A "Substantially Justified" Position Has A Reasonable Basis In Fact And Law
UNITED STATES v. THOUVENOT, WADE & MOERSCHEN (February 18, 2010)
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The Equal Access to Justice Act allows a party that prevails against the United States in litigation to recover its attorneys' fees unless the position of the United States is found to be "substantially justified." Three cases before the Court allowed it to address that standard. In the first, the United States charged an apartment complex site engineer with violating the Federal Housing Act. The trial court denied defendant's motion for summary judgment and its motions for judgment as a matter of law. After the jury returned a defense verdict, however, the court awarded fees to the defendant. Because the defendant's insurer paid for much of its defense, the insurer would receive much of the award. The United States appeals. In the second case, the court affirmed the denial of a Social Security claimant's application for benefits. After the Seventh Circuit reversed and remanded, concluding that a crucial consultant's opinion was entitled to no weight, the court denied an award of fees. The claimant appeals. In the third case, the district court reversed the administrative denial of Social Security benefits but denied the claimant's application for fees. The basis for the reversal was the administrative law judge's possible mischaracterization of some testimony and failure to fully explain the connection between the claimant's condition and his ability to work. The claimant appeals.
In their opinion, Judges Posner, Flaum, and Sykes reversed, reversed, and affirmed. The Court first noted that "substantially justified" was not defined in the statute nor, in their view, was its meaning self-evident. Relying on the title of the statute and its limited application only to persons of lesser means, the Court concluded that the government's position need not be frivolous to justify an award of fees. The Court identified a threshold between frivolous and meritorious, at which a case has a reasonable basis in law and fact, that the United States must meet to be "substantially justified." Applying that standard to the first case, the Court held that there was a presumption that the United States’ position is substantially justified if it survives summary judgment. Just because the jury ultimately decided in favor of the defendant does not mean that the government fell short of its threshold. Although the Court reversed the award of fees, it decided to provide guidance to the lower courts on the additional issue of the impact of a liability insurer on an award of fees. In its view, the Act should not be applied differently if a party otherwise entitled to a fee award his had some of its fees paid by its insuror. In the second case, the Court concluded that the lower court was wrong in denying a fee award. Even though the lower court was originally convinced of the merits of the government's position, the court must be guided by the appellate opinion. If an appellate court reverses in a case it considers a close call, the fact that the lower court was convinced of the merits may support a substantial justification finding. Here, however, the Court made it clear in its earlier opinion that the government's position was not justified. Finally, in the third case, the district court had reversed an administrative denial of benefits but refused to award fees. Like the prior case's "close call" reference, the Court concluded that the lower court was well within its discretion to reverse a denial of benefits but to conclude that the position taken was "substantially justified."
