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Opinion analysis: Richlin Security v. Chertoff

On June 2, 2008, the Court reversed. In an opinion by Justice Alito that was joined in full by six other justices and in part by Justices Scalia and Thomas, the Court held that when the requirements of the Equal Access to Justice Act are otherwise met, a prevailing party can recover paralegal fees from the federal government at prevailing market rates.

After oral argument, it seemed quite likely that Richlin would prevail, so that today’s decision was not much of a surprise. The only real element of surprise was how uniformly Justice Alito’s opinion rejects virtually all of the arguments advanced by the government to support its contention that paralegal fees should instead be reimbursed at cost. The opinion regards the plain language of the statute as decisive, explaining that “[i]n this case, Richlin ‘incurred’ ‘fees’ for paralegal services in connection with its contract action before the Board. Since §504(b)(1)(A) awards fees at ‘prevailing market rates,’ a straightforward reading of the statute leads to the conclusion that Richlin was entitled to recover fees for the paralegal services it purchased at the market rate for such services.” The Court dismisses the government’s argument that Congress intended paralegal fees to be “other expenses” reimbursable at “reasonable cost” as a “fractured interpretation of the statute,” explaining that it found no reason to believe that Congress intended “expenses” to be reimbursed differently from fees and, in any event, “it would hardly follow that amounts billed for paralegal services should be classified as ‘expenses’ rather than as ‘fees.’” Moreover, the Court continued, even if paralegal fees were to be reimbursed at cost, “reasonable cost” would still generally be “deemed to be ‘prevailing market rates’ when such rates could be determined.” Finally, the Court emphasized that the reasoning of its 1989 decision in Missouri v. Jenkins, in which it held that prevailing litigants under Section 1983 could recover paralegal fees at market rates, applied fully to EAJA cases as well.

Justice Alito’s opinion concludes by addressing, and ultimately deeming unpersuasive, legislative history and policy arguments advanced by the government. (Court watchers will not be shocked to learn that Justice Scalia declined to join the legislative history portion of the opinion, while Justice Thomas declined to join both the Missouri v. Jenkins discussion and the entirety of Part III.) The government had seized on a snippet in a Senate Report indicating that “[e]xamples of the type of expenses that should ordinarily be compensable [under EAJA] include paralegal time (billed at cost).” The Court dismissed the snippet, however, as a “stray remark” rendered even less significant by the fact that, “as we observed earlier, the word ‘cost’ could just as easily (and more sensibly) refer to the client’s cost rather than the attorney’s cost.” And the Court rejected the government’s argument (on which the Federal Circuit relied below as well) that allowing paralegal fees to be reimbursed at market rates would create a “perverse incentive” for firms to “shift an inefficient amount of attorney work to paralegals, since paralegal fees could be recovered at a greater percentage of their full market value.” Instead, the Court agreed with Richlin that the argument “proves too much” and could apply just as easily to fees that are undeniably covered under EAJA, such as “agents” and junior attorneys. Finally, although the Court likely would have reached the same result based solely on the text of the statute and Missouri v. Jenkins, Richlin’s cause was certainly helped by the fact that, from a policy perspective, the Court regarded the market-rate system as a far more straightforward one (and, moreover, one which has worked well for some time, both in the Section 1983 context and in circuits employing the same rule for EAJA cases): “Market practice provides by far the more transparent basis for calculating a prevailing party’s recovery under EAJA. It strains credulity that Congress would have abandoned this predictable, working framework for the uncertain and complex accounting requirements that a cost-based rule would inflict on litigants, their attorneys, administrative agencies, and the courts.”