Xue Lu v. United States , 921 F.3d 850 ( 2019 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
XUE LU; JIE HAO, Nos. 17-55040
Plaintiffs-Appellees/ 17-55087
Cross-Appellants,
D.C. No.
v. 2:01-cv-01758-
CBM-EX
UNITED STATES OF AMERICA,
Defendant-Appellant/ OPINION
Cross-Appellee.
Appeal from the United States District Court
for the Central District of California
Consuelo B. Marshall, District Judge, Presiding
Argued and Submitted October 9, 2018
Pasadena, California
Filed April 17, 2019
Before: Sandra S. Ikuta and John B. Owens, Circuit
Judges, and Haywood S. Gilliam, Jr.,* District Judge.
Opinion by Judge Ikuta
*
The Honorable Haywood S. Gilliam, Jr., United States District
Judge for the Northern District of California, sitting by designation.
2 LU V. UNITED STATES
SUMMARY**
Equal Access to Justice Act / Attorneys’ Fees
The panel vacated the district court’s award of attorneys’
fees under the Equal Access to Justice Act (“EAJA”), and
remanded.
The panel held that because the district court did not have
the benefit of Goodyear Tire & Rubber Co. v. Haeger, 137 S.
Ct. 1178 (2017), when it issued an award of attorneys’ fees,
it failed to apply the appropriate legal framework. The panel
further held that it could not determine whether the court’s
error was harmless, and the panel vacated the award and
remanded to allow the district court to reconsider its fee
award under the Goodyear standard. On remand, Goodyear’s
causation standard requires the district court to identify those
expenses that the plaintiffs would not have incurred but for
the specific conduct that abused the judicial process, or to
determine that the government’s conduct so permeated all or
a portion of the suit that “all fees in the litigation, or a phase
of it, meet the applicable test: They would not have been
incurred except for the misconduct.” 137 S. Ct. at 1188.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
LU V. UNITED STATES 3
COUNSEL
Karen Schoen (argued) and Charles W. Scarborough,
Appellate Staff, Civil Division, United States Department of
Justice, Washington, D.C., for Defendant-Appellant/Cross-
Appellee.
V. James DeSimone (argued), V. James DeSimone Law,
Marina del Ray, California; Douglas Grant Ingraham, Law
Offices of Douglas G. Ingraham, Santa Monica, California;
Colleen M. Mullen and Michael D. Seplow, Schonbrun
Seplow Harris & Hoffman LLP, Los Angeles, California; for
Plaintiffs-Appellees/Cross-Appellants.
OPINION
IKUTA, Circuit Judge:
The Equal Access to Justice Act, 28 U.S.C. § 2412(b),
waives the government’s sovereign immunity for the
imposition of attorneys’ fees “to the same extent that any
other party would be liable under the common law.” The
district court exercised its common law authority to award
attorneys’ fees to the plaintiffs under this section. But
because the district court did not have the benefit of
Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178
(2017), when it issued the award, it failed to apply the
appropriate legal framework. Because we cannot determine
whether the court’s error was harmless, we vacate the award
and remand to allow the district court to reconsider its fee
award under the Goodyear standard. On remand, Goodyear’s
causation standard requires the district court to identify those
expenses that the plaintiffs would not have incurred but for
4 LU V. UNITED STATES
the specific conduct that abused the judicial process, or to
determine that the government’s misconduct so permeated all
or a portion of the suit that “all fees in the litigation, or a
phase of it, meet the applicable test: They would not have
been incurred except for the misconduct.” 137 S. Ct. at 1188.
I
We begin with a brief description of the relevant facts and
procedural history of this case, which has spanned over
fourteen years and three appeals.
A
Xue Lu, a Chinese national, arrived in the United States
in 1997 and applied for political asylum. Her asylum
application was assigned to asylum officer Thomas Powell,
who interviewed her with her immigration attorney on
February 15, 2000. Powell later arranged an appointment
with Lu to meet her alone at her apartment. At this meeting,
Powell fondled Lu and told her that he would approve her
application only if she accepted his sexual demands. Lu
rejected Powell’s advances, and shortly after learned that her
asylum application had been denied.1
Jie Hao, also a Chinese national, arrived in the United
States in 1999 and likewise applied for asylum. Powell
interviewed her with her attorney on May 22, 2000, and a few
days later attempted to arrange a meeting alone with Hao in
her home. Hao’s attorney, who had also represented Lu,
contacted the Department of Justice (DOJ) to report Powell’s
conduct. Hao met with a DOJ agent, and agreed to cooperate
1
Lu returned to China in 2009.
