In the

United States Court of Appeals

For the Seventh Circuit

Nos. 10-2676 & 10-3599

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

MARSHALL PECORE AND

CONRAD WANIGER,

Defendants-Appellants.

Appeals from the United States District Court

for the Eastern District of Wisconsin.

No. 07-C-316—William C. Griesbach, Judge.

ARGUED SEPTEMBER 22, 2011—DECIDED DECEMBER 30, 2011

Before BAUER, MANION, and KANNE, Circuit Judges.

KANNE, Circuit Judge. After a six-year investigation, an

additional two-and-one-half years of discovery and pretrial posturing, and a nine-day jury trial, Marshall Pecore

and Conrad Waniger (the “defendants”) prevailed against

civil charges that they violated the False Claims Act

(“FCA”). Unsatisfied with just the trial victory and

perhaps disturbed that the government spent nearly a

decade chasing about $75,000, the defendants moved for
2 Nos. 10-2676 & 10-3599

attorney’s fees under the Equal Access to Justice Act

(“EAJA”), 28 U.S.C. § 2412(d)(1)(A), or alternatively,

sanctions under Rule 37(c)(2) of the Federal Rules of

Civil Procedure. The district court denied both motions.

Despite our discomfort with what looks like government overreaching, we find that the district court’s

ruling was not an abuse of discretion and accordingly,

we affirm.

I. BACKGROUND

The origins of this dispute date back to 2000 when

Menominee Tribal Enterprises (“Menominee,” “MTE,” or

the “Tribe”), the principal business arm of the Menominee

Indian Tribe of Wisconsin, first applied for and received

federal funding under the Hazardous Fuels Reduction

program (“HFR”). The federal Bureau of Indian Affairs

(“BIA”) created HFR as a long-term strategy to gradually reintroduce the beneficial aspects of fire into firedependent ecosystems such as densely-wooded forests.

To obtain HFR funds, an applicant is required to first

submit a proposal for its planned fire reduction work.

Unlike previous federal programs, this fire reduction

program required approved applicants to request BIA

reimbursement only after incurring project costs.

In 2000 and again in 2001, Menominee forest manager

Marshall Pecore, and Menominee fire management officer

Conrad Waniger, applied for HFR funding on behalf of

the Tribe. The application sought federal funds to grade

141 miles of forest roads and to create an additional
Nos. 10-2676 & 10-3599 3

A fuel break is a strip of land cleared of potentially flammable 1

vegetation that runs parallel to a forest road. Among other

benefits, an effective fuel break provides a defensive area

for firefighters.

273 miles of fuel breaks. To create these fuel breaks, MTE’s 1

application represented that it would remove excess

vegetation by performing brushing and disking work. As

its name implies, brushing removes potentially flammable brush near a forest road. Disking, on the other

hand, is the process of mixing organic soil with forest

vegetation to eliminate the continuity of vegetation on

the forest floor. After obtaining BIA approval, Menominee

began HFR work in December 2000, and began invoicing

BIA in 2001. Early MTE invoices requested BIA reimbursement totaling a flat fee of $450 for each mile of fuelbreak work. As work progressed, MTE abandoned its permile, fixed-fee invoices in exchange for invoices that

requested reimbursement for actual costs incurred. The

purpose of this change was hotly disputed during trial.

The government claimed that problems with the Tribe

developed in June 2001, after several MTE staff

members told Dave Congos, the BIA forester assigned to

the Tribe, that MTE’s Roads Department budget was

running a deficit. Menominee employees reported that

the Tribe purposefully diverted HFR funds to the Roads

Department as a way to close the budget shortfall.

Prompted by these reports, Congos and Thomas

Magnuson, another BIA forester, personally inspected

some of the work MTE claimed to have completed. Congos
4 Nos. 10-2676 & 10-3599

and Magnuson walked the forest roads and compared

their observations of work performed to a map prepared

by MTE that purported to show completed and invoiced

work. Both Congos and Magnuson concluded that the

submitted invoices overstated the actual work done.

In some cases, Congos felt that the work performed

actually increased the risk of fire. Congos reported his

findings to his supervisor and discussed the results

with Waniger, who agreed to rework certain portions

of the forest.

