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February 23, 2004.

SELECT MILK PRODUCERS, INC., et al., Plaintiffs, v., ANN M. VENEMAN, Secretary, United States Department of Agriculture, Defendant

The opinion of the court was delivered by: ROYCE LAMBERTH, District Judge


This matter comes before the Court on plaintiffs' application for fees, expenses, and costs incurred in their prosecution of this action. Plaintiffs file for this award pursuant to 28 U.S.C. § 2412(a) and (d), the Equal Access to Justice Act, ("EAJA"). Upon consideration of plaintiffs' motion, the opposition thereto, the reply brief, and the applicable law: the Court shall grant plaintiffs' application for an award under the EAJA. The Court shall awards plaintiffs' fees, expenses, and costs in the amount of $101, 266.83 to be paid by the United States Department of Agriculture.


  The Federal Milk Marketing Orders ("FMMO") is a highly complex regulatory scheme governing the prices for milk and its component parts. The Agriculture Marketing Agreement Act of 1937, 7 U.S.C. § 601 et seq., ("AMAA") governs the process of amending the FMMO, among other things. In order to amend the FMMO the Secretary of Agriculture "shall give due notice of and an opportunity for a hearing upon a proposed order." 7 U.S.C. § 608c(3) (2003). The Secretary has established regulations for holding these hearings. 7 C.F.R. § 900.1 — 7 C.F.R. § 900.18 Page 2 (2004). The regulations require that first a "Notice of Hearing" be issued that "shall define the scope of the hearings as specifically as may be practicable." 7 C.F.R. § 900.4(a). Further, the scope of the hearing is delineated by the specific proposals noticed for hearing and the Secretary identifies the sections of the FMMO that are subject to change in the rulemaking process. An Administrative Law Judge (ALJ) presides at the hearing and, as one of his duties, insures that the hearing is limited to the scope as defined in the Notice of Hearing. 7 C.F.R. § 900.6(b). At this point evidence is submitted on the matters in the notice of hearing, 7 C.F.R. § 900.8(c)(2), and witnesses testify under oath, 7 C.F.R. § 900.8(d)(1). At the close of the evidence parties may file written arguments, 7 C.F.R. § 900.9(b), the ALJ certifies the hearing transcript, 7 C.F.R. § 900.10, and thereafter the Secretary issues a recommended decision, 7 C.F.R. § 900.12.

  The amendments at issue in this case resulted from a congressionally mandated formal rulemaking process. See H.R. 3428, as part of Consolidated Appropriations Act, 2000, Pub.L. 106-113, Div. B, § 1000(a)(8) [§ 2], Nov. 29, 1999, 113 Stat 1536, 1501A-518 ("2000 Act"). The 2000 Act ordered the Secretary to conduct emergency rulemaking, issue amended regulations by December 1, 2000, and implement the resulting formulas on January 1, 2001. 2000 Act Sec.2(c). In April 2000, after requesting proposals, the Secretary published the Notice of Hearing, 64 Fed. Reg. 20094-20104 (April 14, 2000), listing 31 proposals from industry and a standard proposal from the Secretary included in all hearing notices. There was no proposal to create a separate Class III Butterfat price. On the second day of the five day hearing in May 2000, a Dr. Barbano attempted to discuss his idea for a new Class III Butterfat price. The ALJ presiding over the hearing, with the explicit agreement of the Secretary's representative at the hearing, found that "Dr. Barbano's pricing formula is not one of the proposals being considered at this hearing." Page 3 Mem. of P. & A. in Supp. of Pls.' Mot. For T.R.O. and/or Prelim. Inj. and for Expedited Hr'g at 16, (Jan. 19, 2001) (citing Hr'g Tr. at 790-91, dated May 9, 2000) ("Pls.' Mot. for Prelim. Inj.").

  During the remainder of the hearing no participant testified or offered any evidence for the creation of a separate Class III butterfat price. After the hearing the record closed and on December 7, 2000 the Secretary issued a Tentative Final Decision at Fed. Reg. 76832. See also 65 Fed. Reg. 82832 (December 28, 2000). The Tentative Final Decision surprised all of the participants in the hearing because it created a separate Class III Butterfat price provision and made changes to numerous other parts of the FMMO to implement this change, taking up virtually all of the nine pages of amendments. The Secretary denied requests from several participants for an administrative stay of the Tentative Final Decision and the regulation became effective on January 1, 2001. But because the price announcement for January 2001 takes place on February 2, 2001, plaintiffs were afforded a brief opportunity to seek equitable relief from this Court.

