United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Filed April 6, 2012

No. 10-1031

LEPAGE’S 2000, INC. AND LEPAGE’S PRODUCTS, INC.,

PETITIONERS

V.

POSTAL REGULATORY COMMISSION,

RESPONDENT

Consolidated with 10-1033, 10-1279, 10-1294

__________

On Petitioners’ Motion for Attorneys’ Fees

__________

Before SENTELLE, Chief Judge; GRIFFITH, Circuit Judge;

and SILBERMAN, Senior Circuit Judge.

Opinion for the Court filed PER CURIAM.

PER CURIAM: In LePage’s 2000, Inc. v. Postal Regulatory

Commission, 642 F.3d 225 (D.C. Cir. 2011), we vacated an

order of the Postal Regulatory Commission and remanded the

case for further proceedings consistent with our opinion. We

now consider a petition by LePage’s 2000, Inc. and LePage’s

Products, Inc., for attorneys’ fees and expenses incurred in the

litigation leading up to our decision. Because we find that the
2

Commission was not substantially justified in issuing its order,

but that fees and expenses requested for proceedings before the

Commission are not reimbursable, we award a portion of the

fees and expenses sought in the petition for reasons more fully

set forth below.

Background

Details of the factual background of this controversy can be

found in LePage’s 2000, Inc. v. Postal Regulatory Commission,

642 F.3d 225 (D.C. Cir. 2011), and USPS v. Postal Regulatory

Commission, 599 F.3d 705, 706 (D.C. Cir. 2010). To

summarize: In 2006 Congress passed the Postal Accountability

and Enhancement Act (“the PAEA” or “the Act”), Pub. L. No.

109-435, 120 Stat. 3198 (2006), which limited the ability of the

United States Postal Service (“the Service” or “the USPS”) to

engage in nonpostal services. The Act created the Postal

Regulatory Commission (“the PRC” or “the Commission”),

which could approve for continuation of a nonpostal service if

the Commission concluded that there was a public need for the

service and the private sector could not meet the public need for

the service. In carrying out its mission, the PRC divided its

proceedings into two parts, Phase I and Phase II. During Phase

I the Service argued that several of its programs should be

classified as postal services and therefore permitted to continue. 

One of these was the ReadyPost program, in which the USPS

sells USPS-branded shipping supplies in postal retail locations. 

The PRC agreed that this was a postal service and therefore

could continue. Also during Phase I the Service sought to have

several nonpostal services continue. One of these was a

program in which the Service sells licensee-made USPSbranded and USPS-themed products, such as teddy bears and

scales, at USPS retail locations (“the Bears and Scales

program”). The Commission found that this service could

continue because the private sector could not meet the public
3

need for these items as only the Service could provide the

Service’s intellectual property to manufacturers. During Phase

I the Commission also looked at the Service’s commercial

licensing program in general. The Commission determined that

as a general matter the commercial licensing program could

continue because it served a public need by generating revenues

for the Service, benefitted mailers, and promoted and gave

recognition to the Service’s brand. The Commission noted,

however, that this determination was not unqualified.

The Commission then commenced Phase II, during which

it more closely examined the commercial licensing program. In

particular, the Commission looked at the commercial license

held by LePage’s 2000, Inc. and LePage’s Products, Inc.

(“LePage’s”) to sell USPS mailing and shipping supplies

(bubblewrap, for example) that bore the USPS brand at nonUSPS retail locations (“the Bubblewrap program”). The

Commission found that there was no public need for the

Bubblewrap program and that the USPS had failed to

demonstrate that the private sector was unable to meet any

public need for the program. The PRC ordered the USPS to

terminate the Bubblewrap program. The USPS and LePage’s

appealed the Commission’s Phase II order to this court.

In LePage’s 2000, Inc., we vacated the Commissions’s

Phase II order and remanded the case to the PRC. 642 F.3d 225. 

We stated that the Commission’s order was “rife with

anomalies, any one of which is sufficient to justify a remand,

and all of which, when considered together, demonstrate the

Commission was proceeding in a slapdash manner.” Id. at 230-

31. We went on to state that it was “untenable” that the

ReadyPost program was considered a postal service but the

Bubblewrap program was not, when both programs fostered use

of the mail and enhanced consumers’ convenience. Id. at 231. 

