PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

PATRICK H. HYATT; HERMAN O.
CAUDLE; MARY P. LOVINGOOD, on
behalf of themselves and all others
similarly situated,
Plaintiffs-Appellees,

and

NORTH CAROLINA DEPARTMENT OF                                            No. 96-2062
HUMAN RESOURCES,
Plaintiff,

v.

KENNETH S. APFEL, COMMISSIONER OF
SOCIAL SECURITY,
Defendant-Appellant.

Appeal from the United States District Court
for the Western District of North Carolina, at Charlotte.
Graham C. Mullen, District Judge.
(CA-83-655-C-C-M)

Argued: October 28, 1997

Decided: October 27, 1999

Before RUSSELL,* WIDENER, and TRAXLER, Circuit Judges.
_________________________________________________________________
*Judge Russell heard oral argument in this case but died prior to the
time the decision was filed. The decision is filed by a quorum of the
panel. 28 U.S.C. § 46(d).
Affirmed in part, vacated in part, and remanded by published opinion.
Judge Widener wrote the opinion, in which Judge Traxler concurred.

_________________________________________________________________

COUNSEL

ARGUED: Howard Stanley Scher, Appellate Staff, Civil Division,
UNITED STATES DEPARTMENT OF JUSTICE, Washington,
D.C., for Appellant. John Robbins Wester, ROBINSON, BRAD-
SHAW & HINSON, P.A., Charlotte, North Carolina, for Appellees.
ON BRIEF: Frank W. Hunger, Assistant Attorney General, Mark T.
Calloway, United States Attorney, William Kanter, Appellate Staff,
Civil Division, UNITED STATES DEPARTMENT OF JUSTICE,
Washington, D.C., for Appellant. Sarah B. Boucher, ROBINSON,
BRADSHAW & HINSON, P.A., Charlotte, North Carolina; Charles
McB. Sasser, Douglas S. Sea, COX, GAGE & SASSER, Charlotte,
North Carolina, for Appellees.

_________________________________________________________________

OPINION

WIDENER, Circuit Judge:

Not unexpectedly, this step in this litigation is concerned exclu-
sively with attorneys' fees. We affirm in part, vacate in part, and
remand with instructions.

The case arose in the Western District of North Carolina in 1983
as a suit to require the Secretary of Health and Human Services to fol-
low circuit precedent in Social Security cases, especially with respect
to pain. It has been the subject of four published opinions of this
court, a remand by the United States Supreme Court, and the numer-
ous district court decisions leading up to the appeals. See Hyatt v.
Bowen, 476 U.S. 1167 (1986); Hyatt v. Heckler, 757 F.2d 1455 (4th
Cir. 1985) (Hyatt I); Hyatt v. Heckler , 807 F.2d 376 (4th Cir. 1986)
(Hyatt II); Hyatt v. Sullivan, 899 F.2d 329 (4th Cir. 1990) (Hyatt III);
and Hyatt v. Shalala, 6 F.3d 250 (4th Cir. 1993) (Hyatt IV).1
_________________________________________________________________
1 See Hyatt v. Heckler, 579 F. Supp 985 (W.D.N.C. 1984); Hyatt v.
Heckler, 586 F. Supp. 1154 (W.D.N.C. 1984); Hyatt v. Heckler, 618 F.

                     2
The history of this litigation has been set out in some detail in our
previous opinions, and we will not repeat it here. In our decision in
Hyatt III, we affirmed the decision of the district court setting aside
Social Security Ruling 88-13, and in Hyatt IV , we approved the fourth
and fifth motions for attorneys' fees through June 17, 1988. The first,
second, and third motions for attorneys' fees had previously been
acted upon and had been awarded under the provisions of 28 U.S.C.
§ 2412(d)(1)(A) on the basis that the position of the Secretary was not
substantially justified.2 The fourth and fifth motions for attorneys'
fees considered in Hyatt IV were considered under the bad faith stan-
dard of 28 U.S.C. § 2412(b).

I.

In the case presently before us, we consider the sixth motion for
attorneys' fees for the period from June 19, 1988 through June 19,
1994. Hyatt III was decided March 30, 1990, and the government
does not contest the finding of bad faith made by the district court for
the period ending March 30, 1990. So a period we consider here is
from March 30, 1990 until June 19, 1994.

The district court found the government to be in bad faith because
of its previous litigating position, largely or almost wholly concerned
with its refusal to follow circuit precedent, and its reluctance or recal-
citrance to comply with court decisions in this case.

