The opinion of the court was delivered by: John T. Curtin, United States District Judge.
This case was originally filed as a class action against the
Commissioners of the New York State Department of Social Services
(NYSDSS) and the Erie County Department of Social Services (ECDSS) on
September 23, 1991. Item 1. The plaintiff class consisted of members who
were typically mentally retarded and living with older parents who were
eligible for but lost Medicaid coverage. By way of their complaint,
plaintiffs sought to remedy "defendants' policies and practices which have
resulted in the failure to implement 42 U.S.C. § 1383c(c),*fn1 which
provides for continued Medicaid benefits for disabled adults who have had
Supplemental Security Income (SSI)*fn2 benefits discontinued solely
because of eligibility for or an increase in Social Security Child's
Insurance Benefits, also known as Disabled Adult Child's (DAC) benefits."
Item 1, ¶ 1. Only plaintiffs' motion for attorneys' fees, Item 68,
remains to be decided.
The complaint explained the plight of the class members: "When one of
the parents, usually the father, dies, the adult son or daughter
qualifies for DAC benefits on the earnings record of the father. Since
the DAC benefits are more than the SSI check he or she had received until
the father's death, the SSI benefits are terminated." Id., ¶ 2. Once
a person's SSI benefits are terminated, that person also often loses
Medicaid*fn3 benefits, even though they are entitled to continued
Medicaid eligibility under 42 U.S.C. § 1383c(c).*fn4 Plaintiffs
sought injunctive relief guaranteeing their statutory and
constitutional*fn5 rights and requiring full implementation of
42 U.S.C. § 1383c(c); a declaratory judgment that these policies
violate, inter alia, the Social Security Act; and reinstating the Medicaid
benefits of members of the plaintiff class and reimbursement of medical
they incurred from the date their Medicaid benefits were
When this complaint was filed, plaintiffs held the State Department of
Social Services and the Erie County Department of Social Services
responsible for loss of their Medicaid benefits, pointing to NYSDSS as
failing to provide timely and accurate information to ECDSS to identify
individuals who were potentially eligible for Medicaid pursuant to
42 U.S.C. § 1383c(c). All six of plaintiffs' causes of action against
these two defendants were brought under 42 U.S.C. § 1983.
Within two months of filing the complaint, plaintiffs moved to amend,
adding two claims for relief against the new defendant, the Secretary of
Health and Human Services (HHS). Item 7. A Stipulation and Order was
subsequently entered regarding class certification. Item 13. During 1993
and 1994, plaintiffs and defendants undertook settlement negotiations,
which resulted in a Stipulation and Order of Partial Settlement ("Partial
Settlement") on January 31, 1995. Item 15. The Partial Settlement
provided that the HHS Secretary would issue State Medicaid Manual
instructions for the implementation of 42 U.S.C. § 1383c(c). The
instructions would address the obligations of the State Medicaid Agencies
to prospectively certify as Medicaid eligible those persons meeting the
criteria of 42 U.S.C. § 1383c(c). Item 15, p. 3. In order to
implement the Partial Settlement, the Social Security Agency modified its
computer systems*fn6 to insure that the State Data Exchange (SDX),*fn7
sent to the NYSDSS, contained a code in the Medicaid eligibility field
that identified potential § 1383c(c) candidates whose SSI benefits
had been terminated due to the amount of their DAC benefits. Item 15,
¶ 29. The NYSDSS was also required to implement the Partial
Settlement by, inter alia, issuing various Administrative Directives and
Regulations explaining criteria for Medicaid eligibility under
42 U.S.C. § 1383c(c), and providing for readjudication by potential
class members regarding their eligibility for Medicaid. Item 15, ¶¶
In addition, the Partial Settlement identified a remaining problem
confronting a subset of the plaintiff class: those "dually entitled"
Social Security beneficiaries "who receive DAC benefits in addition to
disability insurance benefits based on their own
earnings records, [who]
may be eligible for Medicaid continuation pursuant to the provisions of
42 U.S.C. § 1383c(c)." Item 15, ¶ 28.*fn8 At the time of the
Partial Settlement, the HHS Secretary could not state that their computer
systems produced an identification code for these dually entitled Social
Security beneficiaries. As a result, the Secretary was investigating
whether their computer systems could be modified to indicate such a
code. Id., ¶ 30. Plaintiffs reserved the right to seek future
amendment of the Settlement Order with respect to those dually entitled
individuals who had not been identified as potential class members. Id.,
Following entry of the Partial Settlement, plaintiffs made their first
motion for attorneys' fees on February 24, 1995, reflecting the hours
their attorneys had expended on the case from 1991 through the first two
months of 1995. Item 17. In an order dated September 3, 1996, the court
withheld passing upon the application for attorneys' fees until the
conclusion of the action. Item 31.
