400 F.3d 939 (D.C. Cir. 2005), 04-5145, Select Milk Producers, Inc. v. Johanns

Docket Nº:04-5145.
Citation:400 F.3d 939
Party Name:SELECT MILK PRODUCERS, INC., et al., Appellees v. Mike JOHANNS, Secretary, U.S. Department of Agriculture, Appellant
Case Date:March 18, 2005
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit
 
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400 F.3d 939 (D.C. Cir. 2005)

SELECT MILK PRODUCERS, INC., et al., Appellees

v.

Mike JOHANNS, Secretary, U.S. Department of Agriculture, Appellant

No. 04-5145.

United States Court of Appeals, District of Columbia Circuit.

March 18, 2005.

Argued Jan. 14, 2005

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Appeal from the United States District Court for the District of Columbia (No. 01cv00060).

Michael E. Robinson, Attorney, U.S. Department of Justice, argued the cause for appellant. With him on the briefs were Peter D. Keisler, Assistant Attorney General, Kenneth L. Wainstein, U.S. Attorney, and Michael Jay Singer, Attorney. Susan K. Ullman, Attorney, entered an appearance.

Ryan K. Miltner argued the cause for appellees. With him on the brief were

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Benjamin F. Yale, Kristine H. Reed, and Donald M. Barnes.

Before: EDWARDS, HENDERSON, and RANDOLPH, Circuit Judges.

Dissenting opinion filed by Circuit Judge HENDERSON.

OPINION

HARRY T. EDWARDS, Circuit Judge.

The Secretary of Agriculture ("Secretary") appeals the District Court's award of attorney's fees and costs to several milk marketing cooperatives under the Equal Access to Justice Act ("EAJA"), 28 U.S.C. § 2412 (2000). The underlying litigation involved a dispute between the cooperatives and the Secretary over the price of Class III butterfat. The Secretary argues that the District Court erred in concluding that the milk cooperatives were "prevailing parties" under EAJA and in calculating the amount of the award.

The price of raw milk and its component parts is governed by a complex regulatory regime known as the Federal Milk Marketing Orders ("FMMO"). The Secretary administers the FMMO pursuant to authority under the Agricultural Marketing Agreement Act ("AMAA"), 7 U.S.C. § 601 et seq. (2000). Prior to 2000, the price under the FMMO for Class III butterfat (which is used to make hard cheeses) was the same as the price for Class IV butterfat (which is used to make butter and nonfat dry milk). In December of that year, the Secretary promulgated a rule creating a separate price for Class III butterfat. The new price, which was to be announced on February 2, 2001, would have applied retroactively to transactions that had taken place in January 2001. See Select Milk Producers, Inc. v. Veneman, 304 F.Supp.2d 45, 48-49 (D.D.C.2004).

Select Milk Producers, Inc., Continental Dairy Products, Inc., and Elite Milk Producers, Inc. (collectively "Milk Producers") are milk marketing cooperatives, which would have been subject to an immediate loss of an estimated $5,000,000 if the new price for Class III butterfat had taken effect. Id. at 53. On January 31, 2001, the District Court granted Milk Producers' motion for a preliminary injunction enjoining the Secretary from imposing a separate price for Class III butterfat. The Government did not appeal the preliminary injunction or otherwise seek to defend its position. Instead, the Secretary issued a new rule that did not include a separate price for Class III butterfat. The parties then stipulated to dismissal of the case as moot. See id. at 49-50.

On May 30, 2003, Milk Producers moved for an award of attorney's fees and costs under EAJA, which allows "prevailing parties" to obtain expenses in litigation against the federal government unless the Government's position is substantially justified. See 28 U.S.C. § 2412(d)(1)(A). The District Court concluded that Milk Producers were "prevailing parties" under EAJA and that the Secretary's position in seeking to implement the separate price for Class III butterfat was not substantially justified. Therefore, the court held that Milk Producers were entitled to attorney's fees and costs. See Select Milk, 304 F.Supp.2d at 50-54. The District Court also determined that two of Milk Producers' attorneys should be compensated for some of their hours at rates above EAJA's statutory cap, because the attorneys' expertise in the milk marketing regime was a "special factor" that warranted an enhanced fee under the statute. See id. at 55-57.

On appeal, the Secretary argues that Milk Producers were not "prevailing parties" under EAJA, and that, even if appellees were "prevailing parties," the District Court's fee enhancement award was an

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abuse of discretion. We affirm in part and reverse in part. First, we find that the preliminary injunction at issue in this case was a judgment that resulted in a court-ordered change in the legal relationship between the parties and gave Milk Producers the concrete and irreversible redress that they sought. Given these circumstances, Milk Producers are "prevailing parties" under EAJA. Second, we reverse the District Court's fee enhancement award. The established law of the circuit makes it clear that legal expertise acquired through practice is not a "special factor" justifying an enhanced fee award under EAJA.

