Pierce v. Underwood
487 U.S. 552 (1988)
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Rule of Law:
Under the Equal Access to Justice Act (EAJA), the government's litigation position is 'substantially justified' if it has a reasonable basis in both law and fact. Furthermore, 'special factors' justifying an attorney's fee award above the statutory cap must be based on a distinctive skill or knowledge required for the litigation, not on general factors such as the novelty of the case, the quality of representation, or the contingent nature of the fee.
Facts:
- The Secretary of Housing and Urban Development (HUD) made a decision not to implement an 'operating subsidy' program authorized by the Housing and Community Development Act of 1974.
- The program was designed to provide payments to owners of government-subsidized apartment buildings to help cover rising utility expenses and property taxes, thereby keeping rents affordable.
- A nationwide class of tenants, including Underwood, residing in government-subsidized housing, faced potential rent increases because the Secretary refused to disburse these subsidy funds.
- After numerous lawsuits were filed across the country challenging the Secretary's decision, a newly appointed Secretary settled the litigation with the plaintiffs.
- The settlement agreement created a $60 million fund to be distributed to housing owners or to tenants whose rents had been increased because the subsidies had not been paid.
Procedural Posture:
- Underwood and a class of tenants sued the Secretary of HUD in the U.S. District Court for the District of Columbia, which granted summary judgment for the tenants.
- The case was then transferred to the U.S. District Court for the Central District of California to administer a nationwide settlement.
- Following the settlement, the tenants (respondents) filed a motion in the District Court for attorney's fees under the Equal Access to Justice Act (EAJA).
- The District Court found the Secretary's position was not 'substantially justified' and awarded over $1.1 million in fees, applying rates exceeding the $75/hour cap and a multiplier due to 'special factors'.
- The Secretary (petitioner) appealed the fee award to the U.S. Court of Appeals for the Ninth Circuit.
- The Ninth Circuit affirmed the finding that the Secretary's position was not substantially justified but reversed the multiplier, reducing the award to $322,700, which still included hourly rates above the statutory cap.
- The U.S. Supreme Court granted certiorari to review the Ninth Circuit's decision.
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Issue:
Under the Equal Access to Justice Act (EAJA), does the 'substantially justified' standard require the government to show its position was more than merely reasonable, and do general litigation factors like novelty of issues, counsel's skill, or contingency risk qualify as 'special factors' justifying attorney's fees above the statutory $75-per-hour cap?
Opinions:
Majority - Justice Scalia
No. The 'substantially justified' standard does not require more than reasonableness, and general litigation factors do not qualify as 'special factors' to exceed the statutory fee cap. The standard of review for a district court's determination on this matter is 'abuse of discretion.' The phrase 'substantially justified' means justified in substance or in the main, which is satisfied if the government's position has a 'reasonable basis both in law and fact.' This interpretation is consistent with the use of 'substantial' in other legal contexts, such as 'substantial evidence.' 'Special factors' allowing a fee to exceed the $75-per-hour cap must be unusual and not of broad application. The statutory example, 'limited availability of qualified attorneys,' refers to attorneys with a distinctive knowledge or specialized skill, like patent law, not merely a high level of general legal competence. Factors like novelty, undesirability of the case, results obtained, and contingency fees are routine aspects of litigation that influence market rates and thus do not qualify as 'special.'
Concurring - Justice Brennan
Yes, in part. The term 'substantially justified' should require more than mere reasonableness, and the Court's interpretation of 'special factor' is too restrictive. Congress considered and rejected a 'reasonably justified' standard, indicating it intended a higher burden for the government, meaning its position must have a 'solid basis.' While agreeing that the lower courts erred in their 'special factors' analysis, the majority's interpretation is too stingy. The 'limited availability of qualified attorneys' exception should not be confined to narrow practice specializations; it can also apply when a case requires an attorney of extraordinary skill or experience, which is also a form of qualification for the proceedings.
Concurring-in-part-and-dissenting-in-part - Justice White
No, but the case should be decided differently. While agreeing with the majority's interpretation of 'substantially justified,' a district court's determination on this issue should be reviewed de novo as a question of law, not for abuse of discretion. Applying a de novo standard, the government's position in this case was substantially justified. The relevant housing statute used permissive language ('authorized to make') for the operating-subsidy program, contrasting with mandatory language ('shall make') for another program. This, combined with precedent suggesting the Secretary had discretion over similar programs, provided a reasonable basis for the government's legal position. Therefore, no attorney's fees should have been awarded at all.
Analysis:
This decision significantly shapes litigation against the government under the EAJA by clarifying three key provisions. First, by establishing a deferential 'abuse of discretion' standard of review, it makes district court fee determinations harder to overturn on appeal. Second, defining 'substantially justified' as 'reasonable' sets a moderate bar for the government to avoid fee liability, rejecting a more stringent standard that would have made fee awards more common. Third, and perhaps most impactfully, the Court's narrow interpretation of 'special factors' severely curtails the ability of prevailing parties to recover fees above the statutory cap, effectively making the cap a hard ceiling in all but the most specialized cases and limiting recovery based on attorney skill or case complexity.
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