Michelle Dewalt v. Louis W. Sullivan, Secretary of Health and Human Services

BECKER, Circuit Judge,

dissenting.

I cannot agree with the majority that the meaning of 28 USC § 2412 (d)(2)(A)(ii) (1988) is sufficiently plain to resolve the question at issue in this case — by how much the district courts, in awarding attorney fees, may exceed the statutory cap of $75 per hour. Although I agree that the Equal Access to Justice Act (EAJA) makes clear that increases in the “cost of living” justify awarding rates above the $75 per hour rate, I do not believe that the statute plainly specifies whether market rates for legal fees or increases in the general cost of living should be the basis for determining the amount of increase. Examination of the structure of EAJA, however, compels *31 the conclusion that district courts should award fees above $75 per hour based on increases in market rates for attorneys rather than on increases in the overall cost of living. Therefore, I would hold that the district court’s use of the personal services category of the CPI was appropriate and would affirm. 1

I.

EAJA provides in relevant part:

The amount of fees awarded under this subsection shall be based upon prevailing market rates, for the kind and quality of services furnished except that ... (ii) attorneys fees shall not be awarded in excess of $75 per hour unless the court determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceedings involved, justifies a higher fee.

28 USC § 2412 (d)(2)(A)(ii) (1988) (emphasis added).

As I read it, the statute sets up a four-tiered process for determining the amount of a fee award when the court finds such an award is appropriate. First, a district court should assume that a fee award will be based on the prevailing market rates for comparable work. Second, in the ordinary case, if that prevailing market rate exceeds $75 per hour, the court should award only $75 per hour, as the statute specifies. Third, a court may exceed the $75 per hour statutory cap if it finds 1) that there is an increase in the cost of living or 2) that a special factor justifies an increase. 2 Fourth, if the court chooses to exceed the statutory cap, the court must decide by how much it will exceed the $75 per hour rate.

As I read EAJA, the third and fourth steps of this process are distinct. That is, although an increase in the cost of living is the governing factor in deciding whether to increase the fee award above the $75 per hour rate (Step 3), it is not relevant to determining the amount that such a fee will be increased (Step 4). The statute does not say that the amount of the higher fee will be calculated based on the precise increase in the cost of living. Rather, it simply says that the court must determine “whether an increase in the cost of living ... justifies a higher fee.” Once the court has made the determination that some higher fee is justified because the cost of living has increased, I see nothing in the language of the statute which even hints that the amount of the higher fee should be based on changes in the “cost of living.” 3

Nor does the legislative history of the Equal Access to Justice Act provide insight into Congress’s intent as to how to measure increases above the $75 per hour rate. That history suggests a long period of legislative negotiation and compromise, but no specific indication of how to measure increases in rates when departure from the $75 per hour rate is justified. See The Equal Access to Justice Act: Hearing Before the Subcommittee on Agency Administration of the Senate Comm. on the Judiciary, 97th Cong, 2d Sess (1982) (Se *32 rial No. J-97-140); Implementation of the Equal Access to Justice Act: Oversight Hearings Before the Subcomm. on Courts, Civil Liberties, and the Administration of Justice of the House Committee on the Judiciary, 97th Cong, 2d Sess (1982) (Serial No. 71); HR Rep No. 96-1418, 96th Cong, 2d Sess, 13-14 (1980). Although Congress demonstrated its desire to encourage suits against the government, nothing demonstrates a congressional intent about the mechanical problem of how to measure increases above the $75 per hour rate.

Given the ambiguity in the plain language and the history of the statute, I would focus on the structure of the legislation in order to construe the Act. See generally, Community for Creative NonViolence v. Reid, 490 U.S. 730 , 109 S.Ct. 2166, 2172-73 , 104 L.Ed.2d 811 (1989) (relying on structure of statute to construe its meaning). Such an analysis suggests a different result from the one posited by the majority. The statute makes plain that the normal method for calculating fees is to base the fee award on market rates for legal services. To be sure, Congress, justifiably concerned about rapidly accelerating rates for attorney fees, capped fee awards at $75 per hour unless the district court determined, based on statutorily specified grounds, that an increase above that level was justified. We cannot ignore that cap. But neither should we ignore the statute’s general prescription that market rates should be the basis for fee awards.

I see nothing in the statute which suggests that the practice of basing awards on market rates should evaporate once the $75 per hour cap is implicated. Instead, although the maximum “base rate” a district court can award is $75 per hour, I believe that Congress intended that courts, in departing above that rate, should start at a rate of $75 per hour and then increase the rate based on the percentage increase in the market rate for legal services. In other words, the amount of the fee award should be the amount that $75, the congressional substitute for the maximum market rate in 1981, would purchase today in the market for legal services. 4 This approach is consistent not only with that of the district court in this case but also with the approach of district courts in other cases. See, for example, Harris v. Sullivan, 773 F.Supp. 612, 615-16 (S.D.N.Y.1991).

