Waterman S.S. Corp. v. Maritime Subsidy Bd., s. 88-5392

• Decision Date: 20 April 1990
• Docket Number: 88-5393,Nos. 88-5392,s. 88-5392
• Citation: 901 F.2d 1119
• Parties: WATERMAN STEAMSHIP CORPORATION v. MARITIME SUBSIDY BOARD, et al., Appellants. FARRELL LINES, INCORPORATED v. James H. BURNLEY, IV, et al., Appellants.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1119

901 F.2d 1119

284 U.S.App.D.C. 67

WATERMAN STEAMSHIP CORPORATION v. MARITIME SUBSIDY BOARD, et al., Appellants.

FARRELL LINES, INCORPORATED v. James H. BURNLEY, IV, et al., Appellants.

Nos. 88-5392, 88-5393.

United States Court of Appeals, District of Columbia Circuit.

Argued Nov. 7, 1989.

Decided April 20, 1990.

Appeals from the United States District Court for the District of Columbia.

Edith S. Marshall, Asst. U.S. Atty., with whom Jay B. Stephens, U.S. Atty., John D. Bates, R. Craig Lawrence and Michael J. Ryan, Asst. U.S. Atty., were on the brief, for appellants in No. 88-5392 and No. 88-5393. Wilma A. Lewis, Asst. U.S. Atty., Washington, D.C., also entered an appearance for appellants in both cases.

Edward Aptaker, with whom Edward Schmeltzer and Deana Frances Dudley, Washington, D.C., were on the brief, for appellee Farrell Lines, Inc. in No. 88-5393.

John P. Meade, Washington, D.C., was on the brief for appellee Waterman S.S. Corp. in No. 88-5392.

Before WILLIAMS and SENTELLE, Circuit Judges, and ROBINSON, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge STEPHEN F. WILLIAMS.

STEPHEN F. WILLIAMS, Circuit Judge:

In 1982 the Maritime Subsidy Board issued a grant of authority to United States Lines to conduct around-the-world shipping service with unsubsidized ships. It did so in a manner that effectively denied U.S. Lines's competitors, including Waterman Steamship Corporation and Farrell Lines, Inc., an opportunity to contest the grant. Waterman and Farrell sued the Board in district court, which ordered a remand to the Board and thereby afforded them the missed opportunity. Farrell Lines, Inc. v. Dole, 619 F.Supp. 298 (D.D.C.1985). On the basis of the remand, and without regard to the substantive outcome, the court awarded them attorneys' fees under the Equal Access to Justice Act, 28 U.S.C.A. Sec. 2412 (1989 Supp.). Because we conclude that a remand to the agency in these circumstances does not render Waterman and Farrell "prevailing parties" under EAJA, we reverse. We remand to the district court, however. U.S. Lines ultimately received less broad authority from the Board to conduct unsubsidized service than it had under the 1982 contract. Plaintiffs should have an opportunity to establish that the differential was caused by their litigative success and constitutes enough of a victory to qualify them as at least partially prevailing parties.

I

The Merchant Marine Act of 1936, 46 U.S.C.App. Secs. 1101-1294 (1982), authorizes the Maritime Administration to subsidize the construction and operation of U.S.-flag vessels in foreign trade. 46 U.S.C.App. Sec. 1173. The agency does so by giving an "operating-differential subsidy" to merchant marine operators, amounting to the difference between the domestic cost of operating ships on a given trade route and the cost for foreign competitors. See 46 U.S.C.App. Sec. 1173(b).

In November 1980 U.S. Lines submitted an application for an operating subsidy contract for service on certain routes. In the application it also sought permission to undertake an unrestricted number of unsubsidized voyages. At the time, a set of regulations known as "General Order 80" required subsidized operators to show a "definite need" for unsubsidized service and gave competition a chance to be heard in opposition. See 46 CFR Sec. 281.11 (1986), repealed, Non-Subsidized Voyages Restrictions Elimination, 51 Fed.Reg. 43003 (Nov. 28, 1986). The Maritime Subsidy Board, a branch of the Maritime Administration, stated in an interim opinion that the question of unsubsidized service by subsidized operators deserved further Board review, but that in the meantime U.S. Lines would have to seek authority for any such service under General Order 80. 619 F.Supp. at 301-02; see also United States Lines, Inc., 5 MA 547, 564 (MSB 1981).

After the contract was approved, but before it was actually awarded, U.S. Lines sought to amend the contract to allow it to build 14 "Jumbo Econships" and operate them without subsidy on any legal trade route. In June 1982 the Board approved an amended contract, reducing the original subsidy, requiring construction of the Jumbos, and authorizing their use in unsubsidized around-the-world service. The Board acted without complying with General Order 80, and U.S. Lines's competitors learned of the amended contract through a Maritime Administration press release.

In 1984 Farrell and other competitors of U.S. Lines requested the Board to reopen the contract to inquire into the effects of the authorized Jumbo service on them, arguing that they had been lulled into believing no such service would be authorized without compliance with General Order 80. The Board denied the requests as untimely.