Following their initial meeting in 2001, Waniger submitted revised maps to Congos that again purported to

show portions of the forest where HFR fire prevention

work had been completed and invoiced. In one memorandum submitted by Waniger documenting 2001 fire reduction accomplishments, Wangier claimed that fuel breaks

were created for 96.2 miles. Of those 96 miles, 54 miles

were fully completed and the remaining 42 miles were

95% complete. Maps and memos in hand, Congos inspected Tribal grounds for a second time to determine

whether the actual work performed reconciled to what

MTE had billed. Congos’s inspections confirmed his

belief that the defendants were submitting false invoices

for work that was never completed or completed in a

way that did not meet HFR standards. This inspection,

in part, subsequently served as the basis for the government’s False Claims Act suit.

In July 2002, Congos and Magnuson contacted

Joseph Schwartz in the Office of Inspector General

(“OIG”) for the Department of Interior. Based on
Nos. 10-2676 & 10-3599 5

Congos’s report, Schwartz initiated an investigation

into Menominee’s billing practices that included employee interviews and a review of subpoenaed records.

During the investigation, the government also identified

what it believed were instances of falsified time cards

relating to HFR funds. Namely, the government alleged

that Tribe management required certain employees to

code time worked to fire reduction efforts even though

these employees were actually working on unrelated

projects.

By 2005, the government formally contacted MTE to

discuss the results of the OIG investigation. Throughout

the next several months, the parties communicated regularly and even appeared close to a settlement. But in

2006, the defendants refused the government’s settlement offer and broke off negotiations. At that time, the

defendants maintained their innocence and principally

argued that the allegations were all one big misunderstanding. Had government investigators spent more

time discussing the allegations with Pecore and Waniger,

the defendants argue that the protracted litigation

could have been avoided.

With a settlement off the table in April 2007, the

United States filed suit against MTE, Pecore, and Waniger

alleging violations of the FCA, 31 U.S.C. §§ 3729-33. MTE,

Pecore, and Waniger all filed motions to dismiss. The

district court denied the motions as to Pecore and

Waniger, but granted MTE’s motion because it was not

a “person” within the meaning of the FCA. Subsequently,

the district court rejected the remaining defendants’ and

the government’s partial motions for summary judgment.
6 Nos. 10-2676 & 10-3599

The defendants submitted the Sloan report shortly before 2

trial, but after the discovery period had closed. The government vigorously argued that the report should be excluded

from trial on the grounds that the defendants had violated a

discovery order. The district court noted the violation but

ultimately accepted the evidence to “ensure a full record

and protect the Defendants themselves from the arguably

deficient performance of their attorney.” United States v.

Menominee Tribal Enters., No. 07-C-316, 2010 WL 2465505, at *4

(E.D. Wis. June 15, 2010).

At trial, the defendants claimed that the government

was unclear about the standard fuel-break width it

would use to evaluate whether MTE complied with HFR

protocols. The defendants construed this silence and

subsequent confusion about the fuel-break standard as

evidence of a simple misunderstanding rather than evidence that the defendants knowingly submitted false

invoices. There was further confusion about whether

Menominee employees were properly recording time to

HFR projects. The defendants conceded that one employee had truly misclassified his time, but this fabrication

was nothing more than an isolated anomaly. All other

time-card discrepancies were really a proper internalreporting scheme designed to reclassify time between

certain departments. Again, had the government investigators explicitly discussed these discrepancies with the

Tribe, there would have been no need for litigation.

The defendants considered their ace-in-the-hole to be

a 2009 inspection prepared by Ken Sloan, a retired

forester. The defendants hired Sloan to independently 2

inspect portions of the forest to determine whether
Nos. 10-2676 & 10-3599 7

Ten days before oral argument, the defendants requested 3

that we take judicial notice of various letters and memoranda

that purportedly illustrate Congos’s bias against defendants

Pecore and Waniger. The defendants interpret this bias as the

real reason the government brought suit. Although we are

skeptical that documents defense counsel inadvertently failed

to include in the record are the proper subject of judicial

notice, we offer no opinion on this matter because these documents do not change our conclusion that the district court

did not abuse its discretion in finding substantial justification

for the government’s position.

Menominee had actually conducted appropriate brushing

and disking work between 2000-2002. In response, the

government conducted its own reinvestigation in

October 2009. Congos testified at trial that the Sloan

photographs showed some evidence of cutting, but that

it was not evidence of cutting related to the HFR program. Additionally, Congos testified that other locations

evaluated by Sloan continued to show no signs of any fire

prevention work.