We remanded the Phase II order to the Commission to, inter
4

alia, adopt a reasoned rationale if it intended to continue

classifying the Bubblewrap program as a nonpostal service. Id.

We also reviewed the Commission’s conclusion that there

was no public need for the Bubblewrap program. We found that

the Commission’s determination, that any benefits of the

Bubblewrap program were outweighed by the disadvantages of

selling USPS-branded products that could confuse consumers

and disrupt markets, was flawed. In making this determination,

we noted that in its Phase I order the Commission determined

that for various reasons commercial licensing as a general matter

served a public need, but in its Phase II order noted these

reasons were without sufficient evidentiary support for the

Bubblewrap program. We further noted that the Commission in

Phase I did not distinguish between different types of

commercial licensing, and that the Commission did not explain

how it could read the same evidence differently when applied to

different aspects of the same program. Id. at 232.

Also concerning the Commission’s conclusion that there

was no public need for the Bubblewrap program, we noted that

the Commission had found a public need for the Bears and

Scales program because that program leveraged the Postal

Service’s brand and helped support its core mission. We then

stated that we did “not understand why these same benefits

would not accrue to the Bubblewrap program, which aside from

the seller’s identity, is substantially similar to the Bears and

Scales program.” We further stated that at the least the

Commission must explain this differential treatment of

seemingly like cases. Id.

Finally, we reviewed the Commission’s holding that the

private sector could meet any public need for the Bubblewrap

program. We noted that in Phase I the Commission held that

licensing could not be met by the private sector because no other
5

entity other than the Service could license its intellectual

property, but then in Phase II explained that other entities were

able to provide substitutes for the licensed mailing and shipping

products. We further noted that the Commission offered no

reason for this departure, and stated that we did not see how the

Commission could adopt the position it did in its Phase II order. 

Id. at 233. At the end of the decision, we found the Phase II

order arbitrary and capricious, and stated that the Commission

had “much work to do on remand remedying the abundant

inconsistencies in its order.” Id. at 234.

LePage’s now petitions for an award of attorneys’ fees and

expenses in the amount of $143,693.49, relating both to the

litigation in this court and to the underlying administrative

proceedings. LePage’s seeks the award under the Equal Access

to Justice Act, 28 U.S.C. § 2412(d)(1)(A) (“EAJA”), which

provides in pertinent part that attorneys’ fees and expenses shall

be awarded to a “prevailing party . . . unless the court finds that

the position of the United States was substantially justified.” In

its brief LePage’s argues that it was the “prevailing party” in this

case and that the position of the PRC was not substantially

justified. In its opposing brief the PRC agrees that LePage’s

was the prevailing party but argues that the PRC was

substantially justified in its position and consequently LePage’s

is not entitled to any award of attorneys’ fees. The PRC further

argues that even if this court finds its position to not be

substantially justified, under the EAJA, LePage’s is not entitled

to fees in the amount of $41,028.76 incurred in the underlying

administrative proceedings. The PRC also states that if the court

disagrees with these positions, the PRC does not contest the

amount of fees requested.
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Discussion

The Equal Access to Justice Act, 28 U.S.C. § 2412(d),

states in pertinent part:

Except as otherwise specifically provided by statute, a court

shall award to a prevailing party other than the United

States fees and other expenses . . . incurred by that party in

any civil action . . . including proceedings for judicial

review of agency action, brought by or against the United

States in any court having jurisdiction of that action, 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). Our first task in deciding whether

LePage’s meets the requirements of the EAJA is an easy one:

we must determine whether fee petitioner LePage’s is a

“prevailing party.” LePage’s argues, and the PRC does not

dispute, that our disposition in LePage’s establishes that

LePage’s is a prevailing party within the meaning of the EAJA. 

We agree. In LePage’s we found the PRC’s Phase II order

arbitrary and capricious, vacated it, and remanded the case for

further proceedings. 642 F.3d at 234. We conclude that

LePage’s is a prevailing party for purposes of the EAJA.

Our next task is somewhat more difficult: we must

determine whether, pursuant to the EAJA, the position the

United States (the PRC) took during the litigation was

“substantially justified.” The Supreme Court has explained that

the most naturally conveyed connotation of the phrase

“substantially justified” is “justified in substance or in the main

– that is, justified to a degree that could satisfy a reasonable

person.” Pierce v. Underwood, 487 U.S. 552, 565 (1988)

(quotation marks omitted). As already noted, in LePage’s we
7

found the PRC’s Phase II order arbitrary and capricious. Such

a finding, however, does not necessarily mean that the United

States’ position was not substantially justified. See FEC v.

