* This order and judgment is not binding precedent, e xcept under the

doctrines of law of the case, res judicata, and col lateral estoppel. The court generally disfavors the citation of orders and judg ments; nevertheless, an order and judgment may be cited under the terms and condi tions of 10th Cir. R. 36.3.

** Honorable G. Thomas Van Bebber, Chief Judge, United States District Court for the District of Kansas, sitting by design ation.

UNITED STATES COURT OF APPEALS Filed 11/5/96 FOR THE TENTH CIRCUIT

MONTVIEW PARK PARTNERSHIP; HUDSON REAL ESTATE COMPANY; GINGER KLIETZ,

Petitioners,

v. UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT,

Respondent. No. 95-9536 (HUDALJ 08-93-9421-8) (Petition for Review)

ORDER AND JUDGMENT *

Before BRISCOE and MURPHY, Circuit Judges, and VAN BEBBER, ** District Judge. After examining the briefs and appellate record, th is panel has determined unanimously to grant the parties’ request for a dec ision on the briefs without oral argument. See Fed. R. App. P. 34(f) and 10th Cir. R. 34.1.9. Th e case is therefore ordered submitted without oral argument.-2-

Petitioners Montview Park Partnership, Hudson Real Estate Company, and Ginger Klietz seek review of a decision by responde nt United States Department of Housing and Urban Development (HUD) denying thei r application for attorney fees pursuant to the Equal Access to Justice Act (E AJA), 5 U.S.C. § 504(a)(1). Petitioners filed their application for attorney fe es following settlement of a lawsuit brought by HUD claiming petitioners engaged in illegal discrimination by refusing to rent an apartment to Nancy Williams bec ause of her childrens’ race, in violation of 42 U.S.C. § 3604(a), and by making dis criminatory remarks to Williams, in violation of 42 U.S.C. § 3604(c). In their petition for review, petitioners argue HUD erred in holding they were no t prevailing parties under the EAJA and therefore not entitled to an award of atto rney fees. We agree that petitioners are not entitled to attorney fees and d eny their petition for review.
I. This matter arises from a complaint filed with HUD by Williams, alleging Klietz, an employee of Montview Park Partnership, r efused to rent an apartment to her because her children were of mixed race. Wi lliams further alleged Klietz told her that “she did not allow Blacks in her apartments and would prefer to keep them out.” R. Vol. I, tab 1, Determination of Reas onable Cause and Charge of Discrimination, at 3. Following conciliation attempts and investigation, HUD issued its charge of discrimination. Williams did not elect to have the case tried-3-

in court, and the matter was set for hearing before an administrative law judge (ALJ).Following discovery, but prior to hearing, the part ies entered into a consent agreement whereby petitioners denied they discrimin ated against Williams, but agreed to (1) refrain from future discrimination ba sed on race, color, religion, sex, national origin, handicap, or familial status; (2) provide a questionnaire to all persons making rental inquiries, and maintain recor ds and report all rental inquiries to HUD; (3) require Klietz to participate in a training session on the Fair Housing Act to be provided by HUD; (4) prominently display a HUD fair housing poster in offices where rental inquiries are taken; and (5) pay the sum of $1,000 to Williams. R. Vol. II, tab 59 at 2-4. Following entry of the agreement, petitioners applied for attorney fees under 5 U.S.C . § 504. The ALJ denied the application and petitioners filed a petition for re view with this court pursuant to 42 U.S.C. § 3612(i).
II.

In reviewing an agency’s decision not to award fees under the EAJA, we will modify that determination only if we find “ that the failure to make an award of fees . . . was unsupported by substantial evidence.” 5 U.S.C. § 504(c)(2). However, to the extent an appeal requir es us to decide the proper interpretation of the EAJA, our scope of review is de novo. See Pierce v.1 Because we ultimately determine petitioners are notentitled to attorney