Four of U.S. Lines's competitors, including Farrell and Waterman, then sued the Board. The district court ruled that refusal to reopen the case in 1984 was an abuse of discretion because it was not until long after the 1982 order that the competitors learned of the full scope of the authority granted, evidently by observing U.S. Lines's actual conduct. See 619 F.Supp. at 306. It also held that the Board decision not to apply the terms of General Order 80 to the contract amendment was arbitrary, capricious, and an abuse of discretion. 619 F.Supp. at 308. It remanded the case to the Board for it to entertain a new application by U.S. Lines for its Jumbo service, but neither enjoined the service in the meantime nor reinstated the original subsidy contract, as Waterman and Farrell had requested. Id. at 310-11.

While the remand was pending before the Board, Farrell and Waterman moved in the district court for an award of attorneys' fees under the Equal Access to Justice Act. The court awarded the fees, finding that Waterman and Farrell were each a "prevailing party" and that the government's litigating position was not "substantially justified." It also found that specializing in maritime law was a "special factor" justifying a deviation from the standard $75 per hour cap on attorneys' fees under EAJA, see 28 U.S.C. Sec. 2412(d)(2)(A), and awarded fees for the entire amount of the lawsuit, with some minor reductions. This appeal followed.

II

Waterman and Farrell may be considered prevailing parties if they have "succeeded on 'any significant issue in litigation which achieve[d] some of the benefit the parties sought in bringing suit.' " Texas State Teachers Ass'n v. Garland Indep. School Dist., --- U.S. ----, 109 S.Ct. 1486, 1493, 103 L.Ed.2d 866 (1989) (quoting Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 1939, 76 L.Ed.2d 40 (1983) (quoting Nadeau v. Helgemoe, 581 F.2d 275, 278-79 (1st Cir.1978))). ¹ The plaintiff need not prevail on the "central issue" in the litigation, Texas State Teachers, but must secure some benefit greater than just a "favorable statement of the law in an otherwise unfavorable opinion." Hewitt v. Helms, 482 U.S. 755, 762, 107 S.Ct. 2672 2676, 96 L.Ed.2d 654 (1987). We understand "benefit" to mean something more than an enhanced legal position in a proceeding that ultimately fails to supply any material relief.

In Sullivan v. Hudson, --- U.S. ----, 109 S.Ct. 2248, 104 L.Ed.2d 941 (1989), the Supreme Court considered whether EAJA allowed fees for the administrative phase of a claimant's quest for Social Security disability benefits. The claimant had lost at the administrative level, then secured a remand from the courts on the grounds that the agency had failed to follow its own substantive regulations, and finally prevailed. In finding the fees awardable, the Court was at pains to demonstrate that a Social Security claimant's status as a prevailing party was "often completely dependent on the successful completion of the remand proceedings before the Secretary." Id. 109 S.Ct. at 2255. In concluding that success was so dependent, the Court stated that where the remand did not "necessarily dictate the receipt of benefits, the claimant will not normally attain 'prevailing party' status ... until after the result of the administrative proceedings is known." Id. It analogized the case to Hanrahan v. Hampton, 446 U.S. 754, 100 S.Ct. 1987, 64 L.Ed.2d 670 (1980), where it had held that securing reversal of a directed verdict was not sufficient benefit. The Court concluded, "We think it clear that under these principles a Social Security claimant would not, as a general matter, be a prevailing party within the meaning of the EAJA merely because a court had remanded the action to the agency for further proceedings." 109 S.Ct. at 2255. Finally it noted that "the vast majority" of the Courts of Appeals had reached this conclusion, citing Paulson v. Bowen, 836 F.2d 1249, 1252 (9th Cir.1988); Brown v. Secretary of Health and Human Services, 747 F.2d 878, 882 (3rd Cir.1984), and Swedberg v. Bowen, 804 F.2d 432, 434 (8th Cir.1986). Our own decision in National Coalition Against the Misuse of Pesticides v. Thomas, 828 F.2d 42 (D.C.Cir.1987), though involving the Environmental Protection Agency and a rulemaking, is to the same effect. See also McGill v. Secretary of Health and Human Services, 712 F.2d 28, 31 (2d Cir.1983); Von Luetzow v. Director, Office of Personnel Management, 562 F.Supp. 684, 685-86 (D.D.C.1983); cf. Brewer v. American Battle Monuments Comm'n, 814 F.2d 1564, 1567 (Fed.Cir.1987); H.R.Rep. No. 99-120(I), 99th Cong., 1st Sess., reprinted in 1985 U.S. Code Cong. & Admin. News 132, 148 (in explanation of 1985 reenactment and amendment of EAJA, committee states that "[t]he court will usually decline to make an award upon the remand decision because the remand order did not yet make the applicant a 'prevailing party' and therefore eligible under the EAJA").

Although the Sullivan decision is not a direct holding on the issue before us, the analysis appears a critical step in support of the Court's holding and we see no reason not to take it seriously. Both an agency and a trial court may make missteps along...