Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
In the case of:
Charles J. Godreau, M.D.,
Petitioner,
- v. -
The Inspector General.
DATE: February 14, 1992
Docket No. 91-152
Decision No. 1300
FINAL DECISION ON REVIEW OF ADMINISTRATIVE LAW JUDGE DECISION ON FEE AWARD
This case is before us on exceptions filed by the Inspector General
(I.G.)
to the September 20, 1991 decision of Robert J. Kelly, an
administrative law
judge (ALJ) in the Office of Hearings and Appeals,
Social Security
Administration (ALJ Decision). The ALJ Decision awarded
attorney fees
and expenses to Charles J. Godreau, M.D. (Petitioner)
under the Equal Access
to Justice Act (EAJA), 5 U.S.C. .504. 1/ Section
504 provides for an
award of fees and other expenses incurred by a
prevailing party (other than
the United States) in an agency
adjudication. Petitioner applied for
such an award after the ALJ, in a
decision dated November 30, 1990, had
reversed the I.G.'s determination
to exclude Petitioner from participation in
the Medicare program and
state health care programs for a period of ten years
pursuant to section
1128(b)(6)(B) of the Social Security Act.
The I.G. did not dispute that Petitioner was entitled to an award of
fees
and expenses; however, he took exception to the ALJ's decision to
award
attorney fees at a rate in excess of $75 per hour.
For the reasons discussed below, we conclude that the ALJ erred
in
awarding attorney fees in excess of $75 per hour and modify the
ALJ
Decision to provide for attorney fees not in excess of $75 per hour.
2/
We note that, during the course of the proceedings before the
Board,
Petitioner identified additional fees and expenses for which
he
requested reimbursement under EAJA. As discussed in the last section
of
this decision, however, consideration of this request is outside
the
scope of this proceeding.
Relevant Statutory and Regulatory Provisions
Congress enacted EAJA in 1980 as a result of its concern that
certain
individuals and organizations "may be deterred from seeking review
of,
or defending against, unreasonable government action because of
the
expense involved in securing the vindication of their rights."
H.R.
REP. NO. 1418, 96th Cong., 2nd Sess. 5 (1980). EAJA contains
separate
provisions authorizing the award of fees and expenses to the
prevailing
party in administrative adjudications (5 U.S.C. .504) and in
civil
actions (codified at 28 U.S.C. .2412). As originally enacted,
EAJA
provided for the repeal of sections 504 and 2412 effective October
1,
1984. Public Law 96-481, sections 203(c) and 204(c). However,
in 1985,
Congress revived EAJA without any provision for automatic
repeal.
Public Law 99-80, section 6.
The provisions of EAJA applicable to agency adjudications state
in
pertinent part:
An agency that conducts an adversary adjudication shall
award,
to a prevailing party other than the United States, fees
and
other expenses incurred by that party in connection with
that
proceeding, unless the adjudicative officer of the agency
finds
that the position of the agency was substantially justified
or
that special circumstances make an award unjust. Whether or
not
the position of the agency was substantially justified shall
be
determined on the basis of the administrative record, as
a
whole, which is made in the adversary adjudication for
which
fees and other expenses are sought.
5 U.S.C. .504(a)(1). "Fees and other expenses" are defined as:
the reasonable expenses of expert witnesses . . . and
reasonable
attorney or agent fees (the amount of fees awarded under
this
section shall be based upon prevailing market rates for the
kind
and quality of the services furnished, except that . .
.
attorney or agent fees shall not be awarded in excess of $75
per
hour unless the agency determines by regulation that an
increase
in the cost of living or a special factor, such as the
limited
availability of qualified attorneys or agents for
the
proceedings involved, justifies a higher fee.)
5 U.S.C. .504(b)(1)(A).
Section 504(c)(1) provides in pertinent part that "[a]fter
consultation
with the Chairman of the Administrative Conference of the United
States,
each agency shall by rule establish uniform procedures for
the
submission and consideration of applications for an award of fees
and
other expenses."
Regulations implementing EAJA were promulgated by the Department of
Health
and Human Services (Department) on October 4, 1983. 45 C.F.R.
Part
13. Section 13.2 states that the regulations "apply to
adversary
adjudications pending before the Department between October 1, 1981
and
September 30, 1984." Section 13.6(b) states in pertinent part that
an
award of fees made under EAJA "may not exceed $75 per hour,
regardless
of the actual rate charged by the attorney."