In March 1995, the Social Security Administration (SSA) became an
independent agency, and the Commissioner became a defendant in this
case, joining the Commissioner of HHS (collectively, the "federal
defendants", or "the government"). Item 71, p. 2, n. 1.
The court hosted a series of status conferences and meetings among the
parties during 1995, 1996, 1997, 1998, 1999, and 2000. Often the topic of
the meetings and correspondence concerned the preparation of the computer
program that would identify the dually eligible class members. See Items
25 and 26. Because of the difficulties in creating such a program, the
court ordered that it would hold a hearing to determine why the State and
federal authorities could not resolve the matter more promptly. Item 27.
Throughout 1996 and 1997, the defendants' technical and computer staffs
continued to work on the computer programs. The SVES*fn9 system was to
go into effect in June 1998, and SSA was to provide training manuals.
Item 41. The defendants continued to exchange information in order to
refine the program, Item 46, with input from plaintiffs. Item 48. The
State was unable to access the modified SVES system, Item 49, and
proposed a change to the SDX system. Item 50. The SSA agreed to modify the
SDX system, Items 52, 53, and this endeavor ultimately proved
successful. The process culminated on December 18, 2000, with a
Supplemental Stipulation and Order to Amend the Court's Partial
Settlement ("Supplemental Stipulation"). Item 66.
The Supplemental Stipulation resolved the remaining issue of
identifying the "dually entitled" Social Security beneficiaries. The
Social Security Administration was finally able to modify its computer
system and agreed to forward to the New York State Department of
(NYSDOH) necessary data in order that NYSDOH might
identify prospective dual eligibles under 42 U.S.C. § 1383c(c).
In addition, the SSA agreed to provide NYSDOH with a list of 660 dually
entitled beneficiaries who became ineligible for SSI between July 1, 1987
and March 17, 1994, as well as to identify the dually entitled DAC
beneficiaries who became ineligible for SSI between March 17, 1994 and
March 31, 1999. Item 66, p. 3. Pursuant to the Supplemental Stipulation,
the NYSDOH had corresponding obligations (i.e., notification of the
sub-class, providing for adjudication or readjudication of Medicare
benefits pursuant to 42 U.S.C. § 1383c(c), etc.). At the same time
that the parties filed the Supplemental Stipulation, they also filed a
Stipulated Protective Order which provided that the lists of individuals
(including names, addresses and social security numbers) that the SSA
would be providing the NYSDOH could only be used for the purpose of
determining eligibility for Medicaid and could not be otherwise
disclosed. Item 65.
On January 5, 2001, plaintiffs once again moved for attorneys' fees.
Item 68. In response, the State defendant submitted additional affidavits
and letters, Items 70, 79, 81, 86. The federal defendants opposed
plaintiffs' petition for attorneys' fees. In the alternative, they argued
that no more than 25 percent of the total hours charged by plaintiffs'
attorneys be assessed against the government. Items 71, 75, 78, 85.
I. The Standard: Motion for Attorneys' Fees
Plaintiffs' attorneys are requesting attorneys' fees against the State
and federal defendants pursuant to two different statutory schemes. They
claim attorneys' fees against the federal defendants pursuant to the
Equal Access to Justice Act ("EAJA"), 28 U.S.C. § 2412, and against
the State and County defendants pursuant to 42 U.S.C. § 1988.
The purpose of the EAJA "is to ease the economic imbalance between an
individual claimant and the United States in order to reduce the
likelihood that challenges to unreasonable bureaucratic actions will be
deterred by the high cost of litigating against the Government." Marschok
v. United States, 150 F. Supp.2d 522, 525 (E.D.N.Y. 2001) (citations
omitted). To this end, the EAJA provides that a court shall award fees
and expenses to the prevailing party in an action brought by or against
the Government "unless the court finds that the position of the United
States was substantially justified or that special circumstances make an
award unjust." 28 U.S.C. § 2412(d).
