Gotches v. Heckler

DUMBAULD, Senior District Judge. The inadvertent inhumanity towards the indigent which inheres in institutionalized and bureaucratized income transfer is illustrated by the case at bar. Because appellee Penelope Gotches was enjoying the benefit of benefits under both the Railroad Retirement Act (45 U.S.C. § 231 et seq.) and the Social Security Act (42 U.S.C. § 401 et seq.), the practice “most approved and in use”1 by the two agencies resulted, upon the death of her husband Steve (on January 2, 1982), in cancellation of all benefits except the Railroad Retirement spousal benefit. Thus the income for the support of this 81 year old widow suddenly dropped from $695 to $105 per month. She was told by the Railroad Retirement Board that it would take five or six months before the Board could compute what she was legally entitled to receive as a surviving widow. After her attorney wrote without response to both agencies, suit was filed on April 23, 1982, in the form of a class action seeking relief for the multitude of individuals with dual coverage for benefits. The Board thereupon agreed to increase her interim benefits, and finally decided on May 24, 1982, that, she was entitled to $575.90 per month, retroactive to January 1, 1982. Though the class action never proceeded to determination of a class, settlement negotiations continued, and on November 16, 1982, a consent decree was entered. — 110 — The consent decree provided for the establishment of procedures for the benefit of other surviving spouses than Mrs. Gotches which averted some of the disadvantages of the former “dual eligibility” cut-off. The Railroad Retirement Board agreed to pay interim benefits equal to the amount of “spouse” benefits under both Acts. Schedules for implementation of the new system, and procedures for verifying compliance and reporting to the Court were also included in the decree. The case comes before us in connection with plaintiffs counsel’s application for attorney’s fees, presenting perhaps the common situation deprecated by Judge Aldisert where the “side-show” eclipses the “main tent,” and the inquiry as to the amount of the fee assumes “massive proportions, perhaps even dwarfing the case in chief.” Lindy Bros. Inc. v. American Radiator, 540 F.2d 102, 116 (3rd Cir.1976). The fee award is governed by the Equal Access to Justice Act, 28 U.S.C. § 2412(b), which permits the award of reasonable “fees and expenses of attorneys, in addition to ... costs ... to the prevailing party in any civil action brought ... against the United States or any agency____” It is further provided that “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.” Fees may be denied, under 28 U.S.C. § 2412(d)(1)(A) if the court finds “that the position of the United States was substantially justified or that special circumstances made an award unjust.” Fees may also be reduced or denied under 29 U.S.C. § 2412(d)(1)(C) if the prevailing party “engaged in conduct which unduly and unreasonably protracted the final resolution of the matter in controversy.” By virtue of these statutory provisions for fees the case at bar is removed from operation of the general “American” rule prohibiting fee-shifting. See Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 247, 260, 95 S.Ct. 1612, 1616, 1623, 44 L.Ed.2d 141 (1975). The government argues that its position was “substantially justified” and that “equitable considerations” exist amounting to “special circumstances” making an award unjust.2 It is hard to find anything inequitable in plaintiff’s concern for and efforts to ameliorate the lot of victims of the prior bureaucratic practice. If anything was inequitable (rather than merely ridiculous) it was that prior practice itself. It is difficult to see why the beneficiary of double coverage should suddenly become worse off than if she had had only one string to her bow. More meritorious is the government’s contention “that the position of the United States was substantially justified.” With respect to Mrs. Gotches’ own benefits, however, the government’s position was clearly not justified, and the District Court correctly held that she was entitled to counsel fees. The basic test for determining whether the government’s position is “substantially justified” is one of reasonableness. Ramos v. Haig, 716 F.2d 471, 473 (7th Cir.1983); Berman v. Schweiker, 713 — 111 — F.2d 1290, 1295 (7th Cir.1983); McDonald v. Schweiker, 726 F.2d 311, 316, (7th Cir.1983); Bittner v. Sadoy & Rudoff, 728 F.2d 820, 830 (7th Cir.1984). On this issue the District Court’s discussion is persuasive and evinces no abuse of discretion: In the present case, Mrs. Gotches was unable to secure relief from the agency after her benefits were reduced from $691.00 per month to $105.00 per month. Both agencies must have been aware that regardless of which of the two eventually assumed payments of Mrs. Gotch-es’ survivors benefits, her benefits would exceed $105.00 per month. Yet when presented with Mrs. Gotches’ problem, the agencies did not voluntarily raise her level of benefits. Rather, the government chose to defend its policy in litigation and filed a motion to dismiss or, in the alternative, for summary judgment. In order for the government to show that its position was substantially justified, it must show that the decision to litigate had a reasonable basis in law and fact____ In this case, the decision to litigate, with the knowledge that Mrs. Gotches was entitled to a survivors benefit larger than the interim benefit which she was receiving cannot be considered reasonable. The litigation instituted by plaintiff has indeed fulfilled the policy of Congress to vindicate the public interest by encouraging “private attorneys general.” She is clearly entitled to her reasonable attorney’s