Foley Const. Co. v. U.S. Army Corps of Engineers

• Decision Date: 14 September 1983
• Docket Number: No. 82-2202,82-2202
• Citation: 716 F.2d 1202
• Parties: 31 Cont.Cas.Fed. (CCH) 71,506 FOLEY CONSTRUCTION COMPANY, an Iowa Corporation, Appellant, v. U.S. ARMY CORPS OF ENGINEERS, an Agency of the United States of America; The United States of America; Col. Joseph F. Manzi, Jr.; Herbison Construction Company, a Minnesota Corporation; and Herbison Bridge Company, a Minnesota Corporation, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1202

716 F.2d 1202

31 Cont.Cas.Fed. (CCH) 71,506

FOLEY CONSTRUCTION COMPANY, an Iowa Corporation, Appellant, v. U.S. ARMY CORPS OF ENGINEERS, an Agency of the United States

of America; The United States of America; Col. Joseph F.

Manzi, Jr.; Herbison Construction Company, a Minnesota

Corporation; and Herbison Bridge Company, a Minnesota

Corporation, Appellees.

No. 82-2202.

United States Court of Appeals,

Eighth Circuit.

Submitted May 20, 1983.

Decided Sept. 14, 1983.

Pillers, Pillers & Pillers, P.C. by George W. Pillers, Jr., Clinton, Iowa, Thomas D. McMillen, Jr., Des Moines, Iowa, for appellant.

J. Paul McGrath, Asst. Atty. Gen., Richard C. Turner, U.S. Atty., William Kanter, Richard A. Olderman, Attys., Appellate Staff, Civ. Divisions, Dept. of Justice, Washington, D.C., Ronald H. Rothert, Asst. Dist. Counsel, Rock Island Dist. Corps of Engineers, Rock Island, Ill., Robert C. Dopf, Asst. U.S. Atty., Des Moines, Iowa, for the federal appellees.

Before LAY, Chief Judge, and HEANEY and FAGG, Circuit Judges.

FAGG, Circuit Judge.

Foley Construction Company, the prevailing party in an action brought against the United States Army Corps of Engineers, seeks an award of attorneys' fees and expenses pursuant to the Equal Access to Justice Act (EAJA), 28 U.S.C. Sec. 2412. The district court denied attorneys' fees because it held that the government's position was "substantially justified." We affirm.

I. BACKGROUND

This litigation stems from the award of a construction contract in which Foley was an unsuccessful bidder. The Corps issued an invitation for bids on a flood protection levee to be built along the Mississippi River in Burlington, Iowa. The invitation was limited to small businesses pursuant to the Small Business Administration set-aside program, which promotes the award of federal contracts to small business concerns. Herbison Construction Company submitted the lowest bid. The second lowest bid was submitted by Foley.

Foley delivered in writing a timely protest to the Corps that Herbison did not qualify as a small business. The Corps suspended action on the contract and forwarded the protest to the SBA district office which ruled that Herbison was a small business. After the district office ruled, the Corps awarded the contract to Herbison. Foley then notified the Corps that it intended to appeal the decision of the SBA district office to the SBA Size Appeals Board and it brought an action in federal district court seeking to enjoin the Corps from proceeding under the contract with Herbison. The district court issued a temporary restraining order, and later a preliminary injunction, enjoining the Corps from proceeding under the construction contract until the Size Appeals Board had ruled on Foley's appeal. The Size Appeals Board ruled that Herbison was not a small business, reversing the decision of its district office. The district court then permanently enjoined the Corps from proceeding with the contract with Herbison and ordered the Corps to award the contract to Foley. Thirty days after judgment had been entered, Foley filed an application for legal fees and expenses of $27,444.23 pursuant to the EAJA. The district court denied the application for attorneys' fees because it held that although Foley was the "prevailing party," the government's position was substantially justified.

II. EQUAL ACCESS TO JUSTICE ACT

The Equal Access to Justice Act, 28 U.S.C. Sec. 2412, enacted by Congress in 1980, provides for attorneys' fees in suits by or against the United States under certain limited circumstances. The purpose of the EAJA is to diminish the deterrent effect of the expense involved in seeking review of, or defending against, unreasonable government action. H.R.Rep. No. 1418, 96th Cong., 2d Sess. 5-6 (1980), U.S.Code Cong. & Admin.News 1980, p. 4953. In this case, Foley claims attorneys' fees under 28 U.S.C. Sec. 2412(d)(1)(A):

[A] court shall award to a prevailing party other than the United States fees and other expenses, in addition to any costs awarded pursuant to subsection (a), incurred by that party in any civil action (other than cases sounding in tort) brought by or against the United States in any court having jurisdiction of that action, unless the court finds that the position of the United States was substantially justified * * *.

