### The Honorable Nanette K. Laughrey, United States District 1 

### Judge for the Eastern and Western Districts of Missouri, sitting by designation. No. 96-3285ND

Darvin R. Lane; Dwight Lane, * * Appellants, * * v. * Appeal from the United States * District Court for the United States Department of * District of North Dakota Agriculture; Daniel Glickman, * Secretary of the U.S. Depart- * ment of Agriculture; National * Appeals Division of the * USDA, also known as National * Appeals Staff of the USDA; * Norman G. Cooper, Director * of the National Appeals * Division of the U.S. Department * of Agriculture; Office of * General Counsel USDA; James * Gilliand, General Counsel of * the U.S. Department of Agricul- * ture Consolidated Farm Service * Agency; Grant Buntrock, acting * Adminisrator of the Consoli- * dated Farm Service Agency of * the U.S. Department of * Agriculture, * * Appellees. *

Submitted: March 10, 1997 Filed: July 14, 1997
Before WOLLMAN and BEAM, Circuit Judges, and LAUGHREY, District Judge

. 1

### -2-

LAUGHREY, District Judge.

This is an appeal from the District Court’s order that Plaintiffs , Darvin and Dwight Lane (“Lanes”), are entitled to recover their attorney fees from the United States Department of Agriculture (“Agency”) pursuant to the Equal Access to Justice Act (“EAJA”), 5 U .S.C. § 504. We affirm in part, reverse in part, and remand for further proceedings.

The Lane s are brothers who borrowed money through the Farmers Hom e Admini stration (“FmHA”). The FmHA denied them delinquent farmer loa n servicing and the Lanes appealed to the National Appeals Division (“NAD”). The Lanes won the appeal and then sought their attorney fees under th e EAJA, wh ich provides that a United States agency which conducts a n adversary adjudication must pay the fees and other expenses incurred by th e prevailing party, unl ess the agency’s position is substantially justified
or there are special circumstances that make such an award unjust. 5 U.S .C. § 504(a)(1). An “adversary adjudication” is defined in relevan t part as an adjudication under § 554 of the Administrative Procedure Ac t (“APA”), so long as the government is represente d by counsel or otherwise. 5 U.S. C. § 504(b)(1)(C). The APA § 554 applies to all adjudication s “required by statute to be determined on the record after opportunity for an agency hearing.” 5 U.S.C. § 554 (a). The NAD hearing officer denied the L anes’ EAJA applications, finding that NA D proceedings are not under § 554 of the APA and, therefore, th e EAJA did not apply. The hearing officer did not consider the merits of th e application for fees because he found the EAJA inapplicable. The Lane s sought judicial review of the agency ruling. The district court granted the Lanes’ Motions fo r Summary Judgment, finding that NAD proceedings are under § 554 of the AP A, the EAJA did apply and the Lanes were entitled to
recover

### -3-

their fees and other expenses because the NAD he aring officer did not make a finding that the government’s position was sub stantially justified. The distri ct court’s order granting summary judgment is reviewed de novo

. Don aho v. FMC Corp. , 74 F.3d 894, 897 (8th Cir. 1996)(citing LeBus v
. Northwestern Mut. Life Ins. Co. , 55 F.3d 1374, 1376 (8th Cir. 1995)).

We find that the EAJA is under § 554 of the APA because all thre e prerequisites for cov erage have been satisfied. NAD proceedings are: 1) adjudications; 2)there is an opportunity for a h earing; and 3) the hearing must be on the record. We reject the agency’s argument that the NA D st atute is not under § 554 of the APA but rather is a separate , comprehensive statutory scheme which supersedes § 554 of the APA. The APA cannot be superseded by a subsequent statute “ex cept to the extent that it does so expressly.” 5 U.S.C. § 559. There is no express language in the NAD statute modifying or superseding the APA. F inally, on remand, the NAD heari ng officer will be permitted to consider the merits of the Lanes ’ application for EAJA fees. The agency’s failure to consider the merits of the application was b ecause of its finding that the EAJA did not apply to NAD proceedings. The absence of a finding on the agency’s justification for its position does not automatically entitle the Lanes to recover their attorney’s fees.

A. APPLICABILITY OF THE EAJA TO NAD PROCEEDINGS

For th e EAJA to be applicable to NAD proceedings, the Lanes mus t establish that a NAD hearing is an adjudication under § 554 of the APA “in whic h the position of the United States is represented by counsel o r otherwise.” 5 U.S.C. § 504(b)(1)(C)(I). An adjudication is under the APA if it is governed by § 554 of the APA. Ardestan i v. I.N.S. , 502 U.S. 129, 135, 112 S. Ct. 515, 519, 116 L.Ed.2d 496 (1991). See also , St. Louis Fue l & Supply Co., Inc. v. F.E.R.C. , 890 F.2d 446, 450-51 (D.C. Cir. 1989). Th e question, then, is whether NAD proceedings are governed by § 554 of th e APA.

