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Stokes v. Bowen

argued: January 21, 1987.

STOKES, ELLIS APPELLANT
v.
OTIS R. BOWEN, M.D., SECRETARY OF U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES



On Appeal from the United States District Court for the Eastern District Court for the Eastern District of Pennsylvania, D.C. Civil No. 82-5124

Author: Hunter

Opinion OF THE COURT

HUNTER, Circuit Judge:

1. This is an appeal from a denial by the district court of a petition for attorney's fees under the Equal Access to Justice Act ("EAJA"), 28 U.S.C. § 2412(d) (1978 & Supp. 1986). Appellant Ellis Stokes ("Stokes") (1978 & Supp. 1986). Appellant Ellis Stokes ("Stokes") is a social security disability claimant, who suffers from paranoid schizophrenia and severe mental retardation. He has been institutionalized for short periods of time, and has never been employed except for a few brief stints as a dishwasher. Nevertheless, the for a few brief stints as a dishwasher. Nevertheless, the for a few brief stints as a dishwasher. Nevertheless, the Secretary found that Stokes had enough residual functional capacity to engage in his previous employment as a dishwasher, and thus concluded that Stokes was not disabled within the meaning of the Social Security Act. The district court affirmed the Secretary, but we vacated his decision and remanded to the district court, with instructions that the Secretary evaluate Stokes' claim pursuant to a newly-issued circular outlining the agency's policy on mental-health disability claims. See Stokes v. Schweiker, 729 F.2d 932 (3d Cir. 1984). Upon remand, the ALJ awarded Stokes disability benefits. Stokes now seeks attorney's fees.

2. The EAJA provides that "a court shall award to a prevailing party other than the United States" reasonable attorney's fees and expenses "incurred by that party in any civil action . . . 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." 28 U.S.C. § 2412(d)(1)(A). Before addressing this dispute, we first must clarify the meaning of substantial justification. The Secretary asserts that the test of whether or not the government's position in Social Security disability cases is substantially justified is essentially one of reasonableness, something less than substantial evidence. But the Secretary's position must fail because the meaning of the term "substantially justified" has been effectively resolved by Congress. In reviving EAJA, the House Report stated:

Another problem which has developed in the implementation of the Act has been the fact that courts have been divided on the meaning of "substantial justification." Several courts have held correctly that "substantial justification" means more than merely reasonable. Because in 1980 Congress rejected a standard of "reasonably justified" in favor of "substantially justified," the test must be more than mere reasonableness.

Especially puzzling, however, have been statements by some courts that an administrative decision may be substantially justified under the Act even if it must be reversed because it was arbitrary and capricious or was not supported by substantial evidence is virtually certain not to have been substantially justified under the Act. Only the most extraordinary special circumstances could permit such an action to be found to be substantially justified under the Act.

H.R. Rep. No. 120, 99th Cong., 1st Sess. 9-10, reprinted in 1985 U.S. Cong. & Admin. News 132, 138.

3. "Substantial justification 'constitute[s] a middle ground between an automatic award of fees to a prevailing party and an award made only when the government's position was frivolous.'" Washington v. Heckler, 756 F.2d 959, 961 (3d Cir. 1985) (quoting Dougherty v. Lehman, 711 F.2d 555, 563 (3d Cir. 1983)). The burden of proving substantial justification is on the government. 756 F.2d at 961. To carry his burden, the Secretary must demonstrate "(1) a reasonable basis in truth for the facts alleged; (2) a reasonable basis in law for the theory [he] propounds; and (3) a reasonable connection between the facts alleged and the legal theory advanced." Id. (citing Citizens Council of Delaware County v. Brinegar, 741 F.2d 584, 593 (3d Cir. 1984); Dougherty, 711 F.2d at 564). Our review of the district court's denial of attorney's fees is plenary. See Washington, 756 F.2d at 963.

4. The government has not borne its burden of demonstrating a "reasonable basis in truth for the facts [it has] alleged" in the course of the Stokes litigation. In applying the five-step sequential evaluation of disability claims set out in 20 C.F.R. § 404.1520 (1986), the ALJ ended his inquiry at step four, which provides that

If we cannot make a decision based on your current work activity or on medical facts alone, and you have a severe impairment(s), we then review your residual functional capacity and the physical and mental demands of the work you have done in the past. If you can still do this kind of work, we will find that you are not disabled.

20 C.F.R. § 404.1520(e). The ALJ found that Stokes was able to perform his past work as a dishwasher, and was therefore not disabled. However, as we noted in Stokes v. Schweiker, the Secretary's own representatives did not consider Stokes' experience as a dishwasher to be vocationally relevant. See 729 F.2d at 934. To be "vocationally relevant" for purposes of § 404.1520(e), past work must constitute "substantial gainful activity." 20 C.F.R. § 404.1565(a) (1986). Under the regulations, a claimant will not be found to have engaged in substantial gainful activity if

...(iv) [his] earnings averaged less than $170 a month a ...


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