United States District Court for the District of Columbia
February 23, 2004.
THE GRAY PANTHERS PROJECT FUND, et al., Plaintiffs,
TOMMY G. THOMPSON, Secretary, Department of Health and Human Services, Defendant
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. Bad Faith
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 regard, the Secretary points to
Congress's revision of the statutory deadlines in 2002, an action, he
maintains, shows that his concerns regarding the 2001 deadlines were bona
fide. Pub.L. No. 107-188, §
532(b)(1), 116 Stat. 594, 696 (2002).
The following considerations undermine the exculpatory nature of the
Secretary's explanation: (1) this court does not accept the unspoken
message which the Secretary's explanation seeks to convey viz.,
his actions were really for the benefit of the intended beneficiaries of
the Medicareਚ≱ program rather than the parties who, because of their
obvious access to him, were able to persuade him to do what they wanted
him to do, (2) in any event and to state the obvious, the Secretary has
no more right to violate the law because he thinks he knows best than any
other public official who like him took an oath to uphold the law
regardless of their thinking regarding its wisdom, and (3) regardless of
the Secretary's explanation for not following the mandate of
42 U.S.C. § 1395w-24(a)(1), in his opposition to the present motion he offers
none for his decision to ignore the requirements of
42 U.S.C. § 1395w-21(d) which required him to mail information comparing the
various plans to every eligible individual. With respect to §
1395w-21(d), the Secretary can point to no subsequent revision of this
law to show that any rationale he might have had for ignoring it was, in
the end, well taken or in a sense ratified. To the contrary, the
Secretary's proposed means for disseminating information by telephone and
Internet almost certainly would have been insufficient. As the court
stated when it enjoined the Secretary from disobeying § 1395w-21(d),
"[t]hese sources of information, although useful, will not alleviate the
harm alleged by plaintiffs. For instance, as the [Centers for Medicare
and Medicaid Services ("CMS")] administrator recently stated in testimony
before Congress, a CMS sponsored survey revealed that in 1999 only 21.3
percent of Medicare beneficiaries reported having access to the
Internet." Tr. of Prelim. Inj.
Other evidence in the record also lends support to a finding of bad
faith. The Secretary made no effort to inform Medicare beneficiaries of
the changes he was unilaterally making, despite his knowledge that any
change in the deadlines deadlines would have "a direct effect on the
information that is provided to beneficiaries to make health care
choices." Ex. A to Compl. (May 25, 2001 letter). Only one month after HHS
issued Operational Policy Letter (OPL) 132 on April 27, 2001, that stated
there would be a July 1 deadline for submitting information, it issued
the May 25, 2001 letter that extended the deadline to September 17.
Medicare beneficiaries and the public in general were not informed about
the change in deadlines through published notice or other means. Three
weeks after the May 25, 2001 letter, the Secretary of HHS sent three
memoranda to MCOs detailing the new deadlines and stating that
comparative information would not be mailed. The Health Care Financing
Administration's ("HCFA") web sites for beneficiaries did not contain
links to the three memoranda in the What's New folder and
Information for Beneficiaries folder. Gottlich Decl. ¶ 4
(attach, to PL's Mot. for Prelim. Inj.). The three memoranda appeared on
the web sites only in HCFA's Information for Plans and Providers
folder. Id. By contrast, a link to OPL 132, which indicated a
July 1 deadline would be in effect, had appeared on the What's
New folder in April 2001. Id. ¶ 3. Thus, it appears
Secretary was less than completely transparent and forthcoming
about the fact that he had extended deadlines and did not intend to mail
comparative information in violation of the statute.
The Secretary's actions in direct contradiction to congressional
directives coupled with his failure to consult with or notify
beneficiaries were "extraordinary circumstances" warranting an award of
bad faith attorney's fees. Ass'n of Am. Physicians, 187 F.3d at
660 (D.C. Cir. 1999) (quoting Nepera Chem, 794 F.2d at 702).
Indeed, "dominating reasons of fairness so demand." Id.
B. Calculation of Reasonable Attorney's Fees
To determine the reasonable amount of fees, the court conducts a
three-part analysis: (1) a determination of the reasonable number of
hours expended, (2) a determination of the hourly rate, and (3) where
appropriate, a determination of a multiplier or other adjustment. See
Covington v. Dist. of Columbia, 57 F.3d 1101, 1107 (D.C. Cir. 1995).
Plaintiffs do not seek a multiplier in this action; thus the court need
only calculate the reasonable hourly rate and the reasonable number of
1. Hourly Rate
No ceiling on the hourly rate exists for an award of attorney's fees
for bad faith. 28 U.S.C. § 2412(b); Kerin, 218 F.3d at
190-91. Plaintiffs' counsel are therefore entitled to fees at prevailing
market rates. Covington, 57 F.3d at 1108 & nn.16, 17.
Plaintiffs calculate the reasonable market rate in 2001 at $360/hour, and
in 2002 at $370/hour. HHS does not dispute these market rates.
2. Reasonableness of Hours Expended on this Litigation
Plaintiffs argue that all hours expended in this litigation should be
compensated at bad
faith rates because defendant's bad faith necessitated this action.
