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GRAY PANTHERS PROJECT FUND v. THOMPSON

February 23, 2004.

THE GRAY PANTHERS PROJECT FUND, et al., Plaintiffs,
v.
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 Page 2 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 could Page 3 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.

  II. ANALYSIS

  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 Page 4 "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. 2000).

  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 & Page 5 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 ...


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