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December 20, 2001


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 expenses they incurred from the date their Medicaid benefits were improperly terminated.


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, ¶¶ 12-21.

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., ¶ 31.

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.

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).

The allocation of fee liability among defendants "is a matter committed to the district court's discretion and will not be disturbed unless the determination evidences an abuse of discretion." Koster v. Perales, 903 F.2d 131, 139 (2d Cir. 1990). District courts have "appropriately considered a variety of factors in allocating fee liability including the relative culpability of the parties . . . and the proportion of time spent litigating against each defendant." Id. (citations omitted).

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., ¶¶ 18, 19.

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.

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 ...

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