The government takes the position, however, that the finding of
bad faith is not required under Commissioner, INS v. Jean, 496 U.S.
154 (1990), because following our decision in Hyatt III, the govern-
ment promulgated Social Security ruling 90-1p which, it argues, was
consistent with circuit precedent despite the expressed reluctance of
_________________________________________________________________
Supp. 227 (W.D.N.C. 1985); Hyatt v. Bowen, 118 F.R.D. 572 (W.D.N.C.
1987); Hyatt v. Sullivan, 757 F. Supp. 685 (W.D.N.C. 1991) (appeal dis-
missed without prejudice and remanded to the distric court in consider-
ation of the settlement agreement entered into by the parties in Hyatt v.
Shalala, No. 91-2618 (4th Cir. Jan. 24, 1994).
2 While the district court found bad faith, the fees were not awarded on
that basis.

                     3
the government to promulgate the same. It argues that Jean does not
require a finding of bad faith to continue when the bad faith has
ceased. Otherwise, the argument goes, a finding of bad faith in a case
would operate much like an attainder and would continue indefinitely.

It is true that the plaintiffs contested Social Security Rule 90-1p,
but the appeal of the government from an adverse decision of the dis-
trict court in that case was remanded by agreement on January 24,
1994, and the parties entered into a settlement of all differences in
March, 1994. In the meantime, we had decided the case of Hunter v.
Sullivan, 993 F.2d 31 (4th Cir. 1992). That was a case involving the
very pain standard considered in the Hyatt litigation. Indeed, it
involved Social Security Ruling 90-1p. Hunter construes ruling 90-1p
to be:

          This ruling requires an adjudicator to consider subjective
          testimony concerning pain if a "physical or mental impair-
          ment that could reasonably be expected to cause pain is
          shown by medically acceptable objective evidence."

993 F.2d at 36. As quoted, this construction of ruling 90-1p is consis-
tent with circuit precedent and effectively completes the overruling of
rule 88-13, which commenced the overruling of Social Security ruling
82-58, the ruling which might be considered the principal root of this
controversy. See Hyatt v. Heckler, 579 F. Supp 985, 988, et seq.
(W.D.N.C. 1984).

The narrow question before us is whether Jean requires, in each
case, that a finding be made on the whole case of whether or not the
bad faith standard applies, and apply that finding throughout. While
in many cases that rule might be true, we believe it is not to be
applied in a case such as this in which the government, although
reluctant, has surrendered a position it has maintained through the
years, even if in bad faith. We arrive at this conclusion by the very
language of Jean, which provides "that only one threshold determina-
tion for the entire civil action is to be made." 496 U.S. at 154. The
example given is of unjustifiable agency action forcing litigation, with
the agency then trying to avoid liability by reasonable action during
the litigation. Jean, 496 U.S. at 154, n.10. We think that the use of
the word threshold does not indicate that the same position with

                    4
respect to bad faith must be maintained by the courts throughout the
litigation, regardless of the performance of the government. But it
does mean that once a finding of bad faith has been made, the inferior
courts would be justified in continuing that finding unless conditions
were shown to have been changed, as here. Were this not the case,
the language of the court, in the third-from-the-last sentence of Jean,
would have no meaning. That language is:

          The EAJA further provides district courts' discretion to
          adjust the amount of fees for various portions of the litiga-
          tion, guided by reason and statutory criteria.

Jean, 496 U.S. at 165-66. If the threshold finding of bad faith must
be applied at every stage of the litigation, regardless of the govern-
ment's changed position, that would take from the district courts their
discretion "to adjust the amount of fees for various portions of the liti-
gation." Jean, 496 U.S. at 165-66. In the case before us, after years
of litigation, the government at last changed its position. That present
position has been litigated, and the finding in Hunter is favorable to
the government. We are thus of opinion that it was an abuse of the
district court when it did not find a lack of bad faith beginning with
March 30, 1990.3

Along the same line, since the position of the government has been
litigated and upheld, we think the government's position has been
substantially justified commencing with March 30, 1990.

II.

The district court awarded market-rate fees, but we think this was
error. It should have awarded fees at the historic rate. See Library of
Congress v. Shaw, 478 U.S. 310 (1986); National Wildlife Fed. v.
Hanson, 859 F.2d 313, 318 (4th Cir. 1988).
_________________________________________________________________

3 We agree with the government that its initial opposition for fees
claimed for work on the fourth and fifth fee petitions was a mistake, not
deliberate misconstrucing of precedent.

