Judge.” Entered at the direction of Judge Traxler, with the concurrence of Judge Widener v. Jo Anne B. Barnhart, Commissioner of Social Security

Filed: October 25, 2002
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 01-2021
(CA-83-655-C-C-M)
Patrick H. Hyatt, et al.,
Plaintiffs - Appellees,
versus
Jo Anne B. Barnhart, Commissioner of Social
Security,
Defendant - Appellant.
O R D E R
The court amends its opinion filed August 22, 2002, as
follows:
On the cover sheet, section 1 -- the status is changed from
“UNPUBLISHED” to “PUBLISHED.”
On the cover sheet, section 6 -- the status line is corrected
to read “Affirmed in part, vacated in part, and remanded by
published opinion. Judge Traxler wrote the opinion, in which Judge
Widener and Judge Goodwin joined.”

-- 1 of 27 --

- 2 -
On page 2, first line of opinion -- “PER CURIAM” is corrected
to read “TRAXLER, Circuit Judge.”
Entered at the direction of Judge Traxler, with the
concurrence of Judge Widener and Judge Goodwin.
For the Court
/s/ Patricia S. Connor
Clerk

-- 2 of 27 --

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
4444444444444444444444444444444444444444444444447
PATRICK H. HYATT; HERMAN O.
CAUDLE; MARY P. LOVINGOOD, on
behalf of themselves and all others
similarly situated; NORTH CAROLINA
DEPARTMENT OF HUMAN RESOURCES, No. 01-2021
Plaintiffs-Appellees,
v.
JO ANNE B. BARNHART,
COMMISSIONER OF SOCIAL SECURITY,
Defendant-Appellant.
4444444444444444444444444444444444444444444444448
Appeal from the United States District Court
for the Western District of North Carolina, at Charlotte.
Graham C. Mullen, Chief District Judge.
(CA-83-655-C-C-M)
Argued: June 3, 2002
Decided: August 22, 2002
Before WIDENER and TRAXLER, Circuit Judges, and
Joseph R. GOODWIN, United States District Judge for the
Southern District of West Virginia, sitting by designation.
____________________________________________________________
Affirmed in part, vacated in part, and remanded by published opinion.
Judge Traxler wrote the opinion, in which Judge Widener and
Judge Goodwin joined.
____________________________________________________________
COUNSEL
ARGUED: Howard Stanley Scher, Appellate Staff, Civil Division,
UNITED STATES DEPARTMENT OF JUSTICE, Washington,

-- 3 of 27 --

D.C., for Appellant. Douglas Stuart Sea, COX, GAGE & SASSER,
Charlotte, North Carolina, for Appellees. ON BRIEF: Robert D.
McCallum, Jr., Assistant Attorney General, Robert J. Conrad, Jr.,
United States Attorney, William Kanter, Appellate Staff, Civil Divi-
sion, UNITED STATES DEPARTMENT OF JUSTICE, Washington,
D.C., for Appellant. Charles McBrayer Sasser, COX, GAGE &
SASSER, Charlotte, North Carolina; John R. Wester, Anthony S.
Ketron, ROBINSON, BRADSHAW & HINSON, P.A., Charlotte,
North Carolina, for Appellees.
____________________________________________________________
____________________________________________________________
OPINION
TRAXLER, Circuit Judge:
In this latest chapter of the Hyatt class action litigation, the Com-
missioner of the Social Security Administration (the "SSA") appeals
the district court's order granting plaintiffs' Seventh and Eighth
motions for attorneys' fees under the Equal Access to Justice Act
("EAJA"), 28 U.S.C.A. § 2412(d) (West 1994 & Supp. 2002). The
district court found that the position taken by the SSA in a dispute
arising out of a settlement agreement between the parties was not
"substantially justified" within the meaning of § 2412(d) and, there-
fore, that an award of fees and costs was warranted. The SSA asserts
that the district court abused its discretion in finding that the SSA's
litigation position was not "substantially justified" and, in the alterna-
tive, that the award is excessive. We affirm in part, vacate in part, and
remand.
I. BACKGROUND
A.
This class action lawsuit, rapidly approaching the two-decade
2

-- 4 of 27 --

mark, was initiated by social security disability claimants seeking to
compel the Secretary of Health and Human Services to cease the
practice of ignoring a claimant's testimony regarding the degree of
pain in the absence of objective clinical findings substantiating the
alleged pain. We ultimately determined that the Secretary's position
evinced a refusal to acquiesce to Fourth Circuit precedent to the con-
trary,1 and remanded the case in order for the claims to be reconsid-
ered free of the Secretary's policy of nonacquiescence. See Hyatt v.
Heckler, 807 F.2d 376 (4th Cir. 1986) (Hyatt II); Hyatt v. Heckler,
757 F.2d 1455 (4th Cir. 1985) (Hyatt I), vacated and remanded sub
nom. Hyatt v. Bowen, 476 U.S. 1167 (1986). After our ruling, how-
ever, the Secretary continued the policy of nonacquiescence, prompt-
ing this court ultimately to order the Secretary to distribute Fourth
Circuit law on the subject of pain as a disabling condition to all
administrative law judges and others within this circuit who look to
the Secretary for advice on such matters. See Hyatt v. Sullivan, 899
F.2d 329, 336-37 (4th Cir. 1990) (Hyatt III).
After Hyatt III, the SSA promulgated Social Security Ruling
("SSR") 90-1p, which it argued was consistent with circuit precedent.
Upon plaintiffs' challenge to this regulation, the district court ordered
the SSA to amend SSR 90-1p, and the SSA again appealed to this
court. In the interim, however, we issued our decision in Hunter v.
Sullivan, 993 F.2d 31, 36 (4th Cir. 1992) (per curiam), construing the
language of SSR 90-1p as consistent with our precedent. Hyatt III and
Hunter effectively ended the class action dispute between the parties.
The SSA ended its policy of nonacquiescence and the SSA's then-
pending appeal of the district court's decision was remanded by
agreement.
In March 1994, the SSA entered into a Stipulation and Order of
Settlement with the plaintiffs (the "Settlement Agreement") which,
broadly speaking, required the SSA to reevaluate "Hyatt III" disability
____________________________________________________________
1 See e.g., Walker v. Bowen, 889 F.2d 47, 49 (4th Cir. 1989) ("[P]ain
itself can be disabling, and it is incumbent upon the ALJ to evaluate the
effect of pain on a claimant's ability to function. Further, while there
must be objective medical evidence of some condition that could reason-
ably produce the pain, there need not be objective evidence of the pain
itself or its intensity." (internal citation omitted)).
3

