In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 05-1125

BRICKS, INC.,

Petitioner,

v.

UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY,

Respondent.

____________

Petition for Review of an Order of the

Environmental Protection Agency,

Case No. 04-02.

____________

ARGUED SEPTEMBER 15, 2005—DECIDED OCTOBER 21, 2005

____________

Before FLAUM, Chief Judge, and RIPPLE and KANNE,

Circuit Judges.

FLAUM, Chief Judge. In July 2000, Environmental

Protection Agency Region 5 (“the EPA”) filed a complaint

against Bricks, Inc. (“Bricks”), alleging that Bricks violated the Clean Water Act, 33 U.S.C. §§ 1251 et seq.

(“CWA”), by discharging dredge and fill material into

wetlands without a section 404(a) permit, 33 U.S.C. § 1344.

The EPA assessed class II civil penalties against Bricks,

pursuant to section 309(g) of the CWA. 33 U.S.C. § 1319(g).

The administrative law judge (“ALJ”), after two days of

hearings, issued an Initial Decision in favor of the EPA.
2 No. 05-1125

Bricks appealed to the Environmental Appeals Board (“the

Board”). The Board overturned the ALJ’s Initial Decision,

finding that the EPA had not proved its case

by a preponderance of the evidence.

Bricks then filed a fee and expenses application with the

ALJ, pursuant to the Equal Access to Justice Act (“EAJA”).

5 U.S.C. § 504; 28 U.S.C. § 2412. The EAJA allows a

defendant who prevails in an action brought by a federal

agency to recover its legal fees and expenses, unless the

agency’s position was substantially justified or if special

circumstances would make an award unjust. 5 U.S.C.

§ 504(a)(1); 28 U.S.C. § 2412(d)(2)(A)(ii). Bricks contended

that the EPA’s position was not substantially justified and

also argued that it was entitled to fees in excess of the

statutory maximum of $125 per attorney hour. The ALJ

granted Bricks’ fees and expenses, but denied Bricks’

request for attorney’s fees in excess of the statutory maximum. The EPA appealed and Bricks cross appealed to the

Board. The Board reversed the ALJ’s award of fees, finding

that the EPA was substantially justified in bringing its

complaint against Bricks. Bricks petitions for review of the

Board’s decision and asks this Court to reinstate the ALJ’s

fee award and to award Bricks attorney’s fees in excess of

the statutory cap. For the following reasons, we deny

Bricks’ petition.

I. Background

Bricks owns a triangular piece of farmland in North

Aurora, Illinois that is bordered on the east by Orchard

Road, the west by Deerpath Road, and the south by Interstate 88 (“the property”). The property is located approximately two to three miles east and fifteen miles south of

Fox River, a navigable water, and one to two miles west of

a non-navigable tributary of Blackberry Creek. A portion of

the property contains wetlands.
No. 05-1125 3

1 Nationwide Permits are intended to authorize routine activities

with little paperwork and delay. At issue here are Nationwide

Permits 14 and 26, which were effective during the period in

which Bricks’ fill activity took place. Nationwide Permit 14,

entitled “Road Crossings,” authorized fill activity for the construction of roads crossing “waters of the United States,” including

wetlands, so long as that activity complied with certain restrictions. 61 FED. REG. 65,874, 65,915 (Dec. 13, 1996). Nationwide

Permit 26, entitled “Headwaters and Isolated Waters Discharges,”

allowed discharge of dredged or fill material into headwaters and

other non-tidal waters and their adjacent wetlands, if the

discharge would not cause the loss of more than three acres of

waters of the United States. Id. at 65,916. A party wishing to

discharge fill material that would cause the loss of more than onethird of an acre was required to submit a Pre-Construction

Notification to the Corps before commencing. Id. Additionally, the

Corps has authority to grant after-the-fact permits, in accordance

with the regulations promulgated under section 404 of the CWA.

33 C.F.R. § 326.3(e)(1).

In 1997, Bricks began planning to develop the property.

