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United States District Court, Northern District of Illinois, E.D

September 7, 1982


The opinion of the court was delivered by: Prentice H. Marshall, District Judge.


In these two separate actions plaintiffs, having successfully challenged certain administrative actions by the Department of Housing and Urban Development ("HUD"), have moved for an award of attorney's fees against the federal government under the Equal Access to Justice Act ("EAJA"), 5 U.S.C. § 504, 28 U.S.C. § 2412(d) (Supp. IV 1980). While the cases raised separate issues on the merits, the attorney's fees motions come to us at the same time and raise similar questions under the EAJA. In addition, the plaintiffs in both cases are represented by the Legal Assistance Foundation of Chicago and the federal defendant is represented by the same Assistant United States Attorney. Not surprisingly, then, the briefs submitted by the parties in each case are practically identical, with the exception of application of the disputed legal standards to the distinct factual situations. We have consolidated the cases for purposes of our decision on the attorney's fees question.

In Grand Boulevard, we awarded plaintiffs partial summary judgment and enjoined HUD from releasing funds to the City of Chicago for the proposed Paul G. Stewart Phase IV ("Phase IV") housing project "until the City explores the feasibility of modifications of the Phase IV plan which will preserve existing housing and avoid permanent displacement of neighborhood residents." No. 80 C 4760, slip op. at 40 (N.D.Ill. October 14, 1981). In Coleman we found that HUD's decision to sell the South Shore Beach Apartments ("South Shore") was lawful but held that "to the extent that the sale does not provide for a twenty year restriction against conversion of the building to a condominium or cooperative without HUD's prior approval, and to the extent the contract of sale sets aside only seven units of housing to be set aside for non-elderly tenants eligible for § 8 assistance, the sale is set aside and HUD is enjoined from proceeding with it." No. 81 C 1284, slip op. at 29 (N.D.Ill. January 11, 1982). Both sets of plaintiffs now seek to invoke the Equal Access to Justice Act in support of their motions to obtain attorney's fees from the United States.

The EAJA became effective October 1, 1981. The amount of litigation already decided under the Act is testimony to the fact that rarely will lawyers move more swiftly or adroitly than where questions of attorney's fees are at issue. The government for its part is attempting to protect its purse strings by consistently arguing, so far unsuccessfully, that the Act cannot possibly mean what it says. These cases present us with several questions of importance under the EAJA; we treat them in turn.

The government's first line of defense is that an award of fees in both of these cases is barred by the doctrine of sovereign immunity. There is no dispute that Congress waived sovereign immunity in enacting the EAJA. The whole purpose of the statute was to make attorney's fees available against the government where private litigants successfully challenged or defended against agency actions. See generally H.Rep. No. 1418, 96th Cong., 2d Sess., 8-13 (1980) reprinted in [1980] U.S.Code & Admin.News 4984, 4986-92. In its statement of findings Congress declared the Act necessary to offset the high cost of litigation which frequently deterred private parties from seeking review of unreasonable agency actions, and to subject the government to fees under a standard even more beneficial to a prevailing party than embodied in the "American rule" regarding awarding of fees. See infra at 1160-1161. Accordingly, the government does not deny that the statute is an express waiver of sovereign immunity. The question raised is simply one of timing: when does the waiver take effect?

The EAJA was passed on October 4, 1980 and implemented according to the following provision:

  [This section] shall take effect on October 1,
  1981 and shall apply to any adversary
  adjudication . . . and any civil action . . .
  which is pending on, or commenced on or after,
  such date.

