Richlin Sec. Service Co. v. Chertoff, 2006-1055.

• Decision Date: 26 December 2006
• Docket Number: No. 2006-1055.,2006-1055.
• Citation: 472 F.3d 1370
• Parties: RICHLIN SECURITY SERVICE COMPANY, Appellant, v. Michael CHERTOFF, Secretary of Homeland Security, Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

472 F.3d 1370

RICHLIN SECURITY SERVICE COMPANY, Appellant, v. Michael CHERTOFF, Secretary of Homeland Security, Appellee.

No. 2006-1055.

United States Court of Appeals, Federal Circuit.

December 26, 2006.

Gilbert J. Ginsburg, Attorney & Counselor-at-Law, of Washington, DC, argued for appellant.

Reginald T. Blades, Jr., Senior Trial Counsel, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for appellee. With him on the brief were Peter D. Keisler, Assistant Attorney General and David M. Cohen, Director.

Before RADER, Circuit Judge, PLAGER, Senior Circuit Judge, and DYK, Circuit Judge.

DYK, Circuit Judge.

Richlin Security Service Company ("Richlin") appeals a Department of Transportation Board of Contract Appeals ("Board")¹ decision that, under the Equal Access to Justice Act, 5 U.S.C. § 504 (2000) ("EAJA"), paralegal services may only be reimbursed at the cost to the attorney and not at the market rate. Richlin Sec. Serv. Co., DOTCAB No. 3034E and 3035E, 04-2 BCA ¶ 32,789, 2004 WL 2417674 (2004). Because we agree that EAJA only permits reimbursement for paralegal services at cost, we affirm.

BACKGROUND

I

This is the fifth time this case has come before this court.² The previous decisions concerned two fixed-price contracts executed by Richlin and the then Immigration and Naturalization Service ("INS")³ in April 1990 and August 1991. Richlin Sec. Serv. Co. v. Chertoff, 437 F.3d 1296, 1297 (Fed.Cir.2006). Pursuant to the contracts, Richlin agreed to provide guard services for detainees at the Los Angeles International Airport. Id. As the result of a mutual mistake, the contracts misclassified Richlin's employees as "Guard I" rather than "Guard II" for purposes of the wage classification scheme of the Service Contract Act, 41 U.S.C. §§ 351 et seq. (2000). The error resulted in the underpayment of Richlin's employees. Id.

In February 1995, the Department of Labor determined that Richlin's employees were entitled to back wages from Richlin. Id. Richlin then filed a claim against the government for over $1.5 million in back wages and associated taxes on the ground that the original contract price should have been higher to account for the increased wages and associated costs. Id. The contracting officer denied Richlin's claim, and Richlin appealed to the Board. Id. at 1297-98. The government resisted reformation of the contract and defended the subsequent appeals on the ground that Richlin bore the risk of misclassifying its employees. See Richlin Sec. Serv. Co., DOTCAB No. 3034E and 3035E, 04-2 BCA ¶ 32,789. After a series of appeals to the Board and this court, the Board awarded Richlin the amount of the additional wages, payroll taxes, and workers compensation premiums that Richlin was required to pay. Richlin Sec. Serv. Co., 02-2 BCA ¶ 31,876, 2002 WL 1042294 (DOTCAB 2002). We affirmed the Board's decision. Richlin Sec. Serv. Co. v. Ridge, 99 Fed.Appx. 906 (Fed.Cir.2004).

After this court affirmed, Richlin timely submitted an application for reimbursement of attorney's fees, expenses, and costs to the Board pursuant to EAJA. See Richlin Sec. Serv. Co. v. Ridge, 99 Fed. Appx. 906 (Fed.Cir.2004). This appeal concerns reimbursement under EAJA for paralegal services used in the course of the underlying cases (and in preparing the EAJA application).

II

Gilbert J. Ginsburg is an attorney who began representing Richlin in 1994 after the underlying case had been litigated for some time. Over the course of his representation, Ginsburg used paralegals and separately billed his client (Richlin) for their services at market rates. Between 1994 and May 23, 2003 (when Richlin filed its EAJA application), Ginsburg's paralegal billing rates increased from $50 per hour to $80 per hour to $95 per hour to $135 per hour.

EAJA provides:

[a]n agency that conducts an adversary adjudication shall award, to a prevailing party . . . fees and other expenses incurred by that party in connection with that proceeding, unless the adjudicative officer of the agency finds that the position of the agency was substantially justified or that special circumstances make an award unjust.