LU V. UNITED STATES 5
with the government, including by allowing the government
to record her meeting with Powell. The agent told Hao to
signal him during the meeting if Powell engaged in improper
conduct or attempted to touch her, and the agent would
protect her.
At the meeting on June 4, 2000, Powell told Hao that he
would approve her asylum application for $2,000. At some
point in the meeting, he also slapped Hao’s buttocks multiple
times and kissed her on the cheek. The DOJ agent did not
intervene during the meeting. At a follow up meeting on
June 8, Hao gave $2,000 (which she had previously received
from DOJ agents) to Powell. Powell took the money, touched
Hao on the knee, asked for a hug, and again kissed Hao on the
cheek.
As a result of this sting operation, the United States
indicted Powell for violating Lu’s civil rights under color of
law, in violation of 18 U.S.C. § 242, and for seeking bribes
from both Lu and Hao in violation of 18 U.S.C.
§ 201(B)(2)(A). See Xue Lu v. Powell, 621 F.3d 944, 946
(9th Cir. 2010). In 2004, Powell was convicted of both
charges. Id.
B
While the criminal case against Powell was pending, Lu
and Hao filed a civil action under the Federal Tort Claims Act
(FTCA) against Powell, his supervisor, various unknown
agents, and the United States in connection with Powell’s
conduct. Their complaint alleged: (1) deprivation of
constitutional rights, (2) negligence, (3) sexual battery,
(4) assault and battery, (5) intentional infliction of emotional
distress, (6) cruel and inhumane and degrading treatment,
6 LU V. UNITED STATES
(7) interference with the right to seek asylum, and (8) gender
discrimination, harassment, and violence against women. In
2005, after Powell’s conviction and sentencing, the court
granted the government’s motion to dismiss the action against
the United States for failure to state a claim, on the ground
that Powell was acting outside the scope of his employment
when he perpetrated the sexual assaults on the plaintiffs, and
therefore the United States could not be held liable on a
respondeat superior theory.2
On appeal, we reversed in part and remanded two claims
for trial. Xue Lu, 621 F.3d 944, 951. Contrary to the district
court’s determination, we held that Powell acted within the
scope of his employment because his conduct was “incidental
to the asylum system.” Id. at 949. Next, we held that
although the United States is “immune from liability for an
assault or battery by its employee,” see 28 U.S.C. § 2680(h),
Lu and Hao could bring claims for “infliction of emotional
distress,” because “[t]he emotional distress suffered as a
result of the demand for sexual favors is an injury distinct
from the battery,” Xue Lu, 621 F.3d at 950. We also held that
Powell had attempted to interfere with Lu and Hao’s statutory
right to asylum, and therefore they could bring claims for
interference with their civil rights under section 52.1 of the
California Civil Code.3 Id.
2
Hao and Lu’s claims against the individual defendants were
dismissed through a combination of settlement and stipulation after an
additional three years of litigation.
3
Section 52.1(c) of the California Civil Code provides that “[a]ny
individual whose exercise or enjoyment of rights secured by the
Constitution or laws of the United States, or of rights secured by the
Constitution or laws of this state, has been interfered with, or attempted
to be interfered with [in a specified manner] may institute and prosecute
LU V. UNITED STATES 7
On remand, Lu and Hao’s claims for violation of section
52.1 and intentional infliction of emotional distress proceeded
to a bench trial. In an August 5, 2013 order, the district court
ruled in favor of the plaintiffs on both claims, reasoning that
Powell interfered with the plaintiffs’ right to asylum or their
due process right to a meaningful hearing for asylum relief,
and that Powell’s offensive touching constituted intentional
infliction of emotional distress. The district court awarded
$500,000 in damages to Lu and $700,000 in damages to Hao.
After the verdict, the plaintiffs moved for attorneys’ fees.
The district court determined it could award “attorney fees at
market rates in cases involving bad faith by the United
States” if it “finds that the fees incurred during various phases
of litigation are in some way traceable to the [defendant’s]
bad faith.” Xue Lu v. United States, No. 2:01-cv-1758, 2014
WL 2468826, at *1 (C.D. Cal. May 23, 2014) (quoting Brown
v. Sullivan, 916 F.2d 492, 495, 497 (9th Cir. 1990)). Based
on this standard, the court found that the government’s
conduct resulted in two incidents of pre-litigation bad faith
conduct and two incidents of bad faith conduct during the
litigation.
First, the court held the DOJ agent’s “failure to come to
[Hao’s] aid after Powell touched Plaintiff[’s] buttocks”
constituted bad faith pre-litigation conduct. Id. at *3.
Second, the court found that the government had engaged
in pre-litigation bad faith conduct by delaying consideration
in his or her own name and on his or her own behalf a civil action for
damages . . . .”