5 U.S.C. § 554 note. The government's contention is that while the Act clearly covers cases pending on October 1, 1981, it only applies to that portion of legal work done after October 1, 1981. The argument is predicated in large measure on the generalization that waivers of sovereign immunity must be expressed and cannot be implied. See United States v. Mitchell, 445 U.S. 535, 538, 100 S.Ct. 1349, 1351, 63 L.Ed.2d 607 (1980); United States v. Testan, 424 U.S. 392, 399, 96 S.Ct. 948, 953, 47 L.Ed.2d 114 (1976); United States v. King, 395 U.S. 1, 4, 89 S.Ct. 1501, 1502, 23 L.Ed.2d 52 (1969). But, unlike the cases cited, we are not asked here to construe an otherwise ambiguous statute and infer a consent to be sued on the part of Congress.*fn1 The general prohibition against awarding fees and costs against the federal government, embodied in 24 U.S.C. § 2412 (1976), see Alyeska Pipeline Co. v. Wilderness Society, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975), was abrogated by the EAJA. See Commissioners of Highways v. United States, 681 F.2d 821 (7th Cir. 1982) ("The Act constitutes a significant relaxation of sovereign immunity in actions seeking attorneys' fees from the United States.") Indeed, in one of the cases cited by the government for the general proposition that the United States is immune from an award of fees absent an express waiver, Knights of the Ku Klux Klan v. East Baton Rouge Parish School Board, 643 F.2d 1034 (5th Cir. 1981), the Supreme Court granted a petition for certiorari, vacated the judgment summarily and remanded for reconsideration in light of the EAJA, East Baton Rouge Parish School Board v. Knights of the Ku Klux Klan, 454 U.S. 1075, 102 S.Ct. 626, 70 L.Ed.2d 609 (1982). Despite the fact that all of the legal work was done on the case prior to October 1, 1981, on remand the Fifth Circuit held the case was "pending" within the meaning of the statute and remanded to the district court for determination of whether plaintiffs were otherwise qualified for an award of fees. See Knights of the Ku Klux Klan v. East Baton Rouge Parish School Board, 679 F.2d 64 at 67-68 (Former 5th Cir. 1982).*fn2 Neither the Supreme Court nor the Fifth Circuit expressed any reservations about the scope of the waiver contained in the EAJA.

In any question of statutory construction, no less in questions of sovereign immunity, we must begin with the language of the statute itself. Absent an indication to the contrary in the legislative history, the plain language of the statute governs our interpretation. See Consumer Product Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980); Aaron v. SEC, 446 U.S. 680, 700, 100 S.Ct. 1945, 1957, 64 L.Ed.2d 611 (1980); Perrin v. United States, 444 U.S. 37, 42, 100 S.Ct. 311, 314, 62 L.Ed.2d 199 (1979); Photo Data, Inc. v. Sawyer, 533 F. Supp. 348, 350 (D.D.C. 1982). There is nothing ambiguous about the language of the EAJA — the statute applies as of October 1, 1981 to qualifying cases "pending on, or commenced on or after, such date." The government's argument would have us read into the statute a qualification (applying the statute to pending cases, but only for that portion of the work done after October 1, 1981) which simply does not exist. As another court said in response to the same argument:

    The plain meaning of the EAJA is contrary to
  the Secretary's argument. The EAJA explicitly
  waives sovereign immunity with regard to a civil
  action or adversary adjudication pending on
  October 1, 1981. The Secretary's argument
  requires an exception to be read into the
  effective date provision, and this the court
  cannot do. The civil action before this court was
  pending on October 1, 1981. This effective date
  provides no barrier to an award of fees and
  expenses which might have occurred before October
  1, 1981. Congress limited the applicability of
  the EAJA to cases pending on October 1, 1981. If it
  had intended to further narrow the number of
  applicable cases in this "pending" status, it could
  have done so by restricting potential cost and fee
  awards to those incurred after the effective date.

Wolverton v. Schweiker, 533 F. Supp. 420, 423 (D.Idaho 1982) (emphasis original); Accord Photo Data, Inc. v. Sawyer, 533 F. Supp. 348 (D.D.C. 1982); see also Heydt v. Citizens State Bank, 668 F.2d 444 (8th Cir. 1982) (applying EAJA to pre-October, 1981 services, but finding government's position substantially justified); WATCH v. Harris, 535 F. Supp. 9 (D.Conn. 1981) (awarding fees for pre-effective date services); Spang v. United States, 533 F. Supp. 220 (W.D.Okla. 1982) (same); Berman v. Schweiker, 531 F. Supp. 1149 (N.D.Ill. 1982) (same); Under-wood v. Pierce, 547 F. Supp. 256, 260-261 (C.D.Cal. 1982) (same).*fn3

Defendants have cited nothing in the legislative history of the EAJA to cause us to depart from the plain meaning of the statute.*fn4 But HUD contends that the purpose of the statute will not be furthered by an award of pre-effective date fees and argues that the cost estimates and budget allocations under the Act indicate that awarding such fees was not contemplated by Congress. Neither argument is persuasive.

