Streamlining Attorney's Fee Litigation Under the Equal Access to Justice Act

  • Recommendation number: 92-5
  • Adopted on: June 19, 1992
  • Publication Date: June 19, 1992
  • Tags: Congress

Congress first waived the government’s immunity from attorney’s fee awards in the Equal Access to Justice Act (EAJA), 5 U.S.C. 504, 28 U.S.C. 2412(d), in 1980 and reenacted the Act in 1985. The EAJA authorizes certain private parties that prevail in non-tort civil litigation against the United States in both courts and agencies to recover their fees and expenses. No recovery is allowed, however, if the government demonstrates its position was substantially justified, which has been construed to require the government to show its position had a reasonable basis in both law and fact. The Act precludes fee awards to parties that exceed a specified net worth or, in the case of businesses and organizations, number of employees. It also sets a maximum hourly rate for attorney’s fees of $75 per hour. The rate can be raised if the court “determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceedings involved, justifies a higher fee”; in agency proceedings, the agency must make such a determination through rulemaking. With cost-of-living increases, attorneys can, at present, hope to recover a little over $100 per hour under the EAJA for most court litigation, though they remain limited to $75 per hour for most litigation before agencies.

Congress sought to accomplish two interconnected goals in the Act: To provide an incentive for private parties to contest government overreaching and to deter government wrongdoing. Congress feared that parties with limited resources would not be able to defend vigorously against government enforcement actions or to challenge opprobrious regulation. One-way fee shifting under the Act was intended to help rectify the imbalance in resources. Because fee awards must be paid out of the offending agency’s budget, Congress hoped that EAJA litigation would also spur agencies to act more prudently, particularly when determining the rights of parties of modest means.

Congress originally estimated that the EAJA would cost the government $100 million a year. In recent years, approximately 2,000 EAJA applications have been resolved each year, of which the vast majority involve social security disability or similar individual benefits disputes. The total payout of fees in these cases has been only $5 to $7 million per year.

Reducing Litigation and Encouraging Settlement

Although the EAJA may not have been used as often as predicted, it has nevertheless generated a significant amount of contentious litigation. Relatively few EAJA applications appear to be settled, and the empirical evidence available indicates that fee litigation often results in more complicated proceedings than are merited. Ambiguous provisions in the Actsuch as the substantial justification standard and the provision permitting enhancements to the fee capfoster additional litigation and minimize the potential for settlement of fee disputes. The Administrative Conference believes amendments to the EAJA would produce significant savings in litigation costs.

To reduce litigation over the proper amount of fees awardable under the EAJA, the Conference recommends several technical modifications to the Act. First, Congress should strike the provision allowing enhancement of fees when “a special factor, such as the limited availability of qualified attorneys for the proceedings involved, justifies a higher fee.” The enhancement provision breeds uncertainty, costs money to litigate, and makes settlement more difficult to obtain. Second, Congress should amend 28 U.S.C. 2412(d)(2) to specify how courts should calculate cost-of-living increases.  Little is gained by litigating over issues such as which price index or subcategory of an index to use in these calculations. Third, Congress should make clear that fees are to be calculated at the adjusted rate applicable on the date the judge or adjudicator issues an order granting the EAJA application.  Currently, courts are split as to when the cost-of-living increase in applicable-for instance, whether it should be calculated as of the date the work is performed, or as of some later date. Choosing the date when the application is granted creates a bright line rule that should simplify the calculation and compensate a private party to a limited extent for the delay in payment, e.g., payment in 1992 for work performed in 1986. Fourth, because the Conference recommends eliminating the enhancement provision and including an offer-of judgment provision (described below), both of which should tend to reduce the fees payable by the government, it also recommends raising the fee cap to approximate more closely the prevailing market rate for attorneys, to ensure the level of compensation under the Act remains adequate to serve its purposes.

