Opinion ID: 170107
Heading Depth: 2
Heading Rank: 2

Heading: Are the EAJA Attorney's Fees Payable to Ms. Manning or to Her Attorney?

Text: Ms. Manning does not dispute the district court's finding that her motion was properly filed under Rule 60(b). We review the denial of Rule 60(b) relief for an abuse of discretion. See Zurich N. Am. v. Matrix Serv., Inc., 426 F.3d 1281, 1289 (10th Cir.2005). Under Rule 60(b)(1), a court may relieve a party from an order based on mistake, inadvertence, surprise, or excusable neglect. Fed.R.Civ.P. 60(b)(1). A mistake may occur if the district court made a substantive mistake of law in its order. Yapp v. Excel Corp., 186 F.3d 1222, 1231 (10th Cir.1999). Applying these standards, we conclude that there was no mistake warranting Rule 60(b)(1) relief, and, therefore, the district court did not abuse its discretion in denying Ms. Manning's motion. In reaching this conclusion, we first look to the EAJA statute. When interpreting the language of a statute, the starting point is always the language of the statute itself. If the language is clear and unambiguous, the plain meaning of the statute controls. A statute is ambiguous when it is capable of being understood by reasonably well-informed persons in two or more different senses. McGraw v. Barnhart, 450 F.3d 493, 498 (10th Cir.2006) (quotation omitted). The EAJA statute provides that a court shall award to a prevailing party other than the United States fees and other expenses . . . incurred by that party in any civil action . . ., including proceedings for judicial review of agency action, brought by or against the United States . . ., unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust. 28 U.S.C. § 2412(d)(1)(A) (emphasis added). As the district court found, this statutory language clearly provides that the prevailing party, who incurred the attorney's fees, and not that party's attorney, is eligible for an award of attorney's fees. See Gisbrecht v. Barnhart, 535 U.S. 789, 796, 122 S.Ct. 1817, 152 L.Ed.2d 996 (2002) (Under EAJA, a party prevailing against the United States in court, including a successful Social Security benefits claimant, may be awarded fees payable by the United States if the Government's position in the litigation was not `substantially justified.'); McGraw, 450 F.3d at 497, 503 (stating EAJA award is to the claimant, while counsel receives [the § 406(b)] award and EAJA award is to the claimant, who may or may not tender that award to counsel, regardless of their agreement); Phillips v. Gen. Servs. Admin., 924 F.2d 1577, 1582 (Fed.Cir.1991) (per curiam) (As the statute requires, any [EAJA] fee award is made to the `prevailing party,' not the attorney.); see also City of Burlington v. Dague, 505 U.S. 557, 572, 112 S.Ct. 2638, 120 L.Ed.2d 449 (1992) (Blackmun, J., dissenting) (The provisions at issue in this case, [the Clean Water Act and the Solid Waste Disposal Act,] like fee-shifting provisions generally, authorize fee awards to prevailing parties, not their attorneys.); Venegas v. Mitchell, 495 U.S. 82, 87, 110 S.Ct. 1679, 109 L.Ed.2d 74 (1990) (Section 1988[ [4] ] makes the prevailing party eligible for a discretionary award of attorney's fees. . . . [I]t is the party, rather than the lawyer, who is . . . eligible. . . .); id. at 89, 110 S.Ct. 1679 ([W]e have already rejected the argument that the entitlement to a § 1988 award belongs to the attorney rather than the plaintiff.); [5] Evans v. Jeff D., 475 U.S. 717, 730, 731-32, 106 S.Ct. 1531, 89 L.Ed.2d 747 (1986) (holding in § 1988(b) case that Congress gave prevailing party statutory eligibility for discretionary award of attorney's fees and statute did not bestow fee award on attorney); Weeks v. Indep. Sch. Dist. No. I-89, 230 F.3d 1201, 1213 (10th Cir. 2000) (relying on case law addressing attorney's fees under § 1988 and deciding that prevailing party language in Fed. R.Civ.P. 54(d) refers to party and not to attorney); Turner v. Sec'y of Air Force, 944 F.2d 804, 808 & n. 2 (11th Cir.1991) (relying on case law dealing with § 1988 and holding in 42 U.S.C. § 2000e-5(k) case that [i]t is clear that the award of attorneys' fees belongs to the prevailing party, not to the attorney representing the party); United States v. Adkinson, 256 F.Supp.2d 1297, 1318 (N.D.Fla.2003) ([T]he [EAJA] fee award belongs to the client, and an attorney has no independent right to a fee award under the EAJA.), aff'd, 360 F.3d 1257 (11th Cir.2004) (per curiam). In addition to the prevailing party language, other parts of the EAJA statute affirmatively