United States of America v. High Plains Livestock, LLC et al
REPORT AND RECOMMENDATIONS by Magistrate Judge Jerry H. Ritter re 349 Application for Attorney's Fees and Other Expenses Pursuant to the Equal Access to Justice Act. Objections to R&R due by 5/23/2018. Add 3 days to the dea dline if service is by mailing it to the person's last known address (or means described in Fed. R. Civ. P. 5(b)(2)(D) and (F)); if service is by electronic means, no additional days are added. (Fed. R. Civ. P. 6(d); Fed. R. Crim. P. 45(c).) (mlt)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
UNITED STATES OF AMERICA,
No. 15-CV-680 MCA/JHR
HIGH PLAINS LIVESTOCK, LLC,
dba PRODUCERS LIVESTOCK AUCTION,
MICHAEL FLEN, CALVIN PAREO, and
PROPOSED FINDINGS AND RECOMMENDED DISPOSITION OF MOTION FOR
Defendants High Plains Livestock LLC, Michael Flen, and Calvin and Darcie Pareo filed
an Application for Attorney's Fees and Other Expenses Pursuant to the Equal Access to Justice
Act 28 U.S.C. § 2412  on June 29, 2017. [Doc. 349]. The United States filed a response on
August 21, 2017 [Doc. 375], and Defendants filed a reply on September 22, 2017. [Doc.
398]. With leave of court, see [Docs. 410 & 411], the United States filed a sur-reply on October
25, 2017. [Doc. 412].
On November 13, 2017, U.S. District Judge M. Christina Armijo entered an Order of
Reference of the motion to U.S. Magistrate Judge Jerry H. Ritter [Doc. 415], with direction to
prepare a recommended disposition.
1. Whether the District Court should consider Defendants’ motion or, instead, dismiss
or return it as premature?
2. Whether any of the Defendants is a “prevailing party” which could be eligible for an
award of fees and expenses under the Equal Access to Justice Act (“EAJA”)?
3. Whether the position of the United States was “substantially justified” so as to
foreclose an award to a prevailing party under the EAJA?
4. If the Defendants are entitled to attorney fees and costs, what fees and costs should
The United States filed this action to resolve thirteen claims that the Defendants violated
the Packers & Stockyards Act (PSA), 7 U.S.C. §§ 181-231, and sought civil penalties and
injunctive relief [Doc. 1]. At the direction of District Judge Armijo, U.S. Magistrate Judge
William P. Lynch held an evidentiary hearing to determine whether a temporary injunction
should issue. After four days of testimony, Magistrate Judge Lynch found that Defendants had
committed multiple violations of the PSA that it was “appropriate to appoint a receiver to
conduct an initial review of HPL’s continued viability and, if viable, to take over all aspects of
HPL’s operations. Additionally, Defendants Calvin and Darcie Pareo and Michael Flen [were
to] have no control over the business, but [were] permitted to provide advice to the receiver.”
[Doc. 55, at 2-3].
When no qualified receiver could be obtained, District Judge Armijo
appointed a Special Master to monitor and report on Defendants' operations. [Docs. 103 & 104]
Subsequently, District Judge Armijo resolved a jurisdictional challenge to Counts I-VIII
by ruling that the governing statutes require the Secretary of Agriculture to pursue civil fines or
prohibitions upon violations of the PSA through an administrative process before filing suit in
the courts. [Doc. 165, at 10-12]. The District Court denied the United States' motion for
reconsideration. [Doc. 295].
The District Court did not dismiss Count IX, against Calvin Pareo [Doc. 165, at 14], nor
dissolve the injunctive relief previously entered against all Defendants, deeming it in the public
interest to maintain oversight over the Defendants' activities pending initiation of administrative
proceedings by the United States. [Id., at 14-16]. The Court noted that Congress "anticipated ...
and allowed for such temporary relief under strictly defined circumstances. 7 U.S.C. §
228a." [Id., at 7]. The Court later ordered the appointment of a co-special master, not then
identified, to provide additional oversight and issued a preliminary injunction addressed to the
operations of Defendants under the PSA. [Doc. 296].
Defendants filed a separate motion to dismiss Count IX for failure to state a claim against
Calvin Pareo [Doc. 266], but the motion was not ruled upon. Instead, Count IX was dismissed
[Doc. 345] upon the unopposed motion of the United States which asserted that, so long as
temporary injunctive relief remained in place, it was "no longer in the interest of the United
States to pursue this claim." [Doc. 336, at 1]. The order of dismissal expressly "[left] in place
only the United States' request for temporary injunctive relief under 7 U.S.C. § 228a." [Doc.
345, at 1].
