UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
BEFORE THE ADMINISTRATOR
In the Matter of
C.F. Industries, Inc.,
Respondent
Docket No. FIFRA-09-0465-C-86-5
RECOMMENDED DECISION
This is an application for attorney fees and expenses pursuant to
the Equal Access :o "Justice Act ("EAJA"), as amended, 5 U.S.C., section
504, and the Agency's implementing regulations, 40 C.F.R. Part 17.
The applicant, C.F. Industries ("CFI"), now known as Country Farm
Supply Inc., was tne respondent in an adjudicative proceeding under the
Federal, Insecticide, Fungicide and Rodenticide Act ("FIFRA"), section
14(a), 7 U.S.C. 136 lja), for the assessment of civil penalties for alleged
violations of FIFRA.
The administrative complaint charged CFI in six counts with altei'i'ng
the labeling on and on two occasions sielling and distributing 5 one callon
containers of a misbranded pesticide that it had unlawfully-repackaged at
its unregistered establishment, in violation of several subsections of
section 12 of FIFRA. A civil penalty totaling $28,160 was proposed pursu-
ant to FIFRA section 14(a) and the Agency's guidelines for the assessment
of civil penalties under section 14(a), 39 Fed. Reg. 27711 (July 31, 1974).
CFI answered and denied the violations and its liability for a penalty.
On March 23, 1987, the parties entered into a Consent Agreement a^d
Final Order assessing a civil penalty of three thousand dollars (S3,000)
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against respondent. CFI contends that under the settlement it has
prevailed in this proceeding and that the EPA was not justified in
bringing it.
To be entitled to an award of attorney's fees and expenses, the
applicant must be an eligible prevailing party. 1/ The grounds on which
fees and expenses are awarded are set forth in 5 U.S.C. section 504(a)(1),
which provides as follows:
An Agency that conducts an adversary adjudication
shall award, to a prevailing party other than the United
States, fees and other expenses incurred by that party in
connection with that proceeding, unless the adjudicative
officer of the agency finds that the position of the agency
was substantially justified or that special circumstances
make an award unjust. Whether or not the position of the
agency was substantially justified shall be determined on
the basis of the administrative record, as a whole, which
is made in the adversary adjudication for which fees and
other expenses are sought.
The first question to consider is whether CFI is eligible for an award
of fees and expenses under subsection 504(b)(1)(B) of the Act. CFI
submitted with its application an affidavit and net worth financial
statement showing a new worth of less than $5 million and stating that
respondent has fewer than 500 employees. I find, accordingly, that CFI
is eligible for an award. 2/
1/ 5 U.S.C. sections 504(a)(1) and (2); 40 C.F.R. 17.5
2/ The EPA's contention that CFI's application is totally deficient
in the form submitted is rejected. No substantial deficiency in the
papers has been shown.
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The next matter to be considered is whether CFI "prevailed" within
the meaning of the Equal Access to Justice Act and the regulations so
as to be entitled to reimbursement for expenditures in defending against
the charges that culminated in the consent agreement.
In Wyoming Wildlife Federation v. United States, 3/ the Court
affirmed the principle that a party does not have to win a final judgment
following a trial on the merits in order to qualify as a "prevailing
party." The Court said,
Even when plaintiffs settle a case with the Government,
they may still be prevailing parties within the meaning of
the EAJA. The question is whether the plaintiffs, through
settlement, achieve some of the benefit the parties sought
in bringing the suit. The courts make this determination
by comparing the plaintiff's complaint with the settlement
agreement. 4/ (citation omitted.)
This same principle applies when, as here, the Environmental Pro-
tection Agency is the complainant seeking assessment of a civil penalty
against CFI in order to stop respondent's alleged activities in violation
of FIFRA and to deter future transgressions.
Although CFI, in the consent agreement, neither admits nor denies
the factual allegations set forth in the complaint, the terms are suffi-
ciently favorable for the complainant to rebut CFI's contention that it
is the prevailing party. Section IV of the consent agreement contains
CFI's certification that it has recalled to the extent possible all of
3/ 792 F.2d 981 (10th Cir. 1986).
4/ Id. at 983; accord, Environmental Defense Fund v. Watt, 554 F. Supp.
36 (ED NY 1982), affirmed 722 F.2d 1081 (2nd Cir.. 1983).
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the, products which may have been repackaged by it and all of the photo-
copies of labels and any and all other documentation or information used
in connection with the alleged sale or distribution of the repackaged pro-
ducts. CFI also agrees to cease and desist from any alleged repackaging
activities with respect to any products which have been registered with
the EPA in accordance with section 3 of FIFRA, 7 U.S.C. section 136a.
The inclusion of section IV plus the addition of a $3,000 penalty enables
complainant to achieve the purpose for which it brought the proceeding,
namely, the cessation of any alleged violations and deterrence from
future transgressions.
Respondent argues, nevertheless, that it is the prevailing party
because the EPA sought a total of $28,160 in civil penalties against CFI
and subsequently settled for $3,000. Respondent, however, overlooks that
the penalty named in the complaint was specifically described as the pen-
alty proposed by the EPA pursuant to section 14(a), and the guidelines for
the assessment of penalties thereunder, 39 Fed. Reg. 27711 (1974), after
consideration of the statutory factors of the size of respondent's busi-
ness, respondent's ability to continue in business and the qravity of the
violations. 5/ It is clear from the complaint that what is an appropri-
ate penalty is negotiable for purposes of settlement depending largely
upon CFI's financial condition. 6/ CFI sought initially to have the case
5/ Complaint at 5.
6/ See civil penalty guidelines, 39 Fed. Reg. at 27712.
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settled without any penalty because of its asserted limited financial
resources. 7/ ** was unsuccessful in this but did persuade the EPA to
accept a reduced penalty of S3,000. 8/
CFI has moved for leave to file a reply in which it asks permission
to submit an affidavit by its attorney that the penalty really reflected
the Agency's lack of confidence in the success and merits of the complaint.
That request is denied. It is uncontested that CFI did press upon the EPA
its claim that payment of the proposed penalty would be onerous because of
its.poor financial condition. Although the reduced penalty standing by
itself might suggest some weakness in the EPA's case, the settlement
agreement when read in its entirety shows a favorable settlement for the
EPA on all charges of the complaint. In short, the EPA's claim that the
penalty was lowered because of CFI's assertedly poor financial condition
is completely consistent with CFI's representations to the EPA and the
terms of the settlement agreement. It is unlikely that the affidavit CFI
now seeks to introduce will add anything of value to the record on the
issue of whether it has prevailed in this action, and there is no reason,
therefore, to prolong this proceeding in order to allow its submission.
7/ See the file of the adjudicative proceeding, Attachment A to
respondent's response to complainant's status report dated June 3, 1986,
and respondent's letter of October 30, 1986, to the EPA's counsel.
8/ Affidavit of Ms. Mary Frost, Attachment No. 1 to the EPA's response
to the application.
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It is found, accordingly, that CFI is not the prevailing party with-
in the meaning of the Equal Access to Justice Act and the regulations
and is, therefore, not entitled to attorney's fees and expenses.
The above finding is sufficient to deny the application. Neverthe-
less, even if it be assumed that CFI did prevail by obtaining a sizable
reduction in the proposed penalty, the application would still be denied
because the EPA has shown that.it was substantially justified in bringing
this action.
Before the 1985 Equal Access to Justice Act extension and amendment,
courts were divided on the meaning of "substantial justification." The
legislative history to the 1985 amendment confirmed some lower court
holdings that "substantial justification' means more than merely reason-
able 9J and should, in fact, be slightly more stringent than one of
reasonableness. 10/ The test is a middle ground between an automatic
award to a prevailing party and a restrictive standard which would re-
quire the prevailing party to show the government position to be frivolous
and groundless. 11/ Under this standard, the government must show not
9/ House Rep. No. 99-120, Part I, 99th Cong., 1st Sess. 9, reprinted in
1985 U.S. Code & Cong. News 138. The legislative history said that the
rejection by Congress in 1980 of a standard of "reasonably justified" in
favor of "substantially justified" meant that the test must be more than
mere reasonableness.
10/ Massachusetts Fair Share v. Law Enforcement Assistance Administra-
tion, 776 F.2d 1066, 1068 (D.C. Cir. 1985).
11/ Bazaldua v. United States I.N.S., 776 F.2d 1266, 1269 (5th Cir.
1985).
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merely that its position was marginally reasonable; but that its position
was clearly reasonable and well founded in law and fact. ]2J
The legislative history also states that an inquiry for EAJA pur-
poses extends beyond litigation arguments and requires an assessment of
the governmental actions that formed the basis of the suit. When the
case is settled the adjudicative officer will look to the record, including
the pleadings, affidavits and other supporting documents filed by the
parties in both the application for fees and expenses and the case on the
merits. 13/
In this case, the administrative enforcement action was initiated as
a result of inspections conducted by EPA inspectors and state employees
with EPA credentials. Their statements, affidavits and several exhibits
were submitted by complainant and taken together establish that complain-
ant was substantially justified in initiating and maintaining the enforce-
ment action against respondent.
The violations charged involve CFI's sale of ROUNDUP, a pesticide
registered to Monsanto Chemical Co. In May 1985, while doing a routine
inspection of CFI, a state agricultural inspector noticed that CFI had
purchased 30 gallon and 5 gallon containers while many sale invoices
showed one gallon sales. Based on the invoice discrepancies and an
anonymous phone call suggesting repackaging, the inspector contacted and
12/ Wyomina Wildlife Federation v. United States, 792 F.2d 981, 985 (10th
Cir. 1986)/
13/ House Rep. No. 99-120, Part 1. 99th Cong., 1st Sess. 12-13, reprinted
in 1985 U.S. Code & Cong. News 141-42.
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visited Jerry Rovey, one of the growers who according to the sale in-
voices had bought one gallon containers of materials from CFI. Rovey had
3 full and 1 partially full gallon containers of ROUNDUP that were not in
original containers and the labels appeared to be photocopies of the
original. J4/
The following week an EPA inspector returned to Rovey's farm and
obtained invoices dated 9/8/84 and 10/1/84 of sales by CFI to Rovey,
for 5x1 gallon containers of ROUNDUP. The inspector acquired one of
the 1 gallon containers with the photocopied ROUNDUP label attached. 15/
Mr. Rovey, in a written statement, confirmed his purchase of 5 one gallon
bottles of ROUNDUP from CFI. Rovey claimed that he requested one gallon
containers of ROUNDUP and CFI's president told him that they only had it
in 5 gallon cans but would put it in 5 one gallon bottles and label them
as having ROUNDUP in them. 16/
EPA inspectors made a third visit to CFI in May 1985, to examine the
purchase and sale records of ROUNDUP, particularly the one gallon size.
They noticed that several ROUNDUP sales invoices were missing. They fur-
ther found by comparing sales and purchase records that approximately 92
more one gallon containers were sold than purchased. Jonavich, CFI's
president, agreed to bring to the State chemist's office the missing
14/ Complainant's response to respondent's application, Attachments 2,
5 (Exh. B).
15/ Complainant's response, Attachment 5 (Exhs. C, D1-D6).
16/ Complainant's response, Attachment 5 (Exh. 07).
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invoices and a couple of statements supporting the legitimacy of the
ROUNDUP repackaging. Jonavich subsequently called and said he could not
get the information together and therefore, would not be coming. 17/
In its motion for leave to file a reply, the only charge in the
complaint which CFI really questions is the claim that the directions for
use were deleted from the labeling. On this issue CFI requests leave to
file an affidavit of its president that the use directions were provided
in the labeling. The EPA has shown that this charge was based upon in-
formation obtained by EPA investigators during their investigation of
CFI. J8/ The EPA was fully justified in relying upon this information.
Indeed, the proffered affidavit of CFI's president does not really meet
the label alteration charge. For, if the use directions were not provided
in the form in which they were furnished in the registered label of a
booklet in a sleeve label, the EPA could still have grounds for asserting
that the label had been unlawfully altered in violation of FIFRA, section
12(a)(2)(A)). Again the additional information which CFI now seeks to
produce does not appear to be of sufficient significance to justify further
delaying these proceedings, and CFI's request, therefore^ is denied.
I find, accordingly, that the position of the EPA in bringing this
complaint was substantially justified.
17/ Complainant's response, Attachment 5 (Exhs. E and F), Attachment 7.
18/ See Complainant's response at 9.
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Finally, CFI accuses the EPA of unduly delaying settlement dis-
cussions, which it claims "highlights" the unreasonableness of the EPA's
action. Delay in abandoning an unmeritorious position can have a bearing
on whether the government's position was substantially justified. 19/ The
EPA, however, refused only to accept settlement under which no penalty
would be imposed. The time taken, thereafter, to reach a mutually accept-
able settlement does not appear to have involved any excessive delays by
the EPA. 20/
For the reasons stated above, it is recommended that CFI's applica-
tion for fees and expenses be denied. 21/
19/ Environmental Defense Fund, Inc. v. Watt, 722 F.2d 1081, 1086 (2d
Cir. 1983).
20/ Affidavit of M. Nancy Frost, Attachment 1 to the EPA's response.
\\J CFI's request for leave to file a reply is also denied. "«'o
reply is needed to the EPA's objections that the application is totally
deficient in form because those objections have been rejected. Supra,
i. 2. CFI's request to furnish additional information by its attorney
jnd by its president have been denied for the reasons set forth in this
opinion. While the EPA was incorrect in assessing penalties of $5,500
instead of $5,000 for three Counts of the complaint, this was not a
significant issue in view of the EPA's consent to a lower penalty.
Gerald Harwood
Chief Administrative Law Judge
DATED:
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(Slip Opinion)
NOTICE: This opinion is subject to formal revision before
publication in the Environmental Administrative Decisions
(E.A.D.). Readers are requested to notify the Environmental
Appeals Board, U.S. Environmental Protection Agency,
Washington, D.C. 20460, of any typographical or other formal
errors, in order that corrections may be made before publication.
BEFORE THE ENVIRONMENTAL APPEALS BOARD
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
In re:
Hoosier Spline Broach Corporation
Docket No. V-W-16-93
EAJA Appeal No. 96-2
[Decided July 2, 1998]
FINAL DECISION
Before Environmental Appeals Judges Ronald L. McCallum,
Edward E. Reich and Kathie A. Stein.
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HOOSIER SPLINE BROACH CORPORATION
EAJA Appeal No. 96-2
HOOSIER SPLINE BROACH CORPORATION
Decided July 2, 1998
Syllabus
This case concerns an application for attorneys' fees filed under the Equal
Access to Justice Act ("the EAJA"), S U.S.C. § 504, by Hoosier Spline Broach
Corporation ("Hoosier"), a manufacturer of steel broaches. The application was
granted, in part, in a proceeding before a presiding officer, and U.S. EPA Region V
("the Region") appeals that decision to the Environmental Appeals Board. The Board
reverses the decision of the presiding officer, ruling that the Region's position in the
underlying enforcement proceeding against Hoosier was substantially justified.
Therefore, Hoosier is not entitled to attorneys' fees.
Between 1990 and 1992 Hoosier discarded its "grinding sludge" waste in a
pile at its Kokomo, Indiana plant In October 1991, Hoosier applied to the Indiana
Department of Environmental Management ("IDEM") for a "special waste permit" to
enable it to dispose of its grinding sludge as nonhazardous waste. As part of its
application, Hoosier submitted test results from four samples taken from the waste pile.
The test results showed that two of the four waste pile samples contained chromium
levels in excess of the S.O milligrams per liter regulatory threshold. In January 1992,
IDEM denied the special waste application, concluding from its independent statistical
analysis of the four waste pile samples that the waste was hazardous for chromium.
Based on IDEM's January 1992 determination and a February 1992 inspection
of the Kokomo facility, the Region filed a four-count complaint against Hoosier in June
1993 under the Resource Conservation and Recovery Act ("RCRA"), which alleged that:
(1) Hoosier had failed to make a timely hazardous waste determination, to notify EPA
of regulated hazardous waste activities, or to obtain an EPA identification number;
(2) Hoosier had failed to apply for or obtain interim status or a RCRA permit;
(3) Hoosier had failed to comply with specified operating standards applicable to
persons who treat, store or dispose of hazardous waste; and (4) Hoosier had failed to
comply with standards pertaining to waste pile management. The complaint sought
injunctive relief in the form of a compliance order requiring Hoosier to make a
hazardous waste determination, cease all hazardous waste activities for which neither
a permit nor interim status had been obtained, comply with standards applicable to
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2 HOOSIER SPLINE BROACH CORPORATION
owners of hazardous, waste piles, and submit a closure plan for the waste pile. The
Region proposed a civil penalty of $825,509 for the alleged violations.
Immediately after the February 1992 inspection was completed, Hoosier
dismantled the waste pile by shipping its contents offsite for disposal as a hazardous
waste. For approximately the next two and a half years, Hoosier continued to dispose
of its grinding sludge waste as hazardous.
In September 1994, based on a new application from Hoosier and new
sampling results (not specified in the record of this proceeding), IDEM issued a special
waste permit to Hoosier which allowed1 Hoosier to dispose of its grinding sludge waste
as nonhazardous.
After settlement negotiations that had been ongoing between Hoosier and the
Region apparently reached an impasse, the case was scheduled for hearing on July 26,
1995. Approximately two weeks before the hearing the case settled, based on an
amended complaint in which the Region dismissed three of the hazardous waste counts,
modified the fourth to allege only that Hoosier had failed to make a hazardous waste
determination, and limited the compliance order to require only that Hoosier submit its
most current hazardous waste determination. As part of the settlement agreement,
Hoosier agreed to pay a civil penalty of $3,000.
In August 1995, Hoosier filed an application for attorneys' fees under the
EAJA, a federal fee-shifting statute which enables parties that prevail against federal
agencies in certain contested administrative proceedings and that meet additional
requirements to obtain attorneys' fees incurred in the action unless the agency can show
that its position in the action was "substantially justified." In November 1996 the
presiding officer assigned to the EAJA proceedings issued a "recommended decision"
in which he found that although the Region was substantially justified in filing the
action and pursuing it initially, it was not substantially justified in continuing to pursue
the action after the special waste permit was issued by IDEM in September 1994.
Consequently, the presiding officer made a "partial award" of EAJA fees in the amount
of $ 16,891.35, covering attorneys fees incurred by Hoosier in the action after September
1994.
The Region appealed from the recommended decision, raising the sole issue
of whether its position in the underlying action was "substantially justified" after
September 1994.
Held: Even if an agency's position was substantially justified when the
underlying action began, a partial award of EAJA fees may nonetheless be proper if
based on a finding that the agency's position subsequently lost substantial justification.
However, in this case, the partial award of fees to Hoosier was error because the
Region's position was substantially justified throughout the course of the underlying
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HOOSIER SPLINE BROACH CORPORATION
3
action, including during the period after September 1994. Thus, the claim for EAJA
fees is denied. In particular:
Hazardous waste claims :
1. The Region was not required to settle or dismiss its hazardous waste claims
after the special waste permit was issued in September 1994, because the
Region's claims concerned waste generated between 1990 and 1992 that
Hoosier placed in the waste pile. The special waste permit, which established
that waste generated in and after September 1994 could be disposed of as
nonhazardous, did not negate the evidence of record indicating that the waste
in the waste pile was hazardous. Thus, the Region had a reasonable basis in
fact and in law for both filing and continuing to prosecute its complaint.
2. When the agency's position in an action is reasonably supported by evidence
in the record, the mere fact that the record contains some contradictory
evidence, which may, in the ultimate judgment of the trier of fact (had the
case gone to hearing), outweigh the evidence upon which the agency's
position is based, provides no basis for an award of EAJA fees. Here,
although there were facts of record that arguably supported Hoosier's view
that the waste in the waste pile was not hazardous, the Region was "entitled
to choose between permissible, though conflicting, views of the available
evidence."
Settlement Terms:
1. In EAJA cases, a trier of fact may not presume that the agency lacks
substantial justification merely because it settles a case on unfavorable terms.
Further, in EAJA cases that settle before the merits of the underlying action
have been adjudicated, the agency's reasons for settlement must be analyzed
and may play a critical role in the substantia] justification determination.
Based on these principles:
a. The presiding officer's conclusions that (1) the Region was "holding
out" for more favorable settlement terms with respect to the counts
ultimately dismissed, and (2) that in the August-September 1994
time frame Hoosier was "proposing or would have accepted"
settlement on the terms ultimately agreed to, are both erroneous, as
the record contains no evidence supporting either conclusion; and
b. the Region's reasons for the timing and terms of the settlement—
(1) that an adverse administrative enforcement decision indicated
that it would not be able to recover much of the approximately
$200,000 economic benefit component of its proposed penalty, and
(2) that a new Agency policy adopted one month before settlement
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4 HOOSIER SPLINE BROACH CORPORATION
was reached gave the Agency discretion to rcauce or eliminate civil
penalties against qualifying small businesses-provided a plausible
explanation for those events. In any event, the timing and terms of
the settlement did not diminish the Region's substantial justification
for continuing to pursue its hazardous waste claims after the special
waste permit was issued.
2. The presiding officer's conclusion that tne Region unreasonaoiy delayed
settlement was erroneous because the course of events in the underlying action
does not demonstrate either that the Region was solely responsible for any
"delay" in the proceedings, or that the "delay," if any, warranted an award of
fees. Instead, the evidence indicates that there was a mutual abatement of
case activity while the partite awaited assignment of a hearing date.
Awarding EAJA fees based solely on such a lull in case activity is improper.
Before Environmental Appeals Judges Ronald L. McCaUum,
Edward E. Reich and Kathie A. Stein.
Opinion of the Board by Judge Stein:
U.S. EPA Region V ("the Region") has appealed a
"supplemental" recommended decision1 issued on November 13,1996, by
Senior Administrative Law Judge Gerald Harwood (the "EAJA Presiding
Officer"),2 which awarded Respondent Hoosier Spline Broach ("Hoosiei")
'A presiding officer who considers a fee petition brought under the EAJA
issues a "recommended decision," which is reviewable by this Board to the same extent
and in the same manner as an initial decision. 40 C.F.R. §§ 17.27 & 22.30.
The original recommended decision in the underlying action was issued on
September 17, 1996; however, it contained no dollar award to Hoosier. The Region's
appeal from that decision, filed on October 7, 1996, was therefore dismissed by the
Board as premature. See Order Dismissing Appeal Without Prejudice (October 11,
1996).
Administrative Law Judge Frank W. Vanderheyden presided over the
underlying RCRA enforcement action until it was concluded by settlement in September
199S. After Hoosier filed its EAJA petition in August 1995, ALJ Spencer Nissen was
assigned to preside over the EAJA proceedings (Order of Designation (January 31,
1996)), but the matter was later "redesignated" to ALJ Harwood (Order of
(continued...)
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HOOSIER SPLINE BROACH CORPORATION
5
$16,891.35 in attorneys' fees and expenses under the Equal Access to
Justice Act (the "EAJA"), 5 U.S.C. § 504. The fee award was based on
the EAJA Presiding Officer's determination that the Region's position in
the underlying action was not "substantially justified" after September
1994. Recommended Decision ("Rec. Dec.") at 15-16. Accordingly, the
EAJA Presiding Officer awarded attorneys' fees and expenses incurred by
Hoosier after that date. Id.-, Supplemental Recommended Decision
("Supp. Rec. Dec.") at 1-3.
The central issue raised in this appeal is whether the EAJA
Presiding Officer eired in determining that the Region's position in the
underlying action was not substantially justified after September 1994.
For the reasons set forth below, we hold that he did err, and therefore
reverse his decision to award fees to Hoosier.
L BACKGROUND
A. Plant Operations
At its plant in Kokomo, Indiana, Hoosier manufactures steel
"broaches," which are precision cutting tools used in the airline and
automobile industries. Rec. Dec. at 1.3 Hoosier's manufacturing process
produces two different wastestreams: a "grinding sludge" from a
"Blanchard" machine; and "dry grinding dust" from machines using dust
2(...continued)
Redesignation (July 11, 1996)). Thus, we shall refer to ALJ Vanderheyden as the
"Prehearing Presiding Officer" and to ALJ Harwood as the "EAJA Presiding Officer."
3Many of the background facts are undisputed, and are summarized in the
Recommended Decision.
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6 HOOSIER SPLINE BROACH CORPORATION
collection.4 During the period Februaiy 1990 to February 1992, Hoosier
discarded its waste9 in a pile at its'Kokomo facility. Rec. Dec. at 2.
In October 1991, Hoosier applied to the Indiana Department of
Environmental Management ("IDEM") for a special waste permit to
enable it to dispose of its grinding sludge as nonhazardous waste. RX 1 6
As part of its application, Hoosier included the results of TCLP tests 7
conducted by its technical consultants on four samples taken from the
waste pile on October 17,1990, April 11,1991, September 11,1991, and
4According to one of Hoosier's consultants, the grinding siuage irom tne
Blanchard machine was grey in coloring, somewhat moist, and consisted of medium-
sized particles. Respondent's Exhibit ("RX") 21 at 1. By contrast, the dry grinding dust
was finer in particle size than the sludge from the Blanchard machine, was also grey, but
was very dry. Id.
'Counsel for Hoosier stated during oral argument that only the Blanchard
sludge was discarded in the pile, and that the dry grinding dust was stored in drums and
was not part of the pile. See Transcript of Oral Argument at 70-71 (July 22,
1997X"Oral Arg. Tr"). Although counsel for the Region did not dispute this at oral
argument, there is nothing in the record to indicate whether only Blanchard sludge was
deposited in the pile. Additionally, we note that the inspection reports indicate that
some sort of coolant, which Hoosier believed was nonhazardous, was poured over the
waste pile. Complainant's Exhibit ("CX") 1 at 2; CX 2 at 3, 5.
'Under the State of Indiana's special waste regulations, waste may qualify for
storage and disposal as a "special waste" only if it is shown to be nonhazardous. See
CX 9, Ind. Admin. Code tit. 329 r. 2-21-10. The special waste regulations provide, in
pertinent part: "If the information submitted indicates that the material proposed for
certification is a hazardous waste * * *, the request for certification shall be disapproved
and the waste shall not be disposed of at a * * * facility permitted under this article.
The waste must be disposed of in accordance with the hazardous waste rules, * • • "
Id.
'"TCLP' refers to EPA's toxicity characteristic leaching procedure, which is
a chemical test to determine whether a solid waste is toxic (and therefore hazardous) for
vcrtain specified metals. Under the TCLP, a waste is toxic for chromium if a sample or
extract of the waste contains a chromium concentration in excess of S.O milligrams per
liter (mg/l). See 40 C.F.R. § 261.24.
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HOOSIER SPLINE BROACH CORPORATION
7
September 24,1991. CX 5. The test results revealed that two of the four
samples contained concentrations of chromium in excess of regulatory
hazardous waste limits.8 Rec. Dec. at 2-3. Consequently, in January
1992, after conducting an independent statistical analysis of die TCLP
sampling results, IDEM denied Hoosier's special waste application,
concluding that the waste in the pile was hazardous:
Approval is hereby denied for disposal 6f grinding sludge
as Special Waste. This dental is based on the analysis of
chromium submitted with the application, which shows
the sludge to be a D0079 characteristic hazardous waste
according to 329IAC 3-5-5. The upper confidence level
* * * for the chromium is in excess of the hazardous
waste level.
CX 7 (Letter trom George E. Oliver, Chief, Special Projects Section,
IDEM, to Gilbert Larison, president of Hoosier Spline Broach (Jan. 9,
1992)).10 Further, although Hoosier contended that the sampling results
The chromium content of the waste pile sample taken on October 17, 1990
was 5.8 mg/1. RX9. The chromium content of the waste pile sample taken on April 11,
1991 was 10.0 mg/1. RX 11.
9 The EPA hazardous waste number for chromium is "D007." See 40 C.F.R.
§261.24.
>0A hazardous waste determination is not made based upon the number of
passes and foils of the samples of waste submitted for testing. To determine whether
a solid waste qualified for disposal as "special waste," the special waste rules required
IDEM to follow the test methods and procedures set forth in an EPA guidance
document, SW 846, "Test Methods for Evaluating Solid Waste, Physical/Chemical
Methods." See CX 9, (lnd. Admin. Code tit 329, r. 2-21-14(c): "All waste sampling
and analyses required or requested pursuant to these rules must be performed in
accordance with the applicable procedures required by 329 IAC 3-6-5 through 329 IAC
3-6-7 * * see also lnd. Admin. Code tiL 329, r. 3-6-6(d) (noting thai procedures for
analyzing extract of waste for chromium were those in SW-846). EPA's SW-846
provided, in pertinent part: "The contaminant of concern is not considered to be present
in the waste at a hazardous level if the upper limit of the CI [confidence interval] is less
(continued...)
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8
HOOSIER SPLINE BROACH CORPORATION
were inaccurate and unreliable due to quality control problems, 11 IDEM
reviewed the quality control data submitted by Hoosier to support those
claims and concluded that the quality control was "ok" and that the waste
"will have to be handled as hazardous waste." RX 3.
On or about February 21, 1992, IDEM conducted a RCRA
compliance inspection of Hoosier's Kokomo plant, during which IDEM
observed and photographed the waste pile. Oral Arg.Tr. at 23. The very
next day, Hoosier dismantled the pile by placing its contents in eighty-five
55-gallon drums, marking the drums with hazardous waste stickers, and
shipping them offsite for disposal as hazardous waste. Rec. Dec. at 3.
After the inspection, Hoosier ceased its practice of storing its waste in a
waste pile, and continued to manifest and ship the waste offsite for
disposal as a hazardous waste. Answer to EAJA Application for Award
of Fees and Expenses Under Equal Access to Justice Act at 7 (Dec. IS,
1995X"EAJA Ans."); Oral Arg. Tr. at 29-30.12
During the period July 1992 to December 1993, Hoosier
conducted TCLP tests on seventeen additional samples of its waste. See
'"(...continued)
than the applicable RT [regulatory threshold]. Otherwise, the opposite conclusion is
reached." SW 846, Chapter Nine-3, note a (emphasis added).
