EAJA Recovery for Paralegal Fees Based on Market Rates

A prevailing party that satisfied the requirements of the Equal Access to Justice Act could recover its paralegal fees at prevailing market rates, because traditional tools of statutory construction and considerations of stare decisis did not support limiting recovery to the cost incurred by the prevailing party's attorney, the United States Supreme Court has held. The Court reversed the Court of Appeals for the Federal Circuit, which had affirmed a board of contract appeals' ruling that the EAJA limits recovery of paralegal fees to the law firm's cost rather than the rate billed the contractor (51 CCF ¶78,687, aff'g 05-2 BCA ¶33,021). The government advocated the statutory interpretation on which these decisions were based --that paralegal fees were "other expenses" recoverable at "reasonable cost" under 5 USC 504(b)(1)(A).

The Supreme Court, however, rejected the government's "fractured interpretation of the statute," stating "a straightforward reading of the [EAJA] leads to the conclusion that [the contractor] was entitled to recover fees for the paralegal services it purchased at the market rate for such services." According to the Court, section 504(b)(1) did not clearly distinguish between the rates at which "fees" and "other expenses" were reimbursed. There also was no basis for classifying amounts billed for paralegal services as "expenses" rather than "fees." Moreover, even if the EAJA limits recovery for paralegal fees to reasonable cost, measuring cost from the perspective of the prevailing party's attorney rather than the prevailing party would be anomalous and inconsistent with section 504(a)(1), which provides for an award to a prevailing party of "fees and expenses incurred by that party." The more plausible interpretation was that "fees and other expenses" were recoverable at "reasonable cost," which would be deemed to be "prevailing market rates" when such rates could be determined. To the extent there was any statutory ambiguity, the Court ruled it was resolved by Missouri v. Jenkins (491 US 274), which held litigants could recover paralegal fees under the Civil Rights Attorney's Fees Awards Act (42 USC 1988). In Jenkins, the Court declared it "self-evident" paralegal fees were included in attorney's fees. The Court also dismissed the government's legislative history and public policy arguments. (Richlin Security Service Co. v. Chertoff, Sec'y of Homeland Security, US SCt, 52 CCF ¶78,943)

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