On June 29, 2017, after dismissal of the claims for civil penalties but before the naming
of the co-special master, Defendants filed the instant motion seeking an award of attorney fees
and other expenses in the amount of $168,037.73. [Doc. 349, at 7]. While Defendants’ motion
for EAJA fees and expenses was pending, the District Court appointed a co-special master to
fulfill some of the objectives of the injunction it previously put in place. [Doc. 353].
After initiating a parallel administrative process through the U.S. Department of
Agriculture, the parties resolved their dispute and Defendants submitted an Amended Unopposed
Emergency Motion to Dismiss Remaining Claims and for an Order Directing Special Masters to
Cease All Work on and Related to this Matter [Doc. 388], which the District Court granted on
a Judgment dismissing "all of Plaintiff's claims against Defendants". [Doc. 391, at 1].
The Equal Access to Justice Act contains two provisions authorizing an award of attorney
fees under proper circumstances, 28 U.S.C. §§ 2412(b) and 2412(d). Defendants here rely upon
the latter provision, which states: "[e]xcept as otherwise specifically provided by statute, a court
shall award to a prevailing party other than the United States fees and other expenses, in addition
to any costs awarded pursuant to subsection (a), incurred by that party in a civil action (other
than cases sounding in tort), ... brought by or against the United States in any court having
jurisdiction of that action, 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. §
Whether the District Court should consider Defendants’ motion or, instead, dismiss or
return it as premature?
The Equal Access to Justice Act requires that a motion for fees and expenses be filed
"within thirty days of final judgment in the action." 28 U.S.C. § 2412(d)(1)(B). The term "final
judgment" is defined as "a judgment that is final and not appealable, and includes an order of
settlement." 28 U.S.C. § 2412(d)(2)(G); see Melka Marine, Inc. v. United States, 29 F. App'x
594, 597 (Fed. Cir. 2002) (unpublished). "The 30-day EAJA clock begins to run after the time to
appeal that 'final judgment' has expired." Melkonyan v. Sullivan, 501 U.S. 89, 96 (1991).
Citing an outdated case, Bryan v. Office of Pers. Mgmt., 165 F.3d 1315 (10th Cir. 1999),
the United States contends that the EAJA application period is jurisdictional. [Doc. 375 at 2]. In
2004, the U.S. Supreme Court held that the thirty-day period is not a declaration of subjectmatter jurisdiction but is a claim processing rule. See Scarborough v. Principi, 541 U.S. 401,
413-14 (2004). For that reason, and in distinction from subject-matter jurisdiction which cannot
be created by consent, Bender v. Williamsport Area School District, 475 U.S. 534, 541 (1934),
the Government can waive the time requirement. Such a waiver can occur either before the
filing period begins, see Former Employee of Marlin Firearms Co. v. United States Secretary of
Labor, 2017 WL 2591781, *3 (No. 11-00060, June 14, 2017) (U.S. Ct. Int'l Trade), or after it has
run. See Vasquez v. Barnhart, 459 F. Supp. 2d 835 (N.D. Iowa 2006). In this case, however, the
United States has not waived the statutory time period, and so the Court must decide what
authority it has to review an application filed “too soon”, noting that "[t]he EAJA is a waiver of
sovereign immunity and it therefore must be strictly construed, Ruckelshaus v. Sierra Club, 463
U.S. 680, 685 (1983)." United States v. Charles Gyurman Land & Cattle Co., 836 F.2d 480, 483
(10th Cir. 1987).
The plain meaning of the preposition within indicates that an EAJA application neither be
filed after, nor before, the thirty-day statutory window. In keeping with that approach, before
final judgment, a pending application can be dismissed without prejudice, see, e.g., J.C.N.
Constr., Inc. v. United States, 2013 WL 491013, at 1 (Fed. Cl. Feb. 8, 2013). As another option,
in 2002, the Federal Circuit ruled that it is within a court's discretion to "return" an EAJA
application filed before entry of a final judgment. Melka Marine, Inc., 29 F. App’x at 4.
There is abundant authority, however, for the proposition that a court may likewise
exercise discretion to consider the merits of an early application, although the U.S. Supreme
Court has not ruled definitively on the issue. Compare Melkonyan, 501 U.S. at 103 (1991)
("This case is not an appropriate vehicle for resolving the issue [of whether the applicant can file
for EAJA fees even before entry of a final judgment]."). Some circuit courts have found
circumstances where EAJA fee applications were deemed timely even though filed before entry
of a final judgment. See, e.g., Cummings v. Sullivan, 950 F.2d 492, 495 n. 4 (7th Cir. 1991)
(EAJA application deemed timely when filed after "section six" Social Security remand but prior
to final judgment) (issue raised sua sponte); Haitian Refugee Center v. Meese, 791 F.2d 1489
(11th Cir. 1986) (Interim fees could be awarded on application filed after remand of
interlocutory appeal where district court denied government motion to enter final judgment.),
partially vacated on other grounds after
rehearing en banc, 804 F.2d 1573 (11th Cir.
