December, 2017
Attorney Fees at the CIT
Mark K. Neville, Jr.
This review deals with persistent questions that clients fighting the federal government in court will often raise. Those plaints are, “Beyond the fact that I am forced to litigate this issue in court, why do I have to pay for it? If it was the government’s intransigence or arbitrary conduct that forced me to take this action, why should they not pay my attorney’s fees if I win? I may not be able to regain any of the time and emotional energy expended, that’s a dead loss for sure, but what about those legal fees and expenses?”
As we remarked in last month’s discussion, an importer that finds itself at the US Court of International Trade (CIT) is typically contesting an action taken by one of the federal agencies charged with administering the trade or customs laws.1 As we had observed then, those agencies are usually Customs and Border Protection or the Department of Commerce. There are other instances where the plaintiff at the CIT could be a former employee of a company adversely impacted by imports, and not an importer. The employee-cum-plaintiff would be seeking Trade Adjustment Assistance (TAA) relief.2 In those TAA cases, the federal agency is the U.S. Department of Labor.3
We were prompted to raise this issue of attorney fees and other expenses in the context of a TAA plaintiff at the CIT because that was the background for a recent CIT decision on this issue of a grant of attorney fees, Former Employee of Marlin Firearms.4
To be clear, the statute allowing the grant of attorney fees and expenses, the Equal Access to Justice Act (EAJA),5 is not limited to TAA cases but prescribes that applications for attorney fees will be available to all successful litigants in civil cases at the CIT, and the other federal courts as well, where the government is a party.
The normal standard is whether the applicant obtained a court order carrying sufficient ‘judicial imprimatur’ to materially change the legal relationship of the parties. The appellate court has held that such court order may be a final judgment on the merits, a court-ordered consent decree, or “other court action ‘equivalent’” to either of these.12
Care should be taken lest the government voluntarily or unilaterally agree to provide relief and later claim that the applicant had not prevailed because the court had not compelled the action. This was what Labor asserted in Former Employee of Marlin Firearms.
Importantly, in EAJA proceedings it is the government’s burden to demonstrate it was substantially justified.14 And the government must show that its position was substantially justified at both the administrative as well as the judicial proceeding.15
As for a definitional standard, the CIT has noted in the 2007 Fakhri decision16 that
In connection with ascertaining legal standards it is equally important to know what the standard is not. For these purposes, the “substantial justification” standard is not a “reasonable justification” standard.18
Note that there is a “safety valve” or “escape hatch” for the government in the form of “special circumstances” that would sustain an otherwise not substantially justified position. The CIT has noted that
That leads us to the next point, in which “equitable considerations” play a role.
The determination of special circumstances is for the Court to make within its discretion, keeping equitable concerns in mind.20
The 2007 decision in Fakhri21 serves as a useful illustration of this inquiry by the CIT. After denying the government’s challenge to its status as a “party” under the EAJA, the plaintiff was allowed to amend the pleadings. Still, after noting that the government’s position was “wholely” [sic] without merit” and that there were no “special circumstances” that would justify the government’s re-litigating arguments that had been raised and denied by the courts, the court denied the grant of fees anyway. That denial was based on the plaintiff’s deliberate and repeated failure to disclose its connection with a corporation. The court employed such principles as “integrity of the court and “good faith and conscience” and “unclean hands.”
The matter of itemized statements will be discussed next, in the context of the court’s review of the claim.
Especially in the case of customs and trade matters, the applicant will seek a higher hourly fee by way of a “special factor enhancement,” due to the specialized expertise demanded.25 In fact, the courts recognize customs and trade law as a specialized practice area, apart from general administrative law.26
In lieu of the payment of interest, which is not permitted under the EAJA,27 claimants will often seek a cost of living adjustment.28 The statute lists the expenses that may be recouped
As a generally applicable remark, in all of the opinions in these EAJA decisions where attorney fees are granted there will be a need for a detailed itemization and breakdown of out-of-pocket expenses and attorney and paralegal hours billed. That itemization will invariably generate a close, “green eye shade” attention to detail in the court’s review of the claim.31
To be clear about the size of the EAJA set, a hasty survey shows that there have been roughly thirty or so EAJA applications submitted to the CIT in the past twenty odd years. Of that group, perhaps ten or eleven dealt with the TAA, with six others involving importers’ claims for fees after a dispute over tariff classification32 and three dealt with litigants’ claims after an antidumping matter.33 The remainder were spread among a miscellany of matters including exclusion, penalty and broker status. Of the ten TAA-based cases, the plaintiff succeeded in six.
