RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit I.O.P. 32.1(b) File Name: 17a0189p.06 

### UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

U NITED S TATES OF A MERICA ex rel. B RIAN W ALL , Plaintiff-Appellee ,

v

.

C IRCLE C C ONSTRUCTION , LLC, Defendant-Appellant

. ┐ │ │ │ │ │ │ │ ┘ No. 16-6169

Appeal from the United States District Court for the Middle District of Tennessee at Nashville. No. 3:07-cv-00091—Kevin H. Sharp, Chief District Judge. Argued: March 15, 2017 Decided and Filed: August 18, 2017
Before: BATCHELDER, ROGERS, and KETHLEDGE, Circuit Judges.

_________________ COUNSEL

ARGUED: Timothy W. Burrow, BURROW & CRAVE NS, P.C., Nashville, Tennessee, for Appellant. Melissa N. Pa tterson, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Timothy W. Burrow, BURROW & CRAVENS, P.C., Nashville, Tennessee, for Appellant. Melissa N. Patterson, Charles W. Scarborough, UNITED STATES DEPARTMENT OF JUSTIC E, Washington, D.C., for Appellee.
KETHLEDGE, J., delivered th e opinion of the court in whic h BATCHELDER, J., joined. ROGERS, J. (pg. 7), filed a se parate dissenting opinion. 

### >No. 16-6169 United States ex rel. Wall v. Circle C Constr. Page 2

_________________ OPINION

_________________ KETHLEDGE, Circuit Judge. This case is before us for a third time. The defendant, Circle C Construction, is a family-owned genera l contractor that buil t 42 warehouses for the United States Army in Kentucky and Tennessee. In the course of building all those warehouses, over a period of seven years, a subcontractor, Phase Tech, paid two of its electricians about $9,900 less than the wages mandated by the Davi s-Bacon Act. That underpayment rendered false a number of “compliance statements” that Circle C submitted to the government along with its invoices. As a result, the government ther eafter pursued Circle C for nearly a decade of litigation, demanding not merely $9,900—Phase T ech itself had paid $15,000 up front to settle that underpayment—but rather $1.66 million, of which $554,000 was purportedly “actual damages” for the $9,900 underpayment. The government ’s theory in support of that demand was
that all of Phase Tech’s electr ical work, in all of the ware houses, was “tainted” by the $9,900 underpayment—and therefore worthless. “The problem with that th eory,” we wrote in the last appeal, was that, “in all of these warehouses, the government turns on the lights every day.” United States ex rel. Wall v. Circle C Constr., LLC , 813 F.3d 616, 617 (6 th Cir. 2016). We therefore reversed a $763,000 j udgment in favor of the govern ment and remanded for entry of an award of $14,748—less than 1% of the government’s demand.
Over the past decade, Circle C paid its attorneys an estimated $468,704 to defend against the government’s claim. In Circle C’s view, Congress has contemplated situations like this one: a 1996 amendment to the Equal Access to Justice Ac t provides that, if a court awards damages to the federal government, but the government’s original demand for damages was both “substantially in excess of th e judgment finally obtained” a nd “unreasonable when compared with such judgment,” then (subject to two excep tions) the court must “award to the [defendant] the fees and other expenses related to defend ing against the excessive demand.” 28 U.S.C. § 2412(d)(1)(D).
Accordingly, on remand after the last appe al, Circle C moved under § 2412(d)(1)(D) for recovery of its attorneys’ fees in this litig ation. But the district cour t denied the motion. CitingNo. 16-6169 United States ex rel. Wall v. Circle C Constr. Page 3

only legislative history—and inde ed without first identifying any ambiguity in the words of the provision at issue, contrary to Supreme Court precedent, see, e.g. , Exxon Mobil Corp. v. Allapattah Servs., Inc. , 545 U.S. 546, 567-68 (2005)—the distri ct court chose to put “aside the mathematical disparity between the damages demand [and] the eventual award[.]” Op. at 4. The court did so even though the actual words of the statute (“[a] demand by the United States . . . substantially in excess of the judgment fina lly obtained”) specifically directed the court to consider that disparity. And othe rwise the district court reasoned that the government’s theory in support of its demand was “not unreasonable” simp ly because the court itself had twice accepted that theory. Op. at 3-4. Circ le C then brought this appeal.