-- 5 of 27 --

claims that had been denied by the SSA under the improper pain stan-
dard. The district court approved the settlement and ordered entry of
the consent decree. It appeared that all that was left to do was to wrap
up the attorneys' fees due under the EAJA. Unfortunately, that has
not been the case.
B.
To date, plaintiffs have filed eight motions for attorneys' fees and
costs under the EAJA. The First, Second, and Third motions for attor-
neys' fees, seeking fees and costs incurred up to July 25, 1985, and
amounting to nearly $200,000, were awarded under the provisions of
28 U.S.C.A. § 2412(d) on the basis that the position of the Secretary
in the class action litigation was not "substantially justified." See
Hyatt II, 807 F.2d at 381-83. Plaintiffs' Fourth and Fifth motions,
seeking fees incurred during the period from May 25, 1985 through
June 17, 1988, and amounting to nearly $350,000, were awarded
under the provisions of 28 U.S.C.A. § 2412(b) (West 1994), based
upon a finding that the Secretary had acted in bad faith by refusing
to acquiesce to this circuit's standard of pain in disability petitions
during this time period. See Hyatt v. Shalala, 6 F.3d 250, 255-56 (4th
Cir. 1993) (Hyatt IV).
Plaintiffs' Sixth motion for attorneys' fees sought just under $1.2
million in fees and costs for the period of June 19, 1988 to June 19,
1994. The district court ruled that plaintiffs were also entitled to fees
during this time frame under the bad faith standard of § 2412(b), but
we vacated that decision in part. See Hyatt v. Apfel, 195 F.3d 188 (4th
Cir. 1999) (Hyatt V). Because the government had promulgated SSR
90-1p, which was consistent with circuit precedent, and ceased its
noncompliance with that precedent after our opinion in Hyatt III was
issued, we held that plaintiffs were entitled to attorneys' fees based
on bad faith only for the period from June 19, 1988 to March 30,
1990, the date we issued our decision in Hyatt III, including fees asso-
ciated with preparing the Fourth and Fifth motions for attorneys' fees.
See Hyatt V, 195 F.3d at 190-91. With the exception of fees incurred
in working on the Fourth and Fifth motions after March 30, 1990, we
held that plaintiffs were not entitled to attorneys' fees for work per-
formed during the period from March 30, 1990 to June 19, 1994,
because the government had not acted in "bad faith" and its position
4

-- 6 of 27 --

had been "substantially justified" after we issued our Hyatt III deci-
sion. See Hyatt V, 195 F.3d at 192. Accordingly, we remanded to the
district court for a recalculation of the fees due under the Sixth motion
for attorneys' fees. On remand, the district court awarded fees and
expenses in accordance with our instructions, resulting in a final
award of approximately $517,000.
II. THE CURRENT APPEAL
The current appeal involves the district court's award of
$1,157,511.51 in fees and expenses under § 2412(d) of the EAJA for
plaintiffs' Seventh and Eighth motions for attorneys' fees. These
motions, filed in June 1996 and April 2000, respectively, cover plain-
tiffs' request for attorneys' fees and costs for the period of June 20,
1994 to March 31, 2000. Unlike the prior fee motions, however, the
fees and costs sought in these latter two motions arise largely from
litigation that arose after the Settlement Agreement was executed by
the parties in the class action lawsuit. Of the total amount of fees and
costs awarded by the district court for the Seventh and Eighth
motions, $51,915.95 reflected work performed by plaintiffs' counsel
in preparing the Sixth Fee motion ("fees for fees"), which the SSA
does not contest.2 The remaining fees and costs sought by plaintiffs,
and awarded by the district court under § 2412(d), are the subject of
the current challenge; specifically, (1) $945,722.05 in attorneys' fees
and expenses incurred from June 20, 1994 to March 31, 2000 for
monitoring the SSA's compliance with the Settlement Agreement and
successfully litigating a dispute that arose between the parties as to
the proper interpretation of two provisions in that Agreement; (2)
$81,224.54 in costs associated with this work; and (3) $78,648.97 in
____________________________________________________________
2 The district court originally intended to deduct fees related to the
plaintiffs' work in preparing that portion of the Sixth motion for attor-
neys' fees which reflected work performed from March 31, 1990 to June
19, 1994, which we had concluded was noncompensable in Hyatt V.
After the parties were unable to agree upon the amount that should be
excluded, however, the district court concluded that this method of calcu-
lation was unworkable. As an alternative, the district court reduced the
"fees for fees" request related to the Sixth Motion by the same percent-
age that our Hyatt V decision had reduced the fees generated in the mer-
its portion of the Sixth Fee motion.
5

-- 7 of 27 --

"fees for fees" associated with plaintiffs' preparation of the Seventh
and Eighth motions.
The SSA asserts that these fees were improperly awarded because
its position in the underlying Settlement Agreement litigation was
"substantially justified" within the meaning of § 2412(d). In the alter-
native, the SSA asserts that the award is excessive because the district
court abused its discretion in finding that a "special factor" within the
meaning of § 2412(d) justified calculating attorneys' fees for two of
plaintiffs' attorneys at a rate in excess of the statutory cap on fees
imposed by the statute, and in including fees and costs for several cat-
egories of work which were not properly charged to the SSA under
§ 2412(d) as a result of the dispute.
III. "SUBSTANTIALLY JUSTIFIED"
Under § 2412(d)(1)(A) of the EAJA, the
court shall award to a prevailing party other than the United
States fees and other expenses . . . incurred by that party in
any civil action (other than cases sounding in tort) . . .
brought by or against the United States in any court having
jurisdiction of that action, unless the court finds that the
position of the United States was substantially justified or
that special circumstances make an award unjust.
Id. (emphasis added). The award of attorneys' fees to a prevailing
party, therefore, "is mandatory unless the government can demon-
strate that its position was `substantially justified,'" EEOC v. Clay
Printing Co., 13 F.3d 813, 815 (4th Cir. 1994), or that special circum-
stances make an award unjust.
"`Substantially justified' means `justified to a degree that could sat-
isfy a reasonable person' or having a `reasonable basis both in law
and fact.'" Id. (quoting Pierce v. Underwood, 487 U.S. 552, 565
(1988)). "Whether or not the position of the United States was sub-
stantially justified shall be determined on the basis of the record
(including the record with respect to the action or failure to act by the
agency upon which the civil action is based) which is made in the
6

