Knight v. U.S.

• Decision Date: 06 January 1993
• Docket Number: Nos. 91-1454,91-1488 and 92-1112,s. 91-1454
• Citation: 982 F.2d 1573
• Parties: Donald KNIGHT and Foster Pepper & Shefelman, a law partnership, Plaintiffs/Cross-Appellants, v. The UNITED STATES of America, Defendant/Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1573

982 F.2d 1573

Donald KNIGHT and Foster Pepper & Shefelman, a law partnership, Plaintiffs/Cross-Appellants, v. The UNITED STATES of America, Defendant/Appellant.

Nos. 91-1454, 91-1488 and 92-1112.

United States Court of Appeals Federal Circuit.

Jan. 6, 1993.

Bennett McConaughy, Foster, Pepper & Shefelman, Bellevue, WA, argued, for plaintiffs/cross-appellants.

Jeffrey A. Clair, Attorney, Civ. Div., Dept. of Justice, DC, argued, for defendant-appellant. With him on the brief, were Stuart M. Gerson, Asst. Atty. Gen., Wevley William Shea, U.S. Atty. and William Kanter, Attorney. Also Mark K. Doyle, Civil Div., Dept. of Justice, DC, for defendant-appellant. Of counsel was Michael Jay Singer.

Before NIES, Chief Judge, ARCHER and CLEVENGER, Circuit Judges.

NIES, Chief Judge.

The United States appeals from a judgment of the United States District Court for the District of Alaska (entered June 10, 1991), in Civil Action No. A90-093, awarding Foster Pepper & Shefelman (Foster Pepper) $4,054.42, pursuant to an Alaska attorney's lien statute, for administrative advocacy on behalf of four employees (of which Knight is one) of the Department of the Interior. ¹ Knight and Foster Pepper (collectively, "plaintiffs") cross-appeal seeking to obtain awards under the Back Pay Act, the Equal Access to Justice Act, and a "common fund" theory. We conclude that the United States is not liable for payment of attorney fees on any of these bases and, accordingly, reverse the judgment in favor of Foster Pepper. In all other respects we affirm the district court.

I.

The dispute that spawned this attorney's fee litigation concerned the Office of Personnel Management's (OPM) interpretation of a statute authorizing Cost of Living Allowances (COLA) for government employees stationed in Alaska and in areas outside the continental United States. The statute caps the COLA at 25 percent of "basic pay." ²

Due to a 1986 reduction in force (RIF), Donald Knight and other employees of the Department of the Interior were removed from their positions but exercised their rights to occupy lower grade positions. Although occupying lower positions, the RIF'ed employees were entitled to retain the same grade and level of pay for a period of several years. Shortly after the RIF, Interior reduced the amount of COLA paid to Mr. Knight and other RIF'ed employees to 25 percent of the basic pay for the positions they actually occupied. This adjustment was made to conform to OPM's interpretation of the statute which defined "basic pay" as the pay for the actual positions each occupied rather than the retained pay which each received.

Mr. Knight promptly hired Foster Pepper, on a sliding contingency fee basis, to handle his claim against the United States challenging the legality of the reduction of his COLA and recoupment of any alleged overpayments as contrary to the statute. Three other Interior employees, similarly situated, also hired Foster Pepper for the same purpose under the same terms.

On February 13, 1987, Foster Pepper wrote Interior respecting its clients' claims to the higher allowances. From the outset, Interior, at the local and national level, agreed with its employees' position, refrained from recouping any amounts paid which were contrary to OPM policy, and requested OPM's reevaluation of their entitlement, forwarding to OPM the attorneys' letter. On December 15, 1987, OPM responded to Foster Pepper, advising them that Interior's current COLA computation (based upon graded, rather than retained pay) was "consistent with current OPM guidance," citing two decisions of the Comptroller General. ³ Nevertheless, OPM gave its assurance that it would reevaluate the question, and it followed up with a request for a legal opinion from the Justice Department's Office of Legal Counsel.

In 1989, the Office of Legal Counsel issued an opinion that the COLA should be computed based upon "retained pay." OPM changed its policy in response. On July 21, 1989, it issued appropriate general instructions to all Federal agencies directing them to award back pay and interest on any timely filed claims arising from the "old" COLA policy.

II.

On September 19, 1989, before any disbursement of back pay by Interior, Foster Pepper submitted to Interior a written request for fees in the amount of 25 percent of any back pay disbursement made pursuant to OPM's July 21, 1989 directive. Foster Pepper sought fees under 5 U.S.C. § 5596(b)(1)(A)(ii) (1988) (the Back Pay Act) for its clients. It also asserted a right to have the fees agreed to by its clients withheld from their back pay award and, in addition, it demanded fees from the back pay of any Interior employee benefitting from the policy change.