With regard to attorneys' fees under 42 U.S.C. § 1988, the standard
is less stringent than that required by the EAJA. Fees under § 1988
are available for successful plaintiffs in a 42 U.S.C. § 1983 lawsuit
(the statute under which relief for plaintiffs' six causes of action was
sought). Section 1988 provides that "the court, in its discretion, may
allow the prevailing party, other than the United States, a reasonable
attorneys' fee as part of the costs." 42 U.S.C. § 1988(b).
II. Plaintiffs' Arguments
In their original motion for attorneys' fees filed in February 1995,
Item 17, plaintiffs' three attorneys, James R. Sheldon, Jr., Edwin J.
Lopez-Soto, and Judith K. Munger, attached itemized affidavits indicating
that they had expended a total of 591.9 hours in prosecuting this
action. They requested total fees in the amount of $88,785:277.4 hours
for James Sheldon at $150.00 per hour; 166.2 hours for Edwin Lopez-Soto
at $150.00 per hour; and 148.3 hours for Judith Munger at $150.00 per
hour. Id., pp. 1, 2. Plaintiffs' attorneys anticipated at the time that
they would also be required to expend time monitoring and enforcing the
Partial Stipulation, and that they may also have to make an additional
motion for attorneys' fees in connection with resolving the issues
concerning dually entitled beneficiaries. Id.
In his affidavit, Mr. Sheldon noted both that the $150.00 per hour fee
and the time expended was reasonable under 42 U.S.C. § 1988, id.,
Ex. A, pp. 9-13. Mr. Sheldon asserted that, under 42 U.S.C. § 1988,
there were no special circumstances that would make an award of
attorneys' fees unjust. Id., ¶ 15. He also asserted that plaintiffs
met all the requirements for attorneys' fees under the EAJA: the
plaintiffs had received the relief they requested and had prevailed in a
civil action against a federal official in her official capacity,
28 U.S.C. § 2412(d)(1)(A) and (d)(2)(C); and the individual net worth
of the named plaintiffs and class members was less than $2,000,
28 U.S.C. § 2412(d)(2)(B). Item 17, Ex. A, ¶ 17.
He also averred that the position of the United States was not
"substantially justified." Although the federal government claimed in its
answer that the plaintiffs had not stated a claim upon which relief could
be granted, Mr. Sheldon pointed out that it had nevertheless rectified
problems in the computer transmittals by reprogramming the system and
issuing new instructions regarding § 1383c(c) in the State Medicaid
Manual. All of these initiatives implemented by the federal defendants
demonstrated the lack of justification for HHS's position. Id., ¶¶
Mr. Sheldon suggested that the court consider allocating responsibility
for the attorneys' fees among the State, federal, and County defendants
as follows: 70 percent to NYSDSS, 25 percent to HHS, and 5 percent to
ECDSS. Mr. Sheldon observed, "I believe this apportionment of
responsibility accurately reflects the relative time expended by
plaintiffs' counsel on the various issues involved in this case, to the
extent that those issues can be isolated with respect to each of the
defendants." Id., ¶ 36. He interpreted the EAJA,
28 U.S.C. § 2412(d)(2)(A), as allowing a maximum billing rate of
$119.25 per hour,*fn11 representing the $75.00 per hour authorized rate
increased by the Consumer Price Index (CPI) for "All Items" (CPI-U). See
Kerin v. United States Postal Service, 218 F.3d 185, 194 (2d Cir. 2000).
Since the hourly rate requested by plaintiffs' counsel, $150.00, exceeded
the EAJA statutory cap of $119.25, he suggested that if the court
apportioned 25 percent of the fee obligation against HHS, the federal
government would pay only 25 percent of
the $150.00 hourly rate, or
$37.50 an hour, which would be half of the $75.00 statutory cap. He also
posited another alternative for the court to consider. The federal
defendants would pay for 25 percent of the total hours expended (.25 x
591.9 hours) at $119.25 an hour. None of the defendants responded to this
motion at the time, and no fees were awarded. In July 1996, Mr. Sheldon
no longer represented plaintiffs. Item 30.
