Sosebee, George v. Astrue, Micahel J.

In the

United States Court of Appeals

For the Seventh Circuit

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No. 06-3326

GEORGE SOSEBEE,

Plaintiff-Appellant,

v.

MICHAEL J. ASTRUE, Commissioner

of Social Security,

Defendant-Appellee.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 05 C 0001—Samuel Der-Yeghiayan, Judge.

____________

ARGUED APRIL 30, 2007—DECIDED JULY 17, 2007

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Before ROVNER, WOOD, and SYKES, Circuit Judges.

WOOD, Circuit Judge. In 1995, George Sosebee stopped

receiving medical care for hepatitis, among other serious

physical ailments, because he lacked insurance and

could not afford further treatment. Even though he was

suffering from severe physical problems, in 1998 he

returned to work because he “desperately needed money

for medical care”; he earned less than $5,000. Sosebee and

his wife are both currently unable to work. They do not

own a home; instead, they rent an apartment. Sosebee

performs some household chores out of necessity because

his wife cannot, but he must use his wife’s wheelchair

to move around. Despite this uncontradicted evidence,

2 No. 06-3326

the district court ruled that Sosebee failed to show his

net worth did not exceed $2,000,000. It therefore denied

his application for attorneys’ fees under the Equal Access

to Justice Act (EAJA), 28 U.S.C. § 2412. Although it did

not say so in so many words, the court must have con-

cluded that the circumstantial evidence of net worth that

Sosebee provided was insufficient to show that his

assets were below the statutory limit. This conclusion

was problematic to start with, and became entirely

untenable when Sosebee offered to supplement the rec-

ord through motions under Rules 59(e) and 60(b). We

therefore reverse and remand for further proceedings

consistent with this opinion.

I

Sosebee filed his original petition for social security

disability benefits in 1995. He was unsuccessful initially,

but on appeal in 2002, the district court remanded the

case to the Social Security Administration (“SSA”) for

rehearing. At that time, Sosebee submitted an applica-

tion for attorneys’ fees pursuant to EAJA, which the

district court granted. SSA denied Sosebee’s application

again in 2004, and Sosebee appealed again to the district

court. As before, the district court remanded the case to

SSA, and Sosebee filed another application for attorneys’

fees. The Commissioner of Social Security opposed the

motion. (At the time, the Commissioner was a woman. She

has since been replaced by a man; for convenience, we

use the gender of the incumbent Commissioner in this

opinion.) The Commissioner’s primary argument was

that the amount of Sosebee’s fee request was unreason-

able. He added, however, that Sosebee had not shown

that he was eligible for EAJA fees because he had not

provided enough evidence to prove that his net worth did

not exceed $2,000,000.

No. 06-3326 3

In his reply to the Commissioner’s opposition brief,

Sosebee stated that his net worth did not exceed

$2,000,000 at the time the civil action was filed, adding

“Sosebee did not specifically plead this in his initial EAJA

application, it was implied in Plaintiff ’s Memorandum

in Support of Summary Judgment.” Sosebee also pointed

(with appropriate citations) to evidence in the record that

supported his representation, including his inability to

afford medical care in 1995, his lack of medical insurance,

his lack of income during the relevant time period, and

his lack of any significant assets.

The district court denied Sosebee’s application for EAJA

fees on April 28, 2006. The court explained that “Sosebee

has not provided the court with documentation concern-

ing his net worth and he has not shown why he was

unable to do so.” Sosebee promptly filed a motion to

amend the judgment under FED. R. CIV. P. 59(e) and a

motion for relief under FED. R. CIV. P. 60(b), attaching

an affidavit with details about his net worth. (The

Rule 60 motion was technically premature in light of the

Rule 59 motion. See Kapco Mfg. Co. v. C&O Enterprises,

Inc., 773 F.2d 151, 153-54 (7th Cir. 1985). We disregard

the Rule 60 motion in the remainder of this opinion.) In

the Rule 59 motion, Sosebee argued that governing

caselaw indicated that it was enough for him to provide

the details about his net worth in his reply brief to the

Commissioner’s opposition brief to his application, or at

the very least the law was unclear at the time he made

his application and thus the evidence he had tendered

with the motion should be accepted. Sosebee’s new affida-

vit left no doubt that he qualified for fees:

May 1, 2006

I George Sosebee declare that I am the plaintiff in this

civil case for disability. I also declare the following

information is the truth to [the] best of my knowledge.

