Assn Amer Physn v. Clinton, Hillary R. , 187 F.3d 655 ( 1999 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 12, 1998 Decided August 24, 1999
No. 98-5048
Association of American Physicians and Surgeons, Inc.,
an Indiana not-for-profit corporation;
American Council for Health Care Reform,
a Virginia not-for-profit corporation;
National Legal & Policy Center,
a District of Columbia not-for-profit corporation,
Appellees
v.
Hillary Rodham Clinton,
wife of the President of the United States;
Donna E. Shalala, Secretary of the Department of
Health & Human Services, et al.
Appellants
---------
No. 98-5049
Association of American Physicians and Surgeons, Inc.,
an Indiana not-for-profit corporation;
American Council for Health Care Reform,
a Virginia not-for-profit corporation;
National Legal & Policy Center,
a District of Columbia not-for-profit corporation,
Appellees
v.
Hillary Rodham Clinton,
wife of the President of the United States, et al.
Ira C. Magaziner, White House Advisor,
Appellant
Appeals from the United States District Court
for the District of Columbia
(No. 93cv00399)
Jacob M. Lewis, Attorney, United States Department of
Justice, argued the cause for appellants Hillary Rodham
Clinton, et al. Frank W. Hunger, Assistant Attorney Gener-
al, and William Kanter and Michael S. Raab, Attorneys,
United States Department of Justice, were on brief.
Irvin B. Nathan, James L. Cooper and Nancy L. Perkins
were on brief for appellant, Ira C. Magaziner.
Thomas R. Spencer argued the cause for the appellees.
Robert C. Gill was on brief.
Before: Ginsburg and Henderson, Circuit Judges, and
Buckley, Senior Circuit Judge.
Opinion for the court filed per Curiam.
Per Curiam: The appellants, officials of the Executive
Branch of the United States Government, including presiden-
tial advisor Ira C. Magaziner, (collectively referred to as the
government) challenge the district court's December 22, 1997
award of attorney's fees to the appellees, Association of
American Physicians and Surgeons, American Council for
Health Care Reform and National Legal & Policy Center,
(collectively referred to as AAPS). The court awarded fees
under the common law on the ground that the government
litigated in bad faith and under the Equal Access to Justice
Act, 28 U.S.C. s 2412, (EAJA) on the ground that the govern-
ment's litigating position was not "substantially justified."
Because we conclude the district court's bad faith findings are
clearly erroneous, we reverse the fee award
and remand for further consideration.
I.
AAPS filed this action on February 24, 1993 alleging that
the government violated the Federal Advisory Committee
Act, 5 U.S.C. app. II, ss 1-15, (FACA) by failing to file an
advisory committee charter for the "President's Task Force
on National Health Care Reform" (Task Force) and by
denying access to meetings of both the Task Force and an
"interdepartmental working group" overseen by Task Force
member Magaziner. On March 3, 1993, in opposition to
AAPS's motion for preliminary injunction, the government
filed a declaration by Magaziner (Magaziner Declaration,
Declaration) which averred, inter alia, that "[o]nly federal
government employees serve as members of the interdepart-
mental working group." Joint Appendix (JA) 135. The
Declaration explained that membership included approxi-
mately 300 "full-time, permanent employees, who work for
the Executive office of the President, for federal agencies, for
members of Congress or for Senate or House committees,"
and 40 "special government employees" who "have been
employed by an agency or the Executive Office of the Presi-
dent for less than 130 days in a 365-day period, either with or
without compensation." JA 135-37. In addition, the Decla-
ration noted that the working group had "retained a wide
range of consultants, who attend working group meetings on
an intermittent basis, either with or without compensation."
JA 137.
On March 10, 1993 the district court issued a memorandum
opinion and order granting AAPS's preliminary injunction
motion. AAPS v. Clinton, 813 F. Supp. 82 (D.D.C. 1993).
