In the 1983 case of Blum v. Stenson, the U.S. Supreme Court ruled that under federal law, attorneys who win cases against government agencies can recover "reasonable" fees from those agencies. The court held that these fees should not be reduced simply because the attorney was working for a nonprofit organization and had promised to represent their client free of charge. The decision came after New York's Department of Social Services appealed an earlier ruling which awarded legal costs to a group representing welfare recipients in a class action suit against them. The department argued that since the lawyers were salaried employees of a non-profit organization, they shouldn't receive full market rates as compensation for their work on this case but rather only direct out-of-pocket expenses incurred during litigation process should be reimbursed by losing party (the state). However, Supreme Court disagreed with this argument stating it would undermine Congress’s intent behind Civil Rights Attorney’s Fees Awards Act of 1976 - encouraging private enforcement civil rights violations through provision reasonable attorney's fee awards.

In the dissenting opinion for Blum v. Stenson, Justice Powell argued that the majority's decision to award attorney's fees based on current rates rather than historical ones would lead to excessive fee awards and potentially drain public funds. He contended that this approach was inconsistent with Congress' intent when it enacted the Civil Rights Attorney’s Fees Awards Act of 1976, which aimed at ensuring reasonable attorneys’ fees. Powell also disagreed with the majority's refusal to consider whether paralegal time should be billed separately or included in overhead costs, arguing that such a practice could inflate fee awards even further. He expressed concern about potential abuse by lawyers who might take advantage of these rulings for personal gain rather than focusing on serving their clients' interests.