U.S. v. Estridge, 85-1706

• Decision Date: 05 August 1986
• Docket Number: No. 85-1706,85-1706
• Citation: 797 F.2d 1454
• Parties: -1006, Unempl.Ins.Rep. CCH 16,857 UNITED STATES of America, Appellant, v. Sidney ESTRIDGE, James F. O'Crowley, Jr., Appellee, Herbert Maslin.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1454

797 F.2d 1454

57 A.F.T.R.2d 86-1006, Unempl.Ins.Rep. CCH 16,857

UNITED STATES of America, Appellant, v. Sidney ESTRIDGE, James F. O'Crowley, Jr., Appellee, Herbert Maslin.

No. 85-1706.

United States Court of Appeals,

Eighth Circuit.

Submitted Jan. 16, 1986.

Decided March 13, 1986.

Opinion on Application for Attorney Fees

on Appeal Aug. 5, 1986.

Before LAY, Chief Judge, FLOYD R. GIBSON, Senior Circuit Judge, and ROSS, Circuit Judge.

PER CURIAM.

This is an appeal from a district court ¹ award of costs and attorneys' fees under the Equal Access to Justice Act (EAJA), 28 U.S.C. Sec. 2412(d) (1982) (amended 1985). In the underlying action, the United States sought to hold O'Crowley and three other individuals liable under 26 U.S.C. Sec. 6672(a) (1982) ² for unpaid employment taxes that Arlen Trophy Company, Inc. (Arlen) had withheld from the wages of its employees for the last quarter of 1975 and the first quarter of 1976. ³ O'Crowley prevailed in the action, and the district court awarded him attorneys' fees and expenses under the Equal Access to Justice Act. ⁴ The government appeals only the award of costs and attorneys' fees to O'Crowley. We affirm.

Section 2412(d)(1)(A) provides:

Except as otherwise specifically provided by statute, 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), including proceedings for judicial review of agency action, 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 or that special circumstances make an award unjust.

28 U.S.C.A. Sec. 2412(d)(1)(A) (West 1985 Supp. & 1986 Supp. IV). ⁵ In a detailed and thoughtful opinion, the district court concluded that the government had not carried its burden of proving that its position against O'Crowley was "substantially justified." ⁶ In reaching this conclusion, the district court emphasized that the government did not furnish O'Crowley with any specific statement of fact or law on which the government based its claim against O'Crowley, thus preventing O'Crowley from demonstrating that the government's position against him was factually and legally untenable. The court also noted that the government failed to investigate the truth of evidence offered by O'Crowley that would have supported O'Crowley's position, gave unwarranted credence to obviously biased witnesses, and failed to reevaluate whether to continue prosecuting O'Crowley after the government's claim against Moats had been resolved in Moats' favor and the district court had awarded Moats costs and attorneys' fees under the EAJA. The district court therefore concluded that the government had not carried its burden of proving that its position against O'Crowley was "substantially justified" and awarded O'Crowley costs and attorneys' fees.

Our role on review is limited to determining whether the district court abused its discretion in finding that the government's position against O'Crowley was not substantially justified. Keasler v. United States, 766 F.2d 1227, 1231 (8th Cir.1985). Under this standard of review, the district court's conclusions of law are reviewable on a de novo basis; its findings of fact are of course subject to the clearly erroneous rule. United States v. 2,116 Boxes of Boned Beef, 726 F.2d 1481, 1486 (10th Cir.), cert. denied sub nom. Jarboe-Lackey Feedlots, Inc. v. United States, 469 U.S. 825, 105 S.Ct. 105, 83 L.Ed.2d 49 (1984); Spencer v. NLRB, 712 F.2d 539, 563-64 (D.C.Cir.1983), cert. denied, 466 U.S. 936, 104 S.Ct. 1908, 80 L.Ed.2d 457 (1984). ⁷ In this regard, to the extent that the district court's findings concerning the strength of positions taken in litigation by the United States are based on assessments of the probative value of the evidence offered by the government, they can be reversed only if clearly erroneous. 2,166 Boxes of Boned Beef, 726 F.2d at 1486; Spencer, 712 F.2d at 564.

