Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-13-01068/USCOURTS-caDC-13-01068-1/pdf.json

Parties Involved:
SecurityPoint Holdings, Inc.
Petitioner
Transportation Security Administration
Respondent

Document Text:

United States Court of Appeals 

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Decided September 2, 2016 

No. 13-1068 

SECURITYPOINT HOLDINGS, INC., 

PETITIONER

v. 

TRANSPORTATION SECURITY ADMINISTRATION, 

RESPONDENT

On Motion for Attorneys’ Fees under 

the Federal Equal Access to Justice Act 

Don J. Pelto, Bradley Graveline, and Laura M. Burson

were on the motion for attorneys’ fees under the Federal 

Equal Access to Justice Act and the supplemental briefs for 

petitioner.

Benjamin C. Mizer, Principal Deputy Assistant Attorney 

General, and Mark B. Stern and John S. Koppel, Attorneys, 

U.S. Department of Justice, were on the response in 

opposition and the supplemental briefs for respondent. 

Before: HENDERSON and SRINIVASAN, Circuit Judges, 

and WILLIAMS, Senior Circuit Judge. 

Opinion for the Court filed by Senior Circuit Judge

WILLIAMS. 

USCA Case #13-1068 Document #1633546 Filed: 09/02/2016 Page 1 of 14
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WILLIAMS, Senior Circuit Judge: In SecurityPoint 

Holdings, Inc. v. TSA, 769 F.3d 1184 (D.C. Cir. 2014), we 

vacated an order of the Transportation Security 

Administration for want of reasoned decisionmaking and 

remanded the case for further proceedings. SecurityPoint now 

seeks an award of attorneys’ fees as a prevailing party under 

the Equal Access to Justice Act (“EAJA”), 28 U.S.C. 

§ 2412(d)(1)(A) (2012). We conclude that SecurityPoint is a 

prevailing party and, in doing so, overrule Waterman 

Steamship Corp. v. Maritime Subsidy Board, 901 F.2d 1119 

(D.C. Cir. 1990), as inconsistent with the Supreme Court’s 

later decision in Shalala v. Schaefer, 509 U.S. 292 (1993).1

 

We also conclude that the challenged order was not 

substantially justified. But because SecurityPoint achieved 

only a partial success in the litigation, we award only a 

portion of the fees sought. 

* * * 

 Our merits decision in SecurityPoint Holdings concerned 

an advertising program at airport security checkpoints in 

which participating airports, under a Memorandum of 

Understanding (“MOU”) with TSA, would contract with 

private companies like SecurityPoint to obtain bins and other 

equipment for use at checkpoints. In exchange, the private 

companies would receive a portion of the revenue from 

advertisements displayed inside the checkpoint bins. 

 In 2012 TSA amended its template for such MOUs to 

include, among other things, a provision requiring airports to 

 1

 Because this part of our opinion rejects a prior statement of 

circuit precedent, it has been considered separately and approved by 

the full court. See Irons v. Diamond, 670 F.2d 265, 268 n.11 (D.C. 

Cir. 1981). (Chief Judge Garland did not participate in this matter.) 

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indemnify TSA from liability for intellectual property claims. 

SecurityPoint opposed these changes and requested that TSA 

cease and desist from implementing them. TSA refused, 

prompting SecurityPoint to seek review in this court. We 

granted SecurityPoint’s petition for review, vacated the denial 

of the cease-and-desist request as arbitrary and capricious, and 

remanded the case to TSA. We didn’t reach SecurityPoint’s 

principal claim—that TSA had amended the MOU template in 

retaliation for SecurityPoint’s patent infringement lawsuit 

against TSA—but held that “TSA’s explanation for persisting 

in the change, in the face of SecurityPoint’s arguments that 

the change was unnecessary and self-defeating for TSA, failed 

to satisfy the minimum requirements of reasoned 

decisionmaking.” SecurityPoint Holdings, 769 F.3d at 1186. 