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As we remarked in last month’s discussion, an importer that finds itself at the US Court of International Trade (CIT) is typically contesting an action taken by one of the federal agencies charged with administering the trade or customs laws.1 As we had observed then, those agencies are usually Customs and Border Protection or the Department of Commerce. There are other instances where the plaintiff at the CIT could be a former employee of a company adversely impacted by imports, and not an importer. The employee-cum-plaintiff would be seeking Trade Adjustment Assistance (TAA) relief.2 In those TAA cases, the federal agency is the U.S. Department of Labor.3
We were prompted to raise this issue of attorney fees and other expenses in the context of a TAA plaintiff at the CIT because that was the background for a recent CIT decision on this issue of a grant of attorney fees, Former Employee of Marlin Firearms.4
To be clear, the statute allowing the grant of attorney fees and expenses, the Equal Access to Justice Act (EAJA),5 is not limited to TAA cases but prescribes that applications for attorney fees will be available to all successful litigants in civil cases at the CIT, and the other federal courts as well, where the government is a party.
Statutory Terms of the EAJA
The EAJA has the effect of taking at least some of those initially registered clients’ complaints out of the rhetorical question category. In its pertinent subsection, the statute makes prevailing litigants whole under these circumstances[A] court shall award to a prevailing party other than the United States fees and other expenses… incurred by that party in any civil action (other than cases sounding in tort), including proceedings for judicial review of agency action, 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.6
The four operative points to take away are that- the private party in a civil case with the government has prevailed, i.e., won, and
- the US position was not substantially justified and
- there are no special circumstances that would make an award unjust
- the fee application is timely and supported by an itemized fee statement7
Party
The statute actually imposes net worth caps that limit “party” status under the EAJA to certain persons and entities. The effect is to restrict recovery of attorney fees to those litigants that might need the money. For these purposes,“party” means (i) an individual whose net worth did not exceed $2,000,000 at the time the civil action was filed, or (ii) any owner of an unincorporated business, or any partnership, corporation, association, unit of local government, or organization, the net worth of which did not exceed $7,000,000 at the time the civil action was filed, and which had not more than 500 employees at the time the civil action was filed…9
The CIT has determined that in an EAJA proceeding after a tariff classification case, the real parties in interest can only be the importer of record or a surety to the transaction because that is set by the CIT’s rules and its jurisdictional statute limit.10Prevailed
The Supreme Court has held that prevailing party must have obtained the benefit of some of the relief it sought in the suit even though a victory on all claims is not required.11The normal standard is whether the applicant obtained a court order carrying sufficient ‘judicial imprimatur’ to materially change the legal relationship of the parties. The appellate court has held that such court order may be a final judgment on the merits, a court-ordered consent decree, or “other court action ‘equivalent’” to either of these.12
Care should be taken lest the government voluntarily or unilaterally agree to provide relief and later claim that the applicant had not prevailed because the court had not compelled the action. This was what Labor asserted in Former Employee of Marlin Firearms.