5 U.S.C. § 504(a)(1) (emphasis added). Subsection 504(b)(1) defines the term "fees and expenses":

"fees and other expenses" includes the reasonable expenses of expert witnesses the reasonable cost of any study, analysis, engineering report, test, or project which is found by the agency to be necessary for the preparation of the party's case, and reasonable attorney or agent fees (The amount of fees awarded under this section shall be based upon prevailing market rates for the kind and quality of the services furnished, except that (i) no expert witness shall be compensated at a rate in excess of the highest rate of compensation for expert witnesses paid by the agency involved, and (ii) attorney or agent fees shall not be awarded in excess of $125 per hour unless the agency determines by regulation that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys or agents for the proceedings involved, justifies a higher fee.)

(emphasis added). To recover "fees and expenses," the prevailing party must submit an application to the agency within 30 days of "a final disposition." 5 U.S.C. § 504(a)(2). The application must include "an itemized statement from any attorney, agent, or expert witness representing or appearing in behalf of the party stating the actual time expended and the rate at which fees and other expenses were computed." Id.

In the EAJA application, Richlin sought reimbursement for $51,793.75 in attorney's fees for work on the underlying cases and $14,225.00 in attorney's fees for preparing the EAJA application. Richlin also applied for reimbursement of paralegal services at the rate billed to Richlin for paralegal time, with the exception of services for the period after June 1, 2004 (when Ginsburg's billing rate for paralegals had increased to $135 per hour). Although it is unclear how Richlin computed the amount claimed for paralegal services, it appears that for services performed after June 1, 2004, Richlin capped the fee request at $95 per hour. Richlin ultimately sought reimbursement for $45,141.10 for 523.8 hours of paralegal time for work on the underlying cases. It also sought an additional $6,760.00 for 68.2 hours of paralegal work preparing the EAJA application.

III

On June 30, 2005, the Board issued a decision finding that "Richlin ha[d] established that it meets the size and net worth requirements for an EAJA award and . . . that Richlin was a prevailing party." The Board then concluded that the government's denial of Richlin's claim was not "substantially justified" under EAJA. See Richlin Sec. Serv. Co., DOTCAB Nos. 3034E and 3035E, 04-2 BCA ¶ 32,789. The Board found that the government's argument that Richlin bore the risk of the mutual mistake of misclassifying its employees was not substantially justified because the contracts expressly placed the risk of misclassification on the government. Accordingly, the Board held that Richlin was entitled to recover attorney's fees, awarding $43,313 in attorney's fees for the underlying cases and $7,126 in attorney's fees for the preparation of the EAJA application.

Regarding reimbursement for paralegal services, the Board reasoned that EAJA does not expressly provide for the reimbursement of paralegal services at the market rate and that the common definition of "attorney" does not include paralegals. Moreover, the Board noted that EAJA's legislative history defines "expenses" to include "paralegal time (billed at cost)." S.Rep. No. 98-586, 98th Cong 2d Sess., at 15 (Aug. 8, 1984). As there was no information in the record before the Board regarding the actual cost to Ginsburg of the paralegal services, the Board took "judicial notice of paralegal salaries in the Washington D.C. area as reflected on the internet." The Board awarded paralegal expenses at a rate of $35 per hour, which it found to be "a reasonable cost to the firm." Accordingly, for paralegal services in connection with underlying cases, the Board awarded $9,394. For services in connection with the EAJA application, the Board awarded $1,200.

Richlin timely appealed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(10) (2000).

DISCUSSION

We review the Board's interpretation of EAJA without deference. Brickwood Contractors, Inc. v. United States, 288 F.3d 1371, 1376 (Fed.Cir.2002); Fanning, Phillips and Molnar v. West, 160 F.3d 717, 720 (Fed.Cir.1998). As the Supreme Court has held repeatedly, EAJA constitutes a waiver of sovereign immunity and should be strictly construed. See, e.g., Ardestani v. Immigration and Naturalization Serv., 502 U.S. 129, 137, 112 S.Ct. 515, 116 L.Ed.2d 496 (1991). EAJA "lifts the bar of sovereign immunity for award of fees in suits brought by litigants qualifying under the statute, [but] does so only to the extent explicitly and unequivocally provided." Levernier Const., Inc. v. United States, 947 F.2d 497, 502 (Fed.Cir.1991) (quoting Fidelity Construction Co. v. United States, 700 F.2d 1379, 1386 (Fed.Cir. 1983)). Thus, we must strictly construe EAJA's fee shifting provision in favor of the government.

I

EAJA generally provides that a "prevailing party" may recover "fees and other expenses" where the position of the government was not "substantially justified." 5 U.S.C. § 504(a)(1). Subsection 504(b)(1)(A) defines "fees and other expenses" and provides that:

"fees and other expenses" includes the reasonable expenses of expert witnesses, the reasonable cost of any study, analysis, engineering report, test, or project which is found by the agency to be necessary for the preparation of the party's case, and reasonable attorney or agent fees.

The question here is whether, under EAJA, amounts for paralegal services may be recovered at market rates as part of "fees"...