rule out the attorney as a recognized applicant for fees and expenses. Panola Land Buying Ass'n v. Clark, 844 F.2d 1506, 1511 (11th Cir.1988). In defining fees and other expenses, the EAJA treats attorneys in the same manner as it treats expert witnesses, engineers, scientists, analysts, or other persons found by the court to be needed to prepare the case. Id.; see also 28 U.S.C. § 2412(d)(2)(A). In addition, the EAJA requires that to apply for fees and other expenses, the prevailing party must submit an itemized statement from the attorney or expert stating the time expended and the fee rate. 28 U.S.C. § 2412(d)(1)(B). Lastly, the EAJA statute conditions eligibility for attorney's fees upon the prevailing party, not the attorney, not having a net worth exceeding $2,000,000. Id. The EAJA therefore permits attorney's fees reimbursement to financially eligible prevailing parties, who make a proper application, and not to their attorneys. Although the statutory language alone makes it clear that the prevailing party and not the attorney may recover an award of attorney's fees, the legislative history for the EAJA also makes it clear that certain prevailing parties, and not their attorneys, may recover attorney's fees when the government's action was not substantially justified. See H.R.Rep. No. 96-1418, at 5-6 (1980), reprinted in 1980 U.S.C.C.A.N. 4984, 4984. The EAJA rests on the premise that certain individuals . . . may be deterred from seeking review of . . . unreasonable governmental action because of the expense involved in securing the vindication of their rights. The economic deterrents to contesting governmental action are magnified in these cases by the disparity between the resources and expertise of these individuals and their government. The purpose of the bill is to reduce the deterrents and disparity 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. Id. This statement of purpose directly addresses the question whether the EAJA fees are for the claimant or for the claimant's attorney and clearly states that the fees are for the claimant. See Panola Land Buying Ass'n, 844 F.2d at 1511 (noting that federal fee statutes were not enacted for the benefit of the Bar but for the benefit of the persons the statutes are designed to reach). [T]he specific purpose of the EAJA is to eliminate for the average person the financial disincentive to challenge unreasonable governmental actions. Comm'r v. Jean, 496 U.S. 154, 163, 110 S.Ct. 2316, 110 L.Ed.2d 134 (1990) The EAJA therefore was not enacted for the benefit of counsel to ensure that counsel gets paid. Panola Land Buying Ass'n, 844 F.2d at 1511. Ms. Manning, however, maintains that uncodified portions of the EAJA anticipate that her attorney will receive the EAJA fee award. In particular, she points to Pub.L. 99-80, § 3, 99 Stat. 186 (1985). This section, however, refers to the fact that the attorney must return to the claimant the smaller of the two fee awards under the EAJA or under 42 U.S.C. § 406(b)(1). It does not state that the attorney is entitled to receive the full amount of the EAJA fees awarded. Rather, the purpose is to ensure that the attorney does not receive double compensation. The language of § 406(b)(1) further supports the conclusion that the EAJA award is for the prevailing party and not her attorney. Under § 406(b), the Commissioner must withhold and pay a reasonable attorney's fee directly to the attorney out of the claimant's past-due benefits, thus guaranteeing payment to the attorney and avoiding collection problems, but the amount of the attorney's fee that must be withheld and directly paid to the attorney is limited to the maximum of 25% of past-due benefits. Burnett v. Heckler, 756 F.2d 621, 626 (8th Cir.1985). Thus, unlike the EAJA, § 406(b) expressly provides for payment to the attorney. Congress has not substantially amended § 406(b) since enacting the EAJA. From this, we draw the conclusion that Congress knows what language to use to award attorney's fees to an attorney and what language to use when it chooses to award the fees to the prevailing party. Congress could have worded the EAJA statute to award attorney's fees to the attorney, but it did not do so. Further support for the conclusion that the EAJA award is for the prevailing party and not for the attorney is the settled law that the attorney does not have standing to apply for the EAJA fees; that right belongs to the prevailing party. See Oguachuba v. INS, 706 F.2d 93, 97-98 (2d Cir.1983). Just as a prevailing party cannot assign her underlying