At the close of the government’s evidence, the defendants moved for judgment as a matter of law, which

the district court denied. After a nine-day trial, the defendants’ theory prevailed. Following their trial victory, the

defendants moved for attorney’s fees under EAJA or

alternatively, sanctions under Rule 37(c)(2). The district

court denied both motions, and the defendants filed

this timely appeal.3
8 Nos. 10-2676 & 10-3599

II. ANALYSIS

Pecore and Waniger present two related issues for

our review. The defendants first contend that the district

court erred by rejecting their post-trial motion for EAJA

attorney’s fees. Similarly, Pecore and Waniger challenge

the district court’s refusal to impose Rule 37 sanctions

against the government. We review both of the district

court’s decisions for an abuse of discretion. Pierce v.

Underwood, 487 U.S. 552, 559-60 (1988) (reasoning that

in EAJA cases, “the district court may have insights not

conveyed by the record, into such matters as whether

particular evidence was worthy of being relied upon, or

whether critical facts could easily have been verified by

the Government.”); Johnson v. Kakvand, 192 F.3d 656,

661 (7th Cir. 1999) (finding that Rule 37 decisions are

reviewed deferentially because “[d]istrict courts possess

wide latitude in fashioning appropriate sanctions and

evaluating the reasonableness of the attorneys’ fees requested”).

A. EAJA Attorney’s Fees

The defendants principally contend that the district

court abused its discretion by rejecting their motion for

EAJA attorney’s fees. A district court may award such

fees where “(1) the claimant is a prevailing party; (2) the

government was not substantially justified in its position;

(3) no special circumstances make an award unjust; and

(4) the fee application is timely and supported by an

itemized statement.” Conrad v. Barnhart, 434 F.3d 987, 989

(7th Cir. 2006) (quotation marks omitted); 28 U.S.C.
Nos. 10-2676 & 10-3599 9

§ 2412(d)(1)(A). Here, the defendants only challenge the

district court’s finding related to the second element:

whether the government was substantially justified in

bringing the FCA action. The government bears the

burden of proving that its position was substantially

justified, and to do so, it must show: “(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 theory

propounded.” Conrad, 434 F.3d at 990; see also

Golembiewski v. Barnhart, 382 F.3d 721, 724 (7th Cir.

2004). In evaluating the government’s position, we

review the claim in its entirety rather than the

individual positions the government may have taken

throughout different phases of litigation. Comm’r, I.N.S.

v. Jean, 496 U.S. 154, 161-62 (1990).

With that, we turn to the defendants’ argument on

appeal, which cites three sets of uncontested facts that

purportedly prove that the government’s case lacked

substantial justification. First, the defendants suggest

that the government’s position had no reasonable basis

in the law. Similarly, the defendants next argue that

the government’s position was not reasonably based on

the facts. And third, Pecore and Waniger argue that the

government failed to adequately investigate the defendants’ evidence. Each set of facts standing alone, the

defendants assert, is enough to show that the government’s position was not substantially justified. Like the

district court before us, we’ll evaluate each of these allegations individually.
10 Nos. 10-2676 & 10-3599

On appeal, the defendants argue for the first time that 4

sovereign immunity protects tribal employees such as Pecore

and Waniger from FCA suits, and as such, the government’s

position lacked substantial legal justification. Although the

defendants made a similar sovereign immunity argument in

their merits brief supporting summary judgment, which the

district court rejected, the defendants did not raise this issue

in their post-trial brief for EAJA attorney’s fees. Accordingly,

the defendants waived this argument as to EAJA attorney’s

fees, and we will not consider it. Fednav Int’l Ltd. v. Cont’l Ins.

Co., 624 F.3d 834, 841 (7th Cir. 2010).

1. The Government’s Position Was Reasonably Based On

The Law4

The defendants first contend that two legal errors

prevented the government from ever establishing a

substantially justified claim. First, the BIA failed to

follow its own internal policies before the government

filed suit. Second, the government’s FCA suit was really

a poorly disguised breach of contract suit. The government’s failure to select the proper cause of action precluded it from developing a substantially justified

FCA claim. Both arguments are baseless.