IDEM's statistical analysis worksheet showed that the upper limit CI for the
four waste pile samples was 8.14 mg/1. CX 7. Since the upper limit CI was in excess
of the S.O mg/1 RT for chromium, the waste was determined to be hazardous. Id.
"See. e.g., RX 3 (IDEM worksheet reflecting Hoosier's belief that there were
quality control problems); RX 4 (letter from Hoosier's consultant attempting to allay
Hoosier's quality control concerns); and Answer to Complaint and Request for Hearing
at 10 (August 31, i 993X"Ans "Xalleging laboratory analyses of samples were inaccurate
due to improper quality control, among other things).
"At oral argument counsel for the Region stated, and counsel for Hoosier did
hot dispute, that Hoosier continued to barrel, ship and manifest its grinding sludge for
disposal as a hazardous waste until September 1994, when it obtained a special waste
permit from IDEM. Oral Arg. Tr. at 30.
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HOOSIER SPLINE BROACH CORPORATION
9
RX 9-19, and 21. Since the waste pile had been dismantled, the additional
samples were collected at the point of generation—that is, from Hoosier's
grinding machines. Id. Of the seventeen additional samples, two collected
in July 1992 showed chromium levels of 7.7 mg/1 and 48.1 mg/1. RX 13,
15. A sample collected on May 12,1993 is reported to have contained a
TCLP chromium level of "27.8 ppm." RX 16.13 The chromium content
for the remaining fourteen samples was below the S.O mg/1 regulatory
threshold. RX 14, 15, 17-19 & 21*.14
R Enforcement Action
1. Pleadings
Based on the test results from the waste pile samples, the IDEM
deteim ination that the waste was hazardous, and the IDEM inspection, the
Region filed a RCRA enforcement action against Hoosier in June 1993.
The four-count complaint alleged violations in connection with Hoosier's
failure to identify and manage the waste in the pile 13 as a hazardous waste.
"Since tne results ior this sample were not reported in milligrams per liter,
the EAJA Presiding Officer ignored this sample in his analysis. Rec. Dec. at 14 n.42.
However, a "ppm" reading is equivalent to milligrams per liter, which means the sample
contained a chromium level of 27.8 mg/1, which was well above the 5.0 mg/1 regulatory
threshold.
l4Notably, of the two July 1992 samples which contained levels of chromium
above the S.O mg/1 regulatory threshold, at least one was from the Blanchard machine.
See RX 15 (showing chromium content of 48.1 mg/1). We cannot determine whether the
other sample, taken on July 7, 1992, was also Blanchard sludge, as it is identified
merely as "sludge grab." RX 13 (showing chromium content of 7.7 mg/1). The May 12,
1993 sample, which had a chromium content of 27.8 mg/1, is identified only as
"grinding sludge."
,sThe complaint refers to Hoosier's waste as "grinding baghouse dust."
Although at oral argument Hoosier claimed that this description m isidentified the waste
in the pile (Oral Arg. Tr. at 71), Hoosier accepted this description in its answer to the
original complaint See Answer to Complaint and Request for Hearing at ^ 11 (August
31, 1993X"Ans."X"Respondent admits that grinding baghouse dust generated by
(continued...)
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10 HOOSIER SPLINE BROACH CORPORATION
Specifically, count one of the complaint alleged violations of 40 C.hn. 9
262.11 and RCRA § 3010 during the period September 1990 to May
1992, in connection with Hoosier's alleged failure to make a timely
hazardous waste determination, to properly notify EPA of regulated
hazardous waste activities, and to obtain an EPA identification number.
Count two alleged violations of 40 C.F.R. § 270.10 and RCRA § 3005
during that same period, in connection with Hoosier's alleged failure to
apply for or obtain interim status ora RCRA permit covering storage and
disposal of the hazardous waste generated at its facility. Count three
alleged continuing violations of 40 C.F.R. part 265, subparts B, C, D, E,
G, and H from September 1990 onward for Hoosier's alleged failure to
comply with certain operating standards applicable to facilities which
treat, store or dispose of hazardous waste.16 Count four alleged violations
of 40 C.F.R. part 265, subpart L,17 during the period September 1990 to
February 1992, for Hoosier's alleged failure to comply with standards
pertaining to waste Dile management
"(...continued)
Respondent was collected in a pile at Respondent's facility * * *."). In any event, the
parties knew and understood that the term "grinding baghouse dust" referred to the
waste in the waste pile. See, e.g.. Oral. Arg. Tr. at 28*29 (counsel for the Region
admitting to being confused about source of waste in pile); id. at 66-67,70-71 (counsel
for Hoosier pointing out that the complaint misidentified the source of the waste in the
pile, but acknowledging that the waste in the pile was the focus of the complaint).
''Subpart B covers general facility standards including requirements for
notices that must be submitted by the facility operators to the Regional Administrator,
and waste analyses which must be performed by operators prior to acceptance of waste
for storage. Subpart C covers maintenance, testing and security requirements whicb
must be followed at treatment, storage and disposal ("TSD") facilities. Subpart D sets
forth the requirements for contingency and emergency plans which apply to all TSD
facilities. Subpart E sets forth the record keeping and reporting requirements for TSD
facilities. Subpart G sets forth the closure and post-closure requirements for TSD
facilities. Subpart H covers the financial requirements which TSD facilities must satisfy
prior to closure.
"Subpart L covers requirements for the management of waste piles.
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HOOSIER SPLINE BROACH CORPORATION 11
The complaint also contained a compliance order requiring
Hoosier to: (1) determine if each solid waste generated at the Kokomo
facility was a hazardous waste; (2) cease all hazardous waste treatment,
storage or disposal activities which required a RCRA permit and for
which neither a permit nor interim status had been obtained; (3) comply
with die standards applicable to owners and operators of hazardous waste
piles; and (4) submit a closure, and if necessary, post-closure plan for the
waste pile. The complaint recommended a civil penalty of $825,509.00,
computed according to the applicable penalty policy. See Attachment 1
to Complaint and Proposed Compliance Order (June 30,
1993X"Compl").11
2. Prehearing Activities
Following the filing of Hoosier's answer in August 1993, the
parties made several attempts to settle the case. The first such attempt
was made at an informal settlement conference on December 13, 1993.
Rec. Dec. at 12. Before the settlement conference, Hoosier provided the
Region with the TCLP results from the four waste pile samples, as well
as the results from the seventeen additional samples taken after the waste
pile was dismantled. Respondent's Reply to EAJA Answer ("Reply to
EAJA Ans.") at 8 n.2. After the settlement conference, the Region noted
in a December 17,1993 joint status report that it was "reconsidering" the
allegations in the complaint and the calculation of the penalty, that
Hoosier had agreed to provide additional documentation regarding the
samples, and that the parties would continue to explore the possibility of
settlement by telephone call or meeting.
In January 1994, the parties requested and were granted an
extension of time to file their prehearing exchanges in order to continue
"According to the Attachment, the $825,509 penalty amount was comprised
of: (1) a gravity-based penalty of $627,000, made up of $90,000 for the first day of the
Violations, plus $537,000 for "additional days of violations"; and (2) an economic
benefit component of $198,509. See CX 8 at 12-25 (computation of gravity-based
penalty); id. at 27-30 (computation of economic benefit component of penalty).
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12 HOOSIER SPLINE BROACH CORPORATION
settlement discussions. Letter from Marcie R. Horowitz, Counsel for
Respondent, to Frank W. Vanderheyden, Administrative Law Judge
(January 25,1994). A further extension of time was granted in February
1994, to enable the Region to complete and present to Hoosier a settlement
proposal then under "management review." Letter from John H. Tielsch,
Assistant Regional Counsel, to Frank W. Vanderheyden, Administrative
Law Judge (Februaiy 24,1994). The parties filed prehearing exchanges
in March 1994, exchanged discovery requests in April 1994, and
continued to explore settlement of the case. Joint Status Report (May 25,
1994). In the May 25, 1994 status report, counsel for the Region
reported: "Complainant continues to reconsider both the allegations of the
complaint and the calculation of the penalty in light ofthe new information
received. Complainant intends to present a new settlement proposal with
modifications to the complaint and the penalty within two weeks. In
addition, settlement discussions may be impacted on conclusion of
Complainant's analysis regarding Respondent's claim of inability to pay
the penalty." Counsel for the Region included a substantially similar
statement in the parties' July 26, 1994 status report
On August 10,1994, the Region mailed a settlement proposal to
Hoosier. Status Report at 1 (Sept 23,1994).19 Sometime in September
1994, while the Region's settlement proposal was under consideration,
IDEM granted Hoosier a special waste permit Application for Award of
Fees and Expenses Under Equal Access to Justice Act at 14 (Aug. 21,
1995X"EAJA App."). The record does not contain a copy of the
September 1994 IDEM permit, nor of the application 20 or sampling results
provided to IDEM in connection therewith. However, both parties
represent in.their EAJA filings that the permit was issued based on a new
application and "new data." EAJA Ans. at 8; Reply to EAJA Ans. at 8.
"Neither this settlement proposal, nor any other settlement offers or
negotiations exchanged between the parties, are included in the record.
®We do note, however, that the billing statements submitted in connection
with Hoosier's EAJA application appear to indicate that the application for the 1994
Special waste permit was prepared and submitted sometime in the June 1994 to July
1994 time frame. See EAJA App. Ex. 2 (time and expense reports for June and July
1994).
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HOOSEER SPLINE BROACH CORPORATION 13
There is no mention of or reference to the special waste permit at all in the
record of the underlying RCRA proceeding.21
Hoosier's counsel responded to the Region's settlement proposal
in a September 23, 1994 telephone conversation, in which she informed
counsel that the parties were quite far apart and that the matter should be
scheduled for hearing. Status Report at 1 (Sept 23,1994). Between the
months of September 1994 and the end of May 1995, the case was
essentially inactive. This inactivity is evidenced by die absence of any
documentation in the administrative record of the enforcement action for
this period, with the single exceptidn of a January 25,1995 status report, 22
and is borne out by Hoosier's low attorney billings during this period.
Specifically, it appears from the detailed time and expense statements filed
with Hoosier's EAJA petition that during the period September 1994 to
May 1995, Hoosier's attorneys billed only 1.5 hours in this case. See
EAJA App. Ex. 2 (Attachment 1-monthly billing records).
3. Settlement
On June 12,1995, the Prehearing Presiding Officer scheduled the
case for hearing on July 26, 1995. Prehearing Conference Report and
Orders (June 12, 1995). On July 10,1995, less than one month later, the
parties notified the Prehearing Presiding Officer that the case was settled
"in principle, pending an amended complaint" Order Canceling Hearing
(July 13, 1995).23 Shortly thereafter, in accordance with the settlement
agreement reached between the parties, the Region dismissed with
prejudice counts two through four of its original complaint and filed an
J'For a more detailed description of the parties' references to the special waste
permit, see infra Part II.A.
HIn this status report, the Region informed the Prehearing Presiding Officer
that the parties wished to proceed to hearing, as it appeared that further negotiations
"would not be productive." Status Report at 1 (Jan. 25, 1995).
"The settlement agreement was not fully executed until September 29,1995.
See Consent Agreement and Final Order at 10 (Sept. 29, 1995)("CAFO").
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14 HOOSIER SPLINE BROACH CORPORATION
amended complaint Rec. Dec. at 13. The amended complaint consisted
of a modified count one, which alleged that Hoosier had failed to make a
timely hazardous waste determination of its Blanchard sludge as required
under 40 C.F.R. § 262.11, a modified compliance order, which required
Hoosier to make a hazardous waste determination within a certain time
frame, and a proposed penalty of $3,000.24
C. EAJA Proceedings
1. Pleadings
Hoosier filed its verified EAJA petition in August 1995, seeking
to recover in excess of $67,000 of the attorneys' fees allegedly incurred in
defense ofthe enforcement action. See EAJA App.at4,14. In its petition
Hoosier contended that the Region's filing and prosecution of the
enforcement action lacked substantial justification, chiefly because the
data upon which the Region based its hazardous waste claims were
unreliable and contained errors which should have been apparent to the
Region before the complaint was filed. Id. at 3. Further, Hoosier
contended that in December 1993, when the parties first made efforts to
settle the case, Hoosier had presented EPA with "new, compelling data,"
consisting of "carefully documented analyses of [Hoosier's] waste" which
"confirmed unambiguously" that the waste was not hazardous for
chromium. Id. at 13. Hoosier pointed out that it had also advised the
Region that, according to Hoosier's investigation into the "RCRA status"
of similar facilities, no other broach manufacturer had been identified as
a generator of chromium hazardous waste. Id. Additionally, Hoosier
stated that it had immediately informed the Region when it succeeded in
having its waste certified by IDEM as a nonhazardous, special waste in
September 1994. Id. Despite all of this, the Region, in Hoosier's view,
"remained unmoved, and [Hoosier] was forced to continue incurring
"From the statements made by counsel for Hoosier at oral argument, which
were not disputed by counsel for the Region, we gather that the amended complaint
focused only on Blanchard sludge because the Region had been informed that the waste
pile contained only Blanchard sludge. Oral Arg. Tr. at 70-71.
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HOOSIER SPLINE BROACH CORPORATION 15
significant attorneys' fees to prepare its defense." Id. at 14. Hoosier
noted that it was not until four weeks before the hearing, when Hoosier
"pleaded one last time for EPA to reconsider its position," that the Region
finally relented. According to Hoosier, the Region's willingness at that
time to voluntarily dismiss counts two, three, and four of the complaint,
and to "vastly reduce[] the scope of count I," demonstrated that the
Region's position in and pursuit of the case lacked substantial
justification. Id.23
To demonstrate that its filing of the action was well-founded, the
Region's answer to the petition highlighted several facts which it claimed
indicated that the waste produced between 1990 and 1992 was hazardous,
such as the two waste pile samples showing levels of chromium in excess
of the 5.0 mg/1 regulatory threshold, IDEM's 1992 determination that the
waste was hazardous for chromium, and Hoosier's shipment of die waste
for disposal at a hazardous waste landfill. See EAJA Ans. at 6-7.
Further, the Region contended that evidence which developed as the case
progressed, such as levels of chromium above the regulatory threshold
reported in samples taken after the waste pile was dismantled,
substantiated the Region's continued prosecution of the case. Id. at 8.26
Additionally, to refute Hoosier's claim that the terms of settlement
indicated that the Region lacked justification for continuing to pursue the
action, the Region offered the following reasons for the terms and timing
of the settlement: (1) that an administrative enforcement decision issued
in December 1994 diminished the likelihood that EPA would be able to
"Hoosier's EAJA petition contained only two references to the special waste
permit, and those references merely noted that the permit had been issued, that the
Region had been informed of that fact, and that despite this knowledge the Region
refused to change its settlement position. See EAJA App. at 5, 8.
"The Region also acknowledged that the special waste permit had been issued
In September 1994. EAJA Ans. at 8,11,12. However, in the Region's view, the permit
established only that waste generated in and after September 1994 could be disposed of
as nonhazardous. Id. at 11; Oral Arg. Tr. at 11-12. See infra note 44.
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16 HOOSDER SPLINE BROACH CORPORATION
recover substantial penalties for the economic benefit of a company's
noncompliance with TSD requirements;27 and (2) that in June 1995, in
response to an April 1995 executive order from President Clinton urging
government agencies to be more "flexible" in dealing with small
businesses,2* the Agency had issued a new small business policy which,
among other things, allowed RCRA penalties against small businesses to
be reduced or completely eliminated in appropriate cases.29 EAJA Ans.
at 12-13. The Region also indicated that it dismissed the hazardous waste
claims in recognition of the feet that EPA had achieved its goals in
bringing the enforcement action:
In this settlement [HoosierJ has agreed to make
a new hazardous waste determination satisfactory to
EPA and to pay a penalty. EPA therefore has achieved
its goals in bringing the suit, namely, deterring further
RCRA violations by imposing a civil penalty and
assuring that [Hoosier] correctly identified and handled
its industrial waste streams.
"The Region refers to In re Harmon Electronics, Dkt No. RCRA-VII-91-H-
0037 (ALJ, December 12, 1994), 1994 RCRA LEXIS 31 (December 12, 1994). In
Harmon, the administrative taw judge reduced the economic benefit component of the
Agency's recommended penalty from $618,914 to $6,072, holding that the economic
benefit was required to be calculated based on the cheapest mode of compliance. Id.,
slip op. at 64-65, 1994 RCRA LEXIS at *41-*43. Although respondent Harmon
subsequently appealed the decision to this Board on other grounds, (see In re Harmon
Electronics, RCRA (3008) Appeal No. 94-4 (EAB, March 24,1997), 7 E.A.D. ), the
Agency did not appeal the reduction in the economic benefit component of the penalty.
aSee Regulatory Reform-Waiver of Penalties and Reduction of Reports
Memorandum for [directors of 27 federal agencies], 60 Fed. Reg. 20621 (April 26,
1995X"Executive Memorandum''). Under the Executive Memorandum, each federal
igency was required to submit by June 15, 1995, a plan showing how it would
implement the policies set forth in the Executive Memorandum. Id. at 20622.
KSee Interim Policy on Compliance Incentives for Small Business (June
I995)("lnterim Policy"). See infra Part II.B.2 for a more detailed discussion of the
\gency's Interim Policy.
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HOOSIER SPLINE BROACH CORPORATION 17
Id. at 4.30
2. Recommended Decision
In his September 17, 1996 recommended decision,31 the EAJA
Presiding Officer rejected Hoosier's arguments about the unreliability of
the initial sampling results, and determined that "the feet that the waste
initially tested hazardous, and continued to test hazardous on some of the
early subsequent tests" provided adequate support for the Region's filing
and initial prosecution of its enforcement action. Rec. Dec. at 14. He
therefore concluded that the Region's position in the action was
substantially justified at the outset Id.
"Hoosier contended in its EAJA petition that it was a "prevailing party." See
EAJA App. at 6-8. The Region, on the other hand, alleged in its answer to the petition
that Hoosier was not a "prevailing party" for purposes of the EAJA. See EAJA Ans. at
2-4. The EAJA Presiding Officer found in favor of Hoosier on this issue (Rec. Dec. at
6-7), and the Region did not appeal this finding.
Since the Region did not appeal this issue, we do not decide whether Hoosier
was a "prevailing party" under the EAJA. However, in declining to address this issue,
we do not suggest that the "prevailing party" requirement may be ignored in determining
whether a party is entitled to the payment of EAJA fees; indeed, the statute provides that
"prevailing party" status is one of several threshold prerequisites to an award of fees
under the EAJA. See 5 U.S.C. § 504(a)(1), (2). We further note that the issue of
"prevailing party" status in the context of this case is a complicated one, and that the
EAJA Presiding Officer's determination that Hoosier was a "prevailing party" is not
beyond dispute. Cf. In re Pivirotto, 3 E.A.D. 96, 100 (CJO 1990)(defendant who
admitted TSCA violations and paid a penalty in settlement thereof was not a "prevailing
party" under the EAJA). However, in light of our conclusion on the substantial
justification question, which was the sole issue raised to us on appeal, a finding that
Hoosier was not a "prevailing party" would not, in any event, change our conclusion that
Hoosier is not entitled to an award of EAJA fees. For the foregoing reasons, we do not
address the "prevailing party" issue.
3lHoosier's EAJA petition was decided by the EAJA Presiding Officer based
on the written record and EAJA tilings only, without any evidentiary hearing or oral
argument. See 40 C.F.R. § 17.25(b)(allowing "adjudicative officer" deciding EAJA
petition to permit additional filings or proceedings, such as an evidentiary hearing or
oral argument).
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18 HOOSIER SPLINE BROACH CORPORATION
The EAJA Presiding Officer thai concluded that the special waste
permit was a significant event that marked a turning point in the action: "1
find, however, that the EPA's case became considerably weaker once
IDEM had approved the waste for disposal as nonhazardous." Id. at 15.
Based on this reasoning, the EAJA Presiding Officer concluded that the
Region should have settled the case soon after issuance of the special
waste permit Id. at 15-16. The EAJA Presiding Officer rejected the
Region's explanation for why the case had not settled in that time frame,
because, in his view, neither the ALJ's Harmon decision nor the
promulgation of the Agency's new policy on small businesses adequately
explained why the Region had dismissed its hazardous waste claims. Id.
at 16. The EAJA Presiding Officer then presumed that the Region had
unreasonably delayed settlement in the hopes of achieving more favorable
settlement terms, and therefore concluded, apparently based on the
perceived significance of the special waste permit and his presumption that
the Region had unreasonably delayed settling the case after it was issued,
that the Region lacked substantial justification after September 1994:
I am assuming that Respondent in September 1994, was
either proposing or would have accepted the settlement
relating to Count I which was incorporated in the
amended complaint, and that it was because the EPA
either refused to dismiss the other counts with prejudice
or was simply holding out in the expectation of a
settlement more favorable to its position on those Counts
that the final settlement was not reached until September
1995. I find that the EPA was not substantially justified
in delaying settlement for either reason. Respondent,
accordingly, is entitled to fees and expenses incurred
after September 1994.
Id.
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HOOSIER SPLINE BROACH CORPORATION 19
3. Appeal
Following issuance of the EAJA Presiding Officer's
November 13, 1996 supplemental recommended decision,32 the Region
filed the instant appeal, contending that the EAJA Presiding Officer's
substantial justification determination was improperly based on matters
outside of the record and on "impermissible inferences from the terms of
settlement," and further, did not consider the record as a whole. Appeal
from a Recommended and Supplemental Recommended Decision by
Administrative Law Judge Harwood at 3 (Dec. 3, 1996X"Reg. App.
Br.").33 In its reply brief, Hoosier claims that the award was based on an
examination of the record as a whole, and that the Presiding Officer's
inferences regarding settlement were permissible, indeed inescapable, from
the evidence contained in the record. Reply Br. at 10,15. After reviewing
the parties' appellate briefs, we requested supplemental briefing on issues
relating to the extent to which settlement evidence may properly be
considered in making an EAJA award, and the propriety of a "partial" fee
award covering the portion of an action where the government's position
is alleged to lack substantial justification. See Order Scheduling Oral
Argument (May 16, 1997). Following the parties' submission of
52In this decision the EAJA Presiding Officer specified the $16,891.35 award
to Hoosier, after reviewing Hoosier's modified declaration in support of its fees which
reflected only the fees incurred alter September 1994, which were computed utilizing
the $75 per hour attorney billing rate prescribed by the statute and regulations. See 5
U.S.C. § 504(b)(2); 40 C.F.R. § 17.7(b)(2).
33In its opening brief on appeal the Region also claimed that the award was
error because there was a split among the federal circuit courts of appeal as to "whether
fees may be apportioned and awarded for [discrete] segments of the litigation on which
the government's position is not substantially justified." Reg. App. Br. at 10. However,
in its supplemental brief and also at oral argument, the Region appears to have
abandoned its challenge to the award on this basis. See, e.g., Supplemental Brief of
U.S. EPA at 22 (June 18, 1997X"Reg. Supp. Br.")("It is appropriate—and not
inconsistent with either EAJA or the Jean decision [INS v. Jean, 496 U.S. 154 (1990)]-
to award a party only those fees relating to the portion of the action in which they
prevailed and the government was not substantially justified.").
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20 HOOSIER SPLINE BROACH CORPORATION
supplemental briefs, the board heard oral argument on these issues on July
22,1997.
D. The EAJA
The Equal Access to Justice Act ("the EAJA") is a fee-shifting
statute that enables private parties who prevail against the government in
certain types of contested proceedings to recover attorneys' fees and
expenses when the government's position in the proceeding is not
"substantially justified." See 1980 Equal Access to Justice Act, Pub. L.
No. 96-481,94 Stat 2325.14 The broad purpose of the statute is to ensure
that private litigants will not be'deterred from challenging questionable
government decisions due to the burden and expense of litigating against
the government As Congress explained:
[B]y allowing an award of reasonable fees and expenses
against the Government when the action is not
substantially justified, [the EAIA] provides individuals
an effective legal or administrative remedy where none
now exists. By allowing a decision to contest
Government action to be based on the merits of the case
rather than the cost of litigating, [the EAJA] helps assure
that administrative decisions reflect informed
deliberation. In so doing, fee-shifting becomes an
instrument for curbing excessive regulation and the
unreasonable exercise of Government authority.
"The EAJA is codified under two statutes covering two distinct types of
proceedings: 5 U.S.C. § 504 ei seq., which governs adversary administrative
adjudications; and 28 U.S.C. § 2412 etseq., which governs civil, non-tort, court actions.
Although case law interpreting the EAJA has developed under both statutes, onlv 5
U.S.C. § 504, relating to administrative adjudications, is at issue in this appeal.
The 1980 EAJA became effective on October 1, 1981, and applied to all
adversary adjudications and civil actions pending on or commenced after that date. Pub.
L. No. 96-481, § 208,94 Stat. 2330 (1980).
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HOOSIER SPLINE BROACH CORPORATION 21
H.R. Rep. No. 1418, 96th Cong., 2d Sess., at 12 (1980), reprinted in
1980 U.S.C.C.A.N. 4984,4991 ("1980 House Report").
Under 5 U.S.C. § 504, a party that prevails in an adversary
adjudication against an administrative agency and that satisfies certain
threshold requirements relating to size and income is entitled to fees and
expenses incurred in that adjudication unless the federal agency can show
that its position in the action was "substantially justified" or that special
circumstances make the award unjust 5 U.S.C. § 504(aXl). Although
the private litigant has the burden of proving thai it is otherwise entitled
to an award of fees (i.e., that it is a prevailing party, meets the size and
income thresholds and has timely filed its EAJA application),33 the
government bears the burden of proof on the issue of substantial
justification. See 1980 House Report at 10-11 ("The Committee believes
that it is far easier for the Government, which has control of the evidence,
to prove the reasonableness of its action than it is for a private party to
marshal the facts to prove that the Government was unreasonable."). See
also Green v. Bowen, 877 F.2d 204,207 (2d Cir. 1989) and In re Biddle
Sawyer Corp., 4 E.A.D. 912,935 (EAB 1993Xciting Green v. Bowen).
"In order to demonstrate entitlement to an EAJA award in this case, Hoosier
was required to show that at the time the underlying action was filed its net worth did
not exceed $7 million, and it employed 500 or fewer employees. 5 U.S.C. §
504(b)(lXBX'985). Hoosier averred in its verified EAJA application that it met these
threshold criteria (see EAJA App. at 8), and the Region did not challenge this.
Part 17 of 40 C.F.R. makes the EAJA applicable to EPA enforcement
proceedings. Although some of the Agency's regulations relating to the threshold
eligibility requirements have not been updated to reflect the new size and income
requirements created by the 1985 amendments to the statute, such as the $7 million
ceiling mentioned in the preceding paragraph, (see, e.g., 40 C.F.R. § 17.5
(1997)(erroneously stating that businesses must have net worth of less than $5 million
in order to be eligible for EAJA award)), these discrepancies appear to be inadvertent
and do not affect the overall applicability of part 17 to EAJA claims brought under the
1985"EAJA statute, such as the one at issue here. See In re Biddle Sawyer Corp., 4
E.A.D. 912, 924 n.39 (EAB 1993).
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22 HOOS1ER SPLINE BROACH CORPORATION
It is now well-settled that the term "substantially justified" means
that the government's position in the adjudication must have a "reasonable
basis both in law and fact" See, e.g., Pierce v. Underwood, 487 U.S.
SS2, 568 (1988X"substantial justification" means "justified in substance
or in the main," which is no different from having a reasonable basis in
law and feet); U.S. v. Rubin, 97 FJd 373, 375 (9th Cir.
1996Xgovemment position is substantially justified if it has a reasonable
basis both in law and in fact); Roanoke River Basin Ass 'n v. Hudson, 991
F2d 132,137 n.4 (4th Cir. 1993Xciting Pierce)', and Kuhns v. Board of
Governors of the Federal Reserve System, 930 F.2d 39, 43 (D.C. Cir.
1991Xciting Pierce).*
Further, the statutory requirement that the substantial justification
determination be based on the "administrative record, as a whole, which
is made in the adversary adjudication for which fees and other expenses
are sought" (5 U.S.C. § 504(aXl) (emphasis added)), has been
consistently interpreted to mean that a trier of fact must evaluate the
government's position in its entirety, and may not focus exclusively on the
government's position or conduct during discrete stages of the case. 37
"Initially, there was a split among the federal circuit courts of appeal as to the
meaning of the term "substantial justification." Although a majority of circuits held that
the government needed only to show that its position was "reasonable in both law and
feet" (see, e.g.. U.S. v. Yoffe, 775 F.2d 447, 449 (1st Cir. 1985); Hanover Building
Materials, Inc. v. Guiffrida, 748 F.2d 1011,1015 (5th Cir. 1984); Foster v. Tourtellote,
704 F.2d 1109, 1112 (9th Cir. 1983)), the D.C. Circuit insisted that the government had
to show something "slightly more" than reasonableness in order to avoid an award of
fees (see, e.g.. Spencer v. NLRB, 712 F.2d 539, 558 (D.C. Cir. 1983)). The Supreme
Court resolved this dispute in Pierce, confirming that the government needed only to
show that its position was reasonable in law and fact. 487 U.S. at 568.
"The 1985 amendments which reenacted and also substantially revised the
statute added the sentence "Whether or not the position of the agency was substantially
justified shall be determined on the basis of the administrative record, as a whole, which
is made in the adversary adjudication for which fees and other expenses are sought"
See Pub. L. No. 99-80, 99 Stat 183 (codified as amended at 5 U.S.C. § 504 and at 28
U.S.C. § 2412). The 1985 amendments, among other things, clarified the meaning of
the phrase "position of the government" in the context of the substantial justification
(continued...)
