Southern Dredging v. United States ( 1996 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
SOUTHERN DREDGING COMPANY,
INCORPORATED,
Plaintiff-Appellant,
v.
UNITED STATES OF AMERICA; JOHN
CHANNON, Acting Secretary of the
No. 95-3099
Army; ARTHUR E. WILLIAMS, Chief
of Engineers; ROBERT F. UNGER,
Major, United States Army Corps
of Engineers; CAROL M. BROWNER,
Administrator, Environmental
Protection Agency,
Defendants-Appellees.
Appeal from the United States District Court
for the District of South Carolina, at Charleston.
David C. Norton, District Judge.
(CA-93-203-2-18)
Argued: July 16, 1996
Decided: September 12, 1996
Before MURNAGHAN and ERVIN, Circuit Judges, and
BUTZNER, Senior Circuit Judge.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
_________________________________________________________________
COUNSEL
ARGUED: Michael Howard Payne, STARFIELD & PAYNE, Fort
Washington, Pennsylvania, for Appellant. Carl Strass, Environment &
Natural Resources Division, UNITED STATES DEPARTMENT OF
JUSTICE, Washington, D.C., for Appellees. ON BRIEF: Stephen P.
Groves, W. Jefferson Leath, Jr., YOUNG, CLEMENT, RIVERS &
TISDALE, L.L.P., Charleston, South Carolina, for Appellant. Lois J.
Schiffer, Assistant Attorney General, Edward Shawaker, Martin W.
Matzen, UNITED STATES DEPARTMENT OF JUSTICE, Washing-
ton, D.C., for Appellees.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
Southern Dredging, plaintiff-appellant, sought attorney's fees from
the United States as a prevailing party under the Equal Access to Jus-
tice Act ("EAJA"), 28 U.S.C. § 2412(d). The district court denied
Southern Dredging's motion for fees. The sole issue on appeal is
whether the district court thereby abused its discretion. For the fol-
lowing reasons, we find that it did not.
I
In 1988, two supervisors of the dredge vessel Cherokee, owned by
Southern Dredging, discharged several tons of dredge spoil into the
Cooper River in South Carolina in violation of the Clean Water Act
("CWA"), 33 U.S.C. § 1311(a). The two employees were subse-
quently fired by Southern Dredging.
In connection with the 1988 incident, Southern Dredging initially
pled guilty to a criminal violation of the CWA. Southern Dredging
withdrew its guilty plea, however, after the Environmental Protection
Agency ("EPA") placed it on a list of violating facilities, which meant
that it could not contract with government agencies. CWA § 508(a),
33 U.S.C. § 1368(a); 40 C.F.R. § 15.10. Subsequently, Southern
2
Dredging entered into a second plea agreement, in which it pled guilty
to a misdemeanor in violation of the Rivers and Harbors Appropria-
tion Act of 1899, 33 U.S.C. §§ 407, 411, for the same incident.1 In the
second plea agreement with the United States, the United States
Attorney agreed that the United States would "not seek to impose any
additional criminal enforcement activities [ ] against" Southern
Dredging arising out of the 1988 incident.
In 1992, the two employees who had supervised the 1988 illegal
discharge into the Cooper River were convicted of felony violations
of the CWA. Following their conviction, notwithstanding the second
plea agreement, the EPA placed the vessel Cherokee on its list of
facilities violating the CWA. CWA § 508(a), 33 U.S.C. § 1368(a); 40
C.F.R. § 15.10. As previously explained, placement on the list prohib-
ited all federal agencies from contracting with Southern Dredging for
the use of the Cherokee.
Southern Dredging filed a lawsuit challenging the listing. Southern
Dredging obtained rulings in its favor on a motion for a temporary
restraining order, a preliminary injunction, and for summary judg-
ment. The district court based its summary judgment ruling primarily
on its interpretation of § 508 of the CWA (the statutory listing provi-
sion).
Section 508(a) of the CWA provides in pertinent part:
No Federal agency may enter into any contract with any per-
son, who has been convicted of any offense under section
1319(c) of this title, for the procurement of goods, materials,
and services if such contract is to be performed at any facil-
ity at which the violation which gave rise to such conviction
occurred, and if such facility is owned, leased, or supervised
by such person.
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1 In addition to the above plea agreements, in January 1991, Southern
Dredging entered into a "global settlement" with the Department of the
Army for the purposes of settling all criminal, civil, and administrative
issues and of avoiding "protracted litigation."
3
33 U.S.C. § 1368(a). The district court ruled that a plain reading of
§ 508 revealed that the clauses of § 508 were conjunctive, meaning
that the government could not contract with a person convicted of a
violation of the CWA if that person intended to perform the contract
at a facility where the violation occurred and the facility was owned,
leased, or supervised by a convicted person. Because neither Southern
Dredging, the Cherokee, nor any of the Cherokee's current supervi-
sors or lessees had been convicted of violating the CWA, the district
court ruled that the Cherokee had been improperly placed on the list.