fees, to be determined by the District Court, for her valuable public service in improving the efficiency of government operations. However, with respect to other parties affected by the class action, we are of opinion that the government was substantially justified in continuing its opposition. No determination of class membership was ever made. Negotiations for the benefit of other victims of the governmental snafu, as distinguished from the original client Mrs. Gotches, were carried on by counsel at his own risk as a matter of pro bono publico service. Even though some relief was obtained for other victims, he never fully prevailed and won a complete victory. The government might properly resist large-scale class-action litigation seeking institutional restructuring and possibly involving some degree of on-going supervision by a federal court. A district court may award attorney fees to a prevailing party under 28 U.S.C. Sec. 2412(d) unless the position of the government was “substantially justified.” This court has interpreted “substantially justified” to mean reasonable. Ramos v. Haig, 716 F.2d 471, 473, (7th Cir.1983). Further, “[t]he government must have a solid though not necessarily correct basis in fact and law for the position it took in this action.” McDonald v. Schweiker, 726 F.2d 311, 316, (7th Cir.1983). The parties entered into settlement negotiations on the class action claim a short time after this suit was filed in the district court. Although the parties agreed on several points and several procedures were implemented by the Board during the negotiations, the settlement negotiations collapsed over the computerization of the claims of plaintiffs who received their benefits under an earlier version of the Railroad Retirement Act, referred to in the consent decree as Old Act cases. The Board was willing to computerize cases arising under the Railroad Retirement Act of 1974 (“New Act Cases”) but was unwilling to make an absolute commitment to computerizing the Old Act cases at some point in the future; according to the record, the Board wanted to obtain experience with computerizing the New Act cases before making a long-range commitment to computerizing the Old Act cases. During an in-chambers conference, the district court judge persuaded the plaintiffs that the Old Act claimants would be adequately protected by the Board’s commitment to: “give serious consideration to computerizing ‘Old Act’ cases, once it has sufficient experience with ‘New Act’ cases to evaluate the effectiveness of computerizing that process, and thereby pay interim — 112 — benefits equal to the combined RRB and SSA spousal benefits pending adjudication of the survivor’s status.” An affidavit submitted by the Board Director after the consent decree was entered demonstrates that the Board’s reservation about computerizing the Old Act cases was well founded. Robert S. Kaufman, the Director of the Board, stated that the number of Old Act cases coming before the Board is constantly declining; that the Board’s lack of access to Social Security payment information would substantially complicate the Board’s computerization effort; that the Board’s resources have been further taxed by Social Security legislation enacted after the consent decree; and, that the old Act cases would eventually be computerized as part of the implementation of a new computerized payment system for all claims. This court will not award attorney’s fees under the Equal Access to Justice Act if the government had “a solid though not necessarily correct basis in fact and law for the position it took ...” McDonald, 726 F.2d at 316. As the foregoing review of the facts demonstrates, the government’s resistance to an immediate computerization of the Old Act cases was reasonable. Hence, the government’s refusal to “cave-in” was substantially justified as that term is used in The Equal Access to Justice Act. Therefore it is necessary to remand this case to the District Court for a specific determination of the amount of fees earned up through May 24, 1982, the date when the Railroad Retirement Board agreed to award increased benefits to Mrs. Gotches. This should be a simple time-based calculation since the government has not objected to the reasonableness of the hourly rate or the method of computation, but merely to payment of fees for services with respect to which the government’s position was thought to be substantially justified. Since this Court has clarified the lines of demarcation with respect to that issue, the parties and the District Court should have no difficulty in arriving at an appropriate figure. AFFIRMED in part, REVERSED in part, and REMANDED for further proceedings in accordance with this opinion. Footnotes [1] To use a Presbyterian locution. [2] It is also argued that plaintiff was not a “prevailing party." This contention is almost frivolous. As the District Court observed: Within eleven days of service of process on the defendants, Mrs. Gotches’ benefits were increased from $105.00 per month to their proper level of $575.00 per month. Certainly it can be inferred that the prompt increase in Mrs. Gotches' benefits was directly related to the filing of her lawsuit. Furthermore, ... the Railroad Retirement Board agreed to provide class-wide relief to surviving spouses of those persons insured under both ... Acts. Through the litigation process Mrs. Gotches was able not only to secure benefits for herself, but for others similarly situated____ Clearly she must be considered a prevailing party. Inclusion of this issue in defendants’ 40 page brief indicates that the government is fighting “tooth and nail” [726 F.2d at 317]. The residuals of over a century of sovereign immunity make it hard to accept an innovative Congressional policy with respect to fees.