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HOOSIER SPLINE BROACH CORPORATION 23
See, e.g., INS v. Jean, 496 U.S. 154,161-62 (1990X"[T]he EAJA • • *
favors treating a case as an inclusive whole, rather than as atomized line-
items."); Rubin, 97 F.3d at 375 (citing Jean); Roanoke River, 991 F.2d
at 139 (same); and Kuhns, 930 F.2d at 44 (same).
n. DISCUSSION
We now turn to the issue before us in this appeal: was the
Presiding Officer's determination that the Agency lacked substantia]
justification after September 1994 error? We review a presiding officer's
recommended decision on EAJA matters de novo, and evaluate the issues
raised on appeal to determine whether the factual findings are supported
by the record and the legal conclusions are consistent with case law or
other applicable legal authority. See Biddle Sawyer Corp., 4 E.A.D. at
913 n.2.38
"(.••continued)
analysis. Prior to the amendments, courts had construed the phrase "position of the
government" to be confined to the government's position in the litigation only,
excluding the government agency's pre-litigation acts or omissions. See H.R. Report
No. 120,99th Cong., 1st Sess., pt. 1, at 11 (1985), reprinted in 1985 U.S.C.C.A.N 132,
140 ("1985 House Report"). The 1985 amendments thus make explicit that the phrase
"position of the agency" includes the government's position in the adversary
adjudication, as well as any acts or omissions of the agency preceding the filing of the
action which cause or form the basis of the adjudication. 1985 House Report at 9, 11.
The EAJA was substantially revised again in 1996. See Pub. L. No. 104-121,
110 Stat. 862 (1996). However, those amendments do not affect this case, as they apply
only to cases commenced on or after March 29, 1996. Id. § 233, 110 Stat. 864.
"Although a federal district court's EAJA determinations are reviewed by the
federal circuit courts of appeal under an abuse of discretion standard (see, e.g.. Pierce
v. Underwood, 487 U.S. 552, 559(1988)), an EAJA determination made by a presiding
officer is treated, for purposes of review by this Board, the same as an initial decision,
which is subject to de novo review. See Biddle Sawyer, 4 E.A.D. at 913 n.2 ("A
'recommended decision' on attorney's fees is treated as an 'initial decision' for purposes
of appeals from EAJA decisions under 40 C.F.R. Part 22."). See also 40 C.F.R. § 17.27
(providing that a recommended decision is reviewed in accordance with Agency
procedures for the type of substantive proceeding involved); 40 C.F.R. § 22.31 (Board's
(continued...)
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24 HOOSIER SPLINE BROACH CORPORATION
rhe fact that the underlying case settled Deiore hearing adds a
layer of complexity to our analysis.39 In particular, it is more difficult for
us to evaluate the reasonableness of the Region's position in the
enforcement action than it would be if the case had been tried, since die
alleged violations were never adjudicated and as a result, evidence bearing
on the strength or weakness of the Region's claims was not as fully
developed as it might have been if a hearing had been held.
Additionally, in this case we consider for the first time the
correctness of a partial award of EAJA fees, based on a finding that the
agency's position in the underlying proceeding lacked substantial
justification after a particular point in die case. Prevailing case authorities
...continued)
review of penalty adjudications, including RCRA proceedings, is de novo); and In re
Port of Oakland and Great Lakes Dredge and Dock Company, 4 E. A.D. 170,184 (EAB
!992XBoard conducts de novo review of presiding officer's factual and legal findings).
Although this Board typically gives some deference to a presiding officer's
factual findings with respect to findings where credibility of witnesses is at issue (see
In re Ocean States Asbestos Removal, Inc., CAA Appeal Nos. 97-2 & 95-5, slip pp. at
11-12 (EAB, March 13,1998), 7 E.A.D. ), we do so where the presiding officer has
superior knowledge of or familiarity with witnesses or evidence. See, e.g., Port of
Oakland. 4 E.A.D. at 193 n.59 (noting that Board will give weight to a presiding
officer's factual findings where presiding officer had the opportunity to evaluate witness
credibility). Thus, we decline to accord any such deference to the EAJA Presiding
Officer's factual findings in this case, since there was no hearing or other proceeding
where evidence was introduced or witnesses testified, and moreover, the EAJA
Presiding Officer was assigned only after the EAJA proceedings were well under way
(see supra note 2), and had no role in the underlying proceedings.
"We note that the Agency's Chiet JudiciaJ officer has evaluated an EAJA case
in such a posture. See In re Pivirotto, 3 E.A.D. 96 (CJO 1990Xaflfinning denial of fees
in TSCA penalty case where respondent was not a "prevailing party" as defined under
the EAJA, and where Agency's position throughout settlement negotiations was
substantially justified because respondents had admitted the violations, and the penalty
sought was "presumptively substantially justified").
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HOOSIER SPLINE BROACH CORPORATION 25
recognize that such partial fee awards are proper,40 so long as the
government's conduct is examined "as a whole." 41
Since the EAJA Presiding Officer found that the Region's position
in the underlying action was substantially justified from the time the action
was commenced in June 1993 up until September 1994 and Hoosier did
not appeal this finding, in order to avoid an award of fees the Region has
the burden of proving that its conduct in the case as a whole, including its
continued prosecution of the case after September 1994, had a reasonable
basis both in fact and in law. Biddle Sawyer, 4 E.A.D. at 935
(government has burden of proof on issue of substantial justification);
Pierce, 487 U.S. at 568 (term "substantially justified" means having a
reasonable basis in law and fact). Although we deal here with a rather
abbreviated administrative record, we are nonetheless persuaded, for the
reasons discussed below, that the Region's conduct throughout the
underlying proceeding, including the period from September 1994 until the
case settled in July 1995, was substantially justified. We shall now
"See, e.g.. U.S. v. Rubin, 97 F.3d 373, 375.(9th Cir. 1996)(fees may be
awarded for "unjustified portion of [government's] conduct"); Quality C. A.T.V., Inc. v.
NLRB, 969 F.2d 541, 545-546 (7th Cir. 1992)(fees awarded for post-trial portion of
action, where government's defense was found to be "unsupportable"); Leeward v. Auto
Wreckers, Inc., 841 F.2d 1143,1149 (D.C. Cir. 1988Xfees awarded from conclusion of
hearing onward, since at that point government lost "protective mantle of'substantial
justification'"); Public Citizens Health Research Group v. Young. 909 F.2d 546, 552
(D.C. Cir. 1990)(case remanded for finding as to whether government's position in
latter portion of action was substantially justified); and Porter v. Heckler, 780 F.2d 920,
925 (11th Cir.- 1986Xfees awarded where government's position was initially justified
but became unjustified when government "needlessly delayed resolving the case on the
merits" through extensive litigation involving four appeals).
i[See, e.g., Jean, 496 U.S. at 161-62 (case should be viewed as an "inclusive
whole, rather than atomized line-items"); Roanoke, 991 F.2d at 139 (court must look
"behind the issue on which the petitioner prevailed to determine, from the totality of
circumstances, whether the government acted reasonably in causing the litigation or in
taking a stance during the litigation"); and Utu Utu Gwaitu Paiute Tribe v. Dep7 of
Interior, 773 F. Supp. 1383, 1388 (E.D. Cal. 199^(substantial justification analysis
"contemplates a view of the entire proceedings rather than an issue-by-issue analysis").
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26 HOOSIER SPLINE BROACH CORPORATION
address the Region's contentions on appeal and die arguments raised by
Hoosier in response thereto.
A. Significance of Special Waste Permit
The Region alleges that the issuance of the special waste permit
was "the only fact of record on which the Presiding Officer makes his
determination that EPA was not substantially justified" (Reg. App. Br. at
S), and contends that the EAJA Presiding Officer's determination was in
error because the special waste permit, standing alone, did not "remove the
EPA's substantial justification for its position." Id. at 5. Specifically, the
Region claims that the special waste permit, which was based on tests of
Hoosier's waste taken at the point of generation in 1994, was not
dispositive as to whether waste sitting in a pile on the ground in 1992 was
hazardous. Id. at 6.
We agree with the Region that the EAJA Presiding Officer
appears to have placed a great deal of weight on the issuance of the special
waste permit, and in fact, appears to have concluded that soon after
issuance of the permit the Region should have settled or dismissed its case:
I find * * * that the EPA's case became considerably
weaker once IDEM had approved the waste for disposal
as nonhazardous. It is true * * * that the certification
was for the "current" wastestream as distinguished * * *
from what had been generated at the time of the
inspection. The EPA does not point to any evidence in
the record, independent of the test results, indicating that
the waste now being generated should not also be
considered representative of the waste generated at the
time of the inspection. It should, then, have become clear
to the EPA that it was unlikely to prevail on the merits
Rec. Dec. at IS. See also id. at IS n.44 ("[U]ntil IDEM had analyzed the
waste as nonhazardous, the EPA would have been substantially justified
in going to hearing on die question of whether the waste found during the
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HOOSIER SPLINE BROACH CORPORATION 27
inspection was hazardous, or, at least, holding out for a settlement other
than the dismissal with prejudice of the counts related to the
mismanagement of hazardous waste.").
We do not quarrel with the feet that the EAJA Presiding Officer
apparently made inferences about the impact of the special waste permit,
even though the permit was not included in the record. Inferences may
properly be drawn so long as they are based on evidence contained in the
record. See, e.g., 2 McCormick On Evidence § 342 (John W. Strong ed.,
4th ed. 1992Xtrier of fact may infer the existence of a fact not in the
record based on a fact contained ui the record).42 In EAJA cases, the
record includes "the filings required or permitted by [the EAJA
regulations]." See 40 C.F.R. § 17.25(b). Here, the evidence in the EAJA
filings regarding the special waste permit contains three undisputed facts:
(1) that the special waste permit was issued in September 1994 (EAJA
App. at 14; EAJA Ans. at 8); (2) that the special waste permit was based
on "new" but unspecified sampling data (EAJA Ans. at 8; Reply to EAJA
Ans. at 8);43 and (3) that the special waste permit established that waste
generated by Hoosier in September 1994 and afterwards could be disposed
"Professor McCormick provided the following example: "[A]ssume thai a
party having the burden of producing evidence of feet A, introduces proof of fact B. The
judge, using ordinary reasoning may determine that fact A might reasonably be inferred
from fact B, and therefore that the party has satisfied its burden * * *. The judge has
not used a presumption in the sense of a standardized practice, but rather has simply
relied upon a rational inference." Id.
''Hoosier contends in its reply brief on appeal that the data submitted in
connection with the September 1994 special waste permit constituted "virtually the
same information that HSB provided to EPA in December 1993." Reply Brief of
Appellee Hoosier Spline Broach Corporation at 6 (Dec. 20, 1996)("Reply Br.").
However, this statement cannot be verified because there is no evidence in the record
specifying exactly what samples were submitted in connection with the 1994 special
waste permit.
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28 HOOSIER SPLINE BROACH CORPORATION
of as nonhazardous (EAJA Ans. at 11; Oral Arg. Tr. at 12). 44 Therefore,
any inferences about the impact of the special waste permit upon the
Region's claims were required tp have been based on these three
undisputed facts. As will be shown below, none of these facts, either
singly or in combination with the others, supports the EAJA Presiding
Officer's conclusion that the Region lost substantial justification for
foiling to settle the case promptly after issuance of the special waste
permit
"At oral argument counsel for die Region stated the following with respect to
the significance of the special waste permit:
Q [Judge Stein]:
Did the [EPA] consider itself to be [b]ound by
the [IDEM] determination in September 1994
that at least with respect to future-generated
waste that the waste was non-hazardous?
A [Carolyn Dick, Esq., EPA counsel]:
[W]e • • • respect the findings of the [IDEM]
when they are the ones implementing the
program * * *. But I think they have their own
program in place to assure that if they're
issuing a special waste permit on the basis that
that waste is not hazardous * * * they can * * *
assure themselves that [the] waste subsequently
generated would not be hazardous.
Q: So the Agency is not taking the position that
Indiana made an erroneous determination in
1994? You're simply savine that that was
prospective only?
A Correct
See also EAJA Ans. at 11: "Only in September 1994, when it finally obtained a Special
Waste Permit, did HSB satisfy the regulatory agencies that its current waste stream was
hot hazardous."
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HOOSIER SPLINE BROACH CORPORATION 29
1. Loss of Substantial Justification
There does not appear to be any uniform or established standard
for determining when and under what circumstances an agency's initially
justified position becomes unjustified. However, we note that in at least
two cases where EAJA fees were awarded based on a loss of substantial
justification, the loss of justification was marked by evidence which
virtually eliminated the agency's chief claims or defenses. For example,
in Leeward Auto Wreckers, Inc. v. NLRB, 841 F.2d 1143 (D.C. Cir.
1988), the NLRB's continued prosecution of an unfair labor practice
claim after the company presented an "incontrovertible defense" to the
claim at die hearing, was determined to lack substantial justification. As
the Court of Appeals for the D.C. Circuit noted in affirming fees from the
conclusion of the hearing onward: "[I]t should have been abundantly
evident that the Board's 'case' against the company had been wrecked at
trial." Id. at 1149.
Similarly, in Quality C.A.T. V. v. NLRB, 969 F.2d 541 (7th Cir.
1992), although the NLRB was determined to have been substantially
justified in filing and pursuing its worker safety claim, the Court of
Appeals for the Seventh Circuit held that it was not justified in continuing
to pursue the claim after the' hearing, where testimony revealed that
workers were not in fact contesting unsafe working conditions.
Accordingly, the Court awarded fees from the conclusion of the hearing
onward. Id. at 545.
In this case, unlike the evidence which caused the courts in
Leeward and Quality C.A. T. V. to conclude that the government had lost
substantial justification, the special waste permit did not "wreck" the
Region's case because the issuance of the permit did not disprove the
Region's chief claim that the waste in the waste pile was hazardous. This
is because the issuance of the permit did not fundamentally negate the
evidence indicating that the waste in the pile was hazardous.
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30 HOOSIER SPLINE BROACH CORPORATION
2. Evidence Regarding Hazardous Nature of Waste
In order to more fully explain our conclusion that the issuance of
the permit did not require the Region to settle its enforcement case
immediately, we discuss the significance of the permit in the context of the
other evidence in the record bearing on the hazardous nature of the waste
in the waste pile. We begin with an outline of the allegations contained in
the complaint and the evidence upon which they were based. As we noted
earlier, counts one, two and four of the Region's complaint alleged
hazardous waste violations confined to the 1990 to 1992 time frame. See
supra, Part IJ3.1. Although count three alleges violations extending
beyond 1992,45 Hoosier's liability for the violations alleged in that count
(covering failure to comply with certain operating standards applicable to
TSD facilities) is predicated upon its alleged failure to comply with
notification and application requirements within the 1990 to 1992 time
frame. See Compl. Tffl 42-44. Further, the penalty which the Region
sought for count three was based on 180 days (six months) of the alleged
violation, a period which clearly fell within the 1990 to 1992 period. See
Compl. Attachment 1; CX 8 (1980 RCRA Penalty Policy) at 12-25
(describing method for computing gravity-based penalty). Thus, with the
exception of the injunctive relief sought in the compliance order, the
Region's complaint is based on acts and/or omissions within the 1990 to
1992 period.46
45The complaint alleges that Hoosier failed to comply with certain operating
standards applicable to owners and operators of TSDs "from September 29, 1990,
onward." Compl. U 44.
^Generally, the compliance order required Hoosier to manage its waste as
hazardous prospectively, after making a hazardous waste determination. Compl. at 11 -
12. The Region admitted during oral argument that after issuance of the special waste
permit this injunctive relief was no longer "a major part of what the Agency was
seeking." Oral Arg. Tr. at 36. In our view, this admission did not diminish the
Region's justification for continuing to pursue its hazardous waste claims after the
permit was issued, because, as we have illustrated, the majority of the complaint focused
on the waste in the waste pile. Consequently, even though the permit weakened the
Region's injunctive relief claims, the Region's continued pursuit of a penalty for the
(continued...)
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HOOSEER SPLINE BROACH CORPORATION 31
In order to prevail on its claims that Hoosier treated, stored and/or
disposed of hazardous waste, the Region would have had to prove that a
representative sample of Hoosier's waste was hazardous. 40 C.F.R. §
261.24 (outlining TCLP procedures for determining whether a "solid
waste" is hazardous). A "representative sample" of waste is a "sample of
a universe or whole (e.g. waste pile, lagoon, ground water) which can be
expected to exhibit the average properties of the universe or whole." Id.
§ 260.10. IDEM analyzed the waste pile samples, concluded they were
hazardous, and thus determined that they were sufficient to disqualify all
of Hoosier's grinding sludge from disposal as "special waste." CX 7
("Approval is hereby denied for disposal of grinding sludge as Special
Waste. This denial is based on the analysis of chromium * * * which
shows the sludge to be a D007 characteristic hazardous waste * * *.")
Therefore, in January 1992 when it originally denied Hoosier's request to
dispose of its waste as a special waste, IDEM clearly was convinced that
the samples were "representative" of Hoosier's waste.
However, Hoosier contended that any sample of its waste with
chromium levels exceeding the 5.0 mg/1 regulatory threshold was not
representative of its waste (Ans. at 11).47 The EAJA Presiding Officer
rejected this contention, observing that the waste pile samples were
"unqualifiedly submitted [by Hoosier] as data which IDEM could rely
upon in making this [hazardous waste] determination." Rec. Dec. at 10.
We agree. Under the State of Indiana special waste regulations,
Hoosier was required to show that waste samples submitted to support
disposal of waste as a "special waste" were representative of that waste.
46(...continued)
alleged violations flowing from Hoosier's failure to manage the waste in the pile as
hazardous was entirely proper and consistent with the RCRA statute. See RCRA §
3008(aXl)(permitting Agency to assess a civil penalty for any past or current violation
of the statute).
47In its answer to the complaint Hoosier alleged: "To the extent any waste
generated by Respondent may have failed the TCLP test * * *, such waste was not
representative of waste generated by Respondent."
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32 HOOSIER SPLINE BROACH CORPORATION
See CX 9, Ind. Admin. Code tit 329, r. 2-21-14(c).48 Furthermore, it is
evident from Hoosier's October 1991 special waste application 49 and from
IDEM's denial letter that Hoosier submitted the waste pile samples in an
effort to qualify all "grinding sludge" for disposal as "special waste." In
light of this, the Region had a reasonable basis for believing that the waste
pile samples were "representative" of the waste produced by Hoosier
during the 1990 to 1992 time frame. The Region further had a reasonable
basis for contending, based on the January 1992 IDEM determination, that
Hoosier's waste was hazardous for chromium.
Additional evidence in the record supports the Region's hazardous
waste claims and its continued prosecution of the enforcement action,
including but not limited to: (1) the February 1992 inspection reports
verifying the existence of a 40 cubic yard waste pile at Hoosier's facility,
samples of which tested hazardous for chromium (CX 1 at 2); (2)
Hoosier's barreling and shipment for disposal as hazardous the waste in
the waste pile as well as all other "grinding sludge" generated between
February 1992 and September 1994 (EAJA Ans. at 7; Oral Arg. Tr. at
29-30); (3) Hoosier's admissions in the transportation manifests
accompanying the waste pile shipments that the contents were "hazardous
waste solid,* * * (D007)" (CX 4B); and (4) the feet that between July
1992 and May 1993, three additional samples of Hoosier's waste tested
hazardous for chromium (RX 13, 15, 16).
The special waste permit, which established that waste generated
in September 1994 and afterwards could be disposed of as nonhazardous
(see supra note 44), simply does not override the substantia] evidence
outlined above which supports die Region's claims that the waste in the
**That regulation provided in pertinent part: "Waste analyses submitted to the
commissioner for review must be accompanied by sufficient documentation of
representative sampling and quality assurance/quality control (QA/QC) information to
establish that the applicable procedure was utilized correctly."
"In its October 1991 special waste application, Hoosier identified the waste
for which the special waste permit was sought as "grinding sludge" and in a brief
description noted: "Excess from grinding wheels and metal."
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HOOSIER SPLINE BROACH CORPORATION 33
waste pile was hazardous. In other words, since the hazardous character
of the waste in the pile was the focus of the Region's complaint, and since
it is undisputed that the special waste permit applied to waste generated
at a much later time, the permit did not, standing alone, disprove that the
waste in the waste pile was hazardous.
Hoosier contends that the special waste perni it, together with other
evidence in the record, "point[s] to the logical conclusion that * * *
something was amiss with the 1991 test results and the waste pile in issue
was not in fact hazardous." Reply Br. at 8-9. The "other evidence"
identified by Hoosier consists of: (1) the alleged inconsistency in the test
results for the waste pile samples, despite the "undisputed" fact that
Hoosier's waste was homogeneous; (2) "questions surrounding the
accuracy of how the samples were handled and tested;" (3) the absence of
evidence that Hoosier's operations had changed in any material way; and
(4) the fact that "no other broach manufacturer had ever identified its
grinding waste as hazardous for chromium." Id.
In our vi^w, these facts do not lead inescapably to the conclusion
that the waste in the waste pile was not hazardous. We note that IDEM
was aware of the alleged "inconsistency" in the sampling results from the
waste pile and was also aware of Hoosier's quality control claims. Yet
IDEM was convinced, after conducting an independent statistical analysis
of the results and after investigating the alleged quality control problems,
that the waste was hazardous. Since IDEM is the agency charged with
implementing and enforcing the State of Indiana's special waste program,
as well as its hazardous waste program, this pronouncement by IDEM
carries significant weight
Second, even assuming (for the sake of evaluating Hoosier's
argument) that Hoosier's operations did not materially change between
IDEM's original hazardous waste finding in 1992 and its issuance of the
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34 HOOSIER SPLINE BROACH CORPORATION
special waste permit in 1994 (an allegation which was never proven), 50
this still does not foreclose the possibility that waste generated by Hoosier
in 1992 and earlier may have been hazardous, while waste generated in
1994 and later may have been nonhazardous. Any number of
circumstances might account for this change, including, as the Region
postulates, the feet that the waste in die pile had been sitting on the ground
for a period of two years, whereas the later waste had not; variability in
the wastestreams; or possibly, fluctuations in the chromium levels
contained in the steel from which the waste was generated. See Reg.
Supp. Br. at 25,31."
Finally, evidence of how other broach manufacturers may have
identified their waste is irrelevant It is Hoosier's waste, not that of other
manufacturers, which is at issue.
At best, the four "facts" alleged by Hoosier merely illustrate that
the issue of when and whether Hoosier's waste was hazardous was a
matter about which reasonable minds could differ. When the
government's position in an action is reasonably supported by evidence in
the record, the mere fact that the record contains some contradictory
evidence, which may, in the ultimate judgment of the trier of fact,
outweigh the evidence upon which the government's position is based,
provides no basis for an award of EAJA fees. See Jackson v. Chater, 94
FJd 274, 279 (7th Cir. 1996)(govemment's denial of social security
benefits based on expert's opinion was substantially justified, even though
expert's opinion was contradicted by other evidence). As the Court of
Appeals for the Seventh Circuit observed in Jackson:
The EAJA Presiding Officer merely observed that there was no evidence in
the record affirmatively showing that there had been any material change in Hoosier's
operations. Rec. Dec. at IS. Hoosier's counsel purported to confirm this observation
by repeating it in its reply brief on appeal. Reply Br. at 9. However, these statements
do not constitute evidence.
"We note, however, that the evidence of record shows very little fluctuation
in the chromium content of the steel from which the waste was generated. See RX 23-
25 (showing chromium levels of steel consistently between 3-4%).
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HOOSIER SPLINE BROACH CORPORATION 35
The government may have been incoirect in advocating
the position advanced by Klein [the expert] with respect
to the existence of suitable woik in light of the conflicting
information in [two vocational publications]. However,
being incorrect on one point does not translate into
lacking substantial justification for one's litigation
position in the entirety of a civil action. There was other
evidence in the record that supported Klein's assessment
of the marketplace, and the government was * * * entitled
* * • to choose between permissible, though conflicting,
views of the available evidence.
94 F.3d at 279-80. See also Williams v. Bowen, 966 F.2d 1259, 1261
(9th Cir. 1992Xgovemment was substantially justified for EAJA
purposes, although ultimately incorrect in denying disability benefits,
where evidence was in conflict as to impact of alleged mental impairment
on claimant's ability to perform work).
Here, as has been shown, the record contained evidence
supporting the Region's views on when and whether Hoosier's waste was
hazardous, as well as evidence upon which Hoosier could base its
conflicting position on this issue. Further, both parties were apparently
prepared to extensively litigate these issues, largely through expert
testimony. Compare Complainant's Prehearing Statement (March 25,
1994Xlisting five witnesses, including a statistician, scientist, and
environmental protection expert, who were to testify on behalf of the
Region with respect to the waste pile sampling evidence) with
Respondent's Pre-Hearing Exchange (March 24, 1994Xlisting several
witnesses, including an engineer and a scientist, who were to testify on
behalf of Hoosier regarding the waste pile sampling evidence). Since
resolution of these disputed issues of fact likely would have been resolved
only after a "battle of the experts," the Region cannot properly be
penalized for pressing forward with its case after the special waste permit
was issued in September 1994. In the words of the Jackson court, the
Region was entitled to choose between "permissible, though conflicting,
views of the available evidence." 94 F.3d at 280.
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36 HOOSIER SPLINE BROACH CORPORATION
3. Representative Nature of "1994 Waste "
Having reviewed the evidence relating to the hazardous nature of
Hoosier's waste, we now evaluate the EAJA Presiding Officer's
conclusion that the Region was not justified in continuing to pursue the
case after September 1994. Apparently, this conclusion rests on the
presumption that the waste samples upon which the special waste permit
was based (hereafter the "1994 waste") 52 were "representative" of waste
in the waste pile. Rec. Dec. at 15.33 We agree with the Region that this
presumption lacks foundation and does not support the EAJA Presiding
Officer's finding that the Region lacked substantial justification after
September 1994.
First, as we have already noted, there is no evidence in the record
about the date, source o£ test results for, or any other defining
characteristics associated with the 1994 waste. See supra Part 11.A and
notes 43 and 52. Therefore, there is no evidence in the record upon which
to make a determination as to whether the 1994 waste "exhibited the
average properties of' the waste in the waste pile (which was disposed of
in 1992). For this reason alone, the EAJA Presiding Officer's
presumption lacks foundation.
Moreover, the EAJA Presiding Officer's presumption completely
ignores the sampling evidence contained in the record, which tends to
"While we use the defined term "1994 waste" for purposes of brevity, there
is no evidence in the record as to when the waste samples submitted to IDEM in
connection with the September 1994 special waste permit actually were taken, or, for
that matter, any other information about those samples (i.e. where they were taken, what
wastestream they were taken from, the number of samples submitted, or the TCLP test
results associated therewith).
"The EAJA Presiding Officer stated: "The EPA does not point to any evidence
in the record, independent of the test results, indicating that the waste now being
generated should not also be considered representative of the waste generated at the
time of inspection. It should then, have become clear to the EPA that it was unlikely to
prevail on the merits." Rec. Dec. at IS.
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HOOSIER SPLINE BROACH CORPORATION 37
support the conclusion that the 1994 waste was not representative of the
waste in the waste pile. Specifically, of the twenty-one test results made
part of the record, * five of the first ten samples—all obtained between
October 1990 and May 1993—yielded TCLP test results above the
regulatory hazardous waste threshold. In contrast, none of the remaining
eleven samples—obtained between July 1993 and October 1993-yielded
TCLP results exceeding the regulatory threshold. These results suggest
that there may have been a change in the hazardous character of Hoosier's
waste after May 1993, and thus reasonably lead to the inference that waste
generated after May 1993 was not representative of waste generated
before that time.
Additionally, the test results reveal that the chromium levels for
Hoosier's Blanchard sludge were consistently higher than the levels
reported for dry grinding dust See, e.g., RX 21 (four Blanchard samples
show chromium levels higher than four grinding dust samples taken on
same day). Further, at least three of the five test results with chromium
levels above the 5.0 mg/l regulatory threshold were from "Blanchard"
sludge. See RX 9, 10, IS." Since the parties agree that the waste in the
pile was comprised only of Blanchard sludge (Oral Arg. Tr. at 70-71),
then samples of dry grinding dust arguably would not be "representative"
of the waste in the waste pile. Therefore, if the 1994 waste contained dry
grinding dust, that waste cannot be deemed to be "representative" of the
waste in the waste pile.
Finally, Hoosier disclosed that it discarded some sort of coolant
into the waste pile. See CX 1 at 2; CX 2 at 3, 5. Without more
information as to the nature or quantities of coolant that were poured over
"This number is comprised of the four original samples taken from the wasfe
pile during the 1990-1991 time frame, plus the seventeen additional samples taken from
the point of generation after the waste pile was dismantled in 1992.
"It is not possible to determine from the record whether the remaining two
samples were from the "Blanchard" machine. The sample contained in RX 13 is
described only as "sludge grab." Likewise, the sample contained in RX 16 is described
only as "grinding sludge."
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38 HOOSIER SPLINE BROACH CORPORATION
the waste pile, there is a reasonable possibility that the coolant may have
affected the chromium levels of the waste in the waste pile. Since there is
no evidence in die record identifying the source of the 1994 waste, it
cannot be determined whether the 1994 waste contained the same coolant
that was poured over the waste pile. In the absence of such evidence, the
19^4 waste cannot properly be deemed "representative" of the waste in the
waste pile.
To summarize, there is simply too little evidence contained in the
record about the 1994 waste to make a dispositive conclusion about
whether those samples were "representative" of the waste in the waste
pile. What is more, there was at least some evidence in the record tending
to show that the 1994 waste probably was not representative of the waste
in the waste pile. Under these circumstances, we find that the EAJA
Presiding Officer's conclusion that the 1994 waste was representative of
the waste in the waste pile is not well-founded. Therefore, to the extent
that the EAJA Presiding Officer's finding that the Region was not
substantially justified in the case after September 1994 rested on this
conclusion, that finding was error.
