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In re Cutler

01/03/2007

Case Number:EAJA Appeal No. 05-01
ELR Citation:37 ELR 41308

This case concerns a petition for an award of attorneys’ fees and other expenses under sections 504(a)(1) and (a)(4) of the Equal Access to Justice Act (“EAJA” or “Act”), 5 U.S.C. §§ 504(a)(1), (a)(4), filed by Donald Cutler (“Cutler” or “Respondent”). The EAJA claims derive from an administrative complaint filed by Region 10 of the Environmental Protection Agency (the “Region”) against Cutler alleging violations of sections 301(a) and 404 of the Clean Water Act, 33 U.S.C. §§ 1311(a), 1344, and proposing a $25,000 penalty for the alleged violations (see 34 ELR 41280). Administrative Law Judge (“ALJ”) Spencer T. Nissen found Cutler liable for the violations alleged in the complaint, but assessed a $1,250 penalty. The ALJ’s penalty assessment turned in part on his determination that Cutler lacked the ability to pay the proposed penalty. The Region appealed the ALJ’s decision to the Environmental Appeals Board (“Board”) on several grounds, including the ALJ’s ability to-pay analysis. In its decision, the Board concluded that the ALJ had properly determined that Cutler lacked the ability to pay a penalty of $25,000, but found several errors in the ALJ’s penalty calculation and assessed a $5,548 penalty.

Following the issuance of the Board’s decision, the ALJ considered Cutler’s EAJA petition. In his petition, Cutler claims to be entitled to EAJA recovery because he is a “prevailing party” within the meaning of EAJA section 504(a)(1). He also claims that, even if found not to be a prevailing party, he should be awarded costs and fees because the proposed penalty was “unreasonably excessive,” within the meaning of EAJA section 504(a)(4). The ALJ denied Cutler’s petition. The Board undertook review of the ALJ’s decision pursuant to its sua sponte review authority under 40 C.F.R. §22.30(b). While the Board agrees with the ALJ’s determination that Cutler is not entitled to a reimbursement of expenditures, the Board disagrees with certain aspects of the ALJ’s legal analysis, and undertook review out of concern that these analytical issues may serve both to discourage meritorious appeals in enforcement cases and to encourage non-meritorious fee petitions under EAJA.

Held: The Board upholds the ALJ’s decision not to award fees but reverses that portion of his analysis concluding that Cutler was a prevailing party on the ability-topay issue, as well as his finding that the Region’s penalty demand was substantially excessive and unreasonable. The Board’s rationale follows:

(1) In order to be considered the “prevailing party” under EAJA section 504(a)(1), a defendant or respondent must be successful in defending against one or more claims, causes of action or counts of liability. Therefore, a respondent who succeeds in obtaining a penalty reduction by way of proving mitigating circumstances, such as ability to pay problems, but fails in vindicating its conduct, has not “prevailed” for EAJA purposes.

(2) Section 504(a)(4) provides an avenue for non-prevailing parties to recover attorneys’ fees and expenses in those instances where “the demand by the agency is substantially in excess of the decision of the adjudicative officer and is unreasonable when compared with such decision, under the facts and circumstances of the case.” 5 U.S.C. § 504(a)(1) (emphasis added). Even if a demand is determined to have been excessive and unreasonable, an award may still be denied if the fee proponent “has committed a willful violation of law or otherwise acted in bad faith, or special circumstances make an award unjust.” Id. (emphasis added). In the instant case, the ALJ found the Region’s penalty demand excessive and unreasonable, but, in the second stage of his analysis, found special circumstances that militated against an award. The Board believes that a broader range of case-specific circumstances, including those that the ALJ considered in the second stage of his analysis, should have been considered in the first stage, as part of the excessiveness/reasonableness determination. Viewing the Region’s position as a whole, in light of all the facts and circumstances of this case, the Board concludes that the penalty demand was neither substantially excessive nor unreasonable, but rather represented a reasonable effort to match the penalty to the facts and circumstances of the case.