The court held that the Task Force was an advisory commit-
tee and that it did not come within FACA's exemption for a
"committee that is composed wholly of full-time, or perma-
nent part-time, officers or employees of the Federal Govern-
ment," 5 U.S.C. app. II, s 3(2)(iii), because First Lady Hillary
Clinton, who chaired the Task Force, was not a federal
employee. The court also concluded, however, that the work-
ing group was not a FACA committee because it worked on
behalf of the Task Force and did not directly advise the
President. See 813 F. Supp. at 88-89 (finding interdepart-
mental working group (1) "directly compares" to task forces
found exempt from FACA in National Anti-Hunger Coali-
tion v. Executive Committee, 557 F. Supp. 524 (D.D.C.), aff'd,
711 F.2d 1071 (D.C. Cir. 1983), because it performed purely
"staff" functions and (2) "fully meets" regulatory exemption
from FACA in 41 C.F.R. s 101-6.1004(k), which "exclude[s]
from the Act's coverage '[m]eetings of two or more advisory
committee or subcommittee members convened solely to
gather information or conduct research for a chartered advi-
sory committee, to analyze relevant issues and facts, or to
draft proposed position papers for deliberation by the adviso-
ry committee or a subcommittee of the advisory commit-
tee' ").
On appeal this court reversed and remanded, concluding (1)
"[t]he question whether the President's spouse is 'a full-time
officer or employee' of the government is close enough for us
properly to construe FACA not to apply to the Task Force
merely because Mrs. Clinton is a member," AAPS v. Clinton,
997 F.2d 898, 910-11 (D.C. Cir. 1993), (AAPS I) and (2) the
record was insufficiently developed to determine whether all
of the working group's members were full-time federal em-
ployees or whether the working group was sufficiently struc-
tured so as to constitute a committee under FACA, id. at 915. The court explained:
When we examine a particular group or committee to
determine whether FACA applies, we must bear in mind
that a range of variations exist in terms of the purpose,
structure, and personnel of the group. Perhaps it is best
characterized as a continuum. At one end one can
visualize a formal group of a limited number of private
citizens who are brought together to give publicized
advice as a group. That model would seem covered by
the statute regardless of other fortuities such as whether
the members are called "consultants." At the other end
of the continuum is an unstructured arrangement in
which the government seeks advice from what is only a
collection of individuals who do not significantly interact
with each other. That model, we think, does not trigger
FACA.
Id. at 915.1 While the working group "seem[ed] more like a
horde than a committee," this court also noted that it had
been created "with a good deal of formality and [is] perhaps
better understood as a number of advisory committees." Id.
at 914.
Taking its cue from this court's language in AAPS I, the
government, in its first submission to the district court follow-
ing remand, adopted what came to be known as the "wander-
ing horde" theory of the case. Accordingly, the government
proposed that discovery be limited to whether the working
group's "structure, personnel and purpose" were such that it
was a FACA committee, regardless whether it fell within the
__________
1 The AAPS I court rejected the district court's determination
that the working group was not a FACA committee because its
members acted merely as advisory staff to the Task Force and did
not directly advise the President. The court reasoned that because
the Task Force was not itself a FACA Committee, the working
group was "the point of contact between the public and the govern-
ment" and could therefore not be exempt from FACA based on its
subsidiary relationship to the Task Force. AAPS I, 997 F.2d at
912-13.
full-time employee exemption. The discovery that followed
was contentious and, in response to a motion to compel that
AAPS filed, the district court set out what it viewed as the
issues before it. The first issue was whether the "formality
and structure of the working group ... [was such that] there
are advisory committees within the working group, even if the
working group itself is not an advisory committee." AAPS v.
Clinton, 837 F. Supp. 454, 456 (D.D.C. 1993). Although, as
we note below, the government had not argued that the
working group was exempt from FACA because it was com-
posed only of full-time government employees, the other
issues the district court thought relevant to discovery in-
volved the "truth of the government's claim that all members
of the working groups are full-time officers or employees of
the government." Id. The district court then issued an
order (dated November 9, 1993) granting the motion to
compel and holding AAPS entitled to sanctions against the
government under Fed. R. Civ. P. 37, although no sanctions
were ever assessed.