-- 8 of 27 --

civil action for which fees and other expenses are sought." 28
U.S.C.A. § 2412(d)(1)(B). And, in determining "whether the govern-
ment acted reasonably in causing the litigation or in taking a stance
during the litigation," we must consider the "totality of the circum-
stances." Roanoke River Basin Ass'n v. Hudson, 991 F.2d 132, 139
(4th Cir. 1993). We review the district court's determination that the
SSA's position was not "substantially justified" for an abuse of dis-
cretion. See Pierce, 487 U.S. at 562-63.
The SSA admits that plaintiffs were "prevailing parties" in the
underlying Settlement Agreement dispute and does not contend that
any "special circumstances" make the district court's EAJA award
unjust. Rather, the SSA only contends that the district court erred in
finding that its position on the merits of the Settlement Agreement
dispute was not "substantially justified." Accordingly, in order to
determine whether the district court abused its discretion in awarding
fees and expenses under § 2412(d), we must first examine the under-
lying dispute which gave rise to the award.
A. The Settlement Agreement Dispute
As previously noted, after our decision in Hyatt III, the SSA ceased
its policy of noncompliance with circuit precedent regarding the con-
sideration of pain in disability cases and adopted SSR 90-1p, which
we ultimately construed to be consistent with our precedent. At the
time, the district court's order to the contrary was pending appeal.
Thus, the case was remanded by consent and the Settlement Agree-
ment resolving the merits litigation was entered in March 1994.
The essence of the Settlement Agreement was to require the SSA
to readjudicate or reassess the claims of all " Hyatt III" class members
under the proper disability pain standard. Hyatt III class members
were defined as those social security claimants who had raised a dis-
ability claim involving allegations of pain which was finally denied
or terminated on or after July 7, 1981 (when the SSA began its appli-
cation of the improper standard), and on or before November 14,
1991 (the date that the proper standard was adopted and applied by
the SSA). In other words, the SSA was required to readjudicate dis-
ability claims that involved pain and that had been denied during the
time that the SSA was applying the incorrect pain standard.
7

-- 9 of 27 --

Simple enough, it seems. But in 1996, a dispute arose as to whether
the SSA was improperly denying class membership to two categories
of individuals that plaintiffs contended should have been covered
under the Settlement Agreement. Unable to effectuate a compromise,
the plaintiffs filed two motions to enforce the Settlement Agreement,
seeking a ruling of the district court adopting their interpretation over
that of the SSA.
The first dispute, which arose in April 1996 and resulted in the
June 1996 motion to enforce the Settlement Agreement, originated
from the SSA's interpretation of an exclusion from the definition of
Hyatt III class membership set out in Paragraph 1(b)(i) of the Settle-
ment Agreement. Paragraph 1(b)(i) applies to individuals who have
filed both a Hyatt III claim (i.e., a claim that resulted in a denial
between July 7, 1981 and November 14, 1991) and a post-Hyatt III
claim (i.e., a claim filed after November 14, 1991 that was also
denied). Specifically, the subparagraph provides that the Settlement
Agreement does not apply to:
A [Hyatt III] claim which has been reasserted by a subse-
quent application or request for reopening covering the same
period of time as the Hyatt III claim and as to which a final
determination on the merits was issued on or after Novem-
ber 14, 1991.
J.A. 32-33. The dispute concerned when "a final determination on the
merits" had been issued after November 14, 1991 on a Hyatt III claim
or, stated otherwise, when a readjudication on the merits had taken
place so as to preclude the claim from falling within the class of Hyatt
III claims entitled to a reassessment or readjudication under the Set-
tlement Agreement.
The SSA took the position that the denial of a post- Hyatt III claim
for disability benefits that alleged the same onset date as the Hyatt III
claim was an adjudication on the merits of the Hyatt III claim if the
post-Hyatt adjudicator (1) considered the entire period of disability
back to the onset date; and (2) had medical evidence available that
described the claimant's condition as of the alleged onset date. In
other words, the SSA argued that Paragraph 1(b)(i) was intended to
provide an individual with only one decision on the merits of his
8

-- 10 of 27 --

Hyatt III claim after November 14, 1991 and that, so long as the post-
November 14, 1991 decision addressed the entire period reflected in
the prior Hyatt III claim, the requisite adjudication had taken place.
The district court disagreed. It interpreted the Settlement Agree-
ment as requiring a formal reopening of the prior claim and held that
the SSA's practice was not sufficient to reopen the claim so as to trig-
ger appeal rights. In addition, the district court held that the SSA's
practice was insufficient to notify the claimant that these rights were
being adjudicated, implicating the due process clause. The district
court stated:
Subparagraph 1(b)[i] . . . does not permit Hyatt III class
membership denial for a Hyatt III claim . . . unless, in a
post-Hyatt decision . . ., SSA reopened (pursuant to 20
C.F.R. 404.987 or 416.1487) the Hyatt III claim . . ., and
made a new decision on the merits of the Hyatt III claim,
and clearly communicated to the claimant in its post-Hyatt
decision that the Hyatt III claim had been readjudicated.
J.A. 556.
The second dispute, which arose in July 1996 and resulted in the
October 1996 motion to enforce, involved the SSA's interpretation of
another exclusion from the definition of Hyatt III class membership
set forth in Paragraph 1(b)(iii) of the Settlement Agreement.
Because the SSA had continued to use an improper pain standard
in reevaluating claims after Hyatt II was issued, individuals who were
eligible for Hyatt II review of their previously denied claims were not
excluded from receiving Hyatt III review under the Settlement Agree-
ment. Subparagraph 1(b)(iii) of the Settlement Agreement, however,
provided that the Settlement Agreement would not apply to:
A claim as to which the individual received any Class Mem-
bership Notice pursuant to the Order of th[e] Court dated
June 25, 1985, or the Order dated December 10, 1987 [a
Hyatt II claim], but failed timely to respond to such Class
Membership Notice.
9

