This case poses a question of first impression in our circuit--whether the Supreme Court's decision in Farrar v. Hobby, --- U.S. ----, 113 S. Ct. 566, 121 L. Ed. 2d 494 (1992), requires us to abandon our long-held rule that plaintiffs who attain the relief they seek through defendants' voluntary action can be "prevailing parties" for purposes of the civil rights attorney's fees statute, 42 U.S.C. Sec. 1988.1 We hold that it does not.

Plaintiffs filed this class action lawsuit in February 1987, challenging a modification in the resource eligibility rules of the Indiana Medicaid Program that was to become effective the following month. Prior to the change, real property that was either producing income or on the market to be sold at its fair market value was not included among an applicant's "available resources." The new rule abolished the protection of property that was for sale and adopted the "$6000/6%" rule for income producing property--only $6000 worth of property producing a return rate of at least 6% would be exempted. Class members were Indiana Medicaid applicants and recipients who would become ineligible under the new rule. On August 1, 1989, however, nearly two years into the litigation, the Indiana Department of Public Welfare reinstated the pre-1987 rule, and the case was voluntarily dismissed as moot.

Plaintiffs then sought to recover their attorney's fees from the Indiana defendant (Sullivan) under section 1988.2 Citing the Supreme Court's decision in Farrar, the district court found that the plaintiffs were not "prevailing parties" for purposes of section 1988 because, although they had attained the relief they sought, they had not won an "enforceable judgment." The plaintiffs now appeal the district court's denial of their fees petition, and we reverse.

We have long recognized that a plaintiff may be a prevailing party for purposes of section 1988 even if the defendant voluntarily provides the relief sought rather than litigating the suit to judgment. See, e.g., Stewart v. McGinnis, 5 F.3d 1031, 1039 (7th Cir.1993), cert. denied, --- U.S. ----, 114 S. Ct. 1075, 127 L. Ed. 2d 393 (1994); Nanetti v. University of Illinois, 867 F.2d 990, 992-93 (7th Cir.1989); Gekas v. Attorney Registration and Disciplinary Comm'n, 793 F.2d 846, 849 (7th Cir.1986). In Stewart, we explained that plaintiffs seeking fees in such cases must satisfy two requirements:

First, "the plaintiff['s] lawsuit must be causally linked to the achievement of the relief obtained," and second, "the defendant must not have acted wholly gratuitously, i.e. the plaintiff['s] claim[ ], if pressed, cannot have been frivolous, unreasonable, or groundless."

5 F.3d at 1039 (quoting Illinois Welfare Rights Organization v. Miller, 723 F.2d 564, 566 (7th Cir.1983)).3 This approach, known as the "catalyst rule," is not unique to this circuit, but has enjoyed nearly unanimous approval in various forms from the other federal circuits as well. See Baumgartner v. Harrisburg Housing Auth., 21 F.3d 541, 545 n. 3 (3d Cir.1994) (collecting cases). Indeed, even the Supreme Court has recognized that fees can be appropriately awarded when a suit has been mooted due to the defendant's voluntary action. In Hewitt v. Helms, 482 U.S. 755, 760-61, 107 S. Ct. 2672, 2675-76, 96 L. Ed. 2d 654 (1987), for example, the Court noted:

It is settled law, of course, that relief need not be judicially decreed in order to justify a fee award under Sec. 1988. A lawsuit sometimes produces voluntary action by the defendant that affords the plaintiff all or some of the relief he sought through a judgment--e.g., a monetary settlement or a change in conduct that redresses the plaintiff's grievances. When that occurs, the plaintiff is deemed to have prevailed despite the absence of a formal judgment in his favor.

