Thomas v. National Science Foundation

• Decision Date: 03 June 2003
• Docket Number: No. 02-5169.,02-5169.
• Citation: 330 F.3d 486
• Parties: William THOMAS, et al., Appellees, v. NATIONAL SCIENCE FOUNDATION, Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

330 F.3d 486

William THOMAS, et al., Appellees, v. NATIONAL SCIENCE FOUNDATION, Appellant.

No. 02-5169.

United States Court of Appeals, District of Columbia Circuit.

Argued March 21, 2003.

Decided June 3, 2003.

Appeal from the United States District Court for the District of Columbia (No. 97cv02412).

Michael E. Robinson, Attorney, U.S. Department of Justice, argued the cause for appellant. With him on the brief were Roscoe C. Howard, Jr., U.S. Attorney, and Michael J. Singer, Attorney, U.S. Department of Justice. R. Craig Lawrence and Lisa S. Goldfluss, Assistant U.S. Attorneys, entered appearances.

William H. Bode argued the cause for appellees. With him on the brief was Anne R. Noble.

Arthur B. Spitzer, Amanda Frost and Brian Wolfman were on the brief for amici curiae ACLU and Public Citizen, Inc., in support of appellees.

Before: GINSBURG, Chief Judge, and EDWARDS and GARLAND, Circuit Judges.

Opinion for the Court filed by Circuit Judge HARRY T. EDWARDS.

HARRY T. EDWARDS, Circuit Judge:

In 1995, the National Science Foundation ("NSF"), the sole appellant before this court, and Network Solutions, Inc. ("NSI"), a private contractor, entered into an agreement which permitted NSI to collect fees for Internet registration services. NSI and NSF divided the fees 70%-30%, with NSF's 30% share deposited into an Intellectual Infrastructure Fund ("Fund") for future Government use on Internet projects. In 1997, William Thomas and other parties (collectively, "appellees"), filed a suit in District Court seeking to enjoin NSF and NSI from spending monies in the Fund and claiming restitution of fees collected from domain name registrants on the Internet. The District Court issued a preliminary injunction temporarily barring NSF and NSI from spending any money in the Fund. See Thomas v. Network Solutions, Inc., No. 97-02412 (D.D.C. Feb. 2, 1998) ("Injunction Order"), reprinted in Appendix ("App.") 71-83. Subsequently, the District Court dismissed all counts of the Amended Complaint except Count One and dismissed NSI from the lawsuit (because Count One concerned only NSF.) See Thomas v. Network Solutions, Inc., 2 F.Supp.2d 22, 38 (D.D.C.1998) ("SJ Decision"). The SJ Decision also granted partial summary judgment for appellees, holding that the portion of the registration fees deposited in the Fund emanated from a tax that was neither imposed nor ratified by Congress as required by Article I, Section 8 of the Constitution. Although the District Court found the "tax" unconstitutional, it awarded no money relief to appellees.

Before the District Court was able to render final judgment or issue an order for specific relief in the case, the President signed into law H.R. 3579, the Fiscal Year 1998 Supplemental Appropriations and Rescissions Act. Section 8003 of the statute "legalized and ratified" the registration fee and the monies held by NSF in the Fund, thus rendering moot appellees' claim before the District Court. The District Court then vacated the preliminary injunction and dismissed the case. Thomas v. Network Solutions, Inc., No. 97-02412 (D.D.C. Aug. 28, 1998) ("Dismissal Order"), reprinted in App. 84-98. The District Court's judgment was affirmed by this court in Thomas v. Network Solutions, Inc., 176 F.3d 500, 507 (D.C.Cir.1999) ("Thomas II").

Appellees then filed a motion for attorney's fees and costs against NSF under the Equal Access to Justice Act ("EAJA"), 28 U.S.C. § 2412(d)(1)(A) (1982). The District Court, held that, because they had succeeded in securing a preliminary injunction and a partial summary judgment, appellees were "prevailing parties" under EAJA and, thus, entitled to fees and costs. Thomas v. Network Solutions, Inc., No. 97-02412 (D.D.C. Mar. 22, 2002) ("Fee Award"), reprinted in App. 551-59; Thomas v. Network Solutions, Inc., No. 97-02412 (D.D.C. Mar. 23, 2001) ("Fee Decision"), reprinted in App. 399-422. NSF appeals from these judgments.

In Buckhannon Board & Care Home, Inc. v. West Virginia Department of Health and Human Resources, 532 U.S. 598, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001) ("Buckhannon"), the Supreme Court denied fees to a party whose claim was mooted by intervening legislation. The Court held that a plaintiff is not a "prevailing party" under a fee-shifting statute simply by virtue of having "acquired a judicial pronouncement that the defendant has violated the Constitution unaccompanied by judicial relief." Id. at 606, 121 S.Ct. at 1841; see also Hewitt v. Helms, 482 U.S. 755, 760, 107 S.Ct. 2672, 2675-76, 96 L.Ed.2d 654 (1987). In our view, the Court's judgment and reasoning in Buckhannon make it clear that appellees are not "prevailing parties" under EAJA. We therefore reverse the judgments of the District Court.

