Pierce v. Underwood, No. 86-1512

CourtUnited States Supreme Court
Writing for the CourtSCALIA, J., delivered the opinion of the Court, in Part I of which all participating Members joined, in Parts II and IV of which REHNQUIST, C.J., and BRENNAN, MARSHALL, BLACKMUN, and STEVENS, JJ., joined, in Part III of which REHNQUIST, C.J., and WHI
Citation487 U.S. 552,101 L.Ed.2d 490,108 S.Ct. 2541
Docket NumberNo. 86-1512
Decision Date27 June 1988
PartiesSamuel R. PIERCE, Jr., Secretary of Housing and Urban Development, Petitioner, v. Myrna UNDERWOOD et al

487 U.S. 552
108 S.Ct. 2541
101 L.Ed.2d 490
Samuel R. PIERCE, Jr., Secretary of Housing and Urban Development, Petitioner,

v.

Myrna UNDERWOOD et al.

No. 86-1512.
Argued Dec. 1, 1987.
Decided June 27, 1988.
Syllabus

One of petitioner's predecessors as Secretary of Housing and Urban Development decided not to implement an "operating subsidy" program authorized by federal statute, which was intended to provide payments to owners of Government-subsidized apartment buildings to offset rising utility expenses and property taxes. Various plaintiffs, including respondent members of a nationwide class of Government-subsidized housing tenants, successfully challenged the decision in lawsuits in nine Federal District Courts. After two of the decisions were affirmed by Courts of Appeals, a newly appointed Secretary settled with most of the plaintiffs, including respondents. While the District Court was administering the settlement, Congress passed the Equal Access to Justice Act (EAJA), which authorizes an award of reasonable attorney's fees against the Government "unless the court finds that the position of the United States was substantially justified." Under the EAJA, the amount of fees awarded must "be based upon prevailing market rates for the kind and quality of the services furnished, except that . . . fees shall not be awarded in excess of $75 per hour unless the court determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceedings involved, justifies a higher fee." The court awarded fees to respondents under the EAJA, concluding that the decision not to implement the operating-subsidy program had not been "substantially justified," and basing the amount of the award, which exceeded $1 million, on "special factors" justifying hourly rates in excess of the $75 cap. The Court of Appeals held that the District Court had not abused its discretion in concluding that the Secretary's position was not substantially justified, and that the special factors relied on by the District Court justified exceeding the $75 cap.

Held:

1. In reviewing the District Court's determination that the Secretary's position was not "substantially justified," the Court of Appeals correctly applied an abuse-of-discretion standard, rather than a de novo standard of review. Neither a clear statutory prescription nor a historical tradition requires this choice of standards. However, deferential, abuse-of-discretion review is suggested by the EAJA's language, which

Page 553

requires a fees award "unless the court finds that" (rather than simply "unless") the United States' position was substantially justified, and by the statute's structure, which expressly provides an abuse-of-discretion standard for review of agency fee determinations. As a matter of sound judicial administration, the district courts are in a better position than the courts of appeals to decide the substantial justification question. Moreover, that question is multifarious, novel, and little susceptible of useful generalization at this time, and is therefore likely to profit from the experience that an abuse-of-discretion standard will permit to develop. Pp. 557-563.

2. The statutory phrase "substantially justified" means justified in substance or in the main—that is, justified to a degree that could satisfy a reasonable person. This interpretation of the phrase accords with related uses of the term "substantial," and is equivalent to the "reasonable basis both in law and fact" formulation adopted by the vast majority of Courts of Appeals. Respondents' reliance on a House Committee Report pertaining to the 1985 reenactment of the EAJA for the proposition that "substantial justification" means "more than mere reasonableness" is misplaced, since the 1985 Report is not an authoritative interpretation of what the 1980 statute meant or of language drafted by the 1985 Committee, which merely accepted the existing statutory phrase. Pp. 563-568.

3. The Court of Appeals correctly ruled that the District Court did not abuse its discretion in finding that the Government's position was not "substantially justified." Although "objective indicia" can be relevant to establishing "substantial justification," they are inconclusive in this case. The Government's willingness to settle the litigation and the stage in the proceedings at which the merits were decided are not reliable objective indicia here. Neither are views expressed by other courts on the merits, which provide some support on both sides. The Government's arguments on the merits of the underlying issue do not command the conclusion that its position was substantially justified. Pp. 568-571.

