Andrew v. Bowen

• Decision Date: 26 January 1988
• Docket Number: No. 87-3557,87-3557
• Citation: 837 F.2d 875
• Parties: Eileen ANDREW; Nick Andrew; Carl Nick; Helen Thomas; Elwood Thomas, on behalf of themselves and all others who are now or will be similarly situated; Evan Sergie, Plaintiffs-Appellants, v. Otis R. BOWEN, Secretary of Health and Human Services; John A. Svahn, Comm. Social Security; Robert London Smith, Commissioner, Alaska Department Health & Social Services, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 875

837 F.2d 875

20 Soc.Sec.Rep.Ser. 314

Eileen ANDREW; Nick Andrew; Carl Nick; Helen Thomas Elwood Thomas, on behalf of themselves and all others who are now or will be similarly situated; Evan Sergie Plaintiffs-Appellants, v. Otis R. BOWEN, Secretary of Health and Human Services; John A. Svahn, Comm. Social Security; Robert London Smith, Commissioner, Alaska Department Health & Social Services Defendants-Appellees.

No. 87-3557.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Nov. 5, 1987.

Decided Jan. 26, 1988.

Tred R. Eyerly, Donald S. Cooper, Heather H. Grahame, Alaska Legal Services Corp., Anchorage, Alaska, for plaintiffs-appellants.

Larry K. Banks, Social Sec. Div., Baltimore, Md., Julie Werner-Simon, Asst. U.S. Atty., Anchorage, Alaska, for defendants-appellees.

Appeal from the United States District Court for the District of Alaska.

Before ANDERSON, NORRIS and HALL, Circuit Judges.

J. BLAINE ANDERSON, Circuit Judge:

I. BACKGROUND

In response to notification that their federal and state disability benefits were going to be terminated or that they were going to be declared ineligible to receive benefits, plaintiffs filed a class action suit against the Secretary of Health and Human Services (Secretary) and the State of Alaska. Plaintiffs were seeking declaratory and injunctive relief prohibiting the use of the Social Security Administration's (SSA) Claims Manual section 12605, and the Program Operations Manual System (POMS) SSI 01140.100. These sections operated to deny Supplemental Security Income (SSI) and state supplemental benefits to individuals owning Alaska commercial fishing permits which are determined by SSA to be income-producing property worth more than $6000. Under these sections, certain property was excluded as a resource for SSI purposes if its value was less than $6000 and the self-support activity in which it was used produces a return of at least 6 percent of equity value. Plaintiffs alleged that these sections violated the publication requirement of the Administrative Procedure Act (APA), 5 U.S.C. Sec. 553; violated the Freedom of Information Act (FOIA), 5 U.S.C. Sec. 552; denied plaintiffs due process of law; and were contrary to the terms of governing federal statutes.

On August 11, 1983, the district court granted plaintiffs' motion for a preliminary injunction and ordered the Secretary to publish her operating policy. The order further enjoined the State of Alaska and the Secretary from terminating state and federal disability benefits under the terms of the challenged Claims Manual and POMS sections to persons who held or whose spouses held commercial fishing permits valued at more than $6,000 until forty-five days had passed after the policy was published and became final. The court based the preliminary injunction solely on the grounds that the challenged sections violated the publication requirement of the APA and the FOIA, and indicated that the plaintiffs had demonstrated a high probability of prevailing on the merits of these claims.

On May 7, 1985, the Andrew case was consolidated with Sergie v. Heckler, No. A84-458 Civ (D.Alaska).

The final regulations were published on October 22, 1985, embodying the $6,000/6 percent policy. Commercial fishing permits were specifically excluded from the $6,000/6 per cent rule. On March 27, 1986, the plaintiffs in Andrew requested that the court dismiss their action. Plaintiffs conceded that they had obtained the relief they sought in their original action since the Secretary had excluded fishing permits from the new rule. On June 6, 1986, the court entered an order dismissing the Andrew action. The plaintiffs in Andrew did not seek dismissal of plaintiff Sergie's claim. Sergie's case was not dismissed to the extent it raises claims not common to the plaintiffs in Andrew. Sergie, who had exhausted his administrative remedies, reached a settlement with the Secretary for the amount of SSI benefits that had been withheld from him.

All plaintiffs subsequently moved for an award of attorneys' fees and costs pursuant to the Equal Access to Justice Act (EAJA), 28 U.S.C. Sec. 2412(d), alleging that the position of the Secretary was not substantially justified. The district court, as far as Sergie is concerned, found that the Secretary's position, while not frivolous, was wholly without merit and granted the request for fees and costs. As far as the Andrew plaintiffs are concerned, the district court found that the Secretary advanced a reasonable defense which was not available to him in Sergie, that being that the Andrew plaintiffs failed to exhaust their administrative remedies. No fees were awarded since the Secretary's position was found to be substantially justified within the meaning of the EAJA.

