Court Opinion

ID: 184934
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:25:53+00
Date Added: 2024-06-11T13:05:21.887454
License: Public Domain

187 F.3d 655 (D.C. Cir. 1999)
Association of American Physicians and Surgeons, Inc.,an Indiana not-for-profit corporation; American Council for Health Care Reform, a Virginia not-for-profit corporation; National Legal & Policy Center, a District of Columbia not-for-profit corporation, Appelleesv.Hillary Rodham Clinton, wife of the President of the United States; Donna E.  Shalala, Secretary of the Department of Health & Human Services, et al. AppellantsAssociation of American Physicians and Surgeons, Inc.,an Indiana not-for-profit corporation; American Council for Health Care Reform, a Virginia not-for-profit corporation; National Legal & Policy Center, a District of Columbia not-for-profit corporation, Appelleesv.Hillary Rodham Clinton, wife of the President of the United States, et al.Ira C. Magaziner, White House Advisor, Appellant
No. 98-5048, No. 98-5049
United States Court of AppealsFOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 12, 1998Decided August 24, 1999

Appeals from the United States District Court for the District of Columbia(No. 93cv00399)
Jacob M. Lewis, Attorney, United States Department of  Justice, argued the cause for appellants Hillary Rodham  Clinton, et al.  Frank W. Hunger, Assistant Attorney General, and William Kanter and Michael S. Raab, Attorneys,  United States Department of Justice, were on brief.
Irvin B. Nathan, James L. Cooper and Nancy L. Perkins  were on brief for appellant, Ira C. Magaziner.
Thomas R. Spencer argued the cause for the appellees. Robert C. Gill was on brief.
Before:  Ginsburg and Henderson, Circuit Judges, and  Buckley, Senior Circuit Judge.
Opinion for the court filed per Curiam.

Per Curiam:

1
The appellants, officials of the Executive  Branch of the United States Government, including presidential advisor Ira C. Magaziner, (collectively referred to as the  government) challenge the district court's December 22, 1997  award of attorney's fees to the appellees, Association of  American Physicians and Surgeons, American Council for  Health Care Reform and National Legal & Policy Center,  (collectively referred to as AAPS).  The court awarded fees  under the common law on the ground that the government  litigated in bad faith and under the Equal Access to Justice  Act, 28 U.S.C. § 2412, (EAJA) on the ground that the government's litigating position was not "substantially justified."Because we conclude the district court's bad faith findings are  clearly erroneous, we reverse the fee award  and remand for further consideration.

I.

2
AAPS filed this action on February 24, 1993 alleging that  the government violated the Federal Advisory Committee  Act, 5 U.S.C. app. II, §§ 1-15, (FACA) by failing to file an  advisory committee charter for the "President's Task Force  on National Health Care Reform" (Task Force) and by  denying access to meetings of both the Task Force and an  "interdepartmental working group" overseen by Task Force  member Magaziner.  On March 3, 1993, in opposition to  AAPS's motion for preliminary injunction, the government  filed a declaration by Magaziner (Magaziner Declaration,  Declaration) which averred, inter alia, that "[o]nly federal  government employees serve as members of the interdepartmental working group."  Joint Appendix (JA) 135.  The  Declaration explained that membership included approximately 300 "full-time, permanent employees, who work for  the Executive office of the President, for federal agencies, for  members of Congress or for Senate or House committees,"  and 40 "special government employees" who "have been  employed by an agency or the Executive Office of the President for less than 130 days in a 365-day period, either with or  without compensation."  JA 135-37.  In addition, the Declaration noted that the working group had "retained a wide  range of consultants, who attend working group meetings on  an intermittent basis, either with or without compensation."JA 137.