4 No. 06-3326

I have been on SSI Disability since December 2003. My

wife does not work and she also receives SSI. I re-

ceived $1,418.00 a month SSI and my wife receives

$1,063.00 a month. We have no other income and

I have not worked since 2002. I never had two million

in assets and do not expect to inherit any assets in

the future. I do not have any stocks, IRA, properties,

retirement plans, saving accounts. I have not received

any gifts or moneys.

My assets are: furniture, clothes, 1998 Chevy Malibu

and a life insurance policy - $5,000. In December 2004

I had $1,555 in a checking account to start and $12.80

as the ending balance. In 2004 I received a $1,260.00

a month from SSI. I live in an apartment complex

and pay $645 a month, plus utilities.

Truly;

<signed George Sosebee>

George Sosebee

The district court was unmoved, denying the Rule 59(e)

motion on its merits on June 27, 2006. (The court also

denied Sosebee’s Rule 60(b) motion as untimely on that

date (although it was actually premature), and denied his

second Rule 60(b) motion on September 5, 2006.) Sosebee

filed his notice of appeal on August 28, 2006.

II

There are two issues in this case that require our

attention: whether the statements made in Sosebee’s

reply brief in support of his EAJA fees application satis-

fied his obligations under the EAJA to show his net

worth; and whether the district court abused its discre-

tion in denying Sosebee’s Rule 59(e) motion. We take

them in turn.

No. 06-3326 5

This court reviews a district court’s decision to award

or deny attorneys’ fees under the EAJA for abuse of

discretion. United States v. Hallmark Constr. Co., 200 F.3d

1076, 1078 (7th Cir. 2000). If the district court reached

its conclusion because of its interpretation of relevant

law, however, then we review that question of law de novo

because a district court’s application of an erroneous

view of the law is by definition an abuse of discretion.

Boyd v. Ill. State Police, 384 F.3d 888, 897 (7th Cir. 2004).

First, we must identify the source of Sosebee’s obliga-

tion to prove his net worth. The statute with which we

are dealing is § 2412(d)(1)(B), which reads as follows:

A party seeking an award of fees and other expenses

shall, within thirty days of final judgment in the

action, submit to the court an application for fees

and other expenses which shows that the party is a

prevailing party and is eligible to receive an award

under this subsection, and the amount sought, includ-

ing an itemized statement from any attorney or ex-

pert witness representing or appearing in behalf of

the party stating the actual time expended and the

rate at which fees and other expenses were computed.

The party shall also allege that the position of the

United States was not substantially justified. Whether

or not the position of the United States was substan-

tially justified shall be determined on the basis of the

record (including the record with respect to the action

or failure to act by the agency upon which the civil

action is based) which is made in the civil action for

which fees and other expenses are sought.

Also relevant is § 2412(b)(2)(B), which defines the term

“party” itself in relevant part as “an individual whose net

worth did not exceed $2,000,000 at the time the suit was

filed.” In Scarborough v. Principi, 541 U.S. 401 (2004), the

Supreme Court had this to say about the way these

provisions should be understood:

6 No. 06-3326

Relevant here, EAJA authorizes the payment of fees

to a prevailing party in an action against the United

States; the Government may defeat this entitlement

by showing that its position in the underlying liti-

gation “was substantially justified.” 28 U.S.C.

§ 2412(d)(1)(A). In a further provision, § 2412(d)(1)(B),

the Act prescribes the timing and content of applica-

tions seeking fees authorized by § 2412(d)(1)(A).

Section 2412(d)(1)(B) specifies as the time for filing

the application “within thirty days of final judgment

in the action”. In the same sentence, the provision

identifies the application’s contents, in particular, a

showing that the applicant is a “prevailing party” who

meets the financial eligibility condition (in this case, a

net worth that “did not exceed $2,000,000 at the time

the . . . action was filed,” § 2412(d)(2)(B)); and a

statement of the amount sought, with an accompany-

ing itemization.

