Richlin Security Service Co. v. Chertoff

The Supreme Court has agreed to clarify whether companies that successfully sue the United States in administrative proceedings are entitled to recover the full market cost of paralegals who aided them.

In the case, Richlin Security Service Co. v. Chertoff, No. 06-1717, Richlin provided guards who watched over detainees at Los Angeles International Airport. Several years into Richlin's contract with the Immigration and Naturalization Service, the federal government concluded that it had misclassified -- and consequently underpaid -- the guards.

Richlin sued the government to recover its lost income and prevailed. Under the Equal Access to Justice Act, 5 U.S.C. Sec. 504, Richlin was entitled to recover "fees and other expenses" incurred in the proceedings.

When Richlin sought those fees, the agency refused to reimburse the company the full amount of money it had been billed for paralegal services, ranging from $50 to $135 an hour. Instead, the Board determined that the company's law firm had a $35 per hour cost for the paralegals and paid the company that amount.

The circuit court of appeals affirmed the decision. The court reasoned that paralegal work should be categorized as an "expense" compensable at cost rather than a fee, akin to an attorney fee, compensable at market rates. The court explained that because the statute capped attorneys' fees at $125 per hour but did not refer to paralegal fee rates, a market-based reimbursement for paralegals could induce firms to shift work to those paraprofessionals to escape the cap.

In asking the Court to review the decision, Richlin argued that the Eleventh Circuit, in Jean v. Nelson, 863 F.2d 759 (11th Cir. 1988) reached the opposite conclusion, creating a clean split between the cirucits.

Richlin also noted that in Missouri v. Jenkins, 491 U.S. 274 (1989), the Supreme Court held that under the analogous Civil Rights Attorney's Fees Awards Act, paralegal services are an element of attorney's fees and therefore should be compensated at a firm's billable rate, rather than at the cost to the firm.The Court had concluded that permitting market reimbursement for paralegals would encourage attorneys to delegate appropriate work to paraprofessionals in order to provide more cost-efficient legal services.

In resisting the petition for certiorari, the government argued that while the statute was designed to encourage the filing of legitimate lawsuits against the United States, it was simultaneously designed to conserve public funds by reimbursing some services at cost rather than at a market markup.Questions presented:Are companies who seek government reimbursement for successful lawsuits against the United States entitled to recover market rates for paralegal fees?

The Supreme Court ruled that companies that successfully sue the United States in administrative proceedings are entitled to recover the full market cost of paralegals who aided them.

In the case, Richlin Security Service Co. v. Chertoff, No. 06-1717, Richlin provided guards who watched over detainees at Los Angeles International Airport. Several years into Richlin's contract with the Immigration and Naturalization Service, the federal government concluded that it had misclassified -- and consequently underpaid -- the guards.

Richlin sued the government to recover its lost income and prevailed. Under the Equal Access to Justice Act, 5 U.S.C. Sec. 504, Richlin was entitled to recover "fees and other expenses" incurred in the proceedings.

When Richlin sought those fees, the agency refused to reimburse the company the full amount of money it had been billed for paralegal services, ranging from $50 to $135 an hour. Instead, the Board determined that the company's law firm had a $35 per hour cost for the paralegals and paid the company that amount.

The circuit court of appeals affirmed the decision. The court reasoned that paralegal work should be categorized as an "expense" compensable at cost rather than a fee, akin to an attorney fee, compensable at market rates. The court explained that because the statute capped attorneys' fees at $125 per hour but did not refer to paralegal fee rates, a market-based reimbursement for paralegals could induce firms to shift work to those paraprofessionals to escape the cap.

In asking the Court to review the decision, Richlin argued that the Eleventh Circuit, in Jean v. Nelson, 863 F.2d 759 (11th Cir. 1988) reached the opposite conclusion, creating a clean split between the cirucits.

Richlin also noted that in Missouri v. Jenkins, 491 U.S. 274 (1989), the Supreme Court held that under the analogous Civil Rights Attorney's Fees Awards Act, paralegal services are an element of attorney's fees and therefore should be compensated at a firm's billable rate, rather than at the cost to the firm.

The Court had concluded that permitting market reimbursement for paralegals would encourage attorneys to delegate appropriate work to paraprofessionals in order to provide more cost-efficient legal services.

In resisting the petition for certiorari, the government argued that while the statute was designed to encourage the filing of legitimate lawsuits against the United States, it was simultaneously designed to conserve public funds by reimbursing some services at cost rather than at a market markup.

On June 2, a unanimous Supreme Court reversed the Federal Circuit's decision, holding that Richlin may recover the fees of paralegals at market rate.

"We find the Government's fractured interpretation of the statute unpersuasive," Justice Samuel A. Alito Jr. wrote for the court."Contrary to the Government's
contention, §504(b)(1)(A) does not clearly distinguish between the rates at which 'fees' and 'other expenses' are reimbursed."

Justice Antonin Scalia joined the opinion except as to Part III–A and Justice Clarence Thomas joined except as to Parts II–B and III.

Questions presented:Are companies who seek government reimbursement for successful lawsuits against the United States entitled to recover market rates for paralegal fees?