1986); Bostic v. Comm'r of Social Security, 858 F. Supp. 2d 1301, 1303-04 (M.D. Fl. 2011)
(EAJA application filed seven weeks before entry of final judgment deemed timely filed.). In
2006, the District Court for the District of Hawaii reported that, while the Ninth Circuit Court of
Appeals had not weighed in on the issue, since the 1985 EAJA amendments every circuit district
court opinion on the issue declared the thirty-day period to be "a deadline, not a
window." Center for Food Safety v. Johanns, 2006 WL 3783434, *1 (CV. NO. 03-00621-JMSBMK, Nov. 7, 2006).
Defendants argue [Doc. 398, at 2] that the timeframe issue is moot since the Court
entered a “final judgment” on September 12, 2017 [Doc. 391]. Although the definition of final
judgment in the EAJA requires the expiration of appellate deadlines after the trial court’s
judgment, 28 U.S.C. § 2412(d)(2)(G), the combination of the September 12th filing and the lack
of any appeal thereafter brings this case within authority from the Tenth Circuit and elsewhere
which would allow the District Court to consider the merits of this EAJA application. See Koch
v. U.S. Dep't of Interior, 47 F.3d 1015, 1021 (10th Cir. 1995) ("[A] plaintiff may ask for
attorney's fees [under EAJA] even when the time for appeal has not elapsed."); see also, e.g.,
Fed. Cl. 204, 208
n. 3 (2014) ("Subsequent cases have
interpreted Melkonyan to allow courts to give effect to EAJA applications filed prior to final
judgment."); Bostic, 858 F. Supp. 2d at 1304 (citing Singleton v. Apfel, 231 F.3d 853, 956 (11th
Cir. 2000), Haitian Refugee Ctr., 791 F.2d at 1495-96, and Inman v. Apfel, No. 3:97-CV-1273-JHTS, 2000 WL 1221858 (M.D. Fla. July. 14, 2000)).
As a practical matter, a dismissal or return of the application as “premature” would only
invite Defendants to refile, with a likely challenge by the United States that the new application
is untimely, creating a “Catch-22” situation that would prevent a determination of the merits of
the application and, to that extent, frustrate the purpose of Congress in enacting the EAJA. See
Ewing v. Rodgers, 826 F.2d 967, 970 (10th Cir. 1987).
Whether any of the Defendants is a “prevailing party” which could be eligible for an award
of fees and expenses under the EAJA?
Under the Equal Access to Justice Act, to obtain an award of fees and expenses in
litigation against the United States, an applicant must be a "prevailing party". 28 U.S.C. §
The EAJA does not contain an express definition of prevailing party, except in
condemnation cases. See 28 U.S.C. § 2412(d)(2)(H).
The watershed definition of prevailing
party for federal fee-shifting statutes is from Buckhannon Board & Care Home, Inc. v. W. Va.
Dep't of Health and Human Resources, 532 U.S. 598 (2001) (as recognized and applied to an
EAJA application by the Tenth Circuit Court of Appeals in Biodiversity Conservation All. v.
Stem, 519 F.3d 1226 (10th Cir. 2008)). Further development of the definition of prevailing party
occurs throughout federal cases involving multiple fee-shifting statutes as the same definition
generally applies. See Cactus Canyon Quarries, Inc. v. Fed. Mine Safety & Health Review
Comm'n, 820 F.3d 12, 16 (D.C. Cir. 2016).
Buckhannon identified "some relief by the court", 532 U.S. at 603, as essential to creation
of a prevailing party, although not necessarily through a decision on the merits. For example, an
enforceable consent decree even without admission of liability may suffice. Id. at 604. The
necessary judicial investment may also be represented by the mooting of the applicant's claims,
and particularly claims for damages.
See id. at 608-09.
The key element is the
"judicial imprimatur" on the result; for that reason, a voluntary action by the opponent, even
where it bestows all the advantage that was sought through the litigation, is not sufficient if not
enforceable by the court. See id., at 605.
