ILANA DIAMOND ROVNER, Circuit Judge.
This case poses a question of first impression in our circuit — whether the Supreme Court's decision in Farrar v. Hobby, ___ U.S. ___, 113 S.Ct. 566, 121 L.Ed.2d 494 (1992), requires us to abandon our long-held rule that plaintiffs who attain the relief they seek through defendants' voluntary action can be "prevailing parties" for purposes of the civil rights attorney's fees statute, 42 U.S.C. § 1988.
Plaintiffs filed this class action lawsuit in February 1987, challenging a modification in the resource eligibility rules of the Indiana Medicaid Program that was to become effective
Plaintiffs then sought to recover their attorney's fees from the Indiana defendant (Sullivan) under section 1988.
We have long recognized that a plaintiff may be a prevailing party for purposes of section 1988 even if the defendant voluntarily provides the relief sought rather than litigating the suit to judgment. See, e.g., Stewart v. McGinnis, 5 F.3d 1031, 1039 (7th Cir. 1993), cert. denied, ___ U.S. ___, 114 S.Ct. 1075, 127 L.Ed.2d 393 (1994); Nanetti v. University of Illinois, 867 F.2d 990, 992-93 (7th Cir.1989); Gekas v. Attorney Registration and Disciplinary Comm'n, 793 F.2d 846, 849 (7th Cir.1986). In Stewart, we explained that plaintiffs seeking fees in such cases must satisfy two requirements:
5 F.3d at 1039 (quoting Illinois Welfare Rights Organization v. Miller, 723 F.2d 564, 566 (7th Cir.1983)).
(citing Maher v. Gagne, 448 U.S. 122, 129, 100 S.Ct. 2570, 2574, 65 L.Ed.2d 653 (1980).)
___ U.S. at ___, 113 S.Ct. at 573. The Court emphasized that "`[t]he touchstone of the prevailing party inquiry must be the material alteration of the legal relationship of the parties'" (id., quoting Texas State Teachers Assn. v. Garland Independent School Dist., 489 U.S. 782, 792-93, 109 S.Ct. 1486, 1493-94, 103 L.Ed.2d 866 (1989)), and reasoned that:
Id. ___ U.S. at ___, 113 S.Ct. at 574. Based on those passages, the district court concluded that a voluntary change in the defendant's behavior could no longer suffice to confer prevailing party status, and that plaintiffs could not receive fees unless they had obtained an enforceable judgment. The Fourth Circuit, sitting en banc, recently reached the same conclusion by a vote of 7-6 in S-1 and S-2 v. State Bd. of Educ. of N. Carolina, 21 F.3d 49 (4th Cir.1994).
The Fourth Circuit is alone, however, in its reading of Farrar. The Third, Fifth, Eighth and Tenth Circuits have all held that their versions of the catalyst rule survive Farrar. See Baumgartner v. Harrisburg Housing Auth., 21 F.3d 541 (3d Cir.1994); Craig v. Gregg County, Texas, 988 F.2d 18, 20-21 (5th Cir.1993);
We agree that Farrar does not preclude the award of fees when plaintiffs attain the relief they seek through defendants' voluntary action. We simply find it implausible that the Supreme Court meant to abolish a rule employed by nearly every circuit and previously recognized by the Court itself as "settled law," without expressly indicating that it was doing so. As the Third Circuit noted in Baumgartner, "it is not likely that the Supreme Court would overturn such a wide-spread theory without even once mentioning it, particularly when it was inapplicable to the case at hand." 21 F.3d at 547. And any possible doubt about the Court's intent is put to rest, in our view, by the fact that the same passages that have been read to preclude the award of fees when defendants have acted voluntarily are derived from and cite the very cases (Helms and Maher) in which the Supreme Court has approved that practice. See Farrar, ___ U.S. at ___, 113 S.Ct. at 573; see also supra at 275.