As we have demonstrated, the Region's position that Hoosier's
waste was hazardous is supported by ample evidence contained in the
record, including: (1) test results ofwaste pile samples which showed that
the waste contained chromium levels in excess of the regulatory threshold;
(2) a finding by the agency charged with implementing and enforcing the
State of Indiana's special waste and hazardous waste programs that the
waste in the waste pile was hazardous; (3) three test results from samples
of waste taken after the waste pile was dismantled which showed that the
waste contained chromium levels in excess of the regulatory threshold; and
(4) Hoosier's own treatment of its waste as hazardous between February
1992 and September 1994. Although there were other facts of record that
arguably support Hoosier's view that its waste was not hazardous (see
supra Part II.A.2), the Region nevertheless had a reasonable basis in fact
for believing that the waste in the pile was hazardous, and for continuing
to pursue those hazardous waste claims even after the special waste permit
was issued. Since it is undisputed that if the waste in the waste pile was
hazardous Hoosier would have been subject to the requirements for
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HOOSIER SPLINE BROACH CORPORATION 39
management and disposal of hazardous waste outlined in the complaint, 56
then the Region also had a reasonable basis in law for pursuing its
hazardous waste claims after the special waste permit was issued. For
these reasons, we are persuaded that the Region had a reasonable basis
both in fact and in law for continuing to pursue its hazardous waste claims
after the permit was issued.
B. Timing and Terms of Settlement
The Region makes a cluster of arguments which essentially allege
that the EAJA Presiding Officer's award of fees is based on improper
inferences and conclusions regarding the terms and timing of the
settlement Specifically, the Region alleges: "The Presiding Officer
improperly based his decision on the terms of settlement, should have
considered EPA's reasons for seeking a settlement in the spring of 1995,
and should have concluded that EPA's conduct in the months preceding
the settlement was reasonable and therefore substantially justified." Reg.
App. Br. at 6. As discussed below: (1) the record does not support the
EAJA Presiding Officer's inferences that the terms of settlement indicate
the Region lacked substantial justification; (2) the Region's proffered
reasons for the dm ing and terms of settlement provide a plausible rationale
for those events, and in any event, the timing and terms of settlement do
not diminish the Region's substantial justification for continuing to pursue
its hazardous waste claims; and (3) the record does not support the finding
that there was any unreasonable delay in reaching settlement in this case,
or that the Region was responsible for any such delay. However, before
evaluating the substance of the Region's claims of error, we begin with a
brief summary of the law relative to settlement in EAJA cases.
"As the EAJA Presiding Officer recognized, since the Region had a sound
factual basis for believing the waste in the pile was hazardous, it had a reasonable basis
in law for requiring Hoosier to manage the waste as outlined in the complaint: "The
legal basis for Complainant's position that this waste, if hazardous, is subject to the
requirements cited in the complaint, is not really questioned." Rec. Dec. at 8.
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40 HOOSKR SPLINE BROACH CORPORATION
In EAJA cases, a trier of fact may not presume that the
government lacks substantial justification merely because it settles a case.
See, e.g., Pierce, 487 U.S. at 568; Kuhns, 930 F2d at 43; One Parcel of
Real Property, 960 F.2d 200,208 (1st Cir. 1992X"The mere fact that the
government settles a case on unfavorable terms, or loses at trial, does not
create a presumption that it operated without substantial justification.").
Therefore, although evidence relating to settlement generally is not
admissible to prove liability for or the validity of a claim (Fed. R. Evid.
408; 40 C.F.R. § 2222(a)), courts have recognized that in EAJA cases the
government's reasons for settlement are admissible for the purpose of
determining whether the government's position in the litigation was
substantially justified. Pierce, 487 U.S. at 568.
Further, since no adverse presumptions may be drawn from the
fact of settlement alone, courts recognize that the government's reasons
for settlement may be critical in the ultimate decision of whether an award
of fees should be made. As the Supreme Court explained in Pierce-."The
unfavorable terms of a settlement agreement, without inquiiy into the
reasons for settlement, cannot conclusively establish the weakness of the
government's position. To hold otherwise would not only distort the truth
but penalize and thereby discourage useful settlements." Id. at 568.
Emphasizing the important role that the government's reasons for
settlement play when a case is settled before any adjudication of its merits,
the Court of Appeals for the D.C. Circuit observed:
Restricting the [substantial justification] inquiry to the
record would make little sense where there is, in effect,
no record. The government has the burden of proving
substantial justification for bringing the action. To
confine the inquiry to the pleadings when the matter is
brought to a close by a voluntary dismissal would be to
place the government at a disadvantage Congress could
not have intended.
Kuhns, 930 F.2d at 42-43 (citations omitted).
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HOOSIER SPLINE BROACH CORPORATION 41
In settling the underlying case, the Region dismissed three of the
counts alleging that Hoosier generated and managed hazardous waste,
modified a fourth count to allege only that Hoosier had failed to make a
hazardous waste determination, reduced the penalty from $825,509 to
$3,000, and required Hoosier to provide its most recent hazardous waste
determination. Rec. Dec. at 13; EAJA Ans. at 13; CAFO at 4-6. Hoosier
contends and the EAJA Presiding Officer implies that these settlement
terms somehow constitute an acknowledgment by the Region that its
hazardous waste claims lacked merit, and therefore should be viewed as
evidence of a loss of substantial justification. - See EAJA App. at 14;37
Rec. Dec. at 16 (see infra part II.B.2).
We reject this characterization of the significance of the terms of
settlement It is universally recognized that a settlement is a compromise
of disputed claims. Although there was conflicting evidence in this case
as to when and whether Hoosier generated hazardous waste, the Region
nevertheless had a reasonable basis in fact-and in law for believing
Hoosier's waste was hazardous during the 1990 to 1992 time frame, and
for continuing to pursue its hazardous waste claims beyond September
1994. See supra part II.A. The fact that the Region compromised its
disputed hazardous waste claims, by dismissing some of the counts in its
original complaint, modifying others, and by, among other things,
accepting a substantially reduced penalty for alleged hazardous waste
violations, does not in itself establish that the Region lacked substantial
justification. To find otherwise would be to squarely repudiate the settled
case authorities discussed in the preceding paragraphs ( see Pierce, 487
U.S. at 568; Kuhns, 930 F.2d at 43), and would also fly in the face of the
legislative intent of the EAJA statute,3S both of which preclude a fact
"Hoosier there stated: "The mere fact that the EPA voluntarily dismissed
Counts II, III, and IV, and vastly reduced the scope of Count I, suggests the lack of
substantial justification for EPA's position in this case."
"For example, a congressional committee observed: "The [substantia]
Justification] standard, however, should not be read to raise a presumption that the
Government position was not substantially justified, simply because it lost the case.
(continued...)
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42 HOOSIER SPLINE BROACH CORPORATION
finder from concluding that the government lacks substantial justification
merely because it settles a case on "unfavorable terms.''
1. Inferences Based on Settlement Terms
Turning to the Region's first claim of error, the Region contends
that the EAJA Presiding Officer's partial award of fees was based on
unfounded presumptions about the content of settlement offers and about
the parties' positions during settlement negotiations. Reg. App. Br. at 4,
6. Specifically, the Region claims: "Judge Harwood coupled [his]
unsupported assumption about the nature of the waste with a further
assumption 'that Respondent in September 1994, was either proposing or
would have accepted the settlement relating to Count I which was
incorporated in the amended complaint' Because of this unsupported
assumption, the Presiding Officer concluded that if EPA had tendered a
settlement offer in September 1994 similar to the one filially entered in
June 1995, the case would have ended eight months earlier." Id. at 4
(citation omitted).
The Region's, contentions appear to be well-founded. In
explaining the basis for the fee award the EAJA Presiding Officer
admitted that he "assumed" Hoosier was proposing or would have
accepted the settlement ultimately incorporated into the amended
complaint, and further stated that the reason settlement was not reached
until September 199S was "because the EPA either refused to dismiss the
other Counts with prejudice or was simply holding out in the expectation
of a settlement more favorable to its position on those counts." Rec. Dec.
at 16. As the Region correctly points out, both assumptions are
unfounded and do not provide a basis for an award of fees.
"(...continued)
Nor, in fact, does the standard require that the Government establish that its decision
to litigate was based on a substantial probability of prevailing." 1980 House Report at
11. We think it safe to surmise that if Congress did not intend for the government to be
wrongly penalized for losing a case outright, it clearly did not intend for the government
to be improperly penalized for settling a case.
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HOOSIER SPLINE BROACH CORPORATION 43
As we noted supra part II A, inferences must be based on
evidence contained in the record. 2 McCormick, supra, § 342. The
"record" in EAJA cases consists of "the written record of the underlying
proceeding and the filings required or permitted by [the EAJA
regulations]." 40 C J Jl. § 17.25(b). In this case, neither the terms of any
of the settlement proposals, nor the substance of any of die settlement
negotiations, were included in the written record of the underlying
proceedings. Nor, with one exception discussed below, were they included
in any of the filings permitted by the EAJA regulations. Thus, the EAJA
Presiding Officer had no evidence upon which to base his assumptions as
to what the parties' settlement positions or postures were during the
September 1994 time frame.
We are aware that in its EAJA petition Hoosier made a veiled
reference to the Region's settlement position after Hoosier obtained the
special waste permit in September 1994, observing, "[s]till EPA refused
to listen, holding fast to its insistence that HSB pay a six-figure penalty to
settle the case." EAJA App. at 3. However, this solitary statement, even
if true, does not support the EAJA Presiding Officer's inferences
regarding settlement The statement offers no support for the assumption
that Hoosier was at that time "proposing settlement on the terms
ultimately agreed to"—presumably upon terms containing a $3,000
penalty. With the exception of the fact that Hoosier rejected the Region's
August settlement offer, the record discloses nothing else about Hoosier's
settlement activities during that period. Thus, it cannot be discerned
whether Hoosier made a counter-offer, or if so, what the contents of such
an offer might have been. Therefore, the Presiding Officer's assumption
that Hoosier was then proposing or would have accepted the terms
ultimately agreed to is nothing more than speculation.
Likewise, Hoosier's statement referencing a "six-figure"
settlement offer does not support the EAJA Presiding Officer's inference
that the Region was "holding out [for] a settlement more favorable to its
position" on the counts dismissed. In the absence of other evidence as to
the substance of the Region's settlement proposal, or of the parties'
negotiations up to that point, the fact that the Region's offer may have
contained a six-figure penalty is not, without more, veiy meaningful.
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44 HOOSIER SPLINE BROACH CORPORATION
Since the Region had a reasonable basis for believing that Hoosier's waste
was hazardous during the period 1990 to 1992, it does not seem
unreasonable that the Region's penalty demand may have remained in the
six figures in the August-September 1994 time frame, especially since the
economic benefit component of the penalty proposed in the complaint was
nearly $200,000,59 and recovering the full economic benefit for a
violator's noncompliance is a fundamental part of the Agency's
enforcement program. See CX 8 at 25-26.
Finally, even if it were true that the Regibn was "holding out*' for
a settlement more favorable to its position on the counts ultimately
dismissed (and, as we have shown, there is no evidence indicating that the
Region was doing this), this does, not mean thai the Region lacked
substantial justification in the proceeding as a whole. As we have
demonstrated, the Region had a reasonable basis in fact and in law for
continuing to pursue the action after the special waste permit was issued.
In sum, the EAJA Presiding Officer's inferences about the parties'
settlement positions are not supported by any evidence in the record.
Further, if the EAJA Presiding Officer's inferences were drawn from
Hoosier's statement hinting that the Region's August 1994 settlement
proposal contained a "six-figure" penalty, that statement still does not
substantiate the inference that die Region was attempting to force Hoosier
to accept an unreasonably high settlement demand, since a six-figure
penalty would not have been unreasonable in light of the nature of the
claims at issue, and the fact that a penalty of that magnitude was clearly
authorized under the statute and the applicable penalty policy. 60
"Notably, at the time the settlement offer was made, the administrative law
judge's decision in Harmon had not yet been issued.
"If the EAJA Presiding Officer's inferences regarding the parties' settlement
positions were in fact based on Hoosier's statement, we feel compelled to note that
reliance on this kind of statement illustrates the dangers of utilizing "settlement
evidence" in the substantial justification analysis. Although the government's reasons
for settlement clearly can be useful in the substantial justification analysis, the policy
(continued...)
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HOOSffiR SPLINE BROACH CORPORATION 45
2. Reasons for Timing and Terms of Settlement
We turn now to the Region's claim that the EAJA Presiding
Officer did not adequately consider the two reasons offered by the Region
to explain the timing and the terms of the settlement, namely: (1) that the
likelihood that the Region would be able to recover a substantial portion
of the economic benefit component of the penalty (which alone totaled
nearly $200,000, see supra note 18), was drastically reduced in the wake
of the ALJ's decision in Harmon-, and (2) that the Agency's new small
business policy (the "Interim Policy") "provided greater leeway to
consider the special circumstances of small businesses when determining
the imposition of penalties for RCRA and other regulatoiy violations."
EAJA Ans.at 12-13.61
....continued)
behind Rule 408 and the back and forth nature of settlement negotiations militate
against the drawing of negative inferences about the reasonableness of the government's
position based on its stance at one particular point during settlement negotiations. As
one court observed: "Courts are * * * traditionally hesitant to inquire into the give and
take of negotiations leading to a settlement" Bailey v. U.S., 721 F.2d 357, 361 (Fed.
Cir. !983Xcase remanded for determination as to whether government's delay
warranted award of EAJA fees).
"During oral argument, counsel for Hoosier made a belated motion to exclude
the Region's stated reasons for settling the case in the time and manner that it did,
contending that these reasons were not properly introduced into the record, as required
under 40 C.F.R. § 17.22(c). Oral Arg. Tr. at 43. We reject this belated objection.
Under § 17.25(b), the "record" to be examined in making a substantial
justification determination includes the government's answer to the EAJA petition,
which is a required filing under § 17.22(a). Although § 17.22(c) requires "facts" in the
answer to be under oath or approved under additional proceedings, this provision is not
strictly applicable here because the Region's rationale for settlement is not a "fact," but
is instead counsel's explanation for why the matter settled when it did. Further, as we
discussed supra, the government's reasons for settlement may play a key role in the
substantial justification determination in cases such as this one, where the matter was
resolved before any adjudication of the merits. See; e.g., Pierce, 487 U.S. at 568. For
all of these reasons, and also because Hoosier's motion is untimely, we hold that it was
not improper for the EAJA Presiding Officer to have considered the Region's reasons
(continued...)
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46 HOOSIER SPLINE BROACH CORPORATION
After noting these reasons for settlement, the EAJA Presiding
Officer stated:
None of the reasons advanced by the EPA for finally
agreeing to the settlement demonstrate that the EPA's
position that Respondent had been generating hazardous
waste at,die time of the inspection was justified after
IDEM had approved the waste for disposal as
nonhazardous waste. [The ALJ's] stand on how the
economic benefit of a Respondent's noncompliance
should be calculated and the EPA's policy with respect
to small businesses may have persuaded die EPA to
moderate its stand on the penalties it should seek, but I
do not see that they are relevant to the question of
whether Respondent had generated hazardous waste,
which was the issue on which Respondent ultimately
prevailed on the merits.
Rec. Dec. at 16. .It is apparent from the remarks quoted above that the
EAJA Presiding Officer did consider the Region's reasons for settlement,
but rejected them because he did not find them sufficiently persuasive.
in our view, the Region's reasons for settlement provide a
plausible explanation for the tim ing and terms of the settlement While the
reasons for settlement are not essential to our finding that the Region was
substantially justified throughout the course of the underlying action, those
reasons are certainly sufficient to make inappropriate any finding that, by
agreeing to such a settlement, the Region somehow conceded that it lacked
substantial justification for filing its complaint and continuing to pursue
hazardous waste claims after the special waste permit was issued.
"(...continued)
for settlement, even though they were not under oath or approved under additional
proceedings.
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HOOSIER SPLINE BROACH CORPORATION 47
Evaluating the impact of the Harmon decision on the settlement,
we note that the Region states that it viewed Harmon as an indication that
it was not likely to recover much of the nearly $200,000 economic benefit
component of its penalty. EAJA Ans< at 11. Based on this admission by
the Region, we think it likely that the Harmon decision would have made
.the Region more willing to substantially reduce the economic benefit
component of the penalty, and, concomitantly, the overall penalty that it
was seeking for the alleged violations, than it might have been willing to
do in the absence of that decision. This is especially so since Harmon was
decided by ALJ Vanderheyden, the administrative law judge who presided
over the underlying case and would have heard this case had it gone to
hearing. See supra note 2; see also Conference Report and Orders (June
12,1995Xscheduling July 26,1995 hearing). In short, we have no reason
to doubt that the Harmon decision may have figured into the Region's
overall calculus in deciding to settle the case.
As for the impact of the Interim Policy on the settlement, that
policy, created and implemented in response to a presidential executive
order which required federal agencies to adopt a "more flexible, effective,
and user friendly approach to regulation" involving small businesses
(Executive Memorandum, 60 Fed. Reg. 20621 (Apr. 26,1995)), may well
have been a motivating factor in the Region's overall decision to settle the
case. Among other things, the Interim Policy gave the Agency discretion
to completely eliminate civil penalties against small businesses that
satisfied certain stated criteria. Interim Policy at 4-5.62 As a small
"The Interim Policy allowed reduction or elimination of civil penalties if a
small business as defined under the policy met some or all of the following criteria:
(1) had made good faith efforts to comply with applicable environmental requirements
while participating in a compliance assistance program, and the violations were detected
while the business was participating in the program; (2) had no prior violations of the
environmental requirements) alleged; (3) was charged with violations that did not cause
serious harm to public health or safety, imminent or substantial danger to the
environment or present a significant health, safety or environmental threat; (4) was not
charged with violations involving criminal conduct; and (5) had corrected the alleged
Violations within ninety (90) days from detection of the violations, or within the
additional time periods allowed under the Interim Policy. Interim Policy at 4-5.
(continued...)
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48 HOOSIER SPLINE BROACH CORPORATION
business that had no prior record of environmental violations, was not
chained with criminal conduct, and that had, according to the Region,
made good faith efforts to comply with die hazardous waste regulations
after the February 1992 IDEM inspection (EAJA Ans. at 13), Hoosier
satisfied some of the stated criteria (see supra note 62) and thus arguably
was the type of small business that the Interim Policy was designed to
benefit Since that is the case, the Region's substantial reduction of its
penalty-from $825,509 to $3,000-might well have been the result of the
Region's exercise of its discretion under the Interim Policy to "eliminate
or mitigate" civil penalties. This seems probable because it does not
appear that such a drastic reduction in the penalty would otherwise have
been authorized under the applicable Agency penalty policy. 63 Further,
the proximity in timing between the adoption of the Interim Policy on June
15,1995, and the "settlement in principle" in this case which was reached
less than one month later on July 10,1995, also suggests that the Interim
Policy may have impacted or affected the terms of settlement in this case.64
The EAJA Presiding Officer appears to have been dissatisfied
with the Region's reasons for settlement primarily because they did not,
in his view, explain why the Region had dropped its hazardous waste
"(...continued)
Further, the Interim Policy provided that the Agency could: (I) eliminate the
civil penalty in cases where the business had satisfied all of the above criteria, or (2)
"mitigate its demand for penalties to the maximum extent appropriate" if the business
had not satisfied all of the above criteria but had nonetheless made a good faith effort
to comply. Id. at 3.
"With exceptions for "litigative risk" and inability to pay, the 1990 RCRA
Penalty Policy authorized a penalty reduction for purposes of settlement of up to 25%
of the proposed penalty in "ordinary" circumstances, and up to 40% of the proposed
penalty in "unusual" circumstances. See CX 8 at 32.
MWe do not rule out the possibility that the timing of settlement in this case
may also have been influenced by other factors, particularly the impending hearing date
Of July 26, 1993. As the Region acknowledged: "[A]s in any settlement, litigation
considerations affect the final resolution * • • " EAJA Ans. at 13. See also part m.B.3
infra.
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HOOSIER SPLINE BROACH CORPORATION 49
claims. Rec. Dec. at 16. However, we are not troubled by this. As we
noted earlier, this settlement, like any other, was a compromise of disputed
claims. We are persuaded that the Region's decision to dismiss certain of
its hazardous waste counts and modify others, particularly in the wake of
the ALJ's decision in Harmon and the promulgation of the Interim Policy,
reflects nothing more than the results of a compromise. Indeed, this case
may well portray the circumstances described in Kuhns, where "[c]hanges
in agency policies or priorities * * * rather than the absence of evidence or
legal support * * * caus[ed] the government to drop a proceeding it
reasonably expected to win." 930F2dat43.
For the foregoing reasons, we find that the reasons for settlement
offered by the Region provide a plausible explanation for both the timing
and terms of settlement Further, the settlement terms do not disturb our
conclusion that the Region was substantially justified for filing its case
and continuing to prosecute its hazardous waste claims after the special
waste permit was issued in September 1994. Consequently, to the extent
the EAJA Presiding Officer used either the terms of settlement or the
Region's proffered reasons for settlement to fortify his conclusion that the
Region lacked substantial justification after September 1994, he
committed error.
3. Delay
As its final claim of error relating to the EAJA Presiding Officer's
analysis of the terms and tim ing of the settlement, the Region contends that
the EAJA Presiding Officer's fee award is improperly based on
assumptions that the Region unreasonably delayed the settlement. Reg.
App. Br. at 4. As discussed supra part II.B. 1, the EAJA Presiding Officer
clearly did make this assumption as he stated: "[I]t was because the EPA
either refused to dismiss the other Counts with prejudice or was simply
holding out in the expectation of a settlement more favorable to its position
on those Counts that final settlement was not reached until September
1995. I find that the EPA was not substantially justified in delaying
settlement for either reason." Rec. Dec. at 16 (emphasis added). Hoosier
also blames the Region for unreasonably delaying settlement in this case.
See Reply Br. at 2,12. However, the course of events in this proceeding
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50 HOOSIER SPLINE BROACH CORPORATION
does not demonstrate that the Region was solely responsible for any
"delay" in the underlying proceedings, and further, case law shows that the
"delay," if any, did not warrant an award of fees.
As a preliminary matter, it is improper to make a determination
of substantial justification based solely on the length of time it takes to
settle a case. Bazaldua v. INS, 776 F.2d 1266,1270 (5th Cir. 1985X"nie
government's delay in settling the case is not by itself a sufficient ground
for the award of attorney's fees * * * under the EAJA * * Essex
Electro Engineers, Inc. v. U.S., 757 F.2d 247,253 (Fed. Cir. 1985X"The
reasonableness of the government's'litigation position is determined by the
totality of circumstances, and we eschew any single-factor approach.").
A claim of delay must therefore be evaluated in light of all surrounding
circumstances.
Second, it appears that even when delay is a factor in the
substantial justification analysis, fees have been awarded where the delay
was either unexplained or accompanied by other circumstances which
indicated that the government's position was wholly without merit 65
Guided by the above cases, we conclude that uie "'delay" (if any)
in this case did not warrant an award of fees. Although the Region clearly
had a sound basis for pursuing its hazardous waste claims, it began efforts
to settle this case within six months after the case was filed. Settlement
"See, e.g., U.S. v. $12,248 U.S. Currency, 957F.2d 1513,1518-1519 (9th Cir.
1992Xthough seizure of property was justified, government's refusal to investigate case,
and lengthy, unexplained delays in filing suit and bringing matter to trial supported
award of fees), Porter v. Heckler, 780 F.2d 920, 925 (11th Cir. 1986)(fees awarded
where government's protracted defense of unexplained suspension of employee, which
involved three appeals, "needlessly delayed resolving the case on its merits.");
Environmental Defense Fund v. Watt, 722 F.2d 1081 (2d Cir. 1983)(fees awarded in
pesticide spraying case where it appeared that several month delay in concluding
settlement was unnecessary and unwarranted, since government had acceded to
plaintiffs' demands even before beginning settlement negotiations); and Ward v.
Schweiker, 562 F. Supp. 1173,1179 (W.D. Mo. 1983Xfees awarded where eight month
delay in finalizing settlement was viewed as inexplicable, since government had
previously settled a similar matter using the identical stipulation).
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HOOSDER SPLINE BROACH CORPORATION 51
discussions continued over the next six months, while the parties
exchanged prehearing statements and discoveiy requests. In August 1994,
just over a year after the case was filed, the Region sent a settlement
proposal to Hoosier, the terms of which were not disclosed in the record.
In September, after receiving a special waste permit, Hoosier rejected the
Region's August 1994 settlement offer, and stated that it believed the case
should be scheduled for hearing. It was not until four months later in
January 199S that the Region formally requested that the case be
scheduled for hearing. Another five months elapsed before the Prehearing
Presiding Officer actually scheduled the case for hearing. In the nine
months between Hoosier's rejection of the settlement offer and the setting
of the hearing date, neither party pursued the case. Indeed, Hoosier's
attorneys billed less than two hours in connection with the case over that
period. See EAJA App. Ex. 2 (Attachment 1-monthly billing records).
There is nothing in this chain of events, wnich traces a pattern
followed in numerous contested civil actions, to support the notion that the
Region was solely to blame for any settlement delay. At oral argument,
counsel for Hoosier acknowledged that by September 23, 1994 " both
parties were saying that they were so far apart in settlement that the matter
needed to proceed to hearing." Oral. Arg. Tr. at 46 (emphasis added).
Counsel for Hoosier further admitted that after Hoosier rejected the
Region's settlement offer "things stopped * * * until about a month before
the hearing." Id. Counsel for Hoosier did not allege that during the nine
months between September 1994 and June 1995 Hoosier did anything to
press for a speedy resolution of the case, and die record does not reflect
that it did. Thus, we think it fair to conclude that both parties are equally
responsible for the settlement "delay" in this case, if there was any delay
at all.
Moreover, there is nothing in the fact pattern outlined above that
suggests that either the length of or reasons for any "delay" were so
wholly without merit as to support an award of EAJA fees. This was not
a case where the government belabored a questionable defense through
extensive litigation, as in Porter, or failed to investigate and prosecute its
case over an extended period of time, as in U.S. v. $12,248 U.S.
Currency. Instead, the Region pursued claims which it reasonably
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52 HOOSIER SPLINE BROACH CORPORATION
relieved, and which the record confirmed, were valid, and at the same time
continued toreevaluate those claims and to seek a negotiated resolution of
the dispute.
When we consider the record of events as confirmed by Hoosier's
admissions during oral argument, what appears to have occurred here is
that after Hoosier rejected the Region's settlement offer, the parties
reached an impasse in the September 1994 time frame, after which they
both suspended further activity while awaiting assignment of a hearing
date. Once the hearing date was assigned, the parties resumed case
preparations and then, perhaps spurred on by the approaching hearing,
were finally able to reach an accord and settle the case.
None of the above cases suggest that this type of mutual
abatement of case activity while awaiting a hearing date, a common
enough occurrence in numerous civil actions, should serve as the basis for
an award of EAJA fees. It is well known that civil actions are marked by
periods of activity and inactivity, and that a period of inactivity is
especially common during and after settlement negotiations. Even Hoosier
acknowledged that this case was not appreciably different from any other
ordinary piece of civil litigation which settles on the eve of trial. Oral Arg.
Tr. at 44.
Furthermore, at least one case demonstrates that awarding fees
based solely on a lull in case activity is improper. In Ashburn v. U.S., 740
F.2d 843 (11th Cir. 1984), a tax refund case ultimately conceded by the
government, one of the deciding factors in the Eleventh Circuit's decision
not to award fees was that during the eleven month period which plaintiff
identified as constituting an unreasonable delay on the part of the
government, the case had been "completely inactive" and plaintiffs
attorneys had billed a total of only 2.2 hours during that period. 740 F.2d
at 851. In this case Hoosier's attorneys billed less than two hours during
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HOOSIER SPLINE BROACH CORPORATION 53
a nine month period of inactivity.66 Ashburn therefore fortifies our
conclusion that an award of fees based on the Region's alleged delay in
settling this case is unwarranted.
C Underlying Case "As a Whole "
The Region's final claim of error is that the EAJA Presiding
Officer failed to examine the case as a whole because if he had done so,
he would have concluded that the Region was justified at all times during
the litigation. Reg. App. Br. at 10.
As noted earlier, Hoosier's contention that it is entitled to an
award of EAJA fees appears to be based at least in part on the feet that it
incurred substantial legal fees in the course of achieving a settlement on
favorable terms. See supra note 66. However, unlike other fee-shifting
statutes, the EAJA does not enable a party to recover fees expended in
trial preparation simply because it prevails in the action. As one court
explained: "We cannot assume that the government must pay [plaintiffs]
attorney's fees merely because it did not successfully defend against
[plaintiffs] suit on the merits in its entirety. The EAJA is not a 'loser
pays' statute" Morgan v. Perry, No. 96-3314, 1998 U.S. App. LEXIS
8114, at *47 (3d Cir. 1998Xemphasis added). In a similar vein, the Court
of Appeals for the Eleventh Circuit observed:
The EAJA * * * does not adopt the position that the
government should compensate all prevailing parties.
Congress did not wish to inhibit the government's
legitimate efforts to enforce the law; nor did it wish to
"During the nine month lapse in case activity only a total of 1.5 hours were
billed for a fee of S257.50 (excluding disbursements). See EAJA App. Ex. 2,
Attachment 1. Notably, however, once the hearing date was assigned, a total of 65.7
hours were billed, totaling $10,134.00 in legal fees (excluding disbursements) for a
single month's worth of hearing preparation. Id. Since the latter amount represents
sixty per cent of the $16,891.35 ultimately awarded by the EAJA Presiding Officer, it
appears that Hoosier's pursuit of fees is primarily an attempt to recapture its hearing
preparation costs.
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54 HOOSIER SPLINE BROACH CORPORATION
impose the potentially high cost of an automatic fee-
shifting position on the government Instead, the Act
provides for a compromise embodied in the standard of
suosiantial justification' * * * «
Ashburn, 740 F.2d at 849 (citations omitted).
When we review the underlying case "as a whole," we are
persuaded that the Region's position was substantially justified both
before and after September 1994. As mentioned, the Region's filing and
pursuit of the enforcement action was based upon evidence, supplied by
Hoosier, that waste which accumulated in a waste pile during the period
1990 to 1992 was hazardous. Based on the sampling results and the
IDEM determination, we find, as did the Presiding Officer, that the
Region's actions in pursuing the matter were well-founded. However, in
our view die issuance of the special waste permit did not require
immediate settlement of the case because although the permit allowed
Hoosier to dispose of its waste as nonhazardous in and after September
1994, it did not eliminate the reasonable basis in fact and in law for the
Region's claims that waste generated between 1990 and 1992 was
hazardous.
