Handron v. Sebelius, Civil No. 08-3119; U.S. District Court (DNJ); opinion by Kugler, U.S.D.J.; filed October 27, 2009. DDS No. 22-7-5757 [18 pp.]

Eastern Benefits Integrity Center, a contractor of the Department of Health and Human Services, sent Dr. John D. Handron a demand letter asserting a Medicare overpayment of $604,038. The letter alleged that Handron’s psychotherapy and diagnostic testing services did not comply with the documentation, level of care and medical necessity requirements for payment under the Medicare program.

On Handron’s appeal, a fair hearing officer of HHS upheld most of the overstatement determination. Handron again appealed and an administrative law judge reduced the overpayment determination to a mere $5,434.48, based on a review of 25 boxes of records, expert testimony and extensive review of the overpayment calculation.

Handron then filed an application under the Equal Access to Justice Act, 5 U.S.C. § 504, for attorneys’ fees and costs. The ALJ denied the application, finding that the proceedings were not an “adversary adjudication” under the act, and thus the act did not apply. The Medicare Appeals Council of HHS adopted the ALJ’s decision.

Plaintiff then filed this complaint. He moves for summary judgment.

Held: Based on an analysis of the EAJA, its legislative history, applicable case law and relevant regulations, “or otherwise” in the EAJA requires that a person physically appear at the adjudication and advocate a position on behalf of the United States. Since that did not occur, the proceeding was not an adversary adjudication and the EAJA, with its provision for attorneys’ fees, is not applicable.

The EAJA, in 5 U.S.C. § 504(a)(1), provides that “an agency that conducts an adversary adjudication shall award, to a prevailing party other than the United States, fees and other expenses incurred by that party in connection with that proceeding, unless the adjudicative officer … finds that the position of the agency was substantially justified or that special circumstances make an award unjust.” Title 5 U.S.C. § 504(b)(1)(B) defines “adversary adjudication” as “an adjudication under section 554 of this title in which the position of the United States is represented by counsel or otherwise….” The court says this dispute is essentially over what “or otherwise” means.

To bring a claim under § 504 for attorneys’ fees, the court says a party must generally show that (1) the proceeding was an adversary adjudication; (2) it was an adjudication under § 554 of the Administrative Procedures Act, 5 U.S.C. § 554; (3) the party was the “prevailing party”; and (4) the position of the United States was not substantially justified.

Here, the parties disagree over whether the ALJ proceeding was an “adversary adjudication.” Plaintiff essentially argues that even though no counsel or other person appeared at the ALJ proceedings, HHS was “otherwise” represented by the demand letter, the fair hearing officer decision and the boxes of records.

The court first finds that the meaning of “or otherwise” is not clear under the plain language of the EAJA. It, therefore, turns to the legislative history.

It says that Congress’s intent with the EAJA was (1) to encourage private litigants to pursue their actions against the government and not be deterred by the prospect of having to pay their own attorneys’ fees; (2) to compensate parties for the cost of defending against unreasonable government action; and (3) to deter the federal government from prosecuting or defending cases in which its position is not substantially justified. However, the House conference report indicates that Congress required an adversary adjudication and defined the term as requiring that the United States be represented by counsel or otherwise to preclude an award when an agency does not take a position in the adjudication.

In other words, Congress did not intend that the EAJA would apply simply because a person was fighting adverse government action, but that it would apply when the government participated in the proceeding. The court says this conclusion is supported by the congressional record from the EAJA’s extension and amendment in 1985.

The court says this history supports the defendant’s position that the ALJ hearing was not an adversarial adjudication because no one appeared on HHS’s behalf.

The court then considers relevant case law. It concludes that the cases plaintiff cites, Chicago Center Hospital v. Heckler , No. 84 C 10069, 1986 WL 10059 (N.D. Ill. Sept. 5, 1986), and Lane v. United States Department of Agriculture , 929 F.Supp. 1290 (D.N.D. 1996), aff’d in part and rev’d in part, 120 F.3d 106 (8th Cir. 1997), show that the “or otherwise” language requires some person to actually appear at the proceeding and advocate for the United States, which did not occur here.

The court also cites case law not cited by plaintiff that indicates that the “otherwise” language requires a physical advocate and that documents alone are insufficient under the EAJA to make a proceeding adversarial.

The court then concludes that regulations regarding the EAJA do not support plaintiff’s position. Congress charged the Administrative Conference with interpreting the EAJA and developing model rules. Among the model rules developed was one defining adversary adjudication that specifically requires a person to appear and to participate. HHS substantially adopted the model rule.

The court finds that the Administrative Conference’s interpretation of the EAJA and HHS’s subsequent adoption of that interpretation are a clear source of guidance that suggests someone rather than something must appear at an adjudication.

Finally, the court says that its own review of the EAJA indicates that a person must physically appear on behalf of the United States. It says that the word “represented” in § 504(b)(1)(C), in the context of being coupled with “by counsel,” suggests that the statute requires some level of advocacy. Advocacy, in the context of a live adjudication, imparts some modicum of real-time interplay with the fact finder. The United States is not represented by documents that support or show its position as there is no real-time interaction with the fact finder to advocate its interests. This advocacy seems to be required by the EAJA.

Therefore, the court finds that an adversary adjudication under the EAJA requires that a person physically appear to advocate on behalf of the United States. Since that did not occur, the EAJA does not apply and plaintiff is not entitled to fees. Plaintiff’s motion for summary judgment is denied and the matter is dismissed.

— By Judith Nallin