  Plaintiffs sought a preliminary injunction on the grounds that the Secretary had unlawfully failed to comply with the appropriate procedural requirements for amending the Federal Milk Marketing Order System. On January 31, 2001 this Court entered a preliminary injunction that enjoined the Secretary of the Department of Agriculture from implementing a separate Class III Butterfat Price in the nation's Federal Milk Order System. See Order Granting Prelim. Inj., January 31, 2001. The Court noted that the "public interest will be served if the Court maintains the status quo with respect to the Class III Butterfat Price until it has resolved the underlying claims presented by the Milk Producers' Complaint." Id.

  The amended regulations provided for a separate Class III Butterfat price and the Secretary intended to announce the new separate Class III Butterfat price on February 2, 2001. Page 4 The new price would be retroactive to January 1, 2001 and would cause an immediate change in milk prices for January milk deliveries. The preliminary injunction prohibited the Secretary from implementing the provisions for the new Class III Butterfat price and directed the Secretary to make specific changes in the Tentative Final Decision appearing at 65 Fed. Reg. 82832 in order to return the regulations to the state that existed before the Tentative Final Decision became effective on January 1, 2001.

  This Court found that plaintiffs met all of the requirements for a preliminary injunction. First, plaintiffs would suffer irreparable injury and would be unable to recover the immediate losses stemming from the implementation of the separate Class III Butterfat price by any means at law. Second, plaintiffs were likely to succeed on the merits of their claims. In fact during the hearing on the preliminary injunction this Court determined that "the Secretary . . . had the right to make both proposals and issues in her notice, but she . . . clearly did not give fair notice to the industry." Tr. at 47-48. Third, the public interest would be served by the injunction. Fourth, the Secretary would not suffer harm if enjoined.

  Following the entry of the preliminary injunction the Secretary had limited options. The 2000 Act mandated specific deadlines for the Secretary. If the Court struck down the Tentative Final Decision via a final judgment or permanent injunction, then the failure to undertake new rulemaking during the preliminary injunction would leave the Secretary in violation of the 2000 Act's January 1, 2001 deadline.*fn1 Either the case could be pursued to final judgment or the Secretary could remedy the underlying wrong and undertake new rulemaking during the preliminary injunction. As this Court clearly spelled out its opinion of the rulemaking process at Page 5 issue during the hearing on the preliminary injunction, the Secretary chose the only viable option and conducted rulemaking afresh. This process resulted in the publication of a new final regulation that took effect on April 1, 2003. The new regulation did not include a separate Class III Butterfat price. But the Court does not rely on the fact that in the final rule, after adhering to the appropriate rulemaking procedure, the Secretary chose not to include a separate Class III Butterfat price because this suit was based upon the fact that the initial rulemaking process used by the Secretary was in violation of the AMAA and its related regulations. Plaintiffs dismissed the case because they obtained their desired result in the form of proper procedural process in the enactment of a new amended regulation — all of which was the result of the preliminary injunction. On May 30, 2003, plaintiffs moved for award of fees and costs pursuant to the Equal Access for Justice Act.


  Plaintiffs request fees and costs pursuant to the Equal Access to Justice Act, 28 U.S.C. § 2412 (2003).*fn2 The Court must consider three separate issues: whether plaintiffs are prevailing Page 6 parties, whether the Secretary's position was substantially justified, and what fees and costs submitted by the plaintiffs are allowable.