Bricks wished to install an access road connecting the

property to Orchard Road and Deerpath Road. Bricks hired

Environmental Planning Team Chicago (“EPT”) to perform

a wetlands delineation on the property, following the

procedures set forth in the U.S. Army Corps of Engineers’

Wetlands Delineation Manual. EPT found that there were

approximately eleven acres of wetlands on the property,

one-third of an acre of which would be filled to construct the

access road, and advised Bricks that it would need to obtain

a Nationwide or Individual Permit before filling

the wetlands.1

 Bricks directed its engineering consultant,

Manhard Consulting, Inc. (“Manhard”) to obtain permits

from the Corps, and Manhard hired Environmental Consultants and Planners (“ENCAP”) to obtain any necessary

permits. ENCAP concluded that Bricks’ plans to install

the access road would impact 0.3 acres of wetlands and

would be covered under a Nationwide Permit. ENCAP then
4 No. 05-1125

submitted a Pre-Certification Notification to the Corps,

asking the Corps to confirm that the project was covered

under a Nationwide Permit.

Bricks began constructing the access road before it

received a response from the Corps, completing the road

between August 23 and 25, 1999. The Corps notified Bricks

on August 23, 1999 that it had received Bricks’ Pre-Construction Notification and that, according to a preliminary

evaluation, the project would require authorization under

Nationwide Permit 26 or under an Individual Permit.

Subsequently, the Corps was informed that Bricks was

already developing the property. A Corps employee visited

the property and observed that Bricks had placed fill in a

wetland area while constructing the access road. The Corps

issued a Cease and Desist Order to Bricks on August 26,

1999. During later investigations, employees of the Corps,

the EPA, and the local Soil Conservation District found that

Bricks had destroyed wetlands when constructing the

access road and two retention basins.

The Corps then responded by letter to Bricks’ Pre-Certification Notification. The Corps reported that Nationwide

Permit 14 would cover Bricks’ construction of the access

road, but not the two retention basins. Bricks would need to

obtain an after-the-fact permit to be covered by Nationwide

Permit 26. While Bricks was attempting to obtain an afterthe-fact permit from the Corps, the EPA issued a Findings

of Violation and Compliance Order (“Compliance Order”)

stating that Bricks was in violation of section 301 of the

CWA. 33 U.S.C. § 1311. The Compliance Order required

Bricks to submit an after-the-fact application to the EPA,

containing a mitigation plan for restoring wetlands located

on the property. Bricks submitted the application in

January 2000. On June 7, 2000, the Corps issued Bricks an

after-the-fact permit pursuant to Nationwide Permit 26,

authorizing Bricks to discharge materials into 1.05 acres of
No. 05-1125 5

wetlands on the property.

On July 21, 2000, the EPA filed an administrative

complaint, alleging that Bricks used bulldozers and other

earthmoving machinery to discharge approximately 8,000

cubic yards of fill into wetlands on its property; that, under

the CWA, this activity constituted discharge of pollutants;

and that because Bricks did not have a permit under section

404 of the CWA, 33 U.S.C. § 1344, Bricks had violated

section 301 of the CWA, 33 U.S.C. § 1311. The complaint

also alleged that the wetlands are adjacent to an unnamed

tributary of Blackberry Creek, which is itself a tributary of

Fox River, an interstate water within the ambit of the

CWA. This made the wetlands “waters of the United

States,” protected by the CWA. See 33 U.S.C. § 1362(7).

Bricks responded by arguing, among other things, that the

wetlands were isolated and did not fall under CWA jurisdiction. Therefore, according to Bricks, the company was not

required to obtain a section 404(a) permit. See 33 U.S.C. §

1344(a).

