The opinion of the court was delivered by: HENRY KENNEDY, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiffs, four national organizations and individual Medicare
beneficiaries, brought this action against defendant Tommy G. Thompson,
Secretary, Department of Health and Human Services ("Secretary" or
"HHS"), for his failure to comply with statutory obligations under
42 U.S.C. § 1395w-24(a)(1) and 42 U.S.C. § 1395w-21(d). Presently
before this court is plaintiffs' motion for attorney's fees pursuant to
the Equal Access to Justice Act ("EAJA"), 28 U.S.C. § 2412 [#33].
Upon consideration of plaintiffs' motion, the opposition thereto, and the
record of this case, the court concludes that plaintiffs' motion for
attorneys fees should be granted.
I. BACKGROUND INFORMATION
The attorney's fee issue arises in the context of this suit which was
brought to require the Secretary to follow statutory directives that
implement the federal Medicareਚ≱ program. This program provides
beneficiaries the option of selecting health coverage from a variety of
private plans offered by participating Medicareਚ≱ Organizations
("MCOs"). In order to participate in the Medicareਚ≱ program, each
participating MCO must provide the Secretary
with detailed and accurate information describing the coverage they
offer on an annual basis. 42 U.S.C. § 1395w-24(a)(2)-(4). Once the
Secretary has this information, he is required "to broadly disseminate"
the information regarding the coverage options to eligible individuals,
42 U.S.C. § 1395w-21(d)(1), by mailing information comparing
the various plans to every eligible individual.
42 U.S.C. § 1395w-21(d)(2)(A).
This action ensued because of two actions taken by the Secretary in
2001. First, the Secretary extended the deadline for MCOs to submit
information to HHS regarding their plans. Although the statute at the
time required MCOs to provide the information by July 1 of each year,
42 U.S.C. § 1395w-24(a)(1), on May 25, 2001, responding to industry
complaints about the problems the statutory deadline posed for MCOs, the
Secretary notified three industry associations that he had extended the
deadline until September 17. Second, in equally blatant contravention of
statutory authority requiring him to mail plan comparison information to
eligible individuals, 42 U.S.C. § 1395w-21(d)(2), the Secretary
announced HHS's intention to omit plan comparison data from the annual
fall mailing to eligible individuals. In lieu of the mailing, HHS would
encourage beneficiaries to obtain plan information directly from HHS, via
a dedicated telephone service or the Internet.
Plaintiffs filed the instant action on June 22, 2001, and, on July 19,
2001, filed a motion for a preliminary injunction and for summary
judgment. Defending against the motion for a preliminary injunction, the
Secretary insisted that his actions were a proper response to logistical,
budgetary, and practical considerations. In an oral ruling from the bench
on August 9, 2001, this court rejected the Secretary's position, ruling
that assuming the Secretary possessed certain residual authority to
create statutory exceptions based upon "administrative necessity," he
not meet his heavy burden of showing the impossibility of
compliance with the statutory directives at issue in this case. Tr. of
Prelim. Inj. at 4 (Aug. 9, 2001). The court made particular mention of
the Secretary's "audacity" in claiming on the one hand that mailing plan
comparison information to beneficiaries would be too expensive, while on
the other proposing to spend $35 million on advertisements to
educate beneficiaries about how to obtain plan information. Id.
at 8. Thus the Secretary was enjoined to comply with § 1395w-21(d).
In compliance with the court's order, HHS disseminated a supplemental
mailing with the plan comparison information on October 17, 2001. Because
the July 1 deadline had passed, however, the Secretary did not comply
with § 1395w-24(a)(1) during that year. On September 6, 2002, the
court denied the Secretary's motion to dismiss for lack of subject matter
jurisdiction or for a stay of proceedings and granted plaintiffs' motion
for summary judgment.
