United States v. 515 Granby, LLC

• Decision Date: 20 November 2013
• Docket Number: No. 12–2161.,12–2161.
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. 515 GRANBY, LLC; Marathon Development Group, Incorporated, Defendants–Appellants, and 1.604 Acres of Land, more or less, situate in the City of Norfolk, Commonwealth of Virginia, Defendant, Skyline Steel, LLC, Claimant.
• Court: U.S. Court of Appeals — Fourth Circuit

736 F.3d 309

UNITED STATES of America, Plaintiff–Appellee,

v.515 GRANBY, LLC; Marathon Development Group, Incorporated, Defendants–Appellants,and1.604 Acres of Land, more or less, situate in the City of Norfolk, Commonwealth of Virginia, Defendant,Skyline Steel, LLC, Claimant.

No. 12–2161.

United States Court of Appeals,

Fourth Circuit.

Argued: Sept. 19, 2013.

Decided: Nov. 20, 2013.

ARGUED:William Walter Wilkins, Nexsen Pruet, Greenville, South Carolina, for Appellants. Joan M. Pepin, United States Department of Justice, Washington, D.C., for Appellee. ON BRIEF:Kirsten E. Small, Andrew Mathias, Nexsen Pruet, LLC, Greenville, South Carolina, for Appellants 515 Granby, LLC and Marathon Development Group, Inc. John C. Lynch, Ethan G. Ostroff, Troutman Sanders LLP, Virginia Beach, Virginia, for Appellant Marathon Development Group, Inc. Joseph T. Waldo, Stephen J. Clarke, Brian G. Kunze, Waldo and Lyle, P.C., Norfolk, Virginia, for Appellant 515 Granby, LLC. Kris E. Durmer, General Counsel, Julie A. Holvik, Assistant Regional Counsel, General Services Administration, Philadelphia, Pennsylvania; Ignacia S. Moreno, Assistant Attorney General, John E. Arbab, Georgia Garthwaite, Kristin R. Muenzen, Environment & Natural Resources Division, United States Department of Justice, Washington, D.C. for Appellee.

Before DUNCAN and THACKER, Circuit Judges, and GINA M. GROH, United States District Judge for the Northern District of West Virginia, sitting by designation.

Vacated and remanded with instructions by published opinion. Judge DUNCAN wrote the opinion, in which Judge THACKER and Judge GROH joined.

DUNCAN, Circuit Judge:

Appellants 515 Granby, LLC (“Granby”) and Marathon Development Group, Inc. (“Marathon”) appeal the district court's denial of attorney's fees under the Equal Access to Justice Act (“EAJA”), 28 U.S.C. § 2412, after prevailing against the United States on the issue of just compensation in a condemnation proceeding. The EAJA provides that a party who prevails in litigation against the United States is entitled to an award of attorney's fees and expenses unless “the position of the United States was substantially justified” or “special circumstances make an award unjust.” 28 U.S.C. § 2412(d)(1)(A). The district court determined that, although the prelitigation position of the United States was admittedly unreasonable, the United States' overall position was substantially justified under the totality of the circumstances. We vacate and remand to the district court with instructions regarding how to properly weigh the government's prelitigation position in determining whether its position as a whole is substantially justified, and to consider, if necessary, whether special circumstances exist in the first instance.

I.

A.

Granby owned a 1.604–acre parcel of land in Norfolk, Virginia, on which it planned to develop luxury condominiums, retail establishments, and office space. Although the development project never materialized, Granby made improvements to the land by preparing the site for construction, including excavating and installing piles to support a high-rise building. Granby hired Marathon to manage the development of the parcel. Marathon held a lien of over $3 million on the property because of its role in the project. The Bank of the Commonwealth also financed the development project and had a lien on the property.

The United States was interested in obtaining Granby's parcel in order to expand the federal court building in Norfolk. The United States conducted two appraisals of the property. In 2008, appraisers valued it at $7 million. After the economic downturn, it was reappraised in 2009 at a value of $6.175 million. The United States instructed the appraiser in each instance to assess the property as if it were vacant—that is, to ignore any improvements to the land.

After negotiations to purchase the 1.604–acre parcel failed, the United States initiated a condemnation proceeding in 2010 to acquire it by eminent domain. ¹SeeU.S. Const. amend. V; 40 U.S.C. § 3113. Based on the 2009 appraisal, the United States offered $6.175 million as just compensation and deposited that amount with the court. Granby rejected the offer and the case proceeded toward trial on the issue of just compensation under the Fifth Amendment's Takings Clause. Because of its lien, the United States joined Marathon as a party to the action; other lienholders were put on notice as interested parties but were not joined. Marathon participated in the lawsuit, but relied on Granby's valuations of the property's fair market value.

