WOLVERTON v. SCHWEIKER

OPINION

RAY McNICHOLS, District Judge.

This matter is before the court on a claim by plaintiff for an allowance of attorney fees and expenses pursuant to the Equal Access to Justice Act (EAJA), enacted as Title II (§§ 201-208) of the Small Business Export Expansion Act of 1980, Pub.L. 96-481, 94 Stat. 2325, codified as 28 U.S.C. § 2412.

The above action was one to review an adverse decision of the Secretary denying plaintiff's claim for disability insurance benefits under Title II of the Social Security Act, 42 U.S.C. § 405(g). The court found on November 12, 1981 that plaintiff was entitled to benefits and ordered payments.

Plaintiff, as the prevailing party, moved for an award of costs, expenses and attorney fees. The Secretary resists such an award. Briefs have been filed and considered and the matter is ripe for determination.

The EAJA amended Titles 5 and 28 of the United States Code, effective October 1, 1981. The EAJA rests on the premise that certain individuals and organizations may be deterred from seeking review of, or defending against, unreasonable governmental action due to the expense involved in securing the vindication of their rights. The purpose of the Act is to reduce existing deterrents by entitling certain prevailing parties to recover an award of attorney fees, expert witness fees and other expenses against the United States unless the government action was substantially justified.

With an effective date only a few months past, it is understandable that no body of controlling precedent has been established to guide the court in interpreting the provisions of the statute. We appear to be plowing new ground.

The two relevant statutory provisions are 28 U.S.C. § 2412(a) and 28 U.S.C. § 2412(d)(1)(A). These provisions hold:

EAJA'S APPLICABILITY TO SOCIAL SECURITY PROCEEDING

The Secretary first argues that 28 U.S.C. § 2412(d) is not applicable to cases arising under Title II of the Social Security Act. 28 U.S.C. § 2412(d) begins: "Except as otherwise specifically provided by statute ..." The Secretary argues that since the Social Security Act controls awards of attorney fees in cases arising under Title II, § 2412(d), by its express terms, cannot apply to Title II cases.

42 U.S.C. § 406 does not permit an award of attorney fees against the United States under any circumstances. Rather, section 406 limits the amount which an attorney can take as a fee to 25% of the total amount of past-due benefits awarded to his client. The legislative history makes it clear that § 2412(d) "is intended to apply only to cases (other than tort cases) where fee awards against the government are not already authorized."1 Section 406 does not authorize fee awards against the government, thus the conditional language of § 2412(d) does not exclude an award of fees and other expenses under Title II of the Social Security Act.

THE MEANING OF "INCURRED"

28 U.S.C. § 2412(d) authorizes awards only of fees and expenses "incurred ... in any civil action ...". The Secretary argues that the plaintiff has not properly "incurred" any expense for attorney fees in this action. The Secretary argues that although this court has ordered payments for past-due benefits as a matter of law, no fees are incurred pursuant to 42 U.S.C. § 406 until the Secretary or a court determines a "reasonable fee".

Once this court reversed the Secretary and ordered the payment of past-due benefits, the Secretary was required to set a "reasonable" fee to compensate the claimant's attorney.2 Pursuant to this statutory requirement, the Secretary held back 25% of the claimant's award of past-due benefits. The Secretary has not yet determined what a "reasonable fee" is since the case is still pending in federal court. The EAJA does not define the word incurred, but the dictionary defines incurred as meaning "liable for".3 There is no question but that the claimant was represented by an attorney and has alleged the incurrence of attorney fees; the only remaining question is the amount of such fees. Thus, this court finds that the claimant has incurred attorney fees within the meaning of 28 U.S.C. § 2412.

THE EAJA'S EFFECTIVE DATE

The Secretary argues that the EAJA's effective date precludes the award the plaintiff seeks. The EAJA became effective October 1, 1981, and is applicable to a civil action or adversary adjudication pending on that date or commenced thereafter. The Secretary admits that the civil action was pending as of October 1, 1981. Nevertheless, the Secretary points out that virtually all expenses that plaintiff may have incurred in the civil action are attributable to periods prior to the EAJA's effective date. The government concludes that no award can be based on an implied waiver of sovereign immunity, and the EAJA, therefore, cannot be read as authorizing an award including expenses incurred prior to October 1, 1981.

