Appeals from judgments of the United States District Court for the Northern District of New York, Munson, C.J., awarding attorney's fees pursuant to the Equal Access to Justice Act, 29 U.S.C. § 2412(d), but refusing to award fees pursuant to the Social Security Act, 42 U.S.C. § 406(b). The district court also refused to award so-called "bad faith" fees under 28 U.S.C. § 2412(b).
Meskill and Winter, Circuit Judges, and McCurn, District Judge.*fn*
In these four appeals, which we have considered together, we must resolve several troublesome and recurring issues arising out of the awarding of attorney's fees under the applicable provision of the Social Security Act (SSA), 42 U.S.C. § 406(b) (1982). Specifically, we must consider the relationship between the SSA fee provision and an analogous provision of the Equal Access to Justice Act (EAJA), 28 U.S.C. § 2412(d) (1982 & Supp. IV 1986), and we must decide what standards should be applied in assessing the "reasonableness" of fees awarded under the SSA. We also must consider whether the Secretary of Health and Human Services (the Secretary) should be held liable in certain of these cases for so-called "bad faith" fees under 28 U.S.C. § 2412(b) (1982 & Supp. IV 1986).
In each of these four cases, the plaintiff-appellant sought review under 42 U.S.C. § 405(g) (1982) of the Secretary's decision to terminate disability benefits paid pursuant to 42 U.S.C.A. § 423 (West 1983 & Supp. 1988). After the cases were remanded to the Secretary for further review pursuant to the Social Security Disability Benefits Reform Act of 1984 (the Reform Act), Pub. L. No. 98-460, 98 Stat. 1794 (1984), the Secretary found that the plaintiffs' disabilities were continuing and awarded past-due benefits. The plaintiffs then sought attorney's fees under both the SSA and the EAJA. In three of the four cases, the plaintiffs also sought additional "bad faith" fees under 28 U.S.C. § 2412(b). The United States District Court for the Northern District of New York, Munson, C.J., granted EAJA fees in all four cases, concluding that the plaintiffs were prevailing parties and that the Secretary had failed to show that his position in the litigation was substantially justified. Chief Judge Munson refused, however, to grant the parallel applications for fees under 42 U.S.C. § 406(b), simply noting in two of his four separate opinions that any award of SSA fees would be "nearly identical" to the EAJA fees. Finally, the district court refused to grant any "bad faith" fees. For the following reasons, we now affirm in part, reverse in part and remand for further proceedings.
The four plaintiffs-appellants involved in these cases are Dale Wells, William Oliver, William Hlywa and Joseph J. Gemelli. The facts of their cases are similar in many respects and will only be discussed here insofar as they are relevant to the issues presented on appeal. Prior to 1981, all four appellants were receiving disability insurance benefits pursuant to 42 U.S.C. § 423. Then, in 1981 and 1982, the Secretary reached individual decisions to terminate those benefits. After exhausting all administrative appeals, the appellants initiated the instant actions in the district court seeking review of the agency decisions pursuant to 42 U.S.C. § 405(g). All four appellants were represented by Attorney John S. Hogg, who is also an appellant in these actions. In all four instances, the appellants agreed to pay Hogg for his representation on a contingent-fee basis, with Hogg receiving twenty-five percent of any past-due benefits awarded.
While all four actions were pending in the district court, Congress passed the Reform Act, section 2 of which established new standards for determining whether disability benefits may be terminated. See 98 Stat. at 1794-99. Section 2(a) of the Reform Act provided, inter alia, that evidence of "medical improvement" must be considered in termination cases. See id. at 1794 (codified at 42 U.S.C. § 423(f)(1)(A)). In addition, section 2(d)(2) of the Reform Act provided that actions pending in the district courts on September 19, 1984 that "relat[ed] to medical improvement" should be remanded to the Secretary for reconsideration in accordance with the new standards on termination. See 98 Stat. at 1797-98. In late 1984 and early 1985, the district court ordered the instant cases remanded to the Secretary pursuant to the terms of the Reform Act. Ultimately, the Secretary restored the benefits of each of the appellants and the four actions pending before the district court were dismissed in 1987 by stipulations of the parties.
Hogg then filed motions in each case seeking attorney's fees under both the SSA, 42 U.S.C. § 406(b), and the EAJA, 28 U.S.C. § 2412(d). Hogg indicated that if the court decided in any case to grant fees under both provisions, the smaller of the two amounts awarded should be given to the client. In addition, in Hlywa and Gemelli, Hogg sought fees pursuant to 28 U.S.C. § 2412(b), arguing that the Secretary had acted in bad faith in opposing the claimants' actions on the merits and in withholding benefits over an extended period of time. In Oliver, after the Secretary opposed Hogg's initial fee application, the attorney sought fees under section 2412 (b) and sanctions pursuant to Fed. R. Civ. P. 11 for the Secretary's bad faith in opposing the fee request. There was no request for section 2412(b) fees in Wells.
In four separate written opinions dated December 15, 1987, Chief Judge Munson awarded Hogg attorney's fees pursuant to the EAJA, 28 U.S.C. § 2412(d). Citing Vitale v. Secretary of Health and Human Services, 673 F. Supp. 1171, 1175-78 (N.D.N.Y. 1987), the district court concluded that the four appellants should be considered "prevailing parties" for purposes of the EAJA. See 28 U.S.C. § 2412(d) (1)(A). The district court also concluded that the Secretary had failed to meet his burden to make a "strong showing" that his actions in terminating or denying benefits were substantially justified. See Environmental Defense Fund, Inc. v. Watt, 722 F.2d 1081, 1085 (2d Cir. 1983). The Secretary does not challenge either of those conclusions in this appeal. In calculating the EAJA fees, the district court then employed a rate of $90 per hour. Chief Judge Munson concluded in each case that Hogg had provided the necessary proof supporting a cost-of-living adjustment above the statutory rate of $75 per hour. See 28 U.S.C. § 2412(d)(2)(A). As to the SSA fees sought pursuant to 42 U.S.C. § 406(b), the district court simply concluded in Oliver and Wells that any award of such fees would be "nearly identical" to the EAJA fees. Chief Judge Munson therefore denied the motions for the SSA fees. In Hlywa, the district court denied the request for SSA fees without comment; in Gemelli, the district court did not allude at all to Hogg's request for SSA fees. Finally, in Oliver, Hlywa and Gemelli, Chief Judge Munson denied all requests for "bad faith" fees pursuant to 28 U.S.C. § 2412(b). This appeal followed, with the appellants challenging the district court's refusal to award fees pursuant to either 28 U.S.C. § 2412(b) or 42 U.S.C. § 406(b).
We first must consider under what circumstances an attorney who has represented a successful litigant may seek fees under both the EAJA, 28 U.S.C. § 2412(d), and the SSA, 42 U.S.C. § 406(b). Then, we must decide how the calculation of the fees under those two provisions should relate and how the fees should be allocated if fees are awarded under both statutes. Specifically, we must decide whether or not fees awarded under the SSA may be enhanced to reflect the risks inherent in a contingent-fee arrangement between a lawyer and his or her client. Finally, we must decide if the district court erred in refusing to award additional fees pursuant to 28 U.S.C. § 2412(b).
A. Dual Fee Applications Under the EAJA ...