Alteration of Legal Relationships as an Element of Prevailing Party Status
The presence of a judicial imprimatur on the proceedings can be seen through the
alteration of the legal relationship of the parties. "The touchstone of the prevailing party inquiry
must be the material alteration of the legal relationship of the parties in a manner which Congress
sought to promote in the fee statute." Tex. State Teachers Assn. v. Garland Indep. Sch. Dist., 489
U.S. 782, 792-93 (1989). An alteration of legal relationships requires that a plaintiff "receive at
least some relief on the merits of his claim." Hewitt v. Helms, 482 U.S. 755, 760
Judicial action which does not alter those relationships is not sufficient to create a
prevailing party. See, e.g., Outlaw v. Chater, 921 F. Supp. 13, 16 (D.D.C. 1996) (remand of
Social Security appeal to Agency for reconsideration upon finding lack of substantial evidence
was not a basis for EAJA award). Because of the absence of effect upon legal relationships, and
the ability to refile legal claims, a dismissal without prejudice does not support an award of fees.
See, e.g., United States v. Milner, 583 F.3d 1174, 1196-97 (9th Cir. 2009).
Parties which obtain enforceable judgments on the merits or consent decrees have
"prevailed". Biodiversity Conservation All., 519 F.3d at 1229 (citing Buckhannon Board & Care
Home, Inc., 532 U.S. at 604). Both judicial action and enforceability against another party are
A plaintiff does not prevail through a defendant's voluntary change in conduct even
though the change was the objective of litigation. Buckhannon Board & Care Home, Inc., 532
U.S. at 605. A plaintiff whose case is dismissed as moot after a defendant voluntarily takes
favorable action has not prevailed as there is nothing for the plaintiff to enforce against the
defendant. Biodiversity Conservation All., 519 F.3d at 1230; compare Iqbal v. Holder, 693 F.3d
1189, 1194-95 (10th Cir. 2012) (remand to immigration agency for further action in its discretion
did not justify EAJA fees) with Al-Maleki v. Holder, 558 F.3d 1200, 1204-06 (10th Cir. 2009)
(Government's argument that immigration agency acted voluntarily belied by terms of remand
order which declared applicant eligible for naturalization and directed agency to confer
citizenship by a date certain.).
Result is What Creates a Prevailing Party
Whether court relief creates a prevailing party depends upon the nature of the relief:
In all civil litigation, the judicial decree is not the end but the means. At the end
of the rainbow lies not a judgment, but some action (or cessation of action) by the
defendant that the judgment produces--the payment of damages, or some specific
performance, or the termination of some conduct. Redress is sought through the
court, but from the defendant. This is no less true of a declaratory judgment suit
than of any other action. The real value of the judicial pronouncement--what
makes it a proper judicial resolution of a 'case or controversy' rather than an
advisory opinion--is in the settling of some dispute which affects the behavior of
the defendant towards the plaintiff.
Hewitt, 482 U.S. at 761 (emphasis in original).
A favorable mention of a party by a court does not render the party prevailing: "a party
is entitled to attorneys' fees only if it could obtain a court order to enforce the merits of some
portion of the claim it made in its suit." Biodiversity Conservation All., 519 F.3d at 1230. See
also Hewitt, 482 U.S. at 763 (Prevailing party under 42 U.S.C. § 1988 not created
by interlocutory statement that the plaintiff could obtain summary judgment if successful on
remand in overcoming qualified immunity defense).
Effect of Grant of Preliminary Injunction
The cases discussing whether preliminary injunctive relief creates a prevailing party
uniformly address injunctions obtained by the EAJA applicant, which is not the case here.
Nonetheless, the discussion helps to define the kind of judicial action needed to create a
Whether a preliminary injunction creates a prevailing party requires examination of its
practical effect. An initial grant of a preliminary injunction does not create prevailing party
status if it is followed by a loss at the hearing on the merits. Sole v. Wyner, 551 U.S. 74, 83
(2007) (expressing no opinion on the combined circumstances of grant of a preliminary
injunction with an absence of resolution on the merits). Moreover, a preliminary injunction that
merely preserves the status quo pendente lite, as where plaintiff's goal is to cancel a government
project, does not make the plaintiff a prevailing party. Biodiversity Conservation All., 519 F.3d
On the other hand, a preliminary injunction that grants the relief requested, such as
participation in high school classes, creates a prevailing party even where the case is later
dismissed as moot due to the student's graduation. Dahlem v. Bd. of Educ. of Denver Pub.
Sch., 901 F.2d 1508, 1510-11 (10th Cir. 1990). Likewise, although a remand to correct
procedural errors alone would not create a prevailing party, a plaintiff does prevail by obtaining
an injunction forbidding a challenged government action until required procedures are
satisfied. Role Models Am., Inc. v. Brownlee, 353 F.3d 962, 965-66 (D.C. Cir. 2004)
(distinguishing Waterman Steamship Corp. v. Maritime Subsidy Board, 901 F.2d 1119 (D.C.Cir.
