Opinion
Case No. 99 C 1139
February 27, 2001
MEMORANDUM OPINION AND ORDER
This case is before the Court on Plaintiff's application for attorney's fees pursuant to the Equal Access to Justice Act ("EAJA"), 28 U.S.C. § 2412. A divided Seventh Circuit Court of Appeals reversed and remanded for further consideration this Court's decision which had affirmed the Administrative Law Judge's decision denying disability benefits to Plaintiff. The principal issue presented is whether the Commissioner was substantially justified in its legal and factual positions. The Court grants Plaintiff's application in the amount of $32,949.63, because the Court finds the Commissioner's position was not substantially justified and because Plaintiff's application for attorney's fees is reasonable.
I. BACKGROUND FACTS
In 1988, Plaintiff was awarded disability insurance benefits ("DIB") due to alcoholism. After an amendment to the Social Security Act, Plaintiff received notice that his disability benefits would cease in January 1997, unless he could establish a continuing disability unrelated to alcoholism. Plaintiff requested review claiming a disability and inability to work because he suffered from arthritis, a bad back, cirrhosis of the liver, and an ulcer. An Administrative Law Judge ("ALJ") found Plaintiff did not have a disability. Plaintiff requested a review of the ALJ's decision, which the Appeals Council denied. Plaintiff sought judicial review. This Court granted the Commissioner's motion for summary judgment and affirmed the ALJ's decision. Smith v. Apfel, 72 F. Supp.2d 922 (N.D.Ill. 1999). Plaintiff appealed to the Seventh Circuit, limiting his claim primarily to arthritis and hypertension. On appeal, Plaintiff argued the ALJ made flawed credibility determinations, ignored evidence of Plaintiff's arthritis, and improperly afforded greater weight to the opinion of a consulting physician over the opinion of Plaintiff's treating physician. In agreeing with Plaintiff, the Seventh Circuit reversed and remanded for further administrative proceedings holding the ALJ's decision was not supported by substantial evidence. Smith v. Apfel, 231 F.3d 433 (7th Cir. 2000).
Plaintiff submitted an EAJA fee application in the amount of $15,330.55, for the work performed by his attorney, Frederick J. Daley and his associates, at the district court level; and $17,619.08, for the services of Barry Schultz and his associate, who represented Plaintiff before the Seventh Circuit Court of Appeals. These fee applications also included time spent on their fee applications and cost reimbursements. The Commissioner has challenged Plaintiff's entitlement to fees and, alternatively, the reasonableness of the requested fees. Plaintiff has assigned his EAJA fees to counsel.
II. STANDARD FOR FEE AWARD UNDER THE EAJA
The EAJA directs a court to award attorney fees and other expenses to private parties who prevail in litigation against the United States if, among other conditions, the Government's position was not "substantially justified." 28 U.S.C. § 2412(d)(1)(A) and (B). The position of the United States includes both its position during litigation and its position during the administrative proceedings. 28 U.S.C. § 2412 (d)(2)(D). The substantial justification standard requires the government to show its position was grounded in "(1) a reasonable basis in truth for the facts alleged; (2) a reasonable basis in law for the theory propounded; and (3) a reasonable connection between the facts alleged and the legal theory advanced." United States v. Hallmark, 200 F.3d 1076, 1080 (7th Cir. 2000). This Court is required to examine the government's position in both the prelitigation and litigation contexts. Id. When errors are made by the ALJ, the Commissioner is held accountable. Cummings v. Sullivan, 950 F.2d 492, 496 (7th Cir. 1991).
The standard of "substantially justified" is satisfied if there is a genuine dispute or if reasonable people could differ as to the appropriateness of the contested action. Pierce v. Underwood, 487 U.S. 552, 565, 108 S.Ct. 2541, 2550 (1988). "While the parties' postures on individual matters may be more or less justified, the EAJA — like other fee-shifting statutes — favors treating a case as an inclusive whole, rather than as atomized line items." Commissioner, INS v. Jean, 496 U.S. 154, 161-162, 110 S.Ct. 2316, 2320-2321 (1990). This Court is required to make a global assessment to determine whether the government was substantially justified in continuing to push forward at each stage. Hallmark, 200 F.3d at 1081.
The Government's success on the merits is relevant to the "substantial justification" determination. In Pierce, the Supreme Court observed: "Conceivably, the Government could take a position that is not substantially justified, yet win; even more likely, it could take a position that is substantially justified, yet lose. Nevertheless, a string of losses can be indicative; and even more so a string of successes." Pierce, 487 U.S. at 568, 108 S.Ct. at 2551. When considering the issue of EAJA fees, this Court must reexamine the factual and legal circumstances of the case from a different perspective than used at any other stage of the proceeding. Hallmark, 200 F.3d at 1080.