The legislative history of the statute provides ample support for applying the waiver to pre-effective date legal work. One of the principal purposes of the Act was to permit an award of fees under the common benefit or common fund approach which was not previously available to litigants against the government, see 28 U.S.C. § 2412(b), see also Alyeska Pipeline v. Wilderness Society, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975); H.Rep. No. 1418 at 6, reprinted in [1980] U.S.Code Cong. & Admin.News 4984, 4985 (expressing intent to partially overrule Alyeska Pipeline). The House Report indicates that

  [t]he bill rests on the premise that a party who
  chooses to litigate an issue against the
  Government is not only representing his or her
  own vested interest but is also refining and
  formulating public policy. . . . The bill []
  recognizes that the expense of correcting error
  on the part of the Government should not rest
  wholly on the party whose willingness to litigate
  or adjudicate has helped to define the limits of
  Federal authority. Where parties are serving a
  public purpose, it is unfair to ask them to
  finance through their tax dollars unreasonable
  Government action and also bear the costs of
  vindicating their rights.

Id. at 10, U.S.Code Cong. & Admin.News at 4988-89, See also House Conf.Rep. No. 96-1434, 96th Cong., 2d Sess. 25 (1980) reprinted in [1980] U.S.Code Cong. & Admin.News, 5003, 5014. Thus, construing the statute to require a party to bear its own fees where the case is clearly pending on the Act's effective date and the government's position is found to be unreasonable is contrary to the purpose, as well as the plain language, of the statute. Accord Photo Data, Inc. v. Sawyer, 533 F. Supp. at 351; Under-wood v. Pierce, at 261 n. 7.*fn5

Finally, the cost analysis relied on by the defendant actually supports the result we reach here. The Congressional Budget Office (CBO) cost estimates are based on the number of cases likely to be decided adversely to the government during each fiscal year and the average cost to the government of a reasonable attorney's fee in each case. The increase in costs estimated for the second and third year of the program is designed to accommodate the fact that each year the number of cases involving the government has increased slightly, thus the number of adverse decisions, it is assumed, will increase proportionally. See H.Rep. No. 1418, supra at 21, 22, U.S.Code Cong. & Admin.News at 5000, 5001.*fn6 Moreover, the CBO cost estimate assumes that the Act will achieve its intended effect of reducing the deterrence to challenging the government with the result that the number of cases brought will increase, and includes a slight increase in the size of the estimated average award to account for changes in the consumer price index. Id. at 22-23, U.S.Code Cong. & Admin.News at 5001-02. There is absolutely no justification for reading the cost estimates as anticipating a bifurcation of fees depending on whether work in a pending case was performed before or after October 1, 1981.

In light of the plain language of the statute and the history which supports it, we conclude that the EAJA constitutes a waiver of sovereign immunity by the government in cases pending on October 1, 1981, for attorney's fees incurred both before and after the effective date of the Act.

The government's second defense is that its position was "substantially justified." Under the standards set out in the EAJA a "prevailing party" in a civil action against the United States is entitled to fees "unless the Court finds the position of the United States was substantially justified." 28 U.S.C. § 2412(d)(1)(A) (Supp.IV 1980). As we pointed out in a prior opinion "[t]he standard created by this statute is a new one, not in line with either the common law exceptions to the American rule restricting the award of attorneys' fees, or other statutory standards allowing fee awards in certain cases against the United States. It was intended to serve as a `middle ground' between an automatic award of fees to a [prevailing] party and permitting fees only where the government's position was arbitrary or frivolous." Berman v. Schweiker, 531 F. Supp. at 1153-54; see H.Rep. No. 1418, supra at 14, U.S.Code Cong. & Admin. News at 4993. The legislative history makes clear that a determination that the United States was "substantially justified" is tied to the reasonableness of the government's position. See id. at 10, 14, 18, U.S. Code Cong. & Admin.News at 4989, 4993, 4997; H.Conf.Rep. 96-1434, supra at 22, U.S.Code Cong. & Admin.News at 5011.

The parties disagree over whether the "position" of the government referred to in the statute is the underlying agency action or the litigation position of the government's attorneys. The case authority to date is divided on this question and the legislative history supports both positions. Two decisions have construed the "position" of the government to refer to the litigation strategy and arguments. See Citizens Coalition for Block Grant Compliance v. City of Euclid, 537 F. Supp. 422, 426 (N.D.Ohio 1982); Alspach v. District Director of Internal Revenue, 527 F. Supp. 225, 228 (D.Md. 1982). In Citizens Coalition, however, the court chose to analyze the litigation position "only to the extent that when as here there has been no trial on the merits and no admission of fault in the consent decree or otherwise, the court must examine the reasonableness of the government's litigation position [because] it generally has insufficient information to determine the reasonableness of the government's underlying action." 537 F. Supp. at 426. To the contrary is Photo Data v. Sawyer, 533 F. Supp. at 352, where the court held that unreasonable government conduct which led to the litigation in the first place precluded a finding that the government's position was substantially justified.