8 LU V. UNITED STATES
of Hao’s asylum application for seven years, until the
criminal case against Powell was resolved.4 Id.
Third, the court found the government had engaged in bad
faith conduct by arguing during the litigation that Hao could
not claim she suffered an injury from Powell’s touching
because Hao gave “express, voluntary written consent” to
participate in the sting operation, and had assumed the
potential risks associated with the operation. Id. The court
found that Hao had consented only to assisting in the sting,
not to being a victim of offensive touching, and therefore this
argument was in bad faith. Id. at *4.
Finally, the district court held that the government had
engaged in bad faith conduct by arguing that Hao and Lu’s
claims were barred by the intentional tort exception under the
FTCA5 even though we had previously held on appeal that Lu
and Hao could bring claims for intentional infliction of
emotional distress. Id.
The district court did not, however, agree that all of the
conduct identified by Lu and Hao before or during the
litigation constituted bad faith. For instance, the
government’s reliance on an immigration judge’s findings did
not constitute bad faith. Nor did the government engage in
bad faith conduct by making a reference to Lu and Hao’s
claims as “mere allegations” during the proceedings. Id. at *4
n.1.
4
Hao’s asylum application was granted in 2007.
5
The FTCA excludes any claim “arising out of” eleven categories of
torts, including assault or battery, but not including intentional infliction
of emotional distress. 28 U.S.C. § 2680(h).
LU V. UNITED STATES 9
The district court concluded that “[u]nder the totality of
the circumstances” the government’s bad faith “has affected
all portions or phases of the litigation since June 8, 2000,” the
date of the sting operation. Id. at *4. The district court
therefore held that the plaintiffs were entitled to some
$877,563 in fees under 28 U.S.C. § 2412(b). It also awarded
$4,112 in fees under 28 U.S.C. § 2412(d), which provides for
the award of fees to a prevailing party under specified
circumstances,6 for fees incurred prior to the sting operation.
See id. at *5. In total, the district court awarded $881,675 in
fees. Id. at *8.
C
On appeal, we affirmed the district court’s judgment in an
unpublished decision, but vacated the fee award. See Xue Lu
v. United States, 638 F. App’x 614 (9th Cir. 2016). In
considering the district court’s ruling on attorneys’ fees, we
upheld three of the district court’s bad faith findings. First,
we held that the district court had not clearly erred in holding
that the government engaged in bad faith conduct when the
DOJ agent failed to come to Hao’s aid, although “we might
6
28 U.S.C. § 2412(d)(1)(A) provides:
Except as otherwise specifically provided by statute, a
court shall award to a prevailing party other than the
United States fees and other expenses, in addition to
any costs awarded pursuant to subsection (a), incurred
by that party in any civil action (other than cases
sounding in tort), including proceedings for judicial
review of agency action, brought by or against the
United States in any court having jurisdiction of that
action, unless the court finds that the position of the
United States was substantially justified or that special
circumstances make an award unjust.
10 LU V. UNITED STATES
well have come to a different conclusion on de novo review.”
Id. at 618–19. Nor did the district court clearly err in finding
the government’s delay in considering Hao’s asylum
application was bad faith conduct, at least for the first five
years. Id. at 619 n.2. We held that the final two years of
delay (from 2005 to 2007), which “occurred in the ordinary
course of processing” Hao’s asylum application, did not rise
to the level of bad faith. Id. at 619 n.2. Likewise, the district
court did not clearly err in holding the government engaged
in bad faith by arguing that Hao had consented or assumed
the risk of Powell’s sexual touching, although we noted that
a finding of bad faith was not compelled. Id. at 618.
We reversed, however, the district court’s fourth finding
“that the government argued in bad faith that the intentional
tort exception barred Plaintiffs’ claims in spite of our first
opinion.” Id. We noted that “[w]henever the government
presented an intentional tort exception-based theory, it
provided a non-frivolous way to reconcile the argument with
our previous decision.” Id. We concluded that “[b]ad faith
has a high threshold and the district court’s finding of it here
is without support in the record.” Id. We therefore vacated
the fee award and remanded “to allow the district court to
decide what, if any, changes should be made to the award of
fees incurred after June 8, 2000.” Id. at 619.7
D
On remand, the district court again articulated its
understanding that it “may award attorney fees at market rates
7
We also vacated the district court’s fee award to the extent it relied
on 28 U.S.C. § 2412(d)(2)(A), because that section does not apply to tort
actions like this one. Id.
