Keasler v. U.S.

• Decision Date: 03 July 1985
• Docket Number: No. 84-1904,84-1904
• Citation: 766 F.2d 1227
• Parties: -5490, 85-2 USTC P 16,440 Lawrence KEASLER and Keasler Body Company, Inc., Appellee, v. UNITED STATES of America, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1227

766 F.2d 1227

56 A.F.T.R.2d 85-5490, 85-2 USTC P 16,440

Lawrence KEASLER and Keasler Body Company, Inc., Appellee, v. UNITED STATES of America, Appellant.

No. 84-1904.

United States Court of Appeals,

Eighth Circuit.

Submitted March 13, 1985.

Decided July 3, 1985.

John A. Dudeck, Jr., Tax Div., Washington, D.C., for appellant.

Robert B. Branch, Sr., Paragould, Ark., for appellee.

Before JOHN R. GIBSON, Circuit Judge, FLOYD R. GIBSON, Senior Circuit Judge, and BOWMAN, Circuit Judge.

JOHN R. GIBSON, Circuit Judge.

Lawrence Keasler and Keasler Body Company were assessed excise taxes on truck hoist units they had assembled. They prevailed in an action for a refund and after the government's appeal was dismissed, they obtained an award of attorney's fees under the Equal Access to Justice Act, 28 U.S.C. Sec. 2412(d) (1982). The government challenges the award on the grounds that the fee application filed after dismissal of the appeal was untimely, and that its position was substantially justified, even though the only appellate decision in point, one from another circuit, was contrary to its position. We affirm the award of attorney's fees.

Keasler Body was in the business of fitting hydraulic hoists and truck bodies on truck chassis. For the period January 1974 to September 1975, the Internal Revenue Service assessed an excise tax on all the truck-hoist units that Keasler had assembled. The IRS contended that the assembly process constituted taxable manufacturing under I.R.C. Sec. 4061(a)(1). This had been the IRS position since at least 1969. See Rev.Rul. 69-195, 1969 C.B. 276. This ruling had, however, been expressly disapproved by the Tenth Circuit in Jacobs Equipment Co. v. United States, 574 F.2d 1040 (10th Cir.1978), a case involving facts nearly identical to the case at bar.

Keasler paid the assessment and sought a refund from the IRS. Although the IRS acknowledged that Keasler's position was supported by Jacobs, it declined to follow the case and refused the requested refund. ¹ In 1979, Keasler sued for a refund and the case was submitted on stipulated facts. The district court ² granted summary judgment for Keasler on October 2, 1981. The government filed a timely notice of appeal, but later dismissed the appeal on the advice of the Solicitor General. Nine days later (but more than seven months after the grant of summary judgment), Keasler moved the district court for an award of attorneys' fees under section 2412(d) ³ for work before the district court and on the government's short-lived appeal. The government contested the motion on two grounds. First, it argued that Keasler's application was untimely because it was not filed within thirty days of a "final judgment," allegedly the summary judgment granted by the district court. Second, it contended that its position before the district court and on appeal was substantially justified. Keasler was awarded fees for the district court and appellate litigation. Keasler v. United States, 585 F.Supp. 825 (E.D.Ark.1984). The government filed this appeal, and basically repeats here the arguments it made before the district court.

I.

The threshold question is whether Keasler filed a timely application for attorneys' fees incurred during proceedings before the district court. Section 2412(d)(1)(B) requires that an application be submitted to the court "within thirty days of final judgment in the action." ⁴ The circuit courts have interpreted this phrase in a variety of contexts and several conflicting meanings have emerged.

The most persuasive view originated in McDonald v. Schweiker, 726 F.2d 311 (7th Cir.1983). In McDonald, summary judgment was entered for the claimant. The government filed a timely notice of appeal but dismissed the appeal six days later. Within thirty days, the claimant moved for attorneys' fees in the district court. The court of appeals held that the motion was timely. The Seventh Circuit stated that "final judgment," which appears 151 times in the United States Code, does not have a single fixed meaning. Id. at 313. Analyzing the practical consequences under the Act, the court concluded that "final judgment" means the completion of all appellate proceedings. Id. at 315.