III. THE COMMISSIONER HAS NOT MET ITS BURDEN OF PROOF THAT ITS POSITION WAS SUBSTANTIALLY JUSTIFIED
A. Substantial Evidence vs. Substantial Justification
Two different standards apply at the merits stage and the EAJA stage. During the merits portion of a case, the court's determination must be supported by "substantial evidence" in the record "which is evidence a reasonable mind might accept as adequate to support a conclusion." Smith, 231 F.3d at 437. At the EAJA stage, fees are to be awarded unless the government's position was substantially justified. The position of the Commissioner is "substantially justified" if it is "justified to a degree that could satisfy a reasonable person" and have a "reasonable basis in law and fact." Pierce, 487 U.S. at 565, 108 S.Ct. at 2550. Although the language defining the substantial evidence standard is strikingly similar to the standard for substantial justification, the two are not the same. However, an examination of the decision on the merits is important in the EAJA determination. For example, a finding that the government's position on the merits was "arbitrary and capricious" may be at odds with a later conclusion that the government's position was "substantially justified." Hallmark, 200 F.3d at 1081 (remanding case for re-examination of previous denial of attorney's fees).
In Friends of Boundary Waters Wilderness v. Thomas, 53 F.3d 881, 885 (8th Cir. 1995), the court reversed the denial of attorney's fees in which the district court had relied upon its earlier opinion and a dissent on appeal to find the government's position was substantially justified. In its analysis, the court of appeals looked to its earlier opinion and held that its "conclusion that the Chief's position was plainly contrary to existing law [on the merits] counsels so strongly against the conclusion that the Chief's position was substantially justified [for EAJA purposes] that it must determine the outcome." Therefore, this Court must give due deference to the ultimate decision on the merits in deciding the EAJA application while recognizing "the outcome of a case is not conclusive evidence of the justification for the government's position." Hallmark, 200 F.3d at 1079.
A String of Successes Does Not Constitute Substantial Justification
This case presents the issue of what effect the decisions of the ALJ, this Court, and a dissenting judge at the Seventh Circuit, all agreeing with the Commissioner, have on the determination of whether the position of the Commissioner was substantially justified. The Supreme Court has made it clear that such success is not dispositive. "Obviously, the fact that one other court agreed or disagreed with the Government does not establish whether its position was substantially justified." Pierce, 478 U.S. at 569, 108 S.Ct. at 2552.
In United States v. Paisley, 957 F.2d 1161, 1166 (4th Cir. 1992), the government prevailed at every level of the litigation until the Supreme Court reversed and finally decided against the government. Although the Fourth Circuit found the government's position was substantially justified, the court, citing Pierce, discussed "the fact that the claim survived through the court of appeals . . . points generally in the direction of strength, it obviously could not suffice, standing alone, to command a finding of substantial justification. Completely unfounded claims sometimes for a variety of reasons, survive beyond their just desserts." Id. While such objective indicia may be considered when they are relevant, the Seventh Circuit has cautioned "that these objective factors are rarely conclusive. It is more important for the district court to examine the actual merits of the Government's litigating position." Hallmark Constr. Co., 200 F.3d at 1080. While it is proper to consider the opinions of both the district court and dissenting judges, the decision on the merits, and more importantly,
their rationales, "are the most powerful available indicators of the strength, hence reasonableness, of the ultimately rejected position." Paisley, 957 F.2d at 1167.
C. Analysis of Commissioner's Position
The Seventh Circuit strongly criticized the Commissioner's position as contained in the ALJ's decision. The Seventh Circuit held "the ALJ made flawed credibility determinations, erroneously made an independent medical determination that [Plaintiff] did not suffer from arthritis, and failed to properly weigh the medical opinions." Smith v. Apfel, 231 F.3d at 437. The Seventh Circuit decision strongly suggests the Commissioner's prelitigation and litigation positions were not substantially justified because these problems were present throughout the administrative and litigation phases of this case. This conclusion is supported in several ways.
First, the Seventh Circuit concluded no reasonable mind could accept as adequate the evidence accepted by the ALJ to support his conclusion. Smith, 231 F.3d at 437. Despite the contrary views expressed by the ALJ, this Court and the dissent, the Seventh Circuit majority make clear the record developed was simply not adequate to deny disability benefits to Plaintiff.
Second, the Seventh Circuit held the ALJ did not develop a full and fair record. Id., at 437-38. The Seventh Circuit concluded the ALJ could not have accurately assessed Plaintiff's arthritis without more recent X-rays. The court stated it was imperative, in fully and fairly developing the record, for the ALJ to order additional X-rays to assess the magnitude of Plaintiff's arthritis. Id., 437-38. Failure to sufficiently develop the record to support a decision denying benefits leads to the conclusion the ALJ did not have a reasonable basis for his decision.
