UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT
Petition for Rehearing Denied June 30, 1988.
On Motion for Attorney Fees and Expenses.
Edwards and Ruth Bader Ginsburg, Circuit Judges, and MacKinnon, Senior Circuit Judge.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE EDWARDS
James Wilkett seeks an award of attorney fees and expenses under the Equal Access to Justice Act , 28 U.S.C. § 2412 (1982 & Supp. III 1985), as the prevailing party in a case against the Interstate Commerce Commission . See Wilkett v. ICC, 269 U.S. App. D.C. 249, 710 F.2d 861 (1983). The disposition of this case has been long delayed because the original request for fees languished unnoticed in the Clerk's Office for almost four years. We express our regrets for this unfortunate situation, especially since there is no good excuse for the mishandling of Wilkett's initial application for fees.
Albeit belatedly, we now conclude that a fee award is appropriate, because the position of the United States in agency proceedings and in litigation before this court lacked substantial justification and because no special circumstances render an award unjust. We find, however, that two of the Government's objections to the amounts claimed by Wilkett are valid. We have therefore modified the requested award accordingly. I. BACKGROUND
Wilkett Trucking Company ("Wilkett Trucking"), a family business owned by James Wilkett, began operations in 1975 and received its first ICC license in 1978. In March 1981, it applied to the ICC for expanded authority to transport coal from all points in Oklahoma to any point in Texas. The ICC denied Wilkett Trucking's license application because James Wilkett had been convicted in 1981 of second-degree murder under Oklahoma law and conspiracy to distribute a controlled substance in violation of 21 U.S.C. § 846 (1976). In the ICC's judgment, Wilkett's evident disregard for the law rendered him unfit to hold a license, and his ownership of Wilkett Trucking in turn rendered the company unfit for the ICC authorization it had requested.
Wilkett appealed the ICC's decision to this court. The ICC thereupon requested us to remand the case for reconsideration, which we did. Upon reconsideration, the ICC affirmed its earlier denial of Wilkett Trucking's license application. Wilkett again appealed.
This time we reached the merits and reversed. Finding that the ICC's decision constituted "an unexplained departure from previously applied standards," we ruled that the ICC's denial of Wilkett Trucking's application was arbitrary and capricious. Wilkett v. ICC, 228 U.S. App. D.C. 350, 710 F.2d 861, 865 (1983). Accordingly, we remanded the case to the ICC "for the purpose of promptly issuing the authority with such reasonable time limitations as it deems necessary." Id.
On July 22, 1983, Wilkett filed a timely application for attorney fees and other expenses under the EAJA, including fees and expenses incurred in making the fee application. The Government opposed Wilkett's application. Wilkett submitted a reply to the Government's objections (for the preparation of which Wilkett also requested attorney fees and expenses), and the Government responded with a second memorandum. Due to a clerical error in the Court Clerk's Office, the panel that decided Wilkett's appeal was not notified of his attorney fee application until four years later, when Wilkett inquired into the delay. On October 14, 1987, we directed the parties to submit supplemental memoranda addressing the ramifications for Wilkett's application of the 1985 amendments to the EAJA and of pertinent judicial decisions issued since the time of Wilkett's initial application. II. ANALYSIS
Section 2412(d)(1)(Supp. III 1985) provides:
Except as otherwise specifically provided by statute, a court shall award to a prevailing party other than the United States fees and other expenses, in addition to any costs awarded pursuant to subsection (a), incurred by that party in any civil action (other than cases sounding in tort), including proceedings for judicial review of agency action, brought by or against the United States in any court having jurisdiction of that action, unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.