On April 11, 1994 AAPS filed a summary judgment motion
accompanied by a list of individuals who it claimed were
members of the working group but who did not meet the
requirements of FACA's federal employee exemption. The
government filed a cross-motion for summary judgment on
May 4, 1994 and argued that the working group was not a
FACA "committee" because it lacked " 'an organized struc-
ture, a fixed membership, and a specific purpose' " and was
not operated "with 'formality.' " Cross-Motion Memorandum
at 2 (quoting AAPS, 997 F.2d at 914). In addition, the
government stated in a footnote:
Defendants do not argue here that the interdepartmental
working group qualified for the FACA's exemption for
groups comprised wholly of full-time federal employees.
As defendants have stated, the "members" of the work-
ing group were either regular employees of the Execu-
tive Branch or Congress or special government employ-
ees. In light of the Court of Appeals' discussion of the
term "full-time," see AAPS I, 997 F.2d at 914-15, howev-
er, it would be a substantial burden for defendants and
this Court to make a person-by-person assessment that
each such "member" worked "full-time." Because it is
clear that the interdepartmental working group and its
working groups lacked the features of FACA committees
identified by the court, it is not necessary for the defen-
dants to attempt to prove the applicability of the FACA's
exemption in any event.
Id. at 2 n.1 (emphasis added).
On May 16, 1994 AAPS moved to hold Magaziner in
contempt for having "made false and misleading statements
under penalty of perjury in his March 3, 1993 Declaration,"
5/16/94 Memorandum in Support of Motion for Sanctions and
Rule for Contempt at 20, and for sanctions against the
government for "defending the case by asserting facts they
knew not to be true" (namely "that only full-time employees
of the federal government ... were participants on the Task
Force working groups"), id. at 18, 16, and for having "con-
stantly refused to comply with Plaintiff's discovery requests
and [the district court's] November 9, 1993 Order compelling
discovery," id at 18.
At a hearing on July 25, 1994 the district court denied the
cross-motions for summary judgment and reserved ruling on
the contempt and sanctions motion. See JA 832-33. There-
after the government made the then defunct working group's
documents available for inspection and as a consequence on
December 21, 1994 the district court issued an order declar-
ing the merits, and the matter of civil contempt, moot.
AAPS v. Clinton, 879 F. Supp. 106 (D.D.C. 1994). In the
same order the court referred Magaziner's possible perjury
and criminal contempt to the United States Attorney for the
District of Columbia "for further development of the facts in
order to determine whether a criminal offense has been
committed." Id. at 108. The court also set a status confer-
ence "to schedule consideration of plaintiffs' collateral re-
quests for other sanctions and attorneys' fees and costs." Id.
at 109.
On August 3, 1995 then United States Attorney Eric H.
Holder, Jr. wrote the district court a letter stating: "The
results of our investigation demonstrate that there is no basis
to conclude that Mr. Magaziner committed a criminal offense
in this matter. There is no significant evidence that his
declaration was factually false, much less that it was willfully
and intentionally so." JA 1990. On August 30, 1995, after
reading a transcript of an August 11 status conference,
Holder again wrote the court, to "clarify" that he did not
intend to imply in the August 3 letter that he had found "a
willful or deliberate attempt to mislead the Court on the part
of the government." JA 2031.2
After additional briefing, the district court issued an order
and opinion dated December 18, 1997 (as amended December
27, 1997) finding the government's conduct "sanctionable" and
awarding AAPS attorney's fees and costs of $285,864.78 both
under the common law's "exception" to the "American rule"
against attorney fees "where the losing party has acted in
'bad faith,' " American Hosp. Ass'n v. Sullivan, 938 F.2d 216,
219 (D.C. Cir. 1991) (citations omitted), and under the EAJA,
which provides that "a court shall award to a prevailing party
other than the United States fees and other expenses ...
