UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
argued: July 14, 1987.
TAYLOR, CATHERINE D., APPELLANT
MARGARET M. HECKLER, SECRETARY OF HEALTH AND HUMAN SERVICES
On Appeal from the United States District Court for the Eastern District of Pennsylvania, D.C. Civil Action No. 85-5601.
Opinion OF THE COURT
A. LEON HIGGINBOTHAM, JR., Circuit Judge.
This appeal concerns the denial of appellant's motion for fees and other expenses under the Equal Access to Justice Act, Extension and Amendment ("EAJA"), Pub. L. 99-80, 99 Stat. 183, codified at 5 U.S.C. § 504 (Supp. IV 1986) and 28 U.S.C. § 2412 (1982 & Supp. Ill 1985). The district court first rejected the government's position and granted appellant's request for disability benefits. Another trial judge later summarily denied appellant's EAJA fee motion in a one-page order. Taylor v. Bowen, No. 85-5601 (E.D. Pa. Dec. 29, 1986). This second district court found that the "defense of this action" by appellee the Secretary of Health and Human Services ("the Secretary") "was substantially justified." Id. We conclude that the district court's judgment on the EAJA fee motion was legally erroneous. Because the government has failed to demonstrate a solid and well-founded basis in truth for its underlying denial of appellant's request for disability benefits, we will reverse the judgment of the district court and remand this matter for a calculation of appellant's fees and other expenses under EAJA.
In her request for Social Security disability benefits, appellant Catherine D. Taylor alleged that she was disabled by incessant lower back pain. Uncontradicted record evidence demonstrates that Taylor's condition leaves her unable to perform even menial household tasks. The record also shows that Taylor's formal education ceased at age sixteen when she completed the sixth grade, and that her most recent employment was in 1971, when she worked as a waitress.
Two treating physicians and one consulting physician examined Taylor and submitted the medical evidence contained in the administrative record. Dr. William Cassidy treated her as an outpatient and was her treating physician during three hospital visits. On July 14, 1983, Taylor was admitted to Philadelphia's Northeastern Hospital by Dr. Cassidy. She complained of severe lower back pain. An x-ray of the lumbosacral spine revealed bilateral spondylolysis of L5.*fn1 It also revealed a slight narrowing of the L4, L5 disc space. Taylor was placed in traction and given physical therapy and medication. After nine days of hospitalization, she was discharged; Dr. Cassidy reported that Taylor's condition at that time was "much improved." Appendix ("App.") at 104. On January 3, 1984, however, Taylor was readmitted to Northeastern Hospital by Dr. Cassidy; she was then diagnosed as suffering from "severe low back pain [that] did not respond to outpatient treatment and rest at home." Id. at 95. Dr. Cassidy's examination revealed "extreme tenderness over the lumbosacral joint." Id. After receiving treatment similar to that she had received during her first hospitalization, Taylor this time was released from the hospital after seven days. On August 15, 1984, she was admitted to Northeastern Hospital for the third time. An examination showed "tenderness . . . present over the spine of L5 and S1." Id. at 120. A CAT scan revealed that Taylor had "a herniated disc at the L4-5 level." Id. Following the CAT scan, however, she "progressed very well" and was discharged ten days later. Id. In a September 26, 1984, report submitted to Pennsylvania Bureau of Disability Determination, n.2 [Footnote Omitted] Dr. Cassidy indicated that any bending caused Taylor to experience pain that was relieved only by bed rest and medication. Id. at 124.
On July 16, 1984, Dr. Richard Paolino, also a treating physician, examined Taylor and diagnosed her condition as a "lumbar strain and sprain, lumbar myofascitis."*fn3 App. at 115. In his report to the Bureau of Disability Determination, Dr. Paolino noted that, at the time he examined Taylor, she was "unable to walk, stand, [or] sit for long periods of time without experiencing some type of stiffness or pain. [Taylor is] restricted in reaching for objects on shelf." Id. Dr. Paolino also noted that Taylor had a "marked impairment of movement to any degree of lateral bending and forward flexion or extension." Id.
The third physician, Dr. Nicholas Frignito, conducted a consultative examination of Taylor on April 16, 1985. He concluded that, due to lower back pain, "there is no doubt that [Taylor] is limited in the amount of walking she can do, or the amount of lifting and bending she can do." App. at 131. Dr. Frignito's diagnosis was "Herniated Nucleus Pulposus at L4 and 5 . . . with chronic lumbar pain." Id.