The Government does not deny that Wilkett meets the statutory definition of a "party" or that he prevailed in his appeal. Nor is there any longer reason to doubt that Wilkett's suit constituted a "civil action" not sounding in tort. To be sure, in 1983 the Government contended that judicial review of an agency licensing decision was not a "civil action" for purposes of 28 U.S.C. § 2412 because another provision of the EAJA, codified at 5 U.S.C. § 504(b)(1)(1982), explicitly precluded an award of attorney fees in connection with agency proceedings "for the purpose of granting or renewing a license." The 1985 amendments to the EAJA, however, added the phrase "including proceedings for judicial review of agency action" to clarify the unexplained existing reference to "any civil action." Equal Access to Justice Act, Extension and Amendment of 1985, Pub. L. No. 99-80, § 2(a)(2), 99 Stat. 183, 184. The Government apparently concedes that this addition eviscerates its former objection. See Respondents' Supplemental Memorandum in Opposition to Petitioner's Application for Fees and Other Expenses at 4 n.3. In light of the change, Wilkett's suit plainly falls within the statutory definition of "any civil action." *fn1
Because these prerequisites have been met, our analysis must proceed in three stages. First, we must ascertain whether the Government's position was "substantially justified." If it was not, then we must further ask whether "special circumstances" would render an award of attorney fees unjust. If the answer to this question is also negative, we must, finally, consider the Government's objections to the amount of the fees Wilkett claims.
A. Was the Position of the United States "Substantially Justified" ?
In determining whether the Government's position was substantially justified, we must examine the ICC's actions and explanations as well as the Government's arguments before this court. The EAJA, as amended, defines the "position of the United States" to mean, "in addition to the position taken by the United States in the civil action, the action or failure to act by the agency upon which the civil action is based." 28 U.S.C. § 2412(d)(2)(Supp. III 1985). The EAJA further provides that "whether or not the position of the United States was substantially justified shall be determined on the basis of the record (including the record with respect to the action or failure to act by the agency upon which the civil action is based) which is made in the civil action for which fees and other expenses are sought." 28 U.S.C. § 2412(d)(1)(Supp. III 1985). The burden of proving that its position was substantially justified both in agency proceedings and in litigation rests with the Government. See Federal Election Comm'n v. Rose, 256 U.S. App. D.C. 395, 806 F.2d 1081, 1086-87 & n.12 (D.C. Cir. 1986); Spencer v. NLRB, 229 U.S. App. D.C. 225, 712 F.2d 539, 557 (D.C. Cir. 1983), cert. denied, 466 U.S. 936, 104 S. Ct. 1908, 80 L. Ed. 2d 457 (1984).
Under the law of this circuit, the Government's position was "substantially justified" if the Government "acted slightly more than reasonably, even though not in compliance with substantive legal standards applied in the merits phase" of the litigation. Rose, 806 F.2d at 1087; see also Baker v. Commissioner, 252 U.S. App. D.C. 81, 787 F.2d 637, 643 n.10 (D.C. Cir. 1986); Blitz v. Donovan, 239 U.S. App. D.C. 138, 740 F.2d 1241, 1244 (D.C. Cir. 1984); Spencer, 712 F.2d at 558. A finding that an agency acted arbitrarily and capriciously within the meaning of the Administrative Procedure Act, 5 U.S.C. § 706(2), does not preclude the Government from demonstrating that the agency's actions and its conduct in litigation were "substantially justified." Some types of arbitrary and capricious behavior, such as an agency's failure to provide an adequate explanation for its actions or its failure to consider some relevant factor in reaching its decision, may not warrant a finding that an agency's action lacked substantial justification under applicable statutes or regulations. See, e.g., Rose, 806 F.2d at 1087-89. However, a finding that an agency acted arbitrarily and capriciously by denying equal treatment to two similarly situated parties, or by failing to enforce a rule in a situation to which it plainly applied, renders it much more likely that the Government's action was not substantially justified. See Rose, 806 F.2d at 1089.