541 U.S. at 405. Although § 2412(d)(1)(A) does not ex-

pressly incorporate the financial eligibility details to

which the Court referred, which as it noted are found

within the definition of the term “party” found in

§ 2412(d)(1)(B), the Court construed the reference to the

need to show “eligibility” in the former statute to incorpo-

rate the financial limitations. See also Bazalo v. West, 150

F.3d 1380, 1384 (Fed. Cir. 1998) (noting that “[t]he

additional requirement of net worth . . . is not separately

enumerated in the statute, but subsumed within the

definition of ‘party’ ”).

This court had already held, years earlier, that “the

party seeking to recover its litigation costs . . . [bears] the

burden of establishing that it [meets] the net worth

limitations of the EAJA”. Woll v. United States, 44 F.3d

464, 470 (7th Cir. 1994). Neither we nor the Supreme

Court in Scarborough, however, had to focus on what a

party needs to do in order to satisfy that obligation. The

No. 06-3326 7

question we must address is thus whether Sosebee satis-

factorily showed both that he prevailed and that he met

the financial eligibility criteria of § 2412(d)(2)(B).

Somewhat surprisingly, no standard practice or rule

for fee petitions seems to have developed. (This may be

because, in the overwhelming majority of Social Security

cases, it is plain from the record that the plaintiff ’s net

worth is nowhere near the $2,000,000 mark.) In Comm’r,

INS v. Jean, 496 U.S. 154 (1990), the Supreme Court

summarized the requirements for a fee application as

follows:

[E]ligibility for a fee award in any civil action re-

quires: (1) that the claimant be a “prevailing party”;

(2) that the Government’s position was not “substan-

tially justified”; (3) that no “special circumstances

make an award unjust”; and, (4) pursuant to 28 U.S.C.

§ 2412(d)(1)(B), that any fee application be sub-

mitted to the court within 30 days of final judgment in

the action and be supported by an itemized statement.

496 U.S. at 158. The only question at issue in Jean,

however, was whether the position of the Government

was substantially justified. The Court therefore had

nothing to say about what the applicant had to present

in order to show that she was a “prevailing party.” At

least one court dispensed with the need for a party to

reiterate that she meets the financial criteria, when that

was otherwise apparent from evidence in the record. See,

e.g., Hirschey v. Fed. Energy Regulatory Comm’n., 760 F.2d

305, 309 n.19 (D.C. Cir. 1985) (concluding that “[t]here

is no serious question here that, according to record

documents, [plaintiff] meets the financial qualifications

specified in 28 U.S.C. § 2412(d)(2)(B)” with no further

discussion of the plaintiff ’s satisfaction of the net worth

requirement).

This was the route that Sosebee took in his initial

application for fees. When the Commissioner, in passing,

8 No. 06-3326

questioned whether he met the net worth requirements

in his opposition brief, Sosebee replied with record cita-

tions that he believed supported his eligibility. The dis-

trict court rejected this showing as inadequate, and went

on in its rulings on the Rule 59 and Rule 60 motions to

demand concrete information on the net worth question.

Insofar as the district court was saying that an affi-

davit of net worth would be an efficient way of presenting

evidence on the point, we agree with it. Indeed, applicants

for fees and their counsel would be well advised to sub-

mit such an affidavit in every case, to avoid the kind of

litigation we have here. Nevertheless, there is nothing

magical about an affidavit if other competent evidence

in the record supports a finding that the applicant quali-

fies as a “party”—meaning that his or her net worth does

not exceed $2,000,000.

