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Wood v. Betlach

United States District Court, D. Arizona

April 19, 2017

Flint Wood, et al., Plaintiffs,
v.
Thomas J Betlach, et al., Defendants.

          ORDER

          David G. Campbell United States District Judge

         Pending before the Court is Plaintiffs' renewed motion for attorneys' fees under the Equal Access to Justice Act (“EAJA”), 28 U.S.C. § 2412(d). Doc. 142. The motion is fully briefed. Docs. 142, 153, 159. The Court will grant the motion in part.[1]

         I. Relevant Facts.

         Arizona participates in Medicaid through the Arizona Health Care Cost Containment System (“AHCCCS”), which administers Arizona's Medicaid plan, its demonstration projects, and certain state-only initiatives. On March 31, 2011, Arizona submitted a request to the Secretary of Health and Human Services for approval of a proposed demonstration project under Section 1115 of the Social Security Act (“SSA”). The Secretary may approve any Section 1115 demonstration project that, in her[2] judgment, “is likely to assist in promoting the objectives” of specified SSA programs, including the Medicaid program. 42 U.S.C. § 1315(a). Arizona's proposed new project covered the childless adult population that had been covered by the previous 2001 demonstration project, but with enrollment frozen at lower levels. It also included a copayment rule which modified the 2001 demonstration project by increasing copayments for the childless adult population. On October 21, 2011, the Secretary approved the project for a five-year period, through September 30, 2016.

         Plaintiffs brought this action in May 2012 to challenge the copayments imposed on childless adults. Plaintiffs argued that the Secretary's approval of the copayments violated the Administrative Procedure Act (“APA”) and the SSA. This Court granted Plaintiffs' motion for class certification (Doc. 87), but denied their motion for a preliminary injunction (Doc. 88). On February 7, 2013, the Court determined that the Secretary's decision to approve the project was arbitrary and capricious because she failed to consider and address Plaintiffs' evidence and the expert opinion of Dr. Ku. Doc. 102 at 8, 18-22. The Court remanded the case to the Secretary for a new decision.

         On April 8, 2013, the Secretary reaffirmed her prior decision and again approved Arizona's request. The parties briefed renewed motions for summary judgment, and the Court entered summary judgment in the Secretary's favor. Doc. 117. The Court held that the Secretary had reasonably determined that Arizona's proposed project met the Section 1115 factors, and denied Plaintiffs' request for attorneys' fees because it found that they were not “prevailing parties.” The Ninth Circuit reversed that decision, holding that Plaintiffs “are entitled to prevailing party status with respect to the February 6, 2013 order remanding the approval of the Medicaid demonstration project to the Secretary.” Wood v. Burwell, 837 F.3d 969, 978 (2016).

         II. Legal Standard.

         Under the EAJA, the Court shall award attorneys' fees to a prevailing party unless the United States shows that its position was “substantially justified or that special circumstances make an award unjust.” 28 U.S.C. § 2412(d)(1)(A); Gutierrez v. Barnhart, 274 F.3d 1255, 1258 (9th Cir. 2001). The Supreme Court's decision in Hensley v. Eckerhart, 461 U.S. 424 (1983), sets forth the analysis for attorneys' fees that applies to EAJA cases. INS v. Jean, 496 U.S. 154, 161 (1990); Sorenson v. Mink, 239 F.3d 1140, 1145 n.2 (9th Cir. 2001).

         III. Analysis.

         The Ninth Circuit held that Plaintiffs are entitled to prevailing party status. See Wood, 837 F.3d at 978. The Court must now determine whether: (1) the government's position was substantially justified, or (2) special circumstances make an award of attorneys' fees unjust. 28 U.S.C. § 2412(d)(1)(A); see also Thangaraja v. Gonzales, 428 F.3d 870, 873-75 (2005). If both answers are negative, the Court must also determine whether the attorneys' fees request is reasonable.

         A. Substantial Justification.

         “The government bears the burden of demonstrating substantial justification.” Thangaraja, 428 F.3d at 874 (citing Gonzales v. Free Speech Coalition, 408 F.3d 613, 618 (9th Cir. 2005)). In the context of attorneys' fees determinations, the Ninth Circuit has held that: “‘Substantial justification' is equated with ‘reasonableness.'. . . The government's position is ‘substantially justified' if it ‘has a reasonable basis in law and fact.'” Ramon-Sepulveda v. INS, 863 F.2d 1458, 1459 (9th Cir. 1988) (quoting Pierce v. Underwood, 487 U.S. 552, 566 n.2 (1988)); see also Al-Harbi v. INS, 284 F.3d 1080, 1085 (9th Cir. 2002).

         That this Court found the Secretary's initial decision to be arbitrary and capricious and not supported by substantial evidence is “a strong indication that the ‘position of the [Secretary] in this matter was not substantially justified.'” See Thangaraja, 428 F.3d at 874 (quoting Al-Harbi, 284 F.3d at 1085). “Indeed, it will be only a ‘decidedly unusual case in which there is substantial justification under the EAJA even though the agency's decision was reversed as lacking in reasonable, substantial and probative evidence in the record.'” Id.