(citing Maher v. Gagne, 448 U.S. 122, 129, 100 S. Ct. 2570, 2574, 65 L. Ed. 2d 653 (1980).)4

Although not actually addressing the issue, Farrar included some language that can be read to conflict with the award of attorney's fees when defendants' action has been purely voluntary. Farrar discussed whether a plaintiff who had received nominal damages could be considered a prevailing party for purposes of section 1988. The Court held that although such plaintiffs were indeed prevailing parties, they nonetheless were not entitled to attorney's fees. In reaching that result, the Court reviewed its own prevailing party jurisprudence and derived this principle:

[T]o qualify as a prevailing party, a civil rights plaintiff must obtain at least some relief on the merits of his claim. The plaintiff must obtain an enforceable judgment against the defendant from whom fees are sought, Hewitt [v. Helms, 482 U.S. 755, 760, 107 S. Ct. 2672, 2675-2676, 96 L. Ed. 2d 654 (1987) ], or comparable relief through a consent decree or settlement, Maher v. Gagne, 448 U.S. 122, 129 [100 S. Ct. 2570, 2574-75, 65 L. Ed. 2d 653] (1980).

--- U.S. at ----, 113 S. Ct. at 573. The Court emphasized that " '[t]he touchstone of the prevailing party inquiry must be the material alteration of the legal relationship of the parties' " (id., quoting Texas State Teachers Assn. v. Garland Independent School Dist., 489 U.S. 782, 792-93, 109 S. Ct. 1486, 1493-94, 103 L. Ed. 2d 866 (1989)), and reasoned that:

No material alteration of the legal relationship between the parties occurs until the plaintiff becomes entitled to enforce a judgment, consent decree, or settlement against the defendant.

Id. --- U.S. at ----, 113 S. Ct. at 574. Based on those passages, the district court concluded that a voluntary change in the defendant's behavior could no longer suffice to confer prevailing party status, and that plaintiffs could not receive fees unless they had obtained an enforceable judgment. The Fourth Circuit, sitting en banc, recently reached the same conclusion by a vote of 7-6 in S-1 and S-2 v. State Bd. of Educ. of N. Carolina, 21 F.3d 49 (4th Cir.1994).

The Fourth Circuit is alone, however, in its reading of Farrar. The Third, Fifth, Eighth and Tenth Circuits have all held that their versions of the catalyst rule survive Farrar. See Baumgartner v. Harrisburg Housing Auth., 21 F.3d 541 (3d Cir.1994); Craig v. Gregg County, Texas, 988 F.2d 18, 20-21 (5th Cir.1993);5 Little Rock School Dist. v. Pulaski County Special School Dist., No. 1, 17 F.3d 260, 263 n. 2 (8th Cir.1994); American Council of the Blind, Inc. v. Romer, 992 F.2d 249, 250-51 (10th Cir.), cert. denied, --- U.S. ----, 114 S. Ct. 184, 126 L. Ed. 2d 143 (1993);6 see also Beard v. Teska, 31 F.3d 942, 951-52 (10th Cir. 1994). In addition, the First and Sixth Circuits have each cited Farrar for various purposes in cases that employ their catalyst rules, suggesting that although apparently not faced directly with the question, the courts perceived no outright conflict between the two. See Paris v. United States Dept. of Housing and Urban Development, 988 F.2d 236, 238 (1st Cir.1993); Citizens Against Tax Waste v. Westerville City School, 985 F.2d 255, 257-58 (6th Cir.1993).

We agree that Farrar does not preclude the award of fees when plaintiffs attain the relief they seek through defendants' voluntary action. We simply find it implausible that the Supreme Court meant to abolish a rule employed by nearly every circuit and previously recognized by the Court itself as "settled law," without expressly indicating that it was doing so. As the Third Circuit noted in Baumgartner, "it is not likely that the Supreme Court would overturn such a wide-spread theory without even once mentioning it, particularly when it was inapplicable to the case at hand." 21 F.3d at 547. And any possible doubt about the Court's intent is put to rest, in our view, by the fact that the same passages that have been read to preclude the award of fees when defendants have acted voluntarily are derived from and cite the very cases (Helms and Maher) in which the Supreme Court has approved that practice. See Farrar, --- U.S. at ----, 113 S. Ct. at 573; see also supra at 275.

