Aronson v. U.S. Dept. of Housing and Urban Development

• Decision Date: 01 November 1988
• Docket Number: No. 88-1524,88-1524
• Parties: Robert A. ARONSON, Plaintiff, Appellee, v. UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, et al., Defendants, Appellants. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 1

866 F.2d 1

Robert A. ARONSON, Plaintiff, Appellee, v. UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT et al., Defendants, Appellants.

No. 88-1524.

United States Court of Appeals First Circuit.

Heard Nov. 1, 1988.

Decided Jan. 19, 1989.

Michael E. Robinson, Appellate Staff, Civ. Div., Dept. of Justice, Washington, D.C., with whom John R. Bolton, Asst. Atty. Gen., Frank L. McNamara, Jr., U.S. Atty., and Leonard Schaitman, Appellate Staff, Civ. Div., Dept. of Justice, Washington, D.C., were on brief, for defendants, appellants.

James H. Lesar, Washington, D.C., for plaintiff, appellee.

Before BOWNES, BREYER and SELYA, Circuit Judges.

BOWNES, Circuit Judge.

This is an appeal by the United States Department of Housing and Urban Development (HUD) from an award of attorneys fees to Robert A. Aronson under the Freedom of Information Act (FOIA), 5 U.S.C. Sec. 552(a)(4)(E). Aronson and another attorney prosecuted the action in the district court. A third attorney handled the appeal. The district court awarded fees to Aronson, as well as the other two attorneys. There are two issues on appeal: whether attorney fees should have been awarded at all; and, if so, whether Aronson, as a pro se lawyer, is entitled to fees for the time he spent on the case.

I.

The facts and issues undergirding this appeal are found in Aronson v. U.S. Dep't of Housing and Urban Dev., 822 F.2d 182 (1st Cir.1987). We recapitulate what is necessary for the questions now before us. Aronson brought an FOIA action against HUD seeking information about individual mortgagors whose mortgages were insured under the National Housing Act and who were entitled to receive reimbursements, known as "distributive shares," from HUD when the mortgage insurance expired. HUD refused to release the information claiming that to do so would result in a "clearly unwarranted invasion of privacy" and that therefore the information was exempt from disclosure under FOIA's "Exemption 6," 5 U.S.C. Sec. 552(b)(6).

For present purposes it suffices to say that the "distributive shares" came from insurance premiums paid by lenders who issued and insured the mortgages under the National Housing Act. HUD was obligated by law, 12 U.S.C. Sec. 1711(c), to pay over the "distributive" shares to those to whom it was due. HUD's performance of this obligation was less than satisfactory. In 1981, the Comptroller General reported that as of March 31, 1980, there were 198,000 unpaid "distributive shares" totaling $52 million. The Comptroller General found that HUD did not follow effective procedures for informing mortgagors about applying for their distributive shares, for obtaining mortgagors' addresses or for locating mortgagors whose addresses were unknown.

HUD's poor performance record opened up a field for private tracing operations. A private tracer, through a FOIA request, would ask HUD for the names and last known addresses of mortgagors entitled to distributive shares. When the tracer located an eligible recipient, he/she offered to help obtain the amount due in return for a percentage of it. Starting in 1980 HUD gave the information requested to private tracers. It also instituted new and more effective procedures for locating individuals to whom distributive shares were owed, including a one-year search period after the shares had vested. The search period was later expanded to two years.

In 1985, HUD's FOIA policy changed. It refused to give information to tracers until the two-year search period had expired. It also applied a two-year period of withholding information as to unclaimed shares that had vested prior to December 31, 1979 and that had become reactivated as a result of a ruling by the Comptroller General that the statute of limitations did not apply to distributive shares. This was the situation when Aronson entered the picture.

Aronson was one of the private tracers who had obtained information from HUD in the past. His usual fee was 35 percent of the amount refunded. In January 1986 Aronson made a FOIA request for the entire file of unpaid distributive shares that had vested as of December 31, 1985. Following its new policy, HUD released only the information for shares vesting between December 31, 1979 and December 31, 1983. Aronson brought suit in the district court. The court held that HUD was justified in refusing to disclose information for shares vesting after December 31, 1983 but ordered disclosure of shares vesting before December 31, 1979. Aronson appealed from the decision of nondisclosure as to shares vesting after December 31, 1983. HUD did not appeal.