On July 12, 1984, Taylor applied for Supplementary Security Income based on disability. Her application was denied both initially and upon reconsideration. Taylor requested a hearing before an Administrative Law Judge ("ALJ"), and a hearing was held on April 9, 1985. App. at 23-26. At this hearing, which lasted a total of eight minutes, Taylor testified that she continuously suffers from lower back pain and that she takes large amounts of medication to alleviate her pain. Id. at 28-30. She stated that she can walk no farther than one block and that she can sit for no more than an hour at a time. Id. at 30.
The ALJ acknowledged at the hearing that Taylor has a problem with her back that "seems to be getting worse." App. at 32. Nonetheless, on June 11, 1985, the ALJ denied Taylor's request for disability benefits. App. at 9-15. Her request for review was subsequently denied by the Appeals Council. App. at 4. The decision of the ALJ thus stood as the final decision of the Secretary. Id.
Taylor appealed to the district court for review of the Secretary's final determination. Both Taylor and the Secretary filed motions for summary judgment. On May 14, 1986, the district court, adopting a magistrate's report, granted Taylor's summary judgment motion. Taylor v. Bowen, No. 85-5601 (E.D. Pa. May 14, 1986). The government did not appeal from this judgment for Taylor. Approximately two months later, the trial judge died. Taylor's case was then reassigned to another member of the United States District Court for the Eastern District of Pennsylvania. Before this second trial judge, Taylor filed a motion for attorney's fees under EAJA. The district court denied this motion without opinion. Taylor, No. 85-5601 (E.D. Pa. Dec. 29, 1986).
Our appellate jurisdiction to review the district court's final order is conferred by 28 U.S.C. § 1291 (1982), and our standard of review is plenary.*fn4 E.g. Russell v. Heckler, 814 F.2d 148, 152 (3d Cir.), petition for cert. filed, 56 U.S.L.W. 3258 (U.S. Oct. 6, 1987) (No. 87-251, filed Aug. 13, 1987); accord Pullen v. Bowen, 820 F.2d 105, 109 (4th Cir. 1987).
EAJA entitles a prevailing party to receive reasonable fees and costs incurred in any non-tort civil action against the United States "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) (Supp. III 1985). We note that Taylor became a "prevailing party" when the district court held that she was entitled to disability benefits. See Brown v. Secretary of Health & Human Servs., 747 F.2d 878, 883 (3d Cir. 1984) ("it is the receipt of . . . benefits that renders a typical Social Security plaintiff a prevailing party"). We also note that the Secretary does not argue that there are "special circumstances" that would render an EAJA fee award in this case unjust. See generally Taylor v. United States, 815 F.2d 249, 252-54 (3d Cir. 1987) (" Taylor II ") (applying EAJA's special circumstances exception); Brinker v. Guiffrida, 798 F.2d 661, 667-68 (3d Cir. 1986) (rejecting government's claim to fall within this EAJA exception). This appeal thus raises a single question: whether the government's positions in this Social Security disability case, which were rejected by the district court, were nonetheless "substantially justified."
This question is not new to this Court. "On numerous prior occasions," Edge v. Schweiker, 814 F.2d 125, 128 (3d Cir. 1987) (" Edge II "), we have devoted much attention to the task of interpreting the EAJA statutory phrase, "substantially justified." Notwithstanding such attention, however, erroneous district court judgments continue to necessitate the bringing of EAJA appeals, such as this one, to this Court. Accordingly, before we examine the facts before us, we will review the "settled law" detailed in our previous EAJA decisions. Id.
Although EAJA identifies a singular entity -- "the position of the United States" -- as the focus of a court's inquiry under this statutory exception, 28 U.S.C. § 2412(d)(1)(A) (Supp. Ill 1985), it also makes clear that "the required [inquiry is] two-pronged." Lee v. United States, 801 F.2d 115, 116 (3d Cir. 1986) (Becker, J., dissenting from denial of petition for rehearing in banc). EAJA defines "'position of the United States' [as] . . . the position taken by the United States in the civil action [and] the action or failure to act upon which the civil action is based. . . ." 28 U.S.C. § 2412(d)(2)(D) (Supp. III 1985). Accordingly, our decisions "have consistently defined 'position of the United States' as 'not only the litigation position . . . but also the agency position [that] made the lawsuit necessary.'"*fn5 Lee, 801 F.2d at 116 (Becker, J., dissenting from denial of petition for rehearing in banc) (quoting National Resources Defense Council v. United States Envtl. Protection Agency, 703 F.2d 700, 708 (3d Cir. 1983)). As Judge Becker summarized matters in Lee, "the government is thus deemed to have two positions for EAJA purposes, both [of which] must be 'substantially justified' . . . . If either government position does not bear scrutiny, the prevailing private party should be awarded attorneys' fees [and other reasonable fees and expenses]." Id.