Cases interpreting the EAJA’s requirements have not

been as specific as they perhaps should have been on this

point, as Sosebee points out. Courts have interpreted

the statute to require varying levels of supporting evi-

dence, depending on whether the applicant is a corpora-

tion or individual and whether there is a serious doubt

about the applicant’s eligibility. The Tenth Circuit has

said that “[w]hen challenged as to eligibility for an EAJA

award, the party seeking such an award must do more

than make a bare assertion that it meets the statutory

criteria,” and in that setting it found insufficient “an

unverified and unsworn letter from [the party’s] accoun-

tant.” Shooting Star Ranch, LLC v. United States, 230

F.3d 1176, 1178 (10th Cir. 2000) (emphasis added). The

Ninth Circuit has commented that “the standard of proof

is not articulated [but] the Supreme Court has stated that

a ‘request for attorney’s fees should not result in a second

major litigation.’ Consequently, some informality of proof

is appropriate.” United States v. 88.88 Acres of Land, 907

F.2d 106, 108 (9th Cir. 1990) (quoting Hensley v.

Eckerhart, 461 U.S. 424, 437 (1983)).

No. 06-3326 9

The Court of Federal Claims (a trial-level Article I court,

see 28 U.S.C. § 171) has found inadequate a party’s

unsupported statement that he satisfied the EAJA net

worth requirement, but in that case there was contradic-

tory evidence in the record about the plaintiff ’s net worth.

Doe v. United States, 54 Fed. Cl. 337, 343 (Fed. Cl. 2002).

The court undoubtedly saw a red flag when “the underly-

ing cause of action began with the assertion that plain-

tiff was ‘a prospective buyer’ of a yacht.” Id. See also Fields

v. United States, 29 Fed. Cl. 376, 383 (Fed. Cl. 1993)

(holding that a conclusory affidavit without support-

ing evidence is inadequate to establish net worth). By

contrast, the Federal Circuit (which, of course, hears

appeals from the Court of Federal Claims, see 28 U.S.C.

§ 1295(a)(3)) has quoted approvingly the Court of Appeals

for Veterans’ Claims standard that a party satisfies the

EAJA by stating in the fee application that “the ap-

plicant’s net worth, at the time of filing the appeal, did

not exceed $2,000,000 or by filing a reference to an in

forma pauperis ruling.” Bazalo, 150 F.3d at 1381-82.

Our own court has held, and we reaffirm, that “[t]he

proceeding to recover fees under the [Equal Access to

Justice] Act is intended to be summary; it is not in-

tended to duplicate in complexity a public utility com-

mission’s rate of return proceeding.” Cont’l Web Press, Inc.

v. NLRB, 767 F.2d 321, 323 (7th Cir. 1985). The EAJA is

meant to open the doors of the courthouse to parties, not

to keep parties locked in the courthouse disputing fees

well after the resolution of the underlying case. The

EAJA’s requirements must be interpreted accordingly.

The Commissioner is correct that Sosebee’s net worth

must meet the statutory requirements as of the date

Sosebee commenced his suit in district court, which is

January 2005. He had the burden of showing this by the

normal civil standard of proof, which is to say by a prepon-

10 No. 06-3326

derance of the evidence. See Herman & MacLean v.

Huddleston, 459 U.S. 375, 390 (1983). Although his initial

application may have been conclusory, when the Com-

missioner challenged him on this point he identified

evidence in the record that supported him. Reviewing the

materials on which he relied and even ignoring the

additional facts contained in his supplemental affidavit,

we conclude that no reasonable factfinder could find that

Sosebee’s net worth as of January 2005 exceeded

$2,000,000. That record included several key facts

about Sosebee’s recent income, healthcare, and living

situation, and it also had the 2001 and 2002 district court

findings that Sosebee was eligible to proceed in forma

pauperis and that he was eligible for an EAJA attorneys’

fees award.

In denying Sosebee’s EAJA application, the district

court either applied an impermissibly high standard of

proof or it improperly exalted form over substance. The

court asserted that it “need not draw inferences” from the

evidence, but this is exactly what factfinders do. Drawing

inferences is not the same thing as speculation. Indeed,

nothing but wild speculation would have supported a

finding that Sosebee was worth more than $2,000,000.

Nowhere in his brief does the Commissioner seriously

suggest that Sosebee does not meet the EAJA’s net

worth requirement. Sosebee did not stand silent in re-

sponse to the Commissioner’s challenge to his net worth,

as in Woll, 44 F.3d at 470. When challenged, he replied

with specific, uncontradicted evidence in the record. Taken

as a whole, Sosebee’s proof of financial eligibility, while

informal, was adequate. 88.88 Acres of Land, 907 F.2d

at 108 (quoting Hensley, 461 U.S. at 437). The district

court abused its discretion in concluding otherwise.