We review the district cour t’s denial of Circle C’s moti on for an abuse of discretion. See Minor v. Comm’r of Soc. Sec. , 826 F.3d 878, 882 (6th Cir. 2016). The relevant statutory scheme is straightforward. Title 31 U.S.C. § 3730(g) provides, “[ i]n civil actions brought under this section by the United States, the provisions of s ection 2412(d) of title 28 shall apply.” This case is undisputedly an action brought under § 3 730 by the United States—which means that § 2412(d)(1)(D) (the fee-shifting section cited in Circle C’s mo tion) “shall apply” here.
Yet the government ventures to argue th at § 2412(d)(1)(D) does not apply. Section 3730(g) is entitled, “Fees and expenses to prevaili ng defendant.” Circle C technically was not a prevailing defendant, because on remand the distri ct court entered a judg ment in favor of the government (albeit in an amount that was less than 1% of the amount the government initially sought). The government thus contends that § 2412(d)(1)(D) does not apply, because that
section authorizes awards to non -prevailing defendants (in cases where, among other things, the government’s demand was unreasonable). But th at argument overlooks a basic principle of statutory construction, namely that a provision ’s title “cannot limit the plain meaning of the
text.” Penn. Dep’t of Corr. v. Yeskey , 524 U.S. 206, 212 (1998) (citati on omitted). And here the text of § 3730(g) could hardly be plainer: that subsection says that, in circumstances undisputedly present here, “the provisions of § 2412(d) of title 28 shall apply”—which means
that all of those provisions apply, incl uding § 2412(d)(1)(D).
Thus we turn to § 2412(d)(1)(D), which provides in relevant part:No. 16-6169 United States ex rel. Wall v. Circle C Constr. Page 4

If, in a civil action brou ght by the United States . . . the demand by the United States is substantially in excess of the judgment finally obtained by the United States and is unreasonable when compared with such judgment, under the facts and circumstances of the case, the court sh all award to the part y the fees and other expenses related to defending against th e excessive demand, unless the party has committed a willful violation of law or otherwise acted in bad faith, or special circumstances make an award unjust. Under this subsection, the pa rty seeking fees bears the bur den of proving (i) that the government’s demand was substantially in exce ss of the award obtained by the judgment and (ii) that the government’s demand was unrea sonable compared to that judgment. See United States v. One 1997 Toyota Land Cruiser , 248 F.3d 899, 906 (9th Cir. 2001). Here, the government demanded $553,807.71 in purported actual damages, trebled to about $1.66 million.
See 31 U.S.C. § 3729(a)(1)(G). And “the judgment finally obtained by the United States” was $14,748. To say that the government’s demand wa s substantially in excess of the judgment, therefore, only understates matters.
That leaves the question wh ether the government’s demand wa s “unreasonable” as that term is used in § 2412(d)(1)(D). Neither this ci rcuit nor, so far as we can tell, any other has specifically interpreted the term “ unreasonable” as used in that provis ion. But that term is hardly abstruse. As a matter of ordinary usage, “unr easonable” means “not g overned by reason” or “exceeding reasonable limits; immoderate[.]” The American Heritage Dictionary 1957 (3d ed. 1994). And meanwhile there is a well-develope d body of law concerning a similar inquiry under a related provision: namely, whether the gover nment’s position was “substantially justified” under § 2412(d)(1)(A). On that point, our court (along with numerous others) has held that “[t]he question of substantial justification is essentially one of reasonableness[.]” United States v. 0.376 Acres of Land , 838 F.2d 819, 827 (6th Cir. 1988) (i nternal quotation marks omitted); see also, e.g. , Foley Constr. Co. v. U.S. Army Corps of Eng’rs , 716 F.2d 1202, 1204 (8th Cir. 1983) (gathering cases). Thus, the inquiry under bot h provisions turns on reasonableness. We
therefore look to the caselaw in terpreting “substantially justif ied” under § 2412(d)(1)(A) to determine whether the government’s dema nd was “unreasonable” under § 2412(d)(1)(D).
The Supreme Court has held that, to be “substantially justifie d” under § 2412(d)(1)(A), the government’s position “of course” must be “m ore than merely undeserving of sanctions forNo. 16-6169 United States ex rel. Wall v. Circle C Constr. Page 5