 After our decision issued, SecurityPoint filed a timely 

application for attorneys’ fees under the EAJA. We deferred 

consideration of the application pending TSA’s actions on 

remand. After the proceedings on remand were completed, 

the parties submitted additional briefs on the fee motion and, 

at our request, filed briefs discussing whether the Waterman

case should be overruled.2

 

* * * 

 The EAJA directs a court to award “fees and other 

expenses” to a “prevailing party” in a civil action against the 

United States unless the government’s position was 

“substantially justified” or “special circumstances make an 

award unjust.” 28 U.S.C. § 2412(d)(1)(A). “[F]ees and other 

 2

 In December 2015 SecurityPoint filed a new petition for 

review in this court challenging TSA’s response on remand. 

SecurityPoint Holdings, Inc. v. TSA, 15-1449 (D.C. Cir., Dec. 14, 

2015). 

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expenses” include “reasonable attorney fees.” Id. 

§ 2412(d)(2)(A). A fee application must be filed within 30 

days from entry of final judgment, id. § 2412(d)(1)(B), 

defined under the EAJA as “a judgment that is final and not 

appealable,” id. § 2412(d)(2)(G). (A final judgment is not 

appealable within the meaning of this provision if the time for 

appeal has expired without one being filed. Melkonyan v. 

Sullivan, 501 U.S. 89, 96 (1991); see also Al-Harbi v. INS, 

284 F.3d 1080, 1083-84 (9th Cir. 2002) (considering the 

opportunity to apply for certiorari).) 

 In determining whether a litigant is a prevailing party, we 

apply a three-part test: “(1) there must be a court-ordered 

change in the legal relationship of the parties; (2) the 

judgment must be in favor of the party seeking the fees; and 

(3) the judicial pronouncement must be accompanied by 

judicial relief.” Initiative & Referendum Inst. v. USPS, 794 

F.3d 21, 23-24 (D.C. Cir. 2015) (citation and internal 

quotation marks omitted). Our 2014 decision clearly satisfies 

the second and third requirements. The question is whether 

the decision effected “a court-ordered change in the legal 

relationship of the parties.” 

 Relying principally on Waterman, TSA argues that 

SecurityPoint is not a prevailing party because it achieved a 

“purely procedural victory.” TSA Original Br. 3. That 

appears to be a correct reading of Waterman. There the 

Maritime Subsidy Board granted U.S. Lines authority to 

conduct unsubsidized around-the-world shipping service 

without giving competing companies an opportunity to contest 

the grant. The competitors sued the Board in district court, 

which found an abuse of discretion in the Board’s refusal to 

entertain their objections; the district court remanded the case 

and thereby afforded the competitors the missed opportunity 

to contest the grant. While the remand was pending before 

the Board, the district court awarded the competitors 

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attorneys’ fees under the EAJA. This court reversed, holding 

that such a procedural victory didn’t make the plaintiffs 

prevailing parties. We reasoned that “[f]rom a party’s 

viewpoint . . . correct procedures and use of correct 

substantive standards are largely (if not entirely) instruments 

to a desired end—a change in someone’s primary conduct in 

the real world: relief from a restriction, grant of a benefit, 

imposition of a restriction on others, etc.” 901 F.2d at 1122. 

The remand in Waterman wasn’t enough, we said, because it 

didn’t confer on the plaintiffs any “benefit in the real world, 

outside the judicial/administrative process.” Id. at 1123. 

Rather, the remand merely “increased the odds” of ultimately 

obtaining such a benefit, which we saw as insufficient. Id. 

 In reaching this result, Waterman relied a good deal on 

the Supreme Court’s decision in Sullivan v. Hudson, 490 U.S. 

877 (1989). There the Court considered whether a Social 

Security claimant was entitled to fees incurred during the 

administrative phase of the proceedings. The claimant had 

lost at the administrative level, secured a remand from the 

courts on the ground that the agency had failed to follow its 

own regulations, and finally prevailed on remand. In holding 

that the claimant was entitled to recover fees for the 

proceedings on remand, the Court observed that where the 

remand didn’t “necessarily dictate the receipt of benefits, the 

claimant will not normally attain ‘prevailing party’ status . . . 

until after the result of the administrative proceedings is 

known.” Id. at 886. Further: “We think it clear that . . . a 

Social Security claimant would not, as a general matter, be a 

prevailing party within the meaning of the EAJA merely 

because a court had remanded the action to the agency for 

further proceedings.” Id. at 887. Waterman invoked both of 

these passages, saying that “[a]lthough the Sullivan decision is 

not a direct holding on the issue before us, the analysis 

appears a critical step in support of the Court’s holding and 

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we see no reason not to take it seriously.” Waterman, 901 

F.2d at 1122. 