Rose, 806 F.2d 1081, 1087 (D.C. Cir. 1986) (in discussion of

‘substantially justified’ standard, court stated that “a finding in

the merits phase that the Government’s underlying action was

‘arbitrary and capricious’. . . does not compel an award of fees”

under the EAJA). The court in Rose implied that, when

considering whether conduct is substantially justified, we should

look to the reason the agency action was invalidated as arbitrary

and capricious. The court went on to give two examples in

which it may be difficult to demonstrate that an agency’s

arbitrary and capricious actions are substantially justified: “an

agency’s unjustifiably disparate treatment of two similarly

situated parties works a violation of the arbitrary-and-capricious

standard”; and “an agency’s failure to apply a rule in a situation

to which the rule obviously pertains.” 806 F.2d at 1089. 

Furthermore, in Hill v. Gould, 555 F.3d 1003 (D.C. Cir. 2009),

we noted that although we had previously found the particular

decision of the Secretary of the Interior at issue to be arbitrary

and capricious, see Hill v. Norton, 275 F.3d 98 (D.C. Cir. 2001),

that decision did not “suffer from the defects common to

positions that are not substantially justified”; i.e., it was neither

“flatly at odds with controlling case law,” nor “in the face of an

unbroken line of authority.” 555 F.3d at 1008 (quotation marks

omitted).

We note that “[t]he Government has the burden of proving

that its position . . . was ‘substantially justified’ within the

meaning of the Act.” Halverson v. Slater, 206 F.3d 1205, 1208

(D.C. Cir. 2000). In arguing that its position was substantially

justified, the PRC begins with the standards set forth in Rose and

Hill. Citing Hill, the PRC claims that its position was neither

“flatly at odds with controlling case law” nor “in the face of an

unbroken line of authority.” The PRC argues instead that the
8

Phase I and Phase II proceedings constituted the only time that

any agency or court interpreted the portion of the Act at issue. 

And concerning the standards set forth in Rose, the PRC

contends that in this case it never treated similar parties

differently or failed to apply a rule to a situation where the rule

obviously pertains. 

The PRC argues that instead it was substantially justified in

distinguishing programs based on the identity of the seller as

well as the nature of the products at issue. First, the PRC notes

that it distinguished the ReadyPost program from the

Bubblewrap program by who was making the sale, i.e., the

Postal Service for the ReadyPost program and private parties for

the Bubblewrap program. The PRC argues that it was

substantially justified in making this distinction because during

Phase I it had been determined that the ReadyPost program was

a postal service and the commercial licensing program (i.e., the

Bubblewrap program) a nonpostal service. Furthermore, argues

the PRC, it was also substantially justified in distinguishing the

Bubblewrap program from the Bears and Scales program based

on the identity of the seller, because any impression that the

Postal Service stands behind its products would be stronger with

respect to products that the Postal Service sells itself. Second,

the PRC notes that it focused on the nature of the products at

issue when it distinguished between licensing for products

related to Postal Service operations and licensing for purely

promotional products. The PRC argues that it was substantially

justified in making this distinction as well because licensing

agreements in and of themselves have little effect on the public,

and instead it is the licensee’s marketing of a product bearing

the Postal Service’s brand that serves the public at large.

Although the PRC argues forcefully that its positions were

substantially justified, we cannot agree. In our discussion in

LePage’s of the PRC’s argument distinguishing programs based
9

on the identity of the seller, we first noted not only that the PRC

“did not set [the argument] forth below” but also that the

argument was “inconsistent with the position it took below.” 