No doubt in many cases arguing whether to scrutinize the agency action or the litigation position makes a mountain out of a molehill. As the court in Citizens Coalition pointed out, "[T]he two positions are closely related (i.e. to defend an unreasonable action in court may itself be an unreasonable action), and the distinction may often be academic." 537 F. Supp. at 426. But where, as in the instant cases, our review on the merits of the controversy was controlled by the standards set out in the Administrative Procedure Act, 5 U.S.C. § 706(2)(A) (1976), the difference may be important. Under the narrow standard of review established by the APA for cases such as these, an agency action may only be set aside where it is found to be "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." See Grand Boulevard Improvement Assoc. v. City of Chicago, slip op. at 8-10; Coleman v. HUD, slip op. at 10-13. Where the plaintiffs have succeeded in challenging agency conduct under that narrow standard of review, they have already demonstrated that the underlying position of the government was unreasonable. It would be too much for the English language to bear to say that a position can be arbitrary, capricious, or an abuse of discretion but nevertheless "reasonable." Thus, if we were to look solely at the reasonableness of the underlying action, a reversal under the standards of § 706(2)(A) would appear to negate the need to further inquire into the reasonableness of the government's "position."

The statute, however, appears to contemplate further review of the government's "position" after a finding for the private party. While there is support in the legislative history for focusing on the underlying action,*fn7 the bulk of the commentary suggests we examine the decision of the government to litigate and the reasonableness of the position advanced before the court.

  [The standard] presses the agency to address the
  problem of abusive and harassing regulatory
  practices. It is intended to caution agencies to
  carefully evaluate their case and not to pursue
  those which are weak or tenuous. At the same
  time, the language of the section protects the
  government when its case, though not prevailing,
  has a reasonable basis in law and fact.
  Furthermore, it provides a safety valve where
  unusual circumstances dictate that the government
  is advancing in good faith a credible, though
  novel, rule of law.

H.Rep. No. 1418, supra 14, U.S.Code Cong. & Admin.News at 4993.*fn8 Moreover, while the burden of establishing a substantial justification is clearly on the government where the private party has prevailed, see id. at 10-11, U.S.Code Cong. & Admin.News at 4989, it is also true that "[t]he standard . . . should not be read to raise a presumption that the Government position was not substantially justified, simply because it lost the case. Nor, in fact, does the standard require the Government to establish that its decision to litigate was based on a substantial probability of prevailing." Id. at 11, U.S.Code Cong. & Admin.News at 4990.

This focus on the "case" and "decision to litigate" is consistent with the general purpose of the statute to conform the responsibility of the government to that of private parties under the common law exceptions to the no attorney's fees rule, see § 2412(b),*fn9 and the citation to Fed.R.Civ.P. 37 (fees to be awarded to a prevailing party on motion to compel discovery unless losing party's position is "substantially justified"), see H.Rep. No. 1418, supra at 18, U.S.Code Cong. & Admin.News at 4997. Both of those standards, to which § 2412(d) is compared, focus on the litigation position of the losing party, not their position in their underlying, challenged conduct.*fn10 This does not mean that the reasonableness of the agency position which underlies the litigation is irrelevant. As the district court in Alspach pointed out, there may be many cases where the "Government action in administrative or judicial enforcement proceedings . . . is the litigation posture." Alspach, 527 F. Supp. at 228 (emphasis original).

As applied to a decision on the merits under the standards set out in § 706(2)(A), we believe the inquiry required by the EAJA is twofold. Where the government's litigation position depends on a defense of the agency's application of an undisputed legal standard to the facts of a given case, a finding that the agency's action was arbitrary, capricious, or an abuse of discretion, is determinative of the private parties' right to fees under the EAJA. This is so because wherever the government's litigation position is simply a defense of the agency's interpretation of factual matters, the "reasonableness" of agency's action and the litigation position are precisely the same. If the agency's interpretation of the facts is arbitrary, then so is the government's decision to defend the agency's interpretation.

