S.Ct.: Paralegal fees against US are at market rate

The Supreme Court unanimously held that the Equal Access to Justice Act permits prevailing parties in cases against the federal government to recover fees for paralegal services at the prevailing market rate. Richlin Security Servs. V. Chertoff, No, 06-1717 (Jun. 2, 2008).

The Court’s opinion, by Justice Alito, relied on the statute’s plain text and precedent on 42 U.S.C. §1983; it rejected as unpersuasive the Government’s textual, legislative history and policy arguments. 

                The Act allows for recovery of “fees and expenses,” defined as “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.” It specifies that “fees” shall be based on market rates, with two exceptions not relevant here. 5 U.S.C. § 504; 28 U.S.C. § 2412.

 

               Amy Howe on SCOTUSblog nicely summarizes the decision:

The opinion regards the plain language of the statute as decisive, explaining that “[i]n this case, Richlin ‘incurred’ ‘fees’ for paralegal services in connection with its contract action before the Board. Since §504(b)(1)(A) awards fees at ‘prevailing market rates,’ a straightforward reading of the statute leads to the conclusion that Richlin was entitled to recover fees for the paralegal services it purchased at the market rate for such services.” The Court dismisses the government’s argument that Congress intended paralegal fees to be “other expenses” reimbursable at “reasonable cost” as a “fractured interpretation of the statute,” explaining that it found no reason to believe that Congress intended “expenses” to be reimbursed differently from fees and, in any event, “it would hardly follow that amounts billed for paralegal services should be classified as ‘expenses’ rather than as ‘fees.’”

Moreover, the Court continued, even if paralegal fees were to be reimbursed at cost, “reasonable cost” would still generally be “deemed to be ‘prevailing market rates’ when such rates could be determined.” Finally, the Court emphasized that the reasoning of its 1989 decision in Missouri v. Jenkins [491 U.S. 274], in which it held that prevailing litigants under Section 1983 could recover paralegal fees at market rates, applied fully to EAJA cases as well.

Justice Alito’s opinion concludes by addressing, and ultimately deeming unpersuasive, legislative history and policy arguments advanced by the government. (Court watchers will not be shocked to learn that Justice Scalia declined to join the legislative history portion of the opinion, while Justice Thomas declined to join both the Missouri v. Jenkins discussion and the entirety of Part III [discussing legislative history and policy arguments].) The government had seized on a snippet in a Senate Report indicating that “[e]xamples of the type of expenses that should ordinarily be compensable [under EAJA] include paralegal time (billed at cost).” The Court dismissed the snippet, however, as a “stray remark” rendered even less significant by the fact that, “as we observed earlier, the word ‘cost’ could just as easily (and more sensibly) refer to the client’s cost rather than the attorney’s cost.”

And the Court rejected the government’s argument (on which the Federal Circuit relied below as well) that allowing paralegal fees to be reimbursed at market rates would create a “perverse incentive” for firms to “shift an inefficient amount of attorney work to paralegals, since paralegal fees could be recovered at a greater percentage of their full market value.” Instead, the Court agreed with Richlin that the argument “proves too much” and could apply just as easily to fees that are undeniably covered under EAJA, such as “agents” and junior attorneys.

Finally, although the Court likely would have reached the same result based solely on the text of the statute and Missouri v. Jenkins, Richlin’s cause was certainly helped by the fact that, from a policy perspective, the Court regarded the market-rate system as a far more straightforward one (and, moreover, one which has worked well for some time, both in the Section 1983 context and in circuits employing the same rule for EAJA cases): “Market practice provides by far the more transparent basis for calculating a prevailing party’s recovery under EAJA. It strains credulity that Congress would have abandoned this predictable, working framework for the uncertain and complex accounting requirements that a cost-based rule would inflict on litigants, their attorneys, administrative agencies, and the courts.”

                Also interesting (but not mentioned by SCOTUSblog) was the Court’s discussion of sovereign immunity and its relevance to statutory interpretation. The Government argued that “any right to recover paralegal fees under the EAJA must be read narrowly in light of the statutory canon requiring strict construction of waivers of sovereign immunity.” The Court, however, said that it has “never held that [this canon] displaces the other traditional tool of statutory construction,” and that the precedents cited by the Government “all used other tools of construction in tandem with the sovereign immunity canon.” As to the EAJA: “There is no need for us to resort to the sovereign immunity canon because there is no ambiguity left for us to construe.”

The Court rejected a similar sovereign immunity argument last week in Gomez-Perez v. Potter, 2008 WL 2167189 (May 27, 2008) (NO. 06-1321) (summary here), where Alito wrote for the Court that this canon applied only to the actual waiver provision of the Age Discrimination in Employment Act (ADEA), not to the Act’s substantive provisions, and that in any event the Act “prohibits retaliation with the requisite clarity.” As I noted regarding Gomez-Perez, the Richlin reasoning contrasts with Alito’s application of a “clear statement rule” to remedies under a Spending Clause statute in Arlington Cent. School Dist. Bd. of Educ. v. Murphy, 548 U.S. 291, 296 (2006).