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LAKE PILOTS ASSOCIATION, INC. v. UNITED STATES COAST GUARD

March 31, 2004.

Lake Pilots Association, Inc., Plaintiff
v.
United States Coast Guard, et. al, Defendants



The opinion of the court was delivered by: REGGIE B. WALTON, District Judge

MEMORANDUM OPINION

This matter is before the Court on plaintiff's motion for attorney fees for services rendered in connection with the award of a partial judgment it obtained.*fn1 Upon considering plaintiffs motion, defendants' opposition, and plaintiff's reply, the Court concludes that plaintiff is entitled to an award of reasonable attorney's fees. However, because plaintiff failed to carry its burden with respect to the full amount for which it seeks reimbursement, the Court will reduce the amount of fees awarded.

I. Is Plaintiff Entitled to an Award of Attorney's Fees?
  Plaintiff moves for an award of attorney's fees pursuant to the Equal Access to Justice Act, 28 U.S.C. § 2412 ("EAJA"). The EAJA provides in pertinent part,

  [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, Page 2 brought by or against the United States . . . unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.

 Id. § 2412(d)(1)(A) (emphasis added). Defendants oppose any award, contending that plaintiff is not a prevailing party because it did not receive a favorable ruling within the meaning of the EAJA. Defendants' Opposition to Plaintiff's Motion for Attorney Fees Under the Equal Access to Justice Act ("Defs.' Opp'n") at 1-2. Further, defendants argue that even if plaintiff is a "prevailing party," their position was "substantially justified," precluding an award in any event pursuant to the EAJA. Id. Finally, even a fee award is warranted, the defendants argue that plaintiff's request is excessive and should be reduced accordingly.*fn2 Id. The Court will address each of the defendants' arguments in turn.

 A. Whether Plaintiff is a Prevailing Party

  A recent Circuit opinion casts light on the meaning of the term "prevailing party" as the term relates to the EAJA. To be a prevailing party, a party must obtain a "substantial part of the relief it sought and the lawsuit must have caused "a change in someone's primary conduct in the real world." Role Models America. Inc. v. Brownlee, 353 F.3d 962, 966 (D.C. Cir. 2004) (citing Waterman Steamship Corp. v. Maritime Subsidy Board, 901 F.2d 1119, 1122 (D.C. Cir. 1990)). In Role Models, the plaintiff ("Role Models") sued the United States Army for violating regulations that required the Army to provide adequate notice prior to selling a military base, Page 3 which prevented Role Models from competing for the purchase of the property at issue in that case. Id. at 965. Role Models ultimately secured a ruling from the Court of Appeals that the Army violated the clear text of the relevant regulations, which resulted in the issuance of an injunction prohibiting the transfer of the property until the defendant complied with its notice obligation. Id. Role Models then sought an award of attorney's fees and the defendant objected, claiming that Role Models was not a prevailing party because it had not actually acquired the property that it sought (the property that was the subject of the injunction). Id. However, the Circuit Court held that Role Models was a prevailing party under the EAJA because it had received the precise relief it sought, namely, an injunction barring the Army from transferring the property and an opportunity to compete for its purchase. Id. at 966. Further, the Court noted that the lawsuit and the relief Role Models obtained caused "a change in [the defendant's] primary conduct in the real world . . ." and accordingly, Role Models was a prevailing party under the EAJA. Id.