There is a second possibility, however, even under the narrow review standards of § 706(2)(A): that the agency action must be set aside because it is "otherwise not in accordance with law." See also § 706(2)(C). Where the government's legal position hinges on a disputed interpretation of the governing law, the fact that the agency decision was set aside is not dispositive. It is certainly possible for the government to argue a reasonable, though erroneous, interpretation of controlling laws or regulations. This is precisely the type of situation where the legislative history indicates the government's position may be deemed "substantially justified." See H.Rep. No. 1418, supra at 14, U.S.Code Cong. & Admin.News at 4993. Thus, where the government's position on questions of law has been found to be in error, the fact that an agency decision has been set aside under the standards of the APA should not be dispositive on the question of the government's liability for fees.

Where the dispute is essentially over the governing legal standard, one additional question need be considered before the government's position may be deemed substantially justified. Assuming the government's "reasonable" though erroneous interpretation of law were correct, would the agency action have been sustained? This is but another way of saying that the government's interpretation of law must be controlling on the underlying dispute. It will not do for the government to put forward a "reasonable" legal interpretation which, even if adopted, would not save the agency action. In such a case the arbitrariness of the underlying action exists independently of the purported dispute over legal standards.*fn11

Applying this framework to the facts in Grand Boulevard, it is apparent that the government's position was substantially justified. The sole issue on which plaintiffs prevailed was purely a question of HUD's legal obligations to review the Community Development Block Grant (CDBG) application under the goals and objectives of national housing policy as established in the Housing and Community Development Act of 1978, 42 U.S.C. § 5313 note (1976), and the CDBG statute, 42 U.S.C. § 5304(a)(4)(C)(i).*fn12 There was no dispute with respect to the only issue on which plaintiff prevailed on any underlying facts. The government contended, based on its view of applicable law and regulations, that its review of the CDBG application was limited, that the application of federal housing policy was to be addressed by the CDBG applicant and not HUD, and HUD was legally obligated to approve projects which eliminate slums or blighted areas, see 24 C.F.R. § 570 (1980). Our statement of the scope of the remedy and the formulation of relief on the merits indicate that our decision was based purely on an interpretation of the governing law. After quoting a decision by Judge. Crowley on a similar question, we stated

  [w]e agree with Judge Crowley that plaintiffs are
  not entitled to any guarantee of replacement
  housing in their neighborhood. Nor are they
  entitled to a guarantee of the preservation of
  all sound housing. They are not entitled to
  prevent the much needed housing opportunities
  offered by Paul G. Stewart Phase IV.

    Judge Crowley also stated, however, that a
  reasonable opportunity for relocation in the
  neighborhood is a "requirement" not merely an
  objective. [Mejia v. HUD, 518 F. Supp. 935 (N.D.Ill.
  1981)] We have found that HUD is also bound by the
  housing policy expressed in § 1441(a)(c) [sic] and
  § 5313.

    The statutes relied on by plaintiffs do not
  require the City to forego a viable urban renewal
  project such as [Phase IV] in order to avoid
  displacing neighborhood residents. Nor do these
  statutes require the City to preserve all sound
  housing. These statutes do, however, require HUD
  to use its power to disburse, withhold and
  condition CDBG funding so as to discourage the
  wholesale displacement and destruction of

    HUD's unconditional approval of the City's CDBG
  application in 1978 and 1979 was an abdication of
  this responsibility. We stress again that
  plaintiffs are entitled to no guarantee that
  housing objectives will be obtained. . . .

    The "commensurate" relief in this case is for
  HUD to require the City to review its plan for
  slum clearance in the 41st and King area to
  determine what means exist, if any, for the
  preservation of sound housing in that area, and
  to minimize the displacement of residents. We
  stress again that the City is required only to

  consider those means which would be consistent
  with the revitalization proposed for the area.

Slip op. at 19-21.

We quote at length from our decision on the merits in Grand Boulevard to make it clear that it did not involve a finding that development of the Phase IV project would be contrary to law or that HUD's ultimate acceptance of the City's CDBG application would constitute an abuse of discretion, or even that plaintiffs are entitled to preservation of the housing at issue or replacement housing within the community. The sole issue on which plaintiffs prevailed was HUD's obligation under the law to require consideration of certain aspects of national housing policy not contained in the City's CDBG application. Whether HUD's position was "substantially justified" therefore depends on whether there exists a reasonable basis for its argument that such consideration was not required. We conclude that there was.