On the facts of this case, we find that the Government has failed to satisfy its burden of showing that its position was substantially justified. The ICC's actions and the Government's arguments before this court clearly fail this circuit's test of "slightly more stringent than 'one of reasonableness.'" Spencer, 712 F.2d at 558. Indeed, they do not even deserve the appellation "reasonable." *fn2
In denying Wilkett Trucking's license application, the ICC considered only the owner's fitness for the expanded authority. Moreover, it based its decision solely on James Wilkett's criminal convictions, not on his record of compliance with ICC regulations. We described this approach as "misdirected" and "unreasonable" in overturning the ICC's decision:
Notwithstanding the fact that the grant of authority will be issued to the [Wilkett Trucking] Company, the Commission focused solely upon the fitness of the individual proprietor, James Wilkett. Such an inquiry is misdirected. While the proprietor's fitness may be relevant, the primary focus should be upon the Company's record of operations. In this instance, the record reveals and the Commission acknowledges that since commencing operations in 1978, Wilkett Trucking has never been cited for violation of Commission rules or regulations. The Company has demonstrated its commitment to continued lawful service. . . . There is no record evidence to suggest that the company would operate unlawfully in the future. . . . The Commission based its conclusion that the Company was unfit solely upon its view that James Wilkett's convictions were indicative of a predisposition on the part of the Company to violate trucking statutes and regulations. That conclusion is unreasonable.
Wilkett, 710 F.2d at 863-64.
We further noted that, "in addition to improperly equating James Wilkett's fitness with that of the Company, the Commission also disregarded its own standards for evaluating fitness." Id. at 864. The ICC's decision betrayed a gross failure to use the test it had
In its Wilkett decisions, the Commission did not apply its aforequoted standards and philosophy in evaluating the fitness issue. Such an unexplained departure from previously applied standards suggests that the Commission's decision in this case is arbitrary and capricious. The Commission's decisions in [ Allan B. Robbins, d/b/a Robbins Trailer Service, No. MC-160342 (I.C.C. Oct. 13, 1982),] and Wilkett are difficult to reconcile and, at the least, suggest an inconsistency in decision-making.
Id. at 865 (citations omitted).
The Government suggests that the agency's position was substantially justified, and that our opinion not only recognizes the arguable merit in the agency's position by describing the ICC's actions as merely "misdirected," but faults it primarily for its failure to offer a justification for its actions, not for their being unjustifiable. The Government's reading of our opinion, however, is untenable. We described the ICC's exclusive focus on James Wilkett's criminal offenses not only as "misdirected," but as positively "unreasonable." And while our opinion admittedly focused on the ICC's failure to explain its decision, particularly in light of clearly contrary agency precedent, our holding perforce assumed that no adequate explanation was possible. We did not simply remand the case to the ICC for a fuller statement of reasons on behalf of its decision. Rather, we granted Wilkett Trucking's petition for review and reversed the ICC's decision "because the Commission failed to apply its usual standards in adjudging fitness." 710 F.2d at 865. "As the finding of unfitness is clearly in error," we said, "the Commission is directed to issue the authority requested." Id. We could not have stated more plainly that the ICC's actions lacked substantial justification.
A cursory review of the relevant factors listed in Spencer, 712 F.2d at 559-61, buttresses this conclusion. Although those factors were designed to guide a court in determining whether the Government's stance in litigation, as opposed to the underlying agency action, was substantially justified, they remain relevant to our inquiry, both because the "position of the United States" includes its litigating posture and because two of these factors may be used to assess the justifiability of agency action as well. One of the factors mentioned in Spencer -the clarity of the governing law-certainly militates in favor of awarding attorney fees. In Wilkett, we found that the ICC failed to apply the test of fitness it had "consistently" applied in the past, and that when the test was properly applied, the ICC's "finding of unfitness [was] clearly in error." Wilkett, 710 F.2d at 865. A second factor discussed in Spencer -the consistency of the Government's position-again favors Wilkett's application. The ICC's decision in Wilkett cannot easily be reconciled with its ruling in Robbins. We were unable to square the two cases when we reached our decision on the merits, and the ...