Not Substantially justified
The government will often staunchly oppose applications for attorneys’ fees under the EAJA. In such an opposition the issue of the US position and whether it was “substantially justified” may play key roles.13Importantly, in EAJA proceedings it is the government’s burden to demonstrate it was substantially justified.14 And the government must show that its position was substantially justified at both the administrative as well as the judicial proceeding.15
As for a definitional standard, the CIT has noted in the 2007 Fakhri decision16 that
The Supreme Court has interpreted the term “substantially justified” to mean “‘justified in substance or in the main’ – that is, justified to a degree that could satisfy a reasonable person . . . . 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. …“Substantially justified” requires “that the Government show that it was clearly reasonable in asserting its position, including its position at the agency level, in view of the law and the facts.” (citations omitted)
The CIT has also described the standard as “clearly reasonable … in view of the law and the facts. The Government must show that it has not ‘persisted in pressing a tenuous factual or legal position, albeit one not wholly without foundation.’”17In connection with ascertaining legal standards it is equally important to know what the standard is not. For these purposes, the “substantial justification” standard is not a “reasonable justification” standard.18
Note that there is a “safety valve” or “escape hatch” for the government in the form of “special circumstances” that would sustain an otherwise not substantially justified position. The CIT has noted that
the purpose of barring a fee award where special circumstances exist has been explained by the courts. This “safety valve” helps to insure that the Government is not deterred from advancing in good faith the novel but credible extensions and interpretations of the law that often underlie vigorous enforcement efforts. It also gives the court discretion to deny awards where equitable considerations dictate an award should not be made.19
Thus, the “special circumstances” standard plays dual roles, and those roles both cut against the private party. The courts have held that its application could rescue what would otherwise be a substantially unjustified position by the government. Moreover, the actual statutory context for “special circumstances” is in the context of a showing that the award was would be unjust.That leads us to the next point, in which “equitable considerations” play a role.
Award Not Unjust
Even if the plaintiff is able to demonstrates its eligibility for the award of fees, having overcome the earlier hurdles, the plaintiff may still come away empty-handed if its hands are “unclean.” Yes, we refer to the familiar phrase “unclean hands” because the court will apply equitable principles.The determination of special circumstances is for the Court to make within its discretion, keeping equitable concerns in mind.20
The 2007 decision in Fakhri21 serves as a useful illustration of this inquiry by the CIT. After denying the government’s challenge to its status as a “party” under the EAJA, the plaintiff was allowed to amend the pleadings. Still, after noting that the government’s position was “wholely” [sic] without merit” and that there were no “special circumstances” that would justify the government’s re-litigating arguments that had been raised and denied by the courts, the court denied the grant of fees anyway. That denial was based on the plaintiff’s deliberate and repeated failure to disclose its connection with a corporation. The court employed such principles as “integrity of the court and “good faith and conscience” and “unclean hands.”
Timely application and itemized statements
On this final criterion we should note that the statute requires that “[a] party seeking an award of fees and other expenses” to submit its application “within thirty days of final judgment in the action.”22 The CIT has interpreted this to mean that an applicant for fees can file no later than thirty days after final judgment but that an application may also be filed before the final judgment.23 In other words, to compare the matter with a familiar filing requirement in a customs context, this timing scheme is unlike a protest filed under 19 USC § 1514. Protests cannot be filed before liquidation of the entry; they must be filed after a liquidation of an entry but no later than 180 days after that liquidation.The matter of itemized statements will be discussed next, in the context of the court’s review of the claim.