The APA § 554 states that it applies to all adjudications “required by statute to be determined on the record after opportunity for an agency

### -4-

hearing .” 5 U.S.C. § 554(a). An adjudication is defined as an “agenc y process for the formu lation of an order.” 5 U.S.C. § 551(7). The review of agenc y determinations by NAD clearly meets the definition of a n adjudication. There is a procedure for hearing facts in dispute, afte r which the hearing officer or Director must issue a determination. 7 U.S.C

. § 6997. The NAD statute also meets the APA § 554 requirement that there be an opportunity for a hearing. Such a hearing is mandatory onc e requested by a participant. 7 U.S.C. § 6997(b). See , Smedberg Mach. & Tool, Inc. v. Donovan , 730 F.2d 1089, 1092 (7th Cir. 1984).
The only remaining requirement is that NAD proceedings must be on the record. The NAD statute does not expressly require the hearing to be on the record; nonetheless, Congress’ intent is cle ar. “Although Section 554 specifi es that the governing statute must satisfy the ‘on the record ’ requireme nt, those three magic words need not appear for a court t o determine that formal hearings are required.” City of West Chicago, Ill.

v. U.S. Nu clear Regulatory Comm’n , 701 F.2d 632, 641 (7th Cir. 1983)

. Congress need only “clearly indicate its intent to trigger the formal, onthe-recor d hearing provisions of the APA.” Id. See also , Moore v
. Madigan , 990 F.2d 375, 378 (8th Cir. 1993), cert
. denied , 510 U.S. 82 3 (1993).

### -5- The NAD statute provides that a participant who appeals an advers e decision shall be giv en an evidentiary hearing. 7 U.S.C. § 6996(a). The evidentiaryhearing consists of a procedure in which the hearing officer has the power to admi nister oaths and to subpoena witnesses and evidence. 7 U.S.C. § 6997(a)(2). The hearing officer and outside parties ar e prohibited from ex parte communications. 7 U.S.C. § 6997(a)(2)(A)(B). Th e hearing o fficer is not bound by prior factual findings. 7 U.S.C. § 6997(c)(2). The appel lant carries the burden of proving that the agency’s decision was erroneous, 7 U.S.C. § 6997(c)(4), and the hearing officer mus t leave the record openfor additional information in response to new facts and evide nce presented at the hearing. 7 U.S.C. § 6997(c)(3). Th e appellant or the agency may request that the Director review the hearing officer’s determination. 7 U.S.C. § 6998(a). The Director’s review i s based on the case record (all material related to the adverse decision), 7 U.S.C. § 6991(4)), the record from the evidentiary hearing under 7 U.S.C

. § 6997 and any other arguments or evidence the D irector chooses to accept. 7 U.S.C. § 6998(b). Judicial review is availabl e upon issuance of a final determination. 7 U.S.C. § 6999.

The re peated references to the record in the NAD statute and it s provision for trial-type procedures make it clear that Congress intended for NAD proceedings t o be governed by § 554 of the APA. Furthermore, the government admits that NAD proceedings are “on the record,” stating, “We do not dis pute that . . . 7 U.S.C. §§ 6996-6998 required the hearin g officer’s decisions to be on the record.” (Gov’t. Br. at 12). The agency argues that even if NAD proceedings appear to meet th e coverage requirements of the APA, it is not “under” the APA but rathe r supersede s it. The agency claims that the NAD statutes are a separate , comprehensive statutory scheme that contain express

### -6-

procedures for conducting hearings. In essence, the agency is arguing tha t the NAD statutes have amended by implication the provision that makes § 55 4 of t he APA applicable to all adjudications required by statute to b e determined on the record after an opportunity for an agency hearing.

The primary flaw in the agency’s argument is that the AP A specifically states that a “subsequent statute may not be held to supersed e
or modify this subchapter . . . except to the extent that it does s o expressly.” 5 U.S.C. § 559. There is nothing in the NAD statutes which expressly states that the APA is inapplicable. By adopting § 559, Congres s made it clear that the APA would apply unless th ere was some expression by Congress that the APA was being superseded. This is a logical approac h giv en the variety of issues and forums covered by the APA and th e po ssibilitythat Congress would inadvertently adopt a provision tha t conflicted with the APA or repeat a provision contained in the APA.
We find unpersuasive the agency’s re liance on Marcello v. Bonds , 349 U.S. 302, 75 S. Ct. 7 57, 99 L.Ed. 1107 (1955), in which the Supreme Court held that the APA didnot apply to Immigration and Naturalization Service depo rtation hearings. Congress, in the Immigration and Nationality Ac t (“INA” ), had elaborately adapted the APA to the deportation process , creating a complete and distinct set of procedur es. Marcello , 349 U.S. at 310. The NAD statutes contain some variations on the APA but thos e variations deal primarily with subjects not cont ained in the APA. Nor are there dir ect conflicts between the APA and the NAD statutes. Compare 5 U.S.C. §§ 554-557 with 7 U.S.C. §§ 6996-6998. T here is one section of the NAD statutes which refers to § 551 of the APA and incorporates by referenc e the definition of “ex parte communication” conta ined in the APA. 7 U.S.C. § 6997(a)(2)(A).

