PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

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No. 10-1494

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MODESTO CRUZ,

 Appellant

v.

COMMISSIONER OF SOCIAL SECURITY

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On Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. No. 2-08-cv-00204)

District Judge: Honorable Lynne A. Sitarski

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Submitted Pursuant to Third Circuit LAR 34.1(a)

September 17, 2010

Before: SCIRICA, RENDELL and FISHER, Circuit Judges.

(Filed: October 22, 2010)

Robert Savoy

3 Neshaminy Interplex, Suite 301

Trevose, PA 19053

Counsel for Appellant
2

Lori R. Karimoto

Social Security Administration

SSA/OGC/Region III

P. O. Box 41777

Philadelphia, PA 19101

Counsel for Appellee

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OPINION OF THE COURT

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FISHER, Circuit Judge.

Modesto Cruz appeals from an order denying his

motion for attorney’s fees under the Equal Access to Justice

Act (“EAJA”), 28 U.S.C. § 2412, and an order denying his

motion to alter or amend judgment. For the reasons stated

herein, we will affirm.

I.

On August 22, 1997, Mr. Cruz applied for Disability

Insurance Benefits under Title II of the Social Security Act,

42 U.S.C. § 401 et seq, claiming neck and back impairments.

His claim for benefits was denied. Thereafter, Mr. Cruz

timely requested a hearing before an Administrative Law

Judge (“ALJ”). Following the hearing, the ALJ denied Mr.

Cruz’s request for review. The Appeals Council denied his

request for further review.
3

On November 19, 2001, Mr. Cruz filed a civil action.

After reviewing a motion for summary judgment filed by Mr.

Cruz, the District Court granted the motion in part, and

remanded the matter to the Commissioner of the Social

Security Administration for consideration of all relevant

medical evidence in determining Mr. Cruz’s residual

functional capacity and ability to return to past relevant work.

On remand, Mr. Cruz sought disability benefits for the

period from November 23, 1996 through November 15, 2000.

On November 15, 2000, Mr. Cruz resumed working for his

previous employer and continued until 2005 when the

employer relocated. The ALJ held a hearing and determined

that Mr. Cruz was not disabled and that he could return to his

past relevant work. Mr. Cruz appealed this decision to the

Appeals Council. The Appeals Council declined to review

the ALJ’s decision.

On March 2, 2006, Mr. Cruz filed a second civil

action. The Commissioner filed an Uncontested Motion for

Remand requesting that the ALJ: (1) reevaluate Mr. Cruz’s

residual functional capacity considering the applicable state

agency opinions; (2) address the treating physician’s opinions

that Mr. Cruz was disabled and provide a rationale for the

weight assigned those opinions; (3) obtain vocational expert

testimony to determine the physical and mental demands of

Mr. Cruz’s past work; and (4) if Mr. Cruz was unable to

perform his past work, determine if there are other jobs Mr.

Cruz could perform. The motion was granted.

The ALJ convened a third hearing to consider the case

following remand. At this hearing, Mr. Cruz submitted
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evidence from Dr. Melanie Ice, his treating physician.

Significant to this appeal, Mr. Cruz introduced Dr. Ice’s April

2007 Medical Source Statement Concerning Nature and

Severity of Impairments (“Dr. Ice’s Statement”). The

statement referred to the closed period from November 23,

1996 to November 15, 2000, and supported a finding that Mr.

Cruz was disabled. The ALJ denied benefits for this closed

period and granted benefits from November 7, 2005 forward.

On January 11, 2008, Mr. Cruz filed a third civil action

seeking judicial review of the final decision of the

Commissioner of the Social Security Administration denying

his claim for disability benefits for the closed period from

November 23, 1996 to November 15, 2000. Both parties

consented to jurisdiction before the Magistrate Judge. In his

claim, Mr. Cruz argued that the ALJ misinterpreted Dr. Ice’s

Statement. Specifically, Mr. Cruz contended that the ALJ

mistakenly applied Dr. Ice’s Statement to his benefits claim

for the period from 2005 onward, instead of the closed period

from November 23, 1996 to November 15, 2000.

On January 30, 2009, the Magistrate Judge issued an

order granting in part and denying in part Mr. Cruz’s request

for review and remanded the case to the ALJ. According to

the Magistrate Judge, the ALJ misread Dr. Ice’s Statement as

applying from 2005 onward instead of the closed period from

1996 to 2000. Therefore, the Magistrate Judge remanded the

case to the ALJ for a determination based on a proper reading

of Dr. Ice’s Statement.