3
On March 10, 1993 the district court issued a memorandum  opinion and order granting AAPS's preliminary injunction  motion.  AAPS v. Clinton, 813 F. Supp. 82 (D.D.C. 1993).The court held that the Task Force was an advisory committee and that it did not come within FACA's exemption for a  "committee that is composed wholly of full-time, or permanent part-time, officers or employees of the Federal Government," 5 U.S.C. app. II, § 3(2)(iii), because First Lady Hillary  Clinton, who chaired the Task Force, was not a federal  employee.  The court also concluded, however, that the working group was not a FACA committee because it worked on  behalf of the Task Force and did not directly advise the  President.  See 813 F. Supp. at 88-89 (finding interdepartmental working group (1) "directly compares" to task forces  found exempt from FACA in National Anti-Hunger Coalition v. Executive Committee, 557 F. Supp. 524 (D.D.C.), aff'd,  711 F.2d 1071 (D.C. Cir. 1983), because it performed purely  "staff" functions and (2) "fully meets" regulatory exemption  from FACA in 41 C.F.R. § 101-6.1004(k), which "exclude[s]  from the Act's coverage '[m]eetings of two or more advisory  committee or subcommittee members convened solely to  gather information or conduct research for a chartered advisory committee, to analyze relevant issues and facts, or to  draft proposed position papers for deliberation by the advisory committee or a subcommittee of the advisory committee' ").

4
On appeal this court reversed and remanded, concluding (1)  "[t]he question whether the President's spouse is 'a full-time  officer or employee' of the government is close enough for us  properly to construe FACA not to apply to the Task Force  merely because Mrs. Clinton is a member," AAPS v. Clinton,  997 F.2d 898, 910-11 (D.C. Cir. 1993), (AAPS I) and (2) the  record was insufficiently developed to determine whether all  of the working group's members were full-time federal employees or whether the working group was sufficiently structured so as to constitute a committee under FACA, id. at 915.The court explained:

5
When we examine a particular group or committee to determine whether FACA applies, we must bear in mind that a range of variations exist in terms of the purpose, structure, and personnel of the group.  Perhaps it is best characterized as a continuum.  At one end one canvisualize a formal group of a limited number of private citizens who are brought together to give publicized advice as a group.  That model would seem covered by the statute regardless of other fortuities such as whether the members are called "consultants."  At the other end of the continuum is an unstructured arrangement in which the government seeks advice from what is only a collection of individuals who do not significantly interactwith each other.  That model, we think, does not trigger FACA.

6
Id. at 915.1  While the working group "seem[ed] more like a  horde than a committee," this court also noted that it had  been created "with a good deal of formality and [is] perhaps  better understood as a number of advisory committees."  Id.  at 914.

7
Taking its cue from this court's language in AAPS I, the  government, in its first submission to the district court following remand, adopted what came to be known as the "wandering horde" theory of the case.  Accordingly, the government  proposed that discovery be limited to whether the working  group's "structure, personnel and purpose" were such that it  was a FACA committee, regardless whether it fell within the full-time employee exemption.  The discovery that followed  was contentious and, in response to a motion to compel that  AAPS filed, the district court set out what it viewed as the  issues before it.  The first issue was whether the "formality  and structure of the working group ... [was such that] there  are advisory committees within the working group, even if the  working group itself is not an advisory committee."  AAPS v.  Clinton, 837 F. Supp. 454, 456 (D.D.C. 1993).  Although, as  we note below, the government had not argued that the  working group was exempt from FACA because it was composed only of full-time government employees, the other  issues the district court thought relevant to discovery involved the "truth of the government's claim that all members  of the working groups are full-time officers or employees of  the government."  Id.  The district court then issued an  order (dated November 9, 1993) granting the motion to  compel and holding AAPS entitled to sanctions against the  government under Fed. R. Civ. P. 37, although no sanctions  were ever assessed.

