even though there is not yet a final determination on the merits of the plaintiff's SSI application.
This rule advances the purpose implicit in the EAJA fee provisions. Congress rightly provides for the award of attorney fees where an applicant is forced to come to the district court and incur legal expenses in order to gain from the agency the full and fair hearing which the agency should have provided in the first place. The EAJA "ensures that [private parties] will not be deterred from seeking review of, or defending against, unjustified governmental action because of the expense involved in securing the vindication of their rights." H.R. Rep. No. 120, 99th Cong., 1st Sess. 4, reprinted in 1985 U.S.C.C.A.N. 132, 132-33. This Congressional purpose is frustrated if parties who prevail on a sentence four remand are unable to obtain EAJA fees because no final administrative determination is reached before the thirty day filing period expires.
As described by counsel for the government at the November 15 hearing, it is the practice of the government in cases, such as the one at bar, where a plaintiff seeks to present further evidence in SSI proceedings, to review a claimed insufficiency of evidence only after the applicant brings suit in federal court and after the Secretary has answered the complaint by denying the need to take further evidence. The government's current practice virtually assures that those applicants who are denied benefits on an insufficient evidentiary basis will have to bring suit in order to obtain a full hearing by the Secretary. Counsel for the government made much of the fact that where the government's attorney then determines that further evidence is necessary, the government "voluntarily" agrees to return the matter to the Secretary for the necessary hearing.
This practice trivializes the applicant's initial hearing, and strongly supports adoption of the rule described above. The government's practice, as represented to this court, is to force the applicant to incur the expenses involved in bringing the matter before this court in order to trigger review of their claim by a government attorney. Of course, the government is free to allocate its resources, including the time and effort of its attorneys, without interference from this court. But the government's practice of delaying review by an attorney of a social security applicant's request to present further evidence until after a federal lawsuit has been filed is an issue before this court, and must be considered in connection with the award of attorney fees.
The shifting of attorney fees to the losing party in civil cases has a real effect on the amount and quality of litigation. Two-way fee shifting tends to increase the amount of meritorious litigation and decrease the amount of frivolous litigation by transferring the expected cost of bringing and maintaining a lawsuit from the party with a meritorious position and to the party unlikely prevail on the merits. In this way, fee shifting encourages the use of alternative, less costly means of dispute resolution, such as arbitration or private settlement. Richard A. Posner, Economic Analysis of Law 539 (3d ed. 1986). For this reason, most private contracts contain fee shifting provisions. The President's recent directive on civil litigation by the government also encourages the adoption of fee shifting where appropriate, as a means of discouraging unwarranted litigation. Executive Order 12778 § 1(h).
One-way fee shifting has a somewhat different effect, encouraging the maintenance of lawsuits by the beneficiaries of the fee shifting and at the same time both discouraging litigation and encouraging resolution of cases by the party who can only expect to pay fees, but not recover them. This effect motivates fee shifting provisions of the civil rights laws and other "private attorneys general" statutes. The EAJA is this type of fee shifting statute. Of course, under the "American Rule," a court may not order fee shifting of any kind in the absence of statutory or other authorization. Alyeska Pipeline Co. v. Wilderness Society, 421 U.S. 240, 44 L. Ed. 2d 141 , 95 S. Ct. 1612 (1975).
The EAJA and § 405(g) provide plenty of latitude to the government in taking action on claims such as those made by Spurlock. The Secretary could have decided to hear further evidence before the matter ever came to this court, thereby risking no payment of Spurlock's attorney fees. Even if no government attorney had reviewed Spurlock's claim until after this civil suit was filed, had the government agreed to a sentence six remand prior to filing an answer to Spurlock's complaint the question of attorney fees would have been governed by the Hudson and Swenson cases, and Spurlock would have received attorney fees under the EAJA only if he prevailed in obtaining SSI benefits from the Secretary. But the government let the matter proceed, and even answered the complaint with a denial that further evidence was required, before ever meaningfully considering whether the denial of Spurlock's request for the taking of additional evidence was meritorious. After this delay, the court was constrained by Melkonyan to remand the matter only in accord with sentence four.
