Superior Court Holds Corporation Entitled To Seek Attorney’s Fees Under Equal Access To Justice Act

| Sep 14, 2013 | Firm News

The Superior Court has held that a successful litigant in administrative proceedings before the Department of Environmental Management is not required to have a net worth under $500,000 to qualify for an award of attorney’s fees under Rhode Island’s Equal Access to Justice Act, R.I.G.L. 42-92-1, et seq. (“the EAJA”). The corporation did have to meet other requirements set forth in the Act: it is “independently owned and operated,” it is not dominant in its field, and it employs 100 or fewer people at the time the administrative adjudication was initiated.

Plaintiff Rolling Acres is a Rhode Island corporations that own real estate in Smithfield. Two other companies, Plaintiffs Smithfield Peat and Smithfield Crushing, operate composting and rock-crushing businesses, respectively, on the property. Smithfield Peat obtained a freshwater wetlands permit from the Rhode Island Department of Environmental Management (RIDEM) and spent $100,000 to install a drainage system. The Rhode Island Department of Transportation (RIDOT) subsequently engaged in a project to improve Route 7 during which RIDOT altered Smithfield Peat’s drainage system without the knowledge of Smithfield Peat or the knowledge of RIDEM.

Ironically, a RIDOT official subsequently complained to RIDEM that Smithfield Peat’s drainage system was causing sedimentation in a nearby stream. RIDEM issued a Notice of Intention to Enforce and then, nine years later, issued a Notice of Violation alleging Plaintiffs had violated various state environmental acts and regulations. Litigation, not hilarity, ensued before the Administrative Adjudication Division (“aad”) of RIDEM. A hearing officer eventually determined that RIDEM had failed to prove that Plaintiffs had committed any violations.

Plaintiffs subsequently made a request for their attorney’s fees of more than $100,000 pursuant to the EAJA and Rule 20 of the ADD Rules of Practice and Procedure. The hearing office denied the request on the grounds that Plaintiffs did not qualify as a “party” under the EAJA. The EAJA defines a “party” as any individual whose net worth is less than $500,000 and “any other business doing business and located in the state, which is independently owned and operated, not dominant in its field, and which employs one hundred (100) or fewer persons at the time the adversary adjudication was initiated.” R.I.G.L. 42-92-2. The hearing officer held that the net-worth requirement applies to businesses as well as individuals and, since, plaintiffs did not establish that they had net worth under $500,000, they did not qualify for an award of attorney’s fees.

Plaintiffs appealed that decision to the Superior Court. The Court held that the EAJA provides two separate ways for litigants to qualify as parties: either as an individual with net worth under $500,000 or as a business meeting the other qualifications set forth in the statute. It noted that both the federal act on which the EAJA was modeled, 28 U.S.C. 2412(d), and other similar state statutes that do impose a net-worth requirement on business set forth a separate amount for businesses. In other states in which similar acts do not set forth a separate net-worth amount for businesses, courts have interpreted that requirement to apply only to individuals. Accordingly, the net-worth requirement in the Rhode Island EAJA should be interpreted to apply only to individuals.

Rollingwood Acres, Inc. v. Rhode Island Department of Environmental Management, P.C. No. 2012-6341, slip op. (R.I. Super. Aug. 26, 2013)

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