substantive action, she cannot assign her right to seek attorney's fees, which is derivative of the underlying substantive action, to her attorney. Cf. Pony v. County of Los Angeles, 433 F.3d 1138, 1140, 1142-44 (9th Cir.) (addressing attorney's fees under § 1988 and rejecting as invalid under California law plaintiff's putative assignment of right to apply for attorney's fees), cert. denied, ___ U.S. ___, 126 S.Ct. 2864, 165 L.Ed.2d 896 (2006). Only after the prevailing party exercises her right to seek an award of attorney's fees under the EAJA and obtains an award may her attorney pursue collection of the attorney's fees. See id. at 1142, 1144. Citing Willis v. Government Accountability Office, 448 F.3d 1341, 1347 (Fed.Cir. 2006), cert. denied, ___ U.S. ___, 127 S.Ct. 1356, 167 L.Ed.2d 76 (2007), and United States ex rel. Virani v. Jerry M. Lewis Truck Parts & Equipment, Inc., 89 F.3d 574, 577 (9th Cir.1996), Ms. Manning argues that even though the EAJA statute gives her the right to claim the fees, her attorney has the right to receive the awarded fees. Because these cases are distinguishable, we reject this argument. The Ninth Circuit has held that Virani, a qui tam action under the False Claims Act, does not apply to fee awards under § 1988. Gilbrook v. City of Westminster, 177 F.3d 839, 874 (9th Cir.1999). The court noted that there are significant differences between a fee award in a qui tam action and in a § 1988 action. Gilbrook, 177 F.3d at 874. Those differences are (1) that the Supreme Court has held that fee awards under § 1988 are bestowed upon the prevailing party and not the attorney; (2) that the governmental-harm concerns present in a qui tam action are not present in a civil rights action; and (3) that denying direct payment to attorneys is consistent with § 1988's purpose of attracting counsel to represent civil rights plaintiffs. Id. (citing Jeff D., 475 U.S. at 731-32, 106 S.Ct. 1531). Gilbrook therefore specifically held that [i]n the absence of a contractual assignment [of the fee award] to counsel, § 1988 requires that attorney fee awards be made directly to the prevailing party. 177 F.3d at 875. Based on our previous discussion that legal principles from § 1988 cases apply to EAJA cases, we conclude that Gilbrook' s analysis and holding are equally applicable in an EAJA case. Willis, a case under the Civil Service Reform Act, is distinguishable on the ground that it addressed the issue whether the attorney had standing to claim attorney fees under that Act. 448 F.3d at 1342, 1345. It cited Virani with approval only to differentiate between the plaintiff's right to seek the fees and the attorney's right to collect the awarded fees. Willis, 448 F.3d at 1347. But in a footnote, Willis recognized that, in an EAJA context, the client, not the lawyer, has the right to collect the fees. Id. at 1347 n. 3 (citing FDL Techs., Inc. v. United States, 967 F.2d 1578, 1580-81 (Fed.Cir.1992), which addresses different EAJA provision, 5 U.S.C. § 504(a)(1), but discusses 28 U.S.C. § 2412(d)(1)(A) and determines they are comparable and that under both provisions prevailing party is entitled to fee award). Further, Ms. Manning argues that because pro se litigants are not eligible for the award of EAJA attorney's fees, see Demarest v. Manspeaker, 948 F.2d 655, 655-56 (10th Cir.1991), the intention of the statute is to provide the attorney with the award. But she fails to recognize that the purpose of the fee award is to allow a claimant to present her claims without having to bear the cost of litigation. See id. at 656. If one of the costs the successful claimant has borne is attorney's fees, then she may, if eligible, recover them under the statute. Ms. Manning cites Dixon-Townsell v. Barnhart, 445 F.Supp.2d 1283 (N.D.Okla. 2006), as authority for reversing an offset of the EAJA fee award. In Dixon-Townsell, the Social Security claimant's EAJA fee award was completely offset under the Debt Collection Improvement Act of 1996 by an amount owed for unpaid child support. Id. at 1284. The claimant moved either to set aside the administrative offset or to correct under Rule 60(a) the clerical error of awarding fees to the claimant. Dixon-Townsell, 445 F.Supp.2d at 1284. The district court granted Rule 60(a) relief, amending the order to state that the EAJA attorney's fees award should be paid to counsel, and not to the claimant. Dixon-Townsell, 445 F.Supp.2d at 1284-85. The court found that the offset could be set aside and the Commissioner had the authority to retrieve the offset money pursuant