Hyatt v. Shalala, 89-2718

• Decision Date: 04 October 1993
• Docket Number: No. 89-2718,89-2718
• Citation: 6 F.3d 250
• Parties: , Unempl.Ins.Rep. CCH 17513A Patrick H. HYATT; Herman O. Caudle; Mary P. Lovingood, on behalf of themselves and all others similarly situated; North Carolina Department of Human Resources # 14, Plaintiffs-Appellees, v. Donna E. SHALALA, Secretary of Health and Human Services, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 250

6 F.3d 250

42 Soc.Sec.Rep.Ser. 354, Unempl.Ins.Rep. CCH 17513A

Patrick H. HYATT; Herman O. Caudle; Mary P. Lovingood, on

behalf of themselves and all others similarly

situated; North Carolina Department of

Human Resources # 14, Plaintiffs-Appellees, v. Donna E. SHALALA, Secretary of Health and Human Services,

Defendant-Appellant.

No. 89-2718.

United States Court of Appeals, Fourth Circuit.

Argued March 7, 1991.

Decided Oct. 4, 1993.

Howard Stanley Scher, Civ. Div., United States Department of Justice, Washington, DC, argued (Stuart M. Gerson, Asst. Atty. Gen., William Kanter, Civil Div., U.S. Dept. of Justice, Washington, DC; Thomas J. Ashcraft, U.S. Atty., Charlotte, NC; Donald A. Gonya, Chief Counsel for Social Security Litigation, Randolph W. Gaines, Deputy Chief Counsel for Social Security, A. George Lowe, Deputy Chief Counsel for Disability Litigation, Donna J. Fuchsluger, Office of the General Counsel, Social Security Div., Dept. of Health and Human Services, Baltimore, MD, on the brief), for defendant-appellant.

John Robbins Wester, Robinson, Bradshaw & Hinson, P.A., Charles McBrayer Sasser, Cox, Gage & Sasser, Charlotte, NC, argued (Dan T. Coenen, Robinson, Bradshaw & Hinson, P.A., on the brief), for plaintiffs-appellees.

Before RUSSELL, WIDENER, and HALL, Circuit Judges.

OPINION

WIDENER, Circuit Judge:

Appellant, the Secretary of Health and Human Services, appeals the district court's order granting $315,083.35 in attorneys' fees and $28,568.86 in expenses to the appellees under the Equal Access to Justice Act, 28 U.S.C. Sec. 2412(b). The issue is whether the district court erred in finding the Secretary acted in bad faith in defense of litigation initiated by the plaintiff-class, and whether the district court erred in the determination of the amount of fees granted. We affirm.

Factual Background

This appeal arises out of an extensive and procedurally tortured eight-year class action suit. This aspect of the case was argued in March of 1991 and held in abeyance until September, 1992. Appellees (plaintiffs) are a group of applicants and recipients of disability benefits under Titles II and XVI of the Social Security Act. They originally brought suit in the Western District of North Carolina to enjoin the Secretary from disregarding this court's standard of pain in disability benefit petitions. Hyatt v. Heckler, 579 F.Supp. 985, 988 (W.D.N.C.1984). The district court granted the injunction, certified and enlarged the class, and ordered the Secretary to comply with Fourth Circuit law. Hyatt v. Heckler, 579 F.Supp. at 1002-1004. The district court also issued its first order under the Equal Access to Justice Act, awarding over $100,000 in attorneys' fees and expenses under 28 U.S.C. Sec. 2412(d) after finding the Secretary was not substantially justified in litigating this issue. At the instance of the plaintiffs, the district court issued an amended fee order finding the Secretary had also acted in bad faith in pursuing this litigation. It found that this allowed it an option to use either Sec. 2412(b) or (d) in its determination of fees. The district court chose to grant the fee award based on Sec. 2412(d) (lack of substantial justification) because that was the subsection on which the plaintiffs' original motion was based. Hyatt v. Heckler, 586 F.Supp. 1154, 1156 (W.D.N.C.1984).

The Secretary then appealed the merits and fee award to this court. We vacated the district court's decision and remanded, allowing the Secretary to reconsider his policy of non-acquiescence under the new standard for pain in light of the then-recently passed Social Security Disability Benefits Reform Act of 1984. Hyatt v. Heckler, 757 F.2d 1455, 1462 (4th Cir.1985) (Hyatt I ). We also directed the district court to dismiss all of the initial claimants who did not comply with 42 U.S.C. Sec. 405(g) of the Social Security Act. Hyatt I, 757 F.2d at 1462. Because exhaustion and timely seeking judicial review were jurisdictional in this circuit, we held the district court should not have enlarged the class to include claimants who had not exhausted their administrative remedies or sought judicial review within sixty days after final agency denial of their claims. Hyatt I, 757 F.2d at 1460-61. We also vacated the district court's fee award to reconsider it in light of our opinion. Hyatt I, 757 F.2d at 1462.