Similarly, the district court found 40 C.F.R. § 15.10, the EPA's inter-
pretive regulation of § 508(a), inapplicable because the clear statutory
language of § 508(a) required that Southern Dredging or the Chero-
kee's current supervisors or lessees be convicted of violating the
CWA in order for the listing provision to be implemented.2 The dis-
trict court did not address the impact, if any, of Southern Dredging's
plea agreement with the government.
On appeal we vacated and remanded the district court's order,
requesting that the ramifications of the second plea agreement on the
listing be considered. Southern Dredging Co. v. United States, 35
F.3d 557 (4th Cir. Sept. 13, 1994) (Table). We did not reach the
underlying merits. Although we stated that Southern Dredging's stat-
utory arguments "carr[ied] strong weight", we remanded for a deter-
mination as to whether the plea agreement, whereby Southern
Dredging pled guilty to a misdemeanor for violating the Rivers and
Harbors Act, barred the United States from listing the Cherokee.
In the interim, the listing period for the Cherokee expired and the
United States had no reason to extend it. Because the listing was no
longer current or applicable, on remand the district court dismissed
the lawsuit as moot.
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2 Section 15.10 provides:
The Listing Official shall place a facility on the List of Violating
Facilities if the facility which gave rise to the conviction is
owned, leased, or supervised by any person who has been con-
victed of a criminal offense under section 113(c)(1) of the CAA
or section 309(c) of the CWA. The mandatory listing is automat-
ically effective upon conviction.
4
Southern Dredging initiated a second round of litigation by seeking
attorney's fees under the EAJA. The district court refused to grant
attorney's fees, finding that the United States' position had been sub-
stantially justified. Southern Dredging has appealed.
II
The EAJA provides that, in actions brought by or against the
United States, attorney's fees shall be awarded to the other party if it
prevails, unless the United States' position was substantially justified
or special circumstances make an award unjust. 28 U.S.C. § 2412(d)(1).3
The award of fees to a prevailing party is mandatory unless "the gov-
ernment can demonstrate that its position was ``substantially justi-
fied.'" EEOC v. Clay Printing Co., 13 F.3d 813, 815 (4th Cir. 1994).
Substantially justified means "justified to a degree that could satisfy
a reasonable person" or having a "reasonable basis both in law and
fact." Id. (quoting Pierce v. Underwood, 487 U.S. 552, 565 (1988)).
It is the government's burden to make that showing. Crawford v.
Sullivan, 935 F.2d 655, 658 (4th Cir. 1991).
The court reviews a lower court's denial of attorney's fees under
the EAJA for abuse of discretion. Pierce, 487 U.S. at 559-62; Clay
Printing Co., 13 F.3d at 815. In determining whether the United
States' position was reasonable, we look to the"totality of circum-
stances." Roanoke River Basin Ass'n v. Hudson , 991 F.2d 132, 139
(4th Cir.), cert. denied, 510 U.S. 864 (1993).
The United States read § 508 disjunctively, taking a facility-based
approach to listing violating facilities. It reasoned that any facility
where violations occurred and the supervisors were convicted should
be placed on the violating facility list, whether or not the supervisors
were still employed by the facility.
While the district court read the statute conjunctively, it found a
number of reasons why the government's position was substantially
justified. First, the district court found that the government's argu-
ments were based on a reasonable statutory construction of § 508(a)
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3 The district court found that Southern Dredging was a prevailing
party. Neither party has disagreed with that finding on appeal.
5
and its accompanying interpretive regulation, 40 C.F.R. § 15.10. Sec-
ond, the district court found reasonable the government's reliance on
a presidential executive order.4 Third, the district court concluded that
the United States had reasonably relied on the CWA's legislative his-
tory in arguing that Congress was primarily interested in addressing
facilities that violated the act--not persons. 5 Fourth, the district court
noted that the United States relied on the general rule which calls for
a broad and generous interpretation of remedial environmental stat-
utes. See, e.g., United States v. Standard Oil Co., 384 U.S. 224, 225-
26 (1966). Finally, the district court noted that the determination of
the exact meaning of § 508(a) was a matter of first impression. For
those five reasons, the district court found that the government's posi-
tion was reasonable and substantially justified in law and fact and
denied attorney's fees. We agree.
The loss of a trial does not determine whether the United States'
position was substantially justified. Nor does the"substantially justi-
fied" standard require the United States to establish that its position
was based on a "substantial probability of prevailing." SEC v. Fox,
855 F.2d 247, 252 (5th Cir. 1988) (quoting legislative history of
EAJA, H.R.Rep. No. 1418, 96th Cong., 2d Sess. 11, reprinted in 1980
U.S.S.C.A.N. 4984, 4989-90). Rather, the standard allows the govern-
ment to advance "in good faith . . . novel but credible . . . interpreta-
_________________________________________________________________
4 The CWA requested the President to issue an executive order requir-
ing federal agencies to comply with § 508(a). The executive order inter-
prets § 508(a) as barring the United States from contracting for the use
of "facilities which have given rise to a conviction for an offense under
. . . section 309(c) of the [Clean] Water Act." Exec. Order No. 11738, 38
Fed.Reg. 25161 (Sept. 10, 1973). Thus, one can make a reasonable argu-
ment that the President interpreted § 508(a) as being facility-based. The
district court found that the United States' belief that the President's
interpretation would receive deference was reasonable and supportable in
law. See Dames & Moore v. Regan, 453 U.S. 654, 668 (1981) (stating
that where "the President acts pursuant to an express or implied authori-
zation from Congress" the executive action is"supported by the strongest
of presumptions and the widest latitude of judicial interpretation").