Third, the Seventh Circuit criticized the ALJ for not commenting on the effects of hypertension, such as dizziness, on Plaintiff's ability to safely operate a forklift. The Seventh Circuit stated the ALJ's failure to consider evidence of dizziness precluded the court from "evaluating whether substantial evidence existed to support the ALJ's finding." Id., at 438. Because the Seventh Circuit concluded the ALJ did not take into consideration all the relevant medical evidence, his decision did not have a reasonable basis in fact.
The Seventh Circuit simply followed existing and established law in deciding in favor of the Plaintiff. The ALJ failed to develop a full and fair record, he did not have a sufficient basis to disregard the treating physician's opinion and he failed to explicitly consider Plaintiff's dizziness. Id., at 437-38. The ALJ failed to conform his findings with these existing principles. The fact this Court and the dissent agreed with the ALJ does not change the result.
Under these circumstances, this Court is compelled to find that in reviewing the entire action, the Commissioner has not met the burden to establish his position was substantially justified. While this Court recognizes the standards for "substantial evidence" dealing with the merits and "substantial justification" dealing with the EAJA are not the same, this Court would be hard pressed to find that for EAJA purposes the Commissioner's position could satisfy a reasonable person, when the Seventh Circuit has held that no reasonable mind could accept as adequate the evidence on the merits. Having reviewed the entire record, the Court concludes Plaintiff is entitled to EAJA fees.
D. Public Policy Considerations of the EAJA also Supports the Award of Fees
One of Congress' expectations in enacting the EAJA was to attract private counsel to represent meritorious disability claimants. Congress was concerned with the possibility that persons "may be deterred from seeking review of, or defending against, unreasonable governmental action because of the expense involved." Sullivan v. Hudson, 490 U.S. 877, 883, 109 S.Ct. 2248, 2253 (1989). Denying the ultimately prevailing party EAJA fees simply because the Government prevailed at one stage of the proceedings would discourage attorneys from representing these individuals past the district court stage, if at all. "When the cost of contesting a Government order, for example, exceeds the amount at stake, a party has no realistic choice and no effective remedy." Id.
The EAJA was designed to rectify this situation by providing for an award of reasonable attorney's fees. In addition, the EAJA encourages government agencies to investigate, prepare and proceed with litigation in a professional and appropriate manner. Likewise, the potential for recovering fees encourages private counsel to assist in improving government efficiency. Hallmark, 200 F.3d at 1080. Absent the availability of EAJA fees, it is unlikely Plaintiff would have been able to pursue an appeal from the ALJ's and this Court's decisions. Therefore, the award of EAJA fees in this case also furthers the strong public policy the EAJA statute was designed to promote.
IV. PLAINTIFF IS ENTITLED TO $32,949.63 IN FEES AND COSTS
The Commissioner argues the fees requested by Plaintiff's attorneys are excessive. The Court has reviewed Plaintiff's fee petitions, pleadings, briefs, docket sheets and finds that the time spent was reasonable, the hourly rate proper, and the work product professional. Both Mr. Daley and Mr. Schultz are experienced social security attorneys who prosecuted this case diligently and efficiently. In addition to briefing, this Court also requires oral argument. Following oral argument, Plaintiff's counsel cited supplemental authority to the Court. Plaintiff also filed a motion to alter or amend judgment after receiving the adverse ruling prior to appeal.
Mr. Schultz did an excellent job in obtaining a reversal of this Court's decision over a dissent. His time was reasonable, his preparation thorough, and his efforts were successful. The 52.5 hours objected to by the Commissioner include drafting a brief and preparing for oral argument in front of the Seventh Circuit Court of Appeals. For an attorney to be effective at any stage of the proceedings, sufficient preparation and practice is crucial.
The time spent by counsel in pursuing their fee application is also reasonable. Supplemental fees for the work performed in preparing EAJA briefs are appropriate. Commissioner, INS v. Jean, 496 U.S. 154, 162, 110 S.Ct. 2316, 2321 (1990). The Court finds the time spent, at both the district court and the appellate level, was reasonable. Without the expertise of Plaintiff's counsel and the availability of the EAJA fees, Plaintiff would not have had the financial resources to enter this courthouse and to seek review.
VI. CONCLUSION
Plaintiff's application for fees and costs is granted. The Clerk of the Court is directed to enter a judgment in favor of Frederick J. Daley, as assignee of Plaintiff Clementine A. Williams Smith, o/b/o Clint Smith, and against Defendant Kenneth S. Apfel, Commissioner of Social Security, in the amount of $32,949.63, for attorney's fees and court costs pursuant to the Equal Access to Justice Act.