Gate Guard Servs. L.P. v. Perez

GATE GUARD SERVICES L.P. et al., Plaintiff/Counter-Defendants, v. THOMAS E. PEREZ, Secretary of Labor, United States Dept. of Labor, Defendant/Counter-Plaintiff.

CIVIL ACTION NO. V-10-91

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS VICTORIA DIVISION

SIGNED: April 9, 2014

MEMORANDUM OPINION & ORDER

Pending before the Court is Plaintiffs Gate Guard Services, L.P. and owner Bert Steindorf's (collectively "GGS") Supplemental Motion to Recover Attorneys' Fees (Dkt. No. 147), to which Hilda L. Solis,¹ Secretary of Labor, United States Department of Labor, (hereinafter "the DOL") has responded (Dkt. No. 148) and GGS has replied (Dkt. No. 149).

I. Background

On February 13, 2013, the Court granted summary judgment in favor of GGS in its Declaratory Judgment Action against the DOL; dismissed all claims by the DOL in its Fair Labor Standards Act (FLSA) Enforcement Action against GGS; and entered final judgment in favor of GGS and against the DOL. (Dkt. Nos. 135 & 136.) By written Memorandum Opinion & Order entered July 24, 2013, the Court denied GGS's Motion to Recover Attorneys' Fees (Dkt. No. 137) without prejudice, for reasons set forth infra. (Dkt. No. 146.)

GGS now re-urges its motion to recover the attorneys' fees that it incurred in the prosecution of its Declaratory Judgment Action and in the defense of the FLSA Enforcement Action. According to GGS, as the prevailing party, it is entitled to attorneys' fees under theEqual Access to Justice Act because the DOL's actions, both during its administrative investigation and in the course of litigation, were taken without substantial justification. The facts relevant to GGS's motion were previously set forth at length in the Court's July 24, 2013 Memorandum Opinion & Order. Gate Guard Services L.P. v. Solis, 2013 WL 3873275 (S.D. Tex. Jul. 24, 2013).

II. Legal Standard

The Equal Access to Justice Act (EAJA), 28 U.S.C. § 2412, was enacted in response to concerns that persons "may be deterred from seeking review of, or defending against, unreasonable governmental action because of the expense involved in securing the vindication of their rights." Sullivan v. Hudson, 490 U.S. 877, 883 (1989); see also H.R. Rep. No. 99-120 at 4 (1985). There are two distinct methods for a district court to award attorneys' fees under the EAJA.

Under the first method, the court is required to grant attorneys' fees to a prevailing party against the United States, unless there are special circumstances that make the award unjust or the government can show that it was substantially justified in its legal position. 28 U.S.C. § 2412(d)(1)(A); Hyatt v. Shalala, 6 F.3d 250, 253-54 (4th Cir. 1993).² Five criteria must be met to support an award of attorneys' fees pursuant to § 2412(d): (1) the applicant must be a "prevailing party" in a suit against the government; (2) no special circumstances can existmaking such an award unjust; (3) a fee application must be made within 30 days of final judgment and supported by an itemized statement of such fees sought; (4) a qualifying party, if a partnership, must not have had a net worth exceeding $7,000,000.00 or employed more than 500 employees at the time of filing of the litigation; and (5) the government's position must not have been "substantially justified." See Commissioner, Immigration & Naturalization Serv. v. Jean, 496 U.S. 154, 158 (1990).

The EAJA further permits a court to award attorneys' fees to the prevailing party to the same extent it may award fees in cases involving other parties, whether by statute or common law. 28 U.S.C. § 2412(b).³ This provision makes the federal government subject to the "bad faith" exception to the "American Rule" on attorneys' fees. Baker v. Bowen, 839 F.2d 1075, 1080, n.3 (5th Cir. 1988). The bad-faith exception allows an award of attorneys' fees where the party seeking the award can show that the government has acted in "bad faith, vexatiously, wantonly or for oppressive reasons." Id. at 1081.

As recognized by the Fourth Circuit in Hyatt v. Shalala, "The distinction between [Subsections 2412(b) and 2412(d)] is of considerable consequence in the calculation of amount of fees." 6 F.3d at 254. Subsection 2412(d) imposes a presumptive $125.00 per hour cap on any award, unless it is adjusted for a special factor or the cost of living. 28 U.S.C. 2412(d)(2)(A). Under § 2412(b), however, the court may use a market rate to determine attorneys' fees. Hyatt, 6F.3d at 254. Thus, § 2412(b) allows for attorneys' fees "that can greatly exceed the cap placed on a § 2412(d) award." Id. Another significant distinction between these two subsections is that § 2412(d) "requires parties to qualify under statutorily prescribed net worth maximums." Maritime Mgmt., Inc. v. United States, 242 F.3d 1326, 1332 (11th Cir. 2001) (citing 28 U.S.C. § 2412(d)(1)(C)(2)(B) (defining "party" for purposes of § 2412(d) by net worth)). Subsection 2412(b) is not limited in this respect. Id.

