May 16, 2009

On Thursday, May 14, 2009 the Minnesota Legislature enacted an amendment to the Minnesota Equal Access to Justice Act (MEAJA) that benefits small businesses and their owners. The newly enacted law, lifting or eliminating the $125 per hour fee cap, may appear on the surface to be not be that significant. Small businesses will benefit greatly from the bill in the future. A link to the bill is found at https://www.revisor.leg.state.mn.us/bin/bldbill.php?bill=H1529.0.html&session=ls86  The Minnesota Senate must pass a procedural vote and then the law will be presented to Governor Tim Pawlenty for signature.

MEAJA provides small businesses and their officers with an opportunity to recover their attorneys fees and costs when they can show that the State of Minnesota, or one of its agencies, legal claims were not substantially justified or had no basis in law or fact before and during the litigation. MEAJA, which was originally enacted in Minnesota in 1986, is patterned after the federal Equal Access to Justice Act. Thirty seven other states have passed similar laws.

How will the 2009 MEAJA amendment help small businesses?

If a small business finds itself defending an unmeritorious action brought by the State, it may seek an award of fees and costs. Prior to the 2009 amendment, a party could generally recover its attorneys fees, but at a rate of no more than $125 per hour. That hourly rate cap was set when MEAJA was initially enacted in the 1980s and has not been revisited. Since then, rates for legal services (like costs for many things) have risen substantially in the intervening years. Most attorneys in Minnesota charge more (sometimes substantially more) than $125 per hour. As a result, a party’s award of attorney fees was limited by the hourly fee cap explicitly stated in MEAJA.  

In certain MEAJA cases, a prevailing party whose counsel charges in excess of $125 per hour may only be able to cover a portion of its fees. In other words if an attorney spent 75 hours on a case and billed at a rate of $250 per hour.  The client would be charged $18,750 to defend against the State of Minnesota, but a MEAJA fee recovery would be limited to only $9,375.  By adopting the MEAJA amendment, the Minnesota Legislature remedied this unfair result.  

Now, because there is no hourly fee cap, the court may award attorneys at the prevailing rate. As a practical matter, this means that an attorney whose client prevails in a case brought by the State and is eligible for a MEAJA award must present a fee affidavit documenting the hours spent on the case to the court. The presiding judge will review the affidavit, including the hours worked and fees charged and render a decision as to the appropriateness of the fees that will be awarded under MEAJA.  

Who was involved in passage of this important amendment to MEAJA? 

The bill was initially sponsored by Senator Don Betzold (DFL-Fridley). The House sponsor was Representative Joe Mullery (DFL-Minneapolis). Senator Betzold and Representative Mullery sheparded the bills through Committee hearings and ultimate passage on the floor of the Minnesota Senate and Minnesota House of Representatives, respectively.

Mike Hickey, State Director of the National Federation of Independent Business (NFIB), provided support with testimony and background information. Mike Hickey asked Hessian & McKasy Environmental Law Attorney Practice Group lawyer Joe Maternowski, who has extensive experience with MEAJA claims, to testify in support of the amendment. In his career in private practice as an environmental attorney, Joe Maternowski represented parties who received two of the highest fee awards – $62,000 and $111,000 – ever granted under MEAJA. Both awards were paid to Mr. Maternowski’s clients by the Minnesota Pollution Control Agency (MPCA).

The views expressed here are my own and do not reflect the views of my employer, Hessian & McKasy. P.A.

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