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OVERRULING PRECEDENT, THE THIRD DEPARTMENT NOW ACCEPTS THE “CATALYST THEORY” WHICH, UNDER THE NYS EQUAL ACCESS TO JUSTICE ACT (EAJA), ALLOWS THE RECOVERY OF ATTORNEY’S FEES BY A PARTY WHO INSTIGATES LITIGATION AGAINST THE STATE AND THE STATE VOLUNTARILY GRANTS THE SOUGHT RELIEF WITHOUT FUTHER LITIGATION; THE “CATALYST THEORY” APPLIES ONLY WHERE THE PARTY “PREVAILS IN WHOLE,” NOT WHERE THE PARTY HAS ONLY “SUBSTANTIALLY PREVAILED” (THIRD DEPT).

The Third Department, reversing Supreme Court and overruling precedent, in a full-fledged opinion by Justice Aarons, determined petitioner was not precluded from an award of counsel fees because the agency petitioner sued, the Office of Temporary and Disability Housing (OTDA), voluntarily granted the relief petitioner sought without the need for further litigation. In so doing, the Third Department overruled Matter of Clarke v Annucci, 190 AD3d 1245, Third Dept 2021, which rejected the so-called catalyst theory and precluded recovery under the NYS Equal Access to Justice Act (EAJA) when the sued agency voluntarily grants the sought relief after litigation has been started: The “catalyst theory” is now accepted as valid in the Third Department where, as in this case, the party “prevails in whole,” but not where a party has only “substantially prevailed:”

The text of the state EAJA, the legislative record, our collective judicial experience and common sense all lead us to conclude that the Legislature could have rationally determined that parties who receive complete relief from the State after the commencement of litigation have prevailed “in whole” even if the State folds and gives it to them. * * *

… [W]e hold that a party prevails in whole when the party obtains all of the relief sought in a lawsuit against the State — including when that relief is granted voluntarily by the State after the action is commenced — and is thus a prevailing party under the state EAJA as a matter of law (see CPLR 8602 [f]). To the extent Clarke is to the contrary, it should no longer be followed. * * *

… [A]lthough we no longer read the state EAJA to require every prevailing party to obtain judicially sanctioned relief, we do not otherwise address a party “who prevails . . . in substantial part” (CPLR 8602 [f]). Petitioner’s case does not require us to resolve whether the catalyst theory applies where a party has substantially, but not wholly, prevailed. We continue to impose an additional requirement on a substantially prevailing party to show a win against the State on the merits of one or more “issues” in litigation, and a corresponding win by the State on the merits of one or more “separate issues” (CPLR 8602 [f] …). Therefore, a party claiming to have prevailed in substantial part must still demonstrate that relief was obtained on the merits in an outcome that changes the legal relationship between the party and the State — for example, a judgment on the merits or a settlement agreement. Matter of Markey v Tietz, 2025 NY Slip Op 04689, Third Dept 8-14-25

Practice Point: If a party starts litigation against the state and the state voluntarily grants the sought relief, the party is entitled to attorney’s fees under the NYS Equal Access to Justice Act (EAJA).

 

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