-- 11 of 27 --

J.A. at 33.
In the motion to enforce, plaintiffs challenged the SSA's decision,
announced in a letter dated July 15, 1996, that it would also deny
Hyatt III class membership to individuals who had timely responded
to a Hyatt II notice initially, but who thereafter had either withdrawn
the claim or failed to respond to requests for additional information,
which the SSA considered to be the equivalent to a withdrawal. In
other words, the SSA interpreted a "fail[ure] timely to respond" to a
Hyatt II notice to include such withdrawals or effective withdrawals
of a Hyatt II claim.
The district court again agreed with the plaintiffs, ruling that the
SSA's class membership denials based on a claimant's failure to pur-
sue Hyatt II relief once the claimant had timely responded to the
notice was not authorized by the Settlement Agreement, and that it
conflicted with the Settlement Agreement's notation that Hyatt III
claimants need not have exhausted the administrative remedies avail-
able to them prior to November 14, 1991. Thus, the district court
ruled that:
SSA may not deny Hyatt III class membership on the
ground that an individual who timely (or untimely with
good cause) responded to a Hyatt II notice subsequently
withdrew that request for Hyatt II relief or otherwise failed
to pursue administrative remedies available under Hyatt II.
J.A. 557.
Having considered the plaintiffs' motions to enforce the Settlement
Agreement collectively, the district court granted the motions on
October 21, 1999, and ordered the SSA to identify and rescreen the
Hyatt III claims that it had previously rejected under its erroneous
interpretation of the challenged portions of the Settlement Agreement.
The SSA did not appeal.
B. The EAJA Award
Under the Settlement Agreement, the SSA was released from any
further liability associated with its failure to follow circuit precedent
10

-- 12 of 27 --

in evaluating claims. The Settlement Agreement, however, made no
specific provision for the recovery of attorneys' fees or costs incurred
by plaintiffs in effectuating the relief called for by the Settlement
Agreement, providing only that plaintiffs may "apply for attorney's
fees to the extent, if any, permitted by law." J.A. 76.
Shortly after the district court issued its order granting plaintiffs'
motions to enforce the Settlement Agreement, plaintiffs filed their
Seventh and Eighth motions for attorneys' fees under § 2412(b), seek-
ing an award of fees at historic market rates on the basis of the SSA's
alleged "bad faith both before and during the course of this litigation."
J.A. 1092. In the alternative, plaintiffs sought an award under
§ 2412(d), at the statutory rate adjusted upward for increases in the
cost of living and for special factors, based upon the fact that they
were prevailing parties in the litigation and the SSA's position was
not "substantially justified."
The district court declined to award fees under § 2412(b) for "bad
faith," but did award the requested fees and costs under § 2412(d).
Relying upon the reasons expressed in its order of October 21, 1999
rejecting the SSA's interpretation of the two disputed provisions of
the Settlement Agreement, the district court found that "the position
taken by SSA in denying class membership had no reasonable basis
in law or fact," J.A. 1094, and therefore was not "substantially justi-
fied" within the meaning of § 2412(d). The district court held that
plaintiffs were entitled under § 2412(d) to all fees and expenses
incurred from June 20, 1994, when plaintiffs began monitoring and
investigating the SSA's noncompliance with the Settlement Agree-
ment, to March 31, 2000. Specifically, the court awarded $945,722.05
in attorneys' fees and expenses for monitoring the Settlement Agree-
ment and successfully litigating the disputes that ultimately arose
under the Agreement; $81,224.54 in costs associated with this work;
and $78,648.97 in fees and expenses associated with preparing the
Seventh and Eighth motions.
The SSA asserts that the district court abused its discretion in find-
ing that it was not substantially justified in defending its interpretation
of the Settlement Agreement. We disagree. We have reviewed the
record before us, and the totality of the circumstances leading up to
the district court's award of fees and expenses under § 2412(d), and
11

-- 13 of 27 --

we agree that the SSA failed to demonstrate that its interpretation of
the two disputed provisions in the Settlement Agreement was "sub-
stantially justified" within the meaning of that statute. As to Para-
graph 1(b)(i), we agree that the construction of it used by the SSA
was unduly restrictive and inconsistent with the intent of the law and
the ostensible purposes of the Settlement Agreement to effect a full
and fair review of the prior rejections. With regard to Paragraph
1(b)(iii), again we agree with the district court that the SSA's inter-
pretation of the exclusion was substantially unjustified and operated
to exclude unnecessarily from reconsideration a group of claimants
entitled to review.
Given the long history of the SSA's fight to deny claimants the
benefit of this circuit's pain standard, its effort to ignore the prior
decisions of the courts in this case, the fact that its construction of the
provisions in question was unnecessarily narrow so as to cause the
denial of proper consideration yet again to intended beneficiaries, and
the district court's familiarity with the parties and the tortured path of
their litigation, we cannot say that the district court's ruling was as an
abuse of discretion. Accordingly, because plaintiffs were the prevail-
ing parties in the Settlement Agreement litigation and the SSA's inter-
pretation of the pertinent portions of that Agreement was not
substantially justified, plaintiffs are entitled to attorneys' fees and
expenses allowed under § 2412(d)(1) of the EAJA.
IV. REASONABLENESS OF THE AWARD
Having determined that the district court did not abuse its discre-
tion is awarding fees and costs to the plaintiffs, we now turn to the
SSA's challenges to the amount of fees awarded.
Under § 2412(d)(2)(A), "fees and other expenses" that may be
awarded to a prevailing party in a civil action against the government
must be "reasonable." 28 U.S.C.A. § 2412(d)(2)(A)(ii) (internal quo-
tation marks omitted). The statute also provides a maximum hourly
rate that can be awarded. Specifically, Congress provided that:
[t]he amount of fees awarded . . . shall be based upon pre-
vailing market rates for the kind and quality of the services
furnished, except that . . . attorney fees shall not be awarded
12