The Amount of Fees and Expenses Granted
Pursuant to the statute,24 “reasonable attorney fees” is defined by means of a ceiling on hourly rates, “attorney fees shall not be awarded in excess of $125 per hour unless the court determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceedings involved, justifies a higher fee.”Especially in the case of customs and trade matters, the applicant will seek a higher hourly fee by way of a “special factor enhancement,” due to the specialized expertise demanded.25 In fact, the courts recognize customs and trade law as a specialized practice area, apart from general administrative law.26
In lieu of the payment of interest, which is not permitted under the EAJA,27 claimants will often seek a cost of living adjustment.28 The statute lists the expenses that may be recouped
reasonable expenses of expert witnesses, the reasonable cost of any study, analysis, engineering report, test, or project which is found by the court to be necessary for the preparation of the party’s case.29
There is a cap on expert witness expenses, however, the amount being tied to the rates paid by the government.30As a generally applicable remark, in all of the opinions in these EAJA decisions where attorney fees are granted there will be a need for a detailed itemization and breakdown of out-of-pocket expenses and attorney and paralegal hours billed. That itemization will invariably generate a close, “green eye shade” attention to detail in the court’s review of the claim.31
EAJA Practice at the CIT
There is a further reason to review the Former Employee of Marlin Firearms decision as a recent EAJA decision at the CIT. One might profitably study the CIT jurisprudence on attorney fees under the EAJA in TAA cases because applications to the CIT for EAJA fees after a victory in a TAA case constitute the largest group of EAJA claims at the CIT.To be clear about the size of the EAJA set, a hasty survey shows that there have been roughly thirty or so EAJA applications submitted to the CIT in the past twenty odd years. Of that group, perhaps ten or eleven dealt with the TAA, with six others involving importers’ claims for fees after a dispute over tariff classification32 and three dealt with litigants’ claims after an antidumping matter.33 The remainder were spread among a miscellany of matters including exclusion, penalty and broker status. Of the ten TAA-based cases, the plaintiff succeeded in six.
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1. To be sure, it would be a mistake to overlook the fact that an importer may find itself as the defendant in a CIT proceeding. This would be the case in an enforcement action brought by the government to collect in a civil penalty case brought under 19 USC § 1592.
2. Pursuant to 19 USC § 2251 et. seq. This regime is treated at length in Neville, “Trade Adjustment Assistance—Trade Law for the Unemployed and Others,” 20 JOIT 14 (Nov. 2009). Note that TAA benefits are not restricted to employees but are available for companies, communities and others.
3. For a recent CIT decision on employees’ TAA claims which demonstrate the depth of the analysis applied and close questioning imposed by the reviewing court in order to ascertain whether there was substantial evidence in the administrative record for Labor determinations, see Former Employees of Geokinetics, Inc. v. US Secretary of Labor, 219 F. Supp. 3d 1392 (CIT 2017).
4. Former Employee of Marlin Firearms Co. v. United States, Slip Ops. 17-72 (CIT 2017) (Former Employee of Marlin Firearms).
5. 28 USC § 2412.
6. 28 USC § 2412 (d) (1) (A).
7. Former Employees of Tyco Electronics, Fiber Optics Div. v. US Department of Labor, 350 F. Supp. 2d 1075, 28 CIT 1571 (CIT 2004).
8. Ardestani v. INS, 502 US 129, 137, 1122 S. Ct. 515 (1991).
9. 28 USC § 2412 (d) (2) (B).
10. 28 USC § 2631(a).
11. See Hensley v. Eckerhart, 461 U.S. 424, 433 (1983), as cited in American Bayridge Corp. v. United States, 24 CIT 9, 86 F. Supp. 2d 1284 (CIT 2000) (American Bayridge Corp.).
12. Rice Servs., Ltd. v. United States, 405 F.3d 1017, 1026 (Fed. Cir. 2005)(citing Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Human Res., 532 US 598, 605 (2001)).
13. For an example where the only basis for the government opposition to the EAJA claim was on its position being “substantially justified,” see Former Employees of Invista S.A.R.L. v. US Secretary of Labor, 714 F. Supp. 2d 1320, 34 CIT 781 (CIT 2010) (Former Employees of Invista).
14. Libas, Ltd. v. United States, 314 F.3d 1362, 1365 (Fed. Cir. 2003).
15. 28 USC § 2412 (d) (2) (D); American Bayridge Corp., 24 CIT at 10, 86 F. Supp. 2d at 1285.
16. Fakhri dba International Trading Co. v. United States, 507 F. Supp. 2d 1305, 31 CIT 1287 (2007).
17. Automatic Plastic Molding, Inc. v. United States, 276 F. Supp. 2d 1362 (CIT 2003) (citations omitted).
18. Id., citing to Spencer v. NLRB, 712 F.2d 539, 558 (1983) (noting that “the Senate Judiciary Committee considered and rejected an amendment to the bill that would have changed the pertinent language from “substantially justified” to “reasonably justified,” S. Rep. No. 253, at 1, 8 (1979) suggesting that the test should, in fact, be slightly more stringent than “one of reasonableness”).
