Davidson v. Veneman, 01-60573.

• Decision Date: 22 January 2003
• Docket Number: No. 01-60573.,01-60573.
• Citation: 317 F.3d 503
• Parties: Charles DAVIDSON, doing business as Davidson Farms, Plaintiff-Appellant, v. Ann VENEMAN, Secretary Department of Agriculture, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

317 F.3d 503

Charles DAVIDSON, doing business as Davidson Farms, Plaintiff-Appellant, v. Ann VENEMAN, Secretary Department of Agriculture, Defendant-Appellee.

No. 01-60573.

United States Court of Appeals, Fifth Circuit.

January 22, 2003.

James C. Crigler, Jr. (argued), McGlinchey Stafford, Monroe, LA, Samuel E. Scott, McGlinchey Stafford, Jackson, MS, for Plaintiff-Appellant.

Robert Gilmon Anderson, Jackson, MS, Gaines H. Cleveland, Asst. U.S. Atty. (argued), Biloxi, MS, for Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Mississippi.

Before KING, Chief Judge, and JONES and EMILIO M. GARZA, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

This is the second appeal to this court by the plaintiff Charles Davidson, doing business as Davidson Farms (Davidson). Davidson previously appealed a grant of summary judgment in favor of the Farm Services Agency (FSA) that prohibited revision of his farm acreage report for 1994, thus preventing him from receiving disaster assistance from the FSA. Davidson v. Glickman, 169 F.3d 996 (5th Cir.1999). We vacated and remanded because the FSA based its position on a legislative rule that did not meet the notice and comment requirements of the Administrative Procedure Act (APA). Id. at 999. Davidson then filed a "motion for fees and other expenses and costs" in the district court. In addition, both parties moved to have the case remanded to the FSA for a revised administrative determination in light of our holding. The district court granted that motion and stayed Davidson's motion for fees and expenses pending the completion of the administrative proceedings.

On remand to the FSA, the agency paid Davidson's claims for 1994 Disaster Assistance Program (DAP) payments based on the revised acreage report, but denied his request for attorney's fees and interest. Davidson next filed a "motion for summary judgment awarding interest" in the district court, as well as a supplemental motion for attorney's fees under the Equal Access to Justice Act (EAJA). The district court denied Davidson's motion for fees, holding that the Government's position was substantially justified, and Davidson appealed. While that appeal was pending, the district court denied Davidson's motion for summary judgment on the interest issue. The FSA did not file a cross-motion for summary judgment on the interest issue and the district court did not enter judgment for either party. In addition, Davidson did not file a second notice of appeal (NOA), but, within thirty days, the parties filed a joint motion to stay the first appeal, supplement the record on appeal, and revise the briefing schedule. The parties also sought approval to waive "any further notice of appeal." The clerk of this court granted the joint motion. The parties did not seek, nor did the district court enter, a separate, final judgment on the interest issue.

After hearing oral argument, we held that we did not have jurisdiction over the interest issue because the district court's denial of Davidson's "motion for summary judgment awarding interest," was not a final judgment under 28 U.S.C. § 1291. We then made a limited remand to the district court, directing it to decide the interest issue and enter a final judgment. On remand, the district court denied Davidson interest and rendered judgment for the Government on this issue. Now that the district court has disposed of all issues, and a final judgment has been entered, we have jurisdiction under § 1291.

I

Davidson first appeals the district court's denial of attorney's fees. We employ an abuse of discretion standard to review a district court's decision under the EAJA that the Government's position was substantially justified, although underlying conclusions of law are subject to de novo review and factual conclusions are reviewed for clear error. Aguilar-Ayala v. Ruiz, 973 F.2d 411, 416 (5th Cir.1992) (citations omitted). After reviewing the circumstances of this case, we hold that the district court did not abuse its discretion in finding the Government was substantially justified in its position and we thus affirm the denial of attorney's fees.

The EAJA, 28 U.S.C. § 2412(d)(1)(A), requires an award of attorney's fees to a claimant against the Government if: (1) the claimant is a "prevailing party"; (2) the Government's position was not "substantially justified"; and (3) there are no special circumstances making the award unjust. Sims v. Apfel, 238 F.3d 597, 599-600 (5th Cir.2001). As a threshold matter, a plaintiff is a "prevailing party" under the EAJA "if [he] succeed[s] on any significant issue in litigation which achieves some of the benefit [he] sought in bringing suit." Id. (citation omitted). In the present case, the FSA's administrative award to Davidson renders him a prevailing party.