On June 19, 1987, the Department promulgated proposed regulations
which
would extend the coverage of 45 C.F.R. Part 13 to include
adjudications
that were pending after September 30, 1984. 52 Fed. Reg.
23311. While
certain other changes in the original regulations were
proposed, no
change was proposed in the $75 per hour limit on fee
awards. As of the
date of this decision, final regulations had not been
promulgated. .The
ALJ Decision To Award Fees
As previously indicated, the I.G. challenged only that part of the
ALJ
Decision which pertains to the rate at which attorney fees are to
be
reimbursed. The ALJ characterized the issue before him as "whether
the
Petitioner is entitled to reimbursement of fees and expenses at
the
`statutory' or the `market' rate." ALJ Decision, p. 10. The
ALJ noted
the I.G.'s argument that any award should be limited to $75 per
hour
because the Department has not promulgated regulations authorizing
an
award in excess of that amount and the proposed regulations limit
the
award of fees to $75 per hour. The ALJ also noted Petitioner's
argument
that, absent final regulations, an award could properly be made at
a
rate in excess of $75 per hour because the statute
specifically
contemplates the award of fees in excess of that rate under
special
circumstances. The ALJ found the latter argument "persuasive,"
stating:
Although the statute clearly delineated the need
for
effectuating regulations which have not yet been promulgated,
it
also clearly enunciated the fact that the statutory rate
might
be inequitable under certain circumstances. The
undersigned
does not feel that the Petitioner should be penalized
because
the Secretary has not yet finalized regulations proposed
more
than four years ago, especially when the intent of Congress,
as
codified by statute, is clear.
ALJ Decision, p. 10. 3/
The ALJ therefore proceeded to consider whether special factors
warranted
an hourly rate in excess of $75, finding that --
[i]n fact, several "special factors" do exist, not the least
of
which is the behavior of the OIG, which surely cost
the
Petitioner more to prepare his case than he would otherwise
have
had to spend to defend himself had the OIG's actions not been
so
deficient procedurally. Further, because of the
complexities
created by the OIG's unorthodox methods, and the severity
of the
sanction imposed, Dr. Godreau was justified in seeking
special
counsel to represent him. The Petitioner originally
sought
local counsel, who advised him to retain a "specialist."
Unfortunately, the availability of local attorneys qualified
to
handle such a specialized case is limited, and Dr. Godreau
was
referred to Mr. Meals, who has significant,
nation-wide
experience in handling similar claims. Therefore,
the
Administrative Law Judge concludes that the Petitioner
is
entitled to reimbursement at a higher rate than $75 an hour.
ALJ Decision, pp. 10-11.
The I.G. filed three exceptions to the ALJ Decision: (1) to the
ALJ's
finding that the fee award could be calculated at the "market"
rate
rather than the "statutory" rate; (2) to the ALJ's finding that
"special
factors" existed in this case; and (3) to the ALJ's finding that
the
government acted in bad faith. As discussed below, we conclude that
the
I.G.'s first exception is well-taken and that the ALJ had no
authority
to award attorney fees in excess of $75 per hour. The I.G.'s
remaining
exceptions raise substantial questions as to whether there was
a
reasonable basis for an award of fees in excess of $75 per hour even
if
the ALJ had the authority to make such an award. However, we need
not
address these questions in view of our holding on the first
exception.
The I.G.'s exception to the ALJ's finding that the fee award could
be
calculated at the "market" rate rather than the "statutory" rate
In support of this exception, the I.G. argued that the ALJ
lacked
authority to award fees at a rate in excess of $75 per hour because
the
regulations promulgated by the Department specifically limit fee
awards
to $75 per hour. The I.G. further argued that the ALJ's view
that
Petitioner had been prejudiced by the Department's failure to
issue
final regulations was "baseless" since the proposed regulations
retained
the $75 per hour limit on fee awards and "there is no reason to
believe
that the agency's final regulation will be any different."
I.G.'s
memorandum dated 11/18/91, p. 14. The I.G. also argued that
section 504
unambiguously provides that an award may not exceed $75 per hour
unless
the Department "determines by regulation" that special factors may
exist
which justify such an award. Finally, the I.G. argued that
section 504
constitutes a waiver of sovereign immunity and that the
statutory
language must therefore be strictly construed.