The ALJ commenced a two-day hearing to consider the

EPA’s complaint. The ALJ found in his Initial Decision that

the EPA had shown by a preponderance of evidence that

Bricks violated section 301 of the CWA by filling wetlands

located on the property. Section 301(a) prohibits any person

from discharging dredged or fill material into waters of the

United States, 33 U.S.C. § 1311(a); 33 U.S.C. § 1362(6),

unless the Corps issues a permit, 33 U.S.C. § 1344(a).

Under regulations promulgated by the Corps, “waters of the

United States” include waters that “are currently used, or

were used in the past, or may be susceptible to use in

interstate or foreign commerce” (i.e., “navigable waters”), 33

C.F.R. § 328.3(a)(1), tributaries of those waters, 33 C.F.R.

§ 328.3(a)(5), and “[w]etlands adjacent to” waters of the

United States or their tributaries, 33 C.F.R. § 328.3(a)(7).

The EPA and Bricks agreed that the property contains

wetlands.
6 No. 05-1125

Bricks argued, however, that the wetlands were “isolated”—not connected to waters of the United States—and

hence not covered by the CWA. Bricks’ central legal argument was that the EPA was precluded from asserting

jurisdiction over the wetlands located on the property,

because of the Supreme Court’s decision in Solid Waste

Agency of Northern Cook County v. U.S. Army Corps of

Engineers, 531 U.S. 159 (2001) (“SWANCC”), in which the

Court rejected the Corps’s argument that isolated ponds

were “navigable waters” under the Migratory Bird Rule.

The ALJ rejected this argument and pointed out that the

Court in SWANCC had distinguished that case from United

States v. Riverside Bayview Homes, Inc., 474 U.S. 121

(1985), in which the Court found that wetlands adjacent to

navigable water were navigable waters, based on the

“significant nexus” between wetlands and navigable waters.

SWANCC, 531 U.S. at 167. Bricks also argued that there

was no hydrological connection between the wetlands on its

property and navigable waters. The ALJ rejected this

argument as well. The ALJ relied on the testimony of four

witnesses and a site map prepared by Bricks’ contractor to

find that, although it was a “close question,” the preponderance of the evidence demonstrated that the wetlands on

Bricks’ property were waters of the United States subject to

the CWA. Specifically, the wetlands ran into a tributary of

Blackberry Creek, and Blackberry Creek ran into Fox River,

a navigable water. The ALJ assessed a $65,000 penalty

against Bricks.

The Board reversed the ALJ’s Initial Decision. The Board

examined the testimony and evidence relied on by the ALJ

and concluded that the EPA had failed to prove, by a

preponderance of the evidence, that there was a hydrological connection between the wetlands on Bricks’ property

and the Fox River.

After the Board issued its Final Order reversing the ALJ’s
No. 05-1125 7

Initial Decision in favor of the EPA, Bricks filed a claim

with the ALJ for legal fees and expenses, pursuant to the

EAJA. The ALJ, relying on United States v. Hallmark

Construction Co., 200 F.3d 1076, 1080 (7th Cir. 2000),

determined that the EPA’s decision to file a complaint

against Bricks was not “substantially justified.” The ALJ

reasoned that because the Board had concluded that the

EPA’s testimony and evidence failed to establish a hydrological connection between the wetlands located on Bricks’

property and a navigable water, Bricks was entitled to legal

fees and expenses. However, the ALJ rejected Bricks’ claim

for attorney’s fees in excess of the statutory maximum of

$125.00 per hour, finding that Bricks failed to show that the

case was sufficiently complex to justify a higher rate under

the “special factor” standard contained in 5 U.S.C. §

504(b)(1)(A). The EPA appealed to the Board. Reviewing the

ALJ’s decision de novo, the Board reversed. The Board

found that the EPA had presented evidence and testimony

showing a possible hydrological connection between the

wetlands located on Bricks’ property and a navigable water.

Additionally, the Board explained that the EPA had

provided support for all of the elements of proof required by

the CWA and that in this case the EPA could not have

predicted that the Board would not find this support

sufficiently persuasive. Bricks now appeals.