In Shalala v. Schaefer, 509 U.S. 292 (1993), however, the 

Court made clear that Hudson turned on the fact that the 

district court had retained jurisdiction during the remand to 

the agency. See id. at 299, quoting the penultimate sentence 

of Hudson. Schaefer had appealed from a denial of Social 

Security benefits and secured a remand based on agency error. 

After he was granted benefits on remand, he sought attorneys’ 

fees as a prevailing party. The issue for the Court was 

whether his application was timely under the EAJA’s 30-day 

clock. The answer, the Court explained, turned on a 

distinction between a “sentence-four” remand and a 

“sentence-six” remand under § 205(g) of the Social Security 

Act, 42 U.S.C. § 405(g). (The labels refer to the sentences of 

§ 405(g).) The crucial difference is that a “sentence-four” 

remand is accompanied by immediate entry of judgment, 

whereas a “sentence-six” remand entails the court’s retaining 

jurisdiction and entering judgment only after completion of 

the remand and post-remand proceedings. See Schaefer, 509 

U.S. at 297. The Court held that a sentence-four remand order 

was a “final judgment” triggering the 30-day clock to seek 

fees. (Curiously, Hudson itself was a sentence-four remand 

with retention of jurisdiction, which was improper under the 

Court’s reading of § 405(g). Id. at 299-300.) 

Critically, the Court rejected the argument that a remand 

order could not be considered a final judgment “since a Social 

Security claimant does not ‘prevail’ until he is awarded Social 

Security benefits.” Id. at 300. To the contrary, the Court said, 

by “[o]btaining a sentence-four judgment reversing the 

Secretary’s denial of benefits,” the plaintiff achieved “some of 

the benefit . . . sought in bringing suit” and thereby obtained 

prevailing-party status. Id. at 302 (citation and internal 

quotation marks omitted). According to the Schaefer Court, 

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Hudson’s “dicta” to the contrary—dicta on which Waterman

relied—“simply failed to recognize the distinction between a 

sentence-four remand, which terminates the litigation with 

victory for the plaintiff, and a sentence-six remand, which 

does not.” Id. at 301. (The Court was plainly not using 

“litigation” in one of the colloquial senses of the term, where 

it encompasses whatever cases may be filed in resolution of 

the parties’ overall dispute.) 

Schaefer is fatal to Waterman’s idea that to “prevail” a 

party must obtain a change in the opposing party’s “primary 

conduct,” such as, in the agency context, “relief from a 

restriction, grant of a benefit, imposition of a restriction on 

others, etc.” 901 F.2d at 1122. Schaefer itself involved a 

remand based on agency error, and the Court deemed it 

sufficient, expressing no view whatever as to the probability 

(much less a certainty) that it would lead to a grant of the 

benefit applied for. Just like the sentence-four remand in 

Schaefer, our 2014 decision in SecurityPoint “terminate[d] the 

litigation with victory for the [petitioner],” Schaefer, 509 U.S. 

at 301: we granted SecurityPoint’s petition for review, set 

aside the challenged order as arbitrary and capricious, and 

remanded the case to the agency for further review (without 

retaining jurisdiction). See CIRCUIT RULE 41(b) (drawing a 

distinction between, on the one hand, remanding a record and 

retaining jurisdiction and, on the other, remanding a case and 

terminating the action). Thus SecurityPoint achieved “some 

of the benefit . . . sought in bringing suit,” which is all that’s 

required. Schaefer, 509 U.S. at 302 (citation and internal 

quotation marks omitted). By vacating the challenged order 

and placing the agency under an obligation to consider the 

cease-and-desist request afresh and supply new or better 

reasons should it decide to deny the request again, our 

decision effectuated “a court-ordered change in the legal 

relationship of the parties.” Initiative & Referendum Inst., 

794 F.3d at 23. 

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Though Schaefer is enough to require overruling of 

Waterman, another subsequent decision, Buckhannon Bd. & 

Care Home, Inc. v. W. Virginia Dep’t of Health & Human 

Res., 532 U.S. 598 (2001), made clear that Waterman’s 

attempted focus on impact in “the real world” was no longer 

sustainable. Rejecting the so-called “catalyst theory,” 