Nature of the Resolution of This Case
Defendants argue that, because only preliminary injunctive relief was granted, and
because the substantive claims for civil penalties were all dismissed, they have “prevailed” in
this action. [Doc. 398, at 2-3]. Defendants characterize the preclusive effect of the final
judgment in this case as a “judicially sanctioned change in the relationship of the parties”, [Doc.
398, at 3], through which Defendants have prevailed. They also argue that they prevailed
because the record establishes that Counts I-VIII were beyond the jurisdiction of the District
Court, and because Count IX had no factual basis. [Doc. 349, at 4]. Defendants’ argument is not
Viewed over the course of the litigation, the picture is quite different. In sum, the United
States asserted a variety of violations of the PSA that would, if proven, support the imposition of
civil fines, and sought temporary injunctive relief in order to protect the public. When called
upon, over the course of a multi-day evidentiary hearing, the United States provided sufficient
proof of its claims to obtain an injunctive order that ousted the individual Defendants from
control of their business for the duration of the litigation.
Before trial on the merits, however, the District Court sua sponte raised the issue of
whether the claims were properly before the Court or, instead, should be processed
administratively through the Department of Agriculture, ultimately deciding that eight of the
civil counts should be dismissed in favor of administrative proceedings. The Court held that
Count IX, as to Calvin Pareo, and the United States’ claim for temporary injunctive relief which
had already been granted, were properly before it. The Court later dismissed Count IX on the
United States’ motion without opposition from Defendants and without any findings as to its
merits, while still retaining injunctive oversight of Defendants’ business operations through its
Special Master. As the parties initiated the administrative proceeding, the Court added a second
Special Master for increased control in the public interest.
The conclusion of the separate administrative proceedings was a Consent Decision which
dismissed all of the government’s claims, but: prohibited all defendants from registration, and
individual defendants from operation, as a “market agency selling on commission” for four
years; imposed a six-part cease and desist order on all defendants, and; assessed substantial civil
penalties jointly and severally, with the majority of penalties in abeyance but subject to
reinstatement upon violation of the Consent Decision. Citing entry of the Consent Decision as
justification, Defendants successfully moved, without Government opposition, to dismiss the
District Court case and terminate the Court’s oversight of their business operations.
In sum, then, Defendants came into the litigation operating their business without any
apparent limitation other than the requirements of law and economics, suffered ouster and the
imposition of court supervision over their business activities pendente lite, and obtained
dismissal of the court case and termination of supervision only through acceptance of a
substantial change in position to their detriment, legal as well as economic and managerial.
When the result is viewed as a whole, as required by the controlling case authorities, there is no
logical characterization of Defendants, or any one of them, as prevailing in this litigation.
Whether the position of the United States was “substantially justified” so as to foreclose an
award to a prevailing party under the EAJA?
If the Court rejects my recommendation and instead finds that the Defendants qualify as
prevailing parties, Defendants must clear another eligibility hurdle before the Court considers the
specifics of their application. Because EAJA fees are intended for cases where the government’s
position is unjustified, every EAJA application is required to include a statement to the contrary:
"that the position of the United States was not substantially justified." 28 U.S.C. §
2412(d)(1)(B). Thereafter, if "the court finds that the position of the United States was
substantially justified", EAJA fees and expenses must be denied. 28 U.S.C. § 2412(d)(1)(A).
Because the federal government most often acts through the auspices of an agency, the EAJA
defines the "position of the United States" as: "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. § 2412(d)(2)(D).
"Under the EAJA, the government bears the burden of showing that its position was
substantially justified." Hadden v. Bowen, 851 F.2d 1266, 1267 (10th Cir. 1988) (quoting Kemp
v. Bowen, 922 F.2d 966, 967 (10th Cir. 1987)).
Whether or not the position of the United States was substantially justified shall
be determined on the basis of the record (including the record with respect to the
action or failure to act by the agency upon which the civil action is based) which
is made in the civil action for which fees and other expenses are sought.
28 U.S.C. § 2412(d)(1)(B).
Broad Context for Analysis
All of the parties’ conduct and positions throughout the dispute are to be considered
The Supreme Court has instructed that, '[w]hile the parties' postures on individual
matters may be more or less justified, the EAJA--like other fee shifting statutes-favors treating a case as an inclusive whole, rather than as atomized lineitems.' Comm'r, INS v. Jean, 496 U.S. 154, 161-62[.] In other words, in
evaluating the Government's position, we must arrive at one conclusion that
simultaneously encompasses and accommodates the entire civil action.