The plain meaning of the EAJA is contrary to the Secretary's argument. The EAJA explicitly waives sovereign immunity with regard to a civil action or adversary adjudication pending on October 1, 1981. The Secretary's argument requires an exception to be read into the effective date provision, and this the court cannot do. The civil action before this court was pending on October 1, 1981. This effective date provides no barrier to an award of fees and expenses which might have occurred before October 1, 1981. Congress limited the applicability of the EAJA to cases pending on October 1, 1981. If it had intended to further narrow the number of applicable cases in this "pending" status, it could have done so by restricting potential cost and fee awards to those incurred after the Act's effective date.

"ADVERSARY ADJUDICATIONS" AND "CIVIL ACTIONS"

The Secretary argues that all expenses, costs and fees incurred during administrative proceedings before the Secretary are excluded from any award pursuant to 28 U.S.C. § 2412.

Section 2412(d)(1)(A) authorizes awards for fees and expenses incurred in a civil action. The civil action in which plaintiff prevailed was pursuant to 42 U.S.C. § 405(g), under which this court reviewed the pleadings and the transcript of administrative proceedings before the Secretary.

Section 2412(d)(3) authorizes an award only on judicial review of an "adversary adjudication", as defined in 5 U.S.C. § 504(b)(1)(C). The definition includes only "an adjudication under [5 U.S.C. § 554] in which the position of the United States is represented by counsel or otherwise". The Secretary's social security proceedings do not fit this definition, for in them the government does not take any "position", nor is it "represented by counsel or otherwise".

The hearings before the Secretary do not come within the definition of either a "civil action" or "adversary adjudication". Legislative history indicates that Congress did not intend a contrary result. The House Judiciary Committee in reporting favorably upon the EAJA expressly based its cost estimates on an exclusion of administrative proceedings under the Social Security Act.4 The Congressional Budget Office's cost estimate observed that social security administrative adjudications are not adversarial, as defined by the bill.5

All costs, fees and expenses incurred in proceedings before the Secretary must be excluded from an award made to plaintiff under the EAJA.

SUBSTANTIAL JUSTIFICATION

The remaining inquiries under § 2412(d) are twofold: first, whether "the position of the United States was substantially justified" or second, whether "special circumstances make an award unjust."

Although the EAJA is silent as to the meaning of the "substantially justified" standard, legislative history does provide significant guidance. Both the House and Senate Reports explain the standard as follows:

The fact that the "substantially justified" standard was based on Rule 37 of the Federal Rules of Civil Procedure7 further indicates that the standard is essentially one of reasonableness.8

Although the "substantially justified" standard essentially looks to the reasonableness of the government action, it should be noted that Senate Committee on Judiciary refused to adopt an amendment to S. 265 which would have changed the language governing the award of fees from "substantially justified" to "reasonably justified."9 Thus, it can be concluded that the applicable standard which this court must apply is slightly above one based on reasonableness.

Legislative history further makes it clear that the burden is on the Secretary to demonstrate that his action was substantially justified.10 The nature of this burden was described by both the House and Senate Report in identical terms:

Applying the standards set out, it is the finding of this court that the Secretary's actions were not substantially justified. In the court's memorandum opinion of December 14, 1979, in which the decision of the Secretary appealed from was reversed and remanded, this court found: "This court is forced to conclude that the ALJ applied incorrect legal standards or alternatively that the decision is not based on substantial evidence.12 After a rehearing the Secretary again denied benefits to Wolverton. Plaintiff filed a motion in this court for summary judgment and on November 12, 1981 this court granted that motion. In the court's memorandum opinion it was found:

As the Secretary points out, a finding that the Secretary's decision was not supported by substantial evidence does not require a concurrent finding by this court that the Secretary's position was not substantially justified. To hold otherwise would mean that EAJA fees were allowable in every case where the court found an absence of substantial evidence, a result certainly not intended by Congress.

This court found, in reversing the Secretary, not only that there was a lack of substantial evidence to support the Secretary's position, but rather that there was no evidence to support his position. The Secretary argues that the vocational expert testified that there were jobs which were available to the claimant. The vocational expert's testimony was in response to a hypothetical question put to him by the ALJ. It was the finding of this court that there was no basis in fact underlying the ALJ's hypothetical question. Again, there was no evidence supporting the Secretary in finding that the claimant had a residual capacity to work.

In summary, the court finds that the Secretary's position was not substantially justified.14 Further, the court finds no special circumstances which would make an award unjust.

It is hereby ordered that plaintiff is entitled to costs, fees and expenses pursuant to 28 U.S.C. § 2412 with regard to the plaintiff's civil action before this court. Accordingly, this court directs plaintiff to resubmit an application for fees and costs incurred in the action before this court. Any costs and fees incurred in administrative proceedings before the Secretary shall be excluded from plaintiff's application.