Battles Farm Co. v. Pierce, s. 85-5945

• Decision Date: 12 December 1986
• Docket Number: 85-5957 and 85-5968,Nos. 85-5945,s. 85-5945
• Citation: 806 F.2d 1098,257 U.S.App.D.C. 6
• Parties: BATTLES FARM COMPANY, et al. v. Samuel R. PIERCE, Jr., Secretary of Housing and Urban Development, Appellant (Two Cases). BATTLES FARM COMPANY, et al., Appellants, v. Samuel R. PIERCE, Jr., Secretary of Housing and Urban Development.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1098

806 F.2d 1098

257 U.S.App.D.C. 6

BATTLES FARM COMPANY, et al. v. Samuel R. PIERCE, Jr., Secretary of Housing and Urban

Development, Appellant (Two Cases).

BATTLES FARM COMPANY, et al., Appellants, v. Samuel R. PIERCE, Jr., Secretary of Housing and Urban Development.

Nos. 85-5945, 85-5957 and 85-5968.

United States Court of Appeals, District of Columbia Circuit.

Argued Oct. 14, 1986.

Decided Dec. 12, 1986.

Appeals from the United States District Court for the District of Columbia (Civil Action No. 76-00393).

John S. Koppel, Atty., Dept. of Justice, with whom Richard K. Willard, Asst. Atty. Gen., Dept. of Justice, Joseph E. diGenova, U.S. Atty. and Robert S. Greenspan, Atty., Dept. of Justice, Washington, D.C., were on the brief for appellant in Nos. 85-5945 and 85-5957 and cross-appellee in No. 85-5968.

Thomas D. Goldberg, with whom Gerald Goldman, Washington, D.C., was on the brief for appellees in Nos. 85-5945 and 85-5957 and cross-appellants in No. 85-5968.

Before STARR and SILBERMAN, Circuit Judges, and McGOWAN, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge SILBERMAN.

SILBERMAN, Circuit Judge:

We have before us the attorneys fees phase of a lengthy lawsuit brought by Battles Farm Co., the owner of a low-income housing project, against the Secretary of Housing and Urban Development. After winning on the merits in part of their suit, the plaintiffs applied for, and the district court awarded, attorneys fees under the Equal Access to Justice Act ("EAJA"). ¹ Because we find the Secretary's position on the merits of the lawsuit to have been substantially justified, we reverse the district court's fee award.

I.

This litigation began on March 8, 1976, when Battles Farm sued HUD Secretary Carla Hills for refusing to pay low-income housing project operating subsidies under the 1974 amendments to the National Housing Act. ² These amendments "authorized" the Secretary to make "operating subsidy" payments to project owners to help defray their increased expenses, thus minimizing the rents they charged tenants. See 12 U.S.C. Sec. 1715z-1(f)(3) (1976). The amendments contemplated two means by which the Secretary would make such payments. First, the Secretary was authorized to make subsidy payments from a "rental reserve fund"--a fund consisting of excess rental charges remitted by project owners to the Secretary. See id. at 1715z-1(g). Second, the Secretary was authorized to enter into long-term contracts committing HUD to pay these subsidies for an extended period of time. See id. at Sec. 1715z-1(f)(3). Secretary Hills, believing that she had discretion not to implement the operating subsidy program and believing that HUD resources were better spent on other housing programs, declined to make subsidy payments from either source. This decision generated numerous lawsuits by housing project owners and tenants, all seeking to compel the Secretary to make such payments.

Battles Farm's lawsuit contained two interrelated claims: that the Secretary was obligated to use the rental reserve fund to make subsidy payments, therefore entitling Battles Farm to retroactive subsidy payments from the fund; and, under the same statutory provision, the Secretary was also obligated to enter into a long-term contract with Battles Farm guaranteeing to continue these subsidy payments for the forty-year life of the project. When this lawsuit began, nine different district courts had already held the Secretary was obligated to make subsidy payments from the rental reserve fund. But no court had yet ruled on the long-term contract issue--no other plaintiffs had brought such a claim. The Secretary defended the lawsuit, arguing that she was neither required to make subsidy payments from the rental reserve fund, nor required to enter into long-term contracts. The district judge ruled for the plaintiffs on the rental reserve fund claim and for the defendant on the long-term contract claim. Battles Farm Co. v. Hills, 414 F.Supp. 521 (D.D.C.1976). In calculating the amount of subsidies owed to Battles Farm, the judge limited the award by basing it on the rents Battles Farm actually charged during the pendency of the lawsuit, rather than the rents it would have charged had HUD implemented the subsidy program. Both sides appealed their respective losses, and the Secretary agreed to begin making subsidy payments to Battles Farm during the pendency of the appeal.