II. Discussion

Bricks asks this Court to find, based on Hallmark, that

the EPA’s position in the underlying enforcement action

was not substantially justified. Bricks further asks this

Court to award it attorney’s fees in excess of the $125.00

per hour maximum established by the EAJA. This Court

will reverse the Board’s decision to deny fees under the

EAJA if that decision was unsupported by substantial

evidence. 5 U.S.C. § 504(c)(2).
8 No. 05-1125

Bricks’ central argument is that because the Board’s

decision in the underlying enforcement action was critical of

the EPA’s position, the Board should have awarded legal

fees and costs under the EAJA. Specifically, the Board

found (1) that the testimony of ENCAP employee Thomas

Kehoe did not provide “the critical missing link” establishing a hydrological connection between the wetlands located

on Bricks’ property and Blackberry Creek or a tributary

thereof; (2) that the testimony of Randolph Briggs, of the

local Soil Conservation District, was “ambiguous” and

“unconvincing” as to whether a channel located south of

Interstate 88 existed at the time Briggs surveyed the site

and whether the channel flowed into Blackberry Creek; (3)

that the Board had “serious doubts” about the reliability of

the notations on a map prepared by Bricks’ engineers,

which the EPA used to establish a hydrological connection;

and (4) that, taken as a whole, the EPA’s “case suffers from

a fatal lack of clarity” and is “contradictory and inconclusive

at best.”

Hallmark outlines a three-part test for determining

whether an agency’s position was substantially justified.

The EPA’s decision is substantially justified if “its position

was grounded in ‘(1) a reasonable basis in truth for the facts

alleged; (2) a reasonable basis in law for the theory propounded; and (3) a reasonable connection between the facts

alleged and the legal theory advanced.’ ” Hallmark, 200 F.3d

at 1080 (quoting Phil Smidt & Son, Inc. v. NLRB, 810 F.2d

638, 642 (7th Cir. 1987)). Hallmark also makes clear that

“the outcome of a case is not conclusive evidence of the

justification for the government’s position.” Id. at 1079.

Instead, the Board’s analysis should “contain an evaluation

of the factual and legal support for the government’s

position throughout the entire proceeding.” Id. at 1080.

In a case such as this one, where the Board’s opinion

appears strongly to favor a defendant who has prevailed in

an underlying suit brought by the government, the Board is
No. 05-1125 9

required to provide a “more thorough explanation for

denying attorney’s fees to the prevailing party.” Id. at 1079.

In Hallmark, the Corps, through the U.S. Attorney, filed

a complaint in federal district court alleging that Hallmark had discharged pollutants into a wetland area, in

violation of the CWA. The district court found for Hallmark

and concluded that the Corps had acted in an arbitrary and

capricious manner by classifying the defendant’s property

as wetlands. United States v. Hallmark Constr. Co., 30 F.

Supp. 2d 1033, 1041 (N.D. Ill. 1998). The district court also

found that the Corps’s determination “was not based on a

consideration of the relevant factors and evidence” and that

“[m]uch of the government evidence rested on speculation

and conjecture.” Id. Nonetheless, the district court denied

Hallmark’s request for legal fees and costs under the EAJA.

Hallmark appealed, and this Court reversed and remanded,

because the district court failed to reconcile its denial of

Hallmark’s EAJA fee request with the strong language it

had used in the underlying case. Hallmark, 200 F.3d at

1081. The Court explained that “the district court’s conclusion on the merits that the government’s position was

‘arbitrary and capricious’ appear[ed], at least on the surface,

to be at odds with its subsequent conclusion that the

government’s position was ‘substantially justified.’ ” Id. This

Court explained that “[a]lthough there is no presumption

that a prevailing party against the government will recover

attorney’s fees under the EAJA, the government bears

the burden of proving that its position meets the substantially justified standard.” Id. at 1079 (internal citations

omitted).