frivolousness[.]” Pierce v. Underwood , 487 U.S. 552, 566 (1988). To m eet that standard, rather, the government’s position must be “justified to a degree that could satisfy a reasonable person.”
Id. at 565.
The question, then, is whether the government’s demand for $1.66 million as compensation for Phase Tech’s $9,900 underpayment of its electricians, in a project spanning seven years, was justified to that degree. The short answer to that question, as we said in the last appeal, is that the damages the government sought to rec over in this case we re “fairyland rather
than actual.” Wall , 813 F.3d at 618.
A longer answer begins with the observation that actual damages are a simple concept, familiar to any first-year student in law school. In the context of this case, actual damages are simply “the difference in value between what the government bargained for and what the government received.” Id. at 617 (citing U.S. ex rel. Roby v. Boeing Co. , 302 F.3d 637, 646 (6th Cir. 2002)). And here those damages were easy to calculate. “[T]he government bargained for two things: the buildings, and th e payment of Davis-Bacon wages. It got the buildings but not quite all of the wages. The shortfall was $9,916. That amount [was] the government’s actual damages.” Id.
The government therefore faces strong headwinds—both common-sense and legal—in asserting that its demand for roughly $554,000 in actual damages, and $1.66 million overall, was reasonable nonetheless. The govern ment’s theory, as noted above, was that all of Phase Tech’s
electrical work was tainte d by the $9,900 underpayment and therefore valueless to the government. As a matter of common sense, however, the government in fact benefits from that work every minute of every day. And legally, as we explained last time, the underpayment is easy to remedy with money damages. Id. at 618. True, goods or services can be legally worthless to the government if, for exam ple, they are “dangerous to use,” id. , or the damages
from the contractor’s breach are not “cal culable in terms of market value.” Id. at 619 (Rogers, J., concurring). But for reasons we have already explained, see id . at 617-18, those conditions are absent here—indeed, obviously absent. Thus, on this record, a reasonable person could not accept the government’s argument that Phase Tech’s electrical work was worthless.No. 16-6169 United States ex rel. Wall v. Circle C Constr. Page 6

The district court, as noted above, held that the government’s theory was reasonable simply because the court itself had twice accepted th e theory. But “the fact that one other court agreed or disagreed with the Government does not establish whether its position was substantially justified.” Pierce , 487 U.S. at 569. True, “a stri ng of successes” in advocating a position might indicate the position is reasonab le; but that is hardly what the government presents to us here. Id. Thus, in this case as in most cases, wh at matters is “the actual merits of the Government’s litigating position.” Id . The district court said not hing about those merits in denying Circle C’s motion. And we have said enough about them already. The government’s demand for $1.66 million as compensation for Phase Tech’s $9,900 underpayment was
unreasonable within the mean ing of § 2412(d)(1)(D).

That means Circle C was entitled to a f ee award unless it “committe d a willful violation
of law or otherwise acted in bad faith, or special circumstan ces make an award unjust.” 28 U.S.C. § 2412(d)(1)(D). The di strict court did not reach this issue because it mistakenly thought that the government’s demand was reasonable . Yet we choose to reach the issue because the parties have briefed it, the me rits are clear, and this litigation has already persisted for nearly ten years. See Carrier Corp. v. Outokumpu Oyj , 673 F.3d 430, 446 (6th Cir. 2012).
We begin with the burden of proof. Typicall y, when a statute articu lates a general rule, the burden of proving an exception re sts with the party invoking it. See N.L.R.B. v. Kentucky River Cmty. Care, Inc. , 532 U.S. 706, 711 (2001). Here, under § 2412(d)(1)(D), when a party establishes that the government’s demand was both excessive and un reasonable, the district court
“shall” award fees to the defenda nt “unless” certain exceptions ( e.g. , “bad faith” or “special circumstances”) apply. 28 U.S.C. § 2412(d)(1)(D) . Thus, the burden of proving “bad faith” or “special circumstances” under § 2412(d)(1)(D) rests with the government. See id

. As to these exceptions, the government first ar gues that Circle C “acted in bad faith.” The Act does not define bad faith, but it is a common term of art. The sixth edition of Black’s Law Dictionary—the one in effect at the tim e § 2412(d)(1)(D) was enacted—defines “bad faith” as “not prompted by an honest mistake as to one’s rights or duties, but by some interested or
sinister motive.” Black’s Law Dictionary 139 (6th ed. 1990). That definition nicely captures the term, and we adopt it here.No. 16-6169 United States ex rel. Wall v. Circle C Constr. Page 7