There is no question that Foley was the "prevailing party" in this litigation. The only dispute in this appeal is whether the position of the United States was substantially justified. The legislative history is helpful in interpreting the substantially justified standard. The House committee report on the EAJA states:

The test of whether or not a Government action is substantially justified is essentially one of reasonableness. Where the Government can show that its case had a reasonable basis both in law and in fact, no award will be made....

The standard, however, should not be read to raise a presumption that the government position was not substantially justified, simply because it lost the case. Nor, in fact, does the standard require the Government to establish that its decision to litigate was based on a substantial probability of prevailing.

H.R.Rep. No. 1418, supra, at 10-11, U.S.Code Cong. & Admin.News 1980, pp. 4989-4990. Although the committee report is strong evidence that a reasonableness standard should be applied, we must also consider that the Senate Judiciary Committee rejected an amendment to the EAJA that would have changed the language of the bill from "substantially justified" to "reasonably justified." S.Rep. No. 253, 96th Cong., 1st Sess. 8 (1979).

The courts of appeals have generally been in agreement that substantial justification is essentially a test of reasonableness. Dougherty v. Lehman, 711 F.2d 555 (3d Cir.1983); Foster v. Tourtellotte, 704 F.2d 1109, 1112 (9th Cir.1983); Broad Avenue Laundry and Tailoring, 693 F.2d 1387, 1391 (Fed.Cir.1982); Wyandotte Savings Bank v. NLRB, 682 F.2d 119, 120 (6th Cir.1982); S & H Riggers & Erectors, Inc. v. OSHRC, 672 F.2d 426, 430 (5th Cir.1982). The District of Columbia Circuit has stated that a standard based on the bounds of reasonableness is appropriate in most cases. For "borderline cases," however, it has developed more particularized criteria, including the clarity of the governing law, the foreseeable length and complexity of the litigation, and the consistency of the government's position. Spencer v. NLRB, 712 F.2d 539 at 557-561 (D.C.Cir.1983). This court appeared to adopt a reasonableness standard in United States for Heydt v. Citizens State Bank, 668 F.2d 444 (8th Cir.1982). In that case, a taxpayer had prevailed in reducing the scope of an IRS summons, but the district court's denial of attorneys' fees was affirmed because the district court found that the summons had been issued in good faith and for a proper purpose. Id. at 448.

In this case, the district court employed a reasonableness test, and that standard has not been challenged by either party on appeal. We now hold that the test of whether the position of the United States is substantially justified is essentially one of reasonableness in law and in fact. The government bears the burden of proving the substantial justification of its position. See H.R.Rep. No. 1418, supra, at 10-11. See also Dougherty v. Lehman, supra; Spencer v. NLRB, supra, at 557; S & H Riggers & Erectors, Inc. v. OSHRC, supra, 672 F.2d at 430; United States for Heydt v. Citizens State Bank, supra, 668 F.2d at 448.

The EAJA does not state which government position must be substantially justified. Several courts have examined the government's litigation position to determine its substantial justification. See, e.g., Spencer v. NLRB, supra, at 556; Tyler Business Services, Inc. v. NLRB, 695 F.2d 73, 75 (4th Cir.1982); Broad Avenue Laundry and Tailoring v. United States, supra, 693 F.2d at 1390-91. See also S & H Riggers & Erectors, Inc. v. OSHRC, supra, 672 F.2d at 430. The Third Circuit has concluded that the government position referred to is not the litigation position, but the agency action which made it necessary for a party to file suit. Natural Resources Defense Council v. U.S.E.P.A., 703 F.2d 700, 707 (3d Cir.1983). In most cases "it makes no functional difference how one conceives of the government's 'position' " because "the litigation position of the United States will almost always be that its underlying action was legally justifiable." Spencer v. NLRB, supra, at 551-552 (footnotes omitted).

The district court examined the government's position in litigation. The government has agreed with that assessment and Foley has not challenged the issue on appeal. Indeed, in its brief, Foley has framed the issue as follows: "Whether the United States Army Corps of Engineers was substantially justified in defending this action [emphasis added]." Foley concludes its brief by stating that "the Government's defense of [the] injunction action was not reasonable and cannot be substantially justified [emphasis added]." Given the way in which the parties have framed the issue on appeal, we will assume, for the purpose of this case, that "position of the United States" refers to the government's position in litigation.

III. ANALYSIS

The issue that this court must decide is whether it was reasonable for the government to defend the Corps' actions in initially awarding the contract to Herbison and then proceeding with the contract after it received notice that Foley intended to appeal the decision of the SBA district office. The district court held that the Corps' "award and failure to suspend further contracting action were clearly illegal acts * * *." (Clear illegality is the standard imposed upon an unsuccessful bidder seeking judicial relief. See Sea-Land Service, Inc. v. Brown, 600 F.2d 429, 434 (3d Cir.1979).) This determination on the merits has not been appealed. The mere fact that the government lost its case, however, does not...