-- 14 of 27 --

in excess of $125 per hour unless the court determines that
an increase in the cost of living or a special factor, such as
the limited availability of qualified attorneys for the pro-
ceedings involved, justifies a higher fee.
Id. (emphasis added).3
The SSA asserts that the district court's award runs afoul of these
limitations upon a recoverable fee under the EAJA in two respects.
First, the SSA asserts that the district court abused its discretion in
finding that "a special factor" justified an hourly rate for two of plain-
tiffs' attorneys in excess of the statutory cap. Second, the SSA asserts
that the attorneys' fees and costs awarded were not "reasonable"
because they included categories of work performed by plaintiffs'
counsel or their employees that the SSA contends is not fairly charged
to it under the EAJA and the dispute which gave rise to the award.
A. The Special Factor Enhancement
We begin with the SSA's challenge to the district court's conclu-
sion that the "special factor" exception to § 2412(d)(2)(A) justified an
increase in the hourly rate for two of plaintiffs' attorneys above the
statutory cap based on the attorneys' expertise in this social security
class action litigation.
1.
Under § 2412(d)(2)(A)(ii), an award of attorneys' fees may not
exceed the lower of the prevailing market rate or the statutory cap,
except in very limited circumstances. See Pierce, 487 U.S. at 571-72.
Specifically, the district court may only exceed the threshold hourly
rate if "an increase in the cost of living or a special factor, such as the
limited availability of qualified attorneys for the proceedings
involved, justifies a higher fee." 28 U.S.C.A. § 2412(d)(2)(A)(ii). The
____________________________________________________________
3 The 1996 Amendments to § 2412(d)(2)(A) increased the statutory
per-hour cap from $75 per hour to $125 per hour. Compare 28 U.S.C.A.
§ 2412(d)(2)(A)(ii) (West 1994) with 28 U.S.C.A. § 2412(d)(2)(A)(ii)
(West Supp. 2002). The district court's award for attorneys' fees incurred
prior to the amendment properly reflected the lower per-hour cap.
13

