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March 3, 1994

CURTIS SNEEDE, by his guardian ad litem Georgia Thompson; JUSTIN THOMPSON, by his guardian ad litem Georgia Thompson; GEORGIA THOMPSON, on her own behalf and as representative of her sons Curtis Sneede and Justin Thompson, Plaintiffs,
MOLLY COYE, M.D. Director, California Department of Health Services; CALIFORNIA DEP'T OF HEALTH SERVICES; THOMAS HAYES, Director, California Department of Finance; CALIFORNIA DEPARTMENT OF FINANCE; LOUIS W. SULLIVAN, M.D., Secretary, United States Department of Health and Human Services; UNITED STATES DEP'T OF HEALTH AND HUMAN SERVICES, Defendants. MOLLY COYE, M.D. et al., Defendants and Third Party Plaintiffs, v. LOUIS W. SULLIVAN, M.D., Secretary, United States Department of Health and Human Services, Third Party Defendant.

The opinion of the court was delivered by: THELTON E. HENDERSON


 This matter comes before the Court on the plaintiffs' Motion for Attorneys' Fees and Costs against the Federal defendants *fn1" under 28 U.S.C. §§ 2412(b) and (d) of the Equal Access to Justice Act ("EAJA"). In light of this Court's ruling, filed concurrently herewith, denying plaintiffs' Motion for Leave to File a Corrected Second Amended Complaint, the Court denies plaintiffs' request for fees under 28 U.S.C. § 2412(b). However, having carefully considered the parties' papers, supporting documentation, and the record herein, the Court grants plaintiffs' request for attorneys' fees and costs under 28 U.S.C. § 2412(d) and directs the parties to proceed as set forth below.


 Under EAJA, prevailing plaintiffs are entitled to recover their attorneys' fees and costs unless the government's position was substantially justified, special circumstances would make an award unjust, or the application for fees is not timely filed. 28 U.S.C. §§ 2412(d)(1)(A), (1)(B); Commissioner, I.N.S. v. Jean, 496 U.S. 154, 110 S. Ct. 2316, 2319, 110 L. Ed. 2d 134 (1990); Oregon Natural Resources Council v. Madigan, 980 F.2d 1330, 1331 (9th Cir. 1992); Thomas v. Peterson, 841 F.2d 332, 335 (9th Cir. 1988) ("EAJA creates a presumption that fees will be awarded unless the government's position was substantially justified"). Once a court finds that a party is entitled to attorneys' fees, it must then determine a reasonable fee. This inquiry focuses on the reasonable number of hours expended and the appropriate hourly rate.

 We first address the requirements for establishing eligibility for fees under EAJA, and second, the issue of a reasonable fee.



 1. Prevailing Party

 A plaintiff qualifies as a prevailing party if she succeeds on "'any significant issue in the litigation which achieved some of the benefit the parties sought in bringing the suit.'" Texas State Teachers Ass'n v. Garland Independent School District, 489 U.S. 782, 109 S. Ct. 1486, 1493, 103 L. Ed. 2d 866 (1989). In this case, there is no dispute that plaintiffs have "prevailed." Their complaint asserted that the state of California was engaging in unlawful deeming practices, in determining eligibility for Medi-Cal, in violation of 42 U.S.C. § 1396a(a)(17)(D), and that the United States Department of Health and Human Services was permitting or requiring such unlawful policies throughout the Ninth Circuit.

 After obtaining certification of a California, and later, a Ninth Circuit-wide class, plaintiffs prevailed against both the State and Federal defendants. On January 5, 1990, we granted a partial summary judgment against the State of California, finding that it was unlawfully relying on improperly deemed income and resources to reduce or deny eligibility for Medi-Cal benefits. On December 11, 1990, we extended this ruling to the Federal defendants, finding that they were permitting or requiring such unlawful deeming throughout the Ninth Circuit.

 Plaintiffs were also highly successful at the remedial stage, which raised a number of highly complex and novel issues regarding compliance. As a result of this Court's remedial rulings, California has revised its eligibility procedures, with respect to deeming, and the Federal defendants have provided all States within the Ninth Circuit with extremely detailed instructions regarding how to develop deeming policies that are consistent with the dictates of the Medicaid Act, as set forth in 42 U.S.C. § 1396a (a)(17)(D).