HUD's reliance on the truncated review procedure and its limited function under the CDBG statute, see 42 U.S.C. § 5304(a), (f), 5403(c), the desire to minimize "front-end review of local development programs", see S.Rep. No. 963, 93d Cong.2d Sess., reprinted in [1974] U.S.Code Cong. & Admin. News 4273, 4324, and the fact that a primary purpose of the CDBG program is to eliminate slum and blighted areas combine to provide a reasonable basis for its position in this lawsuit. See slip. op. at 15-17 & n. 6. At least one court has accepted HUD's position, albeit we believe erroneously. See Hernandez v. Pierce, 512 F. Supp. 1154 (S.D. N.Y. 1981). While we rejected that argument in Grand Boulevard because the expressions of policy we refer to "are not precatory and action taken without consideration of Congressional statements of policy or in conflict with them will not stand", citing United States v. Winthrop Towers, 628 F.2d 1028, 1035 (7th Cir. 1980), we cannot say that the position of the United States was unreasonable or the type of action Congress intended to discourage in passing the EAJA. For that reason, plaintiffs' motion for fees under 28 U.S.C. § 2412(d) is denied in Grand Boulevard Improvement Association v. City of Chicago, No. 80 C 4760.*fn13

Applying the same framework to Coleman, we conclude that the government's position in that case was not substantially justified. Plaintiffs succeeded in their attempt to enjoin the sale of South Shore Beach Apartments on two grounds: HUD's decision to reduce the deed restriction prohibiting the conversion of the building to condominiums from twenty to ten years and HUD's decision to limit § 8 subsidies to elderly residents were found to be abuses of discretion. Neither decision involved any disputed interpretation of law relied on by the agency; rather, both decisions were simply made by the agency without support in the record.

    Kalish's brief statement on the deed
  restriction fails both parts of the Overton Park
  [v. Volpe, 401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d
  136 (1971)] test. Kalish failed to consider all the
  relevant factors, and the record indicates that the
  factors he did consider were discussed in a sketchy
  and conclusory manner rather than in some reasoned
  fashion. The Chicago area staff, after careful
  consideration of the question, has concluded that
  the statutory mandates of HUD, as well as HUD's
  duty to minimize displacement under
24 C.F.R. § 290.20 (1981), required that a twenty year
  restriction on condominium conversion be placed in
  the deed. Kalish made no considered attempt to
  explain why this conclusion was erroneous.
  Accordingly, this court holds that the decision to
  reduce the restriction from

  twenty to ten years was arbitrary and capricious,
  and must be set aside.

Coleman, slip op. at 26.

    There is literally nothing in the record which
  indicates how HUD arrived at its conclusion that
  it would set aside only seven units for
  non-elderly tenants. The record contains no data
  regarding the ages of those tenants eligible for
  § 8 assistance, nor does it contain any statement
  explaining how the figure seven was reached. On the
  record presently before the court, it is impossible
  to determine whether HUD's allocation for
  non-elderly tenants was insufficient, and subjected
  those tenants to an unacceptable risk of
  displacement in violation of 24 C.F.R. §§ 290.20,
  886.301 (1981). Moreover, the court cannot
  determine whether the age restriction is at odds
  with § 8 itself. . . .

Id. at 27-28.

The government attempted to offer a plausible explanation for the administrative action by proffering additional facts to support HUD's determinations which were not contained in the administrative record. But, as we held in the opinion on the merits, "agency action may only be sustained on the rationale offered by the agency at the time the action is taken." Id. at 32 n. 20; see also id. at 19. The principle that agency decisions must be supported by evidence in the "record" and that the reviewing court is limited to consideration of the reasons for a decision asserted by the agency at the time of the decision is well settled. See id. at 10-13, 19. Where the government offers post-hoc rationalizations for unexplained agency decisions which, even if they were believed, could not save the agency action, we do not believe that position is reasonable.

This is a case where private persons, confronted with unexplained agency actions, challenged the agency in court and won. The issues upon which plaintiff prevailed did not, unlike Grand Boulevard, involve any disputed interpretations of law. This is just the type of case where Congress expressed a desire to make the government liable for fees so as to discourage the defense by the government of arbitrary agency actions. The government's position in Coleman was not substantially justified.*fn14

The government nevertheless argues that it should not be liable for that portion of the attorneys' fees attributable to issues which were decided adversely to the plaintiff. The government correctly points out that several grounds urged by the plaintiffs in attacking the proposed sale of South Shore were rejected. Among the issues raised by a plaintiff upon which the government prevailed was the adequacy of the notice of the proposed sale, see Coleman, slip op. at 14-17, the sufficiency of HUD's explanation for rejecting the sale of the building as a cooperative, id. at 17-21, the impact of HUD's failure to conduct an income survey, id. at 21-23, and the sufficiency of HUD's displacement analysis and conclusions, id. at 23-25.