-- 15 of 27 --

mere fact that there is a short supply of lawyers skilled and experi-
enced enough to handle the case is not a "special factor." See Pierce,
487 U.S. at 571-72. Rather, "the `special factor' formulation suggests
Congress thought that [$125] an hour was generally quite enough
public reimbursement for lawyers' fees, whatever the local or national
market might be." Id. at 572.
In order to establish that the "limited availability of qualified attor-
neys for the proceedings involved" is a "special factor" justifying a
fee in excess of the hourly cap, the prevailing party must show that
their "attorneys ha[d] some distinctive knowledge or specialized skill
needful for the litigation in question — as opposed to an extraordi-
nary level of the general lawyerly knowledge and ability useful in all
litigation." Id.
Specific examples of this requisite "distinctive knowledge or spe-
cialized skill" cited by the Court include "an identifiable practice spe-
cialty such as patent law, or knowledge of foreign law or language."
Id. But, examples of purported "special factors" specifically rejected
by the Court are also instructive. They include"[t]he novelty and dif-
ficulty of issues, the undesirability of the case, the work and ability
of counsel, and the results obtained," all of which the Court consid-
ered to be "little more than routine reasons why market rates are what
they are." Id. at 573 (internal quotation marks omitted). The "custom-
ary fees and awards in other cases" was also rejected as a special fac-
tor. Id. (internal quotation marks omitted). See generally Pollgreen v.
Morris, 911 F.2d 527, 537 (11th Cir. 1990) (elaborating on the mean-
ing of "special factor" under § 2412(d)(2)(A)(ii)); Jean v. Nelson, 863
F.2d 759, 774-75 (11th Cir. 1988) (same).
Cases applying the "special factor" formulation defined in Pierce
have also noted its narrow application, although views as to exactly
how narrow it should be have varied somewhat. The D.C. Circuit, for
example, has observed that the two identifiable practice specialties
cited by Pierce as justifying awards in excess of the statutory cap —
"patent law, or knowledge of foreign law or language" — were "both
specialties requiring technical or other education outside the field of
American law." See Waterman S.S. Corp. v. Maritime Subsidy Bd.,
901 F.2d 1119, 1124 (D.C. Cir. 1990) (internal quotation marks omit-
ted). And, the D.C. Circuit later rejected the notion that lawyers prac-
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ticing administrative law in technical fields or regulated industries
would qualify for an enhanced hourly rate solely by virtue of such
specialized expertise:
To be sure, lawyers practicing administrative law typically
develop expertise in a particular regulated industry, whether
energy, communications, railroads, or firearms. But they
usually gain this expertise from experience, not from the
specialized training justifying fee enhancement. If expertise
acquired through practice justified higher reimbursement
rates, then all lawyers practicing administrative law in tech-
nical fields would be entitled to fee enhancements. . . .
[N]othing in the Equal Access Act or its legislative history
indicates that Congress intended this result. . . .
F.J. Vollmer Co. v. Magaw, 102 F.3d 591, 598-99 (D.C. Cir. 1996)
(internal citation omitted) (rejecting fee enhancement for specialized
expertise in firearms law); see also Estate of Cervin v. Commissioner
of Internal Revenue, 200 F.3d 351, 353-55 (5th Cir. 2000) (rejecting
fee enhancement for special expertise in tax law and Texas commu-
nity property law and insurance law).
The Eleventh Circuit, on the other hand, appears to take a slightly
more lenient view, suggesting that a "special factor" rate enhancement
might be appropriate for attorneys who have a special expertise in a
narrow legal specialty, such as patent or immigration law, or who are
fluent in foreign languages relevant to the litigation. See Jean, 863
F.2d at 774. However, that court also noted that "not every immigra-
tion attorney or immigration lawsuit warrants an upward adjustment
of hourly rates and we would suggest that such is also the case in
some patent or foreign law cases." Id. at 774-75 n.12. Rather, "appli-
cation of the phrase will necessarily depend on the complexity of the
case (`the litigation in question') and on the experience (`distinctive
knowledge') and acquired expertise (`specialized skill') of the partic-
ular billing attorney." Id. at 775 n.12. The Seventh Circuit has simi-
larly declined to limit the specialized expertise justifying an enhanced
rate to technical specialties outside the field of American law, holding
that
[w]e think that the directive of the Supreme Court in Pierce
makes clear that the special skill requirement of the statute
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can be defined in terms of either an identifiable practice spe-
cialty not easily acquired by a reasonably competent attor-
ney or special non-legal skills such as knowledge of a
foreign language. . . . Pierce directs the courts to recognize
that certain practice areas require more advanced and spe-
cialized legal skills than those possessed or easily acquired
by most members of the bar. In our view, Pierce acknowl-
edges that there will be cases in which such specialized
training will be necessary. Nevertheless, we believe that
such cases will be the exceptional situation and that, by pro-
viding for the "specialized case," Congress did indeed con-
template such a situation.
Raines v. Shalala, 44 F.3d 1355, 1361 (7th Cir. 1995) (emphasis
added). In sum, the court held, "the appropriate inquiry is whether the
individual case presents such an unusual situation that it requires
someone of specialized training and expertise unattainable by a com-
petent attorney through a diligent study of the governing legal princi-
ples." Id. (internal quotation marks omitted).
2.
In this case, plaintiffs sought an increase in the § 2412(d) statutory
rate to historical market rates ranging from $190 to $275 per hour for
Attorney Sasser and from $190 to $250 per hour for Attorney Sea,
both of whom work with the law firm of Cox, Gage & Sasser in Char-
lotte, North Carolina. The district court awarded the upward adjust-
ment of the hourly rates of Sasser and Sea, finding that they
"possess[ed] specialized skills and distinctive knowledge with regard
to the Social Security Act and Social Security practices, procedures,
regulations, guidelines, and case law, as well as class action enforce-
ment and procedure" and the "necessary expertise in complicated,
Social Security class actions as well as the technical knowledge to
monitor SSA compliance with court orders, discover SSA's violations
and implement effective relief for a large plaintiff class." J.A. 1097.4
The court then proceeded to find that such specialized expertise was
necessary for the litigation in question and that no other competent
____________________________________________________________
4 The district court also increased counsels' hourly rate by a "cost of
living" increase, which the SSA does not dispute.
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counsel in North Carolina was available at the statutory rate. Thus,
the court found that the plaintiffs had met the three requirements of
Pierce for a "special factor" enhancement.5
The SSA does not dispute that Sasser and Sea possess special
expertise in the practice of social security law, as well as in the han-
dling of class action lawsuits. Nor do we find it to be much of a ques-
tion. This lawsuit, spanning nearly two decades, has alone bestowed
that expertise upon them, even if they did not previously possess it.
Rather, the SSA argues that counsel did not possess "distinctive
knowledge or specialized skill needful for the litigation in question —
as opposed to an extraordinary level of the general lawyerly knowl-
edge and ability useful in all litigation." Pierce, 487 U.S. at 572.
We agree. And, we need not determine whether Pierce contem-
plates either an identifiable practice specialty not easily acquired by
a reasonably competent attorney or a specialty requiring technical or
other education outside the field of American law. Under either inter-
pretation of Pierce's intended effect, the expertise of plaintiffs' attor-
neys brought to bear in this case is insufficient.
We note that plaintiffs do not contend that expertise in class action
enforcement and procedure is a "special factor" warranting an
increase in the statutory maximum rate. Nor would it be, as the exper-
tise to handle class actions should certainly not be beyond that pos-
sessed or easily acquired by reasonably competent attorneys licensed
to practice law. And, we note, the weight of authority suggests that
most courts consider special expertise in social security law as insuffi-
cient to warrant an enhancement, at least in the routine social security
benefits case. See Raines, 44 F.3d at 1361 (holding "that the area of
