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Should attorney’s fees be awarded to attorneys or their client?

Under the Equal Access to Justice Act, a court in a civil action against the United States shall “award to a prevailing party other than the United States fees and other expenses . . . incurred by that party” if the position of the United States was not “substantially justified.”  On February 22, in No. 08-1322, the Court will consider whether an EAJA fee award is payable to the prevailing party, rather than that party’s attorney, so that the federal government may use that award to satisfy a debt owed by the prevailing party to the United States.

In 2006, after Ruby Willow Kills Ree prevailed in her suit challenging the denial of her Social Security benefits, the district court granted her motion for EAJA fees and awarded her $2112.60.   However, because Kills Ree owed a debt to the United States, the Department of the Treasury (Treasury) notified her that the EAJA award had been applied to that debt, and she would not receive any of the funds.

Respondent Catherine Ratliff, who represented Kills Rees in her suit, filed suit against the Social Security Commissioner (currently petitioner Michael Astrue) to recover the fees.  She argued that the EAJA fees were awarded directly to her as Kills Rees’s attorney.  The district court rejected that argument.  In its view, the text of the EAJA required awards to be made to the “prevailing party” rather than the party’s attorney, and Ratliff therefore lacked standing to challenge the offset.

On appeal, the Eighth Circuit reversed.  While acknowledging a conflict with the decisions of other circuits, the court of appeals deemed itself bound by its own precedent and thus held that “attorneys’ fees awarded under the EAJA are awarded to the prevailing parties’ attorneys, rather than to the parties themselves.”  Judge Gruender filed an opinion concurring in the judgment.  In his view, although Eighth Circuit precedent dictated a contrary conclusion, both Supreme Court precedent and the text of the EAJA indicated that EAJA fees are awarded to the prevailing party.  The federal government filed a petition for certiorari, which the Court granted on September 30, 2009.

In its opening brief on the merits, the government begins with the plain text of the EAJA – which, the government emphasizes, instructs courts to award fees and other expenses “to a prevailing party,” rather than to the party’s attorney.  That interpretation is, in the government’s view, further supported by the requirement that the prevailing party’s fee application “includ[e] an itemized statement from any attorney,” complete with the attorney’s hourly rate and time expended:  this distinction reflects Congress’s intention that EAJA fees go to reimburse the prevailing party, who could then pay her attorney’s fee.  Moreover, the distinction also has a sound policy basis:  if the EAJA fees go directly to the prevailing party directly, courts can avoid having to mediate disputes over fees.

The government next turns to Congress’s 1985 amendments to the EAJA.  When it enacted those amendments, the government argues, Congress would have been aware of other statutes requiring that fees be paid directly to an attorney, but it nonetheless opted to provide in the EAJA that fees be awarded “to a prevailing party.”  Finally, the government criticizes the Eighth Circuit’s interpretation as lacking any “textual analysis or other reasoning that might provide a sound basis for [its] judgment.”  Instead, the court of appeals “self-consciously departed from what it recognized was a ‘literal interpretation of the EAJA.’”

Respondent Catherine Ratliff also relies on the plain text of the EAJA.  In her view, the plainest reading of the phrase “attorney’s fee” is money meant for an attorney, rather than money to pay the client or her debts.  This reading is, in her view, bolstered by a 1985 amendment to the EAJA providing that when a Social Security “ claimant’s attorney receives fees,” the attorney should refund the smaller fee to the claimant.  Moreover, Ratliff argues, the attorney’s interest in the fees should exempt the fees from any offset.

Ratliff next argues that her interpretation is consistent with the Court’s precedents, which hold that “attorney’s fees awarded under fee-shifting statutes are paid to attorneys”; the decisions on which the government relies do not resolve the question of “who ultimately receives attorney’s fees.”  Nor, Ratliff continues, is the government’s interpretation necessary to avoid embroiling courts in disputes regarding to the allocation of fees and expenses, as there are already state ethics rules that “work well” at regulating the handling of funds.

Finally, Ratliff cautions that the government’s approach would undermine EAJA and other similar fee-shifting statutes.  Attorneys might be reluctant to take on a case, she explains, if they are concerned that they will not be reimbursed even if they win a case.