Next, the Government's position is "substantially justified" if it is "justified in substance or in the main — that is, justified to a degree that could satisfy a reasonable person." Id. at 602 (citing Pierce v. Underwood, 487 U.S. 552, 565, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988)). Substantial justification is a higher burden then that of sanctions for frivolousness; the Government's position must have a "reasonable basis both in law and fact." Pierce, 487 U.S. at 565, 108 S.Ct. 2541, 101 L.Ed.2d 490. This standard is not overly stringent, however, and the position of the government will be deemed to be substantially justified "if there is a `genuine dispute' ... or `if reasonable people could differ as [to the appropriateness of the contested action].'"¹ Id.

The burden of proving substantial justification falls to the Government. Herron v. Bowen, 788 F.2d 1127, 1130 (5th Cir.1986). It must show, based on the record (including the record with respect to the decisions of the agency upon which the civil action is based), that it acted reasonably at all stages of the litigation. 28 U.S.C. § 2412(d)(2)(D); SEC v. Fox, 855 F.2d 247, 248, 251-52 (5th Cir.1988); Herron, 788 F.2d at 1130.

Davidson argues the district court's denial of fees was error because the FSA's refusal to allow him to revise his farm acreage report was arbitrary and capricious, and thus not substantially justified. In chief, he claims it was unreasonable for the Government to rely on an FSA Handbook provision that it knew conflicted with the applicable regulation and had not been adopted pursuant to the notice and comment requirements of the APA. A summary of the Government's position is necessary to evaluate this argument.

At the time Davidson sought the disaster relief payments at issue, the federal regulation provided that reports of acreage could be revised "at any time for all crops and land uses." 7 C.F.R. § 718.24 (1994). Rule 2-CP § 83 of the FSA Handbook, however, prohibited revision when the farmer would benefit from the revised report, so the FSA denied Davidson's request for disaster assistance. See Davidson, 169 F.3d at 998. According to the Government, the regulation was designed to allow prospective revisions of acreage reports but was not intended to allow farmers to later reap the rewards of retrospective disaster assistance, and the Handbook provision was designed to prevent this outcome. Throughout the administrative appeal process and ensuing litigation, the Government consistently argued for the rule in the Handbook because it was the only interpretation that prevented farmers from receiving windfalls.

Davidson emphasizes that the Government did not cite any case holding that the Handbook prevails in a conflict with a regulation. He reasons the Government knew the regulation was dominant, and thus the Government could not have been substantially justified in enforcing the Handbook provision instead. In this regard, Davidson misunderstands the Government's position. In part, the Government maintained the FSA Handbook was not in conflict with the applicable regulation because it was instead only an interpretation of that regulation. Such an interpretation was practical and necessary, from the Government's perspective, to prevent farmers from filing revisions solely to qualify for disaster assistance. Moreover, interpretative rules are not required to meet the notice and comment provisions of the APA, 5 U.S.C. § 553(b)(A), so the method by which the Handbook was adopted does not undermine the Government's position. While we did not accept the Government's argument that the Handbook provision was interpretative, that does not mean the Government was unreasonable in its belief that there was no conflict between the Handbook and the regulation.²

Likewise, the Government was unable to cite a case in support of its argument because the issue was one of first impression, and therefore novel. This fact alone weighs in favor of substantial justification. See Baker v. Bowen, 839 F.2d 1075, 1081 (5th Cir.1988); Herron, 788 F.2d at 1132. The substantial justification standard should not be used to prevent the government from making novel arguments. Rather, the "standard was designed to allow the government to advance `in good faith ... novel but credible ... interpretations of the law that often underlie vigorous enforcement efforts.'" Fox, 855 F.2d at 252 (quoting Russell v. Nat'l Mediation Bd., 775 F.2d 1284, 1290 (5th Cir.1985)).

The Government's success in the early stages of the dispute is also relevant. Although not all the administrative rulings were in the Government's favor, we note that at least two reviewing officers found for the Government on the basis of the Handbook. In addition, the district court granted the Government's motion for a summary judgment on this issue. Davidson is correct in arguing that the district court's judgment in favor of the Government is not sufficient, in and of itself, to show that the Government's position was substantially justified. Nonetheless, the district court's ruling is a factor weighing in favor of the Government. Sp...