8
On April 11, 1994 AAPS filed a summary judgment motion  accompanied by a list of individuals who it claimed were  members of the working group but who did not meet the  requirements of FACA's federal employee exemption.  The  government filed a cross-motion for summary judgment on  May 4, 1994 and argued that the working group was not a  FACA "committee" because it lacked " 'an organized structure, a fixed membership, and a specific purpose' " and was  not operated "with 'formality.' "  Cross-Motion Memorandum  at 2 (quoting AAPS, 997 F.2d at 914).  In addition, the  government stated in a footnote:

9
Defendants do not argue here that the interdepartmental working group qualified for the FACA's exemption for groups comprised wholly of full-time federal employees. As defendants have stated, the "members" of the working group were either regular employees of the Executive Branch or Congress or special government employees. In light of the Court of Appeals' discussion of the term "full-time," see AAPS I, 997 F.2d at 914-15, however, it would be a substantial burden for defendants and this Court to make a person-by-person assessment that each such "member" worked "full-time." Because it is clear that the interdepartmental working group and its working groups lacked the features of FACA committees identified by the court, it is not necessary for the defendants to attempt to prove the applicability of the FACA's exemption in any event.

10
Id. at 2 n.1 (emphasis added).

11
On May 16, 1994 AAPS moved to hold Magaziner in  contempt for having "made false and misleading statements  under penalty of perjury in his March 3, 1993 Declaration,"  5/16/94 Memorandum in Support of Motion for Sanctions and  Rule for Contempt at 20, and for sanctions against the  government for "defending the case by asserting facts they  knew not to be true" (namely "that only full-time employees  of the federal government ... were participants on the Task  Force working groups"), id. at 18, 16, and for having "constantly refused to comply with Plaintiff's discovery requests  and [the district court's] November 9, 1993 Order compelling  discovery," id at 18.

12
At a hearing on July 25, 1994 the district court denied the  cross-motions for summary judgment and reserved ruling on  the contempt and sanctions motion.  See JA 832-33.  Thereafter the government made the then defunct working group's  documents available for inspection and as a consequence on  December 21, 1994 the district court issued an order declaring the merits, and the matter of civil contempt, moot. AAPS v. Clinton, 879 F. Supp. 106 (D.D.C. 1994).  In the  same order the court referred Magaziner's possible perjury  and criminal contempt to the United States Attorney for the  District of Columbia "for further development of the facts in  order to determine whether a criminal offense has been  committed."  Id. at 108.  The court also set a status conference "to schedule consideration of plaintiffs' collateral requests for other sanctions and attorneys' fees and costs."  Id.  at 109.

13
On August 3, 1995 then United States Attorney Eric H.  Holder, Jr. wrote the district court a letter stating:  "The  results of our investigation demonstrate that there is no basis  to conclude that Mr. Magaziner committed a criminal offense  in this matter.  There is no significant evidence that his  declaration was factually false, much less that it was willfully  and intentionally so."  JA 1990.  On August 30, 1995, after  reading a transcript of an August 11 status conference,  Holder again wrote the court, to "clarify" that he did not  intend to imply in the August 3 letter that he had found "a  willful or deliberate attempt to mislead the Court on the part  of the government."  JA 2031.2

