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Lee v. Johnson

argued: March 6, 1986.



Author: Gibbons

Before: GIBBONS, BECKER and ROSENN, Circuit Judges.Opinion

GIBBONS, Circuit Judge :

J. Alan Johnson, United States Attorney for the Western District of Pennsylvania, and William Von Raab, Commissioner of the United States Customs Service, appeal from an order awarding counsel fees, costs, and expenses against the United States pursuant to the Equal Access to Justice Act, 28 U.S.C. § 2412(d) (1982). They contend that no award should have been made. Ft. Steuben Company, Inc. (Ft. Steuben), a plaintiff in the underlying action, cross-appeals from the same order to the extent that it denied reimbursement for certain fees. We affirm the district court award in its entirety.


Ft. Steuben, an Ohio corporation operating in Steubenville, Ohio, imports and resells oriental artifacts and merchandise. Its principal place of business is located in the basement of the home of Makana Lee, its manager. Ft. Steuben's merchandise normally passes through United States Customs at Pittsburgh, Pennsylvania, where the company employs a customs broker to prepare the file entry documents. On October 20, 1983, five officers of the Customs Service traveled from their Pittsburgh office to Steubenville to investigate certain claimed exemptions from duties and county-of-origin marking requirements with respect to goods imported by Ft. Steuben. The agents questioned Mr. Lee, who cooperated. Lee permitted them to inspect merchandise stored in a warehouse at another Steubenville location.

On October 21, 1983, three custom agents returned to Steubenville and padlocked and sealed the doors to the basement of Mr. Lee's house -- including the door connecting the house and the basement -- his garage, and the Ft. Steuben warehouse. The agents acted without a warrant, and the only explanation they gave Mr. Lee for their action, noted on a "Receipt for Retainer or Seized Merchandise" was that all the contents were seized pursuant to 18 U.S.C. § 542 (1982).*fn1 Customs Service agents subsequently entered the premises several times to inspect and inventory their contents.

On November 23, 1983, Lee and Ft. Steuben filed in the United States District for the Southern District of Ohio an action seeking permanent, injunctive relief and damages. In their complaint they alleged that the actions of the Customs Service agents violated the fourth amendment prohibition against unreasonable seizures as well as the fifth amendment's guarantee of due process. They also requested a preliminary injunction ordering a return of the property.

After the district court scheduled a hearing on the motion for pendente lite relief, the Customs Service unilaterally removed the padlocks and seals from Lee's basement and garage. At the time of the hearing the Customs Service remained in possession of the warehouse and was continuing to inspect and inventory its contents, although it had neither notified Ft. Steuben or Lee of any penalty assessment no filed any criminal charges. After a hearing, the United States District Court for the Southern District of Ohio, applying the usual standards for pendente lite injunctive relief, entered an order enjoining the Customs Service from continuing the seizure of the warehouse. Lee v. Raab. Noting that in addition to their request for an injunction Lee and Ft. Steuben had moved pursuant to Federal Rule of Criminal Procedure 41(e) for the return of certain property already removed, the court commented, "Because the granting of the preliminary injunction affords the plaintiffs immediate and substantial relief, and because no criminal proceedings have yet been instituted, plaintiffs' motion for relief under Rule 41(e) is taken under advisement." Id. at 1274-75. The Customs Service did not appeal this order.

On February 7, 1984, one of the Customs Service agents who had participated in the October 21, 1983, seizures served on Mr. Lee, as Custodian of Records of Ft. Steuben, a subpoena duces tecum directing him to produce before a grand jury in the Western District of Pennsylvania forty-six categories of records. All of these subpoenaed records had been seized in the illegal October 1983 raid.

Before the return date of that subpoena duces tecum, the district court in Ohio decided the reserved Rule 41(e) motion. That court's order provides,

WHEREUPON, upon consideration, the Court determines that plaintiffs' motion for return of property is meritorious, and it is hereby GRANTED. Defendants are ORDERED to return immediately any property taken from the Lees' basement or garage or the Ft. Steuben Company warehouse which remains in defendants' custody or control; and it is further

Ordered THAT to the extent this Order shall have the effect under Federal Rule of Criminal Procedure 41(e) of suppressing the admission of illegally seized property into evidence in any future trial or hearing, it shall apply to all the property of the plaintiffs which was seized, including, but not limited to, any article of merchandise and any business record or document that was present on the premises of the Lees' basement or garage or the Ft. Steuben Company warehouse at the time these premises were seized on October 21, 1983.