In addition to these relatively technical modifications to the Act, the Administrative Conference recommends that Congress enact an offer-of-judgment provision to help encourage settlements of fee disputes arising under the EAJA. Upon receiving a private party’s fee application, the government could make an offer of judgment as to the fee award. If the private party rejects that offer and ultimately recovers no more than the offer, it could not recover any fees or expenses incurred for services rendered after the offer was rejected. The offer-of-judgment device should encourage settlement, thereby saving both parties the expense of litigating fee disputes; while the government party gains leverage by extending an offer of judgment, the private party benefits from the opportunity to obtain prompt payment of fees.

This offer of judgment recommendation and the four technical recommendations that precede it involve careful balancing of factors that may either increase or reduce the incentives for attorneys to accept EAJA cases. The Conference presents them as a single package, rather than separate proposals, and emphasizes the interrelationship among the recommendations.

The Conference also recommends Congress act to resolve problems involving implementation of the EAJA’s requirement that parties seeking fees file applications within 30 days after final judgment (or final disposition in agency proceedings). Thirty days does not always provide adequate time for prevailing parties to prepare the necessary materials, and the jurisdictional nature of the requirement forecloses the option of a time extension. Extending the filing deadline to 60 days would reduce the pressure on fee applicants without undue prejudice to the government. More importantly, the Supreme Court’s recent decision in Melkonyan v. Sullivan, 111 S. Ct. 2157 (1991) and Sullivan v. Finkelstein, 110 S. Ct. 2658 (1990), have spawned significant litigation about the timeliness of EAJA applications when the federal courts remand cases to agencies.  Currently, some district court remands to agencies are considered final judgments, thus triggering the 30-day filing limit in the EAJA, even though claimants do not yet know whether they have “prevailed” in the underlying action. The uncertainty created by these cases could be avoided by making clear in the statute that the filing deadline is not triggered in a proceeding on remand until the party has prevailed in the remanded proceeding. Alternatively, Congress could resolve these problems by deleting the 30-day requirement. Most other attorney’s fee statutes do not include any such deadline, and attorneys waiting to be paid for their services will have no incentive to delay filing.

Congress should also encourage private parties litigating against the United States to inform the court or administrative adjudicator before judgment if they intend to apply for EAJA fees should they prevail.  This would permit such decision makers, in appropriate cases, to make a determination as to the substantial justification of the government’s position at the same time they resolve the merits. That simultaneous finding may obviate the need for more extensive briefs at a later time.

Streamlining Fee Disputes in Individual Benefit Cases

Individual benefit claims brought directly under 42 U.S.C. 405(g) or under a provision cross-referencing 42 U.S.C. 405(g), which include social security disability, SSI, Medicare and similar claims, raise some unique issues deserving special consideration. Currently, the substantial justification issue is litigated in a high percentage of all EAJA disputes arising out of such benefit cases; from July 1989 to June 1990, the government prevailed in less than 15% of these disputes. The average EAJA award in such cases is less than $3,500. In light of these facts, the Conference concludes the substantial justification standard should be eliminated for benefit cases involving individual claimants (but not for class actions).  Although automatic fee shifting in these cases would increase the government’s exposure to EAJA awards, that increase would be counterbalanced to some extent by the elimination of considerable government expense in litigating the substantial justification issue.

More importantly, elimination of the substantial justification standard should enable benefit claimants to find representation. Currently, parties seeking to press small disability claims and most SSI claims may have difficulty retaining counsel either through hourly rates or through a contingency fee arrangement; eliminating the substantial justification standard should help ensure the availability of counsel in these cases by making certain that a reasonable fee will be available for any successful claim. In addition, in casesprimarily disability casesin which claimants can obtain counsel through contingency fee arrangements (restricted, in social security cases, to a reasonable fee not to exceed 25% of back benefits, 42 U.S.C. 406(b)), their counsel currently have little incentive to apply for fees under the EAJA.  If counsel have a contingency fee arrangement and obtain an EAJA fee award, they must return the lesser award to the claimant. Public Law 96-481, Section 206, as amended by Public Law 99-80, Section 3, 99 Stat. 186 (August 5, 1985). Not surprisingly, many successful benefits claimants do not apply for EAJA fees (fewer than 40 percent did so from July 1989 to June 1990), even though private parties’ success rate in EAJA litigation exceeds 80 percent.