On January 5, 2001, following entry of the Supplemental Stipulation,
plaintiffs' counsel again moved for attorneys' fees in the amount of
$126,637.50, reflecting 844.25 hours of work. Item 68. Mr. Sheldon sought
compensation for 343.75 hours at $150.00 per hour, Mr. Lopez-Soto sought
compensation for 244.80 hours at $150.00 per hour, and Ms. Munger sought
compensation for 255.70 hours at $150.00 per hour. Id. They referred to
their first motion for attorneys' fees, Item 17, with its attached
affidavits of Sheldon (Ex. A), Lopez-Soto (Ex. B) and Munger (Ex. C), and
attached updated time records reflecting the additional time each
attorney had spent on this case since February 1995.
In a letter-submission to the court, the plaintiffs' attorneys revised
the allocation of fees between defendants that it had proffered in 1995.
While underscoring that allocation is a matter of the court's
discretion, plaintiffs' attorneys agreed with the New York State
defendant that "the fees should be borne equally by the state and federal
defendants," and "in the interests of fairness the fees should be shared
equally." Item 74, p. 1. Plaintiffs' attorneys posited two reasons for
this change of position: (1) The suit involves a federal statute and
program, Medicaid, funded and regulated by both federal and State
governments; both defendants failed to take the steps required to
implement 42 U.S.C. § 1383c(c); and resolving the case required the
collaboration of both federal and State technical staffs. Thus, State and
federal defendants contributed both to the breakdown in implementation of
the statute and to the development of the remedy; and (2) Through the
course of litigation, the delays were more often caused by the failure of
the federal defendant to provide critical information. Id., pp. 1, 2.
Plaintiffs' attorneys offered to forego fees for the work they
performed during the year 2001 (approximately 20 hours) if the case could
be resolved in the "imminent future." Item 84, p. 1.
III. Federal Defendants' Arguments
The federal defendants (the Commissioners of the Department of Health
and Human Services and the Social Security Administration) have raised
the strongest objections to plaintiffs' motion for attorneys' fees. They
first assert that no fees can be awarded against the government because
its position was "substantially justified" within the meaning of the
EAJA, 28 U.S.C. § 2412(d)(1)(A). "[S]ubstantially justified,"
according to Pierce v. Underwood, 487 U.S. 552 (1988), does not mean
"justified to a high degree" but rather is satisfied if there is a
"genuine dispute" or "if reasonable people could differ as to [the
appropriateness of the contested action]." Id. at 565.
Pursuant to this definition, the federal defendants contend that the
lawsuit "basically involved erroneous determinations made by the New York
State Department of Health and Erie County," given that the State and
County failed to continue Medicaid for people who had lost SSI
eligibility due to their receipt of additional Title II benefits. Item
71, pp. 5-6. The government asserts that the State and County are "the
only entities authorized by law to make Medicaid continuation
The government has no authority to make such
determinations" and therefore cannot be considered a "wrongdoer" here.
Id., p. 6. Moreover, it was never the government's responsibility to
identify individuals who should have had their Medicaid continued. Id.,
p. 9. In fact, argues the government, it shared its information with the
State and was part of the solution, not part of the problem. After being
named as a defendant, it "acted reasonably in all aspects of [the]
litigation." Id., p. 7. The government points out how it modified its
computer system at enormous expense and developed a program to identify
all class members from 1987 to March 1995. Id., p. 11. As part of the
modification process, it modified the State Verification and Exchange
System (SVES) with the understanding those changes would satisfy the
State's needs, only to find that the State "did not implement the
necessary systems changes to gain the capability to use the SVES
system . . . ." Id., p. 12.
In the alternative, the government argues that should the court find
its position was neither reasonable nor substantially justified and that
an award of attorneys' fees was appropriate, the government's apportioned
share of the fees should be no more than 25 percent, as suggested by Mr.
Sheldon in the first motion for fees. Item 17.
The government asserts that it should only "reimburse plaintiffs for
the time their attorneys spent handling aspects of this litigation that
involved the Government." Item 71, p. 15, citing Jones v. Espy, 10 F.3d 690
(9th Cir. 1993). The proper methodology would be to use the $75.00 EAJA
rate cap increased by the Corresponding Price Index for each year in
which legal work was performed.
In later submissions, the government reasserted and expanded upon its
initial objections. It pointed to New York State's failures to provide
SSA with the "necessary identifying information concerning those
individuals about whom the State needed information" as well as the
State's failure to implement the SVES system which contained that needed
information. Item 75, p. 4. It also blamed New York State for not
capturing certain important information ...