It is therefore disingenuous for the government to claim at this late date that an award of attorney fees is inappropriate when a plaintiff obtains a sentence four remand from this court. The government, not Spurlock, controlled the timing as to when Spurlock would be afforded the opportunity to present the vocational evidence which should have been heard in the first instance. The government, not Spurlock, declined to consider the merits of Spurlock's request for a further evidentiary hearing until after this court had put on its calendar a hearing to determine Spurlock's motion for summary adjudication of his civil claim. The government, not Spurlock, determined that no government attorney should review Spurlock's request until after an answer had been filed by the government in this matter. An award of EAJA attorney fees might not change the government's practice, but it will lay the costs of fostering civil litigation upon the party responsible, in this case -- the government.
The government's proposed rule for processing EAJA applications in the case of a sentence four remand would permit the government to push onto SSI applicants the costs of the government's actions. The government suggested that a plaintiff who wins a sentence four remand could submit a timely application for attorney fees within thirty days of the remand, which the district court would hold in abeyance until after a final determination of the applicant's claim below. Under the government's scheme, only if the applicant prevailed in obtaining benefits could the applicant return to this court to claim attorney fees, as in the case of a sentence six remand. However the EAJA requirement that a plaintiff must file a petition for attorney fees within thirty days of receiving final judgment presupposes that all information necessary to grant the petition exists at that time. The government's proposal would, of course, muck up the federal courts with unresolved matters and unnecessary proceedings. This is reason enough to reject it. More importantly, the government's rule would defeat the financial incentive placed upon the government by the EAJA to avoid unnecessary litigation.
The EAJA fee provisions are carefully qualified to apply only when the position of the government is not "substantially justified." 28 U.S.C. § 2412(d)(1)(A). This qualification means that the Secretary can reasonably deny SSI benefits without fear that a district court will award attorney fees merely because the court reaches a different result. It is only when the agency acts without substantial justification that the plaintiff is compensated for the legal expenses incurred in obtaining proper agency consideration of a claim.
For these reasons, this court cannot agree with the court in Fergason v. Sullivan, 771 F. Supp. 1008 (W.D. Mo. 1991). In that case, the court considered the issues discussed here, but resisted the need to modify the definition of "prevailing party" to conform with Melkonyan. Instead, the court expressed concern that the definition of "prevailing party" which required an applicant to receive the benefits claimed before receiving attorney fees would time bar all applicants who won sentence four remands from the district court, and invited the Supreme Court to revisit the issue to "harmonize" these requirements. 771 F. Supp. at 1018. With all due respect, this court suggests that where a statutory interpretation previously relied upon by lower courts conflicts with new Supreme Court teaching, it is the lower courts which must adapt. Here, the Supreme Court limited application of its own interpretation of "prevailing party," as described in the Hudson case, to situations in which plaintiff wins a sentence six remand. The only rule in a case involving a sentence four remand which is in harmony with both Melkonyan and the thirty day filing requirement of the EAJA is the one adopted above: an applicant is a "prevailing party" when the applicant obtains a sentence four remand to the Secretary, without regard to whether the applicant later succeeds in obtaining the requested benefits.
Judge Conti's recent opinion in Prasad v. Sullivan, No. C-90-1435-SC (N.D. Cal. Sept. 20, 1991) is not to the contrary. In Prasad, the court entered a sentence four-like remand order without entering final judgment, and later denied EAJA fees on the grounds that plaintiff was not a prevailing party. Judge Conti noted that the "confusion" generated by the Ninth Circuit rule that a party who wins merely a remand in not a prevailing party would be clarified in future cases by Melkonyan's requirement that all sentence four remands be accompanied by a final judgment. Judge Conti's holding in Prasad does not require that a plaintiff in Spurlock's position, who wins a final judgment and a sentence four pursuant to Melkonyan, be denied "prevailing party" status.
The court has already found, in signing the now-vacated August 29 order, that the government's position prior to its stipulating to a remand was not substantially justified. This matter should never have reached the stage where reference to the district court was necessary. Pursuant to the EAJA, when the period for appeal has run on this order entering judgment of a sentence four remand, and for thirty days thereafter, the court will entertain from plaintiff an application for EAJA attorney fees and for all of the expenses incurred in obtaining this sentence four remand.
IT IS SO ORDERED.
DATED: January 28, 1992
VAUGHN R. WALKER
United States District Judge