II.

Having read the statute in this manner, I cannot accept the majority’s analysis for several reasons.

Initially, I believe the majority errs by conflating the inquiry whether to increase the award over the $75 per hour rate with the inquiry by how much the award should be increased. As I have explained, I believe those steps are distinct. Although the majority relies on language in the statute (i.e., “the cost of living”), I believe that those words do not present themselves in the statute as the basis on which to measure increases above $75 per hour. More importantly, I believe that the majority’s construction of the statute ignores the fundamental prescription of the statute — that fee awards should be based on prevailing market rates, even when adjusted by a statutory cap.

The majority contends that the plaintiff’s interpretation of the statute would require the statute to be rewritten to read, “[A]t-torney fees shall not be awarded in excess of $75 per hour unless the court determines that an increase in prevailing market rates ... justifies a higher fee,” see Majority Opinion, at page 29. This contention is misleading. The statute bases the amount of award on prevailing market rates, but caps that award at $75 per hour. When the statute allows courts to increase awards above that cap, there is nothing in the statute which suggests what the basis for that increase would be. Therefore, no *33 matter what interpretation we give to the statute, it is necessary that we, in effect, add words that Congress failed to insert.

Nor is the majority opinion aided by its reference to the definition of “cost of living.” The majority reasons:

Under either definition, however, it is simply impossible to equate “cost of living” with “cost of legal services.” And it is inconceivable that Congress, in 1981, intended a definition of “cost of living” which would measure it by a single component which was not measured and indexed until 1986.

Majority Opinion, at page 80.

To the contrary, the use of the Personal Services Category, which includes a calculation for increases in the cost of legal services, is nothing more or less than an exercise of fidelity to the congressional use of market rates for legal services as the proper measure. The district court’s observation that plaintiffs must shop in the legal market, not the supermarket, correctly apprehends that the relevant consideration is market rates for lawyers’ services and not general increases in the cost of living.

Finally, I do not find the majority’s reliance on Pierce v. Underwood, 487 U.S. 562 , 108 S.Ct. 2541 , 101 L.Ed.2d 490 (1988), either helpful or persuasive. In Pierce, the Court defined the scope of the other consideration (aside from an increase in the cost of living) which justifies a higher fee: the “special factors” category. The Court concluded that that category does not include a mere shortage of lawyers and held that district courts should invoke “special factors” as a ground for departing from the statutory cap only in rare cases. 108 S.Ct. at 2554 . In so holding, the Court was deciding whether a district court was justified in departing from the statutory cap. It did not address the method by which district courts should decide the amount of departure if they decide, in fact, to depart. 5 Therefore, nothing in Pierce should be read as stating the Court’s view on the appropriate method of calculating fee awards once a district court has found it appropriate to exceed the $75 per hour statutory cap.

III.

In sum, I believe that the district court was correct in reading the statute as requiring fees above the statutory cap to be based on increases in the cost of legal services rather than on increases in the overall cost of living. I respectfully dissent.

. I agree with the majority that the standard for review in this case is plenary. Whether the statute requires that fee departures be based on market rates or on increases on the general cost of living is a question of statutory interpretation, subject to plenary review. On the other hand, I would hold that a district court’s use of a particular index or method to measure the increase in market rates for legal services is a discretionary decision, reviewable only under an abuse of discretion standard.

. As the majority points out, there is no contention in this case that a special factor justifies an increase over the $75 per hour rate.

. The majority suggests that because an increase in the cost of living "justifies” a higher fee, it follows that the amount a fee is increased should be directly tied to increases in the cost of living. Although that may be a perfectly sensible result, it is not plain from the text of the statute. The word "justifies” only suggests that an increase is appropriate. It does not suggest that the factor which determines whether a higher fee should be awarded is also the method by which that higher fee is calculated. As I have emphasized, the statute does not mention anywhere in (d)(2)(A)(ii) the method that courts should use to calculate fees above the $75 per hour cap. Given that the only method of calculating fees mentioned anywhere in EAJA is by market rates for legal services, I believe that the structure of EAJA compels that district courts use that method when exceeding the statutory cap.

. District courts would have no difficulty in calculating fees under this approach, as is demonstrated by the district court's opinion in this case. The court applied the precise formula that I have described by beginning with the statutory cap of $75 per hour. The court then found that the increase in market rates for attorney fees during the relevant period was approximately 81%. The court multiplied $75 by 81%. It then added that result ($60.75) to $75 to determine the appropriate market rate per hour.

. Indeed, I believe that the majority’s reliance on Pierce demonstrates the difficulty of the majority’s approach. According to the interpretation of the statute that I have suggested. Pierce was a case about the third step in the process: the decision whether to exceed the statutory cap. In this case, the government has conceded that the district court was justified in exceeding the statutory cap. The present case requires us to decide the fourth step in the process: deciding by how much to exceed the statutory cap. Consequently, Pierce is, at best, only marginally relevant.