The government has not shown that the cond uct giving rise to Circle C’s $14,748 of liability in this case was driven by a sinister moti ve rather than the result of an honest mistake. Unlike many cases under the False Claims Act, this case did not involve a large-scale, systematic effort to defraud the government. Compare, e.g. , United States v. Rogan , 517 F.3d 449, 451 (7th Cir. 2008). Instead, Circle C submitted compliance statements that were inaccurate as to $9,900 of particulars in a project costing more than$20 million. Moreover, one of Circle C’s coowners, John Cates, testified that Phase Tech ga ve Circle C a “set price” for each building, which obscured the amount that Phase Tech paid each electrician. And both of Circle C’s owners, Frances and John Cates, testified that they submitted the certifications on the honest belief that they were true. The government cites no evidence that shows otherwise.
Instead, the government contends that, “[b]y definition, a defendant who has been found
liable under the False Claims Act ha s ‘knowingly’ made or caused ‘false or fraudulent claims’ on public money.” Government Br. at 34 (quoting 31 U.S.C. § 3729(a)). Under the False Claims Act, however, “knowingly” is itsel f a term of art, which refers to three mental states: “actual knowledge,” “deliberate ignorance,” or “reckless disr egard.” 31 U.S.C. § 3729(b)(1)(A). The
district court found that Circle C was reckless—the least culpable of these states—as to whether its compliance reports were accurate regarding the wages paid to Phase Tech’s electricians (actually, on this record, just two of them). Bu t “recklessness is a less stringent standard than bad faith[.]” United States v. Wallace , 964 F.2d 1214, 1219 (D.C. Cir. 1992); see also Red Carpet Studios Div. of S ource Advantage, Ltd. v. Sater , 465 F.3d 642, 646 (6th Cir. 2006) (citing
Wallace for the same proposition). And on this record we see no reason to depart from that rule.
The government also argues that this case pr esents two circumstan ces that are special enough to “make an award unjust.” 28 U.S.C. § 2412(d)(1)(D). First—in reference to the government’s theory that all of Phase Tech’s electrical work was worthless—the government says that, in applying § 2412(d)(1)(D), we should leave room to allow the government to present
“novel but credible” inte rpretations of law. See generally United States v. Winchester Mun.
Utils. , 944 F.2d 301, 306 (6th Cir. 1991). We have no quarrel with that proposition generally, but here the government’s theory was not cred ible because it was unreasonable within the meaning of § 2412(d)(1)(D).No. 16-6169 United States ex rel. Wall v. Circle C Constr. Page 8

Second—and finally—the government warns that a fee award in this case would have a “chilling effect” on its efforts “t o vigorously enforce” the False Clai ms Act. Gov’t Br. at 13-14, 37. One should hope so. In this case the gove rnment made a demand for damages a hundredfold greater than what it was entitl ed to, and then pressed that de mand over nearly a decade of litigation, all based on a theory that as applied he re was nearly frivolous. The consequences for Circle C included nearly a half-million dollars in attorneys’ fees. Section 2412(d)(1)(D) makes clear that the government must bear its share of those consequences as well.

* * *

The district court abused its discretion when it denied Circ le C’s motion. We reverse the district court’s June 17, 2016 Order and remand the case for an awar d to Circle C of “the fees and other expenses related to defending ag ainst the [government’s] excessive demand,” 28 U.S.C. § 2412(d)(1)(D), including, to the extent appropriate, fees incurre d during this appeal
and on remand.No. 16-6169 United States ex rel. Wall v. Circle C Constr. Page 9

_________________ DISSENT

_________________ ROGERS, J., dissenting. The majority accepts that the Government does not owe fees if its position was “substantially justified.” That standard permits the Government to take reasonable litigating positions. See Pierce v. Underwood , 487 U.S. 552, 566 (1988); Glenn v. Commissioner of Soc. Sec. , 763 F.3d 494, 498 (6th Cir. 2014). It is a matter of judgment, however, whether the Government’s litigating pos ition in this case was reasonable. Here the Government had already prevailed on its “taint” th eory of damages before the two district courts that considered this suit, and it was also able to point to a line of cases where something like that theory had prevailed before this and other courts, see, e.g. , U.S. ex rel. Compton v. Midwest Specialties, Inc. , 142 F.3d 296, 304 (6th Cir. 1998); United States v. Mackby , 339 F.3d 1013, 1018–19 (9th Cir. 2003); United States v. Rogan , 517 F.3d 449, 453 (7th Cir. 2008). While it is true that we ultimately rejected the analogy to those cases in th e context of this case, that rejection does not mean that those analogies were not “supported by law and fact” or not “justified to a degree that could satisfy a reasonable person,” as required under the EAJA, Glenn , 763 F.3d at 498–99 (internal quotation marks omitted) (quoting Pierce , 487 U.S. at 565). Under abuse of discretion review, where “substantial deference” is accorded to the judgment of the trial court, Imwalle v. Reliance Med. Prods. , 515 F.3d 531, 551 (6th Cir. 2 008), the district court’s
denial of fees s hould be affirmed.