Saysana v. Gillen, 614 F.3d 1, 5 (1st Cir. 2010) (additional citations and quotation marks
The Court’s analysis must be in depth and thoughtful:
"In considering substantial
justification under EAJA, ... it is not enough to repeat the analysis of the merits decision, and add
adjectives." Taucher v. Brown-Hruska, 396 F.3d 1168, 1175 (D.C. Cir. 2005) (citations
Our EAJA jurisprudence reflects this principle. It requires that the district court
do more than explain, repeat, characterize, and describe the merits
decision. Courts evaluating substantial justification must instead analyze why the
government's position failed in court; if for example, the government lost because
it vainly pressed a position flatly at odds with the controlling case law, that is one
thing; quite another if the government lost because an unsettled question was
resolved unfavorably. See United States v. Hallmark Constr. Co., 200 F.3d 1076,
1080 (7th Cir. 2000) (“the district court must reexamine the legal and factual
circumstances of the case from a different perspective than that used at any other
stage of the proceeding”).
Id. at 1174 (emphasis in original) (additional citations and quotation marks omitted).
The earliest accepted formulation of a test by the Tenth Circuit and other Circuit Courts
for whether the Government’s position was “substantially justified” asked whether it
demonstrated “reasonableness in both law and fact.” Gutierrez v. Sullivan, 953 F.2d 579, 584-85
(10th Cir. 1992), cert. denied sub nom. Shalala v. Gutierrez, 509 U.S. 933 (1993); see also
Fulton v. Heckler, 784 F.2d 348 (10th Cir. 1986); United States v. 2,116 Boxes of Boned Beef,
Weighing Approximately 154,121 Pounds, 726 F.2d 1481, 1486-87 (10th Cir. 1984). The U.S.
Supreme Court in Pierce v. Underwood offered further guidance:
[A]s between the two most commonly used connotations of the word
'substantially,' the one most naturally conveyed by the phrase before us here is not
'justified to a high degree,' but rather 'justified in substance or in the main'--that is,
justified to a degree that could satisfy a reasonable person. That is no different
from the 'reasonable basis both in law and fact' formulation adopted by the Ninth
Circuit and the vast majority of other Courts of Appeals that have addressed this
issue. To be 'substantially justified' means, of course, more than merely
undeserving of sanctions for frivolousness; that is assuredly not the standard for
Government litigation of which a reasonable person would approve.
487 U.S. 552, 555-56 (1988) (citations and footnote omitted).
As to legal issues, the reviewing court must keep in mind that reasonable disputes about
the meaning and effect of laws are common and an adverse ruling does not necessarily mean that
a position was unreasonable: “[A] position can be justified even though it is not correct, and ... it
can be substantially (i.e., for the most part) justified if a reasonable person could think it correct,
that is, if it has a reasonable basis in law and fact.” Id., at 566 n. 2 (quoted in Hadden, 851 F.2d
at 1267. “The government's success or failure on the merits at each level may be evidence of
whether its position was substantially justified, but that success or failure alone is not
determinative of the issue.” Hadden, 851 F.2d at 1267-68 (citation omitted). Results in litigation
must be put into a proper context:
Obviously, the fact that one other court agreed or disagreed with the Government
does not establish whether its position was substantially justified. Conceivably,
the Government could take a position that is not substantially justified, yet win;
even more likely, it could take a position that is substantially justified, yet
lose. Nevertheless, a string of losses can be indicative; and even more so a string
Pierce, 487 U.S. at 569. A judicial victory or defeat at any stage is not conclusive, but always
subject to closer examination as the Supreme Court has explained:
Respondents further contend that the weakness of the Government's position is
established by the objective fact that the merits were decided at the pleadings
stage. We disagree. At least where, as here, the dispute centers upon questions of
law rather than fact, summary disposition proves only that the district judge was
Id., at 568-69.
The state of the law at the time, settled or not, is an important factor to consider: “When
an area of law is 'unclear or in flux, it is more likely that the government's position will be
substantially justified.'" Cherry v. Barnhart, 125 F. App'x 913, 916 (10th Cir. 2005)
(unpublished) (quoting Martinez v. Sec'y of Health & Human Servs., 815 F.2d 1381, 1383 (10th
Cir. 1987)). An error of law does not compel a conclusion that the government’s position was
not substantially justified, as in Saysana, 614 F.3d at 6, where the government was correct to
argue that a Chevron analysis was required, but incorrect about ambiguity in the statute in the
first Chevron step. The First Circuit held that the issue was novel and of first impression, id. at
6, and, in totality, the government's position was not unjustified. Id., at 7.