642 F.3d at 231. Furthermore, we noted that distinguishing

programs based on the rationale the PRC offered below was

“untenable.” Id. Next, in our discussion of the PRC’s

conclusion that there was no public need for the Bubblewrap

program, we stated that the PRC’s assessment of the benefits of

the Bubblewrap program was “flawed” in that the PRC had

determined that commercial licensing served a public need but

that the Bubblewrap program, a commercial licensing venture,

did not. Id. at 232. We further stated that we did not understand

how the PRC could find a public need for the Bears and Scales

program but not the Bubblewrap program when the programs

were substantially similar. Id. We noted that the PRC’s

assessment of public need in its Phase II order departed from its

Phase I order, and that this change had happened “subtly, and

without explanation.” Id. at 233. Finally, we agreed that in its

Phase II order the PRC had “departed without explanation from

its Phase I conclusion that the private sector could not possibly

meet the public need for commercial licensing.” We went on to

state that we did not “see how the [PRC] could adopt the

position it does in its Phase II order.” Id. Taking all of the

above into consideration, we found “[t]he Commission’s order

[] rife with anomalies,” all of which demonstrated that the

Commission “proceed[ed] in a slapdash manner.” Id. at 230-31. 

All in all, we concluded that the Phase II order was “arbitrary

and capricious,” and remanded the order to the Commission

stating that “[t]he Commission has much work to do on remand

remedying the abundant inconsistencies in its order.” Id. at 234

& n.7. Consequently, we cannot conclude that the PRC’s

position was substantially justified.

* * * * * * * * *
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Having determined that under § 2412(d)(1)(A) of the EAJA

LePage’s is entitled to an award of attorneys’ fees because it

was the “prevailing party” and the PRC was not “substantially

justified” in its position, we must next determine the amount to

which LePage’s is entitled. To begin, LePage’s has requested

a total award of $143,693.49, of which $41,028.76 is for fees

paid in connection with proceedings before the PRC wherein the

PRC required LePage’s to discontinue the Bubblewrap program. 

The PRC argues that even if we find that the PRC’s position was

not substantially justified (as we have), LePage’s is only entitled

to fees incurred in connection with proceedings before this court

and not to the $41,028.76 in fees incurred in connection with

proceedings before the PRC. We agree.

It is true, as LePage’s argues, that the EAJA provides for

recovery of fees and other expenses in the context of an

administrative proceeding, but only in the case of “an adversary

adjudication.” 5 U.S.C. § 504. The Act defines “adversary

adjudication” as “an adjudication under section 554 of this title.” 

Section 554 (“Adjudications”) of title 5 provides that “[t]his

section applies . . . in every case of adjudication required by

statute to be determined on the record after opportunity for an

agency hearing . . . .” The upshot is that whether LePage’s may

recover fees incurred during the proceedings before the PRC

depends on whether those proceedings meet this definition of an

“adversary adjudication.” The proceedings before the PRC were

governed by 39 U.S.C. § 404 (e)(3), which requires that the PRC

“review each nonpostal service offered by the Postal Service on

the date of enactment of that Act and determine whether that

nonpostal service shall continue.” The section does not require

a “hearing,” and consequently the proceedings before the PRC

would not appear to meet the above definition of an “adversary

adjudication.” LePage’s nevertheless argues that because the

PRC’s enabling statute, 39 U.S.C. § 503, states that the PRC

“shall promulgate rules and regulations and establish
11

procedures, subject to chapters 5 and 7 of title 5,” then Congress

intended that proceedings conducted by the PRC be governed

by, inter alia, § 554 and its formal adjudication procedures. But

the fact that the PRC’s enabling statute says that the PRC shall

establish procedures subject to chapter 5 of title 5 is irrelevant

because generic provisions of chapter 5 may apply even if the

formal adjudication procedures in § 554 do not. We conclude

that the proceedings before the PRC do not meet the above

definition of an “adversary adjudication,” and LePage’s is

therefore not entitled to the $41,028.76 in fees incurred in

connection with those proceedings.

Deducting the amount of $41,028.76 from the total amount

requested, $143,693.49, leaves $102,664.73. Other than the

argument that its position was substantially justified, the PRC

does not contest this amount. Accompanying LePage’s petition

for attorneys’ fees are detailed billing records of the time spent

by LePage’s attorneys on the matter. LePage’s states that before

submission to us the records were reviewed and any fees

ineligible for reimbursement removed. We have also reviewed

the records for any fees not reimbursable, for example those

incurred for unnecessary travel, duplication of effort and media

relations. Finding none, we conclude that LePage’s is entitled

to an attorneys’ fees award in the amount of $102,664.73.

Conclusion

For the reasons set forth above, we hold that the petition for

attorneys’ fees be granted in part in the amount of $102,664.73.