 A. Plaintiffs Are A "Prevailing Party"

  The analysis of plaintiffs' status as a prevailing party takes place in light of the Supreme Court's holding in Buchannon Bd. and Care Home Inc., v. W. Va. Dept. of Health and Human Res., 532 U.S. 598 (2001) ("Buchannon") and the D.C. Circuit's subsequent application of Buchannon in Thomas v. Nat'l Sci. Found., 330 F.3d 486 (D.C. Cir. 2003) ("Thomas"). In Buchannon, the plaintiffs operated assisted living residences in West Virginia and sued the state of West Virginia seeking relief that certain state laws violated provisions of the Fair Housing Amendments Act of 1988 ("FHAA"), 42 U.S.C. § 3601 et seq. and the Americans with Disabilities Act of 1990 ("ADA"), 42 U.S.C. § 12101 et seq. While the case was pending and before the court had granted any relief of any kind, the West Virginia legislature enacted two bills eliminating the state law provisions at issue. Subsequently defendant moved to dismiss the case as moot and the court granted the motion. Plaintiffs then requested attorney's fees as the prevailing party under the FHAA. Plaintiffs argued they were entitled to fees under the catalyst theory, which asserts that a plaintiff is a prevailing party "if it achieves the desired result because the lawsuit brought about a voluntary change in the defendant's conduct," Buchannon, 532 U.S. at 601. The Supreme Court held the catalyst theory "is not a permissible basis for the award of attorney's fees under the FHAA and ADA" Id. at 598. The seemingly limited scope of this holding is belied by its subsequent interpretation by the D.C. Circuit in Thomas. In Thomas, discussed further infra, the D.C. Circuit rejected the district court's understanding of Buchannon as a rejection of the catalyst theory as "much too narrow" and concluded instead that Page 7 "Buchannon is, first and foremost, about the meaning of the term `prevailing party' in civil litigation under certain fee — shifting statutes." Thomas, 330 F.3d at 492. Thus a closer examination of Buchannon is required.

  In Buchannon, the Supreme Court surveyed its precedent on the issue of prevailing parties and made several determinations. First, the Court observed that the term "prevailing party" is a legal term of art and that in accordance with both its precedent and Black's Law Dictionary, a prevailing party "is one who has been awarded some relief by the court." Buchannon, 532 U.S. at 603. Second, the Supreme Court considered two particular forms of relief that qualified. The Court found that a plaintiff must "receive at least some relief on the merits of his claim before he can be said to prevail." Id. at 604 (quoting Hewitt v. Helms, 482 U.S. 755, 760 (1987)). But "even an award of nominal damages suffices under this test." Id. (citing Farrar v. Hobby, 506 U.S. 103 (1992)). In contrast, the Court also noted that a settlement agreement enforced through a consent decree could serve as the basis for an award of attorney's fees. Id. (citing Maher v. Gagne 448 U.S. 122 (1980)). The Court observed the consent decree "does not always include an admission of liability by the defendant" but "it nonetheless is a court ordered change in the legal relationship between the plaintiffs and the defendant." Id. (citing Texas State Teachers Assn. v. Garland Independent School Dist., 489 U.S. 782, 792 (1989)). The Court combined these concepts stating: "These decisions, taken together, establish that enforceable judgments on the merits and court — ordered consent decrees create the `material alteration of the legal relationship of the parties' necessary to permit an award of attorney's fees." Id. (quoting Texas State Teachers Assn., 489 U.S. at 792. The Court further observed that the catalyst theory "falls on the other side of the line from these examples." Id. at 605. Likewise, neither the reversal of a dismissal for failure to state a claim, nor the reversal of a directed verdict Page 8 for the defendant was a sufficient success to make the plaintiff a prevailing party. At no point did the Court evaluate whether or not a preliminary injunction would be sufficient to make a party a prevailing party in order to obtain an award of fees and costs.

  In Thomas v. National Science Foundation, the D.C. Circuit considered the effect of Buchannon in a case where the district court awarded fees based on a preliminary injunction and partial summary judgment in favor of plaintiffs. Plaintiffs were a class of Internet Domain Name registrants who sued the National Science Foundation ("NSF") over a portion of Internet Domain Name registration fees that went to the NSF on the grounds that such fees constituted an unconstitutional tax. The district court entered a preliminary injunction prohibiting NSF from spending any of the fees collected, but did not stop the collection of the fees. The district court also granted partial summary judgment to the plaintiffs finding the "tax" unconstitutional. But it did not award any damages to the plaintiffs, or otherwise order the NSF to divest the collected funds. Before the district court could ...

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