Confusion about the controlling law lends support to an otherwise reasonable government
position: "In the absence of controlling Supreme Court case law, the available circuit precedent
becomes more significant in considering substantial justification under EAJA." Taucher, 396
F.3d at 1177. In Taucher, there was no controlling Supreme Court case, nor controlling circuit
precedent, and the only arguable analogous circuit decision favored the government. Id. at 1178.
The Tenth Circuit has held that, where a government position was supported by some circuits
but Tenth Circuit law was undecided, a reasonable but erroneous position was substantially
justified for EAJA attorney fee purposes. Koch, 47 F.3d 1015.
Where the law is clear, however, action clearly contrary to law undercuts the
Government’s case, as it should. For example, when an agency violated the clear language of
two identically-worded regulations by failing to give notice to "other interested parties" of an
upcoming property sale, it was unable to meet its burden to prove its action was substantially
justified. Role Models Am., Inc., 353 F.3d at 967.
Reasonableness in Fact
A position can be “substantially justified”, even if it is wrong on the facts, so long as it is
Here as in other areas courts need to guard against being 'subtly influenced by the
familiar shortcomings of hindsight judgment.' Beck v. Ohio, 379 U.S. 89, 96
(1964)… [T]here is always the hope that, after decision, the 'wrong view' looks
considerably less plausible than it did before. But just as discovery of contraband
does not establish probable cause, nor an accident negligence, nor poor returns an
imprudent trustee, so too a loss on the merits does not mean that legal arguments
advanced in the context of our adversary system were unreasonable.
Taucher, 396 F.3d at 1173-74 (additional citations omitted). For a concrete example, consider
United States v. 2,116 Boxes of Boned Beef: After the government seized a large quantity of
adulterated meat, further testing showed that the levels of adulterant were insufficient to present
a real health risk; the court held, however, that on the particular facts, including the observation
of the implantation of the prohibited substance in cattle after the date of its prohibition and the
published science about the persistence of the substance and its carcinogenic nature, the seizure
of the meat was not unreasonable. 726 F.2d at 1490.
Not a Test of Predictive Ability
The "substantially justified" standard "does not 'require the Government to establish that
its decision to litigate was based on a substantial probability of prevailing.'". Taucher, 396 F.3d
at 1173 (quoting Spencer v. NLRB, 712 F.2d 539, 557 (D.C.Cir. 1983)) (additional citation
omitted). Accord, Hadden, 851 F.2d at 1267-68 (“There is no prerequisite that the government's
decision to litigate was based on a substantial probability of prevailing for the government to
defeat a claim for attorney's fees under the EAJA.” (citations and quotation marks omitted)).
ANALYSIS OF THIS CASE
In this case, the record is devoid of any indication that the Department of Agriculture
commenced or threatened to commence administrative proceedings before the United States
Attorney filed suit. The administrative record, instead, consists of proceedings initiated after the
District Court ruled that it did not have subject-matter jurisdiction over Counts I-XIII. The
record provided by the parties is limited to the Consent Decision documenting their negotiated
resolution of the administrative claims.
The substantial penalties and nonmonetary relief
obtained from Defendants as well as the swiftness of the settlement negotiations weigh in favor
of the justification of the Government’s position.
Regarding the litigation, Defendants’ primary argument is that the United States was not
justified in filing suit on Counts I-VIII.
The Complaint alleged violations of the Packers and Stockyards Act (PSA), 7
U.S.C. 181 et seq. (Court Doc. 1). Counts I through VIII alleged violations of the
PSA and sought civil penalties against the Defendants. Count IX alleged that
Defendant Calvin Pareo failed to register as a dealer pursuant to the PSA. As
shown by the record in this matter, the United States was not justified in bringing
Counts I through VIII against the Defendants in federal district court when the
PSA specifically provides that enforcement is to be done through administrative
procedures and the district court lacks jurisdiction to hear such matters. The
United States also had no factual basis for bringing Count IX for failure to register
against Calvin Pareo.
[Doc. 349 at 4].
Does dismissal of Count IX establish that the United States was not substantially justified
in filing that claim in district court?
The second of these arguments is most easily resolved, as there is no showing of support
in the record for any finding nor admission by the Government that Count IX lacked a factual
basis. The United States’ stated reason for moving to dismiss Count IX was “the interest of
justice”, [Doc. 336 at 1], which could mean any number of factors other than factual
insufficiency, especially on the eve of administrative proceedings on the same general topic.
Does dismissal of Counts I-VIII establish that the United States was not
substantially justified in filing those claims in district court?