When a court reviews an EAJA fee petition, its scrutiny involves the process of determining whether the government's positions -- that is, the underlying agency or administrative action or inaction, and the government's position in the lawsuit prompted thereby -- are "substantially justified." 28 U.S.C. § 2412(d)(1)(A) (Supp. III 1985). Interpreting this statutory phrase has caused considerable division in the Courts of Appeals.*fn6 While some courts have concluded that EAJA demands only that the government's positions be reasonable.*fn7 others have required a higher quantum of proof.*fn8
In Lee v. Johnson, 799 F.2d 31 (3d Cir. 1986), we held, relying on the language of the House Committee on the Judiciary Report*fn9 that accompanied the 1985 legislation reviving EAJA after its expiration in 1984,*fn10 that the "substantially justified" exception requires the government to "show more than that [its] position was merely reasonable."*fn11 Id. at 38 n.7. Since Lee, we have reiterated its holding that EAJA requires more than mere reasonableness. See Russell, 814 F.2d at 153 (quoting H.R. Rep. No. 120, 99th Cong., 1st Sess. 9-10 (1985), reprinted in 1985 U.S. Code Cong. & Admin. News 132, 138); Stokes v. Bowen, 811 F.2d 814, 816 (3d Cir. 1987) (" Stokes II ") (same); see also United States v. 1,378.65 Acres of Land, 794 F.2d 1313, 1318 (8th Cir. 1986) (Rosenn, J.,*fn12 joined by Lay, C.J., and Bright, J.) (". . . . Congress did not intend a reasonableness standard for substantial justification of government action to be weak or relaxed. . . . The Government now must show not merely that its position was marginally reasonable; its position must be clearly reasonable, well founded in correct.") (footnote omitted). (footnote omitted). We believe that Judge Rosenn's summary, which we have just quoted in the parenthetical, encapsulates this Court's jurisprudence to date, and we adopt it as a shorthand formulation of our case law in this area. In EAJA cases in this Circuit, a government position is "substantially justified" if it is solid and well-founded.
The burden of proving that each of its positions was substantially justified belongs to the government. We recently summarized the series of proofs it must make as follows:
In order to prevail, the government must show: 1) a [solid and well-founded] basis in law for the facts alleged; 2) a [solid and well-founded] basis in law for the theory it prepounded; and 3) a [solid and well-founded] connection between the facts alleged and the legal theory advanced. Washington v. Heckler, 756 F.2d 959, 961 (3d Cir. 1985) (citing Citizens Council of Delaware County v. Brinegar, 741 F.2d 584, 593 (3d Cir. 1984)).
Garcia v. Schweiker, 829 F.2d 396, 399 (3d Cir. 1987); accord Coup v. Heckler, 834 F.2d 313, slip op. at 9 (3d Cir. 1987).*fn13 In short, unless the government clears six [Text Deleted by Court Emendation] high hurdles (three required showings for each of two positions), EAJA renders it liable for the prevailing party's reasonable fees and costs.
Applying the foregoing legal precepts to the government's position in the underlying disability case,*fn14 we conclude that the government has not borne its burden of proving that its position was substantially justified.
The government has failed to clear the first hurdle in this EAJA inquiry: demonstrating a solid and well-founded basis in truth for its denial of Taylor's request for disability benefits. Three physicians submitted to the ALJ unopposed medical evidence that confirmed the existence and severity of Taylor's medical condition. Taylor also offered her own testimony regarding her chronic back pain. In sum, the record evidence concerning Taylor's disability was strong and detailed. Cf. Rosado v. Bowen, 823 F.2d 40, 43 (2d Cir. 1987) (because evidence of impairment was weak and undeveloped at time of initial hearing before ALJ, government's denial of benefits then was substantially justified). Despite this uncontradicted evidence, however, the ALJ found, on the basis of his observations at the eight minute hearing,*fn15 that
[Taylor] has the residual functional capacity to perform work-related function [sic] except for work involving [sic] prolonged sitting, standing, walking, climbing, balancing, stooping, crouching and kneeling. She is capable of performing many functions but [sic?] alternating her work position. . . . [Taylor] has the residual functional capacity to perform sedentary work [that] provides for alternate standing.