  Here, plaintiff filed a complaint and a motion for a temporary restraining order to enjoin the Coast Guard from implementing its Final Rule. Lake Pilots Assoc. v. United States Coast Guard, 257 F. Supp.2d 148, 153 (D.D.C. 2003). Plaintiff challenged four aspects of the Final Rule, alleging that the Coast Guard misapplied the relevant formula in setting rate ceilings for pilotage services in the Final Rule the Coast Guard had adopted. First, plaintiff alleged that the Coast Guard's exclusion of detention and delay hours from the calculation regarding the number of pilots needed in District Two of the Great Lakes was arbitrary and capricious. Id. at 159. The Court found that this issue was not ripe for adjudication because the Coast Guard had not yet taken a definitive position to treat the several districts> of the Great Lakes differently or to exclude Page 4 such hours in all districts> as a matter of policy. Id. at 160. Second, the plaintiff challenged the Coast Guard's determination regarding target pilot compensation, specifically its reliance on a ship operating company's figures and that the Coast Guard's failure to apply the 150% multiplier for determining the target rate of compensation of first mates. Id. at 165, 168. The Court found that
[g]iven the defendants' failure to adhere to the language of its own regulations, provide notice to interested parties regarding the alternative source of data it would use [— a ship operating company's costs —], or to provide in the administrative record any justification for its reliance on the figures it used to make its calculation . . . [defendants' reliance on the ship operating company's figures was arbitrary and capricious].
Id. at 168. However, regarding the second aspect of this challenge, the Court upheld the defendants' decision not to apply the 150% multiplier, holding that the justification for the formula used was reasonable. Id. at 169.*fn3 Third, the plaintiff argued that the Final Rule was arbitrary and capricious because it disregarded the regulation's requirement that cash be included when calculating the plaintiff's investment base. Id. at 172. The Court held that the manner used to calculate the investment base was arbitrary and capricious because the defendants ignored the language of the regulation. Id. Fourth, plaintiff challenged the denial of certain subsistence expenses by the Coast Guard during its rulemaking process. Id. at 174. Because the defendants conceded that they may have incorrectly disallowed some of the plaintiffs subsistence expenses, Page 5 the Court remanded the case to the Coast Guard to reconsider its calculations of the plaintiffs actual subsistence expenses plaintiff was entitled to claim. Id.

  The fact that plaintiff was only successful on two of the five challenges, resulting in the Court granting partial summary judgment to the defendants, does not alter the fact that plaintiff received the precise relief it sought, i.e., a remand of the Final Rule to the Coast Guard to recalculate the pilotage rates in a manner consistent with the applicable regulations. Id. at 153. In Kennecott Corp. v. EPA, 804 F.2d 763, 764 (D.C. Cir. 1986), the Court held that the petitioners were prevailing parties entitled to attorney's fees despite being only partially successful in their challenge to the agency's regulations. There, the Court ruled in favor of the petitioners on two of the three claims brought against the agency but entered judgment in favor of the defendant agency on the third claim. Id. Similar to Kennecott, in this case the Court concludes plaintiff received a substantial part of the relief it sought.

  Through the lawsuit and the relief it obtained, plaintiff caused a change in defendants' primary conduct in the real world, satisfying the second "prevailing party" requirement. Role Models, 353 F.3d at 966. As already noted, in Role Models, the Court ordered the district court to issue an injunction to stop the transfer of the disputed property until proper notice of the property's availability for sale was provided, which the Court concluded changed the agency's primary real world conduct. Id. Here, plaintiff changed defendants' real world conduct in several ways. First, the defendants conceded that they learned as a result of this litigation that part of their Final Rule had been erroneously promulgated, which they then voluntarily altered. Defs.' Opp'n at 2-3 (citing Great Lakes Pilotage Rates, 67 Fed. Reg. 47464 (July 19, 2002)). Further, the Court found that two aspects of the defendants' 2001 Final Rule were arbitrary and Page 6 capricious and remanded the case back to the agency for proceedings consistent with the Court's opinion. Lake Pilots, 257 F. Supp.2d at 175. Thus, the defendants are not free to re-calculate the pilotage rates in any manner they deem appropriate, but must do so in a manner partially consistent with the ruling the plaintiffs encouraged the Court to make.

  The defendants argue that plaintiff's lawsuit did not change their real world conduct because they voluntarily issued a temporary Final Rule during the course of the litigation, which afforded the plaintiff the relief it sought: a return to the 1997 rates. Defs.' Opp'n at 2. However, the Court specifically ruled that defendants' voluntary action did not render the plaintiffs complaint moot because the temporary rule was not final and did not absolutely eradicate the potential impact of the defendants' prior decision. Lake Pilots, 257 F. Supp.2d at 157-58. The defendants' reliance on Thomas v. National Science Foundation, 330 F.3d 486 (D.C. Cir. 2003), as support for their position is misplaced, as that case is distinguishable from the current situation. In Thomas, the plaintiffs brought an action against a federal agency, the National Science Foundation ("NSF"), alleging that a fee they were charged pursuant to a cooperative agreement constituted an illegal tax. Id. at 488. Plaintiffs sought to enjoin the NSF from spending the money and an order requiring it to return the fee. Id. The district court granted the plaintiffs' preliminary injunction and partial summary judgment motion, holding that the tax was illegal, but awarded no monetary relief to the plaintiffs. Id. Before the district court entered a final judgment, the President signed into law an act which "legalized and ratified" the fee, rendering the plaintiffs' claims before the district court moot. Id. On plaintiffs' motion for attorney's fees, the Court of Appeals held that the plaintiffs were not a "prevailing party" because "the sole effect of the preliminary injunction was to prevent the defendant agency from Page 7 appropriating any money already collected from the registration assessment. [T]he relief merely preserved the status quo." Id. at 493. Therefore, the injunction did nothing to vindicate the plaintiffs' claim and failed to change the material relationship between the parties because it was a "mere legal declaration." Id.