Furthermore, although the special waste permit weakened the
Region's ability to obtain the injunctive relief sought in the complaint, the
issuance of the permit still was not fatal to the Region's hazardous waste
claims, since those claims were substantiated by evidence that the waste
in the waste pile was hazardous. Additionally, although, as Hoosier
contends, the special waste permit when combined with other evidence in
the record may have raised questions as to whether the waste in the waste
pile had been correctly identified as hazardous, this evidence was
counterbalanced by the significant evidence, including IDEM's 1992
determination, that Hoosier's waste was hazardous during the period of
time (1990-1992) upon which the allegations in the complaint were based.
Since the ultimate issue as to when and whether Hoosier's waste was
hazardous never was adjudicated, and further, clearly would have been
contested by competing experts had the matter gone to hearing, an award
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HOOSIER SPLINE BROACH CORPORATION 55
of EAJA fees in the face of such disputed material facts would be
improper.
We note as well that there is no evidence to support the EAJA
Presiding Officer's inferences that in September 1994 Hoosier was
proposing settlement on the terms ultimately agreed to in July 1995, or
that the Region delayed the settlement Instead, evidence in the record
indicates that the lapse of time between the issuance of the special waste
permit and the parties' agreement to settle may have been due, at least in
part, to the parties' mutual abatement of activity while awaiting
assignment of a hearing date. As we have shown, this circumstance does
not support an award of fees under the EAJA.
For the above reasons, we conclude that application of the
substantial justification standard to the facts of this case forecloses any
award of fees. To award fees in this case, which traces a pattern of events
that commonly occur in civil actions that settle before trial, would not only
be improper, but would also discourage the government from settling
cases under reasonable and appropriate circumstances, a result that is
inimical to the purposes and objectives of the EAJA.
UL CONCLUSION
For all of the foregoing reasons, we find that the Region's position
in the underlying RCRA enforcement proceeding continued to be
substantially justified after September 1994, because its hazardous waste
:laims remained viable even after the special waste permit was issued.
We thus hold that Hoosier is not entitled to any attorneys' fees under the
EAJA, either for amounts incurred in defending the underlying action, or
for amounts incurred in connection with this appeal.
So ordered.
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(Slip Opinion)
NOTICE: This opinion is subject to formal revision before
publication in the Environmental Administrative Decisions
(E.A.D.). Readers are requested to notify the Environmental
Appeals Board, U.S. Environmental Protection Agency,
Washington, D.C. 20460, of any typographical or other formal
errors, in order that corrections may be made before publication.
BEFORE THE ENVIRONMENTAL APPEALS BOARD
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
In re:
L&C Services, Inc.
Docket No. VII-93-CAA-112
EAJA Appeal No. 98-1
[Decided January 15, 1999]
FINAL DECISION AND REMAND ORDER
Before Environmental Appeals Judges Scott C. Fulton,
Ronald L. McCallum and Edward E. Reich.
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L&C SERVICES, INC.
EAJA Appeal No. 98-1
FINAL DECISION AND REMAND ORDER
Decided January 15, 1999
Syllabus
OnApril8,1993, the United States Environmental Protection Agency Region
VII ("Region") filed a complaint under section 113(d) of the Clean Air Act, 42 U.S.C.
§ 7413(d), against L&C Services, Inc. ("L&C") and Williams Pipeline Company, Inc.
("WPC"), alleging six violations of 40 C.F.R. § 61.145(c)(6)(i) in connection with
L&C's asbestos abatement and removal activities at WPC's refinery in Augusta, Kansas.
The complaint charged L&C and WPC with six counts of violating the regulation by
failing to ensure that regulated asbestos-containing material ("RACM"), which had been
removed from piping, was kept adequately wet until collected for disposal.
On January 29,1997, the charges were dismissed against L&C after a hearing
on the merits, WPC haying earlier settled its case with the Region. Administrative Law
Judge Carl C. Chameski ("Presiding Officer") found that the Region "failed to carry its
burden of proof with respect to each of the six counts at issue." In re L&C Services,
Inc., Dkt. No. VII-93-CAA-112 (ALJ, Jan. 29, 1997) at 7. On four of the Region's
counts against L&C, the Region was unable to conduct laboratory analysis of material
suspected to contain asbestos because the inspector did not take samples. Thus, the
Region had no direct evidence on those four counts to prove that the materials observed
actually contained asbestos. On the remaining two counts, although the inspector
sampled the observed materials and laboratory analyses confirmed that they contained
regulated asbestos, the Region did not provide probative evidence that the sampled
material was friable (i.e., capable of being "crumbled, pulverized, or reduced to powder
by hand pressure," see 40 C.F.R. § 61.141).
On March 27, 1997, L&C filed an "Application for Award of Fees and
Expenses Pursuant to the Equal Access to Justice Act" requesting an award of
$69,028.42. On December 22, 1997, the Presiding Officer denied L&C's application
for attorneys' fees and expenses. The Presiding Officer's recommended decision held
that L&C was a prevailing party within the meaning of the regulation, but the Region's
position in initiating the enforcement action was nevertheless substantially justified.
Accordingly, the Presiding Officer denied L&C's request for fees and expenses. L&C
filed this appeal on January 16, 1998, requesting that the Board consider whether, based
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2
L&C SERVICES, INC.
on the overall administrative record, the Presiding Officer properly found the Region's
position to be substantially justified.
Held: The Presiding Officer's recommended decision is reversed and
remanded for a determination of reasonable attorneys' fees and expenses to be awarded
to L&C.
1. The Region had no reasonable basis in fact for its position, and thus no
substantial justification, where the administrative record reveals that the Region
adduced neither direct evidence nor compelling circumstantial evidence in support of
key elements of its claim.
2. There is no basis to find special circumstances exist to deny an otherwise
appropriate award of attorneys' fees and expenses.
Before Environmental Appeals Judges Scott C. Fulton,
Ronald L. McCallum and Edward E. Reich.
Opinion of the Board by Judge McCallum:
Appellant L&C Services, Inc. ("L&C") was charged by
Respondent United States Environmental Protection Agency Region VII
(the "Region") for alleged violations of the National Emissions Standards
for Hazardous Air Pollutants ("NESHAP") for asbestos. Upon dismissal
of the complaint,1 L&C filed an application for award of attorneys' fees
and expenses under the Equal Access to Justice Act ("EAJA"), 5 U.S.C.
§ 504, and the Environmental Protection Agency's implementing
regulations, 40 C.F.R. Part 17. Administrative Law Judge Carl C.
Charneski (the "Presiding Officer," or ALJ Charneski") denied L&C's
request for fees and expenses on December 22,1997.2 L&C appeals from
'The Region filed an appeal of the Presiding Officer's decision with the Board
which was dismissed as untimely on February 27,1997. See In re L&C Services, CAA
Appeal No. 97-3 (Feb. 27, 1997) (Order Dismissing Appeal).
2 A presiding officer who considers a fee petition brought under the EAJA
issues a "recommended decision," which is reviewed by this Board to the same extent
and in the same manner as an initial decision. 40 C.F.R. §§ 17.27, 22.30. In this case,
the Presiding Officer issued a decision styled as an "initial decision." See In re L&C
(continued...)
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L&C SERVICES, INC.
3
the Presiding Officer's denial of fees and expenses. We reverse and
remand for a determination of reasonable attorneys' fees and expenses.
L BACKGROUND
A. Factual Background
The Williams Pipeline Company ("WPC") owns a largely
abandoned, 440-acre oil refineiy in Augusta, Kansas ("refinery"). WPC
contracted with L&C for the asbestos abatement and demolition of the
400-acre abandoned portion of the refinery. The asbestos abatement work
performed by L&C at the refinery included the removal of all regulated
asbestos-containing material ("RACM").3
L&C filed an Asbestos Notification Form with the Kansas
Department of Health and Environment ("KDHE") in March 1992. The
form stated that L&C was going to remove 128,000 lineal feet of friable
asbestos from pipe surfaces, 10,000 lineal feet of friable asbestos was to
be left in place on pipe removed by dismantling, 40,000 square feet of
friable asbestos was to be removed from vessels, and 5,000 square feet of
friable asbestos was to be left in place on dismantled heaters and towers.
2(...continued)
Services, Inc., Dkt. No. VI1-93-CAA-112 (ALJ, Dec. 22, 1997)(Initial Decision on
Application for Award of Fees and Expenses Pursuant to the Equal Access to Justice
Act)("Rec. Dec.").
'Regulated asbestos-containing material (RACM) means:
(a) Friable asbestos material, (b) Category 1 nonfriable ACM that
has become friable, (c) Category 1 nonfriable ACM that will be or
has been subjected to sanding, grinding, cutting, or abrading, or (d)
Category II nonfriable ACM that has a high probability of becoming
or has become crumbled, pulverized, or reduced to powder by the
forces expected to act on the material in the course of demolition or
renovation operations regulated by this subpart.
40 C.F.R. § 61.141.
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4
L&C SERVICES, INC.
On seven occasions, KJDHE, Bureau of Air and Radiation, Air
and Asbestos Compliance Section inspector, David Branscum, conducted
on-site inspections of the refinery to investigate L&C's asbestos abatement
and removal work. On April 9, 1992, Inspector Branscum observed the
presence of dry residue on metal jacketing that had been removed from
pipe and placed on the ground in Zone 39 of the refinery. Inspector
Branscum observed that the material had not been wetted or bagged for
disposal by L&C. Inspector Branscum did not take samples of the
material he suspected was RACM during this investigation. This
investigation became the basis for Count I of the Region's complaint
against L&C.
Inspector Branscum inspected the refinery again on April 14,
1992. His inspection of Zones 31 and 39 revealed on the ground what he
believed was RACM on metal jacketing that had been removed from pipes
in a dry condition. He informed L&C that the material had to be bagged
for disposal at the time it was removed. Again, no samples of the
suspected RACM were taken. This investigation formed the basis for
Count II of the Region's complaint.
A third inspection of the refinery was conducted by Inspector
Branscum and his supervisor, Inspector Russ Brichacek, on April 22,
1992. Both inspectors observed metal jacketing that contained dry residue
on the ground in Zone 39. Neither inspector took a sample of the
suspected RACM on this inspection. On May 6, 1992, Inspector
Branscum observed the same metal jacketing that had been observed on
April 22, lying on the ground in Zone 39, but took no samples of the
suspected RACM. These investigations formed the basis for Count III of
the Region's complaint.
Inspector Branscum conducted another inspection of the refinery
on June 25, 1992. Again, he observed metal jacketing containing dry
residue lying on the ground. He took photographs of the metal jacketing
and other equipment. He also took samples of the suspected RACM that
he observed on the June 25; 1992 inspection. This investigation formed
the basis for Count IV of the Region's complaint.
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L&C SERVICES, INC.
5
On August 28,1992, Inspector Branscum conducted an inspection
of the boiler house area in Zone 39. He observed metal jacketing with dry
residue among the debris in the area. He took photographs and samples
of the suspected RACM on the metal jacketing. This investigation formed
the basis for Count V of the Region's complaint.
Inspector Branscum conducted the seventh inspection of L&C's
abatement and removal activities on August 31,1992. He testified that he
again observed metal jacketing containing dry residue which was not being
disposed of properly, but took no samples of the suspected RACM. This
investigation formed the basis for Count VI of the Region's complaint. He
also instructed L&C to cease all demolition and dismantling activities.
B. Procedural History
On April 8, 1993, the Region filed a complaint under section
113(d) of the Clean Air Act, 42 U.S.C. § 7413(d), against L&C and
Williams Pipeline Company, Inc. ("WPC"), alleging six violations of 40
C.F.R. § 61.145(c)(6)(i) in connection with L&C's asbestos abatement
and removal activities at the refinery. Rec. Dec. at 2. The complaint
charged that L&C and WPC had on six occasions violated the regulation
by failing to ensure that RACM, which had been removed from piping,
was kept adequately wet until collected for disposal.4
4 The regulation provides, in pertinent part:
Each owner or operator of a demolition or renovation activity to
whom this paragraph applies, according to paragraph (a) of this
section, shall comply with the following procedures: ~ * * (6) for all
RACM, including material that has been removed or stripped:
(i) adequately wet the material and ensure that it remains wet until
collected and contained or treated in preparation for disposal in
accordance with § 61.150 * * *
40 C.F.R. § 61.145(c)(6)(i).
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6 L&C SERVICES, INC.
On January 29, 1997, the charges were dismissed against L&C
after a hearing on the merits.5 ALJ Charneski found that the Region
"failed to carry its burden of proof with respect to each of the six counts
at issue." Ini. Dec. at 7. Uncontested testimony by L&C's asbestos
expert established that Polarized Light Microscopy ("PLM") is the method
for determining whether asbestos is present in a given material,6 and that
the presence of asbestos cannot be determined by visual observation alone.
Ini. Dec. at 6, 8. The KDHE inspector also admitted that he could not
identify RACM by visual observation alone. Ini. Dec. at 8. Because the
inspector did not take samples, the Region was unable to conduct the PLM
analysis for Counts I, II, III and VI, thus the Region did not have any
evidence in this case that the specific material observed by the inspector
was RACM.
For Counts IV and V, the Presiding Officer found that the Region
did not provide sufficient evidence that the sampled material, determined
to be RACM through PLM laboratory testing, was friable (i.e., capable
of being "crumbled, pulverized, or reduced to powder by hand pressure,"
see 40 C.F.R. § 61.141). Ini. Dec.at 14. The Presiding Officer found the
investigator's testimony regarding the sample collected on June 25,1992,
did.not adequately support a determination of friability, but rather was
relevant to the issue of whether the material was wet or dry.7 Ini. Dec. at
14. Similarly the investigator testified that he "never physically touched
the sample" collected on August 28,1992. Id. Accordingly, the Presiding
5WPC settled with the Region before the hearing on the merits. See In re L&C
Services, Inc., Dkt. No. V11-93-CAA-112 (ALJ, Jan. 29, 1997) at 3 n.2 ("Ini. Dec.").
'The regulatory definition for "nonfriable asbestos-containing material"
specifies Polarized Light Microscopy as the method to identify the asbestos content of
material. See 40 C.F.R. § 61.141.
7We note that the evidence on the narrow issue of whether the sampled
material supporting Count IV was friable may present a closer call than the Presiding
Officer's decision suggests. However, since the Board dismissed as untimely the
Region's appeal of the Initial Decision, we do not question here the Presiding Officer's
evaluation of the investigator's testimony on this issue
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L&C SERVICES, INC.
7
Officer concluded that because the Region was "unable to prove that the
asbestos-containing material initially sampled * * * was friable asbestos,
it cannot * * * establish the violations in Counts IV and V." Id.
On March 27, 1997, L&C filed an "Application for Award of
Fees and Expenses Pursuant to the Equal Access to Justice Act"
requesting an award of $69,028.42.8 On December 22, 1997, the
Presiding Officer denied L&C's application for attorneys' fees and
expenses. See Rec. Dec. at 5. The Presiding Officer held that L&C was
a prevailing party within the meaning of the regulation, but the Region's
position in initiating the enforcement action was nevertheless substantially
justified. Rec. Dec. at 3-4. Accordingly, the Presiding Officer denied
L&C's request for fees and expenses. This appeal followed.9
n. DISCUSSION
On appeal, we have been asked to determ ine whether the Presiding
Officer properly found the Region's position in this action to be
substantially justified. We review a Presiding Officer's recommended
decision on EAJA matters de novo, and evaluate the issues raised on
appeal to determine whether the factual findings are supported by the
record and the legal conclusions are consistent with case law or other
applicable legal authority. See In re Hoosier Spline Broach, EAJA
Appeal 96-2, slip op. at 21 (EAB, July 2, 1998), 7 E.A.D. .
The EAJA is a fee- shifting statute that enables private parties who
prevail against the government in certain types of contested proceedings
to recover attorneys' fees and expenses when the government's position is
not "substantially justified." See 1980 Equal Access to Justice Act, Pub.
!L&C amended its request to reduce the award by $695.00 for attorneys fees
that it had incorrectly included in the original request. Rec. Dec. at 1, n. 1.
This appeal was timely filed with the Board on January 16, 1998.
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8
L&C SERVICES, INC.
L. No. 96-481, 94 Stat. 2325.10 The broad purpose of the statute is to
ensure that private litigants will not be deterred from challenging
questionable government decisions due to the burden and expense of
litigating against the government. As Congress explained:
|BJy allowing an award of reasonable fees and expenses
against the Government when the action is not
substantially justified, [the EAJA] provides individuals
an effective legal or administrative remedy where none
now exists. By allowing a decision to contest
Government action to be based on the merits of the case
rather than the cost of litigating, [the EAJA] helps assure
that administrative decisions reflect informed
deliberation. In so doing, fee-shifting becomes an
instrument for curbjng excessive regulation and the
unreasonable exercise of Government authority.
H.R. Rep. No. 1418, 96th Cong., 2d Sess., at 12 (1980), reprinted in
1980 U.S.C.C.A.N. 4984, 4991 ("1980 House Report"). The burden of
substantial justification is also "to caution agencies to carefully evaluate
their case and not to pursue those which are weak or tenuous." 1980
House Report at 4993. Agency action "unsupported by substantial
evidence is virtually certain not to have been substantially justified." H.R.
Rep. No. 120, 99th Cong., 1st Sess., at 9 (1985), reprinted in 1985
U.S.C.C.A.N. 132, 138 ("1985 House Report"). The government bears
the burden of proof on the issue of substantial justification. See 1980
House Report at 10-11 ("The Committee believes that it is far easier for
l0The EAJA is codified under two statutes covering two distinct types of
proceedings: 5 U.S.C. § 504 et seq., which governs adversary administrative
adjudications; and 28 U.S.C. § 2412 etseq., which governs civil, non-tort, court actions.
Although case law interpreting the EAJA has developed under both statutes, only 5
U.S.C. § S04, relating to administrative adjudications, is at issue in this appeal.
The 1980 EAJA became effective on October 1, 1981, and applied to all
adversary adjudications and civil actions pending on or commenced after that date. Pub.
L. No. 96-481, § 208, 94 Stat. 2330 (1980).
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L&C SERVICES, INC.
9
the Government, which has control of the evidence, to prove the
reasonableness of its action than it is for a private party to marshal the
facts to prove that the Government was unreasonable."); see also Green
v. Bowen, 877 F.2d 204, 207 (2d Cir. 1989); In re Biddle Sawyer Corp.,
4 E.A.D. 912, 935 (EAB 1993) (citing Green v. Bowen).
The term "substantially justified" means that the government's
position in the adjudication must have a "reasonable basis both in law and
fact." See, e.g., Pierce v. Underwood, 487 U.S. 552, 568 (1988)
("substantial justification" means "justified in substance or in the main,"
which is no different from having a reasonable basis in law and fact); In
re Hoosier Spline Broach Corp., EAJA Appeal No. 96-2, slip op. at 22
(EAB, July 2, 1998), 7 E.A.D. (government position is substantially
justified if it has a reasonable basis both in law and in fact) (citing
Pierce).
Further, the statutory requirementthat the substantial justification
determination be based on the "administrative record, as a whole, which
is made in the adversary adjudication for which fees and other expenses
are sought" (5 U.S.C. § 504(a)(1) (emphasis added)), has been
consistently interpreted to mean that a trier of fact must evaluate the
government's position in its entirety, and may not focus exclusively on the
government's position or conduct during discrete stages of the case. See,
Hoosier, slip op. at 22-23 (citing Commissioner, INS v. Jean, 496 U.S.
154, 161-62 (1990); U.S. v. Rubin, 97 F.3d 373, 375 (9th Cir. 1996);
Roanoke River Basin Ass'n v. Hudson, 991 F.2d 132, 139 (4th Cir.
1993); and Kuhns v. Board of Governors of the Federal Reserve System,
930 F.2d 39, 44 (D.C. Cir. 1991)).
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10
L&C SERVICES, INC.
Substantial justification issues are not matters of first impression
for the Board." Here, we find that the Presiding Officer's decision that
the Region's position was substantially justified to be in error.
There appears to be no dispute that the Region's position was
reasonably based in law. The Region alleged violations of 40 C.F.R.
§61.145(c)(6Xi) and L&C admitted that the regulation applied to its work
at the refmeiy. See Ini. Dec. at 8 ("EPA is correct in arguing that the
asbestos NESHAP work practice requirements set forth in Section
61.145(c) apply in this case. In fact, L&C concedes this very point.").
The Region's enforcement theory that a violation of the NESHAP can be
proven by appropriate circumstantial evidence is also not in dispute. See
App. Brief at 11 ("The EPA may be correct in asserting that 'it generally
can try and prove its case by circumstantial evidence."). Accordingly, we
only review whether the record supports the Presiding Officer's
"The Board has determined whether the Agency's position was substantially
justified in two instances. See In re Biddle Sawyer Corp., 4 E.A.D. 912 (EAB
1993)(finding the Region was not substantially justified because it did not advance
reasonable interpretations of regulation in the underlying enforcement action); In re
Hoosier Spline Broach Corp., EAJA Appeal No. 96-2 (EAB, July 2, 1998), 7 E.A.D.
(holding that Agency position was substantially justified).
We also note that the Agency's Chief Judicial Officer evaluated three EAJA
cases involving the issue of whether the Agency's position was substantially justified.
See In re Silver Stale Aviation, Inc., I E.A.D. 862 (CJO 1984) (remanding a decision
denying fees in FIFRA penalty case where new evidence of an EPA mistake not
disclosed to the presiding officer may have been determinative of whether Agency
position was substantially justified); In re Reabe Spraying Service, Inc., 2 E.A.D. 54
(CJO 1985)(affirming a denial of fees in FIFRA penalty case where the presiding officer
found Agency's position to be substantially justified); In re Pivirotto, 3 E.A.D. 96 (CJO
1990)(affirming denial of fees in TSCA penalty case where respondent was not a
"prevailing party" as defined under the EAJA, and where Agency's position throughout
settlement negotiations was substantially justified because respondents had admitted the
violations, and the penalty sought was "presumptively substantially justified").
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L&C SERVICES, INC.
11
determination that the Region had a reasonable basis in fact to initiate this
action against L&C.13
It is our conclusion that the Presiding Officer's "review of the
overall record" does not support a finding that the Region's position was
reasonably based in fact. This is a case where the Presiding Officer
should have found "the administrative record to be so deficient that the
government would not be substantially justified in relying on it." See
Smith v. Heckler, 739 F.2d 144, 147 (4th Cir. 1984), citing Guthrie v.
Schweiker, 718 F.2d 104, 108 (4th Cir. 1983).
As to Counts I, II, III and VI, the Presiding Officer concluded that
the Region did not have any evidence to establish a basic element of its
case - whether the observed materials contained asbestos. See Ini. Dec.
at 7. For these four counts, the investigator did not take samples of the
observed materials, thus the Region could not conduct PLM laboratory
analysis to confirm that the materials contained asbestos. L&C's asbestos
expert testified that presence of asbestos could not be confirmed by visual
observation alone, and the Region's investigator admitted that he could not
confirm the presence of asbestos visually. Id. at 8. Simply stated, in this
case, the administrative record with respect to these four counts does not
,2The Region posits, in the alternative, that even if there is no substantial
justification for its position, special circumstances exist that would make an award of
fees unjust. Reply Brief at 15-16 (citing 40 C.F.R. § 17.1). The Region argues that an
award of fees would be unjust because the Region's "credible interpretation of liability"
was found by the Presiding Officer to be "not so easily resolved." See Reply Brief at
16. The Region mischaracterizes the Presiding Officer's decision. The Presiding
Officer was not pointing out the difficulty of analyzing the facts of the case under the
Region's interpretation of liability; rather the Presiding Officer appeared to be
appropriately critical of the Region's contention that L&C's liability could be concluded
based almost exclusively on evidence relating to the amount of asbestos proposed to be
removed and the fact that the asbestos NESHAP applied to the removal project. The
Region's reliance on In re Reabe Spraying, 2 E.A.D. 54, 59 (CJO 1985), is also
misplaced. As discussed above, there is no dispute that the Region had a reasonable
basis in law for its position. Because the Region's position in this case is not one that
advances "novel but credible extensions and interpretations of the law," see Reabe
Spraying at 59, there is no basis to find special circumstances exist here.
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12
L&C SERVICES, INC.
provide substantia! justification for the Region's position that L&C had
violated the asbestos NESHAP because it contains no evidence that the
specific material observed by the KDHE investigators was asbestos.
Similarly, for Counts IV and V, the Presiding Officer concluded
that the Region had adduced no evidence "to prove that the asbestos-
containing material initially sampled * * * was friable asbestos." Id.
at 14. In view of the Region's failure to offer probative evidence
establishing that the observed materials were finable, we can only assume
that the Region did not have a reasonable basis in fact for the position that
L&C had violated the asbestos NESHAP on these counts.
This is not a case where the record contains contradictory
evidence, which may, in the ultimate judgment of the Presiding Officer,
outweigh the evidence upon which the government's position is based, thus
providing no basis for an award of EAJA fees. See Jackson v. Chater, 94
F.3d 274, 279 (7th Cir. 1996); See also Williams v. Bowen, 966 F.2d
1259, 1261 (9th Cir. 1996) (government was substantially justified for
EAJA purposes, although ultimately incorrect in denying disability
benefits, where evidence was in conflict as to impact of alleged mental
impairment on claimant's ability to perform work). Rather, this is a case
where the Region put on its case without a shred of direct evidence
establishing key elements of the offenses with which it charged L&C.
Moreover, the Region lacked any compelling circumstantial evidence to
fill the gap left by the complete absence of direct evidence.
The Presiding Officer's reliance on L&C's Asbestos Notification
Form, and an asbestos survey13 of the refinery by Diversified
Environmental Technologies, Inc. ("DETI"), an engineering firm hired by
WPC, to support a determination of substantial justification is misplaced.
See Rec. Dec. at 3-4. At best, the notification form and testimony related
l3The survey was never entered into evidence by the Region during the
proceedings and the Region's attempt to make DETI laboratory results part of the
record, post-hearing, was denied by the Presiding Officer by Order dated May 30,1996.
See Ini. Dec. at 10.
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L&C SERVICES, INC.
13
to the DETI survey lend support to the fact that there was a large amount
of asbestos at the refinery; that L&C intended to remove and abate friable
asbestos; and that the asbestos NESHAP workplace standards were
applicable to L&C's proposed work at the refinery. As ALJ Charneski
had found in the underlying decision as to liability, see Ini. Dec. at 8-10,
this information could not, in itself, prove liability since it does not provide
any support, direct or circumstantial, for the factual determinations of
whether the specific material observed by the inspector was asbestos or
friable.
The Region argues, "[T]his is not a case where it can be said that
there was no friable asbestos involved." Reply Brief at 7. That general
assertion only supports the legitimacy of conducting a compliance
inspection at the refinery. The fact that friable asbestos may be
"involved" is not a sufficient basis for the Region to take the additional,
more serious step of filing a complaint against L&C, charging it with
violations of the law. For that, the Region needed to have proof for each
count that the specific material observed by the inspector was actually
regulated asbestos and friable, not just that he suspected the material was
asbestos or friable.14 L&C's asbestos notification form and the DETI
survey relied upon by the Region merely "provide[] support for the EPA's
belief that the material being removed was friable asbestos." Reply Brief
at 9 (emphasis added). They are not adequate to support a determination
that the Region had a reasonable basis in fact for its position that L&C
had violated the asbestos NESHAP.
14There is no evidence in the record to suggest that all of the metal jacketing
in the areas inspected at the refinery was coated with friable asbestos at the time of
removal. In fact, the record reflects testimonial evidence by DETI employee, Rodney
Hill, that there was "almost as much non-asbestos material in the areas involved here
as there was asbestos-containing material." Ini. Dec. at 10.
The Region also makes much of the fact that L&C presumably had decided to
treat all insulation in work areas as if it contained asbestos (Reply Brief at 7); but even
if this were true, L&C's decision to treat all materials as if they contained asbestos does
not logically lead to the conclusion that they actually contained asbestos.
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14
L&C SERVICES, INC.
\Vhen we review the underlying case "as a whole," we are
convinced that the Region's position in this action was not reasonably
based in fact because the administrative record was so lacking of evidence
that the specific materials observed by the inspector were either asbestos
or friable.
in CONCLUSION
Accordingly, we reverse the Presiding Officer's recommended
decision denying L&C's application for attorneys' fees and expenses, and
remand for a determination of reasonable attorneys' fees and expenses to
be awarded to L&C, unless the parties settle pursuant to 40 C.F.R. §
17.24.
So ordered.
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UNIFEn STATES ENVIRONMENTAL PROTECTION AGENCY
BEFORE THE ADMINISTRATOR 83 J UL 23 P3
In the Matter of
Reabe Spraying" Service, Inc.,
Respondent
Docket No. I.F. & R.-V-651-C
DECISION DENYING APPLICATION FOR FEES AND EXPENSES
This is an application for attorney feef and expenses pursuant to the
Equal Access to Justice Act, Public Law No. 96-481, 94 Stat. 2325, specifi-
cally pursuant to Section 203(a)(1) of the Act (codified in 5 U.S.C. 504),
and the Agency's implementing regulations, 40 CFR Part 17.
The applicant, Reabe Spraying Service, Inc. ("Reabe") was the respondent
in a proceeding under the Federal Insecticide, Fungicide, and Rodenticide Act
("FIFRA"), Section 14(a)(1), 7 U.S.C. 1 36J_( a) (1), for the assessment of civil
penalties for alleged violations of the Act. The administrative complaint
charged Reabe with six violations in connection with an aerial spraying of a
mixture of Parathion, Sevin and Kocide. Four of the violations concerned
Reabe's alleged failure to follow label directions in applying Parathion, one
concerned its alleged failure to follow label directions in applying Sevin,
and one concerned its alleged failure to follow label directions in applying
Kocide. Following three days of hearings, an initial decision was filed on
April 30, 1982, sustaining one of the charges relating to Parathion, but
dismissing all other charges. Reabe appealed the decision, and on February 16,
19&3, the Judicial Officer entered a final decision adopting the initial
deci si on.
