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State, Dept. of Health and Social Services v. Okuley

Supreme Court of Alaska

June 26, 2009

STATE of Alaska, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, Appellant,
v.
Denise OKULEY, on behalf of herself and all those similarly situated, Appellees.

Rehearing Denied Aug. 20, 2009.

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[Copyrighted Material Omitted]

Page 249

Joanne M. Grace, Assistant Attorney General, Talis J. Colberg, Attorney General, Anchorage, for Appellant.

James J. Davis, Jr., Goriune Dudukgian, Ryan Fortson, Northern Justice Project, Anchorage, for Appellees.

Before : FABE, Chief Justice, MATTHEWS, EASTAUGH, CARPENETI, and WINFREE, Justices.

OPINION

MATTHEWS, Justice.

I. INTRODUCTION

This appeal involves a common fund fee award to attorneys who represented, on a pro bono basis, a class of persons wrongly denied Interim Assistance benefits by the State of Alaska. As a result of class counsel's efforts, the State was required to pay $990,010 in retroactive Interim Assistance benefits to 301 class members, as well as $91,575 in prejudgment interest. The court awarded class counsel $46,131.70 in prevailing party attorney's fees under Alaska Civil Rule 82. Over the State's objection and without requiring that notice of a common fund fee request be sent to class members, the court also awarded class counsel fees from the common fund, granting counsel's request for an amount equal to the prejudgment interest, $91,575, or 9.25% of the fund. Class counsel thus received a total fee award of around $137,707. The State appeals the common fund fee award in its parens patriae capacity. Although we recognize that awarding fees from the fund without notice to class members of the fee request was not the best procedure, we affirm the award because it was fair and reasonable and not an abuse of discretion.

II. FACTS AND PROCEEDINGS

A. Facts

In August 2005 the Northern Justice Project filed a class action lawsuit against the State of Alaska on behalf of Interim Assistance (IA) benefits applicants, alleging that an internal policy the state adopted in 2003 to save costs violated the Alaska Administrative Procedures Act (APA). IA benefits are available to Alaskans who have applied for Supplemental Security Income (SSI) benefits [1] but who have not yet received a final decision from the federal government on their SSI applications.[2] To qualify for IA benefits, a state-approved physician or psychiatrist must find the applicant disabled.[3] If the federal government finds the applicant qualifies for SSI benefits and thus begins paying such benefits, the applicant must repay the state for the IA benefits she received; [4] if she does not qualify, she is not required to repay the state.[5] To reduce the number of applicants who are not required to repay the state and thus save costs, the state implemented an internal policy change in 2003 that added a secondary disability assessment. Under the 2003 policy, if the state-approved doctor found the applicant disabled and eligible for IA benefits but a secondary " medical screener" disagreed, the state denied the application. The state did not follow the APA in promulgating this policy.

In April 2005 Denise Okuley, the named class representative, applied for IA benefits and though found eligible by the state-approved physician, was denied benefits based on the medical screener's secondary assessment. The Alaska Pro Bono Program

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(APBP) referred Okuley's case to the Northern Justice Project. APBP, Okuley, and the Northern Justice Project signed a " tripartite retainer agreement," which provided that the Northern Justice Project would represent Okuley on a pro bono basis and that " any fees awarded by [the court] at the conclusion of this case [would] be retained by APBP and the Northern Justice Project."

B. Proceedings

Okuley moved for a preliminary injunction against the State, challenging the 2003 policy's legality. In September 2005 the superior court converted the motion into a summary judgment motion and ruled in Okuley's favor.[6] Subsequently, Okuley moved to certify the class under Alaska Civil Rule 23(b)(2).[7] The superior court certified two classes: " (1) IA applicants whose applications were denied by the State despite being found to be disabled by a state-approved doctor, but whose SSI applications were still being processed by the federal government; and (2) IA applicants whose applications were denied by the State despite being found to be disabled by a state-approved doctor, and whose SSI applications were subsequently denied by the federal government."

The parties reached an agreement as to the first class, consisting of 153 members, with the State agreeing to pay $759,930 in retroactive IA benefits. [8] Because Okuley and the State could not agree as to the second class, consisting of 237 members, Okuley moved for summary judgment, requesting that these members be awarded retroactive IA benefits. The superior court granted the motion over the State's opposition and ordered the State to pay $230,080 in retroactive IA benefits to the 167 members of this class who had responded to the State's notices.

As a result of Okuley's class action, the State was required to pay 301 class members $990,010 in retroactive IA benefits.[9] The State also agreed to pay $91,575 (9.25%) in prejudgment interest.

Class counsel moved for prevailing party fees under Alaska Civil Rule 82, as well as for " reasonable attorney's fees from the common fund." The State did not oppose the Rule 82 motion, and the court awarded $46,131.70 in prevailing party fees. The State did oppose counsel's request for fees from the common fund, arguing that (1) the doctrine should not apply to public benefits cases, and (2) the hourly rate claimed by counsel was unreasonable as compared to the hourly rate the State's attorneys are paid. In requesting common fund fees, class counsel urged the court ...


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