US v. 515 Granby, LLC
Filing
PUBLISHED AUTHORED OPINION filed. Originating case number: 2:10-cv-00320-NKM-BWC. [999243455]. [12-2161]
Appeal: 12-2161
Doc: 39
Filed: 11/20/2013
Pg: 1 of 17
PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-2161
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.
Appeal from the United States District Court for the Eastern
District of Virginia, at Norfolk.
Norman K. Moon, Senior
District Judge. (2:10-cv-00320-NKM-BWC)
Argued:
September 19, 2013
Decided:
November 20, 2013
Before DUNCAN and THACKER, Circuit Judges, and Gina M. GROH,
United States District Judge for the Northern District of West
Virginia, sitting by designation.
Appeal: 12-2161
Doc: 39
Filed: 11/20/2013
Pg: 2 of 17
Vacated and remanded with instructions by published opinion.
Judge Duncan wrote the opinion, in which Judge Thacker and Judge
Groh joined.
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.
2
Appeal: 12-2161
Doc: 39
Filed: 11/20/2013
Pg: 3 of 17
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
proceeding.
issue
of
just
compensation
in
a
condemnation
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
make an award unjust.”
justified”
or
“special
circumstances
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.
3
Appeal: 12-2161
Doc: 39
Filed: 11/20/2013
Pg: 4 of 17
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.
2008, appraisers valued it at $7 million.
was
reappraised
in
2009
at
In
After the economic
downturn,
it
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
4
Appeal: 12-2161
Doc: 39
Filed: 11/20/2013
Pg: 5 of 17
2010 to acquire it by eminent domain. 1
40 U.S.C. § 3113.
See U.S. Const. amend. V;
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
lien,
the
United
action;
other
parties
but
Amendment’s
States
lienholders
were
not
Takings
joined
were
joined.
Clause.
Marathon
put
on
Marathon
as
Because
of
its
party
to
the
a
notice
as
interested
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
incentive.
value
of
the
developer’s
entrepreneurial
The district court ultimately granted most of the
government’s
evidence.
the
motions
to
exclude
certain
types
of
valuation
As a result, Granby lowered its valuation to $16.32
million shortly before trial.
1
Because the condemnation proceeding relates to one of the
court buildings for the Eastern District of Virginia, Judge
Norman K. Moon of the Western District of Virginia was assigned
to the case.
5
Appeal: 12-2161
Doc: 39
The
Filed: 11/20/2013
government
ordered
Pg: 6 of 17
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.
U.S.C.
§
2412(d)(2)(H).
Here,
the
jury’s
verdict
of
28
$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
6
Appeal: 12-2161
Doc: 39
judge,
who
Filed: 11/20/2013
recommended
eligible
for
because
fees,
the
that
costs,
Pg: 7 of 17
both
and
government’s
Granby
other
and
expenses
position
was
Marathon
under
not
justified and there were no special circumstances.
found
that
justified,
the
it
did
circumstances.
government’s
not
position
reach
the
was
question
EAJA
substantially
The district
court rejected the magistrate judge’s recommendation.
it
the
were
Because
substantially
of
special
This appeal followed.
II.
The arguments on appeal mirror those before the district
court.
Appellants argue that the government’s position was not
substantially
position
justified
should
because
automatically
substantial justification.
an
unreasonable
foreclose
a
court
prelitigation
from
finding
They contend that the district court
erred by considering their financial ability to litigate and the
reasonableness of their position. 2
find,
as
a
circumstances
district
matter
that
court
of
would
did
not
law,
make
Appellants also ask us to
that
an
reach
there
are
no
special
award
unjust.
Because
the
question
of
the
special
circumstances, we do not address it here.
2
We have considered the appellants’ argument regarding the
district court’s characterization of Marathon’s status and find
it to be without merit.
7
Appeal: 12-2161
Doc: 39
Filed: 11/20/2013
Pg: 8 of 17
We review the district court’s denial of attorney’s fees
under the EAJA for abuse of discretion.
487
U.S.
552,
562–63
(1988).
A
Pierce v. Underwood,
district
court
discretion when it makes an error of law.
Basham,
561
F.3d
302,
326
(4th
Cir.
abuses
its
United States v.