In this case, the Board properly concluded that the EPA’s

position in the underlying enforcement action was substantially justified. As an initial matter, the Board’s decision

reversing the ALJ’s Initial Decision was not the “slam

dunk” that Bricks implies. The Board made clear that it

was “not rul[ing] out the possibility that a hydrological
10 No. 05-1125

connection exists between [the wetlands on Bricks’ property] and Blackberry Creek or a tributary thereof.” Instead,

the Board “simply h[e]ld that the [EPA] ha[d] not met its

burden of proving such a connection by a preponderance of

the evidence.” In Hallmark, by contrast, the district court

below found that the Corps’s decision to classify Hallmark’s

property as wetlands was arbitrary and capricious, not

simply insufficient to establish the Corps’s case by a

preponderance of the evidence.

Additionally, in this case the Board provided a sufficient

explanation to reconcile its decision for Bricks in the

underlying enforcement action with its denial of fees and

costs to Bricks under the EAJA. Examining the administrative record as a whole, the Board found that the EPA had

“presented a significant amount of evidence pointing to a

possible hydrological connection between the [wetlands

located on Bricks’ property] and a navigable water or a

tributary thereof to the south,” including testimony and

map notations. The Board explained that “this is not a

situation where the [EPA] omitted a crucial element of proof

from its case; rather, this is a situation where the proof was

in fact presented, but it fell short, in the Board’s view, of

meeting the [EPA]’s Burden of Persuasion.” The Board

found that “[u]nder these circumstances, we would be hard

pressed to conclude that the [EPA] lacked a reasonable

basis to proceed” with its complaint against Bricks. Therefore, the Board concluded that it could not “expect the

[EPA] to have predicted the outcome of the Board’s determinations” because its decision in the underlying enforcement

action “turned, in part, on the Board’s findings and conclusions relating to the probative value of the witnesses’

testimony, including doubts surrounding the depth of the

witnesses’ knowledge of the relevant circumstances as well

as gaps, ambiguities, and contradictions in the testimony of

the witnesses when considered in the aggregate.”

The Board’s distinction between a reversal based on the
No. 05-1125 11

credibility and weight of the agency’s testimony and

evidence and a reversal based on a missing “crucial element

of proof” is supported by this Court’s decision in Europlast,

Ltd. v. NLRB, 33 F.3d 16 (7th Cir. 1994). In that case, we

considered whether the NLRB should have awarded attorney’s fees to an employer under the EAJA after the NLRB

dismissed an unfair labor practices complaint that was

brought against the employer. We affirmed the decision of

the Board to deny the employer’s application for fees,

because “it was possible to draw a set of inferences” from

the testimony offered by the NLRB that would have supported the NLRB’s position. Id. at 18. Therefore, the

NLRB’s decision to file a complaint against the employer

was substantially justified. Id. at 17; cf. Temp Tech Indus.,

Inc. v. NLRB, 756 F.2d 586, 590 (7th Cir. 1985) (NLRB’s

decision to litigate issue of company’s alleged unlawful

termination of striking employee turned on assessment of

employee’s credibility and fact that ALJ did not find

employee credible did not mean NLRB’s position was not

substantially justified or that company was entitled to a fee

award under the EAJA).

In this case, the EPA presented testimony and evidence

to show a hydrological connection between the wetlands

located on the property and Blackberry Creek, but the

Board found that the testimony and evidence was not

sufficient to meet the EPA’s burden of persuasion. Specifically, the Board found that while the testimony of

Thomas Kehoe showed that a drainage ditch ran from the

property to the south under Interstate 88, it did not

show that a hydrological connection existed to the south

of Interstate 88; that while the testimony of Randolph

Briggs showed that there was an “S” shaped channel located

to the south of Interstate 88, Mr. Briggs did not specifically

state that the channel existed in 1999 or was “continuously

flowing”; that while Amy Nerburn testified that a hydrological connection existed, her opinion was based on a docu-
12 No. 05-1125

