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Bennett v. Castro

United States District Court, D. Columbia.

November 24, 2014

ROBERT BENNETT, et al., Plaintiff,

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For ROBERT BENNETT, LEILA JOSEPH, DELORES J. MOORE, Plaintiffs: Janell Maria Byrd, LEAD ATTORNEY, Craig L. Briskin, Steven A. Skalet, MEHRI & SKALET, PLLC, Washington, DC; Jean Marie Constantine-Davis, LEAD ATTORNEY, AARP FOUNDATION, Washington, DC.

For SHAUN DONOVAN, in his capacity as Secretary of the United States Department of Housing and Urban Development, Defendant: Thomas David Zimpleman, LEAD ATTORNEY, U.S. DEPARTMENT OF JUSTICE, Washington, DC.


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ELLEN SEGAL HUVELLE, United States District Judge.

Plaintiffs Robert Bennett and Leila Joseph have moved for an award of attorney's fees, costs, and expenses pursuant to the Equal Access to Justice Act (" EAJA" ), 28 U.S.C. § 2412. Plaintiffs originally brought suit in 2011 against the Secretary of the Department of Housing and Urban Development (" HUD" ) in his official capacity, alleging that the agency's implementation of the Home Equity Conversion Mortgage (" HECM" ) program violated the Administrative Procedure Act, 5 U.S.C. § 551, et seq. This Court initially dismissed the case for lack of standing in Bennett v. Donovan (" Bennett I " ), 797 F.Supp.2d 69 (D.D.C. 2011). The Court of Appeals reversed. See Bennett v. Donovan, 703 F.3d 582, 403 U.S.App.D.C. 262 (D.C. Cir. 2013).

This Court, on remand, granted summary judgment to plaintiffs. See Bennett v. Donovan (" Bennett II " ), 4 F.Supp.3d 5, (D.D.C. 2013). It found that HUD's regulations violated the unambiguous text of the implementing statute by authorizing the agency to insure HECMs that became due and payable upon the death of a mortgagor who was survived by a non-borrowing spouse. See id. at 14-15. Following the instructions of the Court of Appeals, this Court remanded to the agency to fashion appropriate relief. See id. at 15.

Plaintiffs now assert that, in light of this Court's decision in Bennett II, they are

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prevailing parties and that the government's position was not substantially justified. (Pls.' Mot. for Attorneys' Fees, Costs, and Expenses [ECF No. 51] (" Pls.' Mot." ).) Plaintiffs therefore request a total award of $293,932.40. ( Id. at 2.) For the reasons stated below, plaintiffs' motion will be granted in part and denied in part, and plaintiffs will be awarded $236,112.89.


The background of this case has been described by this Court and the Court of Appeals. See Bennett, 703 F.3d at 584-86; Plunkett v. Castro, No. 14-cv-326, 67 F.Supp.3d 1, at *3-15 (D.D.C. Aug. 28, 2014); Bennett II, 4 F.Supp.3d at 7-8; Bennett I, 797 F.Supp.2d at 71-73. The Court will therefore confine its discussion to the facts and statutory framework relevant to the instant motion.

HECMs, which are colloquially referred to as " reverse mortgages," allow homeowners to convert " a portion of accumulated home equity into liquid assets." 12 U.S.C. § 1715z-20(a)(1). A borrower who takes out an HECM loan may receive some combination of a lump sum payment, monthly payments, or a line of credit. See id. § 1715z-20(d)(9). Unlike a traditional mortgage, an HECM loan is generally not repaid until a specific " trigger" event occurs; for example, the death of the borrower or the sale of the home. See id. § 1715z-20(j); 24 C.F.R. § 206.27(c)(1). This arrangement is particularly favorable for the borrower because HECM loans are generally nonrecourse -- that is, they are secured only by the home. 12 U.S.C. § 1715z-20(d)(3). If the value of the home is less than the amount of the loan when the trigger event occurs and the loan comes due, the lender has no recourse to the borrower's other assets. Since the loan balance increases over time as interest accumulates, lenders can face a major loss if the borrower lives longer than expected.

In order to mitigate this risk and encourage lenders to provide elderly homeowners with HECM loans, Congress authorized HUD to insure HECMs that meet certain eligibility requirements. See 12 U.S.C. § 1715z-20(a), (d), (j). The particular provision at issue in the underlying litigation states:

The Secretary may not insure a home equity conversion mortgage under this section unless such mortgage provides that the homeowner's obligation to satisfy the loan obligation is deferred until the homeowner's death, the sale of the home, or the occurrence of other events specified in regulations of the Secretary. For purposes of this subsection, the term " homeowner" includes the spouse of a homeowner.

12 U.S.C. § 1715z-20(j). In implementing the statute, HUD issued the following regulation concerning when HECM loans become due and payable:

The mortgage shall state that the mortgage balance will be due and payable in full if a mortgagor dies and the property is not the principal residence of at least one surviving mortgagor, or a mortgagor conveys all or his or her title in the property and no other mortgagor retains title to the property. For purposes of the preceding sentence, a mortgagor retains title in the property if the mortgagor continues to hold title to any part of the property in fee simple, as a leasehold interest as set forth in § 206.45(a), or as a life estate.

