Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 73-C-3014, 74-C-183 -- James B. Parson, Judge.
Before Cummings, Chief Judge, Swygert, Senior Circuit Judge, and Cudahy, Circuit Judge.
In 1973 plaintiff-appellee Robert Tidwell, for himself and on behalf of a class similarly situated, filed a complaint against the Director of the Illinois Department of Mental Health ("DMH").*fn1 An amended complaint was later filed in which Tidwell named the Secretary of the United States Department of Health, Education and Welfare*fn2 and the Administrator of the Social Security Administration*fn3 as additional defendants ("federal defendants"). In 1974 plaintiff-appellee Robert Schreckenberg, for himself and on behalf of others similarly situated, filed a suit identical to the Tidwell complaint. The two suits were consolidated pursuant to the state defendant's motion.*fn4 The plaintiffs challenged the statutory and regulatory scheme providing for the payment of Social Security disability benefits ("Social Security benefits" or "disability benefits") to institutionalized mental patients.
Specifically, plaintiffs alleged that their disability benefits were unlawfully seized by the state and federal defendants in violation of 42 U.S.C. §§ 407 and 1983 and the Fifth and Fourteenth Amendments of the Constitution. The plaintiffs' disability benefits were subject to seizure by one of two methods:
(1) If a patient entering an Illinois institution was determined to be competent, the patient was asked to sign DMH Form 623. The form allowed the state to accumulate disability benefits and other assets in a trust fund. When the assets in the fund reached $400, the state could use the surplus to pay the support costs incurred by the patient at the institution. DMH Form 623 did not disclose to the patient that the patient would be cared for regardless of whether the form was signed, that the agreement was revocable at any time or that the agreement covered Social Security disability benefits, which were not otherwise subject to legal process. See Figure I.
(2) If a patient was determined to be incompetent, a representative payee was appointed to receive the patient's disability benefits. The superintendent of the patient's institution was appointed as the payee if there was no other person available, such as a family member, to serve in that capacity. The process for appointing a representative payee did not provide notice to the patient or an opportunity for the patient to submit evidence. Once a representative payee was appointed, the disability benefits were accumulated in a trust fund identical to that used in conjunction with Form 623. See Figure I.
A three-judge court was impaneled to consider the issues raised by this suit. On June 23, 1976 the court found that the Illinois statutory and regulatory scheme involving the use of DMH Form 623 was in conflict with 42 U.S.C. § 407 and, therefore, violated the supremacy clause of the Constitution. The three-judge court also found that the appointment of an Illinois institutional superintendent as a representative payee was not per se unlawful, but that the procedures actually used to appoint such a payee violated due process standards. The court ordered specific remedial steps to cure both violations.
Subsequent to this ruling, both the State and the federal defendants altered their procedures relating to patients' disability benefits. On March 5, 1979 the three-judge court amended its 1976 order and determined that the revised federal procedures for appointing a representative payee now comported with due process. The court also found that revised DMH Form 623 was no longer an assignment in violation of 42 U.S.C. § 407. Additionally, Tidwell's motion for class certification was granted.
After this decision, plaintiffs' attorneys filed motions in the Northern District of Illinois pursuant to 42 U.S.C. § 1988 requesting attorney's fees against both the State and federal defendants. The court concluded that fees could not be awarded against the federal defendants and Tidwell voluntarily reduced fees attributable solely to these defendants. On February 6, 1981, the district court held that the State was responsible for all remaining attorney's fees and applied a 1.5 lodestar multiplier to the hourly rates of all attorneys and paralegals.
The State now appeals from the final judgment of the court on four grounds:
(1) Tidwell did not have standing to challenge the legality of DMH Form 623;
(2) the original Form 623 was not an assignment in violation of 42 U.S.C. § 407;
(3) the district court erred in awarding attorney's fees; and,
(4) the district court erred in failing to apportion attorney's fees between the state and federal defendants and by ...