The litigation then entered a dormant phase lasting almost six years. During this period, a number of contradictory events occurred: the Fourth and Ninth Circuits ruled against HUD on the rental reserve fund issue; ³ the Supreme Court granted certiorari to review both of those decisions; ⁴ this court ordered the Battles Farm appeal held in abeyance pending the Supreme Court's review of the Fourth and Ninth Circuit cases; a successor HUD Secretary settled eleven rental reserve fund lawsuits in 1978, agreeing to pay some $60 million in subsidies; and, also in 1978, Congress terminated the operating subsidy program.

The Battles Farm litigation came back to life in February, 1982, when this court reactivated the appeal. ⁵ In the second phase of the litigation, HUD Secretary Samuel Pierce dropped HUD's earlier argument that the Secretary had discretion not to make subsidy payments. Instead, he merely defended Battles Farm's appeal of the district court's ruling limiting the amount of retroactive subsidies owed by HUD. He also defended against Battles Farm's argument that the Secretary was required to enter into a long-term subsidy contract. This court issued its decision in April, 1983, agreeing with Battles Farm on the calculation of retroactive subsidies due, but affirming the district court's rejection of Battles Farm's long-term contract claims. Battles Farm Co. v. Harris, 703 F.2d 1292 (D.C.Cir.1983). Thus, when the dust had settled on the merits phase of the lawsuit, Battles Farm had prevailed on its claim for rental reserve fund subsidies and HUD had prevailed on its refusal to enter into a long-term contract.

Battles Farm then applied for attorneys fees under the EAJA. ⁶ The Secretary opposed the application on the grounds that its position in the underlying litigation had been "substantially justified." In an unpublished opinion, the district court determined that the Secretary's position had not been substantially justified and so awarded $152,063.60 in attorneys fees, paralegal expenses, and costs. The Secretary now appeals, arguing that the district court erred both as to its "substantially justified" determination and as to its rulings on other aspects of the fee award. ⁷ Battles Farm cross-appeals from the district court's decision to limit plaintiffs' reimbursement for paralegal costs.

II.

The Equal Access to Justice Act is a fee-shifting statute that allows certain private parties to recover attorneys fees and other costs incurred as a result of litigation against the federal government. But unlike other fee-shifting statutes that are designed solely to encourage private "attorneys general" to bring meritorious litigation in the public interest ⁸ and therefore ignore the reasonableness of the government's litigating position, the EAJA's purpose is somewhat different. It is designed to encourage small private plaintiffs and defendants to persevere against or resist the U.S. government if the government takes an unjustified litigating position. ⁹ And, perhaps more importantly, the statute is meant to discourage the federal government from using its superior litigating resources unreasonably--it is in this respect an "anti-bully" law. Thus, under the EAJA it is not enough that the private party "prevail" against the government in order to obtain attorneys fees. The government has the opportunity to show that its litigating position was "substantially justified;" ¹⁰ if it meets that burden, the court cannot award attorneys fees. Spencer v. NLRB, 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). ¹¹ Whether the government's position was substantially justified depends to an important degree on the clarity of the governing law at the time the government made its litigating decision--if the extant law is clearly against the government, its position is not considered substantially justified. Id. at 559.

The government contends that its litigating position on the rental reserve fund issue was substantially justified because the governing law was unsettled at the time the original lawsuit was filed and remained so throughout the litigation. To offset the nine adverse district court decisions, the government relies on a favorable (if not directly on point) prior decision of this Circuit, ¹² as well as subsequent developments, particularly the Supreme Court stay ¹³ and grant of certiorari in similar cases. ¹⁴ The government also argues that the work Battles Farm's lawyers devoted to the long-term contract claim, on which the government prevailed, is separable from fees sustained on the rental reserve fund claim. Battles Farm, on the other hand, argues that we should focus primarily on the governing law with respect to the rental reserve fund issue at the time the lawsuit was initially filed--when nine district courts had directly held against the government on that question. Battles Farm maintains that we should give no weight to the Supreme Court's grants of stay and certiorari; if we look to subsequent events at all we should be influenced by the government's settlement of the rental reserve fund issue in 1978. Finally, the appellee contends that the district court was correct in treating work done on both claims as interrelated.

We find it unnecessary to determine whether the government was separately justified in its litigating position on the rental reserve fund issue because we agree with both the district court and Battles Farm that the two claims were interrelated. But this very...