Argument Preview: Richlin Security Service Co. v. Chertoff

Amy wrote the following preview of today’s argument in Richlin Security Service v. Chertoff.  Please note that Amy represented amici National Association of Legal Assistants, et al., at both the cert. and merits stage.

Under the Equal Access to Justice Act, parties who prevail in adversary administrative proceedings or in court against the United States may be awarded “fees and other expenses” unless the position of the United States was not substantially justified. The EAJA defines “fees and other expenses” as including “reasonable . . . attorney fees,” and it further provides that, subject to a cap of $125 per hour, “[t]he amount of fees awarded under this section shall be based upon prevailing market rates for the kind and quality of the services furnished.” Today in No. 06-1717, Richlin Security Service Co. v. Chertoff, the Court will consider whether fees for paralegal services are compensable at prevailing market rates.

Background

The case arises from the underpayment of petitioner Richlin’s employees for services performed under a contract with the Department of Transportation. After Richlin partially prevailed on its claim, it sought attorney fees and other expenses under the EAJA, including over $65,000 in attorney fees at the statutory maximum of $125 per hour and nearly $52,000 in paralegal fees. The Department of Transportation Board of Contract Appeals awarded Richlin approximately $50,000 in attorney fees but only $10,587 for paralegal fees. The Board ruled that under the EAJA, paralegal fees may be reimbursed only at the cost to the firm rather than at the rate billed to the client, and – based on its Internet research – it found that $35 per hour was a reasonable cost for paralegal fees.

Richlin appealed to the U.S. Court of Appeals for the Federal Circuit, which affirmed. Over the dissent of Senior Judge Plager, the Federal Circuit held that paralegal costs should be regarded as “other expenses” recoverable only at cost under the EAJA, particularly because the EAJA’s limited waiver of sovereign immunity requires a narrow construction of the statute. This is especially true, the court of appeals reasoned, because Congress had imposed a cap on attorney fees but had not done so with respect to paralegal costs. In the Federal Circuit’s view, the Supreme Court’s decision in Missouri v. Jenkins (1989), holding that “a reasonable attorney’s fee” under 42 U.S.C. 1988 included compensation at market rates for paralegals, does not apply to EAJA because of “differences in the surrounding language, structure, and purpose” of that statute.

Petition for Certiorari

After the Federal Circuit denied its petition for rehearing and rehearing en banc, Richlin filed a petition for certiorari, which the Court granted on November 13, 2007. Richlin first alleged that the Federal Circuit’s decision conflicted with the decisions of four other circuits, most notably the Eleventh Circuit’s decision in Commissioner v. Jean. Certiorari was warranted, Richlin contended, for the further reason that the Federal Circuit (by virtue of the number of cases on its docket involving monetary claims against the federal government) plays an outsized role in EAJA jurisprudence. And the Federal Circuit’s decision also conflicts with the Court’s decision in Missouri v. Jenkins. Opposing certiorari, the government relied heavily on the reasoning of the Federal Circuit below. It sought to minimize any conflict with the decisions of other circuits: in its view, several of the lower court decisions cited by Richlin were distinguishable, while the Eleventh Circuit’s decision in Jean did not discuss the issue in any detail and thus did not create a “considered conflict.”

Merits Briefing

In its brief on the merits, Richlin contends that the Court’s decision in Jenkins applies fully to the EAJA context. The Court in Jenkins, Richin emphasizes, deemed it “self-evident” that the term “attorney fees” includes fees for the work of non-lawyers who contribute to an attorney’s work-product. The only question, according to the Court, was how to “valuate” paralegal services – e.g., at market rates or at cost – and the Court held that paralegal fees should be reimbursed at market rates when it is the prevailing practice in the relevant legal community to do so. Pursuant to Jenkins, Richlin argues, paralegal services are compensable as part of “attorney fees,” and the EAJA’s reference to compensation at “prevailing market rates” is dispositive with regard to how those services should be compensated. The statutory cap on attorney’s fees under EAJA is, according to Richlin, irrelevant. When EAJA was enacted in 1980 and re-enacted in 1985, the market rates for most attorneys were at or below the EAJA cap. Thus, it explains, “Congress would not have expected market-rate recovery for paralegal services to result in ‘overuse’ of paralegals”; by contrast, the Federal Circuit’s holding would drive up costs for clients by encouraging firms to use higher-priced attorneys rather than paralegals.

Finally, Richlin argues that even if paralegal services should be compensated at cost rather than market rate, the Federal Circuit erred in holding that “cost” is measured by the cost to the lawyer. Rather, Richlin argues, EAJA should at a minimum reimburse prevailing parties at the cost paid by the client. The United States bases its argument first on the text of the EAJA. It emphasizes that paralegal fees are more properly regarded as “other expenses” under the EAJA rather than “attorney fees.” This is particularly so, the United States notes, in light of the lack of any cap on paralegal fees, which “strongly suggests Congress thought paralegal charges would be treated as expenses.”

The United States again seeks to distinguish Missouri v. Jenkins, which it characterizes as involving “a different fee-shifting statute (Section 1988) with materially different language.” Most significantly, in the U.S.’s view, Section 1988 did not have a counterpart to the “other expenses” category included in the EAJA. Thus, in Jenkins, the Court was faced with the choice whether paralegal services fell within the purview of “reasonable attorney’s fees” or, alternatively, were not compensable. Here, by contrast, the Court need decide only which category – “fees” or “expenses” – encompasses paralegal services. Moreover, the United States notes, unlike Section 1988, EAJA was not intended to be fully compensatory. The United States also emphasizes legislative history (which Richlin rejects as relating to failed legislation rather than the bill that was ultimately enacted) indicating that paralegal time should be reimbursed “at cost.”

Finally, the United States urges the Court not to consider Richlin’s alternative argument that paralegal services should, at a minimum, be reimbursed at their cost to the client. That argument, according to the U.S., “is not fairly included in the question presented, was not pressed or passed upon below, and therefore is not properly before the Court.” But in any event, the United States argues, Congress made clear that “other expenses” should be reimbursed at their “reasonable cost.”