As for the jurisdictional issue, there are two component arguments: (1) that the United
States should never have filed Counts I-VIII in the District Court, and (2) that, having filed, the
United States should not have argued against dismissal of Count I-VIII for the reasons relied
upon by the Court. In keeping with the authorities, both arguments are considered in the context
of the Government’s position as a whole.
Weighing most heavily against the Government is the District Court’s conclusion that the
Packers and Stockyards Act states “the clear intent of Congress”, [Doc. 165, at 12], that the type
of claims brought in Counts I-VIII be raised in “the administrative process, and only the
administrative process”. Id.
In order to reach that conclusion, the District Court performed a
close and careful review of the statutory structure, noting that at least one provision (7 U.S.C.
§203) authorized court proceedings in the first instance, but that the authority to bring suit under
7 U.S.C. § 215 and 216 was limited to enforcement of orders previously issued by the Secretary
through administrative proceedings. Id. at 5-7. There is some persuasive weight to the argument
that the United States should have properly interpreted the statute prior to bringing suit or should
have presented a proper interpretation in response to the Court’s invitation to brief the issue.
On the other hand, it is notable that the issue of primary jurisdiction that prompted
briefing was raised not by the Defendants but by the Court sua sponte. [Doc. 165, at 2-3]. At
that time, the Court asked the parties to brief whether the appropriate action by the Court would
be to dismiss Counts I-VIII, or merely to stay the action pending administrative proceedings. Id.
During the briefing period, the formerly-assigned Magistrate Judge denied Defendants’ motion
to stay discovery, see id. at 3, indicating a reasonable basis for disagreement about the viability
of the questioned counts. It is also relevant that the ultimate action by the District Court was
dismissal of Counts I-VIII, not based upon primary jurisdiction but a distinct theory of exclusive
jurisdiction, again raised by the Court sua sponte rather than by the Defendants. Id. The District
Court noted that although the term primary jurisdiction had been applied in a previous Tenth
Circuit case under different provisions of the PSA, U.S. Supreme Court authority on exclusive
jurisdiction was controlling, the operative distinction being that primary jurisdiction requires a
stay pending referral to the administrative agency while exclusive jurisdiction requires dismissal
of the subject counts. Id., at 9-10. Neither of the parties argued exclusive jurisdiction in their
briefs. [Docs. 107 & 108]
Finally, it is significant that the United States’ initial position was that the Court should
grant temporary injunctive relief to protect the public while the merits of its claims were
resolved. Such relief was authorized by statute and was granted and maintained throughout the
litigation and the administrative process and until the conclusion of that process was
demonstrated to the District Court. See 7 U.S.C. § 228a; [Doc. 165, at 14-16].
In hindsight, it was improper for the United States to initiate Counts I-VIII in the District
Court rather than in administrative proceedings. Viewing the matter as a whole, however, and
given: (1) the need for prompt injunctive relief to protect the public; (2) the evidentiary record of
multiple violations of the act sufficient to justify substantial restrictions on Defendants’ business
activities; (3) the absence of initiative by Defendants to raise the issue of exclusive jurisdiction
before it was raised by the District Court sua sponte; and (4) the lack of any evidence of bad
faith by the Government, I conclude that the position of the United States was substantially
If the Defendants are entitled to attorney fees and costs, what fees and costs should be
Because I have recommended that the District Judge find that Defendants are not entitled
to any award of fees and expenses under the EAJA, I have not analyzed the reasonableness of
Defendants’ specific request. If the District Judge rejects these recommendations and concludes
that an EAJA award is required, a reasonableness analysis will be required.
I recommend that the District Judge:
(1) Deem Defendant’s EAJA application to be timely, even though filed prematurely, as
final judgment has now been entered and the time for appeal has expired, the matter is fully
briefed, and the United States has cited to no sovereign interest that would be damaged by
deciding the merits of the application;
(2) Find that none of the Defendants meet the definition of prevailing party under the
(3) Find that the position of the United States was substantially justified; and
(4) For reasons (2) and (3) above, deny Defendants’ Application for Attorney’s Fees and
Expenses Pursuant to the Equal Access to Justice Act… [Doc. 349].
JERRY H. RITTER
UNITED STATES MAGISTRATE JUDGE
THE PARTIES ARE FURTHER NOTIFIED THAT WITHIN 14 DAYS OF SERVICE of
a copy of these Proposed Findings and Recommended Disposition, they may file written
objections with the Clerk of the District Court pursuant to 28 U.S.C. § 636(b)(1).
A party must file any objections with the Clerk of the District Court within the fourteenday period if that party wants to have appellate review of the proposed findings and
recommended disposition. If no objections are filed, no appellate review will be allowed.
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?