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2
To be entitled to an award of attorney"'s fees and expenses, the applicant
must be an eligible prevailing party.V The grounds on which fees and expenses
are awarded are set forth in 40 CFR 17.06(a), which provides as follows:
A prevailing applicant may receive an award for
fees and expenses incurred in connection with a
proceeding unless the position of the EPA as a
party to the proceeding was substantialy justified
or unless special circumstances make the award
sought unjust. The fact that the EPA did not pre-
vail does not demonstrate that the Agency's position
was not substantially justified.2/
The first question to consider is whether Reabe is eligible for an
award of fees. Reabe has submitted with its application an asset schedule
to its 1981 income tax return showing a net worth of less than $500,000.3/
The EPA contends that this is inconsistent with Reabe's position in the
proceeding wherein it elected not to contest its financial ability to pay
a proposed penalty that the EPA says was calculated on the assumption that
Reabe's net worth was $1,000,000. The argument is presumably intended
solely for the purpose of impeaching Reabe's figures, since even if Reabe's
net worth were $1,000,000, it would still be eligible to obtain fees and
]_/ See 5 U.S.C. 504(a)(1); 40 CFR 17.05.
2/ The first sentence in 40 CFR 17.06(a) follows generally the language
of 5 U.S.C. 504(a)(1). The last sentence is not in the Act but is in accord
with the legislative history and with judicial construction of the Act. See
infra at 6-7.
3/ "Net worth" is not specifically defined in the Act or the regulations
but it is assumed to have its ordinary meaning of assets less liabilities.
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3
expenses.4/ There are serious flaws in the EPA's argument. First, the
proposed penalty, in accordance with the EPA's FIFRA guidelines, was
calculated on the basis of Reabe's gross sales, and was so stated in
Complainant's prehearing letter dated September 18, 1981. The assumption
that Reabe also had a net worth of over $1,000,000, appears to have now
been disclosed for the first time and could not conceivably therefore
provide a basis for any waiver by Reabe. Second, in stating that it would
not contest its financial ability to pay the proposed penalty of $6,000,
Reabe went on to say that it did intend to apply for all fees and costs,
and so no waiver can be implied by its action.Jj/
I find, accordingly, that Reabe is eligible for an award.
The next matter to be considered is whether Reabe "prevailed" with-
in the meaning of the Equal Access to Justice Act and the regulations so
as to be entitled to reimbursement for expenditures~in defending against the
charges that were dismissed. In the complaint, four label directions
for Parathion were alleged to have been violated. The one on which the
complaint was upheld was the violation of the label direction to "keep
all unprotected persons and children away from treated area or when
there is danger of drift." A penalty of $5,000 was requested for this
violation and it was the only violation with respect to Parathion for
which a penalty was requested. Two other violations with respect to
4/ Eligibility extends to corporations with a net worth of up to $5
million. 40 CFR 17.05(b)(5).
5/ See letter of Reabe's attorney dated August 18, 1981.
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4
Parathion namely, of the label directions "Do not apply when weather
conditions favor drift from the areas treated", and "Do not allow this
material to drift onto neighboring crops or non-crop areas" were dismissed
because they were not sustained by the evidence. A fourth violation,
that of the label statement reading, "Do not breathe - Poisonous if
breathed - Breathing vapors, spray rnist or dust may be fatal" was dis-
missed because the EPA construed this label warning as being violated
by Reabe if persons on adjoining land were exposed to drifting vapors and
spray mist, and this construction was rejected.
In the case of the Kocide, the label direction alleged to have.been
violated was that reading "Do not apply when weather conditions favor drift
from the areas treated." A penalty of $500 was requested. That charge was
dismissed on the same grounds as the alleged violation of a similar direction
on the Parathion label, namely, that it was not sustained by the evidence.
Finally, with respect to the Sevin, the label directions alleged to have
been violated were the statements "Harmful if inhaled" and "Avoid breathing
of dust or spray." A penalty of $500 was also requested for this violation.
That charge like the charge relating to similar wording on the Parathion
label was dismissed because it was found to rest on a misinterpretation of
what was intended by the statements.
It can be seen, that the five charges which were dismissed all were
based upon the underlying claim that the pesticidal mixture being sprayed
had drifted onto adjoining property. The EPA contends ';hat they were
minor charges because no penalty was requested for the three charges
relating to Parathion and only $500 each for the Sevin and Kocide charges.
Even though the Agency was seeking to establish only the violation and
request only a nominal penalty or none at all for these charges, however,
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5
Reabe regarded them as important enough to defend against and not to
have on its record a finding that it did commit these violations. Not
to reimburse Reabe for its effort if the Agency has taken an unreason-
able position, would be contrary to the intendment of the Equal Access
to Justice Act. As the court stated in Goldhaber v. Foley, 698 F. 2d.
193, 197, "[T]he Act's governing principle [is] that the United States
should pay those expenses which are incurred when the government presses
unreasonable positions during litigation. This principle devolve's from
the Act's central purpose to eliminate any barrier to litigation challeng-
ing unreasonable government conduct presented by the specter of attorney's
fees."
A final argument made by the EPA is that Reabe should not be considered
to have prevailed because the initial decision did not expressly adopt
Respondent's position that there had not been and could not have been any
drift. Instead, there was only a finding that the evidence was insufficient
to establish that drift did occur or could have occurred. All that was
required to be found, however, in order for Reabe to prevail, was that
the EPA had failed to show by the preponderance of evidence that the
facts with respect to the dismissed charges were as alleged in the complaint,
i.e., that their existence was more probable than their nonexistence.^/
It is all, accordingly, that should be required for Reabe to be a prevailing
party.
It is found, therefore, that Reabe is a prevailing party within the
meaning of the Equal Access to Justice Act and the regulations on those
charges that were dismissed, and is entitled to reimbursement unless the
6/ See 40 CFR 22.24.
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6
EPA's position was substantially justified or unless special circumstances
make the award unjust.
As to whether the EPA's position was substantially justified or whether
special circumstances make an award unjust, the legislative history has this
to say about the standard to be applied:
The test of whether or not a Government action is substantially
justified is essentially one of reasonableness. Where the
Government can show that its case had a reasonable basis both in
law and fact, no award will be made. In this regard, the strong
deterrents to contesting Government action require that the
burden of proof rest with the Government. This allocation of the
burden, in fact, reflects a general tendency to place the burden
of proof on the party who has readier access to and knowledge of
the facts in question. The committee believes that it is far
easier for the Government, which has control of the evidence, to
prove the reasonableness of its action than it is for a private
party to marshal the facts to prove that the Government was un-
reasonable.
Certain types of case dispositions may indicate that the Govern-
ment action was not substantially justified. A court should look
closely at cases, for example, where ther.e has been a judgment on
the pleadings or where there is a directed verdict or where a
prior suit on the same claim had been dismissed. Such cases
clearly raise the possibility that the Government was unreasonable
in pursuing the litigation.
The standard, however, should not be read to raise a presumption
that the Government position was not substantially justified,
simply because it lost the case. Nor, in fact, does the standard
require the Government to establish that its decision to litigate
was based on a substantial probability of prevailing. Further-
more, the Government should not be held liable where "special
circumstances would make an award unjust. This "safety valve"
helps to insure that the Government is not deterred from advancing
in good faith the novel but credible extensions and interpreta-
tions 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.7/
7/ H.R. Rep. No. 1418, 96th Cong. 2d. Sess. 10-11 (1980), reprinted in
T980 U.S. Code Cong. & Ad. News 4984-90; see also H.R. Conf. Rep. No. 96-
1434, 96th Cong. 2d. Sess. 21-22 (1980), reprinted in 1980 U.S. Code Cong.
& Ad. News 5010-11.
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7
In short, the inquiry is to determine whether the EPA has shown that its
case had a reasonable basis in law and fact.
When Respondent prevails because the Agency was found to have not proved
its case by the preponderance of evidence, the reasonableness of the Agency's
position can be judged by the evidence it relied on. If, for example, the
EPA had no evidence to support its case, the Agency's position could not be
described as a reasonable one. See Wolverton v. Schweiker, 533 F. Supp.
420, 425 (D. Idaho 1982). On the other hand, simply to award fees and expenses
because the Agency lost on the factual issues would be inconsistent with
Congress' intent. The standard of reasonableness "should not be read
to raise a presumption that the Government's position was not substantially
justified simply because it lost the case. Nor, . . . does . . . [it] require
the Government to establish that its decision to litigate was based on a
substantial probability of prevailing." H.R. Rep. .No. 1418, supra at 11,
1980 U.S. Code Cong. & Ad. News at 4990. See Broad Ave. Laundry and Tailoring
v. U.S., 693 F. 2d. 1387, 1391-92 (Fed. Cir. 1982); Bennett v. Schweiker,
543 F. Supp. 897 (D.D.C. 1982).
Obviously, then, the EPA's burden lies somewhere in between these two
polar positions: it has to show that there was evidence to support its position
but does not have to show that the evidence was so overwhelming as to virtually
guarantee that it would prevail. Given the risks necessarily involved in
litigation where the burden is on the Government to show that the evidence
preponderates in its favor, and this, in turn, depends on how the presiding
officer evaluates the evidence, an appropriate test in accord with Congress'
intent would appear to be that the EPA must show that the Agency was possessed
of facts from which it could reasonably believe that the law had been violated.
Since the facts depend upon the evidence in the Agency's possession, another
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8
way of stating the test is that the Agency's position is reasonable if
the evidence on which it proceeded was sufficient to establish a prima
facie case warranting a decision in favor of the Agency if left unexplained
or unrebutted. If the evidence is speculative or deficient in some other
way so as not to add up to a prima facie case, it is difficult to see
how the Agency's position could be justified as reasonable. I find that
the Agency has sustained the burden of showing that its position was
reasonable under the test as herein stated._8/
The EPA in this case relied primarily on the testimony of several adults
who were present at the time of spraying and~who experienced physical
symptoms consistent with exposure to Parathion, Sevin or Kocide. Reabe's
principal witness in defense was Dr. Morgan, an admitted expert on detecting
adverse effects of pesticides on human health. Dr. Morgan had supervised
tests for pesticide poisoning done on blood and urine samples taken from
several of the adults who were assertedly exposed to the pesticidal
spray. His testimony that the tests were reliable indications of pesticide
poisoning, and that no evidence of pesticide poisoning was observed in
the samples tested, was found to nullify the inference that the adults had
been exposed to a pesticidal overspray. The EPA, however, did not know
the substance of Dr. Morgan's testimony until his deposition was taken
8/ An Agency may have reasonable grounds for proceeding with a case
even if the evidence to support its position is so weak that the chances
are against its prevailing, but I am not aware of what they would be.
In any event, nothing said by the Agency in support of its position here
indicates that the Agency had any grounds for proceeding other than that
the facts of which it was cognizant warranted its prosecution of the case.
Also deve'lopments as the case proceeds could possibly change the Agency's
position from a reasonable one to an unreasonable one. Such developments,
however, do not appear to have occurred in this case.
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9
after the hearing, and even then could have concluded that the result
was still in the balance, since Dr. Morgan did not purport to explain
what could have caused the symptoms experienced by. the adults.
Reabe asserts that the tests of samples taken by the Wisconsin Depart-
ment of Agriculture, which the EPA did have in its possession, furnished the
EPA with scientific evidence indicating no drift or overspray. The EPA,
however, could reasonably believe that the "eyewitness" testimony from the
adults who claimed they were exposed to the spray would outweigh the nega-
tive results obtained from the tests, particularly since the evidence
did raise some questions about the way the samples were handled.
Finally, to show that of the weather conditions favored drift, the EPA
relied on expert testimony that the reported meterological conditions at
the time of the spraying could have favored drift toward the adjoining
property. While this testimony was not considered sufficient because of
other evidence in the record, the answer to the question as to what weather
conditions should be considered as favoring drift was not clear-cut. EPA's
reliance on the expert testimony to show that drift which it claimed did
occur was consistent with weather conditions was reasonable, and so was the
inference drawn therefrom that the weather conditions did favor drift.
In short, the factual issues in this case were sharply disputed.
Although the EPA did not prevail, there is simply no basis for saying that
the EPA had taken an unreasonable position on any of the factual issues.
As to the two charges which were dismissed because it was found that
the EPA had misconstrued the label warning against breathing or inhaling
the spray, it is to be noted that this was not a defense raised by Reabe,
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10
who relied entirely on its factual con tention that no drift did occur
could have occurred. Instead, dismissal was based on my own reading of
what was intended by the statements. Assuming, however, that Reabe
would still be considered a prevailing party even though it won on grounds
other than those urged by it, I find that there was substantial justification
for the Agency's position.9/
The EPA's interpretation did appear to be raised for the first time.
It was consistent with its underlying factual position that there had been
drift. Also implicit in the label warnings was that the pesticide was
harmful if breathed or inhaled by anybody. There is, additionally, authority
for the proposition that, being remedial in purpose, the label statements
should be broadly construed to prohibit all consequences that could be
inherent therein.J_0/ While I found that the Agency was attempting to
stretch the meaning of the label statements too far, the Agency was
advancing in good faith a credible interpretation of the label statements.
It's position, therefore, had a reasonable basis in both law and fact and
9/ The EPA has not specifically addressed the question of whether its
interpretation of the label statements was reasonable, although its burden
of proving that its action was substantially justified applies to its legal
as well as factual positions. In view of the EPA's vigorous defense of its
position, however, and also because Reabe has also avoided any discussion of
the question in its papers, I construe the Agency's silence as attributable to
an oversight or to a misunderstanding of what its burden under the Equal Access
to Justice Act entails, rather than an admission that is position was unjustified.
I could, of course, now ask the EPA to brief the question before deciding it, but
in view of my familarity with the proceeding, such a step seems unnecessary.
10 / See Gardner & North Roofing & Siding Corp. v. Bd. of Governors of the
Federal Reserve Systems, 464 F. 2d 838, 841-42 (P.C. Cir. 1972).
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11
was substantially justified within the meaning of the Equal Access to
Justice Act.11 /
Since it is found that the EPA's position is substantially justified,
it is unnecessary to consider the EPA's argument that special circumstances
exist which would in any event make an award unjust.12/
Accordingly, it is recommended that the application for fees be denied.
Jerald Harwood
Administrative Law Judge
July 26, 1983
11/ See H.R. Rep. No. 1418 supra at 11 , 1980 U.S. Code Cong. & Ad. News at
4990; S&H Riggers & Erectors Inc. v. Occupational Safety & Health Review
Commission, 672 F. 2d 426, 430-31.
12/ While also not necessary for decision in this case, it is further
noted that Reabe's application in its present form does not give enough
information to determine the reasonableness of its request for $5,279.63 to
cover its fees and expenses. Specifically, Reabe has failed to provide a
detailed itemization of the time spent and the rate at which time was billed,
without which no determination can be made as to whether Reabe's calculations
are in compliance with the rates specified in 40 CFR 17.07(b)(1) and (2).
Counsel should bear this in mind with respect to any future applicaton for
fees which may be filed.
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BEFORE THE ADMINISTRATOR
U.S. ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
In the Matter of:
Reabe Spraying Service, Inc.
Respondent
Docket No. V-651-C
-9
FIFRA Appeal No. 83-4
FINAL DECISION ON ATTORNEY'S FEES
Background
This is an appeal by Reabe Spraying Service, Inc. from
an Administrative Law Judge's (presiding officer) decision
denying Reabe attorney's fees as a prevailing party in a FIFRA
1/
civil penalty proceeding. In the civil penalty proceeding,
the presiding officer issued an initial decision dismissing
most of the charges related to Reabe's aerial application of
2/
a mixture of Parathion, Sevin and Kocide. The Judicial
Officer adopted the initial decision as the Agency's final de-
cision, together with the findings, conclusions and reasons in
support thereof.
1/ Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA)
Section 14(a)(1).
2/ The administrative complaint contained six charges against
Reabe in connection with aerial application of a Parathion/Sevin/
Kocide mixture to a bean field. The complainant charged that
Reabe applied the pesticide mixture in a manner inconsistent with
six separate label prohibitions (hence the six charges) in viola-
tion of FIFRA §12(a)(2)(g)/ thereby causing spray to drift onto
the property of an adjoining children's day care center.
(next page)*
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(Footnote No. 2 cont'd)
The Parathion label prohibitions
Do Not Apply When Weather
From the Areas Treated.
Keep All Unprotected Persons and Children Away
From Treated Areas or Where There is Danger of
Drift.
Do Not Allow This Material to Drift Onto Neigh-
boring Crops or Non-crop Areas.
Do Not Breathe.
POISONOUS IF BREATHED.
Breathing Vapors, Spray, Mist or Dust May be
Fatal.
The Kocide label prohibition in question read:
Do Not Apply When Weather Conditions Favor Drift
From Areas Treated.
The Sevin label prohibition in question read:
HARMFUL IF INHALED. Avoid Breathing of Dust Spray.
The presiding officer dismissed the charges of violating
the two label warnings against breathing or inhaling Parathion
or Sevin. With respect to those two label warnings, he stated:
These statements appear to be on the label to protect
from exposure those who handle or use these pesticides and
not to prevent misapplications that may expose-others,
which is the nature of the charges in this case. Protec-
tion of the public from exposure, when deemed necessary,
would seem to be covered by such statements as the prohibi-
tions on the Parathion and Kocide labels against applying
when weather conditions favor drift, and the requirement on
the Parathion label that unprotected persons and children
be kept away from where there is danger of drift (footnote
omitted). Initial Decision, p. 12.
The presiding officer dismissed all remaining charges except
the charge of violating the Parathion label prohibition relating
to keeping all unprotected persons and children away from areas
where there is danger of drift. For that charge Reabe was
assessed a civil penalty of $600.
in question read:
Conditions Favor Drift
-------
-3-
Reabe then applied for attorney's fees and expenses pur-
suant to the Equal Access to Justice Act (EAJA), 5 U.S.C. $504 ,
and the Agency's implementing regulations, 40 CFR §17 (1984).
The presiding officer issued his Decision Denying Application
For Fees and Expenses (Decision Denying Application For Fees)
3/
on July 26, 1983. It is that decision which is being ap-
pealed here. The Chief Judicial Officer, as the Administrator's
delegatee, has the authority to decide this appeal pursuant to
40 CFR §§17.27 and 22.30 (1984). For the reasons set forth
below, the presiding officer's Decision Denying Application
For Fees is affirmed.
Discussion
An applicant may receive an award for fees and expenses
in connection with a proceeding brought against it by EPA if it
"prevails," unless the position of EPA as a party to the proceed-
ing is substantially justified or unless special circumstances
1/
make the award sought unjust. 40 CFR § 17.6(a)( 1984). The
3/ An initial determination by an ALJ on an application for at-
torney's fees is referred to as a "recommended" (rather than an
"initial") decision in the Agency's EAJA regulations, 40 CFR
§17.26 (1984). As used in 40 CFR §17.26 (1984), that term has no
particular significance. A recommended decision on attorney's
fees is treated the same way as an initial decision for purposes
of the Agency's appeal procedures. In the Matter of Robert Ross
& Sons, Inc., TSCA Appeal No. 82-4, n. 7 (Jan. 28, 1985).
£/ In the presiding officer's view, Reabo "prevailed" within the
meaning of the EAJA and its implementing regulations since cer-
tain of the charges against it were dismissed. However, Reabe
lost on one of the charges brought against it. In other words,
considering" all the charges, Reabe prevailed only partially.
(next pagej
-------
-4-
test of whether or not Agency action is substantially justi-
fied is essentially one of reasonableness; it is incumbent
upon EPA to show that it possessed facts from which it could
5/
reasonably believe that the law had been violated. See
Decision Denying Application For Fees, pp. 6, 7.
Facts in EPA's possession at the time of the civil penal-
ties proceeding included statements of several adults who were
present at the day care center at the time of spraying and who
made observations and experienced physical symptoms consistent
(Footnote No. 4 cont'd)
The issue raised is whether such a party can be considered a
"prevailing party" as that term is used in the EAJA, or whether
it must prevail on all charges brought against it, particularly
if the charges, as here, arise out of the same transaction (e.g.,
aerial spraying of a pesticide) and involve alleged violations
of the same statutory provision (e.g., FIFRA §12(a)(2)(G)).
Preliminary research on this issue indicates that its resolution
is complicated. For one thing, the EAJA contains no definition
of the term "prevailing party." Moreover, compelling arguments
can be advanced on either side of this issue. (For a discussion
of partially prevailing parties and attorney's fees under the
fee-splitting provisions of the Civil Rights Act, see Hensley v.
Eckerhart, U.S. 103 S.Ct. 1937 ( 1983)). Accordingly,
since resolution of this issue is not necessary to reach an ul-
timate result in this case, I -elect not to review-it at this time.
Rather, I prefer to review it when and if it arises in a future
case on appeal where it has a more direct impact on the ultimate
outcome of the controversy, and can be fully briefed by the
parties.
5/ The presiding officer denied Reabe's request for attorney's
Fees because he found that although Reabe prevailed on the
charges which were dismissed, the Agency's position with respect
to those charges was substantially justified.
The "special circumstances" exemption will be discussed at
length late'r in this decision.
-------
with exposure to Parathion, Sevin or Kocide. — Decision
Denying Application For Fees, p. 8. Their statements are
enlightening.
Ms. Goggin, a teacher who was present stated:
"I could feel and taste a very foreign substance
that - you know, I could feel it on my arms and my
face. I could taste it and I continually tried to
wash my hands and, you know, wash my face, but it per-
sisted . " Tr. 9-11.
Another teacher who was present, Ms. Erickson, reported that at
the time of the spraying, "there was a slight breeze coming up
the path and it smelled like some kind of insecticide, something
like that." The next day she had a sore throat and a runny nose
which persisted for about a week. Tr. 109-116. Ms. Goldsmith,
a day care aide who was present, stated she smelled and tasted
something in the air which she described as having a "mediciney"
smell, and a "chalky" taste. She experienced a constriction in
her chest and throat. After a few days she had a sore throat
and her eyes watered and burned. Tr. 129-132, 134.
Others present gave similar testimony. Luz Mata heard
others say, "it smells awful." The next day she developed a
sore throat. Tr. 143-149. Magdalena Flores observed, "there
was like dust and it tasted bitter and sour" inside the build-
ing. Later in the day she had a stomach ache and cramps lasting
6/ Present at the adjoining day care center at the time of the
spraying were five young children between the ages of two and
six and approximately fifteen adult women. Four of the adults
were teachers, one was the cook, and the remainder were partici-
pating in a "Young Child Development" class.
-------
-6-
all night and the next day. Tr. 150-52, 157. Dorothy
Kramlich smelled an "unusually, pungent odor" inside the
building which persisted for several hours. Tr. 200-203, 206.
However, in rebuttal Reabe submitted urine and blood sam-
ples of those present at the center during spraying as well as
test data from two samples of vegetation on the day care center
property which purported to show that the center's environs
were not exposed to the pesticide mixture sprayed on the adjoin-
ing bean field. In other words, the test data purported to show
that drift had not occurred. Although the presiding officer re-
lied on this scientific evidence and found drift had not
occurred (or at least that EPA Region V failed to demonstrate
that drift had occurred by a preponderance of the evidence),
the Region, in light of the questions surrounding the test
7/
data's reliability, had good reason to reject the test data
7/ The way the vegetation samples were collected and handled
casts doubt on the reliability of the negative test results.
First, the samples were collected a full two days after the
spraying had occurred. Then they were transported in an auto-
mobile for an hour under conditions of high temperature and
humidity. The samples were finally frozen, but not packed in
ice, for a four hour trip to the lab. Under these circumstances
one would expect the pesticides to break down and negative test
results would not be surprising.
The blood and urine tests were analyzed by Dr. Donald Morgan,
an Associate of Preventive Medicine and Environmental Health at
the University of Iowa. He did not analyze the samples for the
presence of Kocide. Moreover, the fact that the urine test re-
sults were negative is inconclusive since both Sevin and Para-
thion are rapidly metabolized and excreted. Initial Decision,
p. 9. Finally, Dr. Morgan's conclusion that some of the physical
symptoms nreviously described were likely not attributable to
(next pagey~
-------
-7-
in favor of the many, consistent statements of those present
during spraying indicating the likelihood that drift had oc-
curred. Clearly, the Region had good reason to believe that
8/
drift had occurred and the labels' prohibitions against drift
had been violated. Therefore, as the presiding officer found,
EPA's action charging Reabe with violation of the labels'
prohibitions against drift was substantially justified.
Also, the presiding officer found the Region's inter-
pretation of the two similar label warnings against breathing
Parathion and Sevin to be substantially justified. (See n. 2,
supra.) The warning on the Sevin label read:
HARMFUL IF INHALED . . . Avoid Breathing of
Dust or Spray.
(Footnote No. 7 cont'd)
drifting of Parathion and Sevin seems irrelevant in light of
his admission "that it was possible that they could have been
related to some other chemical in the spray such as copper
compound or Xylene (which may have been used as a carrier
of pesticides)." Initial Decision, p. 11.
8/ The various labels' prohibi-tions against drift-are as
Follows:
Do Not Apply When Weather Conditions Favor
Drift (Parathion Label).
Do Not Allow This Material to Drift Onto
Neighboring Crops or Non-Crop Areas
(Parathion Label).
Do Not Apply When Weather Conditions Favor
Drift From Areas Treated (Kocide Label).
-------
-8-
The warning on the Parathion label is similar. Under the
Region's interpretation, Reabe would be in violation of the
label warnings against breathing or inhaling Parathion or
Sevin if its spray drifted, and as a result, anyone breathed
or inhaled the spray dust.
Contrary to the Region's interpretation, these warnings
appear to be on the label to protect those who handle or use
the pesticides in question from exposure, and not to protect
others from exposure to drift resulting from misapplication.
See Initial Decision, p. 12. Accordingly, I am not convinced
that the Region's interpretation of the label warnings against
breathing or inhaling Sevin or Parathion was substantially jus-
tified since it stretches the meaning of these label warnings
beyond what was intended.
In any event, if the presiding officer erred when he
found the Region's interpretation of these two label warnings
to be substantially justified, it was harmless error. For
even if the Region's interpretation is not substantially jus-
tified, it is justified by the EAJA's "special circumstances"
exemption which allows an agency latitude to advance in good
faith the novel but credible extensions and interpretations of
the law that often underlie vigorous enforcement efforts, with-
out being deterred by the prospect of attorney's fees and ex-
penses under the EAJA, should it fail to prevail. H.R. Rep.
-------
-9-
No. 1418, 96th Cong., 2d Sess. 10-11 (1980), reprinted in 1980
U.S. Code Cong. & Ad. News, 4984-90; see also H.R. Conf. Rep.
No. 96-1434, 96th cong., 2d Sess. 21-22 (1980), reprinted in
1980 U.S. Code Cong. & Ad News, 5010-11.
Here, there is no reason to question the presiding offi-
cer's finding that the Region's interpretation of these two
label warnings was being advanced in good faith. Moreover, as
the presiding officer stated, the Region's interpretation was
a credible (if not a substantially justified) interpretation,
particularly in light of the fact that, being remedial in pur-
pose, "label statements should be broadly construed to prohibit
all consequences that could be inherent therein." (Citation
omitted.) Decision Denying Application For Fees, p. 10.
Accordingly, even if not substantially justified, the Re-
gion's interpretation of the two label warnings against breath-
ing Parathion and Sevin fall within the special circumstances
exemption of the EAJA. Therefore, Reabe is not entitled to an
award of attorney's fees under the EAJA for defending against
9/
the charges that it violated these warnings.
9/ That leaves one charge for discussion. Unlike the other
five, this remaining charge was not dismissed. The presiding
officer assessed a $600 penalty against Reabe for failing to
abide by a requirement on the Parathion label which states:
Keep All Unprotected Persons and Children Away
From Treated Areas or Where There is Danger
of Drift.
(next page)
-------
-10-
Reabe's Arguments on Appeal
On appeal Reabe makes three arguments, all of which are
10/
made in a summary fashion.
First, Reabe argues that the presiding officer's Decision
Denying Application for Fees is in "error because it does not
address the question that industry practice and recently codi-
fied statutes and federal regulations place responsibility for
all claimed notice requirements on the farmer or land owner."
Reabe fails to specifically identify by citation which "codified
statutes and regulations" it refers to. More significantly,
this argument appears irrelevant to any issue which I may prop-
erly consider in the instant appeal. The purpose of this
appeal proceeding is to consider whether the presiding officer
properly denied Reabe's application for attorney's fees. How
Reabe's present argument is relevant to that question is left
unexplained, and I am unable to fathom any independent ex-
planation as to its relevance. Accordingly, it is rejected.
(Footnote No. 9 cont'd)
Since Reabe failed to "prevail" on this charge, it, of course,
has no legitimate claim to an award of attorney's fees incurred
in association with defending this charge. See Bartholomew v.
Watson, 665 F.2d 910, 914 (1982); Muscari v. Quinn, 614 F.2d
577, 579-581 (1980).
10/ For some reason which is not evident, Reabe has misstyled its
Notice of Appeal as a "Motion to Reconsider." Generally, motions
for reconsideration are directed to the tribunal originally de-
ciding a controversy; when a party wishes review of an original
decision by' an appellate tribunal it generally files an appeal,
i.e., Notice of Appeal and Supporting Briefs. See 40 CFR §22.30
(1984).
-------
-11-
Reabe also appeals "based on the attached [i.e., attached
to its appeal papers] affidavit as to the number of hours and
fee per diem charged in this matter by the petitioner's attor-
ney. " Of course the fee amount is totally irrelevant to whether
or not an award is justified under the EAJA and its implementing
regulations. Resolution of that question depends upon the fac-
tors previously discussed at some length, i.e., "prevailing
party" status and lack of substantial justification or special
circumstances which would otherwise make an award of attorney's
fees unjust. Accordingly, Reabe's second argument is rejected.