On October 11, 1984, Congress passed a bill amending and extending section 2412(d). It added a definition to the EAJA providing that " 'final judgment' means a judgment that is final and not appealable." H.R. 5479, 98th Cong., 2d Sess. Sec. 2(b)(3)(G), 130 Cong.Rec. H11479 (daily ed. Oct. 4, 1984). S.Rep. No. 919, 98th Cong., 2d Sess. 16 (1984), expressly approved the Seventh Circuit's opinion in McDonald. The President refused to sign H.R. 5479 and it did not become law. See Premachandra v. Mitts, 753 F.2d at 642 n. 9. Nevertheless, the bill influenced the Third Circuit when it decided Taylor v. United States, 749 F.2d 171 (3d Cir.1984) (per curiam). In Taylor, the claimant prevailed on the merits in the district court and the judgment was affirmed on appeal. Within thirty days of the appellate affirmance, the claimant filed a request for fees with the district court. The Third Circuit held that the application was timely under the following construction: "fee petitions under the EAJA must be filed no later than thirty days after the expiration of the time to appeal, or after the termination of the litigation by the court of last resort, or after a losing party asserts that no further appeal will be taken." Id. at 174. ⁵

Subsequently, the District of Columbia Circuit adopted the reasoning and holding in McDonald. In Massachusetts Union of Public Housing Tenants, Inc. v. Pierce, 755 F.2d 177 (D.C.Cir.1985) (per curiam), the court held that EAJA applications must be filed within thirty days of the "time that a judgment becomes final because an appeal is completed or foregone." Id. The claimants in Pierce had been granted summary judgment on the merits. They filed a motion in the district court for fees more than thirty days after the final judgment had been entered but less than thirty days after the sixty-day period that the government had to appeal. The court held that the application was timely. Id. at 179-80.

Most recently, the Sixth Circuit approved McDonald. Feldpausch v. Heckler, 763 F.2d 229 (6th Cir.1985). Relying also on the legislative history discussed in Taylor, the court held that an application for fees is timely if made within thirty days after the expiration of the time to appeal. Id. at 232. ⁶

Two circuits have taken a different path. In McQuiston v. Marsh, 707 F.2d 1082 (9th Cir.1983), the district court dismissed the suit as moot. Nearly three months later, the claimant moved for fees under section 2412(d). Following a brief discussion, which interpreted "final judgment" to mean the same thing under section 2412(d), Fed.R.Civ.P. 54, and 28 U.S.C. Sec. 1291 (1982), ⁷ the court held that a request for attorneys' fees is untimely if filed more than thirty days after the district court has entered judgment. Id. at 1084-85. In dicta, the court rejected the argument that the thirty-day period should commence upon the expiration of the time to appeal or upon termination of the action in the court of last resort.

In Gold Kist, Inc. v. USDA, 741 F.2d 344 (11th Cir.1984), the claimant lost in proceedings against the government in the district court. On appeal, judgment was entered for the claimant, and it requested an award of attorneys' fees although no application had been filed with the district court. The court recognized the holding in McQuiston that "final judgment" means final in the district court, and agreed with its construction "when the non-governmental party prevails below." Id. at 349 (dictum). Nevertheless, it felt that requiring a party losing before the lower court to apply for fees "would be senseless." Id. Thus, it concluded that "when the non-government party loses in the district court but prevails on appeal, it must file its application for fees under the EAJA within 30 days of the judgment of the appellate court." Id.

The reasoning in McQuiston and the dictum in Goldkist are too abbreviated to be persuasive. We believe McDonald was rightly decided and its acceptance by the other circuit underscores its strength. We also find significant the context in which section 2412(d) appears. Chapter 161, part 6 of the Judicial Code, in addition to containing section 2412, regulates the payment of judgments and compromise settlements by the government. 28 U.S.C. Sec. 2414 (1982) provides that "[w]henever the Attorney General determines that no appeal shall be taken from a judgment or that no further review will be sought from a decision affirming the same, he shall so certify and the judgment shall be deemed final." Because of its proximity to the statute in question, section 2414 provides one of the best indications of what constitutes a final judgment against the government. Under this definition, the government's dismissal of the Keasler appeal is a "final judgment." Considering our preference for relying on the context in which a statute appears in determining its meaning, see Premachandra, 753 F.2d at 638, section 2414 is sufficient to support the result here. We hold that the order dismissing the government's appeal is a final judgment under section 2412(d)(1)(B).

II.

The second issue is whether the district court erred in awarding fees against the government for proceedings at the trial level. First, the government bears the burden of showing that its "position" was substantially justified. ⁸ Foley Construction Co. v. United States Army Corps of Engineers, 716 F.2d 1202, 1204 (8th Cir.1983), cert. denied, --- U.S. ----, 104 S.Ct. 1908, 80 L.Ed.2d 457 (1984). In this circuit, the "position of the United States" includes the government's position at both the prelitigation and litigation stages. Iowa Express Distribution v. NLRB, 739 F.2d 1305, 1309 (8th Cir.), cert. denied, --- U.S. ----, 105 S.Ct. 595, 83 L.Ed.2d...