 The end result is that plaintiffs achieved very significant benefits for thousands of applicants who would otherwise be denied needed medical benefits. See Wulsin Decl. at P 6 ("the court's decisions will have a significant impact on the financial circumstances of [Medi-Cal] recipients throughout the State, allowing them to obtain needed medical care that they could not have obtained absent the relief that the decision ensures"); Bird Decl. at P 6 ("The results of the Sneede case have been extremely important in California, based upon the comments and responses I have observed from advocates at our Statewide task force meetings . . . [At such meetings] advocates volunteered that the new Sneede rules had been of remarkable benefit to their clients").

 2. Substantial Justification

 Once we determine that the plaintiffs are the prevailing party, it is the government's burden to demonstrate that fees should nonetheless be denied because the "position" of the United States was "substantially justified." Oregon Natural Resources Council, 980 F.2d at 1331.

 The "position" of the United States refers to the agency's underlying position -- i.e. the agency action or inaction upon which the litigation is based -- and the agency's litigation position. Id. at 1331; Thomas, 841 F.2d at 334-5. Thus, a finding that "either the government's underlying conduct or its litigation position was not substantially justified is sufficient to support an award of EAJA fees." Cervantez v. Sullivan, 739 F. Supp. 517, 521 (E.D. Cal. 1990). See also Jean, 496 U.S. 154, 110 S. Ct. at 2319, n. 7 (Congressional intent is to provide for fees when an unjustifiable agency action forces litigation, but then the agency tries to avoid liability by reasonable behavior during the litigation); Andrew v. Bowen, 837 F.2d 875, 880 (9th Cir. 1988).

 The term "substantial justification" requires the agency to "show that its position has a reasonable basis in law and fact." Pierce v. Underwood, 487 U.S. 552, 565, 108 S. Ct. 2541, 2550, 101 L. Ed. 2d 490 (1988); Abela v. Gustafson, 888 F.2d 1258, 1264 (9th Cir. 1989). This means "'of course, more than merely undeserving of sanctions for frivolousness.'" Jean, 469 U.S. 154, 110 S. Ct. at 2319, n.6.

 The underlying conduct at issue here is the decision of the Secretary of Health and Human Services to issue his August 1989 transmittal, which permitted or required State Medicaid agencies to promulgate regulations that violated the unambiguous terms of the Medicaid statute, as set forth in 42 U.S.C. § 1396a(a)(17)(D). We readily agree with plaintiffs that this underlying conduct lacked any reasonable basis in either law or fact, and thus can not be "justified to a degree that could satisfy a reasonable person." Pierce, 487 U.S. at 565-66.

 As we previously held, the statutory language at issue in this case could hardly be more plain or unambiguous. In no uncertain terms, it prohibits the Secretary from deeming income from persons outside the spousal or parent-child relationship. See Sneede, 728 F. Supp 607, 609-10 (N.D.Cal. 1990); A long line of other courts have unanimously reached the same conclusion, including the Ninth Circuit Court of Appeals. See Vance v. Hegstrom, 793 F.2d 1018 (9th Cir. 1986) ("The plain language of subsection 17(D) explicitly prohibits the deeming of income from persons [outside the spousal or parent-child relationship]") (emphasis added); Olson v. Norman, 830 F.2d 811, 818 (8th Cir. 1987) ("We join the other courts that have unanimously rejected the Secretary's efforts to rewrite or ignore the clear language of [§ 1396a(a)(17)(D)]")(emphasis added); Childress v. Sullivan, 738 F. Supp. 1348, 1349-50 (D. Colo 1990)(government's interpretation of § 1396a(a)(17)(D) was not substantially justified in light of the "plain" language of (17)(D) and the government's "string of losses"). *fn2"

 Notwithstanding the above, the Secretary inexplicably and without ever proffering any reasonable justification, insisted on flouting § 1396a(a)(17)(D) in favor of a policy which permitted or required States to deem income outside the spousal or parent-child relationships.