Finally, Reabe argues "the heart and essence of the . . .
claim by the EPA [was] that the personnel in the day care cen-
ter had been subjected to drift and overspray, which claim was
totally rebutted by scientific evidence in the possession of
the EPA when the complaint was filed, and was dismissed after
hearing."
Suffice it to say that in light of the large number and
consistency of the statements of those present at the center at
the time of spraying, together with the questions surrounding
the reliability of the scientific evidence (see n. 7, supra. ),
the Region had good reason to believe that drift had occurred.
Accordingly, despite the fact that physical test data failed to
confirm the occurrence of drift, the Region was substantially
justified in bringing the complaint.
-------
-12-
For all of the foregoing reasons, the presiding officer's
Decision Denying Application for Fees and Expenses is affirmed.
So ordered.
Ronald L. McCa.llum
Chief Judicial Officer (A-101)
Dated:
-------
CERTIFICATE OF SERVICE
I certify that copies of the foregoing Final Decision on
Attorney's Fees in the matter of Reabe Spraying Service, Inc.
FIFRA Appeal No. 83-4, were sent to the following persons in
the manner indicated:
By 1st class mail:
Daniel G. Golden,
Anderson, Fisher,
O'Brien & Rici
P.O. Box 285
1257 Main Street
Stevens Point, WI
Esq.
Shannon,
54481-0285
Michael J. Walker, Esq.
Office of Regional Counsel
Room 1644, Mail Code 5-C
U.S. EPA Region V
230 South Dearborn St.
Chicago, IL 60604
Ms. Beverly Thompson
Regional Hearing Clerk
U.S. EPA Region V
230 South Dearborn St.
Chicago, IL 60604
By hand delivery: Hon. Gerald Harwood
Administrative Law Judge (A-110)
U.S. EPA Headquarters
401 M Street, S.W.
Washington, DC 20460
Ms. Bessie Haramiel
Hearing Clerk
U.S. EPA Headquarters (A-110)
401 M Street, S.W.
Washington, DC 20460
M. Gail Wingo
Secretary to the Chief
Judicial Officer
Dated: SW 28 ISS5
-------
BEFORE THE ADMINI^TrRA-TpgD
U.S. ENVIRONMENTAL PRQ^&.CT'fQNO^CS^NCY f<"
WASHINGTON fHD,\Qlii3 CLERK ' ,y^
85
JAM 30 Ml: 45
/O
/
* /
In the Matter of:
Robert Ross & Sons, Inc.
Respondent
Docket No. TSCA-V-C-008
TSCA Appeal No. 82-4
ORDER DENYING APPEAL; ELECTION NOT TO
REVIEW SUA SPONTE
This order denies EPA Region V's motion t
-------
-2-
of the Toxic Substances Control Act (TSCA), 15 U.S.C. §2615(a),
and the Agency's implementing regulations, 40 CFR §761.10(a)
2/
(1979).
Having prevailed, Robert Ross applied for attorney's fees
and other expenses under the EAJA. The Chief Judicial Officer
referred Ross' application for attorney's fees to the presiding
y
officer for his consideration. After reviewing Region V's
evidence against Robert Ross, the presiding officer concluded
that EPA was not substantially justified in bringing an enforce-
ment action under TSCA and he awarded Robert Ross attorney's
i/
fees and expenses in the amount of $71,243.17.
2/ Robert .Ross prevailed on the administrative trial level
before the presiding officer (Initial Decision, Docket No.
TSCA-V-C-008, February 1, 1982) and, it prevailed in the
administrative appeal before the Administrator (Final Decision,
TSCA Appeal No. 82-4, April 4, 1984).
2/ Ross erroneously applied to the Chief Judicial Officer for
attorney's fees and expenses, rather than to the hearing officer
who presided over the underlying action which gave rise to the
claim for fees and expenses. See 40 CFR §17.21 (1984).
4/ This was $7,391.28 less than reguested by Ross in its
application. The total award requested was $78,634.85. Ross
requested $52,143.75 for attorney's fees; $24,237 for expert
witness fees; and $2,254.10 in miscellaneous fees and expenses.
(The $78,634.85 total includes fees incurred in connection with
bringing the EAJA suit. Expenses incurred in bringing a success-
ful EAJA suit are clearly recoverable. Cianciarelli v. Reagan,
729 F.2d 80 (D.C. Cir. 1984).) The reduction by the presiding
officer was based on his finding that the fees and expenses
claimed for expert witnesses exceeded the $24.09/hour rate
ceiling allowed for expert witnesses pursuant to 40 CFR
§17.07(b)(1) (1983). The $52,143.75 requested for attorney's
fees was not reduced.
-------
-3-
Although the presiding officer's decision was appealable,
Region V failed to file an appeal within the 20-day time limit
specified in the rules. See 40 CFR §§17.27 and 22.30 (1984).
Having missed the deadline by almost two full weeks, the Region
made a motion to file its appeal out of time based upon the
claim that its Counsel was "out of the office and unavailable
to respond" when the presiding officer's decision was received.
Left totally unexplained was why, and for how long, Counsel was
"out of the office." No other reason was provided by the
Region for its failure to file a timely appeal. In a timely
response to Region V's motion, Robert Ross objected to the
Region's request to file its appeal out of time. Since the
Region has provided no legitimate excuse for it's failure to
5/
file its administrative appeal on time, Region V's motion to
file an appeal out of time is denied.
5/ Section 22.07(b) of the Agency's Consolidated Rules of Practice
(40 CFR Part 22), which applies to EAJA proceedings (See 40 CFR
§ 17.27), states :
"The motion [for extension of time] shall be filed
in advance of the date on which the pleading, document
or motion is due to be filed, unless the failure of
a party to make timely motion for an extension of time
was the result of excusable neglect. (Emphasis added.)
The bare assertion by the Region, without additional explanation,
that Counsel was "out of the office and unavailable to respond"
hardly constitutes excusable neglect. See In re Four Season
Securities Law Litigation, 493 F.2d 1288, 1290 (10th Cir.,
1973); Magham v. Young, 154 F.2d 13 (1940); Citizens Protective
League, Inc. v. Clark, 178 F.2d 703 (D.C. App., 1949); U.S. ex
rel Robinson v. Bar Association of District of Columbia, 190
F. 2d 664 (D.C. App., 1951).
-------
-4-
In cases where there is no appeal, the presiding officer's
initial decision automatically becomes the Agency's final order
by operation of law unless the Administrator, or his delegatee,
elects to review the presiding officer's decision sua sponte.
y
40 CFR §22.27(c) (1984). If the decision of the presiding
officer (together with all the findings of fact and conclusions
of law contained therein) appears to be correct there is no
need for sua sponte review. In this case, the presiding officer's
decision awarding Robert Ross fees and expenses, and each and
every finding of fact and conclusion of law contained therein,
appear to be correct. Accordingly, there is no need for sua
sponte review and the presiding officer's decision awarding
fees and expenses therefore constitutes the Agency's final
7/
order by operation of 40 CFR §22.27(c) (1984).
6/ In this instance the Agency's Part 22 Rules of Practice are
applicable, 40 CFR Part 22 (1984). See 40 CFR §17.27 (1984).
Under those Rules the Administrator has 45 days from the date
the initial decision is served on the parties to decide whether
to elect sua sponte review. In this case by order of the Chief
Judicial Officer dated October 25, 1984, the 45 day sua sponte
period was stayed pending review of the Region's motion to file
its appeal out of time. As discussed above the Region's motion
to file out of time has been denied; stay of the 45 day sua
sponte period is hereby lifted.
7/ An initial determination by an ALJ on an application for
attorney's fees is referred to as a "recommended" (rather than
an "initial") decision in the Agency's EAJA regulations, 40 CFR
(next page)
-------
-5-
Region V is hereby directed to immediately disburse
$71,243.17 to Robert Ross & Sons, Inc.
So ordered.
Ronald L. McCallum
Chief Judicial Officer
Dated! afws-
(Footnote No. 7 cont'd)
§17.26 (1984). The Administrative Procedure Act (APA),
5 U.S.C. §557, uses "recommended decision" as a term of art,
and requires an agency review procedure for recommended decisions
which is somewhat different than that prescribed by the APA for
initial decisions. A presiding officer's initial decision
can become the agency's final decision automatically without
further proceedings by the agency. By contrast, where the
presiding officer makes a recommended decision, the agency must
itself consider and determine all issues properly presented.
For reasons too lengthy to fully explicate within the context
of this short opinion, it appears that the term "recommended
decision" contained in the Agency's EAJA regulations was not
intended in the APA sense. Accordingly, the Agency need not
reconsider and redetermine all issues already properly considered
and determined by the presiding officer; rather the decision of
the presiding officer automatically becomes final agency action
as previously explained.
-------
CERTIFICATE OF SERVICE
This is to certify that a copy of the foregoing Order
Denying Appeal; Election Not to Review Sua Sponte in the Matter
of Robert Ross & Sons, Inc., TSCA Appeal No. 82-4, has been
mailed or hand delivered to the following:
Honorable Spencer T. Nissen
Administrative Law Judge
EPA Headquarters (A-110)
401 M St., S.W.
Washington, DC 20460
Michael J. Walker, Esq.
Eric P. Dunham, Esq.
Office of Regional Counsel
EPA Region V
230 South Dearborn St.
Chicago, IL 60604
Richard D. Panza, Esq.
Marsha L. Nicoloff, Esq.
Wickens, Herzer & Panza Co., L.P.A.
1144 West Erie Avenue
Lorain, OH 44052
Mary Langer
Regional Hearing Clerk
EPA Region V
230 South Dearborn St.
Chicago, IL 60604
Bessie L. Hammiel
Hearing Clerk
EPA -Mail Code A-110
Washington, DC 20460
(I -
f~. T~
M. Gail Wingo ^
Secretary to the Chief
Judicial Officer
Dated ;/^^A ^
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
BEFORE THE ADMINISTRATOR
,o
CV
o
In the Matter of
Robert Ross & Sons, Inc.,
Docket No. TSCA-V-C-008
Application for Attorneys'
Fees and Expenses Under the
Equal Access to Justice Act
Recommended Decision
This proceeding arises from an application by Robert Ross & Sons,
Inc.!/ for attorneys' fees and expenses under the Equal Access to
Justice Act (5 U.S.C. § 504). The application results from a complaint,
issued by the Director of the Enforcement Division, U.S. Environmental
Protection Agency, Region V on March 31, 1980, charging Robert Ross &
Sons, Inc., hereinafter Ross or applicant, with violations of the Toxic
Substances Control Act (15 U.S.C. § 2601 et seq.). Following a hearing
in Chicago, Illinois during the period September 22 -.24, 1981, the ALJ
issued an initial decision on February 1, 1982, dismissing the complaint
for the reason that Complainant had not shown that Ross had improperly
disposed of PCBs as cnarged. Complainant appealed the dismissal in part
and in a final decision, dated April 4, 1984 (TSCA Appeal No. 82-4), the
Judicial Officer affirmed the dismissal"! Ross filed an appl icatiorT^or
1/ The application reflects that effective December 1, 1981, Robert
Ross & Sons, Inc. was reorganized into four separate corporations.
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RECEIVED
EPA PMG10N IV
HEARING CLERK
84 SEP 25 PI2: 0
-------
2
attorneys' fees and expenses on March 2, 1982, and an amended application
on May 2, 1984, EPA having in the meantime promulgated regulations (4U CFR
Part 17) implementing the Act. The application was referred to the ALJ
for preparation of a recommended decision by an order from the Judicial
Officer, dated July 19, 1984.
Although the applicant originally requested a hearing on the appli-
cation, that request was withdrawn by a letter to the ALJ, dated August 16,
1984. Based on the record as presently constituted, I find that the
following facts are established:^./
Findings of Fact
1. The complaint, issued on March 31, 1980, charged Ross with improper
disposal (incineration) of PCBs of greater than 500 ppm, to-wit 4400
ppm and 760 ppm, in violation of § 6 of TSCA and 40 CFR '761.10 (1979).
Ross was also charged with improper disposal of PCB laden waste oils
in concentrations of 67.3 ppm in violation of § 6 of the Act and 40
CFR 761.10.
2. Samples upon which the first charge of improper disposal was based
were drawn from an 80,000-gallon tank (SOI) and from a 17,000-gal1 on
tank (S03) at the time of an inspection of the Ross facility conducted
by representatives of EPA on July 10, 1979. The sample (S28) upon
which the second charge of improper disposal was based was drawn from
an excavated area at the facility referred to as the "mixing pit" at
the time of an inspection on November 5, 1979.
2/ Findings are based on the initial decision unless otherwise
i ndi cated.
-------
3
3. EPA's Central Regional Laboratory (CRL) analyzed the samples utilizing
gas chromatography with electron capture detection (GCEC) and reported
PCB concentrations of 4400 ppm in sample SOI, 760 ppm in sample S03
and 67.3 ppm in sample S28. CRL reported a PCB concentration of 95
ppm on a second sample (S08) drawn from the 80,000-gal1 on tank
during the inspection on July 10, 1979. This sample was not used
as a basis for a charge against Ross.
4. The contents of the 80,000-gal1 on tank were incinerated sometime
during the period July 10 to October 2, 1979. Complainant did not
present any evidence at the hearing that the contents of the 17,000-
gallon tank were disposed of in a similar fashion. Likewise,
Complainant did not present any evidence at the hearing as to the
disposition of the material found .in the mixing pit on November 5,
1979.
5. Analysis of a sample drawn from the 17,000-gal 1 on tank by representa-
tives of the Ohio EPA on October 2, 1979, revealed a PCB concentration
of 11.89 ppm. Analyses by Environmental Research Group, Inc., a
testing and consulting firm employed by Ross, of what purported to be
duplicates of sample S28 drawn from the mixing pit on November 5,
1979, revealed PCB concentrations of 10 and 15 ppm.
6. The Ross incinerator did not comply with Annex I, 40 CFR 761.40 (1979).
7. The instrument utilized by CRL to test for the presence of PCBs
(GCEC) produces a strip-chart recording referred to as a chromatogram.
Identification of PCBs is made by comparing the chromatogram of the
sample with chromatograms of PCB standards. PCB concentration is
determined by use of a formula involving the concentration of the
-------
4
standard times the area of the sample divided by the area of the
standard times the final volume of the diluted sample divided by the
weight of the sample. Although these calculations are normally
made by a computer, there are instances wherein the calculations
are performed manually.
8. In order to conduct the tests, it is necessary to dilute the portion
of the sample injected into the chromatograph and this dilution must
.be recognized in calculating PCB concentrations. Computer printouts
of CRL calculations on samples SOI and S03 are in terms of micrograms
per liter or parts per billion (ug/1) and it is necessary to divide
by 1,000 in order to convert to parts per million. The printout
for sample SOI reflects a PCB concentration of 4377.56 ug/1.
9. Ross denied the alleged violations, contending, inter alia, that
the samples were not representative and that the tests were
improperly conducted.
10. In dismissing the complaint, the ALJ found, inter alia, that sample
SOI from the 80,000-gal1 on tank was only a "grab sample" and not
representative of the contents of the tank and that there was no
evidence indicating the PCB concentration of any portion of the
waste at the time of incineration. Because there was no evidence
of the dilution of Ross' waste to reduce PCB concentrations below
50 ppm (40 CFR 761.1(b)) or of the addition thereto of PCBs in
concentrations of 500 ppm or greater (40 CFR 761.10(g)(ii)), it was
concluded that these provisions of the regulations were not
applicable. Although Complainant did not explain how the PCB
concentration of 4377.56 ug/1 shown on the computer printout for
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5
sample SOI (finding 8) became the reported result of 4400 ppm, Ross'
expert was apparently able to duplicate this result from an examination
of the CRL file and the ALJ concluded that Ross had not established
its contention that the test on this sample was improperly conducted
or calculated.
11. The ALJ found that wastes present in the 17,000-gallon tank on July 10,
1979, were the same wastes in the tank on October 2, 1979, and that
Complainant had not established its contention that the contents of
that tank had been incinerated or otherwise improperly disposed of
during that period as charged. Regarding sample S28 collected from
the mixing pit on November 5, 1979, the ALJ found that Complainant
had not established by a preponderance of the evidence that this
sample contained PCBs in excess of 50 ppm as charged. Moreover, he
found that there was no evidence as to the disposition of the waste
present in the mixing pit on November 5, 1979.
12. Complainant appealed the ALJ's decision only as to the sample reierred
to as SOI. Respondent, although agreeing that the dismissal was
proper, filed a protective appeal as to that part of the decision
holding test results had not been shown to have been improperly
conducted or calculated. The Judicial Officer held that even though
the sample was not representative, it, nevertheless, had probative
value, but sustained the dismissal for the reason that Complainant
has failed to prove that the sample in question contained PCBs in
excess of 50 ppm (Final Decision, TSCA Appeal No. 82-4, April 4,
1984). He reached this conclusion, because the computer printout
showing PCB concentrations in sample SOI (finding 8) reported
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6
results in terms of micrograms per liter or parts per billion and
dividing the reported figure (4377.56) by 1,000 would result in a
PCB concentration of only 4.4 ppm. It was concluded that Complainant
had not sustained its burden of proving the violation charged.
13. Ross filed an initial application for attorneys' fees and expenses
under the Equal Access to Justice Act (EAJA or Act) (5 U.S.C. 504)
on March 2, 1982, within 30 days of the receipt of the ALJ's decision.
At the time, EPA had not promulgated regulations implementing the Act.
The application requested a total of $69,672.35, consisting of
$43,181.25 in attorneys' fees (575.75 hours at the rate of $75.00 per
hour), $24,237 in fees and expenses for expert witness and the
balance of $2,254.10 in miscellaneous fees and expenses.
14. Subsequent to the final decision, Ross submitted an amended applica-
tion for fees and expenses pursuant to the EAJA (letter to Judicial
Officer, dated May 2, 1984). The amended application reflected an
additional 119.5 hours at $75 an hour expended in perfecting and
supporting Ross' appeal and opposing Complainant's appeal, making a
revised total of $52,143.75 claimed for attorneys' fees. Amounts
claimed for expert witnesses and miscellaneous fees and expenses
remained the same.
15. The itemized statement from Ross' expert Henry R. Friedberg &
Associates reflects 13.5 hours at $45.00 an hour spent on this matter
in 1979, 68 hours at $54.00 an hour in 1980 and 140.5 hours at $54.00
an hour in 1981 for a total of $11,866.50. Mr. Friedberg was one of
two expert witnesses for Ross who appeared at the hearing. This state-
ment also reflects a total of $10,225.50 for analyses of samples. The
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7
regulation (40 CFR 17.07(b)(1)) limits the compensation of expert
witnesses to $24.09 per hour. Application of this rate to total time
expended (222 hours) reduces this aspect of the claim by $6,518.52 to
$5,347.98. This sum added to the total for analyses ($10,225.50)
equals $15,573.48.
16. The itemized statement of Mr. Paul S. Epstein, Ross' other expert
witness at the hearing, reflects a total of 36 hours expended on the
Ross matter. This time is billed at the rate of $50.00 an hour,
which together with travel and out-of-pocket expenses of $345.00,
comprise the total amount claimed of $2,145.00. Application of the
maximum hourly rate set by the regulation ($24.09) would reduce the
fee claim by $872.76 to $927.24.
17. The application includes a net worth statement reflecting that Ross
has total assets of approximately $3.3 million. Included with the
application is a statement that there were no transfers from, or
obligations incurred by, Ross in the one-year period prior to March 31,
1980, which reduced Ross' net worth below $5,000,000. The appli-
cation states that at the time the proceeding qiving rise to this
application was instituted, Ross had 50 employees and that at no time
has it had more than 500 employees.
18. Complainant has filed an answer to the application and Ross has filed
a reply to the answer.
Conclusions
1. Ross is the prevailing party and a qualified party to receive an
award under the EAJA (5 U.S.C. 504).
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8
2. Complainant was not substantially justified in issuing the complaint
and pursuing the proceeding charging Ross with violations of the
Toxic_Substances Control Act and there are no special circumstances
making an award to Ross unjust.
3. Ross did not engage in conduct which unduly protracted the
proceedi ng.3/
4. Save for amounts claimed by experts in excess of the maximum hourly
rate allowed by 40 CFR 17.07(b)(1), amounts claimed are adequately
documented, are considered to be reasonable and should be allowed.
Pi scussi oh
The Act, 5 U.S.C. 504, provides in pertinent part:
"(a)(1) An agency that conducts an adversary
adjudication shall award, to a prevailing party
other than the United States, fees and other
expenses incurred by that party in connection with
that proceeding, unless the adjudicative officer
of the agency finds that the position of the agency
as a party to the proceeding was substantially
justified or that special circumstances make an
award unjust."
The Act became effective on October 1, 1981, and applies to any
adversary adjudication, as defined in section 504(b)(1)(C) of Title 5,
U.S.C., which is pending on, or commenced after, such date. The-
proceeding giving rise to this application was commenced on March 31,
1980, and was clearly pending on October 1, 1981. Civil penalty pro-
ceedings under § 16(a) of the Toxic Substances Control Act (15 U.S.C.
3y In fact, there is substantial basis for Ross' assertion that
Complainant delayed the hearing and ultimate resolution of this matter
by failing to promptly respond to legitimate discovery requests.
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9
2615(a)) are adjudications required by statute to be conducted in
accordance with 5 U.S.C. 554 and the regulation (40 CFR 17.03(a)(3))
specifically lists such proceedings as within the coverage of the EAJA.
Legislative history of the ActA/ is to the effect that while no
presumption that the agency's position was not substantially justified
arises from the mere fact that the agency lost, the test is essentially
one of reasonableness and the burden of proof in this respect is on the
agency. The rule appears to be that in order to defeat an award to an
otherwise eligible party, the government must show that its action had a
reasonable basis in law and fact. S & H Riggers and Erectors, Inc. v.
OSHA, 672 F.2d 426 (5th Cir. 1982); Enerhoul, Inc. v. NLRB, 710 F.2d 748
(11th Cir. 1983) and 01 sen v. Department of Lummerce, Census Bureau, 735
F.2d 558 (Fed. Cir. 1984). Some courts, however, whi1e not precisely
articulating the scope of the appropriate standard, have indicated that
4/ See House Report No. 96-1418, September 26, 1980, at 10, 11; U.S.
Code Congressional and Administrative News (1980) at- 4989: "The test of
whether or not a Government action is substantially justified is essentially
one of reasonableness. Where the Government can show that its case had a
reasonable basis both in law and fact no award will be made. In this regard,
the strong deterrents to contesting Government action require that the
burden of proof rest with the Government. This allocation of the burden,
in fact, reflects a general tendency to place the burden of proof on the
party who has readier access to and knowledge of the facts in question. The
committee believes that it is far easier for the Government, which has
control of the evidence to prove the reasonableness of its action than it
is for a private party to marshal the facts to prove that the Government
was unreasonable ****." "The standard, however, should not be read to raise-
a presumption that the Government position was not substantially justified
simply because it lost the case. Nor, in fact, does the standard require the
Government to establish that its decision to litigate was based on a sub-
stantial probability of prevailing." Id at 4990.
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10
the showing required of the government [to defeat an award] should be
slightly above or more strict than simply reasonableness.^./
Irrespective of the rule to be applied, however, it would seem to be
clear that Complainant's action herein did not have a reasonable basis
in fact and cannot be regarded as substantially justified. The final
decision establishes that Complainant's evidence showed prima facie that
sample SOI contained PCBs at a concentration of 4.4 ppm, rather than 4400
ppm as charged, and that Complainant's contention that this gap could be
bridged by application of the correct dilution factors to the reported
result was based on mere speculation. Inasmuch as Complainant had the
burden of establishing the violation charged by a preponderance of the
evidence and incineration of PCBs in concentrations below 50 ppm in an
unapproved incinerator was not a violation of the Act or regulations,
the charge against Ross was dismissed.
Complainant argues that reasonableness in this context means that
the agency must be possessed of facts from which it could reasonably
believe that the law has been violated and points to the ALJ's finding
that Ross had not established its contention that tests on sample SOI had
been improperly conducted or calculated (Answer at 11, 18, 19).
Complainant says that another way of stating the test is that the agency's
position is reasonable if the evidence was sufficient to establish a prima
facie case in its favor, unless explained or rebutted.
Jj/ See Wolverton v. Schweiker, 533 F.Supp. 420 (D.Idaho, 1982);
Spencer v. NLRB, 712 F.2d 539 (D.C. Cir. 1983). This is apparently based
on the fact that the Senate Judiciary Committee considered and rejected
an amendment that would have changed the applicable standard from "sub-
stantially justified" to "reasonably justified," the former being regarded
as the greater burden.
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11
While Complainant's description of the applicable standard for
determining whether its action was substantially justified within the
meaning of the EAJA is almost certainly too lenient,.6/ no issue need be
taken therewith in this instance because it is clear that Complainant has
not established a prima facie case of a violation of the PCB rule where
its documentary evidence shows a concentration of incinerated PCBs of
only 4.4 ppm, far below the legal limit of 50 ppm. It is true that the
ALJ, based in part on the fact Ross' expert, from an examination of the
CRL file, was apparently able to duplicate reported PCB results as to
sample SOI, found that Ross had failed to establish its contention that
the tests were improperly conducted or calculated. The data upon which
the expert's determination was based is not in the record, however, and
the final decision holds as a matter of law that failure to document or
otherwise support the final reported PCB concentration (Complainant1 s
laboratory director having acknowledged that good laboratory practice
required such documentation) under the circumstances present here requir
the conclusion that Complainant has not met its burden of proving the
violation charged by a preponderance of the evidence.
The result might well be different if Complainant's documentation
bridged the gap between the reported result and the figure shown on the
computer printout and doubts were cast on the validity of the tests by
independent evidence introduced by Ross.Z/ In that instance, it would be
6/ See Sullivan, The Equal Access to Justice Act In the Federal Courts,"
84 CoTum. L. Rev. 1089, wherein it is argued that the standard should be
the existence of a genuine controversy in which the government has some
likelihood of prevailing. This would appear to require as a minimum some
evaluation of opposing evidence, which is not true as to the mere ability
to prove a prima facie case.
7/ This appears to be precisely the case with regard to sample S28
collected from the mixing pit on November 5, 1979.
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12
apparent that Complainant had made out a prima facie case, which is
not true as to sample SOI herein. Although the final decision does
state (at 19) that the burden of proof therefore shifted back to Complain-
ant to provide evidence of how the so-called dilution factor was used in
the laboratory procedures followed by Complainant's analyst, the mentioned
discrepancy was highlighted through the cross-examination of Complainant's
own witnesses. It is therefore concluded that Complainant failed to make
out a prima facie case as to sample SOI and that its action as to that
sample was not substantially justified even under its own explication of
the applicable standard.**/
Split or partial awards under the Act are clearly appropriate and even
if its action as to sample SOI is deemed substantially justified, its
action as to the other samples cannot be. As Ross points out (Reply to
Complainant's Answer at 8), Complainant had no evidence that the contents
of the 17,000-gallon tank were incinerated between July 10 and October
2, 1979, as charged in the complaint and no evidence as to the disposition
of the wastes present in the mixing pit on November 5, 1979. Complainant
8/ In Ulrich v. Schweiker, 548 F.Supp. 63 (D.Idaho, 1982) the court
reversed the Secretary's decision denying disability benefits under the
Social Security Act. Nevertheless, the application for fees under the EAJA
was denied, the court holding that there was a genuine dispute as to
plaintiff's eligibility, the decision was a "close call" and therefore,
the Secretary's decision was substantially justified. Cf. Wolverton v.
Schweiker (note 5, supra), where Secretary's decision was not supported
by substantial evidence or, according to the court, any evidence, Secretary's"
decision was not substantially justified and an award under the Act was
made. In Cinciarelli v. Reagan, 729 F.2d 80 (D.C. Cir. 1984), the
government settled the underlying litigation after the government's
position on statutory interpretation was rejected on appeal. In subsequent
litigation under the EAJA, the government's position as to interpretation
of the statute, although erroneous, was held to be substantially justified.
Its position on the facts, however, was held not to be substantially
justified, making a partial award appropriate.
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13
did not bother to appeal the ALJ's dismissal of the complaint in these
respects. Accordingly, apart from any questions and the validity of the
tests,9/ its action as to these wastes cannot be regarded as
substantially justified.
Complainant's answer to the application includes references to
citizen complaints of odors, haze and respiratory ailments and a copy of
a memorandum, dated November 5, 1979, referring, inter alia,I£/ to com-
plaints of odors by residents in the area of the Ross facility. Included
as Attachment B to the answer is a petition signed by over 100 residents
of Eaton Township that proper operational controls be imposed on the
facility so that it operated without endangering the petitioners' health.
Ross was permitted to reply to the answer and has filed a motion to
strike the attachments and references thereto in the answer, asserting
that the petition was not in the record of the proceeding and pointing
out that Complainant has not moved for further proceedings in accordance
with 40 CFR 17.25(b). Ross further points out that in the absence of a
motion for further, proceedings, any additional facts must be supported
by affidavit in accordance with 40 CFR 17.22(c), which has not been done
in this instance. Ross alleges that the attachments and references
9J Although Complainant is considered to have established a prima
facie case that sample S28, collected from the mixing pit on November 5,
1979, contained PCBs at a concentration of 67.3 ppm, the CRL file and
computations were reviewed by Ross' expert, Mr. Paul Epstein, and the ALJ
held that his uncontradicted testimony cast sufficient doubt as to the
validity of the CRL reported result that it could not be held Complainant
had established by a preponderance of the evidence the sample contained
PCBs equal to or in excess of 50 ppm.
10/ It is of interest that the memorandum refers to the conflicting
data leases arising from the large differences between PCB concentrations
reported by CRL on samples taken on July 10, 1979, and the Ohio EPA on
samples taken on October 2, 1979. The memorandum attributes the differences
to analytical error and/or the fact product sampled in July may have been
i nci nerated.