2009).
Although
this
standard is deferential, it is not merely “a simple, accept-onfaith,
rubber-stamping
fees under the EAJA.
of
district
court
decisions”
regarding
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 substantially
justified 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).
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
8
Appeal: 12-2161
Doc: 39
Filed: 11/20/2013
Pg: 9 of 17
“justified to a degree that could satisfy a reasonable person”
and
as
“more
than
frivolousness.”
487
context,
a
merely
U.S.
position
is
at
undeserving
of
565–66.
the
substantially
In
sanctions
for
eminent-domain
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
concluding
guidance
that
the
notwithstanding,
government’s
we
have
prelitigation
no
difficulty
and
litigation
postures together comprise, in the words of the statute, “the
position
of
the
United
States.” 3
3
As
the
Supreme
Court
has
Significantly, the EAJA defines the government’s position
as “the position taken by the United States in the civil action”
(Continued)
9
Appeal: 12-2161
Doc: 39
Filed: 11/20/2013
Pg: 10 of 17
elaborated, courts must undertake “a single evaluation of past
conduct” that examines the “case as an inclusive whole, rather
than as atomized line-items.”
154, 159 n.7, 162 (1990).
Comm’r, INS v. Jean, 496 U.S.
Moreover, although not directed to
the specific question at hand, we have noted the necessity to
“look
beyond
the
issue
on
which
the
petitioner
prevailed
to
determine, from the totality of the circumstances, whether the
government
acted
reasonably
in
causing
taking a stance during the litigation.”
the
litigation
or
in
Roanoke River Basin
Ass’n, 991 F.3d at 139.
Having
recognized
the
need
to
consider
both
the
government’s prelitigation and litigation positions, we now turn
to the more challenging question of how to assess substantial
justification when the government’s prelitigation position was
unreasonable but its litigation position was reasonable. 4
For
as well as “the action or failure to act by the agency upon
which the civil action is based.” 28 U.S.C. § 2412(d)(2)(D).
4
It is the multiple stages of this case that significantly
complicated the district court’s task of analyzing the totality
of the circumstances in the usual manner. Often, as in Roanoke
River Basin Ass’n, the district court must examine the
reasonableness of the government’s position on multiple issues
to determine whether it was, as a whole, substantially
justified.
991 F.3d at 138–39.
Here, on the other hand, the
district court has to balance two different positions on the
single issue presented in the case, which grafts an extra layer
onto our traditional analysis.
10
Appeal: 12-2161
Doc: 39
Filed: 11/20/2013
Pg: 11 of 17
this analysis, we can draw guidance from the views of our sister
circuits, who have addressed the question directly, albeit with
differing results.
Some have gone as far as stating that a
reasonable litigation position can never cure an unreasonable
prelitigation stance.
For example, the Second Circuit stated,
“[I]f the underlying Government position is not substantially
justified,
a
Government’s
court
must
litigation
considered alone.”
award
fees
position
is
.
.
itself
.
even
if
the
reasonable
when
Smith v. Bowen, 867 F.2d 731, 734 (2d Cir.
1989); see also Morgan v. Perry, 142 F.3d 670, 684 (3d Cir.
1998).
Other circuits have emphasized the importance of the
prelitigation
position
without
creating
a
bright-line
rule.
E.g., Hackett v. Barnhart, 475 F.3d 1166, 1174 (10th Cir. 2007);
United
States
v.
Marolf,
277
F.3d
1156,
1164
n.5
(9th
Cir.
2002); Marcus v. Shalala, 17 F.3d 1033, 1036 (7th Cir. 1994).
As
we
elaborate
below,
we
endorse
the
latter
approach
as
consistent with our precedent generally and truer to the dual
purposes of the EAJA: providing incentives for private parties
to vindicate their rights in the judicial system and creating a
check on government action.
Sullivan v. Hudson, 490 U.S. 877,
883 (1989); see also H.R. Rep. 96-1418, at 9–10 (1980).