The EAJA does not indicate the scope of recovery that should be granted to a prevailing party who has not succeeded on all issues raised in the case. We have canvassed the legislative history and find no guidance on this question. We do know, however, that the determination of whether plaintiffs qualify as a prevailing party under the meaning of the statute is to be guided by the existing case law under the Civil Rights Attorney's Fees Act, 42 U.S.C. § 1988. See H.Rep. No. 1418, supra at 11, U.S.Code Cong. & Admin.News at 4990 ("It is the committee's intention that the interpretation of [prevailing party] be consistent with the law that has developed under existing statutes."). Under these circumstances, absent any indication to the contrary in the legislative history, we think it appropriate to look to those same cases to determine the standard to be used in awarding fees where a private party has prevailed on only some of the issues litigated.

There is a substantial body of case law in this circuit under § 1988 on the question of the scope of recovery where plaintiff's victory on the merits is less than complete. In Syvock v. Milwaukee Boiler Manufacturing Co., 665 F.2d 149 (7th Cir. 1981), the court attempted to reconcile the potentially conflicting case law. Compare Sherkow v. Wisconsin Department of Public Instruction, 630 F.2d 498 (7th Cir. 1980) and North-cross v. Board of Education, 611 F.2d 624 (6th Cir. 1979) with Busche v. Burkee, 649 F.2d 509 (7th Cir. 1981) and Muscare v. Quinn, 614 F.2d 577 (7th Cir. 1980). The plaintiff in Syvock successfully litigated his claim against defendant for age discrimination in employment in violation of 29 U.S.C. § 623-634 (1976), but lost on the issues of the employer's willfulness and mitigation of damages. Syvock, 665 F.2d at 162. The district court reduced the award of attorney's fees accordingly, relying on the opinion in Muscare v. Quinn, 614 F.2d 577 (7th Cir. 1980). The court of appeals reversed, finding the district court's reliance on Muscare misplaced. The central factor identified by the court in determining whether plaintiff is entitled to all or only a portion of his attorney's fees is whether plaintiff "essentially succeeded" on his claim. The standard is drawn largely from the decision of the Third Circuit in Hughes v. Repko, 578 F.2d 483, 487 (3d Cir. 1978):

  [A] prevailing party on a particular claim is one
  who fairly can be found by the district court to
  have essentially succeeded on such claim, as
  "claim" is used in Fed.R.Civ.P. 10(b). We say
  "essentially succeeded" because in many cases a
  party may prevail on his basic claim but not all
  aspects thereof.

After quoting the above language the Syvock court held:

    Just as the plaintiffs Hughes "essentially
  succeeded" in their section 1982 claim against
  Mrs. Repko, plaintiff Syvock "essentially
  succeeded" in his ADEA suit against Milwaukee
  Boiler. Syvock's failure to prevail on the
  question of willfulness and mitigation of damages
  should no more diminish his award than did the
  Hughes' failure to succeed on the punitive damage
  issue or their contention that the attorney's
  fees issue was a jury question.

665 F.2d at 164.

What distinguishes Syvock and Hughes from Muscare, where the court held only a partial award of fees was warranted, is the absence of an independent claim resting on a separate basis where plaintiff was unsuccessful. In Muscare plaintiff challenged the constitutionality of a grooming regulation of the Chicago Fire Department and claimed that his disciplinary hearing violated his procedural due process rights. The court upheld the grooming regulation but found for plaintiff on the adequacy of the process afforded. Syvock, 665 F.2d at 163. Similarly in Busche v. Burkee, where an award of full fees was reversed, plaintiff presented three separate claims of alleged constitutional violations and prevailed on only one. The critical distinction between the cases is that

  [t]he two [claims] on which he failed to prevail
  were not mere aspects of a larger claim that
  affected the amount of damages he was due for the
  claim on which he did succeed. They were
  independent claims, as was the challenge to the
  constitutionality of the grooming regulation in
  Muscare, on which he did not succeed.

Syvock, 665 F.2d at 165 (emphasis original).