14
After additional briefing, the district court issued an order  and opinion dated December 18, 1997 (as amended December  27, 1997) finding the government's conduct "sanctionable" and  awarding AAPS attorney's fees and costs of $285,864.78 both  under the common law's "exception" to the "American rule"  against attorney fees "where the losing party has acted in  'bad faith,' " American Hosp. Ass'n v. Sullivan, 938 F.2d 216,  219 (D.C. Cir. 1991) (citations omitted), and under the EAJA,  which provides that "a court shall award to a prevailing party  other than the United States fees and other expenses ...  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).  The district  court first found that Magaziner (as well as any staff and  counsel who participated in drafting the Magaziner Declaration) had acted in bad faith in four respects in making the all government-employee assertion.  The court further found  that the government acted in bad faith by failing (1) "to  correct or change" Magaziner's "factual representation to the  court" that "all 'members' of the working group were federal  employees" or (2) to "timely advise t[he] court that it was not  making the 'all-employee' argument attributed to the government by the Court of Appeals and by plaintiffs."  AAPS v.  Clinton, 989 F. Supp. 8, 11 (1997).  Having thus "separately  determined that the United States in this case did not act in  good faith, and that its conduct is therefore sanctionable," the  district court stated that "[t]his same conduct leads the court  to conclude that the positions taken by the United States in  this litigation were not substantially justified."  989 F. Supp.  at 13.  Having found "that the defendants acted in bad faith  until August 1994, when they determined to settle or moot  this case," 989 F. Supp. at 15, the court awarded fees for  work performed before that date in excess of the EAJA  hourly cap,3 noting:  "The Court of Appeals affirmed this  court on the one prior occasion where this court granted an  award of attorney's fees against the government for acting in  'bad faith, vexatiously, wantonly, or for oppressive reasons,' "  id. at 15 (citing American Hospital Ass'n v. Sullivan, 938  F.2d 216 (D.C. Cir. 1991) (upholding fee award based on  common-law exception, notwithstanding plaintiff was ineligible for any fee under EAJA § 2412(d)(2)(B))).  The government and Magaziner appeal the fee award and its underlying  findings of bad faith.4

II.

15
We review an EAJA fee award for abuse of discretion and  "will reverse the district court if its decision rests on clearly  erroneous factual findings or if it leaves us with a definite and  firm conviction that the court below committed a clear error  of judgment in the conclusion it reached upon a weighing of the relevant factors."  F.J.  Vollmer Co. v. Magaw, 102 F.3d  591, 595-96 (D.C. Cir. 1996).  Similarly, "the question of bad  faith in the context of the common law exception to the  American rule on counsel fees ... is one of fact requiring a  clearly erroneous standard of review."  American Hosp.  Ass'n v. Sullivan, 938 F.2d at 222.  Nevertheless, the substantive standard for a finding of bad faith is "stringent" and  "attorneys' fees will be awarded only when extraordinary  circumstances or dominating reasons of fairness so demand."Nepera Chem., Inc. v. Sea-Land Serv., Inc., 794 F.2d 688, 702  (D.C. Cir. 1986).  Further, the finding of bad faith must be  supported by "clear and convincing evidence," see Shepherd v.  American Broadcasting Cos., Inc., 62 F.3d 1469, 1476-78  (D.C. Cir. 1995), which "generally requires the trier of fact, in  viewing each party's pile of evidence, to reach a firm conviction of the truth on the evidence about which he or she is  certain."  United States v. Montague, 40 F.3d 1251, 1255  (D.C. Cir. 1994).  Because we find insufficient evidence in the  record to satisfy the stringent bad faith standard, we hold that the district court's bad faith findings are clearly erroneous.

16
We first conclude there is an inadequate basis for the  court's finding that the government acted in bad faith by not  "timely advis[ing]" the court that "it was not making the 'all employee' argument attributed to the government by the  Court of Appeals and by plaintiffs."  997 F. Supp. at 11.  Assuming that the government affirmatively invoked the exemtion in the district court as a defense of working group documents, a fact that is not at all clear from the record5 government informed the  court, albeit in a footnote, in its May 4, 1994 memorandum in  support of summary judgment, quoted supra pp. 6-7, that it  was not claiming the federal employee exemption for the  working group.  At worst the government's failure to do so  earlier demonstrates only that it wanted to keep its options  open--and so it remained silent. The government was under no "clear" duty before then to disavow it and therefore its silence, while apparently  misleading, does not amount to bad faith.  See American  Hosp. Ass'n v. Sullivan, 938 F.2d at 222 ("[B]ad faith may be  found where a party has violated a 'clear [legal] duty.' ")  (Ginsburg, J., dissenting, quoting majority opinion, 938 F.2d  at 219).

