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U.S. Court In District Of Columbia Awards Attorneys' Fees Against DHHS Secretary For Bad Faith


HLD, v. 32, n. 4 (April 2004)

U.S. Court In District Of Columbia Awards Attorneys' Fees Against DHHS Secretary For Bad Faith

Plaintiffs the Gray Panthers Project Fund, three national organizations, and individual Medicare beneficiaries sued The Department of Health and Human Services Secretary Tommy G. Thompson based on his actions in extending a statutory deadline for Medicare+Choice Organizations (MCOs) to submit information about their plans and for omitting plan comparison data from annual mailings to beneficiaries as required by statute. Rejecting the Secretary's argument that his actions were proper in light of budgetary and practical considerations, the trial court enjoined the Secretary to comply with the statutory requirements and granted summary judgment to plaintiffs.

Plaintiffs then moved for an award of attorneys' fees under two provisions of the Equal Access to Justice Act (EAJA), 28 U.S.C. � 2412: (1) that the government's position was not substantially justified and (2) that plaintiffs were the prevailing party in a civil action against a government official acting in his official capacity. The Secretary conceded that his position was not substantially justified, but contended that he did not act in bad faith and therefore the bad faith hourly rate allowed under the EAJA was not warranted.

The U.S. District Court for the District of Columbia ordered the Secretary to pay plaintiffs' attorneys' fees of $173,922. The court first addressed the issue of the Secretary's bad faith. Under the common law exception to the "American Rule" against the award of attorneys' fees, fees may be awarded if the losing party acted in bad faith where the party had a statutory duty and failed to perform the duty. Plaintiffs argued the Secretary's bad faith was his actions in not adhering to his statutory duty by extending the deadline and omitting the plan comparison data.

The court found clear and convincing evidence that the Secretary's actions were in bad faith in light of the statutory mandates. The court determined the Secretary's actions were not for the benefit of the beneficiaries as he claimed, but were for the benefit of other parties who "were able to persuade him to do what they wanted him to do." The Secretary had no right to violate the law, said the court, and he offered no reasonable explanation why in both instances he failed to follow the law. When the Secretary decided to extend the deadline for the MCOs to file the information he failed to inform Medicare beneficiaries or the public about the change in the deadline. Therefore, the court determined plaintiffs were entitled to attorneys' fees.

The court then addressed the issue of calculating reasonable attorneys' fees. The court noted there was no ceiling on the hourly rate for attorneys' fees for bad faith. Plaintiffs argued all of the hours should be compensated at bad faith rates, and the Secretary argued bad faith rates should only be applied to plaintiffs' litigation hours before the court issued the preliminary injunction. Courts have apportioned bad faith rates and EAJA rates in some circumstances, said the court, but in this case the Secretary's bad faith arose before the litigation and the case should be treated as a whole for the imposition of attorneys' fees. Therefore, the court applied bad faith rates and awarded plaintiffs $173,922 in attorneys' fees.

The Gray Panthers Project Fund v. Thompson, No. 01-1374 (D.D.C. Feb. 23, 2004).

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