LU V. UNITED STATES 11
for the entire course of litigation, including time spent
preparing, defending, and appealing . . . awards of attorneys’
fees, if it finds that the fees incurred during various phases of
litigation are in some way traceable to the [defendant’s] bad
faith.” Xue Lu v. United States, No. 2:01-cv-1758, 2016 WL
11087106, at *2 (C.D. Cal. Nov. 10, 2016) (quoting Brown,
916 F.2d at 495, 497) (alterations and emphasis in district
court order). Because we had rejected the conclusion that the
government’s intentional tort argument constituted bad faith
conduct, the court set out to calculate which fees were
“traceable to the three findings of bad faith affirmed by the
Ninth Circuit,” namely the DOJ agent’s failure to come to
Hao’s aid, the government’s delay in considering Hao’s
asylum application, and the government’s argument that Hao
had consented or assumed the risk of Powell’s sexual
touching. Id.
To trace these fees, the district court relied on a
declaration submitted by plaintiffs’ counsel, which provided
two alternatives for calculating attorneys’ fees. Id. First,
counsel argued that “all work performed in this case is
traceable to Powell’s bad faith” and so all fees should be
awarded. As an alternative, however, counsel traced the
hours incurred by each attorney or staff member to one or
more of the district court’s three surviving findings of bad
faith. The plaintiffs took a broad view of traceability. For
instance, the declaration claimed that two incidents of bad
faith conduct—the DOJ agent’s failure to assist Hao after
Powell touched her, and the government’s delay in
consideration of Hao’s asylum application—“existed from the
inception of the litigation so the majority of Plaintiffs’
counsels’ work was in some way traceable to that bad faith
conduct.” Further, the declaration claimed that the
government’s argument about the FTCA’s exception for
12 LU V. UNITED STATES
intentional torts related to Powell’s offensive touching, and
therefore work addressing the intentional tort argument was
also traceable to bad faith. Finally, the declaration claimed
that because work for both Hao and Lu substantially
overlapped, only work performed solely for Lu was not
recoverable. Based on this analysis, the declaration
concluded that the work traceable to bad faith amounted to
$676,751 in fees, see id., some $200,000 less than the amount
the district court had previously awarded for the entire
litigation.
Without undertaking any independent analysis, the district
court adopted the declaration, and concluded that “[t]he
evidence submitted by Plaintiffs demonstrates $676,751 in
fees expended in the underlying action is traceable to one or
more of the three findings of bad faith by the Government,”
and awarded the entire amount to plaintiffs. Id. at *2, *4.
Plaintiffs also moved for attorneys’ fees incurred on the
appeal of the previous fee award and post-remand. Although
this fee motion was not timely under Ninth Circuit
Rule 39-1.6, the district court held that the untimely filing
was a result of excusable neglect under Pincay v. Andrews,
389 F.3d 853 (9th Cir. 2004) (en banc). The district court
granted the motion in full, holding that “[t]he evidence
submitted by plaintiffs demonstrates $314,651 in fees
expended on the second appeal and post-remand is traceable
to one or more of the three findings of bad faith by the
Government.” Xue Lu, 2016 WL 1108716, at *4. In total, the
court awarded $993,758 in attorneys’ fees. The government
appealed.
LU V. UNITED STATES 13
II
After the district court ruled, the Supreme Court issued its
opinion in Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct.
1178 (2017). Goodyear shed a new light on the framework
for awarding attorneys’ fees as sanctions, which is equally
applicable to an award of fees under § 2412(b). Therefore,
we begin by explaining this framework in light of Goodyear.
A
In Goodyear, three plaintiffs claimed that the failure of a
Goodyear tire caused their motorhome to drive off the road
and flip over. 137 S. Ct. at 1184. During discovery, the
plaintiffs repeatedly asked Goodyear to provide internal test
results for the tire, but Goodyear delayed its responses or
refused to turn over requested documents. Id. The plaintiffs
finally settled with Goodyear before trial. Months after the
settlement, the plaintiffs learned that Goodyear had withheld
a crucial set of test results for the tires. Id. The plaintiffs
then moved the district court for an award of attorneys’ fees
and costs as sanctions for discovery fraud. Id. The district
court found that Goodyear “had engaged in a ‘years-long
course’ of bad-faith behavior,” making “repeated and
deliberate attempts to frustrate the resolution of this case on
the merits.” Id. The court therefore ordered Goodyear to
reimburse the plaintiffs for attorneys’ fees and costs paid
during the suit, reasoning that due to Goodyear’s egregious
behavior, “all of the attorneys’ fees incurred in the case [can]
be awarded without any need to find a causal link between
[those expenses and] the sanctionable conduct.” Id. at 1185
(internal quotation marks omitted). We upheld this award on
appeal. Id. The Supreme Court reversed, holding that the
14 LU V. UNITED STATES
award was inconsistent with the proper framework for
imposing such sanctions.