I. BACKGROUND

The factual background of this case is recited at length in the District Court's opinion. See Select Milk Producers, Inc. v. Veneman, 304 F.Supp.2d 45 (D.D.C.2004) (" Select Milk "). Therefore, there is no need here for a detailed statement of facts. Rather, we will focus on the facts that are relevant to the disposition of this appeal.

The FMMO is a complex regulatory regime governing the price of raw milk and its components. Id. at 48. In order to amend market prices under the FMMO, the Secretary must provide notice and an opportunity for a hearing. See 7 U.S.C. § 608c(3) (2000). Under agency regulations, before conducting a hearing, the Secretary must first issue a Notice of Hearing, which, among other things, delineates the scope of the hearing. See 7 C.F.R. § 900.4(a) (2004). An Administrative Law Judge ("ALJ") then presides over the hearing, and, following the hearing, the Secretary issues a decision on the proposed amendment. See id. §§ 900.6, 900.13a. To become effective, the amendment must be ratified by a designated number of milk producers. See 7 U.S.C. § 608c(8), (9); 7 C.F.R. § 900.14.

In the Consolidated Appropriations Act of 2000, Pub.L. No. 106-113, 113 Stat. 1501 (1999), Congress directed the Secretary to conduct emergency rulemaking to amend the FMMO. The statute instructed the Secretary to issue amended regulations by December 1, 2000, and implement the resulting formulas for milk pricing by January 1, 2001. See id. Div. B., § 1008(a)(8), 113 Stat. 1536, 1501A-518. In response to this legislation, the Secretary published a Notice of Hearing in the Federal Register in April 2000, listing various proposals to amend the FMMO. See Milk in the Northeast and Other Marketing Areas; Notice of Hearing on Class III and Class IV Milk Pricing Formulas, 65 Fed.Reg. 20,094 (Apr. 14, 2000) ("April Notice"). Prior to the April Notice, the price for Class III butterfat had been the same as the price for Class IV butterfat, and the notice did not propose the creation of a separate price for Class III butterfat. In May 2000, an ALJ presided over a five-day hearing on the proposed amendments. During the hearing, one of the participants sought to raise the possibility of imposing a separate price for Class III butterfat. However, with the agreement of the Secretary's representative, the ALJ concluded that the issue was beyond the scope of the hearing. See Select Milk, 304 F.Supp.2d at 48.

Thus, it is uncontested that the Secretary never gave notice of the possibility of a separate price for Class III butterfat, and this matter was never pursued as an issue in the hearing before the ALJ. Nonetheless, in December 2000, the Secretary issued a tentative final decision that, inter alia, created a separate price for Class III butterfat. See Milk in the Northeast and Other Marketing Areas; Tentative Decision on Proposed Amendments and Opportunity To File Written Exceptions to Tentative Marketing Agreements and to Orders, 65 Fed.Reg. 76,832

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(Dec. 7, 2000) ("Tentative Decision"). The new Class III butterfat price was scheduled to be announced on February 2, 2001, retroactive to January 1 of that year. See Select Milk, 304 F.Supp.2d at 49. After the Tentative Decision was approved by more than the required number of dairy producers, the Secretary promulgated an interim rule amending the FMMO in order to implement the new prices. See Milk in the Northeast and Other Marketing Areas; Interim Amendment of Orders, 65 Fed.Reg. 82,832 (Dec. 28, 2000) ("December 2000 rule").

Milk Producers sought a preliminary injunction in District Court to prevent the implementation of the December 2000 rule, arguing that the Secretary had failed to comply with the notice and hearing procedures for amending the FMMO as mandated by the AMAA and agency regulations. On January 31, 2001, the District Court granted Milk Producers the relief they requested, entering a preliminary injunction that enjoined the Secretary from imposing the separate Class III butterfat price. Select Milk Producers, Inc. v. Glickman, No. 01-00060 (D.D.C. Jan. 31, 2001) ("2001 preliminary injunction"), reprinted in Joint Appendix ("J.A.") 30.

The consequences of the 2001 preliminary injunction were significant. The District Court found that, absent the injunction, "[t]he retroactive nature of the [Secretary's] price announcement meant that on February 2, 2001, [Milk Producers] would [have been] subject to an immediate loss of an estimated $5,000,000." Select Milk, 304 F.Supp.2d at 53. This loss would have resulted from transactions between Milk Producers and third parties that were consummated in January 2001. See id. The District Court also found that, had the new Class III butterfat price taken effect, Milk Producers' loss could not have been recovered. Thus, the trial court held that "a preliminary injunction was the only effective relief [that Milk Producers] could seek." Id. And in avoiding...

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