24 C.F.R. § 206.27(c)(1).

Plaintiffs are widowed spouses of holders of HECMs insured by HUD. Bennett II, 4 F.Supp.3d at 7-8. Plaintiffs were neither listed on the deeds to their spouses' homes nor on the HECMs that their spouses had signed. Bennett I,

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797 F.Supp.2d at 73. Consistent with 24 C.F.R. § 206.27(c), the HECM loans became due and payable upon the death of the mortgagors, i.e., plaintiffs' spouses. Id. Facing foreclosure, plaintiffs brought suit, alleging that HUD's regulations violated federal law by failing to protect non-mortgagor spouses as required by 12 U.S.C. § 1715z-20(j).

In their motion for summary judgment, plaintiffs contended that 12 U.S.C. § 1715z-20(j) was " capable of a single meaning: namely, that HUD may only insure reverse mortgages that come due after the death of both the homeowner (the mortgagor) and the spouse of that homeowner regardless of whether that spouse is also a mortgagor." Bennett II, 4 F.Supp.3d at 9. Defendant responded that subsection (j) was " ambiguous because the statute can also be read to protect only those spouses who are co-obligors on a reverse mortgage." Id. at 9-10.

The Court found that defendant's interpretation of the statute " would render the second sentence of subsection (j) mere surplusage" because, if a spouse was a co-obligor on a reverse mortgage, " he or she would automatically be considered a 'homeowner' under the terms of the statute.'" Id. at 10. The Court pointed out that Congress used the phrase " each mortgagor" in another subsection of the same statute and could have used similar language in subsection (j) had it intended to convey the meaning suggested by defendant. Id. at 11.

The Court also noted that the statute's legislative history supported plaintiffs' interpretation. In particular, a report by the Committee on Banking, Housing and Urban Affairs stated that subsection (j) was " intended to 'defer[] any repayment obligation until death of the homeowner and the homeowner's spouse. . . ." Id. at 13 (alterations in original) (quoting S. Rep. No. 100-21, at 28 (1987)). Defendant's only response was to cite a Conference Report discussing HUD's discretion in implementing the HECM program, but defendant " fail[ed] to point to any language in the Conference Report that specifically address[ed] the question presented in [the] case." Id.

The only other pertinent argument put forward by defendant was that HUD could, under the " other events" clause of subsection (j), " make the death of all borrowers a triggering event." Id. at 14 (quoting Def.'s Combined Mem. in Supp. of his Mot. for Summ. J. and Opp. to Pls.' Mot. for Summ J. [ECF No. 33] (" Def.'s MSJ" ) at 20.) This Court found that argument " without merit" since it would " render another statutorily-specified triggering event ('the homeowner's death') meaningless." Id.

The Court granted summary judgment to plaintiffs, concluding that 12 U.S.C. § 1715z-20(j)'s meaning was unambiguous under Chevron step one. See id. at 12 (" [The statute] means what it says: the loan obligation is deferred until the homeowner's and the spouse's death." ). The Court held that " HUD's regulation as applied to plaintiffs is invalid." Id. at 14. Following the guidance provided by the Court of Appeals, this Court remanded to the agency " so that it [could] fashion appropriate relief." Id. at 15.

Plaintiffs now argue that, pursuant to the EAJA, they are entitled to $293,932.40 in attorney's fees, costs, and expenses. (Pls.' Mot. at 1.) The EAJA provides, in relevant part, that " a court shall award to a prevailing party . . . fees and other expenses . . . incurred by that party in any civil action . . . , including proceedings for judicial review of agency action, brought by or against the United States . . . , unless the court finds that the position of the United States was substantially justified or that special circumstances make an award

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unjust." 28 U.S.C. § 2412(d)(1)(A). Plaintiffs contend that they are prevailing parties and that the government's position was not substantially justified. Defendant disagrees, and, in the alternative, it challenges the amount of plaintiffs' requested award. The Court will address these issues in turn.



The D.C. Circuit has articulated a three-part test for determining whether a party has prevailed for purposes of fee-shifting statutes: " (1) there must be a 'court-ordered change in the legal relationship' of the parties; (2) the judgment must be in favor of the party seeking the fees; and (3) the judicial pronouncement must be accompanied by judicial relief." District of Columbia v. Straus, 590 F.3d 898, 901, 389 U.S.App.D.C. 58 (D.C. Cir. 2010) (quoting Thomas v. NSF, 330 F.3d 486, 492-93, 356 U.S.App.D.C. 222 (D.C. Cir. 2003)). A " mere 'judicial pronouncement,' . . . unaccompanied by ' judicial relief,' is not sufficient to make a claimant a 'prevailing party.'" Thomas, ...

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