 Not surprisingly, federal defendants do not even attempt to defend the reasonableness of their underlying conduct on the merits. Instead, the Secretary falls back on blanket principles that have little persuasive force under the particular circumstances presented here. For example, the Secretary emphasizes that the Medicaid statute is renowned for its complexity. However, the simple fact that a federal statute is complex, as many are, does not shield the government from liability for fees. Moreover, the specific language at issue here was not difficult to interpret. Rather, as the courts have consistently agreed, it is "plain" and "unambiguous.

 The government also seeks support from the fact that the general concept of "deeming" has been upheld by the Supreme Court in other contexts. However the fact that deeming, as a general concept, has been upheld is simply beside the point. No one in this case has ever disputed that deeming can not occur in the proper context.

 The government's final argument is that language in the Ninth Circuit's December 13, 1991 memorandum opinion shields it from any liability for fees. As explained below, however, this argument is equally unavailing.

 Of the many rulings entered in this action, only one was appealed. That ruling, contained in an order issued June 8, 1990, concerned a narrow remedial issue (involving one step of the state of California's proposed method for determining the income and need of California's Medi-Cal Family Budge Units). As required by Ninth Circuit rules, plaintiffs included a statement in their appellate brief that they intended to seek attorney fees if they prevailed on appeal. Neither plaintiffs nor defendants briefed the issue of fees.

 On December 13, 1991, the Ninth Circuit affirmed the Court's June 8, 1990 order on merits. At the same time, it also ruled that plaintiffs were not entitled to recover fees for the appeal under section 28 U.S.C. § 2412(d) because the government's position was substantially justified. Dec. 13, 1991 Memorandum Opin. at 10-11.

 Federal defendants argue that under the "law of the case" doctrine, the Ninth Circuit's ruling prevents this Court from determining whether the government's underlying conduct was "substantially justified." The fatal flaw in this argument is that the only matter before the Court of Appeals, and the only matter considered, was a single issue concerning California's proposed remedial plan. See Memorandum Opin. at 1, n. 1 ("The only issue presently before this Court is the propriety of the June 8 order") (emphasis added). Thus, the only "position" the Court of Appeals could have evaluated for "substantial justification" was the Secretary's litigation position regarding the June 8, 1990 order on appeal. Indeed, the Court of Appeals never once discusses or addresses the Secretary's underlying conduct in its decision. *fn3"

 It is well settled that the Law of the Case doctrine only "operates to preclude a reexamination of issues of law decided on appeal, explicitly or by necessary implication." Chapman v. Nat'l Aeronautics and Space Administration, 736 F.2d 238, 240 (5th Cir.), cert.denied, 469 U.S. 1038, 83 L. Ed. 2d 406, 105 S. Ct. 517 (1984). Given the above, it is clear that the Ninth Circuit neither explicitly, nor by necessary implication, evaluated or passed judgment on the government's underlying conduct in this case. Accordingly, defendants' argument regarding the law of the case must be rejected. *fn4"

 In sum, and for all the foregoing reasons, we conclude that the government has not met its burden of demonstrating that its underlying position, which necessitated this litigation, was substantially justified, "that is, justified to a degree that could satisfy a reasonable person." Pierce, 487 U.S. at 565, 108 S. Ct. at 2550. Indeed, there are few cases in which this Court could imagine the government's underlying conduct having less justification than in the instant case. *fn5"

  The determination that the government's prelitigation position was not substantially justified acts as a "one-time threshold for fee eligibility." Jean, 110 S. Ct. at 2320. Thus, plaintiffs are presumptively entitled to a fee award which "encompasses all aspects of the civil action," absent some unreasonably dilatory conduct by the prevailing party on any portion of the action, which is not a factor here. Id. see also, id. at 2322 ("The purpose and legislative history of the statute reinforce our conclusion that Congress intended EAJA to cover the cost of all phases of successful civil litigation addressed by the statute"). Accordingly, plaintiffs are presumptively entitled to recover for all phases of this litigation. *fn6"

 3. Special Circumstances

 A court may deny fees to a prevailing party even where the government's position was not substantially justified, if special circumstances would make an award unjust. 28 U.S.C. § 2412(d)(1)(A). This provision, however, should only be invoked with caution. J & J Anderson, Inc. v. Town of Erie, 767 F.2d 1469, 1474 (10th Cir. 1985); Martin v. Heckler, 773 F.2d 1145, 1150 (11th Cir. 1985) (special circumstances exception should be narrowly construed). Federal defendants do not point to any special circumstances that would make an award unjust in this case, and we find none either.