In response to this exception, Petitioner asserted that Congress
intended
that each agency promulgate rules authorizing fees in excess of
$75 per hour
under specified circumstances. Petitioner argued that the
I.G. should
not be permitted to undermine Congressional intent by simply
failing to
promulgate a final rule. Petitioner also asserted that,
while a rate of
$75 per hour might have been reasonable when the
Department's initial rule
was promulgated in 1983, in 1991 that rate
"would not fully compensate a
client for hiring even the most
inexperienced lawyer at most major urban law
firms." Petitioner's
memorandum dated 1/7/92, p. 9. Thus, in
Petitioner's view, if
reimbursement is limited to $75 per hour, the effect
would be to "render
consideration of any special factors an exercise in
futility . . . ."
Id. (emphasis in original).
At issue here is the proper construction of the language in
section
504(b)(1)(A) which states that "attorney . . . fees shall not be
awarded
in excess of $75 per hour unless the agency determines by
regulation
that an increase in the cost of living or a special factor . .
.
justifies a higher fee." 4/ In our view, this language is clear on
its
face: attorney fees are limited to $75 per hour unless the
agency
issues a regulation which permits the award of a higher fee based on
an
increase in the cost of living or some special factor. There is
nothing
in this language which requires the agency to issue a
regulation
permitting a higher fee; instead, the general prohibition on fees
in
excess of $75 per hour stands "unless" there is an agency
regulation
which permits a higher fee. Thus, the award of a higher fee
in this
case cannot reasonably be based on the theory that the
Department
defaulted on an obligation to provide for higher fees. 5/
Moreover, although the language in section 504(c)(1) stating that
"each
agency shall by rule establish uniform procedures for the submission
and
consideration of applications for an award of fees" expressly
requires
that each agency issue implementing regulations, there is no
indication
that these regulations must provide for the award of fees in
excess of
$75 per hour. In addition, the legislative history of this
section does
not indicate that Congress expected the agencies to include such
a
provision in their regulations. 6/ Moreover, reading the
statute to
permit an ALJ to issue an award in excess of the $75 per hour
limit only
if the agency has authorized such an award by regulation makes
sense
since the agency has responsibility for administering the
appropriated
funds involved, as well as the programmatic expertise necessary
to
evaluate potential "special factors" which may be present in
cases
before the agency. This approach also prevents
arbitrary
decisionmaking. 7/
Since the statute leaves it to the discretion of each agency whether
to
permit awards of attorney fees at a rate in excess of $75 per
hour,
Petitioner's assertion that he could not have retained
even
inexperienced counsel for $75 per hour is irrelevant.
Moreover,
contrary to Petitioner's argument, our conclusion that the award
here is
limited to $75 per hour does not make the statutory reference to
special
factors meaningless since an agency may choose by regulation
to
authorize higher fees on the basis of special factors.
Even if there were some ambiguity in the language of the statute,
we
conclude that, under the circumstances, the ambiguity should be
resolved
in the I.G.'s favor. As the I.G. pointed out, courts have held
that
section 504 is in effect a waiver of sovereign immunity, and that,
as
such, it must be construed as narrowly as possible. See,
e.g.,
Ruckelshaus v. Sierra Club, 463 U.S. 678 (1983). Thus, we must
adopt
any reasonable reading of the statute which limits the amount of
the
government's liability. Here, the plain wording of the
statute
contemplates that any determination to pay more than $75 per hour is
a
discretionary one, to be exercised by regulation rather than
through
case-by-case adjudication.
Additional Fees and Expenses
During the course of the proceedings before the Board, Petitioner,
acting
pro se, advised the Board that he had incurred additional legal
bills as a
result of his exclusion from the Medicare program, and in
effect requested
that the Board modify the ALJ's award to cover amounts
identified in invoices
from two law firms which he provided. In
response to the Board's
request for comment, the I.G. stated that awards
may be made for the
reasonable expenses incurred by a prevailing party
in pursuing and defending
a fee award. The I.G. nevertheless took the
position that an additional
award was not warranted here. The I.G.
alleged, among other things,
that Petitioner's request (1) was not made
in the proper format, (2) included
amounts which were not related to
proceedings on the EAJA application and (3)
included amounts already
claimed and awarded or amounts which could have been
claimed in the
application submitted to the ALJ but were not. 8/
We conclude that the issue of whether additional fees and expenses
should
be awarded is outside the scope of this proceeding. The
Board's
authority extends only to review of ALJ decisions on applications
for
awards under section 504. Since the ALJ has not considered
Petitioner's
request for an additional award, there is nothing for us to
review at
this point. If, however, Petitioner applies to the ALJ for
an
additional award, Petitioner may file exceptions to any decision by
the
ALJ denying all or part of the application for award. Any
additional
award would of course be subject to the $75 per hour limit which
we find
governs here.
