Fee Shifting Statute Was Plain, With Circumstances Requiring Reversal Of Fee Denial As To Contractor
The Equal Access to Justice Act (EAJA) has a mandatory fee-shifting provision that allows a court to award fees to a non-prevailing defendant where the government’s demand for damages in a case is “substantially in excess of the judgment finally obtained” and “unreasonable when compared with such judgment.” 28 U.S.C. §2412(d)(1)(D). A district judge denied fees to a non-prevailing defendant contractor, but a 2-1 majority panel of the federal Sixth District Court of Appeals reversed and remanded to the district judge to fix an award of fees in USA ex rel. Wall v. Circle C Construction, LLC, No. 16-6169 (6th Cir. Aug. 18, 2017) (published).
What happened is that the government sued a contractor for $9,900 in wage underpayments under the False Claims Act, although its demand ballooned to $1.6 million under a “taint” of the entire construction of a government building theory. Government obtained a judgment of $763,000, but the Sixth Circuit in an earlier opinion reversed that down to $14,748—less than 1% of the government demand, rejecting the government’s “taint” theory. The district judge then denied contractor’s motion to recoup $468,704 in fees under the EAJA fee-shifting provision.
By a 2-1 vote, the Sixth Circuit reversed based on the fairly stark circumstances of record. Although finding no circuit interpretation of the “unreasonable” wording of the EAJA fee-shifting provision, it borrowed case law interpretation of “substantially justified” in an earlier EAJA statutory provision. The majority found that the contractor should have been awarded fees, finding no bad faith in contractor’s defense and no injustice that would militate in favor of a contrary conclusion. The dissenting judge would have affirmed under the deferential abuse of discretion standard, finding the fee award substantially justified in nature.