Opinion ID: 510634
Heading Depth: 2
Heading Rank: 2

Heading: Bad Faith Fees

Text: 26 Finally, we must consider the appellants' claims in three of these four cases that Chief Judge Munson erred in refusing to grant additional fees pursuant to 28 U.S.C. Sec. 2412(b) for the Secretary's alleged bad faith. We will not disturb the district court's refusal to grant such fees unless it was an abuse of discretion. See, e.g., Sierra Club v. U.S. Army Corps of Engineers, 776 F.2d 383, 390 (2d Cir.1985), cert. denied, 475 U.S. 1084, 106 S.Ct. 1464, 89 L.Ed.2d 720 (1986). Section 2412(b) provides that: 27 Unless expressly prohibited by statute, a court may award reasonable fees and expenses of attorneys ... to the prevailing party in any civil action brought by or against the United States or any agency or any official of the United States acting in his or her official capacity in any court having jurisdiction of such action. The United States shall be liable for such fees and expenses to the same extent that any other party would be liable under the common law or under the terms of any statute which specifically provides for such an award. 28 The prevailing rule under American common law is that parties to litigation pay their own attorney's fees regardless of the lawsuit's outcome. See Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 247, 95 S.Ct. 1612, 1616, 44 L.Ed.2d 141 (1975); Sierra Club, 776 F.2d at 390. However, there is an exception to this general rule when a court determines that an unsuccessful party has 'acted in bad faith, vexatiously, wantonly, or for oppressive reasons.'  Alyeska, 421 U.S. at 258-59, 95 S.Ct. at 1622 (quoting F.D. Rich Co. v. United States, 417 U.S. 116, 129, 94 S.Ct. 2157, 2165, 40 L.Ed.2d 703 (1974)). We have held that an award of fees under the bad faith exception is warranted when the losing party's claims were 'entirely without color and made for reasons of harassment or delay or for other improper purposes.'  Sierra Club, 776 F.2d at 390 (quoting Browning Debenture Holders' Committee v. DASA Corp., 560 F.2d 1078, 1088 (2d Cir.1977)). The test is conjunctive and neither meritlessness alone nor improper purpose alone will suffice. Id. 29 This common law exception to the general rule regarding fees and costs was codified at 28 U.S.C. Sec. 2412(b) and added to the EAJA in response to congressional concerns that the government be subjected to the same standards that apply to private litigants. See H.R.Rep. No. 1418, 96th Cong., 2nd Sess. 8-9, reprinted in 1980 U.S.Code Cong. & Admin.News 4953, 4986-87. The exception, as codified, stands completely apart from that portion of the EAJA discussed earlier, under which the government may be held liable for fees at certain statutory rates unless its position in litigation is substantially justified. See 28 U.S.C. Sec. 2412(d). Section 2412(b) requires far more egregious conduct on the government's part than is required under section 2412(d) and it exposes the government to liability for costs and fees above and beyond the limit set by section 2412(d). See Barry v. Bowen, 825 F.2d 1324, 1333-34 (9th Cir.1987). 30 Here, the appellants in Oliver argue that the Secretary acted in bad faith in opposing the attorney's various applications for fees. In Hlywa and Gemelli, the appellants argue that the Secretary acted in bad faith in opposing them on the merits. We do not believe that Chief Judge Munson abused his discretion in concluding in each of these instances that such fees were not warranted. 31 First, in Hlywa and Gemelli, the appellants argue principally that the Secretary intentionally delayed the awarding of past-due benefits and failed to follow recognized standards in determining the claimants' eligibility. As the government argues, however, both cases were pending during the period immediately before the passage of the Reform Act, when there was considerable uncertainty regarding the proper standards to be employed in terminating disability benefits. See De Leon v. Secretary of Health and Human Services, 734 F.2d 930, 936 & n. 12 (2d Cir.1984) (decided approximately six months before the passage of the Reform Act). See also H.R.Rep. No. 618, 98th Cong., 2nd Sess. 11, reprinted in 1984 U.S.Code Cong. & Admin.News 3038, 3048 (noting the lack of clear standards before the passage of the Reform Act). Moreover, during the delay following remand, the appellants could have elected to receive interim benefits pursuant to the terms of the Reform Act. See Pub.L. No. 98-460, Sec. 2(e), 98 Stat. 1794 at 1798-99. We have considered the appellants' various arguments regarding the Secretary's alleged bad faith and we have concluded that the district court did not abuse its discretion in declining to award fees pursuant to 28 U.S.C. Sec. 2412(b). 32 We must also consider the claim in Oliver that the Secretary acted in bad faith in opposing the applications for attorney's fees. The appellants contend that the Secretary acted frivolously in opposing their claim that Oliver was a prevailing party by virtue of the Secretary's decision to award past-due benefits following the remand. However, there is case law clearly supporting the Secretary's argument. See, e.g., Truax v. Bowen, 842 F.2d 995, 997 (8th Cir.1988) (per curiam). The district court in these cases decided otherwise, choosing to follow cases to the contrary from within this Circuit. See Vitale, 673 F.Supp. at 1175-78. The Secretary chose not to cross-appeal Chief Judge Munson's ruling on this matter, but we hardly think that the original argument can be seen as constituting bad faith. 33 In sum, having reviewed the remainder of the arguments in Oliver, we do not believe that the district court abused its discretion in declining to award fees pursuant to 28 U.S.C. Sec. 2412(b). However, in light of earlier holdings in this opinion regarding the standards to be employed in fee applications under the SSA, we offer a cautionary note regarding the Secretary's role in opposing requests for fees under that statute. 34 The appellants in these cases argue that the Secretary's self-styled role as a protector of claimants in fee applications is often markedly inconsistent with his posture in vigorously opposing the payment of benefits. Cf. Gruber v. Bowen, 673 F.Supp. 970, 971 (W.D.Wis.1987). The Secretary, on the other hand, argues that he has an obligation to see that Congress' intent is carried out and to see that claimants are protected from overreaching by their attorneys. See Moore v. Califano, 471 F.Supp. 146, 148-50 (S.D.W.Va.1979), appeal dismissed, 622 F.2d 585 (4th Cir.1980) (mem.). Although the Secretary undoubtedly has some proper role in fee applications, we agree that there can be a hollow ring to vigorous, routine opposition to both benefits and fees. See Gruber, 673 F.Supp. at 971. A request for attorney's fees should not result in a second major litigation. Hensley, 461 U.S. at 437, 103 S.Ct. at 1941. Accordingly, we agree with the Third Circuit's view expressed in Coup that the Secretary's role in opposing fee applications pursuant to 42 U.S.C. Sec. 406(b) should be no more than to explain what in his judgment [would be] an appropriate fee ... if calculated in accordance with the standards the agency w[ould] apply ... for work before it. See 834 F.2d at 325. If the Secretary's opposition to fees strays significantly beyond those boundaries, then the district courts have discretion to award fees for bad faith pursuant to 28 U.S.C. Sec. 2412(b).CONCLUSION 35 We affirm the district court's calculation of fees pursuant to 28 U.S.C. Sec. 2412(d) and we affirm the denials of bad faith fees pursuant to 28 U.S.C. Sec. 2412(b). We reverse the district court's failure to determine independently whether attorney's fees were also appropriate under 42 U.S.C. Sec. 406(b). We therefore remand these cases to the district court for further proceedings consistent with this opinion. Once appropriate fees under 42 U.S.C. Sec. 406(b) are calculated, the district court should order Attorney Hogg to return the lesser of either that amount or the EAJA award to his clients.