We therefore hold that plaintiffs who attain the relief they seek through defendants' voluntary action may qualify for fees by way of the catalyst theory notwithstanding Farrar. We reverse the district court's holding to the contrary and remand for the court to determine whether the plaintiffs have prevailed under that approach.
MANION, Circuit Judge, dissenting.
Farrar v. Hobby, ___ U.S. ___, 113 S.Ct. 566, 121 L.Ed.2d 494 (1992), has placed the lower courts at a fork in the road by stating: "[T]o qualify as a prevailing party, a civil rights plaintiff must obtain at least some relief on the merits of his claim. The Plaintiff must obtain an enforceable judgment against the defendant from whom fees are sought or comparable relief through a consent decree or settlement." Id. ___ U.S. at ___, 113 S.Ct. at 573 (citations omitted). Several circuits, and now the Seventh, have declared or implied that this language is mere dicta and thus not a valid standard for determining a prevailing party. Instead, the so-called "catalyst rule" is still the proper test. (Opn. at 274.) See Baumgartner v. Harrisburg Hous. Auth., 21 F.3d 541 (3d Cir.1994); Little Rock Sch. Dist. v. Pulaski County Special Sch. Dist., No. 1, 17 F.3d 260, 263 n. 2 (8th Cir.1994); American Council of the Blind of Colo., Inc. v. Romer, 992 F.2d 249, 250-51 (10th Cir.1993).
Moreover, even under the expansive "catalyst rule" the Zinns fall short. The catalyst rule requires that "the plaintiffs' lawsuit must be causally linked to the achievement of the relief obtained." In re Burlington N., Emp. Practices Lit., 832 F.2d 422, 425 (7th Cir.1987) (quoting Harrington v. DeVito, 656 F.2d 264, 266-67 (7th Cir.1981). The impetus for Indiana's change in its resource eligibility rules was not the Zinns' lawsuit; rather it was a change in federal law. Some additional facts help to understand the distinction. Prior to March of 1987, Indiana's Medicaid Program did not include as "available resources" real property that was either producing income or on the market to be sold at its fair market value. But after that date, the Department of Health and Human Services required Indiana to count these assets as "available resources." Accordingly, Indiana modified its resource rules to comply with federal requirements. The Zinns filed this class action challenging Indiana's modification. In their lawsuit the Zinns adamantly maintained that a ruling by a division of the Department of Health and Human Services caused Indiana to change its rules to the detriment of the Zinns. While the lawsuit was pending, the federal government passed the Medicare Catastrophic Coverage Act of 1988. This caused Health and Human Services to change its rules, which enabled Indiana to return to its former and more generous method of determining eligibility. Indiana thus modified its "resource eligibility" rules so that once again real property that was either producing income or on the market to be sold at its fair market value was not included as "available resources." The parties stipulated that this case should be dismissed because the Act rendered the case moot. These facts demonstrate that the causal link to Indiana's modification of its "eligibility rules" was the change in the federal law, not the Zinns' lawsuit.
For the above reasons I respectfully dissent.
As discussed below, the Fourth Circuit, sitting en banc, has disagreed with the reading of Farrar that we now adopt and, in so doing, also has disagreed with our reading of Helms. See S-1 and S-2 v. State Bd. of Educ., 21 F.3d 49 (4th Cir.1994). The dissent to the original panel opinion in S-1, which was subsequently adopted by the en banc court and has been endorsed by our dissenting colleague, concluded that Helms had reserved judgment on whether voluntary defendant action can render a plaintiff "prevailing." See S-1 and S-2 v. State Bd. of Educ., 6 F.3d 160, 171 (4th Cir.1993) (J. Wilkinson, dissenting). The portion of Helms cited in that opinion, however, reserves judgment only on the more limited question of whether a party can prevail when the defendant voluntarily takes action that the complaint did not request. See 482 U.S. at 763, 107 S.Ct. at 2677. The above-quoted portion of Helms makes clear that the Court did not intend to suggest that whether a plaintiff can prevail when the defendant voluntarily provides the relief sought was an unresolved question.