  The Court finds this case distinguishable from Thomas for two reasons. First, the issue in Thomas was rendered moot, while here the Court specifically found that the defendants' voluntary actions had not rendered the case moot and entered a partial judgment declaring particular aspects of defendants' Final Rule arbitrary and capricious. Lake Pilots, 257 F. Supp.2d at 157. With respect to those portions of the Final Rule declared to be arbitrary and capricious, the Final Rule was remanded to the agency for further proceedings. The Supreme Court made has it clear in that a remand, standing alone, does not preclude a party from achieving prevailing party status. Shalala v. Schaefer, 509 U.S. 292, 300-301 (1993). Rather, the question is whether the plaintiff prevailed on the merits of the challenge. See Massachusetts Fair Share v. Law Enforcement Assistance Admin., 776 F.2d 1066, 1068 (D.C. Cir. 1985) (holding that the plaintiff had "establish[ed] an entitlement to relief on the merits of the claim . . . [and was therefore] entitled to fees even [though it was] remanded to the agency for further action."). As noted above, the Court in Kennecott, 804 F.2d at 764, found that the petitioners were entitled to recover attorney's fees despite being only partially successful in challenging EPA regulations. The result in the underlying decision, Kennecott Corp. v. EPA, 684 F.2d 1007, 1020 (D.C. Cir. 1982), was the Court remanding the regulation back to the agency for reconsideration consistent with its opinion. The remand back to the agency did not alter the Court's conclusion that the petitioners were entitled to attorney's fees. Here, the Court's remand regarding the Page 8 aspects of the Final Rule determined to be arbitrary and capricious established plaintiffs entitlement to fees. Second, the plaintiffs in Thomas were seeking monetary relief and an injunction to preserve the "status quo." Here, plaintiff did not seek monetary relief, but an injunction that would stop the enforcement of a rule it believed was arbitrary and capricious and which had caused the plaintiff pilots to "los[e] . . . hundreds of thousands of dollars over the past year in revenues. . . ." Lake Pilots, 257 F. Supp.2d at 153-54 (citations omitted). Therefore, the Court's decision was not a "mere legal declaration" preserving the status quo, but it materially altered the relationship between the parties. Thus, the Court concludes that plaintiff is a prevailing party within the meaning of the EAJA.

 B. Defendants' Position was not Substantially Justified

  The Coast Guard next argues that it need not pay attorney's fees because its position in the underlying litigation was substantially justified. Defs.' Opp'n at 8. The EAJA directs the Court to award attorney fees "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 government has the burden of proving that its position, including both the underlying agency action and its arguments taken in court in defense of its action, were "substantially justified" within the meaning of the Act. Halverson v. Slater, 206 F.3d 1205, 1208 (D.C. Cir. 2000). Government conduct is "substantially justified" where it is `justified in substance or in the main' — that is, justified to a degree that could satisfy a reasonable person. That is no different from . . . [having] a reasonable basis both in law and fact." Id. (quoting Pierce v. Underwood, 487 U.S. 552, 565 (1988). While the legislative history of the EAJA indicates that an "[a]gency action found to be arbitrary and capricious or unsupported by Page 9 substantial evidence is virtually certain not to have been substantially justified under the Act," H.R. Rep. No. 99-120, at 9-10 (1985), reprinted in 1985 U.S.C.C.A.N. 132, 138, the District of Columbia Circuit has stated that "whether agency action invalidated as arbitrary and capricious might nevertheless have been substantially justified depends on what precisely the court meant by `arbitrary and capricious.'" F.J. Vollmer Co. v. Magaw, 102 F.3d 591, 596 (D.C. Cir. 1996). In Vollmer, the Court suggested that a remand to an agency because it had failed to fully explain its reasoning or to consider a relevant factor in reaching a decision ...


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