First, the defendants argue that the government

violated the internal BIA policy manual and the Midwest

Regional Office Handbook, both of which require the

government to consult with Tribe personnel before

taking federal action. Had the government obeyed the

two internal consultation policies, the Tribe could have

explained away the confusion about its fire reduction

work, the rationale for its complex billing practice, and
Nos. 10-2676 & 10-3599 11

whether the width of its fuel breaks complied with

HFR standards. According to the defendants, had these

conversations occurred, both parties could have avoided

trial. But, as a threshold matter, a government agency’s

internal policies and procedures (as opposed to duly

enacted regulations) do not have the force of law. See

Krasilych v. Holder, 583 F.3d 962, 966 (7th Cir. 2009) (noting,

for example, that the “Attorney General’s guidelines are

internal rules that have no legal force”). In this case, the

clue as to the status of the BIA policy is located on the

very first page of the Government-to-Government Consultation Policy, where it plainly states that the policy

“illustrates the guidelines that the Bureau of Indian

Affairs will follow for consultation with tribal governments.” Bureau of Indian Affairs, Government-to-Government Consultation Policy 1 (2000) (emphasis added).

Certainly agency guidelines do not carry the weight of

law, and thus, any alleged violation can serve only as

probative evidence that the government failed to file

suit in good faith.

The seven cases cited by the defendants in support of

their policies and procedures argument do not bolster

their claim. Instead, each case only suggests the possibility for EAJA attorney’s fees when the government

violates a law, an agency regulation, or clear judicial

precedent. See, e.g., Stewart v. Astrue, 561 F.3d 679, 684

(7th Cir. 2009) (awarding EAJA attorney’s fees “because

the ALJ contravened longstanding agency regulations, as

well as judicial precedent”); Golembiewski, 382 F.3d at 724

(awarding EAJA attorney’s fees because “the ALJ and

Commissioner violated clear and long judicial precedent
12 Nos. 10-2676 & 10-3599

and violated the Commissioner’s own Ruling and Regulations”); Or. Natural Res. Council v. Madigan, 980 F.2d

1330, 1332 (9th Cir. 1992) (awarding attorney’s fees

after the agency failed to issue regulations demanded by

clear statutory language). Because the defendants allege

only that the government violated internal policy guidelines, we reject their first legal argument.

Even if the BIA’s policies had the force and effect of

law, the record belies the defendants’ claim that they

were not adequately consulted before the government

brought suit. For example, Congos testified that he

spoke with Waniger in 2001 about the work deficiencies

Congos identified during his initial forest inspection, and

Waniger promised to rework the identified areas. During

the remainder of 2001 and 2002, Congos, Waniger, and

Pecore communicated through written memoranda and

work-completion maps about the status of the Tribe’s

HFR work. In 2005, the government contacted the Tribe

to formally discuss the results of the OIG investigation.

And, during much of 2006, the parties engaged in significant settlement negotiations. Each discussion occurred

before the government brought suit in 2007. As a

simple question of fact, the record reveals that the defendants had several years to eliminate any misunderstandings about its work. Ultimately, the defendants’

internal-policies argument is baseless.

The defendants’ second legal objection to the district

court’s ruling is that the court failed to recognize that

the government’s suit was more akin to a breach-of-contract action than an FCA action. According to the defen-
Nos. 10-2676 & 10-3599 13

dants, if the government misused the FCA statute, then

surely it could not have been substantially justified

in bringing such a suit. As a result, the defendants

claim the breach-of-contract action should have been

governed by the Indian Self-Determination Education

and Assistance Act (“ISDEAA”).

We need not spend much time discussing the merits

of the defendants’ claim because the district court rightfully concluded that a case involving contract performance

does not necessarily foreclose FCA liability. Menominee

Tribal Enters., 2010 WL 2465505, at *6 (citing United States

ex rel. Davis v. Dyna Corp., 17 F.3d 397 (9th Cir. 1994)

(unpublished table decision)). It is perfectly logical for a

contracting party to knowingly submit a false invoice

purportedly pursuant to a valid contract. As we will

discuss shortly, the government had reasonable grounds

for believing that the defendants knowingly submitted

false invoices, and as such, the government’s claim fit

neatly into the FCA.

Because the defendants’ legal objections are without

merit, we find that the government had substantial

legal justification for bringing an FCA claim.

2. The Government’s Position Was Reasonably Based On

The Facts

The defendants next contend that the government’s

position was not substantially justified because the government failed to prove its factual allegations at trial.

Here, the defendants argue that an FCA claim requires

the government to prove the defendants submitted a
14 Nos. 10-2676 & 10-3599

false statement, see Hindo v. Univ. of Health Scis./The

Chicago Med. Sch., 65 F.3d 608, 613 (7th Cir. 1995), but

the government could never prove that the defendants

lied. In the absence of a lie, the government’s position

had no substantial factual justification.