Extending the EAJA’s Coverage

Finally, the Conference recommends Congress consider extending the Act’s coverage, on a category-by-category basis, to particular agency and court proceedings that have the same characteristics as those adversary proceedings now covered by the Act. The Act covers only “adversarial adjudications” in agencies, which are defined as “adjudications under section 554 of [title 5].” The Supreme Court in Ardestani v. INS, 112 S. Ct. 515 (1991), construed that provision to exclude agency proceedingssuch as deportation caseswhich have virtually the identical attributes as proceedings under section 554 but are not technically covered by that provision. Similarly, it is unclear whether EAJA covers all litigation against the United States in Article I courts, even though such proceedings are often directly analogous to those covered by the Act in Article III courts.  Congress has dealt explicitly with some of these courts; for example, the EAJA was amended in 1985 to include the United States Claims Court, and a separate statute, with somewhat different standards than the EAJA, provides for fee awards in Tax Court proceedings. 26 U.S.C. 7431. But other Article I bodies remain to be considered. The Court of Veterans Appeals, for example, recently decided it does not have authority to award attorney’s fees under the Act. Jones v. Derwinski, No. 90-58 (March 13, 1992).

 

Recommendation

 

1. Congress should amend the Equal Access to Justice Act, 5 U.S.C. 504, 28 U.S.C. 2412(d), as follows:

a. To reduce litigation over the dollar value of fee awards, (1) the provision in the Act allowing enhancement of fees when “a special factor, such as the limited availability of qualified attorneys for the proceedings involved, justifies a higher fee” should be stricken, (2) the Act should specify the precise method to be used in calculating future cost-of-living  adjustments to the fee cap, (3) the Act should state the rate to be used is the one that is applicable when the judge’s (or administrative adjudicator’s) order awarding EAJA fees is issued, and (4) the $75 per hour fee cap should be raised to approximate more closely the prevailing market rate for attorneys.

b. To encourage settlements, the Act should include an offer-of-judgment procedure: after an EAJA application is filed, the government may make an offer of judgment on the EAJA claim; if the private party rejects the government’s offer and is ultimately awarded no more than that offer, that party forfeits the right to seek fees or expenses for the EAJA litigation from the time the offer of judgment is rejected.

c. To eliminate litigation on the question of when prevailing parties must file for fees, either the 30-day filing deadline in 5 U.S.C. 504 and 28 U.S.C. 2412(d) should be extended to 60 days, to run from the date of final disposition of the case,1 or the filing deadline should be eliminated.

d. To promote judicial economy, the Act should encourage private parties litigating against the United States to notify the court or administrative adjudicator prior to judgment if they intend to file an EAJA application should they prevail, so as to enable the decisionmaker, in appropriate cases, to determine whether the government’s position was substantially justified within the meaning of the Act of the same time that judgment is entered against the United States.

2. Congress should modify the provisions of 28 U.S.C. 2412(d) as they apply to individual benefit claims either brought directly under 42 U.S.C. 405(g) or Under a provision cross-referencing 42 U.S.C. 405(g) in the federal courts. For those cases, the Act should provide for fee awards to prevailing claimants in individual actions without reference to whether the position of the United States was substantially justified.

3. Congress should consider whether to extend the Act’s coverage, on a category-by-category basis, to:

a. Agency proceedings that, although not technically adjudications “under section 554 of Title 5),” are required by statute to employ procedures equivalent to those of such formal adversary proceedings;

b. Proceedings before Article I courts that have the same attributes as covered proceedings in Article III courts and in agencies.

 

Citations:

57 FR 30108 (July 8, 1992)

__ FR _____ (2011)

1992 ACUS 19


1 “Final disposition” occurs when a party has prevailed in a proceeding and the disposition of the proceeding is final and unappealable; in proceedings involving a remand from a court to an agency, final disposition does not occur until the remanded proceeding is concluded and the resulting administrative order is final and unappealable.