unless the court finds that the position of the United States
was substantially justified or that special circumstances make
an award unjust," 28 U.S.C. s 2412(d)(1)(A). The district
court first found that Magaziner (as well as any staff and
counsel who participated in drafting the Magaziner Declara-
tion) had acted in bad faith in four respects in making the all-
government-employee assertion. The court further found
that the government acted in bad faith by failing (1) "to
correct or change" Magaziner's "factual representation to the
court" that "all 'members' of the working group were federal
employees" or (2) to "timely advise t[he] court that it was not
making the 'all-employee' argument attributed to the govern-
__________
2 Holder wrote specifically in response to the district court's
observation at the conference that " 'the thrust' " of Holder's Au-
gust 3, 1995 letter was "that 'the government and the government's
lawyers have misled or misrepresented facts to the Court,' " JA
2030 (quoting district court).
ment by the Court of Appeals and by plaintiffs." AAPS v.
Clinton, 989 F. Supp. 8, 11 (1997). Having thus "separately
determined that the United States in this case did not act in
good faith, and that its conduct is therefore sanctionable," the
district court stated that "[t]his same conduct leads the court
to conclude that the positions taken by the United States in
this litigation were not substantially justified." 989 F. Supp.
at 13. Having found "that the defendants acted in bad faith
until August 1994, when they determined to settle or moot
this case," 989 F. Supp. at 15, the court awarded fees for
work performed before that date in excess of the EAJA
hourly cap,3 noting: "The Court of Appeals affirmed this
court on the one prior occasion where this court granted an
award of attorney's fees against the government for acting in
'bad faith, vexatiously, wantonly, or for oppressive reasons,' "
id. at 15 (citing American Hospital Ass'n v. Sullivan, 938
F.2d 216 (D.C. Cir. 1991) (upholding fee award based on
common-law exception, notwithstanding plaintiff was ineligi-
ble for any fee under EAJA s 2412(d)(2)(B))). The govern-
ment and Magaziner appeal the fee award and its underlying
findings of bad faith.4
II.
We review an EAJA fee award for abuse of discretion and
"will reverse the district court if its decision rests on clearly
erroneous factual findings or if it leaves us with a definite and
firm conviction that the court below committed a clear error
of judgment in the conclusion it reached upon a weighing of
__________
3 When the sanctioned conduct occurred, the EAJA capped fee
award rates at $75 per hour. See 28 U.S.C. s 2412(d)(2)(A) (1994).
In 1996 the hourly cap was raised to $125. See Pub. L. No.
104-121, s 232(b)(1), 110 Stat. 847, 863 (1996).
4 AAPS disputes Magaziner's standing to appeal the findings of
bad faith regarding the Magaziner Declaration. Because those
findings underlie the district court's finding of bad faith by the
government, whose standing is unchallenged, we must address them
in any event to resolve the government's appeal. Accordingly, we
need not decide whether Magaziner himself has standing.
the relevant factors." F.J. Vollmer Co. v. Magaw, 102 F.3d
591, 595-96 (D.C. Cir. 1996). Similarly, "the question of bad
faith in the context of the common law exception to the
American rule on counsel fees ... is one of fact requiring a
clearly erroneous standard of review." American Hosp.
Ass'n v. Sullivan, 938 F.2d at 222. Nevertheless, the sub-
stantive standard for a finding of bad faith is "stringent" and
"attorneys' fees will be awarded only when extraordinary
circumstances or dominating reasons of fairness so demand."
Nepera Chem., Inc. v. Sea-Land Serv., Inc., 794 F.2d 688, 702
(D.C. Cir. 1986). Further, the finding of bad faith must be
supported by "clear and convincing evidence," see Shepherd v.
American Broadcasting Cos., Inc., 62 F.3d 1469, 1476-78
(D.C. Cir. 1995), which "generally requires the trier of fact, in
viewing each party's pile of evidence, to reach a firm convic-
tion of the truth on the evidence about which he or she is
certain." United States v. Montague, 40 F.3d 1251, 1255
(D.C. Cir. 1994). Because we find insufficient evidence in the
record to satisfy the stringent bad faith standard, we hold
that the district court's bad faith findings are clearly errone-
ous.