We ruled that HUD's disclosure obligation began after its initial one-year search period expired. We felt that withholding information until the end of the second search year was not justified. We, therefore, held that Aronson was entitled to the information requested for those shares vesting between December 31, 1984 and December 31, 1985. 822 F.2d at 188.

Following our opinion, Aronson requested attorney fees, and after a hearing, the district court awarded the requested amount. This appeal ensued.

II.

We start our review fully cognizant that "[a]n award of attorney fees under the FOIA is a matter for the sound discretion of the trial court." Education/Instruccion, Inc. v. U.S. Dep't of Housing and Urban Dev., 649 F.2d 4, 7 (1st Cir.1981). This discretion, however, is circumscribed by two generally accepted principles. The first is that a plaintiff is not automatically entitled to an award of attorney fees just because he/she succeeds in obtaining the requested information. Crooker v. U.S. Parole Comm'n, 776 F.2d 366, 367 (1st Cir.1985); Education/Instruccion, 649 F.2d at 7; Crooker v. U.S. Dep't of Justice, 632 F.2d 916, 922 (1st Cir.1980); Blue v. Bureau of Prisons, 570 F.2d 529,533 (5th Cir.1978).

The second restraint on the district court's discretion is that it must take into consideration four factors in determining whether attorney fees should be awarded under FOIA. These four factors are: "(1) the benefit to the public, if any, derived from the case; (2) the commercial benefit to the complainant; (3) the nature of the complainant's interest in the records sought; and (4) whether the government's withholding of the records had a reasonable basis in law." Crooker v. U.S. Parole Comm'n, 776 F.2d at 367. See also Cazalas v. U.S. Dep't of Justice, 709 F.2d 1051, 1053 (5th Cir.1983); Aviation Data Serv. v. F.A.A., 687 F.2d 1319, 1321 (10th Cir.1982); Education/Instruccion, 649 F.2d at 7; Crooker v. U.S. Dep't of Justice, 632 F.2d at 922.

With this backdrop in place we turn to the district court opinion. The court first found that plaintiff was eligible for attorney fees because he had substantially prevailed in the litigation. Appellant does not question this preliminary conclusion. We find it correct. The court then considered the four factors in determining whether Aronson was entitled to attorney fees. It found that plaintiff's action conferred a significant benefit on the public. In doing so, the court explicitly relied on the following statement from our opinion in the first appeal.

It cannot be gainsaid that there is a strong public interest in disclosure when that disclosure would lead to the distribution of refunds that would otherwise have little chance of reaching their rightful owners. HUD recognized this public interest in its pre-1984 policy of releasing information on all eligible mortgagors. It continues to recognize this interest today in its policy of releasing information after the two-year search period. The public interest is manifestly served by the disclosure and consequent disbursement of funds the government owes its citizens. The problem of nondisbursement in this context is dramatized by the alarming figure of $52 million the government had failed to distribute as of March, 1980. The public interest in the release of the information, and in the attendant correction of the problem of nondisbursement, is consistent with FOIA's goals of the exposure of agency action to public inspection and oversight. See Department of Air Force v. Rose, 425 U.S. 352, 360-61, 96 S.Ct. 1592, 1598-99, 48 L.Ed.2d 11 (1976).

Aronson, 822 F.2d at 185. Despite the appearance of being self-laudatory, we agree with the district court.

The court discussed the second and third factors together: the commercial benefit to the complainant and the nature of the complainant's interest in the records sought. The court found that the potential for commercial personal gain did not negate the public interest served by Aronson's lawsuit. It pointed out that plaintiff was but one of many tracers engaged in ferreting out people to whom HUD owed distributive share funds. The court's findings on factors two and three did not constitute an abuse of discretion. We point out that the failure of HUD to comply reasonably with its reimbursement duty would probably only be disclosed by someone with a specific interest in ferreting out unpaid recipients. This is a case where financial interest serves the public good.

Finally, the district court found that the government's withholding of the records did not have a reasonable basis in law. This part of the district court opinion bears quoting.

In my opinion, it appears that defendants refused to disclose these records to avoid the embarrassment of public scrutiny that would result from disclosure of the amount of funds HUD failed to distribute. More importantly, though, it is disingenuous for defendants to argue that their withholding of records was colorable when the Court of Appeals held that, while Exemption 6 generally applies to these records, the exemption did not apply to the vast majority of plaintiff's request. The court specifically held that HUD's "expanded search procedures" after the first year were murky and lacking in both definition and merit, and that defendants were justified in withholding records only for the first...