Lee v. Raab, 576 F. Supp. 1267, slip op. at 4-5 (S.D. Ohio Feb. 13, 1984). This February 13, 1984 order covers all the records listed in the subpoena duces tecum. Again, there was no appeal.

Relying on the two orders issued by the Ohio District Court, Lee and Ft. Steuben filed a complaint in the Western District Court of Pennsylvania on February 17, 1984. In that complaint they charged that the Customs Service officials had initiated the grand jury investigation in retaliation for Lee and Ft. Steuben's prosecution of the civil suit in the Southern District of Ohio and for the purpose of assisting in the government's defense of that action. they further alleged that the subpoena itself was a fruit of the illegal search and seizure. The plaintiffs sought a preliminary and permanent injunction barring the United States Attorney from continuing the grand jury investigation and barring designated agents of the Customs Service from further participating in any investigation relating to the illegally-seized property. Lee and Ft. Steuben simultaneously filed in the pending civil action a motion to quash the grand jury subpoena duces tecum and a motion for a preliminary injunction.

The government's response to the plaintiffs' motions did not dispute the complaint's factual allegations. Conceding that the October 1983 seizure unconstitutional, that the Ohio district court has issued a valid injunction, and that the Ohio district court had issued the February 13, 1984, order quoted above, the government nevertheless contended that it was free to subpoena the very records it had illegally seized and to have the Customs Service agents who had effected the illegal seizure participate in the grand jury proceeding. Government's Response to Defendant's [sic] Complaint, reprinted in Joint Appendix at 71-82.

On March 12, 1984, a judge of the Western District of Pennsylvania held a hearing on the plaintiffs' motion and heard testimony. Shortly thereafter the district court quashed the subpoena duces tecum, enjoined the government from issuing of any additional subpoenas seeking evidence that the Ohio district court had already suppressed, and enjoined seventeen officials of the Customs Service and certain government attorneys from further participation in the grand jury investigation. Lee v. Johnson, Civil Action No. 84-379 (W.D. Pa. Mar. 23, 1984).*fn2 The government did not appeal from this order, and it remains in effect, along with the orders of the Ohio district court referred to above.


On June 1, 1984, Ft. Steuben filed in the Western District of Pennsylvania an application seeking reimbursement for costs, attorneys' fees, and expenses it incurred in connection with its suit in that court. In addition to that amount, which totaled $23,830.81, Ft. Steuben sought reimbursement for the attorneys fees, costs, and expenses that it would incur in prosecuting the fee petition. In support of its petition Ft. Steuben filed detailed affidavits.

The government filed a response to the application, contending that, as a matter of law, Ft. Steuben was not entitled to reimbursement. It filed no affidavits contesting the reasonableness of the hourly rates requested or the reasonableness of the hours expended, nor did it file any affidavits in support of its legal contentions.

At the district court hearing on the petition, the government offered no evidence, choosing to rely entirely upon its legal arguments. Thus the fee application was before the court on Ft. Steuben's application, its uncontradicted affidavits, and the underlying record in the case.

The district court held that Ft. Steuben qualified for reimbursement, Lee v. Johnson, C.A. No. 84-379 (W.D. Pa. May 3, 1985), and it entered an order awarding to Ft. Steuben attorneys fees of $17,978.32, and costs and expenses of $2015.01. Lee v. Johnson, C.A. No. 84-379 (W.D. Pa. May 3, 1985) (order). Although it also ordered the government of reimburse Ft. Steuben for attorney fees it incurred in preparing the fee petition, the district court refused to order reimbursement for expenses associated with the subsequent litigation of the fee petition. This appeal and cross-appeal followed.


A. The Government's Appeal

The Equal Access to Justice Act provides in relevant part,

[A] court shall award to a prevailing party . . . fees and other expenses . . . incurred by that party in any civil action . . . ., unless the court finds the position of the United States was substantially justified . . . .

28 U.S.C. § 2412(d)(1)(A) (1982).*fn3

The government argued in the district court and argues now to this court that (1) Ft. Steuben was not a "party" as defined by the Act; (2) Ft. Steuben's suit was not a "civil action"; and (3) that the position of the United States was "substantially justified." We ...

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