17
We also find no bad faith in the government's failure "to  correct or change" the Magaziner Declaration's representation to the court that all members of the working group were  federal employees.  Given that the government did not press  the federal employee exemption, the representation, if false,  was not material and therefore cannot be characterized as  made in bad faith.  Cf. Whitney Bros. Co. v. Sprafkin, 60  F.3d 8, 14-15 (1st Cir. 1995) (rejecting "bad faith" finding  based on alleged perjury where district court "neither explained why it concluded that the [defendants] had perjured  themselves nor explained why any allegedly untrue statements were material").  Further, this finding cannot stand  because the district court's subsidiary findings of bad faith in  drafting the Magaziner Declaration, on which the court rested the finding, are not supported by clear and convincing evidence.

18
The court first found that the Declaration "clearly implies  that consultants are a category completely distinct from that  of special government employees" but that Magaziner (as well  as "his staff and the government's lawyers") must have  known that those terms " 'were used loosely and inconsistently among and between the different agencies, and not everyone agreed in their definitions.' "  989 F. Supp. at 11 (quoting  8/3/95 Holder letter at 12 (JA 2000)).  The court cited no  evidence, however, that at the time the Declaration was  drafted Magaziner disbelieved the distinction between employees and consultants (only the former of which he characterized as working group "members") based on the degree of  their participation or, alternatively, that such a distinction  was objectively unreasonable.  Cf. Whitney Bros. Co., 60 F.3d  at 14 (rejecting bad faith finding based on "frivolous" defenses because district court did not explain "how these defenses  are frivolous or why they were objectively or subjectively  unreasonable at the time they were advanced").  In fact, in  AAPS I, this court concluded that the level of the consultants'  involvement was a "key issue" in determining whether the  consultants were members of the working group, although it  found there was insufficient record evidence then to resolve  it.  997 F.2d at 915.  We therefore cannot say that the  Declaration's characterization of the "consultants" as "intermittent" attendants at working group meetings, as distinct  from the more frequently involved members (including special  government employees), manifested bad faith.  Cf. Johnson  Controls, Inc. v. United Ass'n of Journeymen & Apprentices  of Plumbing & Pipe Fitting Indus. of U.S. & Can., 39 F.3d  821, 826 (7th Cir. 1994) (upholding denial of attorney's fee  award because "this case presents at least a colorable question of law" and court "c[ould] not conclude, therefore, that  [the plaintiff's] arguments before the district court and on  appeal were frivolous or in bad faith").

19
Second, the district court found that the Magaziner Declaration was "dishonest" in representing that "people are employees when there was never a piece of paper created that said they were employees--with or without pay."  997  F. Supp. at 11.  Again there is an insufficient basis for a bad  faith finding.  The Declaration did not claim employment  paperwork had been created and there is no evidence in the  record that Magaziner knew at the time of his Declaration  whether it had been.  He described a "special government  employee" simply as one who had been "employed" by the  government "for less than 130 days in a 365-day period,  either with or without compensation," with no mention of  employment formalities such as paperwork.  As the government notes, such paperwork, while perhaps the norm, is not a  condition of special government employment as statutorily  defined.  See 18 U.S.C. § 202(a) ("[T]he term 'special Government employee' shall mean an officer or employee of the  executive or legislative branch of the United States Government, of any independent agency of the United States or of  the District of Columbia, who is retained, designated, appointed, or employed to perform, with or without compensation,  for not to exceed one hundred and thirty days during any  period of three hundred and sixty-five consecutive days,  temporary duties either on a full-time or intermittent basis, a  part-time United States commissioner, a part-time United  States magistrate ...").

20
Third, the district court found that the Declaration, "in an  effort to avoid discovery and block live testimony, improperly  represented as a fact that all 'members' of the working group  were federal employees."  997 F. Supp. at 11.  As we noted  above, there is no clear and convincing evidence that the  Declaration's drafters did not reasonably believe the representation to be true when made.