On March 17, 2009, Mr. Cruz filed a motion for

attorney’s fees under the EAJA, 28 U.S.C. § 2412. Mr. Cruz
5

alleged that he was entitled to attorney’s fees because the ALJ

improperly considered Dr. Ice’s Statement and the

Commissioner’s defense of the ALJ’s decision was not

substantially justified. According to the Commissioner, the

ALJ realized that Dr. Ice’s Statement applied to the closed

period from 1996 to 2000. The Commissioner maintained,

however, that the ALJ found it more relevant to the period

from 2005 onward.

On June 22, 2009, the Magistrate Judge denied Mr.

Cruz’s motion for attorney’s fees. Viewing the totality of the

circumstances, the Magistrate Judge concluded the ALJ

reasonably analyzed the facts of the case. Furthermore, in its

examination of the Commissioner’s position, the Magistrate

Judge focused on the inconsistencies in Dr. Ice’s notes for the

closed period from November 1996 to November 2000.

Contrary to Dr. Ice’s Statement, her other notes from this time

frame did not support a disability finding. Considering these

notes and other medical records, the Magistrate Judge found

that the Commissioner’s position regarding the ALJ’s

interpretation of Dr. Ice’s Statement was substantially

justified. Accordingly, the Magistrate Judge denied Mr.

Cruz’s motion for attorney’s fees.

On July 7, 2009, Mr. Cruz filed a motion to alter or

amend judgment. Mr. Cruz alleged that the Magistrate Judge

improperly denied his motion for costs, improperly intruded

upon the Commissioner’s role in the fact-finding process by

making a credibility determination as to Dr. Ice’s Statement,

and erred by failing to apply Third Circuit precedent.
6

On December 18, 2009, the Magistrate Judge denied

the motion. First, addressing Mr. Cruz’s claim for costs, the

Magistrate Judge interpreted the applicable statutory language

and explained that, given the broad statutory discretion in

awarding costs, it did not commit clear error of law.

Furthermore, the Magistrate Judge found it had not made a

credibility determination as to Dr. Ice’s Statement. Instead,

the Magistrate Judge concluded it correctly applied Third

Circuit precedent for assessing EAJA claims.

On April 21, 2010, Mr. Cruz timely filed the instant

appeal alleging that the Magistrate Judge abused its discretion

by denying his claim for attorney’s fees pursuant to 28 U.S.C.

§ 2412(d)(1)(A) and costs pursuant to 28 U.S.C. § 2412(a)(1).

II.

The Magistrate Judge exercised jurisdiction pursuant to

42 U.S.C. § 405(g). We have jurisdiction over this appeal

pursuant to 28 U.S.C. § 1291. “The district court’s

determination of substantial justification in a suit under the

EAJA is reviewed for abuse of discretion.” Morgan v. Perry,

142 F.3d 670, 682 (3d Cir. 1998) (citing Pierce v.

Underwood, 487 U.S. 552, 560 (1988)). According to this

standard, “[a]n abuse of discretion arises when the district

court’s decision ‘rests upon a clearly erroneous finding of

fact, an errant conclusion of law or an improper application of

law to fact.’” Morgan, 142 F.3d at 682 (quoting Hanover

Potato Prods., Inc. v. Shalala, 989 F.2d 123, 127 (3d Cir.

1993)). Likewise, “[a]n abuse of discretion can also occur

‘when no reasonable person would adopt the district court’s

view.’” Morgan, 142 F.3d at 683 (citation omitted). As a
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result, “we will not interfere with the district court’s exercise

of discretion ‘unless there is a definite and firm conviction

that the court . . . committed a clear error of judgment in the

conclusion reached upon a weighing of the relevant factors.’”

Id. (citation omitted).

III.

Mr. Cruz advances two arguments on appeal. First,

Mr. Cruz contends that the Magistrate Judge abused its

discretion by finding that the Commissioner’s position was

substantially justified, and therefore he is entitled to

attorney’s fees under the EAJA, 28 U.S.C. § 2412(d)(1)(A).

Second, Mr. Cruz argues that the Magistrate Judge abused its

discretion in denying his claim for costs other than attorney’s

fees pursuant to 28 U.S.C. § 2412(a)(1). We address each

argument in turn.

A.