Before reviewing the record, it is first important to

recall that the substantial justification standard does not

require the government to have won at trial. In fact, the

government’s position need not even be correct. Pierce,

487 U.S. at 566 n.2 (“[A] position can be justified even

though it is not correct, and we believe it can be substantially (i.e., for the most part) justified if a reasonable person could think it correct.”). Rather, substantial justification only requires the position to have

“a reasonable basis in law and fact.” Conrad, 434 F.3d at

990; Pierce, 487 U.S. at 565 (a position need only be “justified to a degree that could satisfy a reasonable person”). Here, the defendants broad assertions that “[t]he

government’s [motive] theory collapsed at trial” and “the

Government failed to prove that either Pecore or

Waniger lied,” only suggest that the jury sided with the

defendants, not that their opponent’s position was

never substantially justified. Therefore, we generally

ignore what the jury believed or did not believe at trial,

and instead focus on whether the government’s position

as a whole could satisfy a reasonable person. See Jean,

496 U.S. at 161-62.

Moving to the facts, the defendants first argue with

some force that the government could never articulate a

reasonable motive theory. After all, why would two men
Nos. 10-2676 & 10-3599 15

Motive is not an element for an FCA claim. See Hindo, 65 5

F.3d at 613. Rather, the defendants appear to only highlight the

lack of motive as evidence that defendants did not knowingly

submit a false statement.

risk criminal and civil sanctions when they never

received any benefits in return? Without a motive theory,

the defendants contend that the government could not

prove a lie or false claim, and without a lie, an FCA claim

necessarily fails. Hindo, 65 F.3d at 613. Although the 5

defendants attempt to construe the motive question

as uncontested, this issue was subject to conflicting evidence and testimony such that a reasonable person

could have accepted either version of events, which is

all we require. Pierce, 487 U.S. at 565. For example, the

government maintained throughout trial that Congos

and Pecore were looking for a source of funds to keep

the Menominee Roads Department in the black. The

district court heard testimony to this effect. On the

other hand, the defendants claim that the government’s

“key” motive witness unknowingly contradicted the

government’s theory by suggesting that additional

Roads Department funds were only spent three years

after they were requested. The defendants construed

this testimony as proof that the Roads Department

never had an urgent need for additional funding, and

thus, Pecore and Waniger were never motivated to

falsify government invoices to obtain additional funding.

In pointing to the version of events that the jury apparently believed, the defendants ignore the legitimate
16 Nos. 10-2676 & 10-3599

factual dispute that existed throughout the litigation.

Instead, the defendants seem to simply rely on their

trial victory. But this is not enough. Furthermore, even

if we completely accept as true the defendants’ version

of motive, it still does not directly contradict or disprove

the government’s position that the Roads Department

faced serious budget difficulties. Accordingly, the

district court did not abuse its discretion in finding

that the government’s motive theory was substantially

justified, even though it apparently failed at trial.

The defendants’ second factual dispute highlights the

miscommunication between the parties about Tribal

billing practices. Here, the defendants claim that they

never billed the government on a per-mile basis, but

rather, only submitted bills for actual fire prevention

costs incurred. Moreover, the bills detailing actual costs

represented an accurate snapshot of MTE’s legitimate

costs. The defendants also contend that the maps submitted to Congos were never supposed to accurately

represent the precise amount of work MTE had completed. Instead, the maps were only to be used as a

general guide to their work. Accordingly, the defendants argue that government confusion was the

reason for the charges against Pecore and Waniger, and

thus, the government could never prove that Pecore

or Waniger submitted a false claim.

As was the case for the factual dispute about the defendants’ motive, the government offered evidence to

counter the defendants’ theory. First, the government

offered testimony suggesting that MTE had submitted a
Nos. 10-2676 & 10-3599 17

handful of invoices on a per-mile basis. Only after

Congos’s initial inspection did the Tribe change to costbased invoicing. Next, the government offered a 2001

accomplishments memorandum prepared by Waniger

stating that fuel breaks were created for 96.2 miles and

that work was at least 95% completed. The government

also offered testimony indicating that Waniger submitted a second completion map to Congos after MTE

rework was completed. Finally, the government offered

Congos’s testimony about his 2001 and 2002 inspections

as well as his brief 2009 reinspection following the

Ken Sloan report. On appeal, our review of the record

confirms the district court’s finding that there was

ample confusion associated with the Tribe’s invoices.