 4. Timeliness of Application

 Under 28 U.S.C. § 2412(d), the plaintiff must submit an application for attorneys' fees within 30 days of final judgment. This is a mandatory, jurisdictional condition. Shalala v. Schaefer, 125 L. Ed. 2d 239, 113 S. Ct. 2625, 2632 (1993); Olson, 830 F.2d at 821.

 Defendants contend that plaintiffs' request for fees is untimely because it was not filed within 30 days of this Court's December 11, 1990 order, which extended the Court's earlier ruling against the State defendants to the Federal defendants. Alternatively, Defendants argue that the application should have been filed within 30 days of February 26, 1991, which is the date that the appeal from the December 11, 1990 order was dismissed. Both arguments are meritless since the December 11, 1991 order was clearly not a final judgment. Melkonyan v. Sullivan, 501 U.S. 89, 111 S. Ct. 2157, 2162, 115 L. Ed. 2d 78 (1991); Fed. R. Civ. P. 58. Rather, we agree with plaintiffs that, if anything, the request for fees is premature. However, this does not preclude the Court from acting on the instant motion because fees may be awarded on an interim basis. Golden Gate Audobon Society, Inc. v. U.S. Army Corps of Engineers, 738 F. Supp. 339, 341 (N.D. Cal. 1988).



 Where, as here, the plaintiffs have satisfied the conditions for recovering attorneys' fees under § 2412(d), we must determine what fee is "reasonable." The process for determining a reasonable fee under 28 U.S.C. § 2412(d) is the same as that followed in cases awarding fees under 42 U.S.C. § 1988. Jean, 110 S. Ct. at 2320. ("once a private litigant has met the multiple conditions for eligibility for EAJA fees, the district court's task of determining what fee is reasonable is essentially the same as that described in Hensley [v. Eckerhart]").

 Accordingly, we must determine the number of hours reasonably expended in the litigation and multiply that figure by a reasonable hourly rate. Hensley v. Eckerhart, 461 U.S. 424, 433-34, 103 S. Ct. 1933, 76 L. Ed. 2d 40[] (1983); Gates v. Deukmejian, 987 F.2d 1392, 1397 (9th Cir. 1993). This figure, which is commonly referred to as the lodestar, may then be increased or decreased based on certain factors that are not subsumed within the initial calculation of the lodestar. D'Emanuele v. Montgomery Ward & Co., Inc., 904 F.2d 1379, 1383 (9th Cir. 1990). However, such upward or downward adjustments are "the exception rather than the rule since the lodestar amount is presumed to constitute a reasonable fee." Id.; Gates, 987 F.2d at 1397.

 1. Number of Reasonable Hours Expended

 It is plaintiffs' burden to "document[] the appropriate hours expended in the litigation" by submitting evidence in support of those hours worked." Gates, 987 F.2d at 1397. The appropriate number of hours includes all time "reasonably expended in pursuit of the ultimate result achieved, in the same manner that an attorney traditionally is compensated by a fee-paying client for all time reasonably expended on a matter." Hensley, 461 U.S. at 431. However, it does not include hours that are "excessive, redundant, or otherwise unnecessary because, for example, the case is overstaffed." Id. at 433, 437, 103 S. Ct. at 1939-40.

 Plaintiffs have submitted detailed declarations and supporting time sheets demonstrating that they have spent a total of 1428 hours litigating the merits of this action. Under Jones v. Espy, 10 F.3d 690 (9th Cir. 1993), plaintiffs have allocated these hours between purely state, purely federal and joint state-federal matters. The hours set forth below represent those hours spent on purely federal matters and 50 percent of those hours spent on joint state-federal matters. Rubin Supp. Decl. P 4 -6 and Ex. A & C. *fn7" Fed. Hrs 1/2 Jt. Hrs Total Hrs Evelyn Frank 443.45 87.53 530.98 Michael Parks 127.00 8.5 135.50 Jane Perkins 19.00 2.38 21.38 Mark Regan 31.50 4.0 35.50 TOTAL: 723.36


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