2 The Board did not discuss whether the hydrological connection

theory pursued by the EPA had a reasonable basis in law. See

Hallmark, 200 F.3d at 1080. Bricks maintains that the Supreme

Court’s decision in SWANCC, 531 U.S. 159, discredited that

theory. However, the ALJ correctly found in the underlying

enforcement proceeding that SWANCC held only that the Corps

had exceeded its authority under the CWA by extending the

definition of “navigable waters” to include isolated ponds used as

habitat by migratory birds. Id. at 171. The Supreme Court was

careful to distinguish SWANCC from Riverside Bayview Homes,

474 U.S. 121, in which the Court found that “Congress’ concern for

the protection of water quality and aquatic ecosystems indicated

its intent to regulate wetlands ‘inseparably bound up with the

(continued...)

ment containing a watershed plan, rather than her personal

knowledge; and that while Thomas Slowinski testified that

drainage from the general area of Bricks’ property flowed

into Blackberry Creek, he also testified that there was no

defined stream channel to the south of Interstate 88.

Similar to the NLRB in Europlast, 33 F.3d at 18, the

Board decided not to infer from the above testimony that a

hydrological connection existed between wetlands located on

the property and Blackberry Creek. But the Board also did

not rule out the possibility that there was a hydrological

connection, and it cited approvingly the ALJ’s decision in

the underlying enforcement action that the existence of a

hydrological connection was a “close question.” In this

Circuit, although not dispositive,“the closeness of the

question is, in itself, evidence of substantial justification.”

Cummings v. Sullivan, 950 F.2d 492, 498 (7th Cir. 1991).

In sum, we find that the Board’s decision to deny Bricks’

request for legal fees and expenses was supported by

substantial evidence. The EPA had a reasonable basis for

pursuing its hydrological connection theory, even though

the Board did not ultimately find in the EPA’s favor.2
No. 05-1125 13

2 (...continued)

“waters” of the United States.’ ” SWANCC, 531 U.S. at 167

(quoting Riverside Bayview Homes, 474 U.S. at 134). Additionally,

regulations promulgated by the Corps include within the definition of “waters of the United States” wetlands adjacent to waters

of the United States or their tributaries. 33 C.F.R. § 328.3(a)(7).

In United States v. Gerke Excavating, Inc., 412 F.3d 804, 807 (7th

Cir. 2005), we cited that regulation approvingly and found that if

waters from wetlands enter a stream that flows into a navigable

water, those wetlands are “waters of the United States” under the

CWA. See also Carabell v. U.S. Army Corps of Eng’rs, 391 F.3d

704, 710 (6th Cir. 2004) (wetlands adjacent to but separated by a

man-made berm from a ditch that flowed into tributaries of

navigable waters are “waters of the United States” subject to

CWA jurisdiction); United States v. Rapanos, 376 F.3d 629, 642

(6th Cir. 2004) (wetlands with a surface water connection to

tributaries of navigable waters are subject to CWA jurisdiction).

We note that the Supreme Court has granted a writ of certiorari

in Carabell and Rapanos to consider whether wetlands that are

hydrologically isolated from any “waters of the United States” are

subject to CWA jurisdiction. ___ S. Ct.___, 2005 WL 2493858 (U.S.

Oct. 11, 2005). The Court’s decision in that case will not affect our

decision here, because the EPA’s complaint against Bricks was

based on the theory that the wetlands on Bricks’ property are

hydrologically connected to waters of the United States—that is,

the wetlands are adjacent to a tributary of Blackberry Creek, and

Blackberry Creek flows into Fox River, a navigable water.

Because we agree with the Board that an award of Bricks’

legal fees and expenses is inappropriate, we need not

reach the issue whether Bricks is entitled to attorney’s fees

in excess of the statutory maximum.

III. Conclusion
14 No. 05-1125

For the foregoing reasons, Bricks’ petition for review of

the Board’s decision denying Bricks its legal fees and costs

is DENIED.

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—10-21-05