We therefore hold that plaintiffs who attain the relief they seek through defendants' voluntary action may qualify for fees by way of the catalyst theory notwithstanding Farrar. We reverse the district court's holding to the contrary and remand for the court to determine whether the plaintiffs have prevailed under that approach.7

MANION, Circuit Judge, dissenting.

Farrar v. Hobby, --- U.S. ----, 113 S. Ct. 566, 121 L. Ed. 2d 494 (1992), has placed the lower courts at a fork in the road by stating: "[T]o qualify as a prevailing party, a civil rights plaintiff must obtain at least some relief on the merits of his claim. The Plaintiff must obtain an enforceable judgment against the defendant from whom fees are sought or comparable relief through a consent decree or settlement." Id. --- U.S. at ----, 113 S. Ct. at 573 (citations omitted). Several circuits, and now the Seventh, have declared or implied that this language is mere dicta and thus not a valid standard for determining a prevailing party. Instead, the so-called "catalyst rule" is still the proper test. (Opn. at 274.) See Baumgartner v. Harrisburg Hous. Auth., 21 F.3d 541 (3d Cir.1994); Little Rock Sch. Dist. v. Pulaski County Special Sch. Dist., No. 1, 17 F.3d 260, 263 n. 2 (8th Cir.1994); American Council of the Blind of Colo., Inc. v. Romer, 992 F.2d 249, 250-51 (10th Cir.1993).1 The Fourth Circuit, in a divided en banc decision, S-1 and S-2 v. State Bd. of Educ. of N.C., 21 F.3d 49, 51 (4th Cir.1994), has followed a different course.2 In following Farrar that court held: "A person may not be a 'prevailing party' plaintiff under 42 U.S.C. Sec. 1988 except by virtue of having obtained an enforceable judgment, consent decree, or settlement giving some of the legal relief sought...." I find the Fourth Circuit's analysis compelling and would thus follow its lead down that path less traveled. Because the Zinns have not obtained an "enforceable judgment, consent decree, or settlement," Farrar, --- U.S. at ----, 113 S. Ct. at 573, I conclude that they are not "prevailing parties."

Moreover, even under the expansive "catalyst rule" the Zinns fall short. The catalyst rule requires that "the plaintiffs' lawsuit must be causally linked to the achievement of the relief obtained." In re Burlington N., Emp. Practices Lit., 832 F.2d 422, 425 (7th Cir.1987) (quoting Harrington v. DeVito, 656 F.2d 264, 266-67 (7th Cir.1981). The impetus for Indiana's change in its resource eligibility rules was not the Zinns' lawsuit; rather it was a change in federal law. Some additional facts help to understand the distinction. Prior to March of 1987, Indiana's Medicaid Program did not include as "available resources" real property that was either producing income or on the market to be sold at its fair market value. But after that date, the Department of Health and Human Services required Indiana to count these assets as "available resources." Accordingly, Indiana modified its resource rules to comply with federal requirements. The Zinns filed this class action challenging Indiana's modification. In their lawsuit the Zinns adamantly maintained that a ruling by a division of the Department of Health and Human Services caused Indiana to change its rules to the detriment of the Zinns. While the lawsuit was pending, the federal government passed the Medicare Catastrophic Coverage Act of 1988. This caused Health and Human Services to change its rules, which enabled Indiana to return to its former and more generous method of determining eligibility. Indiana thus modified its "resource eligibility" rules so that once again real property that was either producing income or on the market to be sold at its fair market value was not included as "available resources." The parties stipulated that this case should be dismissed because the Act rendered the case moot. These facts demonstrate that the causal link to Indiana's modification of its "eligibility rules" was the change in the federal law, not the Zinns' lawsuit.3 The Zinns, therefore, could not recover even under the catalyst rule.

For the above reasons I respectfully dissent.