4. The District Court abused its discretion in fixing the amount of respondents' attorney's fees, since none of the reasons relied on by the court to increase the reimbursement rate above the statutory maximum was a "special factor" within the EAJA's meaning. Since the "special factor" formulation suggests that Congress thought that $75 an hour is generally sufficient regardless of the prevailing market rate, the "limited availability" factor must refer to attorneys "qualified for the proceedings" in some specialized sense, such as patent lawyers for patent proceedings, rather than just in their general legal competence. Similarly, in order to preserve the $75 cap's effectiveness, other "special factors"

Page 554

must be such as are not of broad and general application. Thus, most of the factors relied on by the court—the "novelty and difficulty of issues," "the undesirability of the case," "the work and ability of counsel," "the results obtained," and "the contingent nature of the fee"—do not qualify since they are applicable to a broad spectrum of litigation and are little more than routine reasons why market rates are what they are. Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 483 U.S. 711, 107 S.Ct. 3078, 97 L.Ed.2d 585, distinguished. Pp. 571-574.

761 F.2d 1342 and 802 F.2d 1107, affirmed in part, vacated in part, and remanded.

SCALIA, J., delivered the opinion of the Court, in Part I of which all participating Members joined, in Parts II and IV of which REHNQUIST, C.J., and BRENNAN, MARSHALL, BLACKMUN, and STEVENS, JJ., joined, in Part III of which REHNQUIST, C.J., and WHITE, STEVENS, and O'CONNOR, JJ., joined, and in Part V of which REHNQUIST, C.J., and STEVENS, J., joined, and WHITE and O'CONNOR, JJ., joined except as to the last three lines. BRENNAN, J., filed an opinion concurring in part and concurring in the judgment, in which MARSHALL and BLACKMUN, JJ., joined, post, p. ---. WHITE, J., filed an opinion concurring in part and dissenting in part, in which O'CONNOR, J., joined, post, p. ---. KENNEDY, J., took no part in the consideration or decision of the case.

Thomas W. Merrill, Washington, D.C., for petitioner.

Mary S. Burdick, Los Angeles, Cal., for respondents.

Justice SCALIA delivered the opinion of the Court.

Respondents settled their lawsuit against one of petitioner's predecessors as the Secretary of Housing and Urban Devel-

Page 555

opment, and were awarded attorney's fees after the court found that the position taken by the Secretary was not "substantially justified" within the meaning of the Equal Access to Justice Act (EAJA), 28 U.S.C. § 2412(d). The court also determined that "special factors" justified calculating the attorney's fees at a rate in excess of the $75-per-hour cap imposed by the statute. We granted certiorari, 481 U.S. 1047, 107 S.Ct. 2177, 95 L.Ed.2d 834 (1987), to resolve a conflict in the Courts of Appeals over important questions concerning the interpretation of the EAJA. Compare Dubose v. Pierce, 761 F.2d 913 (CA2 1985), cert. pending, No. 85-516, with 761 F.2d 1342 (CA9 1985) (per curiam ), as amended, 802 F.2d 1107 (1986)(case below).

I

This dispute arose out of a decision by one of petitioner's predecessors as Secretary not to implement an "operating subsidy" program authorized by § 236 as amended by § 212 of the Housing and Community Development Act of 1974, Pub.L. 93-383, 88 Stat. 633, formerly codified at 12 U.S.C. §§ 1715z-1(f)(3) and (g) (1970 ed., Supp. IV). The program provided payments to owners of Government-subsidized apartment buildings to offset rising utility expenses and property taxes. Various plaintiffs successfully challenged the Secretary's decision in lawsuits filed in nine Federal District Courts. See Underwood v. Pierce, 547 F.Supp. 256, 257, n. 1 (CD Cal. 1982) (citing cases). While the Secretary was appealing these adverse decisions, respondents, members of a nationwide class of tenants residing in Government-subsidized housing, brought the present action challenging the Secretary's decision in the United States District Court for the District of Columbia. That court also decided the issue against the Secretary, granted summary judgment in favor of respondents, and entered a permanent injunction and writ of mandamus requiring the Secretary to disburse the accumulated operating-subsidy fund. See Underwood v. Hills, 414 F.Supp. 526, 532 (1976). We stayed the Dis-

Page 556

trict Court's judgment pending appeal. Sub nom. Hills v. Cooperative Services, Inc., 429 U.S. 892, 97 S.Ct. 250, 50 L.Ed.2d 175 (1976). The Court of Appeals for the Second Circuit similarly stayed, pending appeal, one of the eight other District Court judgments against the Secretary. See Dubose v. Harris, 82 F.R.D. 582, 584 (Conn. 1979). Two of those other judgments were affirmed by Courts of Appeals, see Ross v. Community Services, Inc., 544 F.2d 514 (CA4 1976), and Abrams v. Hills, 547 F.2d 1062 (CA9 1976), vacated sub nom. Pierce v. Ross, 455 U.S. 1010, 102 S.Ct. 1700, 72 L.Ed.2d 127 (1982), and we consolidated the cases and granted the Secretary's petitions for writs of certiorari to review those decisions, Harris v. Ross, 431 U.S. 928, 97 S.Ct. 2630, 53...

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