21
Fourth, the district court found bad faith in that the  Declaration "was actually false because of the implication of  the declaration that 'membership' was a meaningful concept  and that one could determine who was and was not a 'member' of the working group."  997 F. Supp. at 11.  It is not  clear on what basis the district court found that membership,  either when the Declaration was written or through the life of  the working group, was not a meaningful concept.  Holder  found only that membership was a "fuzzy" concept.  In its discovery responses the government conceded simply that  membership was not a "significant" or "operative" concept,  but never that it was not meaningful (in the sense that one  could not distinguish members from non-members).  Although the concept of membership may not have been crystal  clear, it did have meaning--indeed, the district court applied  the concept in choosing the government's list of 630 members  over the list of 1000 alleged members presented by AAPS. See AAPS, 879 F. Supp. at 105.  The Declaration may have  given the impression that determining membership was easy; nevertheless, because there is insufficient evidence that, in  distinguishing between members and non-members, the Declaration's drafters intended to mislead the court, it was  clearly erroneous for the court to find bad faith based on the  distinction.

22
For the preceding reasons, we hold that the district court's  findings of bad faith, both in the Magaziner Declaration's  drafting and in the government's litigation conduct, are without clear and convincing evidentiary support and that the  attorney's fee award therefore cannot be upheld insofar as it  rests on bad faith.  We further hold that the court's award  cannot be sustained under the EAJA on the basis that the  government's litigation position was not substantially justified  because the court expressly based the award on its predicate,  and inadequately supported, bad faith findings. Accordingly, we reverse the attorney's fee award and remand for further consideration by the district court.  While our decision forecloses an  award based on the government's alleged assertion of the  federal employee exemption (whether for bad faith or under  the EAJA), the district court may, if it finds the evidence so  warrants, award fees under the EAJA or Fed. R. Civ. P. 11  based on another asserted defense (such as the government's  argument that the working group was not a FACA committee  because it "d[id] not offer advice or recommendations directly  to the President," JA 120, which the record suggests may not  be true, see, e.g., JA 2262).  In addition or in the alternative,

23
the district court may consider assessing the sanctions (under  Fed. R. Civ. P. 37) to which the court found AAPS was  entitled in its November 9, 1993 order granting AAPS's  motion to compel.  See AAPS, 837 F. Supp. at 354.

24
So ordered.

Notes:

1
 The AAPS I court rejected the district court's determination  that the working group was not a FACA committee because its  members acted merely as advisory staff to the Task Force and did  not directly advise the President.  The court reasoned that because  the Task Force was not itself a FACA Committee, the working  group was "the point of contact between the public and the government" and could therefore not be exempt from FACA based on its  subsidiary relationship to the Task Force.  AAPS I, 997 F.2d at  912-13.

2
 Holder wrote specifically in response to the district court's  observation at the conference that " 'the thrust' " of Holder's August 3, 1995 letter was "that 'the government and the government's  lawyers have misled or misrepresented facts to the Court,' " JA  2030 (quoting district court).

3
 When the sanctioned conduct occurred, the EAJA capped fee  award rates at $75 per hour.  See 28 U.S.C. § 2412(d)(2)(A) (1994).In 1996 the hourly cap was raised to $125.  See Pub. L. No.  104-121, § 232(b)(1), 110 Stat. 847, 863 (1996).

4
 AAPS disputes Magaziner's standing to appeal the findings of  bad faith regarding the Magaziner Declaration.  Because those  findings underlie the district court's finding of bad faith by the  government, whose standing is unchallenged, we must address them  in any event to resolve the government's appeal.  Accordingly, we  need not decide whether Magaziner himself has standing.

5
 The government's only explicit reference to the exemption's  application to the working group was in a footnote in its March 3,  1993 memorandum opposing temporary injunctive relief.  See JA  117 n.26 ("If plaintiffs are concerned that working group members  have met with Mr. Magaziner, such meetings would not be covered  by FACA.  All working members, like Mr. Magaziner, are federal  employees.").  The Magaziner Declaration described the working group as made up exclusively of  "federal government employees" but it made no mention of the FACA federal employee exemption and did not claim the employee members were "full-time, or permanent part-time" government employees, a necessary element of the exemption.