to 31 C.F.R. § 285.4(h). Dixon-Townsell, 445 F.Supp.2d at 1285. The court also found that there was no authority to grant the EAJA fees to the claimant, because the fees are intended to compensate counsel and not to generate income for the claimant. Id. (citing Demarest, 948 F.2d at 656). We reject the conclusions reached in Dixon-Townsell. First, it neither discusses the plain language of the EAJA statute, nor considers the legislative history or case law interpreting the statute. In Ms. Manning's case, the award was correctly made to her and not to her attorney based on the clear statutory language that the award is to the prevailing party. See Reeves v. Barnhart, 473 F.Supp.2d 1173, 1176-77 (M.D.Ala.2007) (distinguishing and rejecting Dixon-Townsell ); see also McCarty v. Astrue, 505 F.Supp.2d 624, 630-31 (N.D.Cal.2007) (rejecting Dixon-Townsell as not persuasive). Dixon-Townsell' s citation to Demarest was inapposite, because, as indicated above, that case set forth the rule that pro se plaintiffs may not receive EAJA attorney's fees awards, and neither Mr. Dixon-Townsell nor Ms. Manning proceeded pro se. See Reeves, 473 F.Supp.2d at 1177. And Demarest did not hold that the EAJA attorney's fees should be paid to counsel. Continuing to argue that the EAJA award is for her attorney, Ms. Manning contends that it is customary in the Tenth Circuit for the EAJA attorney's fees to be paid directly to counsel. It is true, as she points out, that this court in Weakley, 803 F.2d at 580, ordered the government to pay EAJA attorney's fees to the plaintiff's attorney. But we did not address whether the Social Security claimant or the claimant's attorney was entitled to recover the fees under the EAJA statute. We merely awarded attorney's fees under § 406(b) and under the EAJA at the same time. Weakley, 803 F.2d at 580. Because the EAJA fees were greater than the § 406(b) fees, we ordered that counsel pay the smaller amount, represented by the § 406(b) fees, to the claimant. Weakley, 803 F.2d at 580. We have, however, more recently specifically stated in McGraw, based on analysis of the EAJA language, that the EAJA award is to the claimant, whereas the § 406(b) award is to counsel. [6] McGraw, 450 F.3d at 497. [7] Ms. Manning next argues that providing payment to her, instead of to counsel, might result in counsel receiving no payment for the work he has performed, thereby negating the purpose of the EAJA. She also contends that paying all the EAJA fees to the claimant directly would have a chilling effect on a claimant's ability to obtain representation. Ms. Manning's argument is purely speculative. Even if it is true, the clear language of the statute provides that attorney's fees are paid to the prevailing party, not the attorney. And in Jeff D., 475 U.S. at 741 n. 34, 106 S.Ct. 1531, the Supreme Court addressed and rejected a similar argument: We are cognizant of the possibility that decisions by individual clients to bargain away fee awards may, in the aggregate and in the long run, diminish lawyers' expectations of statutory fees in civil rights cases. If this occurred, the pool of lawyers willing to represent plaintiffs in such cases might shrink, constricting the effective assess to the judicial process for persons with civil rights grievances which the Fees Act was intended to provide. . . . We believe, however, that as a practical matter the likelihood of this circumstance arising is remote. Ms. Manning argues that the district court ignored the taxation problems that would occur to her if the EAJA fee award is paid directly to her. Like the lien issues mentioned in the first section of this decision, the taxation issues were not developed in the district court. But because, as discussed above, the EAJA attorney's fees belong to the prevailing party, we can easily conclude that Ms. Manning is properly taxed on that income. Cf. Campbell v. Commissioner, 274 F.3d 1312, 1313-14 (10th Cir.2001) (holding that award of attorney's fees under Title VII is income to former employee); Sinyard v. Commissioner, 268 F.3d 756, 757, 759 (9th Cir. 2001) (holding that attorney's fees paid on prevailing party's behalf pursuant to court order approving settlement of Age Discrimination in Employment Act class actions are income to prevailing party). See generally Commissioner v. Banks, 543 U.S. 426, 438-39, 125 S.Ct. 826, 160 L.Ed.2d 859 (2005) (declining to address argument that effectiveness of fee-shifting statutes is undermined by treating statutory fee awards as income to plaintiff). Although we conclude that