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14
thereto are irrelevant to the issue at hand and highly prejudicial (Reply
to Answer at 2). Ross says that it was charged with a violation of an
act and regulations addressing the manufacture, use and disposal of PCBs
and that this had nothing to do with water contamination, odors, loss of
vegetation or medical problems. It asserts that no such complaint has
ever been brought against Ross by any state or federal agency.
There being no apparent connection between odors and other complaints
from residents of the area concerning operation of the facility and the
allegations in the complaint, Ross' motion is prima facie well taken.
Although Complainant has not so argued, the only apparent purpose of
including the citizen petition as to the operation of the facility is to
show that special circumstances make an award to Ross unjust.ii./ Because
there is no evidence, other than the alleged improper disposition of PCBs,
that the Ross facility was operated in violation of any federal, state or
local laws or regulations and because any such inquiry would involve extran-
eous matters clearly beyond the scope of the complaint against Ross, any
contention that the citizens' complaints in this instance can be used as a
basis for finding an award to Ross unjust is rejected. The motion to
strike is granted.A?/
Complainant has objected to a number of items in the application for
the reason, among others, the charges were incurred prior to the issuance
11/ Absent such a purpose, the petition hinders rather than helps
Complainant's position, because it tends to demonstrate the complaint was
issued without adequate investigation in response to public pressure.
12/ Before the Judicial Officer, Complainant filed a motion for
leave to file a reply to the motion to strike. This motion was denied
without prejudice to Complainant's right to renew the motion before the
ALJ (letter from Judicial Officer, dated July 19, 1984). Complainant
has not renewed the motion.
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15
of the complaint and thus are not properly part of a proceeding under
40 CFR 17.03(a)(3). Ross points out that the applicable statutory
language (5 IJ.S.C. 504(a)(1)) is that the fees and expenses claimed be
"incurred in connection with that proceeding," i.e., the proceeding in
which the applicant was the prevailing party, and alleges that all the
claimed amounts are properly recoverable. Other than the amounts for
expert witnesses in excess of the hourly rate allowed by the regulation,
which are referred to in the findings and hereinafter, Complainant's
objections are considered to be without merit. Specific reasons for
overruling the objections follow:
b. Charges (attorneys' fees) for telephone calls, research, review,
discussions, etc., on November 5 and 6, 1979, January 3, 15, 16, 17
and 28, February 8 and 26, and March 6 and 16, 1980.
Ross says that these services were performed in anticipation
of the proceeding, were therefore in connection with the pro-
ceeding and are properly recoverable.
Ross was clearly entitled to legal representation in its
efforts to head-off or avoid the filing of a complaint and to be
prepared and informed when, and if, a complaint was filed. Ross'
contention that these services were in connection with the proceeding
and are therefore recoverable is accepted. Questionable, however, is
that portion of the hour of services charged on January 3, 1980, which
represents a call from Mr.~Friedberg concerning a stack test. Prima
facie, this concerns the Clean Air Act rather than the TSCA. Con-
ceivably, however, it could relate to tests as to the qualification of
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16
Ross' incinerator to burn PCBs and inasmuch as the charge is not
otherwise broken down, the charge is accepted.13/
c. Complainant objects to 15 minutes charged on April 7, 1980, for a call
to a Pat O'Connor concerning Federal EPA matters.
Ross explains that Mr. O'Connor was and is Ross' accountant and
that it is necessary that he be fully informed as to suits against the
firm. This explanation is accepted and the charge is allowed.
d. .Complainant also objects to a total of over 5.5 hours charged on
June 3 and 5, 1980, concerning television and newspaper coverage of
the proceeding against Ross.
Ross explains that there was a barrage of unfavorable publicity
concerning the complaint against Ross, that Mr. Ross, President of
the applicant at the time, was interviewed by representatives of the
news media and that Mr. Ross made the decision to appear on a TV
news broadcast in order to explain his company's position to the public.
Because adverse publicity could, and allegedly did, have an unfavorable
impact on Ross' business,!!/ its contention that these services were,.,
in connection with the proceeding is accepted. These charges are
allowed.
13/ The purpose of the EAJA is to encourage contests of unreasonable
or unjustified government actions and this purpose would not be served by
a crabbed or narrow interpretation of allowable fees and expenses under
the Act.
14/ Although not part of the record, it is of interest that a letter
from counsel for Ross to the ALJ, dated October 1, 1980, refers to a press
release concerning the case issued by EPA at the time the complaint was
issued and to statements made by counsel for Complainant at a meeting of
concerned area residents. Complainant, then, appears to have been largely
responsible for the publicity concerning the proceeding and its present
objection to expenses incurred by Ross in an effort to counter an
unfavorable publicity barrage comes with an ill grace.
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17
e,f. Complainant objects to one-half hour charged for a call concerning
hazardous waste from EPA on July 16, 1980, and to 15 minutes charged
on October 6, 1980, concerning a U.S. EPA Task Force.
Ross points out that it operates a hazardous waste incineration
facility and alleges that both calls related to the proceeding against
Ross. This explanation is accepted and these charges are allowed.
g. Complainant objects to charges on July 22, October 17, 20 and 28,
¦1980, concerning Freedom of Information Act requests and an appeal
from an apparent denial of such a request. Complainant says that
these charges are not properly part of the proceeding and therefore
unallowable (Answer at 5).
Ross asserts that these charges were in connection with the
proceeding, because they were necessitated by Complainant's ignoring
its attempts to make discovery and thus obtain information essential
for its defense. As indicated (note 3, supra), the record supports
Ross in this respect and these charges are allowed.
h. Complainant objects to charges shown on November 13, 1980, which
include preparation of RCRA plans and two calls to Mrs. Crornling,
Executive Vice President of Ross, concerning these plans.
Ross alleges that preparation of the RCRA plans involved an
analysis of this proceeding's impact on such plans and that there-
fore .the fees for such time are allowable. Although the matter is
not free from doubt, this explanation is accepted.
j.k.
1 ,m
& n. Complainant objects to time charged on October 15, 1981, for a call
• to the ALJ as to whether a transcript of the hearing had been filed,
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18
for a call on January 4, 1982, to the ALJ relative to an extension
of time to file a brief, for calls to the Judicial Officer on March 2,
1982, -elative to an extension to file an appeal and a brief in
support thereof, for a call on April 13, 1982, relative to an extension
of time to file pleadings and for charges in the total amount of
$148.65 for express mail.
These charges were all incurred in connection with the proceeding,
ire normal and expected happenings in present day litigation and are
clearly allowable.
i. Complainant objects to time (3.5 hours) charged on December 30, 1981,
which includes research of the Equal Access to Justice Act upon the
ground this time was not properly part of the proceeding.
Ross' answer to this argument is less than satisfactory, merely
stating that research regarding the EAJA was included, because the
Act was mentioned in its brief. It is concluded, however, that this
time is properly chargeable, because it has been held that under the
EAJA applicable to judicial proceedings (28 U.S.C. 2412) expenses
incurred in bringing a successful EAJA suit are recoverable.
Cinciarelli v. Reagan, (note 8, supra). The language allowing
recovery of attorney's fees in judicial- proceedings tracks that
allowing such recovery in administrative proceedings and no reason is
apparent why a similar rule should not apply to the latter proceedings.
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19
Regarding its claim for expert witness fees, which as noted previously,
were computed at rates in excess of that allowed by the regulation, Ross
points out.that the Act {§ 504(b)(1)(A)) provides that recoverable "fees
and expenses" includes reasonable expenses of expert witnesses and that
the amount of fees is to be based upon prevailing market rates for the
kind and quality of services furnished. Ross argues that the hourly rate
charged by Messrs. Epstein ($50.00) and Friedberg ($54.00) is nearly the
same and constitutes strong evidence that the prevailing market rate for
such services is approximately $50.00 an hour. Recognizing that the Act
further provides that no expert witness may be compensated at a rate in
excess of the highest rate paid by the involved agency for expert
witnesses, Ross attacks the $24.09 hourly rate set by the regulation as
unreasonable and contrary to law. Regardless of the merits of this
argument, the ALJ may not ignore or invalidate the regulation and is
bound thereby.
Ross' application is otherwise in conformity with the Act and
regulation.il/
15/ In a letter to counsel, dated August 2, 1984, the ALJ inquirei
whether Ross presently.desired a hearing and pointed out that the
application did not include the statement required by 40 CFR 17.13(b)(1)
as to the hourly rate billed and paid by the majority of counsel's clients
during the relevant time period. The omitted statement was supplied by
a letter from counsel, dated August 14, 1984, wherein it was alleged that
the rate of $75.00 per hour specified on page 22 of the amended appli-
cation and incorporated by reference in its affidavit was considered to
comply with the cited requirement.
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20
Conclusi on
It is recommended that Ross' application for fees and expenses under
the Equal Access to Justice Act (5 U.S.C. 504) be allowed in the amount
of $71,243.17.1®/
16/ This sum is derived by deducting the amount claimed for expert
witness fees above the amount allowed by the regulation ($7,391.28) from
the total claim of $78,634.45. If Complainant's position as to the
propriety of the sampling and testing of sample SOI be regarded as
substantially justified, it is concluded that one-half of the recommended
total claim should be allowed.
Dated this
day of September 1984.
Sper^er T. Nissen
Administrative Law Judge
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UNITED STATES ENVIRONMENTAL PROTECTION AGF.NCY
BEFORE THE ADMINISTRATOR
I:
3^rr"IO 3?
In the Matter of
Silver State Aviation, Inc
I.F.& R. VIII-70C
Respondent
DECISION DENYING APPLICATION FOR
ATTORNEY'S FEES AND EXPENSES
r°
This is an application for attorney's fees and expenses pursuant to
the Equal Access to Justice Act, Section 203(a)(1), Pub. L. No. 96-481,
94 Stat. 2325 (codified in 5 U.S.C. 504), and the Agency's implementing
regulations, 40 CFR Part 17.
The applicant, Silver State Aviation, Inc. ("Silver State") was the
respondent in a proceeding under the Federal Insecticide, Fungicide, and
Rodenticide Act ("FIFRA"), Section 14(a), 7 U.S.C. 136]_(a), for the
assessment of civil penalties for alleged violations of the Act. The
administrative complaint, issued on August 23, 1982, charged Silver
State with misuse of the pesticide Hoelon in that Silver State's "operator"
failed to follow the label direction that impermeable pants and shirt
should be worn while mixing and loading the pesticide, and Silver State's
pilot failed to follow the label's direction that a cartridge type resperator
must be worn during aerial application. Silver State answered, denying
liability, raising several defenses, and requesting a hearing. Settlement
was discussed but proving unfruitful the parties in preparation for
the hearing exchanged witness lists and documents and supplied certain
information about their respective positions which I had requested.
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2
EPA thereafter moved for a partial accelerated decision which was granted
in part, and also sought and was allowed additional discovery but not to
the extent it had requested. For its part, Silver State moved for a
stay of administrative proceedings pending determination of a district court
action it had brought for a declaratory judgement that FIFRA had unconstitu-
tionally delegated power to the pesticide producer to prescribe its condition
of use. The stay was denied. A hearing was scheduled for June 8, 1983,
but was never held, because the EPA on May 23, 1983, a little more than two
weeks prior to the hearing, moved to dismiss the complaint with prejudice,
stating the motion was based on the "discovery of new information."
To be entitled to an award of attorney's fees and expenses, the applicant
must be an eligible prevailing party.]_/ The grounds on which fees and expenses
are awarded are set forth in 40 CFR 17.06(a), which provides as follows:
A prevailing applicant may receive an award for
fees and expenses incurred in connection with a
proceeding unless the position of the EPA as a
party to the proceeding was substantially justified
or unless special circumstances make the award
sought-unjust. The fact that the EPA did not pre-
vail does not demonstrate that the Agency's position
was not substantially justified.2/
As to its eligibility for an award of attorney's fees and other expenses,
Silver State has submitted a financial statement showing a net worth of
considerably less than $5 million.^/ While its application is silent as to its
1/ See 5 U.S.C. 504(a)(1); 40 CFR 17.05.
2/ The first sentence in 40 CFR 17.06(a) follows generally the language
of 5 U.S.C. 504(a)(1). The last sentence is not in the Act but is in accord
with the legislative history. See infra at 5.
2/ "Net worth" is not specifically defined in the Act or the regulations but
Tt is assumed to have its ordinary meaning of assets less liabilities.
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3
number of employees, Silver State's size as shown in its financial statement
and the nature of its business make it extremely unlikely that it has in excess
of 500 employees, the maximum allowable for an eligible applicant. It is,
accordingly, assumed for purposes of considering the application that Silver
State is eligible for an award.
The next question to be considered is whether Si 1 ver State is a prevailing
party. Neither the Equal Access to Justice Act nor the regulations define
"prevailing party" but an explanation of what was intended is to be found in the
committee reports. There, it is stated as follows:
Under existing fee-shifting statues, the definition of
prevailing party has been the subject of litigation. It
is the committee's intention that the interpretation of
the term in S. 265 be consistent with the law that has
developed under existing statutes. Thus, the phrase
"prevailing party" should not be limited to a victor only
after entry of a final judgment following a full trial on
the merits. A party may be deemed prevailing if he obtains
a favorable settlement of his case, Foster v. Boorstin, 561
F. 2d 340 (O.C. Cir. 1977); if the plaintiff has sought a
voluntary dismissal of a groundless complaint, Corcoran v.
Columbia Broadcasting System, Inc., 121 F. 2d 575, (9th
Cir,. 1941); or even if he does not ultimately prevail on
all issues, Bradley v. School Board of the City of Richmond,
416 U.S. 696 (1 974).4/
The EPA contends that Silver State should not be considered to have
prevailed since the dismissal did not in any way reflect a decision by the
presiding officer giving credence to any of Silver State's defenses.
Dismissal of the suit, however, was a disposition favorable to Silver
State. Indeed, the dismissal with prejudice gave Silver State virtually
the same relief that it would have obtained if it had prevailed on the
4/ H.R. Rep. No. 96-1418, 96th Cong.
Code Cong. & Ad. News 4984, 4990. To
Rep. No. 96-1434, 96th Cong. 2d Sess.
Cong. S Ad. News 5010-5011.
2d Sess. 11, reprinted in 1980 U.S.
the same effect, see also H.R. Conf.
21-22, reprinted in 1980 U.S. Code
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4
merits after a hearing. If the fact that it results from the voluntary
action of the EPA rather than from a decision on the merits were of
conseauence, the Agency could press its case, no matter how unjustified,
in the hopes of achieving some success, but defeat a party's right to an
award by simply withdrawing short of actually litigating its claims.
This would clearly be contrary to Congress' intent in passing the Equal
Access to Justice Act. As the court stated in Goldhaber v. Foley, 698
F. 2d 193, 197, "[T]he Act's governing principle [is] that the United
States should pay those expenses which are incurred when the government
presses unreasonable positions during litigation. This principle devolves
from the Act's central purpose to eliminate any barrier to litigation
challenging unreasonable government conduct presented by the specter of
attorney's fees."5/
It is found, therefore, that Silver State is a prevailing party within the
meaning of the Equal Access to Justice Act and the regulations and is entitled
5/ The EPA's argument, however, is relevant in determining the amount of the
award, since Silver State is not entitled to an award for work done on interloc-
utory issues on which it did not prevail. Thus, although Silver State's
application includes monies expended in connection with its district court action
and accompanying motion for a stay of the administrative hearing, these would not
be allowable expenses for this proceeding . The district court action was
brought on the ground that FIFRA by making compliance with the labeling
enforceable by civil or criminal penalties, unconstitutionally delegated
legislative powers to the pesticide manufacturer, and the stay of administrative
proceedings was sought on the ground that the Agency had no authority to decide
the constitutionality of its enabling legislation. The stay of the administrative
proceeding was denied because the constitutional question did not appear to be
substantial and Silver State had an adequate remedy in the judicial review of any
order that may be issued in the administrative proceeding. Clearly, then, Silver
State did not prevail on the matter so far as it concerned the administrative
proceeding and no reimbursement for expenses incurred in connection therewith
should be allowed. As to Silver State's right to expenses in the district
court action, the district court and not this proceeding is the proper forum
to determine that question. See Corcoran v. Columbia Broadcasting System, Inc.,
121 F. 2d 575 (9th Cir. 1941).
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5
to reimbursement unless the EPA's position was substantially justified or
unless special circumstances make the award unjust.
As to whether the EPA's position was substantially justified or whether
special circumstances make an award unjust, the legislative history has this
to say about the standard to be applied:
The test of whether or not a Government action is substantially
justified is essentially one of reasonableness. Where the
Government can show that its case had a reasonable basis both in
law and fact, no award will be made. In this regard, the strong
deterrents to contesting Government action require that the
burden of proof rest with the Government. This allocation of the
burden, in fact, reflects a general tendency to place the burden
of proof on the party who has readier access to and knowledge of
the facts in question. The committee believes that it is far
easier for the Government, which has control of the evidence, to
prove the reasonableness of its action than it is for a private
party to marshal the facts to prove that the Government was un-
reasonable.
Certain types of case dispositions may indicate that the Govern-
ment action was not substantially justified. A court should look
closely at cases, for example, where there has been a judgment on
the pleadings or where there is a directed verdict or where a
prior suit on the same claim had been dismissed. Such cases
clearly raise the possibility that the Government was unreasonable
in pursuing the litigation.
The standard, however, should not be read to raise a presumption
that the Government position was not substantially justified,
simply because it lost the case. Nor, in fact, does the standard
require the Government to establish that its decision to litigate
was based on a substantial probability of prevailing. Further-
more, the Government should not be held liable where "special
circumstances would make an award unjust. This "safety valve"
helps to insure that the Government is not deterred from advancing
in good faith the novel but credible extensions and interpreta-
tions 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.^/
6/ H.R. Rep. No. 1418, 96th Cong. 2d. Sess. 10-11 (1980), reprinted in
1980 U.S. Code Cong. & Ad. News 4984-90; see also H.R. Conf. Rep. No. 96-
1434, 96th Cong. 2d. Sess. 21-22 (1980), reprinted in 1980 U.S. Code Cong.
& Ad. News 5010-11.
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6
In short, the inquiry is to determine whether the EPA has shown that
its case had a reasonable basis in law or fact.
Silver State was admittedly the owner of the airplane used to spray
the pesticide. Its liability in this case turns on whether it should be
held responsible for the failure of both the person loading the pesticide
onto the plane and the pilot who made the application to follow label
directions, and this, in turn, depends on the construction of FIFRA, Section
14(b)(4), 7 U.S.C. 136J_(b)(4), which provides in relevant part that, "[T]he
act, omission, or failure of any officer, agent, or other person acting for
or employed by any person shall in every case be also.deemed to be the act,
omission, or failure of such person as well as that of the person employed."
From outward appearances, the EPA could have reasonably concluded from its
investigation that the relationship between Silver State which owned the
airplane and contracted for the spraying, and the loader and the pilot
was such as to make the loader and pilot each if not an employee of
Silver State at least an "agent . . . acting for" Silver State._7/ Silver
State, however, in its answer raised the defense that the pilot and
loader were independent contractors. In its prehearing exchange, it
explained in further detail that the two persons were both pilots certified
as aerial applicators who had contracted with Silver State to do the
actual application. It was further stated that they were paid a fee
from which no monies were withheld for income tax or any employee deduction
7/ Apparently no information was furnished by the loader or by the pilot
or by Silver State during the investigation to lead to a different conclusion.
To the contrary, the pilot acted in a manner that was entirely consistent with
the assumption that he was an employee or at least stood in some agency relation-
ship to Silver State, since he acknowledged receipt of the notice of inspection
and of the receipt for pesticide samples on behalf of Silver State.
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7
taken, that they had complete control over the mixing, mixing, loading
and application of chemicals and that under their arrangement with
Silver State, if their actions resulted in any claims against Silver
State, their share of the fees would be withheld and applied toward
satisfaction of the claim.
The EPA's first response to Silver State's statements was to seek to
obtain further information through discovery about Silver State's relation-
ship to the loader and pilot. The EPA then sought to obviate any need for
discovery by moving for an accelerated decision on the legal grounds that
under Section 14(b)(4), it was irrelevant whether the loader and pilot
were or were not independent contractors. The accelerated decision was
denied, since I did not construe Section 14(b)(4) as imposing liability
on Silver State, if the loader and pilot were independent contractors
not subject to Silver State's direction and control in loading and applying
the pesticide, and Silver State had done everything that could reasonably
be expected of it as.owner of the airplane to insure that the label
directions were complied with. Whether this was the relationship between
Silver State and the loader and the pilot was definitely in dispute.
Following the denial of the motion, the EPA attempted to proceed with
the discovery, but because of additional facts coming to its attention as
well as for other reasons, the EPA moved to dismiss the complaint.8/
£3/ In moving to dismiss, the EPA stated its motion was based on the dis-
covery of new information. In its opposition to the application for fees,
the EPA states that the motion was also prompted by the "escalating expenses
involved with proceeding to a full hearing on the matter."
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8
The EPA contends that its decision to institute the action was reason-
able given the facts of which it had knowledge, and the record supports that
contention. See supra at 6. Indeed, although Silver State in its answer
alleged in conclusory terms that the pilot and loader were independent
contractors, it appears that the details on which that conclusion was based
were first made known to the EPA in the prehearing exchange.^/ The EPA, then,
deciding, after attempting some discovery, that the case was now in a
posture where it would be too expensive to bring the case to hearing as well
as for other reasons, moved to dismiss.10/ It would certainly be reasonable
for the EPA to terminate its prosecution of a case short of a hearing once
it obtained information casting doubt upon a respondent's liability. While
it appears that the EPA's reason here was also based upon its unwillingness
to spend additional monies as well as upon any reassessment of Silver State's
liability, this, of course, should have no bearing on the reasonableness
of the EPA's position for purposes of determining whether fees and expenses
-are awarded. An Agency should be able to take into account the expense
entailed to meet new facts which have come to light in deciding whether
to proceed further in a case. The Equal Access to Justice Act certainly
was not intended to confront the Agency with the dilemma of either expending
monies it is unwilling to spend to continue with a case, or suffer payment
of attorney's fees if it drops the case.
y This appears to have been the basis for EPA's discovery request
and was not really disputed by Silver State.
ID/ Rrief in Response and Opposition to Respondent's Application for Fees
¥nd Expenses at 2.
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9
The EPA argues that not only was the position it took with respect to
Silver State's liability under Section 14(b)(4) for the acts of the loader
and pilot reasonable on the facts, but that it also comes within the exception
For "special circumstances [which] make the award unjust." In the committee
reports this exception is described as a "safety valve" which "helps to in-
sure that the Government is not aeterred from advancing in good faith the
novel but credible extensions and interpretations of the law that often under-
lie vigorous enforcement efforts." The interpretation urged by the EPA does
appear to be novel. At least no previous agency or court decisions have been
cited where it was considered.il / It is also one which had some support
from the plain language of the Act. In fact, the correctness of the
interpretation turned really on whether Congress intended to impose strict
liability on Silver State for acts done by independent contractors with
whom it contracted to do work, a question on which the legislative history
itself offered little enlightment. While I did not agree with the EPA's
postion, nevertheless it was certainly a credible one taken in good faith
to carry out the law.
11/ The case of Magna Corporation, I.F. & R. Docket No. VIII-35C (EPA,
TrTitial Decision issued November 14, 1978) cited by the EPA in its brief in
its support of its motion for an accelerated decision was clearly distinguish-
abl e.
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in
Accordingly, I find that the EPA's position was substantially justified
and that, in any event, special circumstances would make, an award unjust. It
is recommended, therefore, that the application for fees and expenses be
August IB, 1 983
12/ One point made by the EPA which need not be considered here since the
application for fees is denied, but which counsel ought to be mindful of in
any future application is that the regulations, 40 CFR 17.08(b)(2), limit
attorneys fees to $75 per hour so that Silver State's application based on
a rate of $100 would have to be reduced accordingly.
denied.12/
Gerald Harwood
Administative Law Judge
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RECEIVED
REGION IV
!MG CLERK
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
85JUN II fill: 01
BEFORE THE ADMINISTRATOR
In the Matter of
Weed Heights Development Co.,
Docket No. TSCA-09-84-0010
Application for Attorneys' Fees
and Expenses Under the Equal
Access to Justice Act.
Equal Access To Justice Act. Failure to provide net worth
documentation required by 40 C.F.R. 17.12 pursuant to Order
provides justification for entry of a Default Order result-
ing in dismissal of application for attorneys' fees.
Appearances:
Patrick V. Fagan, Esquire
Mike Soumbeniotis, Esquire
Allison, Brunetti, MacKenzie, Hartman,
Soumbeniotis & Russell, Ltd.
P. 0. Box 646
Carson City, NV 89702
Counsel For Respondent
David M. Jones, Esquire
Office of Regional Counsel
U. S. EPA, Region IX
211 Fremont Street
San Francisco, CA 94105
Counsel For Complainant
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DEFAULT ORDER*
This proceeding arises from an application by Weed Heights Development
Company (Weed Heights or Applicant) for attorneys' fees and expenses pursu-
ant to the Equal Access to Justice Act (EAJA), (5 U.S.C. 504) and the
Environmental Protection Agency's (EPA) implementing regulations, 40 C.F.R.
Part 17.
The application results from a Complaint issued by EPA on January 30,
1984, charging Weed Heights with violations of the Toxic Substances Control
Act (15 U.S.C. 2601, et seq.) involving inspection/use conditions, inade-
quate marking, improper storage and inadequate recordkeeping of PCB trans-
formers. Weed Heights answered, denying liablity in that the six transformers
referenced in the investigative report were never owned by Weed Heights.
Exhibits attached to the Answer provided evidence that the said transformers
had been sold or transferred by Anaconda Minerals Company, the former owner
of the Weed Heights property and the transformers, prior to Weed Heights'
acquisition of the property in December 1982.
Thereafter, on June 6, 1984, Complainant EPA filed Motion For Leave
To File First Amended Complaint. The motion was granted and, in effect,
added two additional Respondents, Mesaba Service and Supply Co., and
Martin Electric Co. Again, in its Answer, Weed Heights asserted the
same defense of nonownership.
Subsequently, Weed Heights filed Motion To Dismiss And/or For Acceler-
ated Decision citing lack of. ownership or interest.in the transformers and
referencing documentary proof thereof.
* This Default Order shall constitute the Initial Decision in this Proceed-
ing. 40 C.F.R. 22.17(b)
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Complainant's Response to said Motion To Dismiss was dated June 22,
1984. Rule 22.16(b) of the Consolidated Rules of Practice require that a
party's response to any written motion must be filed within ten (10) days
after service of motion. Failure of Complainant to comply with this Rule
formed one of the bases upon which the Motion To Dismiss was granted.
Sec. 22.20 of the Rules of Practice provides that:
The Presiding Officer, upon motion of the
respondent, may at any time dismiss an action
without further hearing or upon such limited
evidence as he requires, on the basis of fail-
ure to establish a prima facie case or other
grounds which show no right to relief on the
part of the complainant.
Respondent Weed Heights provided documentary proof that it does not
own or have any interest in the transformers which are the subject of this
Complaint.
Complainant's response to said motions states that the inspection
report filed by the EPA field investigators records no disclaimer of title
to the transformers or responsibility for same by Mr. Darrell W. Johnson
on behalf of his employer or principal, Weed Heights Development Company.
And that this, among other things, leads to the assumption that title was
still in Weed Heights. The documentary evidence submitted by Respondents
nullifies this assumption.
Complainant states that the purpose of the First Amended Complaint
was to determine "just who is the owner of this personalty and where does
the responsibility for compliance with TSCA repose." The Order Granting
the Motion to Dismiss states that the forum for that determination is by
means of a more thorough investigation and not in a formal hearing.
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And further, the fact that the transformers were located on the
premises of Weed Heights does not place liability upon Weed Heights, especi
ally in view of the arrangements made between Mesaba Service and Supply Co.
and Martin Electric Company, the subsequent owners of the transformers,
to remove them from that location. Complainant did not appeal the Order
Granting Motion To Dismiss.
Complainant filed a Motion To Dismiss the application for attorneys'
fees stating in part, as follows:
"Section 17.12, Net Worth Exhibit, provides 1n pertinent part as
fol1ows:
(a) Each applicant. . .must submit with its application
a detailed exhibit showing its net worth at the time the pro-
ceeding was initiated. . . The exhibit may be in any form
that provides ful1,disclosure of assets and liabilities of the
applicant and any affiliates and issufficient to determine
whether the applicant qualifies under the standards of 5 U.S.C.
504(b)(1)(B)(i). . .
The application submitted by Weed Heights Development Company contains
references to the affidavits of Don H. and Joy Tibbals which are apparently
intended to satisfy the provisions of Section 17.12(a) cited above. The
affidavits attached to the application make reference only to the net worth
of Weed Heights Development Company at the time the proceedings were initi-
ated and there is no "detailed exhibit" which will meet the requirements of
the regulation cited above.
The Court agreed and in Order dated March 5, 1985, advised Respond-
ent:
The information provided in the application and affidavits
is not sufficient to determine the qualification of Weed
Heights for an award. In order to give consideration to this
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- 4 -
application, the provisions of 40 CFR 17.12 must be fulfilled.
This information shall be filed with the Regional Hearing
Clerk no later than March 27, 1985.
No response having been received from Respondent to this Order an
Order To Show Cause Why Default Order Should Not Be Issued was filed
May 2, 1985, requiring the parties to file responses thereto no later than
May 21, 1985. Respondent did not submit a response.
It is therefore ordered that the application for attorneys' fees and
expenses under the Equal Access To Justice Act filed by Respondent in this
proceeding is dismissed with prejudice for failure to submit the net worth
documentation required by 40 C.F.R. 17.12 pursuant to Order.
It is so ordered.
Chief Administrative Law Judge
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CERTIFICATION
I hereby certify that the original of this Default Order was hand-
delivered to the Hearing Clerk", U. S; EPA, Headquarters, and three copies
were sent by certified mail, return receipt requested, to the Regional
Hearing Clerk, U. S. EPA, Region IX, for dissemination pursuant to 40
C. F. R. 22.27(a).
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