We also agree with the district court’s finding that “even

if the Defendants’ expense-based view of its billing

was entirely correct, that did not entitle it to list areas

of work done (by mileage) if those areas were not

actually done.” Menominee Tribal Enters., 2010 WL 2465505,

at *3. Ultimately, the intense nature of this debate

suggests to us that either party’s position could be accepted as true by a reasonable person.

Two final points about the defendants’ factual disputes bear mentioning. First, the defendants ignore the

objective, although not necessarily conclusive, evidence

that the government’s complaint survived both a motion

to dismiss and a motion for summary judgment. United

States v. Thouvenot, Wade & Moerschen, Inc., 596 F.3d 378,

382 (7th Cir. 2010) (“[T]here is a [rebuttable] presumption

that a government case strong enough to survive both

a motion to dismiss and a motion for summary judg-
18 Nos. 10-2676 & 10-3599

The defendants criticize Thouvenot because it supposedly shifts

6

the government’s statutory burden of proof to the prevailing

defendant by creating a presumption of substantial justification if a case survives both a motion to dismiss and summary

judgment. This is wrong. Thouvenot only construes a motion

to dismiss or summary judgment victory as objective and

perhaps compelling evidence of substantial justification. Pierce,

487 U.S. at 568 (finding that objective factors are relevant).

Notably, Thouvenot left the door open for an attorney’s fees

award in those cases where something emerges at trial proving

that the government never had a case or in those cases where

the district court judge has new evidence to show that she

“erred grievously in refusing to grant the defendant’s motion

to dismiss or motion for summary judgment.” Thouvenot, 596

F.3d at 382. But, even if Thouvenot was somehow improperly

decided, the district court in this case expressly stated that

Thouvenot was only a second, independent ground for

rejecting the defendants’ EAJA motion. In other words, even

if Thouvenot did not exist, the government’s position was

still substantially justified. 

ment is substantially justified.”). This objective evi- 6

dence combined with the intensity of the factual

disputes between the parties illustrates that the government had a substantial fact-based justification for

bringing suit. The second, and perhaps more important,

concluding thought is that our review is limited to a

discussion of whether the district court abused its discretion. Conrad, 434 F.3d at 990. Although our own

review of the record shows that the government’s

position was substantially justified, we must again acknowledge the district court’s unique position to
Nos. 10-2676 & 10-3599 19

observe and weigh the evidence over two-and-onehalf years of an intensely factual litigation. Pierce, 487

U.S. at 560 (“[S]ome of the elements that bear upon

whether the Government’s position ‘was substantially

justified’ may be known only to the district court.”).

Ultimately, the defendants have not offered anything

to cast doubt on the district court’s well-reasoned sixteenpage opinion.

For the preceding reasons, we find the district court

did not abuse its discretion in concluding that the government’s position had a substantial factual justification.

3. The Government Properly Investigated The Defendants’

Evidence

Finally, the defendants argue that the government

failed to properly investigate its own FCA claim, in

violation of 31 U.S.C. § 3730(a) (“The Attorney General

diligently shall investigate a violation under section

3729.”). Such a failure to investigate, according to the

defendants, is further evidence that the government’s

position was never substantially justified. Pecore and

Waniger assert that the government’s reliance on

stale Congos inspections instead of the more recent

Sloan report exculpating the defendants is proof that

the government failed to investigate. We disagree.

As a threshold matter and as the district court noted,

the loose grasp the government supposedly had on the

facts might have more to do with the defendants’ borderline discovery abuses rather than the government’s
20 Nos. 10-2676 & 10-3599

failure to investigate to the defendants’ liking. See

Menominee Tribal Enters., 2010 WL 2465505, at *4. We

lend little credence to the defendants’ argument that

the government should have dropped its suit after

reading the Sloan report when that report was not produced until the eve of trial. Second, there is no support

for the defendants’ apparent position that the government must give greater deference to the defendants’

expert rather than rely on its own forester’s inspections. Instead, trial litigation routinely boils down to

a battle of experts, and a dispute between experts “tends

to show a good faith dispute,” Chicago Dist. Council of

Carpenters Pension Fund v. Reinke Insulation Co., 464

F.3d 651, 656 (7th Cir. 2006), which is another way to

say that both parties’ claims were substantially justified.