Buckhannon held that a plaintiff doesn’t become “prevailing” 

merely because “the lawsuit brought about a voluntary change 

in the defendant’s conduct.” Id. at 600. Applied in a court 

following Waterman, Buckhannon would appear to block an 

award of fees even if a judicial remand on a procedural point 

led to an agency change completely meeting the plaintiffs’ 

substantive concerns. Cf. Initiative & Referendum Inst., 794 

F.3d at 23-25 (awarding fees where the terms of the remand 

made the plaintiffs’ substantive victory inevitable). 

TSA contends that “[t]he distinction Schaefer drew in the 

Social Security context . . . makes little sense in the broader 

framework of APA review” because “it would lead to the 

anomalous result that someone who secured a remand without 

retention of jurisdiction would be a ‘prevailing party,’ while 

someone who secured a remand with retention of jurisdiction 

would not.” TSA Second Suppl. Br. 6. Apart from being 

precisely the line drawn in Schaefer, the distinction is in no 

way “anomalous.” When a court retains jurisdiction, the civil 

action remains ongoing, and any fee motion must await final 

judgment. In such a case, the remand order is only an interim 

victory; final judgment will not be entered until proceedings 

on remand conclude, and the determination of prevailingparty status properly awaits the sequel (e.g., an outcome at the 

agency favorable to the plaintiff, as in Hudson, 490 U.S. at 

881-82, or continued dispute in court). By contrast, when a 

court remands a case based on agency error without retaining 

jurisdiction, the case is terminated and the petitioner becomes 

a prevailing party without regard to the outcome on remand 

(which can be challenged by way of a new petition, as 

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happened here). Cf. Former Employees of Motorola Ceramic 

Products v. United States, 336 F.3d 1360, 1366 (Fed. Cir. 

2003). 

TSA tries to analogize the remand in this case to interim 

victories within the federal court system that are insufficient 

for prevailing-party status, such as withstanding a motion to 

dismiss or obtaining “an interlocutory ruling that reverses [a] 

dismissal for failure to state a claim.” TSA Second Suppl. Br. 

6. But the analogy is inapt. When a district court denies a 

motion to dismiss—or when an appellate court reverses a 

grant of such a motion—the plaintiff has won nothing but an 

opportunity to continue pressing his claims in the case 

originally filed. Such a ruling doesn’t compel the defendant 

to alter its conduct one whit; it merely means that an attempt 

to throw the case out was unsuccessful. And, as in cases 

where the court retains jurisdiction, ascertaining the prevailing 

party must await further developments in the case. 

 Finally, TSA cites Sole v. Wyner, 551 U.S. 74 (2007), in 

which the Supreme Court held that a plaintiff who obtained a 

preliminary injunction but was ultimately denied any 

permanent relief was not a prevailing party. See id. at 77-78. 

According to TSA, “if the preliminary injunction obtained in 

Sole . . . was insufficient to make plaintiff there a prevailing 

party, then a remand for reasoned decisionmaking by an 

agency cannot be sufficient, by itself, to make petitioner a 

prevailing party where the agency may ultimately adhere to its 

initial determination.” TSA Second Suppl. Br. 8. A fallacy in 

that reasoning is, again, that the preliminary injunction in Sole

was but an interim victory en route to final judgment (which 

was against the fee applicant), whereas the vacatur and 

remand in this case terminated the litigation in SecurityPoint’s 

favor. See Sole, 551 U.S. at 84 (“express[ing] no view on 

whether, in the absence of a final decision on the merits of a 

claim for permanent injunctive relief, success in gaining a 

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preliminary injunction may sometimes warrant an award of 

counsel fees”). Moreover, fee cases involving preliminary 

injunctive relief may be sui generis, as reflected by the 

complex array of decisions on that subject. See, e.g., Select 

Milk Producers, Inc. v. Johanns, 400 F.3d 939 (D.C. Cir. 