The distinction drawn by the court of appeals rests on an identification of whether the "claims" presented by plaintiffs are separate and distinct factual matters or merely different methods of attacking the same underlying conduct. The focus is not whether the plaintiffs prevailed on each legal theory, but whether they "essentially succeeded" in their claim against the underlying conduct by examining not whether the plaintiffs prevailed on each legal theory, but rather whether they "essentially succeeded" in their claim against the underlying conduct. The focus on claims with an independent factual base is supported by the citation to the "separate transaction or occurrence" language of Fed. R.Civ.P. 10(b); See also Fed.R.Civ.P. 13(a) (compulsory counterclaims); Fed.R.Civ.P. 15(c) (relation back of amendments). The test of whether a claim involves a "separate transaction or occurrence" depends on the factual relationship and evidentiary foundation of one or more "claims". See generally 3 J. Moore, Moore's Federal Practice ¶¶ 13.13, 15.15 at 13-297 to 310, 15-198 to 208 (1982). Where the evidence indicates there is but a single claim, and plaintiffs argue one or more legal theories, the fact that they prevail on only some of the theories should not be used to reduce the amount of their fee award.*fn15

The application of this test to the Coleman case is not easy. Plaintiffs attacked HUD's sale of South Shore on several different grounds and "prevailed" on two of them.*fn16 But we are nevertheless convinced that under the framework adopted by the court of appeals plaintiffs have essentially succeeded on a single claim and therefore are entitled to recover all fees reasonably incurred in their effort to have the sale set aside. The factual basis for the entirety of plaintiff's attack is contained in a single administrative "record."*fn17 The evidence relevant to each of plaintiffs' claims substantially overlapped and, of course, all of the claims concerned the sale of a single piece of property. Moreover, while plaintiffs' arguments depended in part on different regulations, each argument was tied to a single overriding theme — that HUD failed to consider the objectives of national housing policy as identified in applicable laws in deciding what to do with South Shore. Finally, the ultimate relief plaintiff obtained — enjoining the sale of South Shore — is substantially the same as plaintiff would have been entitled to had they prevailed on their other theories in the case. That fact, while not dispositive, is indicative of the fact the attack on the sale of South Shore was but a single claim upon which plaintiff "essentially succeeded." The result of that victory is that the displacement of tenants which may have resulted but for plaintiffs' victory has been substantially reduced.*fn18 We believe that Coleman involved one transaction or occurrence and that plaintiffs have essentially succeeded in their attack on HUD's disposition of the South Shore Beach Apartments and therefore are entitled to all fees reasonably expended in this litigation.

Defendants' final line of attack is that the amount of time counsel spent in preparing this case and the fees charged are not reasonable. We reject that contention. The total amount claimed by counsel for preparing the case, the discovery and document review, and briefing and arguing the motions for summary judgment is $28,466.00, spread over the work of three attorneys. The rate charged is $75.00 per hour for two of the attorneys and $65.00 for the third. Given the nature and complexity of the issues involved here and the high quality of the submissions of plaintiffs' counsel we find both the amount of time spent and rate of compensation charged to be fair and reasonable. We do not share the view of the United States that a total of 60 hours spent preparing and briefing a detailed summary judgment motion based on a sketchy and frequently inadequate administrative record is "excessive." Nor do we find the time spent by counsel reviewing and preparing the case in conference or meeting with clients to be unreasonable. We agree with plaintiffs' citation to the statement in Unemployed Workers Organizing Committee v. Batterton, 477 F. Supp. 509, 515 (D.Md. 1979) that

  [a]lthough the detail of [counsel's] time log
  does reveal some non-legal functions within his
  total billing, the overall presentation appears
  to be both fair and reasonable, given the nature
  and extent of his involvement in this case. It is
  not the function of the courts, in reviewing
  fees, to second guess every minute detail of time
  spent by an attorney in working on a case.

In summary, we hold that plaintiffs in Grand Boulevard Improvement Association v. HUD, No. 80 C 4760, are not entitled to fees pursuant to the Equal Access to Justice Act as the government's position in that action was substantially justified. We hold that plaintiffs in Coleman v. HUD, No. 81 C 1284, are entitled to attorneys fees under the Equal Access to Justice Act in the amount of $28,466.00. Accordingly, in No. 81 C 1284, judgment will enter in favor of plaintiffs and against the United States of America in the amount of $28,466.00 with instructions that it be paid directly to plaintiffs' counsel, the Legal Assistance Foundation of Illinois.

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