social security law cannot in itself be considered such a specialized
area of law practice as to warrant, as a general rule, payment in excess
of the [statutory] rate"); Stockton v. Shalala, 36 F.3d 49, 50 (8th Cir.
1994) (reversing enhancement for attorney's expertise in a "straight-
forward social security disability case that did not involve particularly
____________________________________________________________
5 We note that "special factors" have been applied in the past to
increase the hourly rates of plaintiffs' counsel. See Hyatt II, 807 F.2d at
382-83. Hyatt II, however, was decided before Pierce and, therefore,
plaintiffs do not rely upon it as support in this case.
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difficult or complex issues"); Harris v. Railroad Ret. Bd., 990 F.2d
519, 521 (10th Cir. 1993) (holding "that a Social Security specialist
does not solely by virtue of that expertise fall under the `special fac-
tor' exception"); Chynoweth v. Sullivan, 920 F.2d 648, 650 (10th Cir.
1990) ("We cannot say that the law of Social Security benefits falls
sufficiently outside the mainstream of general legal practice to be
automatically entitled to enhancement under" § 2412(d)(2)(A)(ii).).
But see Begley v. Secretary of Health & Human Servs., 966 F.2d 196,
200 (6th Cir. 1992) (vacating and remanding an award to counsel in
a social security class action case for consideration of "special fac-
tors" because "[t]he district court failed to exercise its discretion to
decide the[ ] issues"); Pirus v. Bowen, 869 F.2d 536, 542 (9th Cir.
1989) (holding that practice specialty in social security disability law,
and experience with class action challenges under that law, can be a
specialty that falls within the parameters of Pierce).
We agree that expertise in social security law would be of the type
that is possessed or easily acquired by reasonably competent attorneys
licensed to practice law. And, we are persuaded that combining exper-
tise in these two practice specialities — class action litigation and
social security disability law — does not then become an expertise
beyond that which can be acquired by the diligent study of these not
uncommon areas of American law.
This leaves us with the claim that the "special factor" enhancement
was properly applied because Sasser and Sea possessed expertise in
class action law, social security law, and "the technical knowledge to
monitor SSA compliance with court orders, discover SSA's violations
and implement effective relief for a large plaintiff class." J.A. 1097.
We disagree.
First, we fail to see how the "technical knowledge" of social secur-
ity law and its practice is different from simply a specialized expertise
in that area of the law and a proficiency in its practice. To the extent
plaintiffs' counsel rely upon their ability to maneuver through the
more informal or even unwritten protocols established within the
agency, we are also unpersuaded. Practice specialties in the adminis-
trative arena will all involve this ability, which of course will be
unique to the specialty but still acquired from the practice of it. If
plaintiffs' counsel have undertaken any exceptional or specialized
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education or training beyond the diligent study and practice required
of any practice speciality, the district court has offered no elaboration
as to what that specialized education or training has been. And, to the
extent plaintiffs' counsel rely upon some expertise in computer skills,
we think it safe to take note of the routine necessity of such skills in
today's law practices.
Second, even if we were to assume that plaintiffs' counsel can
establish a "distinctive knowledge or specialized skill" by cobbling
together the expertise they have gained in handling this long and
arduous class action lawsuit, there has been no satisfactory showing
that such expertise was necessary to handle the dispute that actually
gave rise to the award of attorneys' fees and costs currently at issue.
At this juncture of the litigation, the class action social security litiga-
tion has been settled. The dispute that gave rise to the plaintiffs' abil-
ity to recoup attorneys' fees and costs under the EAJA is a dispute
regarding the interpretation of two relatively uncomplicated provi-
sions in the Settlement Agreement. Indeed, the perceived clarity of
those provisions is in large part responsible for the district court's
determination that the SSA's interpretation of them was not "substan-
tially justified" in the first instance. We have no doubt that Sasser and
Sea were logical choices to litigate the Settlement Agreement dispute,
given the practical knowledge they had gained in assisting with the
underlying merits litigation and drafting that Agreement. However,
we fail to see how the expertise gained by Sasser and Sea in the
underlying social security class action can be considered a "special
factor" justifying the district court's decision to take this rather nar-
row Settlement Agreement dispute outside the norm and into the
exceptional case required by Pierce.
To conclude, even if we were to assume that this case was histori-
cally one involving such difficult or complex social security issues so
as to render it a "special factor" case warranting an hourly fee in
excess of the statutory maximum, the current status of this case is one
for fees arising exclusively from the interpretation of two provisions
in the Settlement Agreement. Plaintiffs have not made a sufficient
demonstration that counsel's "technical expertise in monitoring com-
pliance with a court order," rises to the requisite level of a specialized
skill contemplated by Pierce. Nor do we believe the ability to monitor
compliance with a court order and to discover violations and imple-
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ment effective relief for a large plaintiff class equates to the examples
given by the Court in Pierce — education and expertise in patent law
and specialized, non-legal education in foreign law or language. We
have no doubt that Sasser and Sea are extraordinarily qualified to han-
dle complicated class action social security lawsuits and that they are,
as a result of this expertise, able to command an hourly market rate
along the lines of that requested by them. But plaintiffs have failed
to demonstrate that Sasser and Sea possessed specialized training or
expertise beyond that which can and should be acquired by a reason-
ably competent attorney engaged in the practice of a legal specialty
that he or she has chosen to become proficient in by diligent study
and work. They are, therefore, limited to the statutory cap of
§ 2412(d)(2)(A)(ii).
B. Challenges to the Amount of Hours
We now turn to the SSA's challenges to the amount of the fees and
costs awarded for several specific categories of work performed by
plaintiffs' counsel, which the SSA contends were not compensable
under § 2412(d). The SSA disputes the district court's award of fees
associated with transferring various case-management responsibilities
from Legal Services Corporation to a non-profit community legal
office, for training provided to individual lawyers for handling indi-
vidual Hyatt III claims, and for various non-legal tasks that were per-
formed by a paralegal employed by plaintiffs' counsel.
Once the district court determines that plaintiffs have met the
threshold conditions for an award of fees and costs under the EAJA,
the district court must undertake the "task of determining what fee is
reasonable." INS v. Jean, 496 U.S. 154, 161 (1990); see also Hensley
v. Eckerhart, 461 U.S. 424, 433 (1983). "A request for attorney's fees
should not result in a second major litigation. Ideally, of course, liti-
gants will settle the amount of a fee." Hensley, 461 U.S. at 437. How-
ever, "[w]here settlement is not possible, the fee applicant bears the
burden of establishing entitlement to an award and documenting the
appropriate hours expended." Hensley, 461 U.S. at 437. Counsel
"should submit evidence supporting the hours worked," id. at 433,
and exercise "`billing judgment'" with respect to hours worked, id. at
434. "Hours that are not properly billed to one's client also are not
properly billed to one's adversary pursuant to statutory authority." Id.
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at 434; see also Kelly v. Bowen, 862 F.2d 1333, 1335 (8th Cir. 1988)
(holding "that the district court has the authority under
§ 2412(d)(2)(A) to award those reasonable and necessary expenses of
an attorney incurred or paid in preparation for trial of the specific case
before the court, which expenses are those customarily charged to the
client where the case is tried" (internal quotation marks omitted)).
The district court is accorded "substantial discretion in fixing the
amount of an EAJA award," Jean, 496 U.S. at 163, but is charged
with the duty to ensure that the final award is reasonable. The extent
of a plaintiff's success is an important factor to consider when deter-