         The Secretary argues that “both the October 2011 and the April 2013 [agency] approvals [] had a ‘reasonable basis in law and fact[, ]'. . . even if the former was procedurally deficient[.]” Doc. 153 at 6. The Secretary also argues that he “prevailed on every material issue save one, ” and that “the sole issue on which he did not prevail was reasonable.” Id. at 7-13. Both arguments are unpersuasive.

         The Secretary's first argument can be reduced to a contention that attorneys' fees may not be awarded under the EAJA for procedural victories. But that contention is plainly incorrect. Courts routinely award attorneys' fees under the EAJA for procedural victories. See, e.g., Tobler v. Colvin, 749 F.3d 830, 834-35 (9th Cir. 2014) (Social Security Disability remand); Rueda-Menicucci v. INS, 132 F.3d 493, 495 (9th Cir. 1997) (BIA remand); Newton-Nations v. Betlach, No. 03-cv-2506-PHX-ROS, at 4, 13 (D. Ariz. Aug. 22, 2014) (Medicaid case).

         The Secretary's second argument is more appealing on its face, but ultimately unpersuasive. The Secretary argues that the Court must “assess the case holistically, ” even if the “suit contains multiple stages and rounds of briefing, and even if the parties' postures on individual matters during those phases may be more or less justified.” Doc. 153 at 7 (citing Jean, 496 U.S. at 161-62 (internal quotations omitted)). “The matter for the Court to decide at present, then, is whether the government's position, as a whole, had a reasonable basis in law and fact.” Id. (emphasis in original). The Secretary goes on to argue that when the balance of issues won is weighed against issues lost, the government's position was substantially justified. Id.

         Courts in APA cases, however, often limit their focus to whether evidence in the administrative file was properly considered by the agency. See, e.g., Tobeler, 749 F.3d at 834-35; Rueda-Menicucci, 132 F.3d at 495; Flores v. Shalala, 49 F.3d 562, 564 (9th Cir. 1995). In Flores, for example, a social security disability claimant brought an action asserting that a decision of the Secretary of Health and Human Services (HHS) denying benefits was not supported by substantial evidence. 49 F.3d at 564. The district court remanded for further proceedings. Id. at 565. Following a decision on remand that the claimant was disabled for a closed period, but not thereafter, the district court denied claimant's motion for fees. Id. On appeal, the Ninth Circuit held that the district court improperly focused on post-remand proceedings on the ultimate issue of disability, and should instead have considered whether HHS was substantially justified with respect to the procedural issue which the court had remanded. Id. at 566. Applying the same focus here, the Secretary's position cannot be substantially justified given the Court's finding that it was arbitrary and capricious.

         The Secretary contends that his position was reasonable, and thus substantially justified, because no “pellucid pronouncements on the Secretary's responsibilities vis-à-vis objections to demonstration projects” existed. Doc. 153 at 12. He argues that the Ninth Circuit has held that “it is not fair to conclude that every violation of a regulation or statute by an agency stamps its position as unreasonable[, ]” and “[t]he government may avoid EAJA fees if it can prove that the regulation it violated was ambiguous, complex, or required exceptional analysis.” Meinhold v. U.S. Dep't of Def., 123 F.3d 1275, 1278 (9th Cir. 1997), amended, 131 F.3d 842 (9th Cir. 1997). But contrary to the Secretary's contention, the regulation violated was not ambiguous, complex, or requiring exceptional analysis. The regulation required the Secretary to consider objections, and no evidence in the reviewable record indicated that she did so. Indeed the Court found as much in its February 2013 opinion, stating:

Here, as in Beno, the record contains no evidence that the Secretary considered or responded to Plaintiffs' substantive objections during the administrative process . . . . [or] that the Secretary considered plaintiffs' objections during the administrative process as she was required to do (Beno, 30 F.3d at 1075) or that she reasonably relied on her own expertise when she reached a conclusion that runs counter to the expert opinion submitted by Plaintiffs.

Doc. 102 at 15-18.

         The Secretary argues that this case is distinguishable from Beno and Newton-Nations. Specifically, the Secretary argues that unlike in Beno, where the Secretary conceded that the information it failed to review was relevant to her inquiry, the Secretary in this case conceded no such thing. Doc. 153 at 12. “In short, the Secretary reasonably believed that not every objection raised during the administrative process merits an on-the-record response, and reasonable minds may differ as to whether Plaintiffs' objection in this case was the sort of objection that did.” Id. The Secretary lost the argument on relevance when the Court remanded the decision for failing to consider relevant evidence. Doc. 102 at 14-15 (“Plaintiffs submitted the Ku Declaration to DHHS as part of the administrative process . . . . Plaintiffs' administrative submission related to an important aspect of the Secretary's required analysis . . . [and] the Secretary was required to address Plaintiffs' submission and their contention that the opinion of Dr. Ku . . . applied in this case.”). Plaintiffs' argument that “unlike Newton-Nation ...


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