Opinion ID: 499512
Heading Depth: 2
Heading Rank: 2

Heading: The Test for Substantial Justification

Text: 14 The EAJA is a waiver of sovereign immunity and it therefore must be strictly construed, Ruckelshaus v. Sierra Club, 463 U.S. 680, 685, 103 S.Ct. 3274, 3278, 77 L.Ed.2d 938 (1983). The so-called American rule, moreover, is that parties pay their own attorney's fees, absent certain common-law and statutory exceptions. See, e.g., H.R.Rep. 1418, 96th Cong., 2d Sess. 8 (1980), reprinted in 1980 U.S.Code Cong. & Admin.News 4953, 4986-87. We must thus read the language of the statute closely to determine under what circumstances Congress was willing to require the government to pay the attorney's fees of other parties. 15 The statutory language sets out a two-part test. The court must first determine whether the non-government party prevailed. If so, that party shall be awarded fees unless the government's position was substantially justified or other special circumstances would make an award unjust. 28 U.S.C. Sec. 2412(d)(1)(A). A three-way classification is thus envisioned: 1) the non-government party prevails and the government's position is not substantially justified, 2) the non-government party prevails and the government's position is substantially justified, and 3) the non-government party does not prevail. Only in the first of these cases shall the court award attorney's fees. Conversely, the court may not award fees in the second and third cases. This follows from the mandatory language used in the statute and from the government's sovereign immunity where that language does not apply. 16 The classification above is derived directly from the statute. It is also supported by the legislative history of the EAJA. House Report 96-1418 expressly states that [t]he standard ... should not be read to raise a presumption that the Government position was not substantially justified, simply because it lost the case. H.R.Rep. 1418, 96th Cong., 2d Sess. 11 (1980), reprinted in 1980 U.S. Code Cong. & Admin.News 4953, 4990. This is precisely what the district court's definition does: if the government loses, it pays. This approach effectively changes the classification system for condemnation cases to one governed by only one question: whether the non-government party prevailed. This result is clearly contrary to Congress' intent. To make the substantial justification determination, therefore, we must establish a test other than the one used to determine which party has prevailed. 17 Because the sole issue at trial in condemnation proceedings is the very narrow factual issue of valuation, a particularized test is needed for such cases. The test must be workable in light of the statutory command that the issue be decided upon the record already available to the district court. 28 U.S.C.A. Sec. 2412(d)(1)(B) (West.Supp.1987). 18 Factors that have been considered by other circuits in making substantial justification determinations include the amount of the jury award, the deposit made by the government, the initial offer made by the government, the appraisals upon which the government relied, the government's position on valuation at trial, and other awards in the area. See United States v. 1,378.65 Acres of Land, 794 F.2d 1313, 1318 (8th Cir.1986); United States v. 640.00 Acres of Land, 756 F.2d 842, 850 (11th Cir.1985); United States v. 341.45 Acres of Land, 751 F.2d 924, 940-41 (8th Cir.1984), vacated, 786 F.2d 1168 (8th Cir.1986); United States v. 101.80 Acres of Land, 716 F.2d 714, 728 (9th Cir.1983). Unfortunately, none of these factors are reliable indicators of the land's actual value. Awards are unreliable because they are almost always some dollar value between the government's and the landowner's claims of value, 3 which are themselves unreliable because they rely on appraisals which are very flexible. In turn, the government's offer and position at trial are generally based on its (generally low) appraisals. Finally, the deposit is merely the government's estimated compensation; it may not be used as evidence at trial of the land's value, 341.45 Acres, 751 F.2d at 940 n. 12, and is therefore not part of the record. 19 The Ninth Circuit, in an opinion that addressed the question only cursorily, upheld a determination of lack of substantial justification under a reasonableness standard because the government's original deposit was wholly inadequate, representing only a fraction of the true value of the easement condemned as found by the jury. 101.80 Acres, 716 F.2d at 728. This jury award vs. deposit approach has been rejected by a subsequent court in recognition of the lack of meaning attributable to the deposit. 341.45 Acres, 751 F.2d at 940 n. 12. Neither party in this case argues for this standard. 20 The Eighth Circuit held that the substantial justification determination should be made by looking to the totality of the circumstances. Id. at 940. 4 The circumstances listed are primarily the reasonableness of the government's appraisals and whether its offer and position on valuation at trial were consistent with those appraisals. The reasonableness of the government's appraisals is to be determined by considering the qualifications and possible conflict of interests of the appraisers and the factual basis for their appraisals. The appraisal/offer/position-at-trial comparison is only moderately useful, as these factors will presumably be consistent in most cases. The comparison would be most helpful if landowners could show at trial whether the government had gotten multiple appraisals and what they were. In most cases that will not be possible, however, as litigants generally do not have access to government appraisals in condemnation cases other than those the government chooses to use at trial. See, e.g., Hoover v. United States, 611 F.2d 1132, 1138-42 (5th Cir.1980); Fed.R.Civ.P. 24(b) advisory committee note, 48 F.R.D. 487, 503-05. 21 Finally, the Eleventh Circuit requires a determination of whether the government should have made greater efforts to settle the case before deciding to litigate. 640.00 Acres, 756 F.2d at 850. The district court is to 22 explore what offers were made by the government to the landowners prior to trial, whether the price per acre offered was comparable to other awards being made on similar tracts in the area at that time, whether the government's appraisal of the land which formed the basis of the offer was by a neutral and impartial expert appraiser or by one regularly employed by the government, whether the appraisal was based on sound comparables, and such other facts that may be presented by the parties, which will illuminate the issue of the good faith of the government in trying to reconcile the dispute prior to subjecting the landowners to litigation. 23 Id. While we are not sure that it is possible on the record before the district court for it to judge whether the government ought to have tried harder to settle, the factors listed above all seem to be fairly objective and useful when considered together. 24 We therefore instruct district courts to determine whether the government's position was substantially justified based on the totality of the circumstances, as reflected in the record before the court. Such circumstances include: 25 1) the reasonableness and reliability of the government's appraisals introduced into evidence, based on the 26 a) qualifications of the appraiser 27 b) impartiality or lack thereof on the part of the appraiser 28 c) factual basis of the appraisal; specifically, the reasons why the appraisal differs from that of the landowner 29 d) awards and sales of similar property in the area at the time in question, 30 2) a comparison of the government's appraisal, the offer made, and proof of valuation at trial, and 31 3) any other relevant evidence. 32 We remand this case for determination of whether the government's position was substantially justified under this test. 33 REVERSED AND REMANDED.