Hackwell v. U.S.

• Decision Date: 05 July 2007
• Docket Number: No. 05-1509.,05-1509.
• Citation: 491 F.3d 1229
• Parties: Kim HACKWELL and Killian, Guthro & Jenson, P.C., Plaintiffs-Appellants, v. UNITED STATES of America; Department of Justice; Alberto Gonzales, Attorney General; and Timothy Garren, Director, Torts Branch, Civil Division, and His Successors in Office, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

491 F.3d 1229

Kim HACKWELL and Killian, Guthro & Jenson, P.C., Plaintiffs-Appellants, v. UNITED STATES of America; Department of Justice; Alberto Gonzales, Attorney General; and Timothy Garren, Director, Torts Branch, Civil Division, and His Successors in Office, Defendants-Appellees.

No. 05-1509.

United States Court of Appeals, Tenth Circuit.

July 5, 2007.

Jeffrey Robert White of Center for Constitutional Litigation, P.C., Washington D.C. (J. Keith Killian and Damon J. Davis of Killian, Guthro & Jensen, P.C., Grand Junction, Colorado, with him on the briefs) for Plaintiffs-Appellants.

Elizabeth Goitein (Peter D. Keisler and Mark B. Stern, with her on the brief), United States Department of Justice, Civil Division, Washington, D.C., for Defendants-Appellees.

Before BRISCOE, HOLLOWAY, and LUCERO, Circuit Judges.

HOLLOWAY, Circuit Judge.

Plaintiffs-Appellants Kim Hackwell and Killian, Guthro & Jensen, P.C. (KGJ) filed a complaint in the United States District Court for the District of Colorado challenging a regulation, 28 C.F.R. § 79.74(b), that interprets the attorney-fee limitations set forth by the Radiation Exposure Compensation Act, 42 U.S.C. § 2210 note Sec. 9. The district court granted the Defendants' motion to dismiss for failure to state a claim. Dist. Ct. Order at 24. See Fed. R.Civ.P. 12(b)(6). We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and reverse and remand for proceedings consistent with this opinion.

I. BACKGROUND

On October 15, 1990, Congress enacted the Radiation Exposure Compensation Act (RECA) to remedy the injustice suffered by those exposed to radiation created by the government's atomic-weapons testing during the Cold War. This Act limited the fee a RECA claimant's attorney could collect: "Notwithstanding any contract, the representative of an individual may not receive, for services rendered in connection with the claim of an individual under this Act, more than 10 per centum of a payment made under this Act on such claim." Pub.L. No. 101-426, § 9 (1990).

On July 10, 2000, Congress amended this Act in several ways—one of which was to reduce attorney fees in certain circumstances:

(a) General Rule. Notwithstanding any contract, the representative of an individual may not receive, for services rendered in connection with the claim of an individual under this Act, more than that percentage specified in subsection (b) of a payment made under this Act on such claim.

(b) Applicable percentage limitations. The percentage referred to in subsection (a) is —

(1) 2 percent for the filing of an initial claim; and

(2) 10 percent with respect to —

(A) any claim with respect to which a representative has made a contract for services before the date of the enactment of the Radiation Exposure Compensation Act Amendments of 2000 . . .; or

(B) a resubmission of a denied claim.

(c) Penalty. Any such representative who violates this section shall be fined not more than $5,000.

42 U.S.C. § 2210 note Sec. 9 (emphasis added).

On March 23, 2004, in accordance with his authority to "issue such regulations as are necessary to carry out this Act," id. § 2210 note Sec. 6(j), the Attorney General promulgated a regulation interpreting the phrase "services rendered" to include "costs incurred":

(b) Fees.

(1) Notwithstanding any contract, the attorney of a claimant or beneficiary along with any assistants or experts retained by the attorney on behalf of the claimant or beneficiary, may not receive from a claimant or beneficiary any fee for services rendered, including costs incurred, in connection with an unsuccessful claim.

(2) Notwithstanding any contract and except as provided in paragraph (b)(3) of this section, the attorney of a claimant or beneficiary, along with any assistants or experts retained by the attorney on behalf of the claimant or beneficiary, may receive from a claimant or beneficiary no more than 2% of the total award for all services rendered, including costs incurred, in connection with a successful claim.

(3)(I) If an attorney entered into a contract with the claimant or beneficiary for services before July 10, 2000, with respect to a particular claim, then that attorney may receive up to 10% of the total award for services rendered, including costs incurred, in connection with a successful claim.

