Gibson, Dunn & Crutcher's offices in Washington, D.C. Photo: Diego M. Radzinschi/ALM

Gibson, Dunn & Crutcher on Monday lost its bid for $800,000 in legal fees for the firm's pro bono victory in a major separation-of-powers challenge in the U.S. Supreme Court.

The U.S. Court of Appeals for the D.C. Circuit, in an order issued without comment, rejected the fee request in the case Lucia v. SEC. Chief Judge Merrick Garland and Judges Gregory Katsas and Neomi Rao did not participate in the decision. The total fee request amounted to $818,730.80 for more than 4,000 hours of work.

In Lucia, the high court ruled 7-2 that administrative law judges at the U.S. Securities and Exchange Commission are “officers” within the meaning of the Constitution’s appointments clause and the judge in Raymond Lucia’s case at the securities agency was not properly appointed. Lucia was entitled to a new hearing on securities charges before a properly appointed judge, the majority held.

The Supreme Court's ruling cast some uncertainty over the thousands of administrative law judges serving across the federal bureaucracy, and litigation has ensued over the scope of the court’s decision.

In December, Gibson Dunn partner Mark Perry, who successfully argued the Supreme Court case, filed the fee request under the Equal Access to Justice Act. The federal law provides that a "prevailing party" in litigation against the federal government is entitled to fees and expenses unless the government's position was "substantially justified." The government bears the burden of showing that its position had a "reasonable basis in both law and fact."

The Obama-era Justice Department had defended the SEC's position that its judges were lawfully sitting. Trump's DOJ switched positions at the Supreme Court and argued against the SEC's position. That switch complicated Gibson's Dunn fee petition.

Even after telling the Supreme Court that the Justice Department's prior litigating position was wrong, Perry said in the fee request, “the government refused to concede that the constitutional violation required a meaningful remedy—asking the Supreme Court, instead, merely to remand for ‘further proceedings.’ The Supreme Court rejected that position, too, holding that a ‘new hearing’ before a different adjudicator was required. In short, the government dug in its heels all the way to the end, and lost it all.”

The Justice Department and the SEC said in their response to Gibson Dunn's fee petition that the government's litigation position was reasonable. The government noted that "no other appellate court had evaluated the status of ALJs under the appointments clause" until the Lucia case was at the en banc stage in the D.C. Circuit.

"Indeed, the Justice Department not only defended the commission in this court, but had endorsed the same position for nearly two decades," the government said in its D.C. Circuit filing.

Despite the switched stance in the litigation, the government told the D.C. Circuit, "the solicitor general did not opine on the reasonableness of the government’s previous position."

Gibson Dunn's fee request sought an hourly rate of $125—the maximum allowed under the Equal Access to Justice Act—plus a cost-of-living adjustment. The cost-of-living adjustment for the Washington area results in claimed hourly rates of $196.32 in 2015, $198.48 in 2016, $200.67 in 2017 and $204.34 in 2018. The fee petition did not include the normal hourly rates for the Gibson Dunn partners and associates who worked on the case.

Perry and San Francisco-based partner Marc Fagel, co-chair of the firm’s securities enforcement team, were the lead attorneys, billing for 496.6 hours and 105.8 hours, respectively.

Eight associates also billed for their hours on the case. Overall, the firm said it dedicated 6,000 hours on Lucia’s case since 2015, when the SEC administrative law judge ruled against him.