B
In explaining the proper framework, Goodyear began
with first principles: that “[f]ederal courts possess certain
‘inherent powers,’ not conferred by rule or statute, ‘to
manage their own affairs so as to achieve the orderly and
expeditious disposition of cases.’” Id. at 1186 (quoting Link
v. Wabash R. Co., 370 U.S. 626, 630–31 (1962)). Indeed, the
Supreme Court has long made clear that “[c]ourts of justice
are universally acknowledged to be vested, by their very
creation, with power to impose silence, respect, and decorum,
in their presence, and submission to their lawful mandates.”
Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991) (quoting
Anderson v. Dunn, 6 Wheat 204, 227 (1821)). Among the
inherent powers recognized by the Supreme Court is the
power “to fashion an appropriate sanction for conduct which
abuses the judicial process.” Goodyear, 137 S. Ct. at 1186
(quoting Chambers, 501 U.S. at 44–45). Such a sanction may
include the assessment of attorneys’ fees against “a party that
has acted in bad faith.” Id.; see also Chambers, 501 U.S.
at 45–46 (“[A] court may assess attorney’s fees when a party
has ‘acted in bad faith, vexatiously, wantonly, or for
oppressive reasons.’”).8
Goodyear emphasized that a bad faith fee award, “when
imposed pursuant to civil procedures, must be compensatory
rather than punitive in nature.” 137 S. Ct. at 1186 (citing
8
Such fee awards are an exception to “the so-called ‘American
Rule,’” which “prohibits fee shifting in most cases.” Chambers, 501 U.S.
at 45.
LU V. UNITED STATES 15
Mine Workers v. Bagwell, 512 U.S. 821, 826–30 (1994)). “In
other words, the fee award may go no further than to redress
the wronged party ‘for losses sustained’; it may not impose an
additional amount as punishment for the sanctioned party’s
misbehavior.” Id. (quoting Bagwell, 512 U.S. at 829). If a
fee award goes beyond a compensatory purpose, “a court
would need to provide procedural guarantees applicable in
criminal cases, such as a ‘beyond a reasonable doubt’
standard of proof.” Id.; see also Miller v. City of Los Angeles,
661 F.3d 1024, 1030 (9th Cir. 2011) (noting that “non-
compensatory sanctions” may be “akin to criminal contempt
and may be imposed only by following the procedures
applicable to criminal cases, including appointment of an
independent prosecutor, proof beyond a reasonable doubt and
a jury trial”).
Because the imposition of attorneys’ fees against a party
who abused the judicial process is limited to compensation
for the wronged party, “the court can shift only those
attorney’s fees incurred because of the misconduct at issue.”
Goodyear, 137 S. Ct. at 1186. “[A] sanction counts as
compensatory only if it is calibrated to the damages caused by
the bad faith acts on which it is based.” Id. (cleaned up).
Therefore, the court must “establish a causal link—between
the litigant’s misbehavior and legal fees paid by the opposing
party.” Id.; see also Miller, 661 F.3d at 1029. Goodyear
rejected our determination that “the trial court could grant all
attorney’s fees incurred during the time when [Goodyear was]
acting in bad faith.” Id. at 1189 (emphasis and internal
quotation marks omitted). According to the Court, “that is a
temporal limitation, not a causal one,” and therefore “it is
wide of the mark.” Id. Instead, “[a] sanctioning court must
determine which fees were incurred because of, and solely
16 LU V. UNITED STATES
because of, the misconduct at issue (however serious, or
concurrent with a lawyer’s work, it might have been).” Id.
Goodyear framed this causal link “as a but-for test”: a
party “may recover ‘only the portion of his fees that he would
not have paid but for’ the misconduct.” Id. at 1187 (quoting
Fox v. Vice, 563 U.S. 826, 836 (2011)). If an expense would
have been incurred even absent any bad faith conduct, it
cannot be part of a bad faith fee award. Id. A court may not
shift fees if “the same work would have been done (for
example, the same deposition taken) to contest the non-
frivolous claims in the suit.” Id. In other words, a district
court making a bad faith fee award must determine “whether
a given legal fee—say, for taking a deposition or drafting a
motion—would or would not have been incurred in the
absence of the sanctioned conduct.” Id. Thus, a court must
generally engage in “the grind of segregating individual
expense items (a deposition here, a motion there)” or
“categories of such items (again, like expert discovery)” in
order to determine which fees “would not have been incurred
except for the misconduct.” Id. at 1188.
In certain exceptional cases, the but-for test allows a court
to “shift all of a party’s fees, from either the start or some
midpoint of a suit, in one fell swoop.” Id. at 1187.