(ii) If an attorney resubmits a previously denied claim, then that attorney may receive up to 10% of the total award to the claimant or beneficiary for services rendered, including costs incurred, in connection with that subsequently successful claim. Resubmission of a previously denied claim includes only those claims that were previously denied and refiled under the Act.

(4) Any violation of paragraph (b) of this section shall result in a fine of not more than $5,000.

28 C.F.R. § 79.74(b) (emphasis added).

Plaintiff Kim Hackwell is the daughter of a deceased uranium worker who qualifies to receive a payment under the RECA. Ms. Hackwell attempted to hire KGJ, a law firm that represents RECA claimants, to assist her in filing her RECA claim. But KGJ decided not to represent Ms. Hackwell, allegedly because 28 C.F.R. § 79.74(b)'s fee limitation applies to the sum of the attorneys' expenses and fee, and KGJ could not afford to represent Ms. Hackwell under this scheme.

Subsequently, KGJ and Ms. Hackwell filed a complaint challenging the regulation on several grounds. See infra n. 1. The district court, applying Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), held that the Attorney General's interpretation of the RECA's attorney-fee limitation is reasonable and consistent with Congress's intent. Specifically, the district court concluded that combining costs incurred with payments for services rendered when calculating the limit on an attorney's fee is consistent with the RECA's purpose to benefit radiation-exposure victims. Indeed, the court reasoned, one section in the RECA forbids the Attorney General from collecting costs incurred in carrying out the Act. The court also noted that several fee-shifting statutes, such as § 1988 of the Civil Rights Act, use the phrase "attorney fee" to include expenses as well as fees.

The district court therefore deferred to the Defendants' regulation, found that the regulation is consistent with the RECA, and granted the Defendants' Fed.R.Civ.P. 12(b)(6) motion to dismiss. Ms. Hackwell and KGJ filed this timely appeal.

II. DISCUSSION

The Plaintiffs assert that the district court erred in several respects,¹ yet our resolution of the first alleged error moots the remaining issues presented. The Plaintiffs argue that the district court should have set aside 28 C.F.R. § 79.74(b) as inconsistent with Congress's unambiguous intent and 42 U.S.C. § 2210 note Sec. 9. The Government rejoins that 28 C.F.R. § 79.74(b) is entitled to deference because "[t]he mere fact that a fee limitation may be construed by a court or an agency to exclude attorneys' expenses does not suggest that this is the only plausible construction," Aplee. Br. at 24 (emphasis in original), and because the regulation is consistent with both the text and purpose of the RECA's attorney-fee limitation.

Neither party has identified, nor have we found, a federal-court decision addressing the issue presented. We hold that the regulation is contrary to the RECA's plain language and is therefore invalid.

A. Standard of Review

The legal sufficiency of a complaint is a question of law. Sutton v. Utah State Sch. for Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir.1999). So we review de novo a district court's dismissal for failure to state a claim. A motion to dismiss for failure to state a claim "admits all well-pleaded facts in the complaint as distinguished from conclusory allegations." Mitchell v. King, 537 F.2d 385, 386 (10th Cir.1976).

B. The Validity of 28 C.F.R. § 79.74(b)

The Supreme Court in Chevron articulated a two-step test for analyzing an agency's construction of the statute it administers:

First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue . . ., the question for the court is whether the agency's answer is based on a permissible construction of the statute. . . . Such legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute.

Chevron, 467 U.S. at 842-44, 104 S.Ct. 2778.

We determine whether Congress had an intent on the question at issue by "employing traditional tools of statutory construction," id. at 843, 104 S.Ct. 2778 n. 9, "includ[ing] examination of the statute's text, structure, purpose, history, and relationship to other statutes." Harbert v. Healthcare Services Group, Inc., 391 F.3d 1140, 1147 (10th Cir.2004).

1. Chevron Step One

a. The Text of 42 U.S.C. § 2210 note Sec. 9

Following the Supreme Court and Harbert's prescription to examine the statute's language, purpose, history, and relationship to other statutes, we find that the distinction between compensation for "services rendered" and "expenses" is clearly demarcated by common meaning and several federal statutes.

The Random House Dictionary of the English Language 1750 (2d ed.1987) defines "service" as "an act of helpful activity help; aid: to do someone a service" and defines its inflection, "services," as "the performance of any duties or work for another." On the contrary, "expense" is defined as a "cost or charge," and its inflection, "expenses," is defined as "charges incurred during a business assignment or trip[,] . . . money paid as reimbursement for such charges: to receive a salary and expenses." Random House Dictionary at 680.

So...