After Interior denied its fee demands, Foster Pepper filed suit in the Alaska District Court, on behalf of itself and Mr. Knight (the only named employee/client). The complaint included counts for attorney fees and expenses under the Back Pay Act, 5 U.S.C. § 5596(b), the Equal Access to Justice Act (EAJA), 28 U.S.C. § 2412, and a "common fund" theory. Foster Pepper also asserted at some point in the proceedings that, under Alaska Statute § 34.35-430(a)(3) (1990), it had a lien for fees due from its clients. During the pendency of the suit, Interior paid its employees the amount due as back pay. ⁴

In a judgment dated March 5, 1991 (on an oral ruling rendered December 30, 1990), the court dismissed with prejudice the Back Pay Act and EAJA claims. The EAJA was found inapplicable, because there was neither a "civil action," nor an "administrative adjudication," nor an "adversary adjudication" which is a necessary predicate to such award. The court also found Foster Pepper's work not of such nature to be covered by the attorney fees provisions of the Back Pay Act, but, if within the coverage of that Act, the court found no abuse of discretion in Interior's denial of fees. Plaintiffs' claim for assessment of fees against a "common fund", namely the claims of all Interior employees for back pay, was dismissed with prejudice, the court finding that because back pay claims were never before the court, no "common fund" existed or could be established against which attorney fees could be assessed.

However, the court granted plaintiffs' fees "pursuant to the state [of Alaska] attorney's lien statute, in accordance with those fee agreements of the individual employees, [clients of Foster Pepper] of which the Department of Interior had notice prior to disbursement of the checks." The court stated that the award was also supported by "advance notice to the government of an assignment of a part of the award due to Knight such that the government could not ignore the assignment." Subsequently, in a minute order, the district court designated its prior oral ruling of December 30, 1990 as its decision. Following this ruling, Foster Pepper sought additional fees under EAJA for the fee litigation before the district court, which the district court denied.

The government appeals the finding of liability under Alaska's attorney lien statute, as well as the alternative ruling that it was obligated to honor the fee agreement as a partial assignment of the pay of Foster Pepper's clients. Plaintiffs appeal the denial of their claims under the alternate theories advanced. However, with respect to EAJA, fees are sought only for litigation work before the district court.

For the reasons discussed infra, we conclude that no fees are awardable in this case under any of plaintiff's theories:

1) Application of Alaska's attorney's lien statute (Alaska Statutes 34.35.430(a)(3) (1990)) to the United States is barred in this case by sovereign immunity and the Supremacy Clause;

2) No partial assignment to Foster Pepper of its clients' claims against the government is cognizable;

3) No "common fund" existed in this litigation against which the court could assess attorney fees; and

4) The circumstances do not warrant an award to Knight under the Back Pay Act or EAJA.

III. Foster Pepper's Claims

A. Alaska Attorney Fee Lien

The district court awarded attorney fees based upon enforcement of Alaska's attorney's lien statute, which provides that:

An attorney has a lien for compensation, whether specially agreed upon or implied ... upon money in the possession of the adverse party in an action or proceeding in which the attorney is employed, from the giving of notice of the lien to that party.

Alaska Statutes § 34.35.430(a)(3) (1990). Per Foster Pepper, this Alaska statute imposed a lien (to the extent of the 25 percent of recovery specified in its fee agreements) against undisbursed back pay that had been held by the government; its September 19, 1989, letter to Interior was "notice" perfecting this lien; and Interior is liable for failure to honor the lien when it distributed back pay without making the required 25 percent fee deduction. The district court agreed and entered judgment on this claim in Foster Pepper's favor to the extent of the amount owed by its four clients. ⁵

The government asserts sovereign immunity from this suit. It argues that a state lien statute has no effect against the United States absent the government's consent and the government has not waived sovereign immunity respecting the Alaska statute. Further, the state lien law, if applied, would impermissibly regulate the operations of the federal government and compel the disbursement of federal funds for purposes not authorized by federal law. And finally, per the government, the state statute does not apply against a mere debt or obligation. While there is merit in each of these positions, we rest our decision on the jurisdictional ground that the government has not waived its sovereign immunity so as to permit a state law lien to be effective against the amounts of back pay due to its employees. Thus, there can be no government liability for failure to honor the purported lien rights.

Until the COLA back pay...