19. Id. (citations omitted).
20. Devine v. Sutermeister, 733 F.2d 892, 895-96 (Fed. Cir. 1984).
21. See notes 14 and 15.
22. 28 USC § 2412 (d) (1) (B).
23. Former Employee of Marlin. To be clear, the opinion did cite to a contrary authority, a 2016 decision of the Western District of Washington.
24. Title 28 § 2412(d)(2)(A)(ii).
25. See, e.g., International Custom Products v. United States, Slip Op. 15-68 (CIT 2015); Jazz Photo Corp. v. United States, 597 F. Supp. 2d 1364, 1369 (CIT 2008) (Jazz Photo Corp). But see Former Employees of Tyco Elecs. v. US Dep’t of Labor, 28 CIT 1571 at 1578-79, 1582-83, 1589-92, 350 F. Supp. 2d 1075 at 1083, 1086, 1092-93 (2004) and Former Employees of Invista (attorney fees capped at statutory rate of $125/hour in this TAA case).
26. Jazz Photo Corp.
27. Diamond Sawblades.
28. A cost of living adjustment (COLA) will lie as a substitute for inflation where there has been a passage of time. See the discussion in Diamond Sawblades, 816 F. Supp. 2d 1342 as well the extended treatment in Former Employees of BMC Software, Inc. v. US Sec. of Labor, 31 CIT 1609, 519 F. Supp. 2d 1291(CIT 2007) 31 CIT 1879, 2007 WL 4181696 (2007) and 32 CIT 1032 (CIT 2008) (collectively BMC Software).
29. Title 28 § 2412(d)(2)(A).
30. Title 28 § 2412(d)(2)(A)(i).
31. See, e.g., Diamond Sawblades and BMC Software cases.
32. For a review of a company’s claim under the EAJA, see Shah Bros., Inc. v. United States, 32 F. Supp. 3d 1348 (CIT 2014) (tariff classification matter) (an award of Plaintiff’s reasonable legal fees, incurred as a direct result of the Government’s unjustified action that led to this litigation, is appropriate pursuant to the EAJA).
33. See Diamond Sawblades Mfrs. Coalition v. United States, 816 F. Supp. 2d 1342 (CIT 2012) (Diamond Sawblades).
2. Pursuant to 19 USC § 2251 et. seq. This regime is treated at length in Neville, “Trade Adjustment Assistance—Trade Law for the Unemployed and Others,” 20 JOIT 14 (Nov. 2009). Note that TAA benefits are not restricted to employees but are available for companies, communities and others.
3. For a recent CIT decision on employees’ TAA claims which demonstrate the depth of the analysis applied and close questioning imposed by the reviewing court in order to ascertain whether there was substantial evidence in the administrative record for Labor determinations, see Former Employees of Geokinetics, Inc. v. US Secretary of Labor, 219 F. Supp. 3d 1392 (CIT 2017).
4. Former Employee of Marlin Firearms Co. v. United States, Slip Ops. 17-72 (CIT 2017) (Former Employee of Marlin Firearms).
5. 28 USC § 2412.
6. 28 USC § 2412 (d) (1) (A).
7. Former Employees of Tyco Electronics, Fiber Optics Div. v. US Department of Labor, 350 F. Supp. 2d 1075, 28 CIT 1571 (CIT 2004).
8. Ardestani v. INS, 502 US 129, 137, 1122 S. Ct. 515 (1991).
9. 28 USC § 2412 (d) (2) (B).
10. 28 USC § 2631(a).
11. See Hensley v. Eckerhart, 461 U.S. 424, 433 (1983), as cited in American Bayridge Corp. v. United States, 24 CIT 9, 86 F. Supp. 2d 1284 (CIT 2000) (American Bayridge Corp.).