Pursuant to the EAJA, “a court shall award to a

prevailing party . . . fees and other expenses . . . incurred by

that party . . . unless the court finds that the position of the

United States was substantially justified or that special

circumstances make an award unjust.” 28 U.S.C. §

2412(d)(1)(A) (2006). The Supreme Court has defined

substantial justification under the EAJA as “justified in

substance or in the main – that is, justified to a degree that

could satisfy a reasonable person.” Pierce, 487 U.S. at 565.

In EAJA claims, the government bears the burden of

demonstrating substantial justification. See Hanover, 989

F.2d at 128 (citation omitted). To satisfy this burden and
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defeat a prevailing party’s application for fees, the

government must establish that there is substantial

justification for its position by demonstrating “(1) a

reasonable basis in truth for the facts alleged; (2) a reasonable

basis in law for the theory it propounded; and (3) a reasonable

connection between the facts alleged and the legal theory

advanced.” Morgan, 142 F.3d at 684 (citation omitted).

Furthermore, “a court cannot assume that the government’s

position was not substantially justified simply because the

government lost on the merits.” Id. at 685. Rather, when

deciding whether the government is substantially justified,

courts should determine whether the government’s position

has a reasonable basis in both fact and law. See id. at 684.

Mr. Cruz argues that the Magistrate Judge abused its

discretion when it found the Commissioner’s position was

substantially justified and denied his claim for attorney’s fees.

Specifically, Mr. Cruz claims that the Commissioner’s

defense of the ALJ’s treatment of Dr. Ice’s Statement had no

basis in fact or law and, therefore, was not substantially

justified. We disagree.

In proceedings below, the Magistrate Judge correctly

analyzed the Commissioner’s position under the three-step

substantial justification test set forth in Morgan. First, the

Magistrate Judge noted that the Commissioner did not believe

that the ALJ misread the dates of Dr. Ice’s Statement. Rather,

the Commissioner reasonably maintained that the ALJ knew

that Dr. Ice’s Statement applied to the period from November

1996 to November 2000, but determined that it better

represented the period from 2005 onward. Second, the

Magistrate Judge reviewed the record as a whole, including
1

 In Morgan, we briefly discussed a claim for costs under

28 U.S.C. § 2412(a)(1). 142 F.3d at 689-90. We declined to

9

Dr. Ice’s inconsistent notes and other medical records, and

determined that it supported a finding of no disability for the

closed period. As such, the Magistrate Judge found that the

Commissioner’s position had a reasonable basis in law.

Third, after examining the Commissioner’s position and the

record, the Magistrate Judge found a reasonable connection

between the facts and the Commissioner’s legal theory. In

concluding that the Commissioner was substantially justified,

the Magistrate Judge correctly applied the relevant facts to the

law and therefore did not “commit a clear error of judgment.”

Id. at 683. Accordingly, the Magistrate Judge did not abuse

its discretion.

B.

Second, Mr. Cruz argues that the Magistrate Judge

abused its discretion by denying his claim for costs other than

attorney’s fees. The pertinent language of the EAJA instructs

that, “[e]xcept as otherwise specifically provided by statute, a

judgment for costs . . . may be awarded to the prevailing party

in any civil action brought by or against the United States or

any agency or any official of the United States acting in his or

her official capacity in any court having jurisdiction of such

action.” 28 U.S.C. § 2412(a)(1).

Although we have not addressed the issue of a district

court’s discretion to award or deny costs under the EAJA, the

decision of the Federal Circuit in Neal & Company, Inc., v.

United States is instructive. In Neal, the court noted that 28 1
reach a decision on the merits of the claim, however, because

the party asking for costs failed to properly appeal from the

district court=s decision not to award costs. See id.

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U.S.C. § 2412(a)(1) “does not create a presumption in favor

of an award of costs to the prevailing party.” 121 F.3d 683,

687 (Fed. Cir. 1997). Instead, broad discretion rests with the

trial court in awarding costs. See id. We agree with the

reasoning of the Federal Circuit in this regard. The plain

language of the statute provides that costs “may be awarded.”

28 U.S.C. § 2412(a)(1). Accordingly, it is appropriate for a

district court to exercise discretion in awarding or denying

costs depending on the particular circumstances. In the case

at hand, the Magistrate Judge considered all the facts and

circumstances surrounding Mr. Cruz’s claims. After careful

deliberation, the Magistrate Judge declined to award costs.

Given this reasoning, the Magistrate Judge did not abuse its

discretion in denying Mr. Cruz’s motion for costs.

IV.

For the foregoing reasons, we will affirm the orders of

the Magistrate Judge.