5 The conference committee report states that: "No Federal agency
could enter into any contract involving any facility convicted under sec-
tion 309." S. Rep. No. 1236, 92d Cong., 2d Sess. (1972), reprinted in
1972 U.S.C.C.A.N. 3776, 3824 (emphasis added).
6
tions of the law that often underlie vigorous enforcement efforts." Id.(quoting Russell v. National Mediation Bd., 775 F.2d 1284, 1290 (5th
Cir. 1985)); see also Griffon v. United States Dep't of Health &
Human Servs., 832 F.2d 51, 53 (5th Cir. 1987) (also quoting Russell).
While the statutory argument Southern Dredging makes is certainly
strong, as we noted in our previous opinion remanding the district
court's summary judgment order, the government's position was not
entirely unreasonable or without a basis in fact and law. Indeed,
although it ultimately lost, the government made a credible case for
its own statutory interpretation given the legislative history, the prin-
ciple regarding broad interpretations of environmental enforcement
regulations, and the Executive Order.
Additionally, the lawsuit brought by Southern Dredging was one of
first impression on the meaning and scope of the§ 508(a) listing pro-
gram. In lawsuits involving first-impression interpretations of stat-
utes, many circuits, including ours, have found that the United States
is presumptively substantially justified within the meaning of the
EAJA if its position is a reasonable legal position and the question is
being addressed for the first time in the circuit. Hyatt v. Shalala, 6
F.3d 250, 256 (4th Cir. 1993); see also TKB Int'l, Inc. v. United
States, 995 F.2d 1460, 1468 (9th Cir. 1993); Stebco, Inc. v. United
States, 939 F.2d 686, 688 (9th Cir. 1990); De Allende v. Baker, 891
F.2d 7, 12-13 (1st Cir. 1989). When the issue of statutory interpreta-
tion is one of first impression not having been addressed by any court,
that principle is even stronger. Griffon, 832 F.2d at 52-53.
Southern Dredging argues that, when the totality of the circum-
stances are considered--in particular, the plea agreement--the gov-
ernment's position cannot be considered reasonable. Southern
Dredging contends that the EPA is bound by the United States' plea
agreement not to subject Southern Dredging to any additional penal-
ties stemming from the 1988 incident other than those Southern
Dredging agreed to in the agreement. See Santobello v. New York, 404
U.S. 257, 262 (1971) ("[W]hen a plea rests in any significant degree
on a promise or agreement of the prosecutor, so that it can be said to
be a part of the inducement or consideration, such promise must be
fulfilled.").
7
The district court failed to address the impact of the plea agree-
ment. Thus, we remain uncertain as to whether Southern Dredging
would have prevailed on the merits under the terms of the plea agree-
ment alone. Whether Southern Dredging or the government would
have prevailed on the merits, however, is not what concerns us here.
Instead, we must examine "the record . . . made in the civil action for
which fees and other expenses are sought," 28 U.S.C. § 2412(d)(1)(B), to determine whether the government's position was sub-
stantially justified even in light of the plea agreement.
There is very little fact-finding as to the plea agreement. We do
know, however, that the government contended that the listing was
not an "additional criminal enforcement activity," from which the plea
agreement protected Southern Dredging. Instead, the government
argued that listing is a sanction that occurs automatically and immedi-
ately upon conviction of a facility's supervisors, owners, or lessees.
See 40 C.F.R. § 15.10. Furthermore, the government argued that the
listing was a penalty distinct in nature from a criminal action and
therefore beyond the scope of the plea agreement. See Shane Meat
Co., Inc. v. United States Dep't of Defense, 800 F.2d 334, 338 (3d
Cir. 1986). The government also contended that Southern Dredging
was aware of the government's position on listing when it entered
into the plea agreement. The government's position was set forth in
its briefs during the litigation following the first plea agreement. It
argued that the United States Attorney's office lacked the authority to
undo statutory and regulatory provisions on mandatory, automatic
listings. It asserted that only the Administrator of the EPA, the Case
Examiner, or the Assistant Administrator had authority to undo a list-
ing. While we may or may not have ultimately agreed with the gov-
ernment on the merits, based upon the record before us and the five
factors listed by the district court, we conclude that the government's
position was substantially justified.
Accordingly, the district court's order denying Southern Dredging
attorney's fees is
AFFIRMED.
8