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When Must the Federal Government Pay Attorney Fees?

February 11, 2020 | Posted in : Article / Book, Fee Award, Fee Entitlement / Recoverability, Fee Jurisprudence, Fee Request, Fee Shifting, Fee Statute, Hourly Rates, Prevailing Party Issues

A recent NLJ article by Marcia Coyle, “When Must the U.S. Pay Legal Fees? A Vietnam Vet Turns to the Supreme Court,” reports on attorney fee recovery from the federal government in an EAJA case.  The article reads:

Alfred Procopio Jr.’s decades-long fight with the U.S. Department of Veterans Affairs changed the law, forcing the agency to provide potentially billions of dollars in benefits for thousands of Vietnam War veterans.  But his dispute with the government hasn’t ended, as his lawyer presses an appeal in the U.S. Supreme Court to collect $35,000 in legal fees.

The petition tests a key element of the Equal Access to Justice Act, or EAJA, a federal law that allows private parties who prevail against federal agencies in certain circumstances to recoup the cost of litigation.  An award of fees under the EAJA is mandatory when a court concludes that the government’s position was not “substantially justified.”  Procopio’s case challenges how courts determine whether the government’s arguments were “substantially justified.”

The septuagenarian Procopio, represented by retired Navy Cmdr. John Wells of Slidell, Louisiana, is asking the justices to review a decision by the U.S. Court of Appeals for the Federal Circuit that said he is not entitled to any compensation. The en banc court in September sided with the U.S. Justice Department in ruling against Procopio’s fee request.  “The Supreme Court takes about one veteran’s case a year,” Wells said in an interview.  “When I filed [the petition], I said, ‘OK, it’s worth a try,’ but given the success rate [in granting review], I didn’t hold out much hope. It’s a very good, legitimate issue.”

In 2010, a dozen federal agencies paid out more than $50 million in court and administrative cases via the EAJA, according to one government report.  The Department of Veterans Affairs tab of $15.5 million was among the highest.  The U.S. Court of Appeals for Veterans Claims in 2017 reported receiving nearly 3,000 applications under the EAJA.

The original statute capped fees at $125 hourly, an amount that is now $200 adjusted for inflation.  Awards are limited to individuals with a net worth of $2 million or less, or the owner of a business or other organization worth $7 million or less and with no more than 500 employees.  Lawyers at major U.S. law firms that have served pro bono sometimes ask courts to award EAJA fees.

‘The Government’s Position Here Was Plainly Wrong.’

Wells argues that the Federal Circuit took an “inelastic and rigid approach” in its conclusion that the government’s position was substantially justified in the case.  The government resisted Procopio’s arguments that so-called Blue Water veterans, who served in the waters of Vietnam, but not on land, were entitled to certain benefits after being exposed to the chemical Agent Orange.

Procopio’s petition relies in part on a concurring opinion from Federal Circuit Judge Kathleen O’Malley, who sympathized with Procopio but ultimately said the court’s hands were tied because of Supreme Court and circuit court precedents.  O’Malley said, “this is the very type of case for which Congress enacted the EAJA.  The government’s position here was plainly wrong.”

O’Malley continued: “Mr. Procopio is the very type of prevailing party, moreover, for whom Congress enacted the EAJA.  Mr. Procopio changed the law for all Vietnam War veterans who served in the Republic of Vietnam’s territorial waters.  And his financial burden in doing so was only increased by the government’s failure to codify its tenuous position into a type of rule whose validity we may review on its face rather than as applied to any individual case.”

O’Malley wrote separately, she said, “to express my belief that the governing interpretation of ‘substantially justified’ sets the bar far too low for the government in a way that is contrary to the plain text of the EAJA and its underlying purpose.”  She implored the judiciary to adopt a standard that she said “breathes life back into the text and purpose of the EAJA.”  The word “substantially,” O’Malley said, “must do some work in defining precisely how justified the government’s position must be.”

In the 1988 case Pierce v. Underwood, the Supreme Court said “substantially justified” means that the government’s position, in both its underlying conduct and its litigating posture, must have a “reasonable basis” in law and fact.  But O’Malley said there is no reasonableness standard in EAJA’s text.  The statutory text, she said in Procopio’s case, “requires that the government’s position be justified by a considerable amount or, at least, that it have a solid foundation in substance.”  And that was not the case with the government’s position in Procopio, she concluded.

Procopio’s fee request stemmed from his victory in January 2019 in Procopio v. Wilkie.  The Federal Circuit, ruling 9-2, said for the first time that the Agent Orange Act of 1991 and its presumption of exposure to the chemical herbicide applies to Navy veterans who served on ships within the 12-mile territorial sea of Vietnam.  The Veterans Affairs department and the Justice Department had argued for years that the 1991 act covered only those veterans who served on the ground or inland waterways of Vietnam.  Six months after the appellate decision, the Justice Department told the Supreme Court that it would not appeal the ruling.  The benefits potentially owed to roughly 90,000 vets have been estimated to cost the government more than $1 billion over 10 years.

In reaching its 2019 decision, the majority, led by Federal Circuit Judge Kimberly Moore, said Congress was clear from its use of the term “in the Republic of Vietnam” that “all available international law unambiguously confirms that it includes its territorial sea.”  The majority overruled the 2008 decision in Haas v. Peake.  The Haas court, Moore wrote, “went astray” when it found ambiguity in the law.  Mel Bostwick, a partner in Orrick, Herrington & Sutcliffe, argued pro bono on behalf of Procopio.

Justice Department’s Opposition

In opposing Procopio’s subsequent fee application in the Federal Circuit, the Justice Department’s civil division, led by Assistant Attorney General Jody Hunt, argued that a 1988 decision benefited the government’s argument that its litigation position was substantially justified.  The Federal Circuit’s ruling in Owen v. United States said that the government’s position can be deemed substantially justified when the government relies on a binding, precedential court of appeals decision that is later overturned.

“Our position relied on this court’s 2008 precedential decision in Haas v. Peake to defend [the] VA’s denial of Mr. Procopio’s presumptive disability compensation claim and the Veterans Court’s decision on appeal,” the Justice Department lawyers told the Federal Circuit.  In the Supreme Court petition, Wells said the justices’ “reasonable person” test for substantial justification “flies in the face of the plain meaning of the statute.”  He contends the Federal Circuit in a 2015 decision had placed the government on notice that its “boots-on-the-ground” position was wrong but it persisted in defending it.