12. Rice Servs., Ltd. v. United States, 405 F.3d 1017, 1026 (Fed. Cir. 2005)(citing Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Human Res., 532 US 598, 605 (2001)).
13. For an example where the only basis for the government opposition to the EAJA claim was on its position being “substantially justified,” see Former Employees of Invista S.A.R.L. v. US Secretary of Labor, 714 F. Supp. 2d 1320, 34 CIT 781 (CIT 2010) (Former Employees of Invista).
14. Libas, Ltd. v. United States, 314 F.3d 1362, 1365 (Fed. Cir. 2003).
15. 28 USC § 2412 (d) (2) (D); American Bayridge Corp., 24 CIT at 10, 86 F. Supp. 2d at 1285.
16. Fakhri dba International Trading Co. v. United States, 507 F. Supp. 2d 1305, 31 CIT 1287 (2007).
17. Automatic Plastic Molding, Inc. v. United States, 276 F. Supp. 2d 1362 (CIT 2003) (citations omitted).
18. Id., citing to Spencer v. NLRB, 712 F.2d 539, 558 (1983) (noting that “the Senate Judiciary Committee considered and rejected an amendment to the bill that would have changed the pertinent language from “substantially justified” to “reasonably justified,” S. Rep. No. 253, at 1, 8 (1979) suggesting that the test should, in fact, be slightly more stringent than “one of reasonableness”).
19. Id. (citations omitted).
20. Devine v. Sutermeister, 733 F.2d 892, 895-96 (Fed. Cir. 1984).
21. See notes 14 and 15.
22. 28 USC § 2412 (d) (1) (B).
23. Former Employee of Marlin. To be clear, the opinion did cite to a contrary authority, a 2016 decision of the Western District of Washington.
24. Title 28 § 2412(d)(2)(A)(ii).
25. See, e.g., International Custom Products v. United States, Slip Op. 15-68 (CIT 2015); Jazz Photo Corp. v. United States, 597 F. Supp. 2d 1364, 1369 (CIT 2008) (Jazz Photo Corp). But see Former Employees of Tyco Elecs. v. US Dep’t of Labor, 28 CIT 1571 at 1578-79, 1582-83, 1589-92, 350 F. Supp. 2d 1075 at 1083, 1086, 1092-93 (2004) and Former Employees of Invista (attorney fees capped at statutory rate of $125/hour in this TAA case).
26. Jazz Photo Corp.
27. Diamond Sawblades.
28. A cost of living adjustment (COLA) will lie as a substitute for inflation where there has been a passage of time. See the discussion in Diamond Sawblades, 816 F. Supp. 2d 1342 as well the extended treatment in Former Employees of BMC Software, Inc. v. US Sec. of Labor, 31 CIT 1609, 519 F. Supp. 2d 1291(CIT 2007) 31 CIT 1879, 2007 WL 4181696 (2007) and 32 CIT 1032 (CIT 2008) (collectively BMC Software).
29. Title 28 § 2412(d)(2)(A).
30. Title 28 § 2412(d)(2)(A)(i).
31. See, e.g., Diamond Sawblades and BMC Software cases.
32. For a review of a company’s claim under the EAJA, see Shah Bros., Inc. v. United States, 32 F. Supp. 3d 1348 (CIT 2014) (tariff classification matter) (an award of Plaintiff’s reasonable legal fees, incurred as a direct result of the Government’s unjustified action that led to this litigation, is appropriate pursuant to the EAJA).
33. See Diamond Sawblades Mfrs. Coalition v. United States, 816 F. Supp. 2d 1342 (CIT 2012) (Diamond Sawblades).
Mark K. Neville, Jr., LL.M. (International Legal Studies), NYU, is a long-time member of the Board of Advisors. He is Principal of International Trade Counsellors and may be reached at mkneville@itctradelaw.com. He has served as an adjunct professor at The University of California, Berkeley’s Haas School of Business and NYU’s Stern School. He is The Journal’s Customs & Trade correspondent.