Plaintiffs seek an award of attorney's fees under two provisions of the
EAJA. First, plaintiffs seek fees under 28 U.S.C. § 2412(d) which
authorizes an award of attorney's fees when the United States' position
was not substantially justified. A statutory cap on the hourly rate of
$125.00 exists for fees under § 2412(d), which can be adjusted for
cost of living increases. 28 U.S.C. § 2412(d)(2)(A)(ii). Second,
plaintiffs seek fees under 28 U.S.C. § 2412(b), which authorizes an
award of reasonable attorney's fees to the prevailing party in a civil
action brought against an official of the United States acting in his
official capacity. Section 2412(b) states that the United States shall be
liable for fees and expenses "to the same extent that any other party
would be liable under the common law." Plaintiffs contend that they are
entitled to fees under § 2412(b) under the common law's exception to
the "American Rule" against attorneys fees
"where the losing party has acted in bad faith." Am. Hosp.
Ass'n v. Sullivan, 938 F.2d 216, 219 (D.C. Cir. 1991) (internal
quotation marks and citations omitted). No statutory ceiling on the
hourly rate used to calculate fees under § 2412(b) exists; thus, an
award of attorney's fees for bad faith can be calculated at market rates.
See Kerin v. U.S. Postal Serv., 218 F.3d 185, 190-91 (2d Cir.
The Secretary only partially opposes plaintiffs' motion for fees. He
does not dispute that his position was not substantially justified under
§ 2412(d). The Secretary, however, argues that he did not act in bad
faith and, therefore, fees at the hourly rate permitted under Section
2412(b) are not warranted. He also disagrees with plaintiff's position
with respect to the reasonableness of the number of hours plaintiffs'
attorneys devoted to litigating certain aspects of this case.
A party may be required to pay attorney's fee as an exception to the
common law's "American Rule" against attorney's fees when the losing
party "has acted in bad faith, vexatiously, wantonly, or for oppressive
reasons." F.D. Rich Co. v. United States, 417 U.S. 116, 129
(1974). An award of attorneys fees under § 2412(b) can be based on
conduct occurring during the litigation or conduct that gave rise to the
litigation itself. Am. Hosp. Ass'n, 938 F.2d at 219. A court can
find pre-litigation bad faith "where a party, confronted with a clear
statutory or judicially-imposed duty towards another, is so recalcitrant
in performing that duty that the injured party is forced to undertake
otherwise unnecessary litigation to vindicate plain legal rights."
Id. at 220 (internal quotation marks and citation omitted).
"[T]he substantive standard for a finding of bad faith is `stringent' and
`attorney's fees will be awarded only when extraordinary circumstances or
dominating reasons of fairness so demand.'" Ass'n of Am. Physicians
Surgeons, Inc. v. Clinton, 187 F.3d 655, 660 (D.C. Cir.
1999) (quoting Nepera Chem., Inc. v. Sea-Land Serv., Inc.,
794 F.2d 688, 702 (D.C. Cir. 1986)). A finding of bad faith must be supported
by "clear and convincing evidence." Id. (quoting Shepherd v.
Am. Broadcasting Cos., 62 F.3d 1469, 1476-78 (D.C. Cir. 1995)).
Plaintiffs do not claim bad faith regarding the manner in which the
instant litigation was defended. Instead, plaintiffs argue that the
conduct that gave rise to this action was in bad faith, i.e., the
Secretary's extension of the deadline until September 17, 2001 for MCOs
to submit information about coverage options and his announcement that
HHS would not be disseminating comparative plan information by mail.
Having considered the evidence relevant to the issue, the court finds
by clear and convincing evidence that the Secretary's actions were in bad
faith. Specifically, while aware of the unambiguous statutory mandates of
42 U.S.C. § 1395w-24(a)(1) and 42 U.S.C. § 1395w-21(d), the
Secretary nevertheless engaged in conduct that required plaintiffs to
undertake otherwise unnecessary litigation to vindicate plain legal
rights. See Am. Hosp. Ass'n, 938 F.2d at 220. The Secretary's
explanation for his wanton conduct offers little in the way of a
counterweight to the evidence that supports this court's finding of bad
faith. The Secretary contends that he did not act in bad faith because
his motivation for extending the deadline for the submission of
information about MCO plans was his legitimate concern that the number of
MCOs leaving the Medicareਚ≱ program because of the time constraints
imposed by 42 U.S.C. § 1395w-24(a)(1) threatened the continuing
viability of the program. In this ...