I. BACKGROUND

Many of the details relating to the underlying litigation in this case are set forth in Thomas II, 176 F.3d at 502-06. Our statement of the facts will therefore focus primarily on the matters related to this appeal.

NSF is an independent federal agency whose authority extends to "coordinating and funding the management of the non-military portion of the Internet infrastructure." Id. at 504. In 1993, NSF signed a Cooperative Agreement with NSI. The agreement called for NSI to design and manage a system for individuals and companies to register their Internet domain names. In addition, NSF agreed to compensate NSI for the costs of offering this service to the public and to provide the company an additional fixed fee for each completed domain name registration.

In 1995, NSF and NSI amended their Cooperative Agreement. Under the revised arrangement, the cost of an Internet domain name would be $100 for new registrations and $50 for yearly renewals. The amended contract allotted 70% of the fees to NSI as consideration for the services provided, with the remaining 30% to be deposited in the Intellectual Infrastructure Fund for future Government use in connection with Internet projects. The fee arrangement under the revised Cooperative Agreement was adopted by NSF and NSI without prior authorizing legislation from Congress.

In October, 1997, appellees, various parties who had paid the Internet registration fees, filed a civil lawsuit against NSF and NSI in the District Court. They claimed that NSF's share of the registration fees (the so-called "Preservation Assessment") was an unconstitutional tax, because Congress never authorized the agency to collect and deposit monies into the Fund. Appellees sought an injunction barring NSF from collecting any further fees or spending any monies in the Fund and a refund of the money that had been deposited in the Fund. Shortly after appellees filed suit, the District Court issued a limited preliminary injunction preventing NSF from "crediting, spending, obligating or using any of the money collected for, placed into, or taken from" the Fund pending final adjudication of the case. Injunction Order, App. 83.

On April 6, 1998, the District Court dismissed all counts of the Amended Complaint, except Count One; granted a partial summary judgment in favor of appellees against NSF on Count One of the Amended Complaint; and dismissed NSI from the case. SJ Decision, 2 F.Supp.2d at 25; Dismissal Order at 2, App. 85. The District Court held that "there is no dispute that the Preservation Assessment exists to generate revenue for public projects and goals, or that it is a fee imposed independent of and above the cost of domain name registration." SJ Decision, 2 F.Supp.2d at 30. Since the 1995 amendment to the Cooperative Agreement had neither been reviewed nor ratified by Congress, the District Court reasoned, NSF's collection of the assessment was an unapproved "tax" in violation of Article I, Section 8 of the Constitution. Id. at 33.

Before the District Court entered final judgment or addressed appellees' claims for relief, Congress passed and the President signed into law Section 8003 of the Fiscal Year 1998 Supplemental Appropriations and Recessions Act:

RATIFICATION OF INTERNET INTELLECTUAL INFRASTRUCTURE FEE. (a) The 30 percent portion of the fee charged by Network Solutions, Inc. between September 14, 1995 and March 31, 1998, for registration and renewal of an Internet second-level domain name, which portion was to be expended for the preservation and enhancement of the intellectual infrastructure of the Internet under a cooperative agreement with the National Science Foundation... is hereby legalized and ratified and confirmed fully as to all intents and purpose as if the same had, by prior Act of Congress, been specifically authorized and directed.

Pub. L. No. 105-174, 112 Stat. 58, 93. This statutory provision had the clear purpose and effect of legalizing and ratifying NSF's Preservation Assessment scheme.

Following enactment of § 8003, NSF filed a motion to vacate the preliminary injunction and dismiss the case as moot. On August 28, 2000, the District Court concluded that Section 8003 was "sufficient to effect a valid ratification of the [Preservation Assessment]." Dismissal Order at 13, App. 96; see also U.S. v. Heinszen, 206 U.S. 370, 384, 27 S.Ct. 742, 745-46, 51 L.Ed. 1098 (1907) (recognizing congressional power to ratify tax retroactively). Finding no other legal impediment preventing NSF from imposing the Preservation Assessment on new registrants or from using the funds already collected, the District Court granted NSF's motion. Dismissal Order at 15, App. 98. This court affirmed the judgment of the District Court, see Thomas II, 176 F.3d at 512, and the Supreme Court denied appellees' petition for certiorari, see Thomas v. Network Solutions, 528 U.S. 1115, 120 S.Ct. 934, 145 L.Ed.2d 813 (2000).

On February 17, 2000, appellees filed a motion in District Court seeking an award of attorney's fees and costs under EAJA. See Plaintiffs' Application in Support of Motion for Award of Attorney's Fees and Costs ("Fee Motion"), reprinted in App. 99-276. EAJA provides that:

Except as otherwise...