In
assessing
the
reasonableness
of
awards
of
attorney’s
fees under the EAJA, we have recognized that “Congress intended
to address governmental misconduct whether that conduct preceded
11
Appeal: 12-2161
Doc: 39
Filed: 11/20/2013
Pg: 12 of 17
litigation, compelling a private party to take legal action, or
occurred in the context of an ongoing case through prosecution
or
defense
of
unreasonable
Ass’n, 991 F.2d at 138.
that
when
the
positions.”
Roanoke
River
Basin
We have also held, more specifically,
government’s
unjustified
prelitigation
position
forces a lawsuit, the petitioner may recover fees under the EAJA
for
the
entire
suit,
even
position was reasonable.
if
the
government’s
litigation
Thompson v. Sullivan, 980 F.2d 280,
281 (4th Cir. 1992); see also Roanoke River Basin Ass’n, 991
F.2d at 139
(stating that substantial justification “focuses .
.
reasonableness
.
on
the
of
[the
government’s]
position
in
bringing about or continuing the litigation”) (emphasis added).
Furthermore, Congress amended the EAJA in 1985, in part, to
emphasize
stance.
the
significance
of
the
government’s
prelitigation
Act of August 5, 1985, Pub. L. No. 99-80, 99 Stat. 183.
The legislative history of those amendments specifically notes
that
the
EAJA
unjustifiably
was
designed
forcing
to
litigation,
prevent
then
acting reasonably during the litigation.
at
9
(1984);
see
also
Jean,
496
U.S.
the
government
avoiding
from
liability
by
H.R. Rep. No. 98-992,
at
159
n.7.
Such
a
strategy of “curing” a purposefully unreasonable prelitigation
position would be particularly problematic in the context of an
eminent-domain proceeding because the government is required to
pay just compensation for a taking under the Fifth Amendment and
12
Appeal: 12-2161
Doc: 39
Filed: 11/20/2013
42 U.S.C. § 4651.
369,
373
Pg: 13 of 17
See also United States v. Miller, 317 U.S.
(1943)
(defining
just
compensation
as
fair
market
value).
B.
In
light
of
the
principles
discussed
above,
we
are
constrained to conclude that the district court did not properly
weigh the effect of the government’s unreasonable prelitigation
position, particularly given the government’s burden of proof. 5
We therefore vacate and remand for a reexamination of the effect
of the government’s prelitigation position using the framework
provided below.
In
short,
prelitigation
we
adopt
position
will
the
view
that
generally
lead
attorney’s fees under the EAJA.
changes,
the
court
must
an
to
unreasonable
an
award
If the government’s position
independently
determine
whether
prelitigation and litigation positions were reasonable.
government’s
prelitigation
of
position
is
unreasonable
its
If the
and
its
litigation position reasonable, the government must then prove
that the unreasonable position did not “force” the litigation or
substantially alter the course of the litigation.
5
In doing so, we imply no criticism of the district court
because our guidance on substantial justification in this
context has been less than clear.
13
Appeal: 12-2161
Doc: 39
Filed: 11/20/2013
Pg: 14 of 17
For each government valuation position in a condemnation
proceeding, the district court should start by asking “whether
the government’s refusal to offer more to the property owners as
just
compensation
had
a
reasonable
Lamson I, 1995 WL 54025, at *4.
court
should
examine
basis
in
fact
and
law.”
In making this assessment, the
such
factors
as:
the
experience,
qualifications, and competence of appraisers; whether there is
evidence
of
bad
relationship
of
faith
the
on
the
part
government’s
of
the
various
government;
appraisals
to
the
each
other; the government’s explanations for changes in its asserted
valuations;
and
the
severity
of
the
alleged
governmental
misconduct.
See generally Roanoke River Basin Ass’n, 991 F.2d
at 139; United States v. 312.50 Acres of Land, 851 F.2d 117,
118–19 (4th Cir. 1988); United States v. Lamson (Lamson II), No.
95-2770,
1996
WL
393171,
*2
(4th
Cir.
July
15,
1996)
(per
curiam); Lamson I, 1995 WL 54025, at *4.
If
the
prelitigation
district
court
valuation
finds
position
that
was
the
government’s
unreasonable
but
its
litigation posture reasonable, the court must then assess the
effect
of
the
compensation.
prelitigation
position
on
the
action
for
just
One important, but not determinative, factor is
the extent to which the government misconduct “compell[ed] a
party
Roanoke
to
resort
River
to
Basin
litigation
Ass’n,
991
14
or
to
prolong
F.2d
at
138.
litigation.”