### -7-

Appellant contends that this reference to the APA would not be necessary if the NA D proceedings were under the APA. These minor variations , however, do not approach the major adaptions contained in the INA. Rather , they highlight the confusion that would occur, b ut for § 559 which forbids amendment of the APA by implication.
More importantly, the INA states that the procedures described in the Act “sha ll be the sole and exclusive procedure for determining th e deportability of an alien under this section.” Marcello , 349 U.S. at 309. The petitioner in Marcello argued that this was not a sufficient statement to s how that Congress intended the INA to supersede the APA, becaus e Congress simultaneous ly repealed an earlier statute which stated that the APAdid not apply to deportation hearings. Since there was no longer an expre ss provision that the APA did not apply, the deportee in Marcell o argued that the APA had to be followed. The Court acknowledged that a n exemption from the APA is not lightly presumed, but also found that: 1) th e
same Congressmen who sponsored the APA had sponsored the INA; 2) there wer e sign ificant differences between the APA and the INA; and 3) Congres s probably thought it unnecessary to include a statement that the IN A supersede d the APA because the INA stated that it was the “sole an d exclus ive procedure for determining the deportability of an alien unde r this section.” The Court refused to require Congress “to employ magical passwo rds in order to effectuate an exemption from the Administrativ e Procedure Act . . ..” Marcello , 349 U.S. at 310 . The NAD statutes do not have a similar legislative history. There has n ever been an expression by Congr ess that the APA does not apply. There is no provision in the NA D statutes that it is the sole and exclusive procedure for conductin g hearings. There is not an extensive adaptation of the APA, only mino r variations. The requirements of § 559 clearly have not been met.

### -8- Ardest ani v. I.N.S. , 502 U.S. 129 (1991), is similarl y distinguishable. In that case, the Supreme Court held that the EAJA is no t applicable to INA dep ortation hearings because the INA is not under § 554 of the APA. This conclusion is based on the Court’s earlier finding i n Marcello that Congress had expressly provided that INA proceedings would not be under § 554 of the APA. In contrast, we have found that proceeding s before the NAD are under § 554 of the APA. The only remaining question is whether the district judge was correct in remanding the case to NAD for th e sole purpose of determining the amount of fees owed to the Lanes.

B. ISSUE ON REMAND

The EAJA states that “[a]n agency that conducts an adversar y adjudic ation shall award, to a prevailing party other than the Unite d States, fees and othe r expenses incurred by that party in connection with that proceeding, unle ss the adjudicative officer of the agency finds that the position of the agency was substantially justified or that specia l circumstances make an award unjust.” 5 U.S.C. § 504(a)(1).

The dist rict court interpreted this section to mean that the Lane s
were entitled to their fees because the NAD hearing officer did not make
an af firmative finding that the agency’s position was substantiall y justified. The record is clear, however, that t he Lanes’ applications for fees were never submitted to the hearing officer for review. Instead, the Lanes were notified by a representative of the agency that the EAJA did no t app lyto NAD hearings and for that reason their fees could not b e recovered.
Relying on 5 U.S.C. § 706(2)(A), the district court found that th e refusal of the agency to consider the Lanes’ applications was

### -9-

not justified by law and, therefore, the court need not give deference to the agency’s finding. The only finding made by the agency, however, was that the EAJA did not apply. The agency’s adjudicative officer has never reviewed the merits of the Lanes’ applications f or fees. We find that the agency ’s adjudicative officer must have an opportunity to consider th e merits of the application prior to judicial review.

To hold o therwise would put the NAD in an untenable position. Once the NAD personnel con cluded that the EAJA did not apply, the adjudicative officer lacked ostens ible authority to award EAJA fees. The law is clear that an adjudicative officer cannot decide issues which are not properly before the officer. See , Fidelity Constr. Co. v. United States , 700 F.2d 1379, 1386 (Fed. Cir. 1983), cert
. denied , 464 U .S. 826, 104 S. Ct. 97, 78 L.Ed .2d 103 (the board of contract appeals had no authority to awar d attorneyfees under the EAJA where its proceedings were not subject to 5 U.S.C. § 554). If the adjudicative officer had rendered a decision on the attor neyfees, he would have violated this principle based on th e und erstanding of the agency at that time. Given that the question o f jurisdiction was novel, the agency did not have an obligation to make an advisory decision on the propriety of the Lanes’ application.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEAL, EIGHTH CIRCUIT.