The Secretary argues that bad faith rates, if warranted at all, should be
applied only to those hours expended before August 9, 2001, when the
court issued the preliminary injunction with which he complied. The
Secretary also argues that plaintiffs are not entitled to attorneys fees
for 14 hours of work relating to a motion to enforce that was never
Courts have apportioned hours at bad faith rates and EAJA rates when
bad faith arose from conduct occurring in the course of litigation.
See Ostano Commerzanstalt v. Telewide Sys., Inc., 880 F.2d 642,
650 (2d Cir. 1989) ("Only those fees attributable to the offensive
conduct can be awarded."); Sierra Club v. U.S. Army Corps of
Engineers, 776 F.2d 383, 389 (2d Cir. 1985) (requiring that an award
of bad faith attorney's fees be "limited to those expenses necessary to
counter a losing party's bad faith"); Ass'n of Am. Physicians &
Surgeons, Inc. v. Clinton, 989 F. Supp. 8, 15 (D.D.C. 1997)
(awarding attorneys fees at market rates until the defendants began
acting in good faith), rev'd on other grounds, 187 F.3d 655
(D.C. Cir. 1999). Because pre-litigation bad faith is at issue in the
instant case, these cases are not on point. In determining whether a
partys position was substantially justified under § 2412(d), one
threshold determination governs eligibility for fees for the entire
action. See Commissioner, I.N.S. v. Jean, 496 U.S. 154, 160
(1990); Anthony v. Sullivan, 982 F.2d 586, 589 (D.C. Cir. 1993).
In Jean, the Court noted that the EAJA "favors treating a case
as an inclusive whole, rather than as atomized line-items." 496 U.S. at
161-62. The Court also stated that district courts have "discretion to
adjust the amount of fees for various portions of the litigation, guided
by reason and statutory criteria. . . . Congress intended the EAJA to
cover the cost of all phases of successful civil litigation addressed by
the statute." Id. at 165-66. In determining attorney's fees
under the Hyde
Amendment,*fn2 the Sixth Circuit held that the district court
should look to the losing party's position as a whole and make only one
finding as to whether the losing party's position was vexatious,
frivolous, or in bad faith. United States v. Heavrin,
330 F.3d 723, 730 (6th Cir. 2003). This court agrees with the rationale of the
Heavrin court. Because cases should be treated as a whole in
determining EAJA fees, this court will make one determination of bad
faith concerning the Secretary's pre-litigation conduct. His failure to
abide by congressional mandates necessitated this action; therefore, all
of the hours expended on this litigation were attributable to his bad
faith, even after the issuance of the preliminary injunction.
The court finds that plaintiffs are entitled to attorneys fees for 14
hours of work relating to the motion to enforce that was never filed.
Apparently, at an October 3, 2002 meeting with employees of the Centers
for Medicare and Medicaid Services ("CMS"), CMS employees stated that the
handbook to be sent out later in the fall to beneficiaries would not
include comparative information about 33 Preferred Provider Organizations
("PPOs") that were participating in a demonstration project. Plaintiffs'
counsel believed this to be in violation of this court's order and began
preparing pleadings to enforce the order. Before the filing of the motion
to enforce, a CMS employee sent plaintiffs' counsel a letter stating that
CMS would include written information on the PPOs in the handbook.
Plaintiffs' counsel then did not file the motion to enforce. Counsel for
defendant represents that plaintiffs made no effort to contact defendant
about this matter before drafting the motion to enforce.
Defendant argues that plaintiffs were not a prevailing party in this
matter and that the court should not reward the "brief first, inquire
later" approach plaintiffs adopted regarding the motion to enforce.
Def.'s Opp'n at 17. Plaintiffs' counsel rejoins that they reasonably
began work on a motion to enforce because, based on the statements of CMS
employees at the October 3, 2002, meeting, time was of the essence so
there was no reason to delay in drafting a motion to enforce. Although
plaintiffs could have conferred with defendant earlier, plaintiffs did
not violate LCvR 7(m), which requires only that the parties confer before
a motion is filed. The court finds that plaintiffs' counsel reasonably
expended the 14 hours on the motion to enforce, given defendant's
previous adherence to a position that was not substantially justified and
in bad faith.
Accordingly, the court awards plaintiffs attorney's fees in the
Attorney 2001 (Hours @ $360) 2002 (Hours @ $370) Total
Chiplin 16.3 hours: $5,868 0 $5,868
Deford 11 6.6 hours: $41,976 100.3 hours: $37,111 $79,087
Gottlich 17 1.4 hours: $61,704 14.0 hours: $5,180 $66,884
Hart 18.6 hours: $6,696 0 $6,696
Nemore 26.5 hours: $9,540 1.5 hours: $555 $10,095
Stein 14.7 hours: $5,292 0 $5,292
TOTAL: 364.1 hours: $131,076 121.8 hours: $42,846 $173,922
For the foregoing reasons, it is this 23rd day of February, 2004,
ORDERED, that plaintiffs' motion for attorneys fees is
GRANTED; and it is further
ORDERED that the Secretary shall pay plaintiffs' attorneys
fees in the amount of $173,922.