mining the reasonableness of the fees requested. See Hensley, 461
U.S. at 440. Unsuccessful claims that are "distinct in all respects"
from the claims upon which the plaintiff has prevailed "should be
excluded in considering the amount of a reasonable fee." Hensley,
461 U.S. at 440; see Jean, 496 U.S. at 163 n.10. In sum, the EAJA
provides that attorneys for a prevailing party should be paid "for all
time reasonably expended on a matter," but the EAJA should not
"produce windfalls to attorneys." Hensley, 461 U.S. at 430 n.4 (inter-
nal quotation marks omitted); see also Daly v. Hill, 790 F.2d 1071,
1084 n.18 (4th Cir. 1986) (noting that an attorney's fee "must ade-
quately compensate counsel without resulting in a windfall").
1.
We begin with the SSA's contention that the district court abused
its discretion in awarding fees and costs associated with work per-
formed in transferring responsibilities from Legal Services to the
North Carolina Justice and Community Development Center
("NCJCDC").
After the parties entered into the Settlement Agreement, a change
in the law prohibited recipients of funds from Legal Services Corpo-
ration from initiating or participating in class action lawsuits against
the federal government. See 45 C.F.R. § 1617.1-1617.4 (2001). As a
result, plaintiffs were forced to terminate the involvement of Legal
Services in the monitoring and implementation of the Settlement
Agreement. Legal Services' role was largely transferred to the
NCJCDC, a non-profit community organization in North Carolina.
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We agree that the district court abused its discretion in awarding
fees and costs associated with this transfer under the EAJA. As previ-
ously noted, no provision for the recovery of attorneys' fees and costs
incurred in effectuating the relief called for by the Settlement Agree-
ment was made by the parties; rather, the Settlement Agreement pro-
vides only that plaintiffs may "apply for attorney's fees to the extent,
if any, permitted by law." J.A. 76. The district court, we have con-
cluded, properly found that an award of fees and costs was justified
under § 2412(d) because the SSA's position in the Settlement Agree-
ment litigation was not "substantially justified" and, therefore, such
an award was permitted by the agreement between the parties. Fees
and costs associated with transferring legal responsibilities from
Legal Services to NCJCDC, however, were not the result of any
action taken by the SSA and, in particular, were not the result of
actions or positions taken by the SSA which were not "substantially
justified." It was the result of a law passed after the Settlement Agree-
ment was reached.
We do not condone the SSA's decision to continue their litigious
posture in the wake of a what should have been the end of this matter.
For this reason, plaintiffs are entitled to recover fees and costs
incurred as a result of that dispute. But, fairness and reasonableness
dictate that the SSA may only be held liable for attorneys' fees and
expenses fairly attributable to the unjustified positions taken by the
SSA. The SSA does not, by virtue of disagreement with plaintiffs'
counsel over provisions in the Settlement Agreement, thereby become
liable for any and all categories of work performed by plaintiffs'
counsel in the interim.
Accordingly, we conclude that the district court erred in awarding
fees and costs associated with transferring legal responsibilities from
Legal Services to NCJCDC. On remand, the district court should
recalculate the amount of fees and expenses awarded so as to exclude
these amounts from the total award.
2.
We likewise conclude that the district court abused its discretion in
awarding fees and costs associated with counsel's work recruiting and
training attorneys in the North Carolina Bar to handle individual
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Hyatt III claims, setting up and maintaining a database of attorneys
willing to accept Hyatt III referrals, and sending announcements to
this database of attorneys.
Again, plaintiffs are entitled to recover attorneys' fees under
§ 2412(d) for litigation under the Settlement Agreement if the SSA's
position in the litigation is not "substantially justified." But, fees and
costs associated with recruiting and training attorneys to handle indi-
vidual Hyatt III claims were not incurred as a result of any actions or
positions taken by the SSA under the Settlement Agreement that were
not "substantially justified" and, therefore, are not reimbursable under
§ 2412(d). Accordingly, on remand, the district court should also
exclude these amounts from the total fees and costs awarded.
3.
Finally, the SSA challenges the district court's award of compensa-
tion for non-legal tasks performed by a paralegal employed by plain-
tiffs' counsel, such as opening and sorting mail, making bulk
mailings, traveling to post offices and other mail facilities, confirming
hotel reservations, speaking with hotel staff, arranging for repairs of
a computer, and planning a volunteer recognition breakfast for Hyatt
volunteers. As justification, the district court found that the paralegal
had supervised 87 persons performing paralegal work to implement
and monitor Hyatt III relief and that this task had resulted in the par-
alegal performing certain administrative tasks that were "essential and
necessary." J.A. 1096.
Although fees for paralegal time may be recoverable under the
EAJA, such fees are only recoverable to the extent they reflect tasks
traditionally performed by an attorney and for which the attorney
would customarily charge the client. See Jean, 863 F.2d at 778
("[P]aralegal time is recoverable as part of a prevailing party's award
for attorney's fees and expenses, [but] only to the extent that the par-
alegal performs work traditionally done by an attorney.") (internal
quotation marks omitted) (alterations in original); Allen v. United
States Steel Corp., 665 F.2d 689, 697 (5th Cir. 1982) ("Paralegal
expenses are separately recoverable only as part of a prevailing
party's award for attorney's fees and expenses, and even then only to
the extent that the paralegal performs work traditionally performed by
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an attorney. Otherwise, paralegal expenses are separately unrecover-
able overhead expenses.").
Although we do not venture to decide at this time which specific
paralegal tasks are not compensable under these principles in this
case, we note that the examples given by the SSA do not seem to be
of the type that would be traditionally performed by an attorney and
charged to the client. On remand, the district court should carefully
evaluate the challenged time entries and award only those entries that
reflect tasks traditionally performed by an attorney, and that are fairly
charged to the activities leading to the discovery of the SSA's failure
to comply with the terms of the Settlement Agreement and the litiga-
tion of that dispute.
C. Challenges to the Costs
Finally, the SSA challenges the district court's award of
$81,224.54 in costs for various items that it contends were either non-
compensable or inadequately documented. In particular, the SSA
asserts that the district court abused its discretion in awarding costs
associated with travel for attorney training sessions in Asheville, Wil-
mington, and Charlotte; travel for other meetings; booking hotel
rooms and meals; and $17,080 in computer consultant charges
requested by NCJCDC.
As we have previously held, plaintiffs are not entitled to recover
attorneys' fees or costs associated with the transfer of file manage-
ment responsibilities from Legal Services to the NCJCDC or with the
training of North Carolina attorneys to handle individual Hyatt III
claims. The work was not necessitated by a post-Settlement Agree-
ment position taken by the SSA that was not "substantially justified."
Again, we leave for the district court the task of individually evaluat-
ing the challenged entries to ensure that the SSA is only charged with
those fees and expenses fairly attributable to the monitoring and
investigatory activities that led to the discovery of the dispute and to
the litigation of that dispute.
V. CONCLUSION
In conclusion, we hold that the district court did not abuse its dis-
cretion in finding that the SSA's position in the underlying Settlement
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Agreement litigation was not "substantially justified" and, therefore,
in awarding attorneys' fees and costs under 28 U.S.C.A. § 2412(d).
We hold, however, that the district court did abuse its discretion, in
the narrow categories discussed, in calculating the amount of fees and
costs awarded. Accordingly, we vacate the award of fees and costs
and remand for a recalculation of the appropriate amount of fees and
costs in accordance with this opinion.
AFFIRMED IN PART, VACATED IN PART,
AND REMANDED
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