According to the Court, Chambers offered “one illustration”
of this situation where “literally everything the defendant
did—‘his entire course of conduct throughout,’ and indeed
preceding, the litigation—was ‘part of a sordid scheme’ to
defeat a valid claim.” Id. at 1187–88 (quoting Chambers,
LU V. UNITED STATES 17
501 U.S. at 51, 57).9 Under these circumstances, “the district
court could reasonably conclude that all legal expenses in the
suit ‘were caused . . . solely by [his] fraudulent and brazenly
unethical efforts.’” Id. at 1188 (quoting Chambers, 501 U.S.
at 58). Similarly, “[i]f a plaintiff initiates a case in complete
bad faith, so that every cost of defense is attributable only to
sanctioned behavior, the court may again make a blanket
award.” Id. This “exceptional case” rule is consistent with
our prior cases holding that where the entirety of the action is
attributable to bad faith abuse of the judicial process, a
district court can award fees “for the entire course of
litigation,” so long as all fees are “in some way traceable to”
bad faith activity. Brown, 916 F.2d at 497.
In short, Goodyear clarified that when awarding
attorneys’ fees as a sanction for bad faith conduct, a district
court must identify the conduct that abused the judicial
process and, applying Goodyear’s but-for standard, identify
only those expenses that the wronged party would not have
9
In Chambers, the director of a television station had entered into a
contract to sell the station’s facilities and license to NASCO, and then
changed his mind. 501 U.S. at 35–36. When NASCO filed a lawsuit, the
director embarked on a scheme to prevent NASCO from using the court
to enforce the contract. Id. at 36–37. In his initial conference with the
district court, the director deliberately concealed the fact that he was
taking steps to transfer the station to a third party for the purpose of
evading the court’s reach. Id. at 37–38. The director “continued to abuse
the judicial process”; he refused to provide essential discovery materials,
made “a series of meritless motions and pleadings and delaying actions,”
and secretly sought permission from the applicable regulatory agency to
relocate the station’s operations. Id. at 38–39 (internal quotation marks
omitted). The district court found that the defendant deliberately misused
the judicial process “to defeat NASCO’s claim by harassment, repeated
and endless delay, mountainous expense and waste of financial resources.”
Id. at 57.
18 LU V. UNITED STATES
incurred but for the misconduct. See 137 S. Ct. at 1187.
Because the fee award must be compensatory, rather than
punitive, the award “may go no further than to redress the
wronged party for losses sustained.” Id. at 1186 (internal
quotation marks omitted). In an exceptional case such as
Chambers, where fees associated with the entirety of an
action, or an entire portion of the action, would not have been
incurred but for the bad faith conduct of a litigant, the district
court may shift “all of a party’s fees, from either the start or
some midpoint of a suit, in one fell swoop.” Id. at 1187.
C
Goodyear’s framework is applicable in our case. In
Goodyear, the Court reaffirmed that courts have inherent,
common law authority to assess attorneys’ fees as a sanction
for bad faith conduct. A court would be precluded from
assessing attorneys’ fees against the United States unless it
waived its sovereign immunity. Accordingly, the EAJA
provided such a waiver for attorneys’ fees awards in civil
cases in which the United States is a party.10 Under the
10
The relevant section provides:
Unless expressly prohibited by statute, a court may
award reasonable fees and expenses of attorneys, in
addition to the costs which may be awarded pursuant to
subsection (a), to the prevailing party in any civil action
brought by or against the United States or any agency
or any official of the United States acting in his or her
official capacity in any court having jurisdiction of such
action. The United States shall be liable for such fees
and expenses to the same extent that any other party
would be liable under the common law or under the
terms of any statute which specifically provides for
such an award.
LU V. UNITED STATES 19
EAJA, “[u]nless expressly prohibited by statute, a court may
award reasonable fees and expenses of attorneys . . . to the
prevailing party in any civil action brought by or against the
United States . . . .” 28 U.S.C. § 2412(b). In such cases,
“[t]he United States shall be liable for such fees and expenses
to the same extent that any other party would be liable under
the common law or under the terms of any statute which
specifically provides for such an award.” Id. (emphasis
added).
We have interpreted the statute’s reference to the common
law as including the common law authority of courts to assess
attorneys’ fees pursuant to their inherent powers. See Barry
v. Bowen, 825 F.2d 1324, 1334 (9th Cir. 1987), overruled on
other grounds as recognized in Mt. Graham Red Squirrel v.