the award of EAJA attorney's fees is to Ms. Manning and not to her attorney, we recognize that perhaps the answer is not as clear as it would appear to be from the statutory language, legislative history, and case law. Admittedly, it seems counter intuitive to hold that an award of attorney's fees does not go to the attorney, especially since the EAJA fees are calculated based on the time spent by the attorney and based on the attorney's hourly rate, see 28 U.S.C. § 2412(d)(1)(B), (2)(A). Indeed, the answer to the question who do the fees go to was not clear to the government, because it switched positions during the course of this litigation. In the district court, it consistently took the position that the award belonged to the attorney. But on appeal, it took the position that the award belonged to Ms. Manning. [8] Despite the government's confusion, we are bound by the statutory language, legislative history, and case law, which has been set forth in detail above. III. Are the EAJA Fees Subject to Offset Under the Debt Collection Improvement Act for Unpaid Student Loan Debts? Under the Debt Collection Improvement Act, the Department of the Treasury's Financial Management Service has the authority to collect nontax debts owed to the United States government by offsetting payments made by other federal agencies. See 31 U.S.C. § 3716; 31 C.F.R. § 285.5(a)(1); see also Exec. Order No. 13,019, 61 Fed.Reg. 51,763 (Sept. 28, 1996) ([T]he primary purpose of the Debt Collection Improvement Act is to increase the collection of nontax debts owed to the Federal Government. . . .). All federal payments, including fees, are subject to administrative offset. 31 C.F.R. § 285.5(e)(1). The only exceptions are for those payments specifically listed. Id. § 285.5(e)(2); see also § 285.5(e)(3)(i)(A) (noting that special rules apply to offset of Social Security benefit payments, excluding SSI payments). One payment type excluded from offset is payments for which a statute expressly prohibits offset. Id. § 285.5(e)(2)(v); see also 31 U.S.C. § 3716(e)(2). An EAJA award is not among the listed exceptions in § 285.5(e)(2). Nor does the EAJA statute prohibit offset of any fee award. See 28 U.S.C. § 2412. Furthermore, the Debt Collection Improvement Act does not exempt an EAJA attorney's fees award from offset. See 28 U.S.C. § 3716. Thus, it is clear that the Debt Collection Improvement Act is sufficiently broad to offset an EAJA fees award for an unpaid student loan debt owed to the federal government. Ms. Manning argues that the district court abused its discretion by failing to consider the holding in Lockhart v. United States, 546 U.S. 142, 126 S.Ct. 699, 163 L.Ed.2d 557 (2005), that the United States may offset an outstanding school loan debt from Social Security benefits beyond a ten-year statute of limitations period. She contends that Lockhart did not make a similar holding with respect to an offset from the EAJA attorney's fees. Relying on McGraw, 450 F.3d at 497, she points out that the EAJA fees are not paid out of Social Security benefits. This argument is without merit, because the Higher Education Technical Amendments of 1991, Pub.L. No. 102-26, § 3, 105 Stat. 123, 124-25 (codified at 20 U.S.C. § 1091 a(a)), which was relied on in Lockhart, eliminated the statute of limitations for all student loan collections. Thus, the district court did not abuse its discretion by failing to consider that under Lockhart the government can recover outstanding student loan debt from Social Security benefits. Instead, the fact that Social Security benefits can be offset arguably provides further support for the conclusion that the EAJA fees award can be offset. The purpose of disability benefits is to provide income required for ordinary and necessary living expenses. 20 C.F.R. § 404.508(a). To the extent that the Debt Collection Improvement Act reaches Social Security disability benefits, whose purpose is to provide income for living expenses, it certainly follows that the Act includes EAJA fees. In comparison, attorney's fees paid directly to an attorney under § 406 are not subject to offset, simply because they are paid directly to the attorney. We conclude that the EAJA attorney's fees award was properly paid to Ms. Manning and that those fees were subject to administrative offset by the Debt Collection Improvement Act for student loan debts she owed to the Department of Education. The judgment of the district court is therefore AFFIRMED. Ms. Manning's unopposed motion to file an addendum of recent citations is GRANTED.