Assessing
the
Appeal: 12-2161
effect
Doc: 39
of
the
Filed: 11/20/2013
government’s
Pg: 15 of 17
misconduct
will
necessarily
vary
based on the particularities of the case, but could include an
examination of precondemnation negotiations, discovery, pretrial
motions practice, and settlement negotiations.
To be clear,
because the government has the burden of proving substantial
justification, it has the onus of justifying the changes in its
valuation figures.
See Lamson I, 1995 WL 54025, at *4; see also
Clay Printing Co., 13 F.3d at 815.
The financial state of the prevailing party, however, is
not relevant in determining substantial justification.
Because
the EAJA itself defines which parties are eligible for EAJA fee
awards, the district court may not consider whether a party who
otherwise meets the statutory threshold “needs” fees in order to
litigate.
See 28 U.S.C. § 2412(d)(2)(B).
Additionally, the
district court may not determine that the government’s position
is substantially justified simply because it is more reasonable
than the private litigant’s.
See Jean, 496 U.S. at 165 (stating
that the substantial-justification requirement “properly focuses
on the governmental misconduct giving rise to the litigation”)
(emphasis
added).
In
other
words,
the
prevailing
party’s
position is relevant only to the extent that it is necessary to
15
Appeal: 12-2161
Doc: 39
identify
Filed: 11/20/2013
the
effects
of
Pg: 16 of 17
the
government’s
unreasonable
prelitigation position. 6
The
conduct
of
the
prevailing
party
may
also
become
important at a later stage of the EAJA fee process: assessing
the amount of fees to be awarded after the district court makes
the “threshold determination” on substantial justification.
Jean,
496
U.S.
justification
at
159.
Once
determination
is
the
made,
threshold
a
the
petitioning
party
is
entitled
to
fees
substantial-
sizeable
attorney’s fees and expenses is not automatic.
See
award
of
Id. at 163.
If
and
expenses,
the
district court has considerable discretion in determining the
amount of the fee award.
See id. at 161 n.9 (noting that, in
practice, district courts often do not grant the full amount of
attorney’s fees that parties request).
The EAJA specifically grants district courts the discretion
to reduce or deny an award “to the extent that the prevailing
6
Although the district court found the notion that Granby
and Marathon were compelled to trial to vindicate their rights
to be “fallacious,” J.A. 351, it did so by inappropriately
comparing the positions of the government and appellants at the
substantial-justification stage, see Estate of Baird v. Comm’r,
416 F.3d 442, 453–54 (5th Cir. 2005) (noting that the court
should only consider whether the government’s, not the private
party’s, position remained consistent).
For example,
the
district court considered the fact that the government’s motions
practice caused appellants to significantly lower their trial
valuation and the fact that this reduction was greater than the
change in the government’s valuations. J.A. 349, 351–52.
16
Appeal: 12-2161
party
Doc: 39
.
.
resolution
Filed: 11/20/2013
.
unduly
of
the
2412(d)(1)(C).
and
Pg: 17 of 17
unreasonably
matter
in
protracted
controversy.”
28
the
final
U.S.C.
§
The Supreme Court has also instructed courts to
assess the fees and expenses to be awarded in light of the
petitioning litigant’s success.
generally
Hensley
Therefore,
the
v.
Jean, 496 U.S. at 163 n.10; see
Eckerhart,
district
court
461
may
U.S.
424,
consider
436
the
(1983).
prevailing
party’s litigation conduct--that is, the reasonableness of their
position--in the determination of the fee award amount, rather
than in the determination of the party’s threshold eligibility
for fees under the EAJA.
III.
For
the
reasons
stated
above,
we
vacate
the
district
court’s opinion and remand for a reexamination of substantial
justification.
The issue of special circumstances under the
EAJA was not before us because the trial court made no finding
on
that
issue.
If
necessary
on
remand,
the
district
court
should also consider whether special circumstances would make an
award of attorney’s fees unjust.
VACATED AND REMANDED
WITH INSTRUCTIONS
17
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?