuit, which could result in an eventual review of the issue by the U.S. Supreme Court.
In the case, the plaintiffs won an Employee Retirement Income Security Act (ERISA) claim regarding delinquent benefit contributions. The plaintiffs then moved for an award of reasonable attorney's fees and costs incurred during the course of the action, as provided for in the statute. The district court declined to award fees for the listed expenses, which included costs for online legal research, after determining that the expenses did not fit the definition for "reasonable attorney's fees" under the statute.
Ninth Circuit's Reasoning
The 9th Circuit reversed, arguing that Supreme Court precedent allows for the award of electronic research expenses. In W. Va. Univ. Hosps., Inc. v. Casey, 499 U.S. 83, 99-100 (1991), the Court established that reasonable attorney's fees did not include expenses that have traditionally been distinct from fees charged by attorneys, such as expert witness fees. The Court also ruled in an earlier case, Missouri v. Jenkins, 491 U.S. 274 (1989), that reasonable attorney's fees only include litigation expenses when it is the "prevailing practice" in an area to separate those costs from the normal hourly rate for the attorney's services. Thus, if a litigation expense isn't traditionally distinct from fees charged by attorneys, and if attorneys normally do not include the expense in their hourly rate, the cost will be recoverable.
The 9th Circuit panel determined that "[n]either tradition nor statutory usage distinguishes computer-based legal research costs from attorney's fees." Therefore, the panel reasoned, if attorneys in the community where the suit is lodged usually separate the charge for online research from their hourly rates, parties may recover that expense as a reasonable attorney's fee. The panel remanded the issue for a determination of the prevailing practice in the local community.
Eighth Circuit's View Differs
Several other circuits have agreed with the 9th Circuit's decision. In fact, only the 8th Circuit has held otherwise. That court, in Standley v. Chilhowee R-IV Sch. Dist., 5 F.3d 319 (8th Cir. 1993), ruled that attorneys must include online research in their hourly rates, and that costs for the research cannot be included in fee awards.
This is an important issue for both attorneys and clients. Attorneys will always prefer to recover expenses from opposing parties rather than from their clients since it keeps the clients happy and increases the chance of repeat business. And clients, obviously, will appreciate not having to pay for the expenses themselves. Because this directly affects both the client's and attorney's bottom line, it is likely that the issue will end up before the Supreme Court at some point in the future. Given the prior Supreme Court decisions and the weight of the Circuit Courts' interpretations, it's a safe bet that the costs of online research will be recoverable as attorney's fees for the foreseeable future.