No. 06-3326 11

III

Even if one were to conclude that the court’s initial

decision lay within the bounds of discretion, that cannot

be said about its denial of Sosebee’s Rule 59(e) motion. To

the extent that a Rule 59(e) motion is based on new

evidence, the decision whether to grant or deny it is

reviewed for abuse of discretion. In re Prince, 85 F.3d 314,

324 (7th Cir. 1996). To the extent that the movant raises

a question of law, we will review the district court’s

decision de novo. Sosebee’s motion presented “newly

discovered evidence that was not available at the time

of trial . . . [and] pointed to evidence in the record

that clearly establishes a manifest error of law or fact.”

County of McHenry v. Ins. Co. of the West, 438 F.3d 813,

819 (7th Cir. 2006) (internal citations and quotation

marks omitted).

Rule 59(e) motions offer district courts an opportunity

to correct errors that may have crept into the proceeding,

before the case leaves the district court for good. The

district court here rejected Sosebee’s motion because it

thought that Sosebee was relying on information that “he

could . . . have presented . . . to the court earlier.” Perhaps

if Sosebee had held back on arguments that were avail-

able to him, this point would have some force. But the

rejected arguments and facts were not being presented

to the court for the first time. With the exception of

Sosebee’s affidavit, all of the other support he offered on

the issue of his net worth in his Rule 59(e) motion was

already in the record. Sosebee’s Rule 59(e) motion asked

the district court to correct the error it made when it

ignored that evidence. See In re Prince, 85 F.3d at 324

(reviewing the “evidence in the record” brought to the

district court’s attention in a Rule 59(e) motion although

not finding abuse of discretion).

Faced with imprecise standards and an unexpected

application of the law by the district court, Sosebee

12 No. 06-3326

properly made a Rule 59(e) motion. Sosebee’s motion told

the district court why he could not have made a better

argument originally, through no fault of his own, as he had

no warning that the district court was going to apply a

much more stringent standard to the eligibility question

than other courts have used in the past. Then Sosebee

attached his affidavit, showing his willingness and

ability to comply with the standard the court had adopted.

We agree with the Eleventh Circuit that some device for

correction of insufficient detail on net worth must be

available. In a case similar to ours, that court held that

the failure to plead net worth should not be fatal to an

EAJA attorneys’ fees application:

Based on the stated purpose of Congress in enact-

ing and extending the EAJA, we conclude that Con-

gress did not intend the EAJA application process to

be a high stakes gamble in which one pleading

failure, such as neglecting to assert that one’s net

worth did not exceed $2,000,000 at the time the

suit was filed, completely forecloses a litigant’s op-

portunity for EAJA fees.

Singleton v. Apfel, 231 F.3d 853, 858 (11th Cir. 2000). We

conclude that the district court’s rejection of Sosebee’s

Rule 59(e) motion was also an abuse of discretion.

IV

In light of our conclusions with respect to Sosebee’s

initial application and his Rule 59(e) motion, we have no

need to reach his arguments about the Rule 60(b) motions.

(In fact, we lack jurisdiction over the second Rule 60(b)

motion, which was decided after Sosebee filed his notice

of appeal in this court. His failure to file a separate

notice of appeal from that action means that it is not

before us. See Goffman v. Gross, 59 F.3d 668, 673 (7th Cir.

No. 06-3326 13

1995)). Knowing Sosebee’s history of more than a decade

of disability, his inability to afford medical care, and

his marginal ability to care for himself and his family,

the district court should have found that Sosebee satis-

fied the EAJA’s net worth requirement. At the very least,

when Sosebee called the court’s attention to the relevant

evidence in the record and furnished his affidavit, the

court should have granted Sosebee’s Rule 59(e) motion. We

REVERSE the judgment of the district court and REMAND

for further proceedings in accordance with this opinion.

Circuit Rule 36 shall apply on remand.

A true Copy:

Teste:

________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit

USCA-02-C-0072—7-17-07