Two issues are before us on this appeal. First, we must determine whether the district court abused its discretion when it determined that it could not award attorneys' fees for the litigation because the Secretary's defense that the original Andrew plaintiffs had failed to exhaust administrative remedies was substantially justified. The second issue raised is whether the district court's apportionment of attorneys' fees was proper when one law firm represented all plaintiffs, all plaintiffs had similar claims, and all plaintiffs obtained relief.

We review the district court's decision to deny attorneys' fees for abuse of discretion. Oregon Environmental Council v. Kunzman, 817 F.2d 484, 496 (9th Cir.1987). An abuse of discretion occurs if the district court based its decision on an erroneous legal conclusion or a clearly erroneous finding of fact. Interpretation of the EAJA is a question of law reviewable de novo. OEC v. Kunzman, 817 F.2d at 496.

II. DISCUSSION

Under the EAJA, a prevailing party is entitled to an award of attorneys' fees if the position of the government is determined not to be substantially justified. 28 U.S.C. Sec. 2412(d)(1)(A).

A. Prevailing Party Status

This court has adopted a two-part test for determining prevailing party status when a case has not gone to final judgment. California Association of Physically Handicapped, Inc. v. FCC, 721 F.2d 667, 671-72 (9th Cir.1983), cert. denied, 469 U.S. 832, 105 S.Ct. 121, 83 L.Ed.2d 63 (1984). Under this test, the party seeking to establish "prevailing party" status must demonstrate that: (1) as a factual matter, the relief sought by the lawsuit was in fact obtained as a result of having brought the action, and (2) there was a legal basis for the plaintiffs' claim. Id. Under the first level of inquiry, the court must identify what the lawsuit originally sought to accomplish and what relief actually was obtained. See, id. at 671. It must then determine whether there exists a "clear causal relationship between the litigation brought and the practical outcome realized." McQuiston v. Marsh, 790 F.2d 798, 800 (9th Cir.1986) (citing American Constitutional Party v. Munro, 650 F.2d 184, 188 (9th Cir.1981.)) This realized relief may come in the form of a settlement or other disposition of the case. The critical factor is whether the party seeking fees has, as a result of bringing the lawsuit, received some or all of the relief originally sought. See id.; Lads Trucking Co. v. Board of Trustees, 777 F.2d 1371, 1375 (9th Cir.1985).

Under the second inquiry, the court must determine whether there was a legal basis for the claim. California Association of Physically Handicapped, Inc. v. FCC, 721 F.2d at 671-72. While this requires some evaluation of the merits, this evaluation is extremely limited. The extent of the court's inquiry is strictly limited to determining whether the claims asserted are "frivolous, unreasonable, or groundless, or [whether] the plaintiff continued to litigate after [they] became so." Ortiz de Arroyo v. Barcelo, 765 F.2d 275, 282 (1st Cir.1985).

We find the plaintiffs to be prevailing parties in that they secured the relief they sought in bringing suit--the exclusion of the value of commercial fishing permits necessary for self-support as a countable resource for purposes of SSI eligibility and that there was a legal basis for plaintiffs' claims.

B. Substantial Justification

Under the EAJA, courts are required to grant costs and attorneys' fees to a prevailing party unless the government can demonstrate that its position was substantially justified. International Woodworkers of America, AFL-CIO, Local 3-98 v. Donovan, 792 F.2d 762, 764-65 (9th Cir.1986). The standard applicable to determine whether the government's position was substantially justified is one of reasonableness in both law and fact. H.R.Rep. No. 96-1418, 96th Cong., 2d Sess. 10, reprinted in 1980 U.S. Code Cong. & Ad. News, 4953, 4984, 4989; Edwards v. Heckler, 789 F.2d 659, 665 (9th Cir.1986). The term "position" includes the underlying agency action and the legal position of the United States during litigation. H.R.Rep. No. 99-120, Part I, 99th Cong., 1st Sess. reprinted in 1985 U.S.Code Cong. & Ad.News, 132, 137, 144; Edwards, supra; see also 28 U.S.C. Sec. 2412(d)(2)(D) (defining "position of the government").

The Secretary's underlying agency action was to utilize an unpublished policy to effectively deny SSI benefits to persons who held an Alaska commercial fishing permit valued by the Secretary at over $6,000. The district court enjoined enforcement of this policy, finding that plaintiffs had demonstrated a high probability of prevailing on the merits that the Secretary had violated the FOIA, as well as the APA. The Secretary's underlying position was described by the district court as "wholly without merit." The district court's finding that the Secretary failed to prove his underlying position was substantially justified is reviewable under the abuse of discretion standard, and its finding is reversible if the district court based its decision on an erroneous legal conclusion or a clearly erroneous finding of fact. OEC v. Kunzman, 817 F.2d...