III. Analysis

GGS previously moved for attorneys' fees solely under § 2412(b). By written Memorandum Opinion and Order entered July 24, 2013, the Court denied GGS's motion upon finding that the DOL's actions were not taken in bad faith. Gate Guard Servs., 2013 WL 3873275 at *7-*8. However, the Court's Order further provided that "[w]hile the DOL's actions may not have constituted bad faith, the Court is not convinced that the DOL has shown that its actions were substantially justified. Thus, denial is without prejudice to refiling pursuant to 28 U.S.C. § 2412(d)." Id. at *8. GGS now moves for attorneys' fees under § 2412(d).

A. Is GGS a "prevailing party"?

"As a threshold matter, a plaintiff is a 'prevailing party' under the EAJA 'if he succeeds on any significant issue in litigation which achieves some of the benefit he sought in bringing suit.'" Davidson v. Veneman, 317 F.3d 503, 506 (5th Cir. 2003) (quoting Sims v. Apfel, 238 F.3d 597, 599-600 (5th Cir. 2001)) (internal alterations omitted). The parties do not dispute that GGS is a prevailing party in this action.

B. Do special circumstances exist that would make a fee award unjust?

The "special circumstances" provision of § 2412(d)(1)(A) is designed to prevent recovery when the party seeking its attorneys' fees has engaged in bad faith behavior and when equitableconsiderations such as the doctrine of "unclean hands" would make an award of attorneys' fees unjust. See, e.g., Devine v. Sutermeister, 733 F.2d 892, 895-96 (Fed. Cir. 1984); Diamond Sawblades Mfrs. Coalition v. United States, 816 F. Supp. 2d 1342, 1359 (Ct. Int'l Trade 2012). The DOL does not argue that an award of attorneys' fees would be unjust, nor is the Court aware of any circumstances that would make a fee award unjust.

C. Was the fee application timely?

The EAJA requires that a fee application be made within 30 days of final judgment. 28 U.S.C. § 2412(d)(1)(B). A final judgment was entered in this case on February 13, 2013. (Dkt. No. 136.) On February 27, 2013, GGS timely filed its original Motion to Recover Attorneys' Fees pursuant to § 2412(b). In a Memorandum Opinion & Order entered July 24, 2013, the Court denied GGS's motion without prejudice and allowed GGS to supplement its original motion with regard to § 2412(d). Gate Guard Servs., L.P., 2013 WL 3873275 at *8. Shortly thereafter, on August 9, 2013, GGS filed its Supplemental Motion to Recover Attorneys' Fees to provide the Court with additional evidence and briefing regarding GGS's entitlement to fees under § 2412(d).

The DOL argues in a footnote that "there was nothing for GGS to supplement given that its first filing had been previously denied," and GGS's motion should therefore be denied as untimely. (Dkt. No. 148 at 1 n.2.) GGS is correct that an argument raised in a footnote is insufficient and may be disregarded by the Court. See Bridas S.A.P.I.C. v. Gov't of Turkmenistan, 345 F.3d 347, 356 n.7 (5th Cir. 2003) (citing United States v. Hardman, 297 F.3d 1116, 1131 (10th Cir. 2002) ("Arguments raised in a perfunctory manner, such as in a footnote, are waived.")). GGS is also correct that because its initial fee application was filed in a timely manner, its supplemental motion is also timely. See Scarborough v. Principi, 541 U.S. 401, 418-19 (2004) (holding a timely-filed fee application under the EAJA may be amended after the 30-day filing period under relation-back doctrine to include allegation of government's lack of substantial justification, where the "amended application 'arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth' in the initial application'") (quoting FED. R. CIV. P. 15(c)(2)). See also Bazalo v. West, 150 F.3d 1380, 1383-84 (Fed. Cir. 1998) (amendment made after 30-day filing period cured fee applicant's initial failure to establish that its net worth did not exceed the individual maximum of $2,000,000.00).

Thus, the Court finds that GGS timely filed its fee application.

D. Is GGS a "party" under § 2412(d)?

As recognized in Part II, supra, § 2412(d) provides for mandatory attorneys' fees if the position of the United States was not substantially justified and the prevailing party meets certain financial eligibility requirements. The Fifth Circuit has made clear that "[a] prevailing party is eligible for fees and expenses only if he meets the statutory definition of a party[.]" Tex. Food Indus. Ass'n v. U.S. Dept. of Agric., 81 F.3d 578, 580 (5th Cir. 1996). For purposes of § 2412(d):

(B) "party" means (i) an individual whose net worth did not exceed $2,000,000 at the time the civil action was filed, or (ii) any owner of an unincorporated business, or any partnership, corporation, association, unit of local government, or organization, the net worth of which did not exceed $7,000,000 at the time the civil action was filed, and which had not more than 500 employees at the time the civil action was filed . . . .

28 U.S.C. § 2412(d)(2)(B). Thus, in order to recover attorneys' fees under § 2412(d), GGS must demonstrate...