Inclusion, Inc. v. Idaho Department of Health & Welfare
161 Idaho 239
| Idaho | 2016Background
- Inclusion, Inc., Inclusion North, Inc., and Inclusion South, Inc. sued the Idaho Department of Health and Welfare (IDHW) alleging breach of Medicaid provider agreements and related claims for underpayment of services.
- The district court granted summary judgment for IDHW, disposing of Inclusion’s claims.
- IDHW sought attorney fees under I.C. § 12-120(3), requesting $74,925 based on 599.4 hours at a $125 market-based hourly rate (though the Attorney General’s internal billing rate/SWCAP was $54/hour).
- The district court found the hours and market hourly rate reasonable but reduced the award to $30,857.11 by applying the AG’s $54/hour SWCAP rate, reasoning fees awarded to a party should not exceed the amount the client actually paid and to avoid alleged fee-splitting or profit.
- IDHW appealed, arguing the court abused its discretion by basing the award on amounts actually billed rather than on the reasonable market rate and hours.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether district court abused discretion in fashioning § 12-120(3) fee award | Inclusion argued (implicitly) the reduced award was proper because fees should not exceed actual costs billed | IDHW argued the award should be based on reasonable hours and market rates, not the client’s internal billed cost | Court held district court abused its discretion; award must be based on reasonable hours and rates (granted IDHW $74,925) |
| Whether fee awards under § 12-120(3) must equal actual fees paid | Inclusion/district court implied fees should be limited to actual amounts paid to avoid profit/fee-splitting | IDHW argued reasonable fees need not equal actual amounts paid and precedent allows recovery even when no actual fees were incurred | Court held Idaho law does not equate reasonable fees with actual fees paid; actual payments are not the controlling measure |
| Whether using the Attorney General’s SWCAP rate raises ethical fee-splitting concerns | District court suggested award at market rate might constitute improper fee-splitting with nonlawyers | IDHW argued the statutory fee belongs to the prevailing party (the State), not the lawyers, so no prohibited fee-splitting occurs | Court held no unethical fee-splitting; statutory award goes to the prevailing party/state, so Rule 5.4(a) concerns inapplicable |
| Whether prevailing party is entitled to fees on appeal under § 12-120(3) | Both parties sought fee entitlement; IDHW sought fees as prevailing appellant | Inclusion argued (implicitly) it was not prevailing | Court held IDHW prevailed on appeal and is entitled to reasonable attorney fees and costs on appeal |
Key Cases Cited
- Smith v. Mitton, 140 Idaho 893, 104 P.3d 367 (discretionary standard for attorney fee awards)
- Swallow v. Emergency Med. of Idaho, P.A., 138 Idaho 589, 67 P.3d 68 (standards for abuse of discretion review)
- Mihalka v. Shepherd, 145 Idaho 547, 181 P.3d 473 (factors for reasonableness of attorney fees under I.R.C.P. 54(e)(3))
- Kidwell v. U.S. Mktg., Inc., 102 Idaho 451, 631 P.2d 622 (prevailing party may recover fees even if no actual fees were incurred)
- In re Dunmire, 100 Idaho 697, 604 P.2d 711 (salaried staff attorneys may recover fees as if private lawyers)
- Copeland v. Marshall, 641 F.2d 880 (D.C. Cir.) (criticizing cost-based inquiries for fee awards; invasive discovery concerns)
- Kugler v. Nelson, 160 Idaho 408, 374 P.3d 571 (prevailing party entitled to fees on appeal under § 12-120(3))