Madigan, 954 F.2d 1441, 1462 (9th Cir. 1992). Said
otherwise, “[s]ection 2412(b) codified the bad faith exception
to the ‘American rule’ against the award of attorney’s fees
and made that exception applicable in suits against the United
States.” Id. Because the ability of a court to award attorneys’
fees against the government for bad faith conduct is the same
as the court’s inherent power to do so against other litigants,
absent another statute that confers additional powers, any
analysis of the bad faith exception under the EAJA “draws
upon the well of cases decided in other contexts.” Id.11
28 U.S.C. § 2412(b).
11
The inquiry under 28 U.S.C. § 2412(b) differs from that undertaken
by courts deciding whether to award fees under 28 U.S.C.
§ 2412(d)(1)(A), which allows a court to shift all fees and expenses
incurred by a prevailing party (other than the United States) in an action
brought by or against the United States, unless the court determines that
the position of the United States in the litigation was “substantially
justified.” 28 U.S.C. § 2412(d)(1)(A); see also INS v. Jean, 496 U.S. 154,
20 LU V. UNITED STATES
III
We now consider what Goodyear means for this case. As
in Goodyear itself, we must consider whether the district
court’s ruling complied with the Goodyear framework, or
otherwise passes a but-for test. We review the district court’s
fee award for abuse of discretion. See Rodriguez v. United
States, 542 F.3d 704, 709 (9th Cir. 2008). And “in light of
the trial court’s superior understanding of the litigation,” its
judgment is “entitled to substantial deference on appeal.”
Goodyear, 137 S. Ct. at 1187 (internal quotation marks
omitted).
Because the district court did not have the benefit of
Goodyear when it issued its ruling, it is not surprising that the
court’s fee award does not comply with Goodyear’s
framework. There are several inconsistencies. First, the
district court did not expressly apply Goodyear’s but-for
standard or undertake the granular inquiry indicated by that
opinion, i.e., segregating individual expense items or
categories of such items and establishing that they would not
have been incurred except for the government’s misconduct.
Rather, the court relied on the plaintiffs’ declaration, which
provided only broad generalizations about causation, and did
not calibrate a close “causal link,” id. at 1186, between the
sanctionable conduct and specific legal tasks. Further, in
indicating that the majority of plaintiffs’ fees were
recoverable merely because the government’s bad faith
158–60 (1990). A court’s determination whether the government’s
position was substantially justified is made for a particular action as a
whole. See Jean, 496 U.S. at 161–62. Section 2412(d)(1)(A) is not
applicable here because the plaintiffs’ claims “sound[] in tort.” 28 U.S.C.
§ 2412(d)(1)(A).
LU V. UNITED STATES 21
conduct “existed from the inception of the litigation,” the
declaration appeared to adopt the temporal approach rejected
in Goodyear. Moreover, the declaration encompassed fees
for work done for both Hao and Lu, contrary to Goodyear’s
clarification that it is inappropriate to grant fees “for all legal
work relating to” specified claims “regardless of whether the
same work would have been done (for example, the same
depositions taken) to contest the non-frivolous claims in the
suit.” Id. at 1187.
Although the district court failed to provide the close
analysis generally required by Goodyear, we must still
consider whether this is one of the “exceptional cases”
identified in Goodyear where the “grind” of tracing each
legal fee to a specific bad faith act is not required. Id. at
1187–88. The court did not make any finding to that effect,
but certain of the district court’s statements suggest that it
deemed the case to be one where the government’s
misconduct was such that it was appropriate to shift all or a
portion of the plaintiffs’ fees “in one fell swoop.” Id. at 1187.
First, in stating that under the “totality of the circumstances”
the government’s bad faith “has affected all portions or
phases of the litigation since June 8, 2000,” the date of the
sting operation, the district court suggested that the
government’s bad faith conduct “so permeated the suit as to
make that misconduct a but-for cause of every subsequent
legal expense,” id. at 1189. Second, the district court held it
could award attorneys fees “if it finds that the fees incurred
during various phases of litigation are in some way traceable
to the [defendant’s] bad faith,” Xue Lu, 2016 WL 11087106,
at *2 (quoting Brown, 916 F.2d at 497) (alteration and
emphasis in district court order), a standard that may be
applicable in exceptional cases, see Brown, 916 F.2d at 497.
Finally, the district court’s bad faith findings included the
22 LU V. UNITED STATES
government’s prelitigation conduct (i.e., the failure to come
to Hao’s aid during the sting and five of the seven years of
delay in processing Hao’s asylum application), which
Goodyear indicated is a consideration in exceptional cases,
see 137 S. Ct. at 1187–88 (stating it had approved the award
in Chambers because “literally everything the defendant
did—‘his entire course of conduct’ throughout, and indeed
preceding, the litigation—was ‘part of a sordid scheme’”).