Conclusion
For the reasons discussed above, we conclude that the ALJ erred
in
awarding attorney fees in excess of $75 per hour. Accordingly,
we
modify the ALJ Decision to provide for attorney fees only to the
extent
they do not exceed $75 per hour.
_____________________________ Donald F. Garrett
_____________________________ Norval D. (John) Settle
_____________________________ Judith A. Ballard Presiding
Panel
Member
1. The I.G.'s redelegation of authority to the Board to
review
decisions on fee awards in I.G. proceedings is dated August 26,
1991.
2. The ALJ specifically stated that the amount awarded consisted
of
$43,916 in attorney fees and $9,663.82 of expenses. ALJ Decision,
p.
12. Petitioner had previously indicated that, if attorney fees
were
limited to $75 per hour, the award of attorney fees would be
$25,850
instead of $43,916. Petitioner's Reply Brief in Response to
OIG's
Memorandum Opposing His Application for an Award of Attorney's Fees
and
Expenses, dated 5/13/91, p. 15. Subject to verification of this
amount
by the I.G., we therefore conclude that attorney fees should be
limited
to $25,850.
3. In reaching this conclusion, the ALJ did not consider the
contrary
holding in the April 30, 1990 decision of the Assistant
Inspector
General for Management and Policy in M.M. Cassim, M.D., Docket
No.
HIP-000-01-0017.
4. The language quoted establishes a limit on the general rule
in
section 504(b)(1)(A) that attorney fees "shall be awarded at
prevailing
market rates for the kind and quality of the services furnished .
. . ."
Neither party relied on this language in support of its
position,
however.
5. This view of the statute is supported by model rules issued by
the
Administrative Conference of the United States (ACUS) for the
guidance
of federal agencies in implementing EAJA. The preamble to the
model
rules states that the statute "authorizes fees in excess of $75 per
hour
only where agencies have so provided by rule." 46 Fed. Reg.
32900,
32904 (June 25, 1981). The preamble also states that "agencies
have
authority to raise the ceiling on hourly rates of attorneys
by
rulemaking . . . . " Id. at 32905. The model rules themselves
include
a section which states that an agency "may adopt regulations
providing
that attorney fees may be awarded at a rate higher than $75 per
hour"
and which explains how agency rulemaking may be initiated. Id.
at
32913. ACUS's understanding of the statute, reflected in model
rules
in place for more than a decade, is significant since section
504(c)(1)
requires that each agency consult with ACUS before issuing a
rule
implementing EAJA.
6. The House report on the Senate bill that was ultimately
enacted
merely states with respect to this provision that "[i]t is intended
that
the rules specify that an award will be made unless the government
comes
forward with a showing that its case was substantially justified
or
special circumstances make an award unjust." H.R. REP. NO. 1418,
supra,
p. 16. The conference committee report itself merely states that
"[t]he
Senate bill directs that uniform implementing regulations with
respect
to application by prevailing parties for an award shall be published
by
each agency . . . ." H.R. REP. No. 1434, 96th Cong., 2nd Sess.
23
(1980).
7. It is arguable that a different result might be warranted in
a
situation where the Department indicated a preliminary recognition in
a
proposed rule that awards in excess of $75 per hour would be proper
if
special factors were present. Here, however, the proposed
regulations
limit fees to $75 per hour. Since the award of higher fees
would not
have been authorized if these regulations had been issued in final
form,
it can hardly be argued that the failure to issue final regulations
was
the only barrier to the award of higher fees.
8. The I.G. also requested that the January 21, 1992 letter in
which
Petitioner made this request be stricken from the record on the
grounds
that it "contains scurrilous accusations which are unsupported by
the
evidence contained in the administrative record" and that
these
accusations are not relevant to the issue of whether additional
fees
should be awarded. I.G. submission dated 2/6/92. We conclude
that it
is not necessary to strike the letter from the record, however,
since
the Board accords no weight to statements which are either
unsupported
by the evidence or