On remand and reconsideration by the district court, plaintiffs filed two more motions for attorneys' fees (their second and third motions). They again asserted that the Secretary had acted in bad faith during this litigation and sought fees under Sec. 2412(b), or, in the alternative, under Sec. 2412(d). Upon reconsideration of the attorneys' fee issue, the district court concluded that the plaintiffs were entitled to $197,051.90 in fees under Sec. 2412(d) for all three motions. The district court, however, reduced the award by five percent in light of the validity of the Secretary's litigating the Sec. 405(g) jurisdictional issues decided in the Secretary's favor by this courts' opinion in Hyatt I. Hyatt v. Heckler, 618 F.Supp. 227, 233 (W.D.N.C.1985).

Plaintiffs also sought review of our decision on the class enlargement issue in Hyatt I by petitioning for a writ of certiorari to the Supreme Court. That writ was granted. The Supreme Court vacated our decision and remanded to us to reconsider the merits of the class enlargement issue in light of Bowen v. City of New York, 476 U.S. 467, 106 S.Ct. 2022, 90 L.Ed.2d 462 (1986). Hyatt v. Bowen, 476 U.S. 1167, 106 S.Ct. 2886, 90 L.Ed.2d 974 (1986).

On remand from the Supreme Court, we affirmed the district court's original decision that enlarged the class. ¹ Hyatt v. Heckler, 807 F.2d 376 (4th Cir.1986), cert. denied, 484 U.S. 820, 108 S.Ct. 79, 98 L.Ed.2d 41 (1987) (Hyatt II ). We held that under the Supreme Court's standard in City of New York, the district court had correctly allowed an enlargement of the class and an equitable tolling of the 60-day requirement without requiring an exhaustion of administrative remedies. Hyatt II, 807 F.2d at 378-80. We also affirmed the district court's grant of attorneys' fees to the plaintiffs as the prevailing party under 28 U.S.C. Sec. 2412(d) and reinstated the five percent amount the district court had deducted on its reconsideration. Hyatt II, 807 F.2d at 382-83. Furthermore, we directed the district court to award an additional fee for counsel's appellate services. Hyatt II, 807 F.2d at 383. So, the first, second and third motions for attorneys' fees have been disposed of and are not a part of this appeal.

Following our decision in Hyatt II, the Secretary requested a rehearing en banc. That motion was denied on February 12, 1987. On May 22, 1987 the Secretary filed a petition for a writ of certiorari to review our affirmance of the enlargement of the class in Hyatt II. The petition for certiorari of the Secretary was denied on October 5, 1987. Bowen v. Hyatt, 484 U.S. 820, 108 S.Ct. 79, 98 L.Ed.2d 41 (1987).

The case returned to the district court. On December 10, 1987, consistent with our opinion in Hyatt II, the district court ordered the Secretary to reevaluate the claims of the now-enlarged class under the Fourth Circuit standard on disabling pain. Hyatt v. Bowen, 118 F.R.D. 572, 573 (W.D.N.C.1987). This, however, was not the end of the matter. On August 8, 1988, the plaintiffs again moved the district court for an order against the Secretary, this time to enforce the district courts' original order requiring the Secretary to abide by the Fourth Circuit standard on pain. Hyatt v. Heckler, 711 F.Supp. 837, 839 (W.D.N.C.1989). Both sides again briefed the issue, with the district court concluding that "[i]t is regrettably obvious that the Secretary has continued to refuse to take those measures necessary to assure that, in the Hyatt reviews, the law of this circuit will apply with full force and effect." Hyatt v. Heckler, 711 F.Supp. at 840. On March 31, 1989, the district court drafted a Social Security Ruling on the pain standard and ordered it distributed to the Secretary's adjudicators in North Carolina. Hyatt v. Heckler, 711 F.Supp. at 844-48.

During this time the plaintiffs filed two more motions for attorneys' fees under Secs. 2412(b) and (d) (fourth and fifth motions). The fourth motion covered, generally, the period from May 25, 1985 through November 29, 1987. ² The fifth motion covered the period of November 11, 1987 through June 17, 1988. ³ The district court entered its order on March 22, 1989, granting the plaintiffs their fourth and fifth motions for fee awards. On this occasion, the district court found the Secretary had acted, in persisting to litigate the disability standard, in bad faith and awarded plaintiffs, after calculations using market rate, $315,083.35 in attorneys' fees and $28,569.86 in expenses under Sec. 2412(b). Hyatt v. Sullivan, 711 F.Supp. 833, 834-36 (W.D.N.C.1989).

The Secretary appealed both the order of March 31, 1989 on the substantive issues, and the March 22, 1989 order awarding attorneys' fees. In a separate opinion, we affirmed the district court's substantive orders requiring the Secretary to comply with the Fourth Circuit law on pain. Hyatt v. Sullivan, 899 F.2d 329 (4th Cir.1990) (Hyatt III ). Though a small part of the district court's decision was vacated and amended, this court affirmed it in the main, finding continued non-acquiescence by the Secretary in resistance to controlling circuit precedent. Hyatt III, 899 F.2d at 335-37.

The remaining order of March 22, 1989 granting appellees attorneys' fees for their fourth and fifth motions is the subject of this appeal.

There are two distinct methods for a district court to award attorneys' fees under the Equal Access to Justice Act. 28 U.S.C. Sec. 2412(d)(1)(A) requires the court to grant attorneys' fees to a prevailing party against the government, unless there are special circumstances that make the award...