Appeal from the United States District Court for the Eastern District of Pennsylvania, Civil Action No. 83-5502
Before: Seitz, Hunter and Mansmann, Circuit Judges.
Noel A. Brinker appeals from an order of the United States District Court for the Eastern District of Pennsylvania denying Mr. Brinker's petition for an award of attorney's fees pursuant to the Equal Access to Justice Act ("EAJA"), 28 U.S.C. § 2412 (Supp. IV 1980). Mr. Brinker was the prevailing party in an action against the Federal Emergency Management Agency ("FEMA") for the proceeds of a crime insurance policy. Therefore he may be awarded attorney's fees unless the government meets its burden to show substantial justification for its position preceding as well as during the litigation, or demonstrates special circumstances making an award of fees unjust.
The parties agree that until the final pleading in litigation of this lengthy dispute, the government's position was based upon factual predicates having no reasonable basis in truth. No cause has been shown for the government's prolonged failure to ascertain the facts. Therefore we hold that the government's final litigation stance, though arguably reasonable, was de minimis with respect to the duration of the dispute as a whole and cannot provide substantial justification for the government's protracted adherence to a position admittedly having no basis in fact. Nor has the government demonstrated the requisite special circumstances.
We, therefore, will reverse the district court's order so that it may award a reasonable attorney's fee.
Under the Housing and Urban Development Act of 1970, Pub. L. No. 91-609, 64 Stat. 1770 (1970), the Secretary of Housing and Urban Development was authorized to issue crime insurance policies in accordance with such terms and conditions as the Secretary should determine. All functions thus vested in the Secretary were later transferred by statute to the Director of the Federal Emergency Management Agency. See Reorg. Plan No. 3 of 1978, § 202, 43 F.R. 41943, 92 Stat. 3789.
Plaintiff Brinker's Philadelphia residence was insured under a Residential Crime Insurance Policy issued by FEMA. On June 8, 1982, the Brinker residence was damaged extensively by fire determined by the Fire Marshal to have been set by an unknown arsonist. Mr. Brinker timely filed a claim under his residential crime policy. The claim was denied and Mr. Brinker filed suit in the district court on November 14, 1983. By order of August 27, 1985, the district court denied FEMA's motion for summary judgment, granted Mr. Brinker's cross-motion and entered judgment in favor of Plaintiff Brinker for the full amount of the insurance policy. FEMA did not appeal.
On September 24, 1985, Mr. Brinker filed an application for an award of attorney's fees in the amount of $7552.50 in the action before the district court. The petition was denied by the district court on December 2, 1985. Mr. Brinker appeals from the denial of the fee petition and further requests permission to submit a supplemental petition for costs and fees incurred in prosecuting this appeal.
The Equal Access to Justice Act provides in relevant part that "a court may award reasonable fees and expenses of attorneys, ... to the prevailing party in any civil action brought by or against the United States or any agency and any official of the United States acting his or her official capacity in any court having jurisdiction of such action." 28 U.S.C. § 2412(B) (1982). However, fees may not be awarded against the United States if "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. § 2412(d)(2)(A). The appellant challenges the district court's finding that the position of the United States was substantially justified.
"'Position of the United States' means, in addition to the position taken by the United States in the civil action, the action or failure to act by the agency upon which the civil action is based; ..." 28 U.S.C. § 2421(d)(2)(D); see also, Natural Resources Defense Council, Inc. vs. EPA, 703 F.2d 700, 708 (3d Cir. 1983). Substantial justification is essentially a standard of reasonableness turning on whether the government's position had a "reasonable basis both in law and fact." Dougherty v. Lehman, 711 F.2d 555, 563 (3d Cir. 1983).
In an action for fees the government has the burden of proving that its actions giving rise to the litigation was substantially justified. Id. at 561. While the arguments of the parties, and any evidence introduced in the fees actions, such as affidavits, must be carefully considered, it is essentially the relevant portions of the record in the underlying action which must be examined in order to determine if the government has proved substantial justification for its positions. Id. at 562.
In order to satisfy its burden to show substantial justification the government must demonstrate (1) a reasonable basis in truth for the facts alleged, (2) a reasonable basis in law for the theory propounded, and (3) reasonable support in the facts alleged for the legal theory advanced. See Citizens Council of Delaware County v. Brinegar, 741 F.2d 584, 593 (3d Cir. 1984).
The district court determined that the government's position was substantially justified. We disagree.
As a preliminary matter we must address the parties' disagreement as to the proper scope of review of the district court's substantial justification conclusion in a case tried before the district court as opposed to a case wherein the district reviewed an administrative record. We expressly left open this question in Washington v. Heckler, 756 F.2d 959, 963 n.4 (3d Cir. 1985) and in Donovan v. Dial America Marketing, Inc., 757 F.2d 1376, 1389 n.17 (3d Cir. 1985) cert. denied 474 U.S. 919, 106 S. Ct. 246, 88 L. Ed. 2d 255 . The plaintiff argues that our review ...