The Supreme Court says Paralegal Time Equals Fees, Not Costs

Lisa Anderson is one of our first graduates and as such one of the first students to hear me preach that, properly utilized, Paralegals generate fees, not overhead or costs for the firm.
Currently a Manager of Compliance for Afni Inc. and a valued member of our Paralegal Advisory Board, Lisa alerted me to the following article produced by Hinshaw & Culbertson, a firm that also employs our Paralegal graduates in it's central Illinois offices. Read the article on the Hinshaw website here.

Paralegal Expenses Are “Fees” Not “Costs” and Shall Be Recovered By Litigants at Prevailing Market Rates

Richlin Sec. Service Co. v. Chertoff, 128 S.Ct. 2007 (2008)

Brief SummaryParalegal expenses recovered from administrative agencies under Equal Access to Justice Act are “fees” within the meaning of the Act and must be compensated at prevailing market rates.

Complete SummaryAfter prevailing in the underlying litigation, Richlin Security Service Co. (“Richlin”) sought attorney’s fees under the Equal Access to Justice Act (EAJA), 5 U.S.C. § 504(a)(l). Included in the amount Richlin sought was more than $50,000 for paralegal work. The Department of Transportation’s Board of Contract Appeals (“Board”) found that Richlin was entitled to fees but that paralegal expenses, which Richlin had calculated based on the firm’s hourly billing rate, should have been calculated according to the cost to the law firm (i.e. paralegal salaries). On appeal, the Federal Circuit affirmed, construing the Act in a way that differentiated between “fees” and “other expenses,” and classifying paralegal work as “other expenses.” The Supreme Court reversed.

The EAJA allows for recovery of “fees and other expenses” incurred in connection with an administrative proceeding. Id. at 2011. Specifically, the provision allows for recovery of “reasonable costs of any study, analysis, engineering report, test, or project . . . and reasonable attorney fees [to] be based upon prevailing market rates . . . .” Id. at 2012 (quoting 5 U.S.C. § 504(a)(1)). The Supreme Court addressed both the issue of whether paralegal expenses are fees or other expenses (e.g. costs), and the issue of the appropriate method of calculation.

The court held that amounts billed for paralegal work are fees, not costs or other expenses, and noted that paralegal work was surely more analogous to attorney work than to “studies, analyses, reports, tests, and projects.” Id. at 2013. The court found further support in analogous precedent - e.g., Missouri v. Jenkins. 491 U.S. 274 (1989) (holding that the provision in 42 U.S.C. § 1988, allowing recovery of attorney fees in civil rights cases, included paralegal fees).
Because paralegal expenses are fees, the court held that such fees should be compensated based on prevailing market rates. But the court also noted that, even if recovery of paralegal fees was instead limited to reasonable costs, “it certainly would not follow that the cost should be measured from the perspective of the party’s attorney.” Richlin Security, 128 S.Ct. at 2013. Citing Section 504(a)(1), the court noted that the Act “provides that an agency shall award to a prevailing party ‘fees and other expenses incurred by that party.’” Id. (emphasis added by court).

Significance of Opinion: This opinion helps solidify the notion that paralegal fees are included within the plain meaning of “attorney fees.”