Third, the defendants’ contention that Congos’s inspections were stale as compared to the Sloan report is, at

best, irrelevant. To the contrary, a reasonable person

could have found that the Congos inspections were

more reliable because they occurred closer in time to

when the fire reduction work was supposedly completed. Finally, Congos testified at trial that the government conducted its own reinspection in October 2009

following the belated Sloan inspection. According to

Congos, the Sloan photos showed some evidence of

cutting unrelated to the HFR program, but other portions of the forest continued to show no signs of any fire

prevention work. Ultimately, the defendants’ contention

that its inspection is better than the others is similar to

the other fact-intensive disputes the defendants have

highlighted on appeal. Like this other conflicting evi-
Nos. 10-2676 & 10-3599 21

dence, the parties’ debate about the validity of the inspections says little about substantial justification.

Rather, the intensity of the dispute, both at trial and on

appeal, shows that a reasonable person could have been

satisfied by either party’s theory. Pierce, 487 U.S. at 565.

Defendants’ reliance on Phil Smidt & Son, Inc. v. NLRB,

810 F.2d 638 (7th Cir. 1987), is misplaced. There,

we reversed the district court’s refusal to impose EAJA

attorney’s fees against the government in part because

of the strong contradictory evidence presented by the

defendant. We chided the government for not making

“any attempt to independently corroborate [its] allegation.” Id. at 643 (emphasis added). In this case, however,

the record reveals that the government investigated the

Sloan report, reinspected portions of the forest, and

concluded that Congos’s inspections were more reliable.

This is not a case where the government completely

abdicated its duty to diligently investigate its claims

against Pecore and Waniger.

Because the government’s position throughout trial

was substantially justified, the district court did not

abuse its discretion in denying defendants’ EAJA motion.

B. Rule 37(c)(2) Sanctions

The defendants allege that the district court also abused

its discretion in denying its Rule 37 motion. Federal Rule

of Civil Procedure 37(c)(2) provides that a district court

must impose reasonable expenses including attorney’s

fees on a party that fails to properly admit the genuine-
22 Nos. 10-2676 & 10-3599

ness of a document pursuant to a Rule 36 request for

admission. Fed. R. Civ. P. 37(c)(2); Hicklin Engineering,

L.C. v. Bartell, 439 F.3d 346, 351 (7th Cir. 2006). But, this

rule provides an escape hatch for those parties that “had

a reasonable ground to believe that it might prevail on

the matter.” Fed. R. Civ. P. 37(c)(2)(C). The district court

found that the government fit into this exception, and

thus, it denied the defendants’ request for sanctions.

We agree.

In its motion for sanctions and again on appeal, the

defendants identify two types of Rule 36 requests that

the government should have admitted. The first type

was a request like Request 21, which asked the government to admit that the defendants incurred $8,707.50

in expenses related to invoice 200. The government

denied knowledge sufficient to admit or deny the request. The second type of Rule 36 request asked

the government to admit that work related to invoice

200, for example, had been substantially completed. The

government unambiguously denied this type of request

as it was the government’s position all along that

Pecore and Waniger submitted invoices for work that was

incomplete, deficient, or both. The defendants served

identical requests for several different invoices.

We need not spend much time disposing of the defendants’ argument because we have already covered much

of this ground in our EAJA analysis. There, we held

that there was reasonable confusion surrounding MTE’s

invoices, completion maps, and accomplishment memoranda such that either party’s position was “justified to a
Nos. 10-2676 & 10-3599 23

degree that could satisfy a reasonable person.” Pierce,

487 U.S. at 565. Rule 37(c)(2) incorporates a standard

that is strikingly similar to Pierce. The 1970 Advisory

Committee notes provide that “the true test under

Rule 37(c) is not whether a party prevailed at trial but

whether he acted reasonably in believing that he might

prevail.” Fed. R. Civ. P. 37 advisory committee’s note;

see Mut. Serv. Ins. Co. v. Frit Indus., Inc., 358 F.3d 1312,

1326 (11th Cir. 2004). Based on our EAJA analysis, we

find that the government reasonably believed it might

prevail on the invoice and map issue for the same

reasons we found the government’s position to be substantially justified. Therefore, we find that the district court did not abuse its discretion in rejecting the

defendants’ request for Rule 37 sanctions.

III. CONCLUSION

We hold that the district court did not abuse its discretion and accordingly, we AFFIRM its decision denying

defendants’ motions for attorney’s fees under either

EAJA or Rule 37(c)(2).

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