On the other hand, there are several indications that this
case is not such an exceptional case. Our prior opinion makes
clear that not all of the government’s activity is part of a
“sordid scheme.” We concluded that the government’s
argument that the FTCA’s intentional torts exception barred
plaintiffs’ claims did not constitute bad faith, and that the
district court’s contrary finding was “without support in the
record.” Xue Lu, 638 F. App’x at 618. We also held that the
final two years of delay in processing Hao’s asylum
application “occurred in the ordinary course” and did not rise
to the level of bad faith. Id. at 619 n.2. Nothing in the record
suggests that the government engaged in needless delay of the
litigation, attempted to harass the plaintiffs with unwarranted
depositions or discovery, defied the letter or spirit of a court
order, or otherwise attempted to hamper the judicial process.
Cf. Chambers, 501 U.S. at 37–42. Moreover, the district
court itself chose to ignore the declaration’s assertion that all
work performed in the case was traceable to the government’s
bad faith, and ultimately declined to award some $200,000 in
attorneys’ fees. Such a ruling would be inconsistent with a
conclusion that the government’s misconduct “so infected the
lawsuit as to account for each and every expense the
[plaintiffs] subsequently incurred.” Goodyear, 137 S. Ct.
at 1188.
LU V. UNITED STATES 23
We therefore conclude that, as in Goodyear, there is too
much uncertainty regarding the record and the district court’s
reasoning to determine whether the district court’s fee award
is consistent with the Goodyear standard. Our uncertainty
“points toward demanding a do-over, under the unequivocally
right legal rules.” Id. at 1190.
We reach the same conclusion with respect to the
government’s challenge to the district court’s award of fees
incurred by plaintiffs during the previous appeal of the initial
fee award and after remand. In general, the Supreme Court
has rejected the argument that costs incurred appealing the
award of a sanction or defending against such an appeal are
incurred “because of” the sanctioned party’s bad faith
conduct in the trial court. See Lockary v. Kayfetz, 974 F.2d
1166, 1177–78 (9th Cir. 1992) (citing Cooter & Gell v.
Hartmarx Corp., 496 U.S. 384, 406 (1990)). As explained in
the context of Rule 11 sanctions, the expenses incurred in
defending a sanctions award on appeal “are directly caused
by the district court’s sanction and the appeal of that sanction,
not by the plaintiff’s” bad faith conduct in the district court.
Cooter & Gell, 496 U.S. at 407. Thus, if the appeal itself is
not frivolous, then a fee award is generally not appropriate.
See id. This conclusion is consistent with the Goodyear
standard, which requires a direct, but-for relationship between
the bad faith conduct and the fees. Nevertheless, there may
be exceptional cases where bringing or defending an appeal
is part of a single “sordid scheme” and is likewise
compensable. The district court may also reconsider this
issue under the correct standard on remand.12
12
The government argues that the district court abused its discretion
in considering the untimely motion for appeal fees under the doctrine of
excusable neglect because it did not give the government leave to file a
24 LU V. UNITED STATES
We conclude that it is most prudent to vacate the fee
award and remand to the district court to determine, under the
standard set out in Goodyear and this opinion. The district
court must identify the abuse of judicial process that is
sanctionable, and apply the but-for standard to determine
which fees would not have been incurred but for that conduct.
See Goodyear, 137 S. Ct. at 1187. If the district court
determines that this is an exceptional case, it must explain
why the entirety of the case, or some portion of the case, was
initiated in “complete bad faith,” so that the court may
appropriately make a blanket award.13
VACATED AND REMANDED.14
sur-reply responding to plaintiffs’ excusable neglect argument. We reject
this argument, and affirm the district court’s ruling, because the
government cannot show that it was prejudiced; the evidence it sought to
provide in its sur-reply was already before the district court, and the
government had the opportunity to present its argument orally at a hearing.
The government also argues that the plaintiffs erred by filing their request
in district court, instead of in the Ninth Circuit. Because the government
did not raise this argument to the district court, it is waived. See Exxon
Shipping Co. v. Baker, 554 U.S. 471, 487 (2008).
13
We reject the plaintiffs’ argument on cross-appeal that the district
court erred in declining to award attorneys’ fees for Powell’s conduct. A
bad faith fee award is not a remedy for the conduct giving rise to the cause
of action, see Chambers, 501 U.S. at 53, and therefore cannot be “based
solely upon a finding of bad faith in the conduct underlying the lawsuit,”
Rodriguez, 976 F.2d at 712 (emphasis and internal quotation marks
omitted). The district court may consider such prelitigation conduct,
however, if raised as evidence that the government’s conduct before the
court was in bad faith or vexatious. See id.
14
The parties shall bear their own costs on appeal.