                     5
III.

The government has conceded that the plaintiffs' attorneys are enti-
tled to fees for their work on the fourth and fifth fee petitions at the
rates in effect at the time the work was performed. We agree.

IV.

The last point we consider is whether the district court's applica-
tion of a 1.333 multiplier for exceptional results should be affirmed.
The subject has been discussed in Hensley v. Eckerhart, 461 U.S. 424
(1983); Blum v. Stenson, 465 U.S. 886 (1984); Pennsylvania v. Dela-
ware Valley Citizens Council, 478 U.S. 546 (1986); and the same
case, reargued on one point, Pennsylvania v. Delaware Valley Citi-
zens Council, 483 U.S. 711 (1987); not to mention our case of Lyle
v. Food Lion, 954 F.2d 984 (4th Cir. 1992).

The upshot of these cases is that many or most of the reasons ini-
tially considered by the inferior federal courts to entitle an attorney
to an enhancement of a fee figured at a rate times hours spent have
been qualified or minimized so that they would have no effect here.
But the item which has survived is an enhancement for "certain `rare'
and `exceptional' cases, supported by both `specific evidence' on the
record and detailed findings by the lower courts." Delaware Valley,
478 U.S. at 565. The district court found this was such a case, and we
quote its findings here:

           The exceptional results obtained by Plaintiffs in this case
          cannot be disputed. Plaintiffs have succeeded in forcing the
          Social Security Administration to halt application of a
          secret, unlawful policy to its determination of hundreds of
          thousands of disability claims in North Carolina and, per-
          haps, to many hundreds of thousands more outside of North
          Carolina. In its last decision on the merits, the Fourth Circuit
          also ordered the Social Security Administration to cease
          applying its unlawful regulations and policies not only in
          North Carolina, but "in this circuit." Hyatt III, 899 F.2d at
          335. Moreover, in apparent response to Hyatt, the Secretary
          thereafter promulgated new national regulations establishing
          a new pain standard.

                     6
           The financial benefits conferred on the Plaintiff class as
          a result of this case are unprecedented. This court has esti-
          mated, conservatively, that Plaintiffs will recover several
          hundred million dollars in disability benefits to which they
          are lawfully entitled. Hyatt v. Heckler, 711 F. Supp at 836.
          These results were obtained in the face of monumental resis-
          tance on every claim made in this "extensive and procedur-
          ally tortured" class action. Hyatt v. Shalala , 6 F.3d at 252.

           Based on the record in this case and the affidavits pre-
          sented with Plaintiffs' fee motion, the success achieved by
          Plaintiffs is properly characterized as exceptional. Plaintiffs
          have succeeded in bringing about fundamental change to a
          recalcitrant agency which brought all of the power of the
          federal government to bear on Plaintiffs and their counsel
          while it resisted Plaintiffs' efforts to enforce the orders of
          this court and the Fourth Circuit each step of the way.
          Accordingly, a multiplier of 1.333 will be applied to the
          lodestar fee in this motion.

While the decisions mentioned above may have downgraded somwe-
hat the numbers of claimants getting relief and the extent of financial
benefits, the other fact-findings of the district court are supported by
the record and have not been downgraded. We agree with the district
court and are of opinion that a multiplier of 1.333 was justifiably
applied to the fees on account of the exceptional results obtained by
the plaintiffs' attorneys.

V.

To summarize, we are of opinion that the plaintiffs are entitled to
attorneys' fees based on bad faith, which has been conceded by the
government, for the period beginning June 19, 1988 through March
30, 1990. These fees should be computed at historic rates. Included
in such fees is the claim of plaintiffs for fees for working on the
fourth and fifth fee motions, or fee petitions, however they may be
called. They also should be computed at historic rates. For the period
following March 30, 1990 until June 19, 1994, we are of opinion the
government was not in bad faith and its position was substantially jus-
tified, so no fees should be allowed for work done for that period

                     7
except for work done on the fourth and fifth fee petitions, which we
note are allowable under the bad faith rule at historic rates. On
remand, the district court will recompute the fees in accordance with
this opinion.

The judgment of the district court is accordingly

AFFIRMED IN PART, VACATED IN PART,
AND REMANDED WITH INSTRUCTIONS.

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