2005) (awarding fees for securing a preliminary injunction 

where a subsequent change in regulation rendered the case 

moot); Role Models Am., Inc. v. Brownlee, 353 F.3d 962 

(D.C. Cir. 2004) (awarding fees for securing an administrative 

remand to correct procedural errors along with a permanent 

injunction barring the government from transferring certain 

property in the meantime); Thomas v. National Science 

Foundation, 330 F.3d 486 (D.C. Cir. 2003) (reversing a fee 

award where the plaintiffs had secured a preliminary 

injunction freezing certain contested funds but a subsequent 

law rendered the case moot); Grano v. Barry, 783 F.2d 1104 

(D.C. Cir. 1986) (holding that the plaintiffs, who sought to 

preserve a historic tavern, were prevailing parties for securing 

a preliminary injunction temporarily barring the tavern’s 

demolition, even though the tavern was eventually razed as a 

result of subsequent litigation). 

 We thus overrule Waterman and hold, consistent with 

Schaefer, that a petitioner who secures a remand terminating 

the case and requiring further administrative proceedings in 

light of agency error is a prevailing party without regard to the 

outcome on remand. Our sister circuits have reached the same 

conclusion in the immigration context. See Johnson v. 

Gonzales, 416 F.3d 205, 209-10 (3d Cir. 2005); Muhur v. 

Ashcroft, 382 F.3d 653, 654-55 (7th Cir. 2004); RuedaMenicucci v. INS, 132 F.3d 493, 495 (9th Cir. 1997). 

* * * 

 We next consider whether the agency’s position was 

“substantially justified,” which would preclude a fee award. 

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28 U.S.C. § 2412(d)(1)(A). A position is substantially 

justified “if a reasonable person could think it correct, that is, 

if it has a reasonable basis in law and fact.” Pierce v. 

Underwood, 487 U.S. 552, 566 n.2 (1988). See also id. at 

565. The government bears the burden of establishing 

substantial justification. See Halverson v. Slater, 206 F.3d 

1205, 1208 (D.C. Cir. 2000). But even a finding that an 

agency’s action was arbitrary and capricious doesn’t preclude 

a decision that the action was substantially justified. See FEC 

v. Rose, 806 F.2d 1081, 1087-90 (D.C. Cir. 1986). 

 TSA has not met its burden of demonstrating that its 

position was substantially justified. In urging TSA to rescind 

the revisions to the MOU template, SecurityPoint advanced 

several serious points: It argued that the indemnification 

demand was a “classic ‘poison pill’” because airports would 

not and could not agree to it. It gave reason to believe that 

TSA’s revisions would not only disable SecurityPoint’s 

business but also damage TSA itself by shifting equipment 

costs to the agency. Finally, it suggested that an 

indemnification commitment was unnecessary because TSA 

had an implied license to use the relevant intellectual property 

at all airports that had contracts with SecurityPoint. TSA’s 

denial letter, penned by its Chief Counsel, was wholly 

unresponsive to these contentions. As we said in 2014, the 

letter offered “no indication that . . . anyone at TSA even 

considered the potential harms to . . . TSA[] from insistence 

on the new provisions” and no engagement with the argument 

that the agency already enjoyed an implied license. 

SecurityPoint Holdings, 769 F.3d at 1188. This indifference 

seems sufficiently beyond ordinary “arbitrary and capricious” 

agency action to qualify as lacking substantial justification. 

 TSA also says that SecurityPoint’s “principal argument, 

both before the agency and in litigation, was that TSA had 

changed the terms of the MOU to retaliate against 

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SecurityPoint”—an argument that TSA “emphatically 

rejected” and that the court didn’t reach. TSA Original Br. 8-

10. That’s true but ultimately irrelevant, because “[t]he 

government . . . must demonstrate the reasonableness not only 

of its litigation position, but also of the agency’s actions.” 

Role Models Am., Inc. v. Brownlee, 353 F.3d 962, 967 (D.C. 

Cir. 2004) (emphasis in original). See also Halverson, 206 

F.3d at 1208; 28 U.S.C. § 2412(d)(2)(D) (providing that 

“position of the United States” refers to both the position 

taken in the civil action and the agency’s act or failure to act 

on which the civil action is based). The court’s not reaching 

the retaliation argument does nothing to help TSA carry its 

burden of showing that the underlying action—the failure to 

address critical arguments made by SecurityPoint—was 

substantially justified. 