The government does not challenge any particular findings of the district court as clearly erroneous. Nor does the government point to any particular error of law made by the district court in concluding that the government's position was not substantially justified. Rather, the thrust of the government's argument on appeal is that the merit of its claim against O'Crowley turned solely on the credibility of certain witnesses. The district court's application of the EAJA to this case, the government argues, in effect requires the government to second-guess the district court in determining whose version of the facts the court would ultimately find credible. The district court's opinion makes clear, however, that O'Crowley's ultimate liability under 26 U.S.C. Sec. 6672(a) turned on far more than witness credibility. The district court's primary reason for finding the government's position against O'Crowley not substantially justified was the fact that the government did not diligently investigate who was responsible for paying Arlen's taxes. Instead, the government brought claims against several officers and directors of Arlen and Gateway, including O'Crowley, who might possibly have been responsible for collecting or paying Arlen's employee withholding taxes, hoping that the court would ultimately find one or more of those individuals liable for Arlen's taxes.

In light of the district court's lengthy and well-reasoned opinion explaining its conclusion that the government's position against O'Crowley was not substantially justified and the government's failure to point to any error in the district court's factual findings or application of the law to those findings, we cannot say that the district court abused its discretion in awarding O'Crowley costs and attorneys' fees under the Equal Access to Justice Act. Accordingly, we affirm the judgment of the district court. ⁸

ROSS, Circuit Judge, dissenting.

I disagree with the result reached by the majority in this case because I believe that the position of the government in this case was "substantially justified" within the meaning of the Equal Access to Justice Act.

This court has heretofore accepted a test of reasonableness in Iowa Express Distribution v. NLRB, 739 F.2d 1305 (8th Cir.1984). Merely losing the case does not satisfy a determination of lack of reasonableness. Id.

Here the court's decision depended almost entirely on the determination of the credibility of the witnesses. In such a case, when the government is unable to determine which party is telling the truth, it is reasonable to do what it did here: It sued all the "responsible" parties and let the court decide the credibility issue.

ON APPLICATION FOR ATTORNEYS' FEES ON APPEAL

LAY, Chief Judge.

In a prior proceeding, this court affirmed a district court award of attorneys' fees and expenses to James F. O'Crowley, Jr., under the Equal Access to Justice Act, 28 U.S.C.A. Sec. 2412(d) (West Supp.1986) (EAJA). O'Crowley now seeks an award of attorneys' fees and expenses under the EAJA for the fees and expenses he incurred in (1) defending the government's appeal from the district court's decision in his favor on the merits, which was later voluntarily dismissed and (2) defending the government's appeal from the district court award of fees and expenses under the EAJA and filing this current EAJA application. We grant O'Crowley's request except as to the fees and expenses he incurred in defending the appeal on the merits.

In the underlying action, the United States sought to hold O'Crowley and three other individuals liable under 26 U.S.C. Sec. 6672(a) (1982) for unpaid employment taxes that Arlen Trophy Company, Inc. had withheld from the wages of its employees. O'Crowley prevailed in the action. Subsequently, the district court awarded O'Crowley attorneys' fees and expenses under the EAJA. The government appealed both the district court's decision in favor of O'Crowley on the merits (the "section 6672 action") and the district court's award under the EAJA (the "EAJA action" or the "EAJA award"), and the appeals were consolidated. Upon the government's own motion, however, this court dismissed the government's appeal of the section 6672 action in an order dated August 6, 1985. The government continued to prosecute its appeal of the district court's EAJA award. After oral argument, we affirmed the district court's award under the EAJA on March 13, 1986. On April 10, 1986, we issued our mandate in the EAJA action. O'Crowley filed his current application for fees and expenses incurred in pursuing both appeals and in filing this application on May 5, 1986.

Jurisdiction

A party seeking an award of attorneys' fees and expenses under the EAJA must submit an application for such an award to the court within thirty days of "final judgment," 28 U.S.C.A. Sec. 2412(d)(1)(B) (West Supp.1986), which the EAJA defines as "a judgment that is final and not appealable," id. Sec. 2412(d)(2)(G). The government contends that O'Crowley's EAJA application to this court is untimely with respect to those fees and expenses O'Crowley incurred in defending against the government's appeal of the district court's decision in the section 6672 action before the government dismissed this appeal on its own motion. With respect to the section 6672 appeal, the government argues, the judgment of this court became "final" for purposes of 28 U.S.C.A. Sec. 2412(d)(1)(B) on August 6, 1985, when this court entered an order dismissing the government's appeal of the section 6672 action. O'Crowley counters that because the appeal of the section 6672 action and the appeal of the EAJA award were consolidated, the judgment of this court on the appeal of the section 6672 action did not become final until this court's judgment in the appeal of the EAJA award became...