fees, we find it unnecessary to decide whether sett lements of administrative claims fall within the scope of “adversary administ rative adjudications” as defined under 5 U.S.C. § 504(b)(1)(C). -4- Underwood , 487 U.S. 552, 558 (1988) (noting questions of law are typically reviewed de novo); Director, O.W.C.P., U.S. Dept. o f Labor v. Ball , 826 F.2d 603, 604 (7th Cir. 1987) (“For matters of law, the APA mandates de novo review.”). Under the provisions of the EAJA pertaining to adve rsary administrative proceedings, prevailing parties may recover attorne y fees from the Government.
See Ardestani v. I.N.S. , 502 U.S. 129, 132 (1991). Specifically, 5 U.S.C. § 504(a)(1) provides that “[a]n 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 proc eeding, unless the adjudicative officer of the agency finds that the position of th e agency was substantially justified or that special circumstances make an awa rd unjust.” The question faced by HUD in this case, and present ed to us on appeal, is how to determine when a defendantis a prevailing party under § 504(a)(1) if the administrative proceedings are resolved prior to a hearing on the merits. 1 In answering this question, the ALJ turned to Farrar v . Hobby , 506 U.S. 103 (1992), in which the Supreme Court announced that “a plaint iff ‘prevails’ when actual-5-

relief on the merits of his claim materially alters the legal relationship between the parties by modifying the defendant’s behavior i n a way that directly benefits the plaintiff.” Id. at 111-12. The ALJ applied the Farrarstandard to the facts before her and concluded HUD was the prevailing party. Accordingly, the ALJ concluded petitioners had not achieved prevailing p arty status and denied their application for fees. On appeal, petitioners conte nd the ALJ erred in relying on the Farrarstandard because it is applicable only to cases fa lling under 42 U.S.C. § 1988. According to petitioners, the appropriate st andard is whether they succeeded on any significant issues in the litigati on. In light of the underlying facts of this case, we f ind it unnecessary to conclusively decide what the proper standard is fordetermining whether a defendant in an adversary administrative adjudicati on has achieved prevailing party status. Under any conceivable answer to this question, whether it be answering the question indirectly, as the ALJ did, by applying the Farrartest to determine if plaintiff is the prevailing party, or whether it involves directly answering the question by applying a separate stand ard to the defendant who seeks fees as a prevailing party, see , e.g. , Commissioner, I.N.S. v. Jean , 496 U.S. 154, 160 (1990) (“In EAJA cases, the court first mu st determine if the applicant is a ‘prevailing party’ by evaluating the degree of su ccess obtained.”); Kelly v. Secretary, U. S. Dept. of Housing & Urban Dev. , 97 F.3d 118, 121 (6th Cir. 1996)-6-

(concluding that, because defendants in FHA discrim ination case had prevailed on several significant issues, they were entitled to a n award of fees under the EAJA); Marquart v. Lodge 837, Intern. Ass’n of Machinists & Aerospace Workers , 26 F.3d 842, 851-52 (8th Cir.1994) (holding that, in o rder to obtain prevailing party status, a defendant in a Title VII case must be abl e to point to a favorable judicial declaration on the merits), it is obvious to us that petitioners are not prevailing parties in the present case, and have therefore notsatisfied the initial threshold for fee eligibility. Although petitioners spend co nsiderable time in their appellate brief describing the positive benefits petitioners obtained through the settlement, we agree with the ALJ that “[t]he terms of the Sett lement Agreement altered the legal relationship between the parties by forcing [ petitioners] to pay [Williams] a sum of money and to undergo training and keep recor ds they otherwise would not have.” R. Vol. III, tab 68 at 5. Further, the fac tual record clearly indicates that petitioners did not receive a single favorable dete rmination from the ALJ prior to the settlement. The fact that petitioners were abl e to reduce their potential liability through settlement does not equate to the ir becoming prevailing parties under the terms of this settlement. Accordingly, e ven assuming the ALJ adopted and applied the wrong standard, we agree with the u ltimate resolution of the issue and conclude any such error was harmless. See generallyIntercargo Ins. Co. v. United States , 83 F.3d 391, 394 (Fed. Cir. 1996) (holding that, under the-7-

Administrative Procedure Act, 5 U.S.C. § 706, princ iples of harmless error apply to the review of agency proceedings). The petition for review is DENIED. Entered for the Court Mary Beck Briscoe Circuit Judge