Granby obtained two appraisals valuing the land at $36.1 million and $30.7 million, respectively. These appraisals were based, in part, on a variety of valuation techniques that the United States opposed, such as valuing the land at its best use and including the value of the developer's entrepreneurial incentive. The district court ultimately granted most of the government's motions to exclude certain types of valuation evidence. As a result, Granby lowered its valuation to $16.32 million shortly before trial.

The government ordered a new appraisal for its trial valuation of the property, this time including improvements to the land, which raised its value to $9 million. Each of the parties rejected last-minute settlement offers: the government offered $9.4 million and Granby offered $15.4 million.

B.

The matter was tried before a jury, which heard evidence relating to Granby's asserted value of $16.32 million and the United States' asserted value of $9 million. The jury returned a verdict of $13,401,741 as just compensation.

Granby and Marathon each applied for attorney's fees under the EAJA, asserting that they were entitled to such fees because they prevailed in an action against the United States and the other requirements of the EAJA were met. The “prevailing party” in an eminent-domain proceeding is the party whose highest trial valuation of the property is closest to the final judgment. 28 U.S.C. § 2412(d)(2)(H). Here, the jury's verdict of $13.4 million was closer to Granby's valuation of $16.3 million than it was to the government's valuation of $9 million. That Granby and Marathon prevailed is not contested.

The United States opposed an award of attorney's fees on the grounds that the government's position was substantially justified and special circumstances existed that would make the award of fees unjust. The issue was referred to a magistrate judge, who recommended that both Granby and Marathon were eligible for fees, costs, and other expenses under the EAJA because the government's position was not substantially justified and there were no special circumstances. The district court rejected the magistrate judge's recommendation. Because it found that the government's position was substantially justified, it did not reach the question of special circumstances. This appeal followed.

II.

The arguments on appeal mirror those before the district court. Appellants argue that the government's position was not substantially justified because an unreasonable prelitigation position should automatically foreclose a court from finding substantial justification. They contend that the district court erred by considering their financial ability to litigate and the reasonableness of their position.² Appellants also ask us to find, as a matter of law, that there are no special circumstances that would make an award unjust. Because the district court did not reach the question of special circumstances, we do not address it here.

We review the district court's denial of attorney's fees under the EAJA for abuse of discretion. Pierce v. Underwood, 487 U.S. 552, 562–63, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988). A district court abuses its discretion when it makes an error of law. United States v. Basham, 561 F.3d 302, 326 (4th Cir.2009). Although this standard is deferential, it is not merely “a simple, accept-on-faith, rubber-stamping of district court decisions” regarding fees under the EAJA. United States v. Paisley, 957 F.2d 1161, 1166 (4th Cir.1992).

A.

As we have stated, the EAJA provides that parties who prevail in litigation against the government are entitled to an award of attorney's fees and other expenses “unless the court finds that the position of the United States was substantiallyjustified or that special circumstances make an award unjust.” 28 U.S.C. § 2412(d)(1)(A). The United States has the burden of showing that its position was substantially justified. EEOC v. Clay Printing Co., 13 F.3d 813, 815 (4th Cir.1994).

We have held that a position is “substantially justified” when it has a “reasonable basis in law and fact.” Cody v. Caterisano, 631 F.3d 136, 141 (4th Cir.2011) (quoting Pierce, 487 U.S. at 566 n. 2, 108 S.Ct. 2541). In Pierce, the Supreme Court clarified that the EAJA's use of “substantially justified” is similar to its use in other statutes, in which it has been defined as “justified to a degree that could satisfy a reasonable person” and as “more than merely undeserving of sanctions for frivolousness.” 487 U.S. at 565–66, 108 S.Ct. 2541. In the eminent-domain context, a position is substantially justified when “the government's refusal to offer more to the property owners as just compensation ha[s] a reasonable basis in fact and in law.” In re Lamson (Lamson I), No. 94–1249, 1995 WL 54025, at *4 (4th Cir. Feb. 10, 1995).

While seeming relatively straightforward, “determining whether the government's position is substantially justified ... ‘has proved to be an issue of considerable conceptual and practical difficulty.’ ” Roanoke River Basin Ass'n v. Hudson, 991 F.2d 132, 138 (4th Cir.1993) (quoting Paisley, 957 F.2d at 1165). In particular, we have found little guidance on the specific question of balancing the government's prelitigation and litigation postures in a case, such as ours, where they differ.

Limited guidance notwithstanding, we have no difficulty...