App. at 15. As United States Magistrate Richard A. Powers, Ill, concluded in a report that the first district court judge subsequently adopted as his own, "the ALJ did not give proper weight to the medical evidence [that] establishes beyond any scintilla of doubt that [Taylor] is disabled." Taylor v. Bowen, No. 85-5601, Report-Recommendation at 3 (E.D. Pa. Apr. 23, 1986). Instead, contrary to all of the record evidence, the ALJ -- i.e., the government -- simply decided that Taylor could perform sedentary work and, therefore, that she was not disabled. The enormous gap between the ALJ's position and the reality reflected in the record evidence refutes the Secretary's claim that the ALJ's factual position was solid and well-founded. See Garcia, 829 F.2d at 399-400; Bailey v. Bowen, 827 F.2d 368, 371 (8th Cir. 1987); Edge II, 814 F.2d at 128-29; Dennis v. Heckler, 756 F.2d 971, 976 (3d Cir. 1985); Tressler v. Heckler, 748 F.2d 146, 150 (3d Cir. 1984).
Taylor urges us, however, to go further. She argues that, in a case where the government's underlying position has failed to pass a court's relatively deferential review under the "substantial evidence" standard, that position by definition also fails to be "substantially justified" under EAJA.*fn16 In each such case, in other words, Taylor would have us hold the government liable for its opponent's reasonable fees and costs unless "special circumstances make an award unjust." 28 U.S.C. § 2412(d)(1)(A) (Supp. III 1985). In Washington v. Heckler, 756 F.2d 959 (3d Cir. 1985), a decision rendered prior to the permanent reenactment of EAJA, (then) Chief Judge Aldisert's powerful concurring opinion argued the position that Taylor is now urging upon this Court.
Based on the bottom line dispositions of this court in Social Security cases, I advocate one single test by which a court may grant attorney's fees to a Social Security claimant on the ground that here was no substantial evidence on the record supporting the Secretary's position. It would hold as a matter of law that, absent truly extraordinary circumstances, in each such case the position of the United States was not substantially justified.
Id. at 969 (Aldisert, C.J., concurring). Despite the obvious appeal of this position on grounds of policy, however, it was rejected by our Court. Id. at 961 n.2; id. at 970-71 (Stern, J., concurring).
Although this position has become even more appealing since Washington, we still decline to recognize such a per se rule. In its report accompanying the permanent reenactment of EAJA, the House Committee on the Judiciary found
especially puzzling . . . 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. Agency action found to be arbitrary and capricious or unsupported 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. 10 (1985), reprinted in 1985 U.S. Code Cong. & Admin. News 138. Although this statement of legislative intent approaches the position advocated by Taylor, we believe that Congress has left the door open [Text Deleted by Court Emendation] to the possibility that the government could demonstrate that a denial of disability benefits that flunked substantial evidence review was nonetheless substantially justified.*fn17 See Note, Institutionalizing An Experiment: The Extension of the Equal Access to Justice Act -- Questions Resolved, Questions Remaining, 14 Fla. St. U.L. Rev. 925, 936 (1987) ("Although this [House Report] indicates a preference for a more rigorous standard for the government, the Committee expected that due to the variety of factual contexts and legal issues involved in EAJA cases, the determination of what is 'substantially justified' will be decided on a case-by-case basis."). We note that our interpretation, unlike Taylor's preserves independent meaning for each of exceptions ("substantially justified" and "special circumstances") that Congress included in EAJA, and we conclude that our pattern of decisions conforms to the way that "the meaning of the term 'substantially justified' has been effectively resolved by Congress." Stokes II, 811 F.2d at 815-16.
Because the government has failed to clear the first hurdle, our EAJA inquiry is at an end. We need not determine whether the government had a solid and well-founded basis in law for its decision denying Taylor's request for disability benefits (hurdle two), or whether there was a sufficient connection between the facts it alleged and the legal theory it propounded in the underlying action (hurdle three). We also need not examine whether the government's litigation position before the first trial judge was "substantially justified" under EAJA (hurdles four, five and six). Because the ALJ's factual position was neither solid nor well-founded, Taylor is entitled to reasonable fees and costs under EAJA.
For the foregoing reasons, we will reverse the judgment of the district court and remand this matter to the district court for a calculation of Taylor's fees and other expenses under EAJA.