* * * 

 Finally, we must determine the amount of fees to which 

SecurityPoint is entitled. SecurityPoint seeks to recover 

$108,393.48 for 564.2 hours of work at a rate of 

approximately $190 per hour. TSA doesn’t contest its 

adversary’s billing rates but argues that SecurityPoint 

achieved only a limited victory in this litigation and that the 

fee award should be reduced accordingly. 

 The Supreme Court has held that “the extent of a 

plaintiff’s success is a crucial factor in determining the proper 

amount of an award of attorney’s fees.” Hensley v. Eckerhart, 

461 U.S. 424, 440 (1983). A first cut in measuring that extent 

depends, where there are multiple claims for relief, on 

whether the successful claims are “related” to the 

unsuccessful ones. Hours spent on unsuccessful claims that 

are “distinct in all respects from” the successful ones should 

be excised. Id. By contrast, where successful and 

unsuccessful claims are related, “a plaintiff who has won 

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substantial relief should not have his attorney’s fee reduced 

simply because the district court did not adopt each contention 

raised.” Id. 

 Here SecurityPoint’s principal argument was that TSA 

adopted the MOU revisions in retaliation for a prior patent 

suit, and that such retaliatory action was both arbitrary and 

capricious and contrary to the First Amendment. 

SecurityPoint also argued (albeit cursorily) that the denial of 

its cease-and-desist request was arbitrary and capricious for 

want of reasoned decisionmaking. The latter argument, the 

only one we reached, was successful. Much argument was 

also devoted to motions by both parties to supplement the 

record with various documents bearing on the retaliation 

claims; we denied those motions as moot. 

 We believe that SecurityPoint’s petition for review 

presented only one claim for relief—that TSA’s denial of the 

cease-and-desist request was unlawful and must be set aside. 

Its assertion of several distinct grounds does not create 

multiple claims. See Am. Petroleum Inst. v. EPA, 72 F.3d 

907, 911-12 (D.C. Cir. 1996). But even if we treated the 

various grounds as separate claims, they are related in the 

sense meant by Hensley. The absence of any affirmative 

explanation for TSA’s action buttressed the claim of 

retaliation. And the efforts to supplement the record were 

clearly related to SecurityPoint’s underlying challenges, as the 

goal was to bring to the court’s attention evidence bearing on 

TSA’s alleged retaliatory intent. This is a case where it is 

“difficult to divide the hours expended on a claim-by-claim 

basis,” so that the litigation should be viewed as a whole. 

Hensley, 461 U.S. at 435. 

 Even when we are satisfied either that SecurityPoint 

raised a single claim or that it raised multiple related claims, 

Hensley tells us to assess the extent of its success and to 

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“award only that amount of fees that is reasonable in relation 

to the results obtained.” 461 U.S. at 440. See also Goos v. 

Nat’l Ass’n of Realtors, 68 F.3d 1380, 1384 (D.C. Cir. 1995). 

In making the assessment we disregard the outcome of the 

remand to TSA; not only is it under review, but under 

Schaefer it is SecurityPoint’s success in the civil action before 

us that we are evaluating. To a degree, the results fall short of 

matching SecurityPoint’s efforts. Had we reached its 

retaliation theory, to which it devoted much of its briefing, we 

might well have responded favorably to its suggestion that we 

order TSA to withdraw the offending changes to the MOU 

template (though subject, presumably, to ultimate restoration 

on an adequate record). See SecurityPoint Merits Reply Br. 

32. Nonetheless, SecurityPoint won a significant victory—an 

opinion vacating the challenged order on the ground that the 

agency had failed to meet the minimum requirements of 

reasoned decisionmaking. Under these circumstances, we 

think a reduction of 20% is appropriate. 

 Finally, TSA argues that SecurityPoint’s billing records 

are inadequate in certain respects and that too many hours 

were spent on various tasks. Upon review of SecurityPoint’s 

contemporaneous records, we conclude that while some 

entries are less than perfect, the time spent on the various 

tasks was reasonable and a further reduction is unwarranted. 

Compare Role Models, 353 F.3d at 968-74 (D.C. Cir. 2004). 

* * * 

 We grant in part SecurityPoint’s application for 

attorneys’ fees and enter an award in the amount of 

$86,714.78. 

 So ordered. 

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