We first conclude there is an inadequate basis for the
court's finding that the government acted in bad faith by not
"timely advis[ing]" the court that "it was not making the 'all-
employee' argument attributed to the government by the
Court of Appeals and by plaintiffs." 997 F. Supp. at 11.
Assuming that the government affirmatively invoked the exemtion
in the district court as a defense of working group documents, a
fact that is not at all clear from the record 5 government informed the
court, albeit in a footnote, in its May 4, 1994 memorandum in
support of summary judgment, quoted supra pp. 6-7, that it
was not claiming the federal employee exemption for the
working group. At worst the government's failure to do so
earlier demonstrates only that it wanted to keep its options
open--and so it remained silent.
The government was under no "clear" duty before then
to disavow it and therefore its silence, while apparently
misleading, does not amount to bad faith. See American
Hosp. Ass'n v. Sullivan, 938 F.2d at 222 ("[B]ad faith may be
found where a party has violated a 'clear [legal] duty.' ")
(Ginsburg, J., dissenting, quoting majority opinion, 938 F.2d
at 219).
We also find no bad faith in the government's failure "to
correct or change" the Magaziner Declaration's representa-
tion to the court that all members of the working group were
federal employees. Given that the government did not press
the federal employee exemption, the representation, if false,
was not material and therefore cannot be characterized as
made in bad faith. Cf. Whitney Bros. Co. v. Sprafkin, 60
F.3d 8, 14-15 (1st Cir. 1995) (rejecting "bad faith" finding
based on alleged perjury where district court "neither ex-
plained why it concluded that the [defendants] had perjured
themselves nor explained why any allegedly untrue state-
ments were material"). Further, this finding cannot stand
because the district court's subsidiary findings of bad faith in
drafting the Magaziner Declaration, on which the court rested
__________
5 The government's only explicit reference to the exemption's
application to the working group was in a footnote in its March 3,
1993 memorandum opposing temporary injunctive relief. See JA
117 n.26 ("If plaintiffs are concerned that working group members
have met with Mr. Magaziner, such meetings would not be covered
by FACA. All working members, like Mr. Magaziner, are federal
employees."). The Magaziner Declaration described the working group as made up exclusively
of "federal government employees" but it made no mention of the FACA federal employee
exemption and did not claim the employee members were "full-time, or permanent
part-time" government employees, a necessary element of the exemption.
the finding, are not supported by clear and convincing evi-
dence.
The court first found that the Declaration "clearly implies
that consultants are a category completely distinct from that
of special government employees" but that Magaziner (as well
as "his staff and the government's lawyers") must have
known that those terms " 'were used loosely and inconsistent-
ly among and between the different agencies, and not every-
one agreed in their definitions.' " 989 F. Supp. at 11 (quoting
8/3/95 Holder letter at 12 (JA 2000)). The court cited no
evidence, however, that at the time the Declaration was
drafted Magaziner disbelieved the distinction between em-
ployees and consultants (only the former of which he charac-
terized as working group "members") based on the degree of
their participation or, alternatively, that such a distinction
was objectively unreasonable. Cf. Whitney Bros. Co., 60 F.3d
at 14 (rejecting bad faith finding based on "frivolous" defens-
es because district court did not explain "how these defenses
are frivolous or why they were objectively or subjectively
unreasonable at the time they were advanced"). In fact, in
AAPS I, this court concluded that the level of the consultants'
involvement was a "key issue" in determining whether the
consultants were members of the working group, although it
found there was insufficient record evidence then to resolve
it. 997 F.2d at 915. We therefore cannot say that the
Declaration's characterization of the "consultants" as "inter-
mittent" attendants at working group meetings, as distinct
from the more frequently involved members (including special
government employees), manifested bad faith. Cf. Johnson
Controls, Inc. v. United Ass'n of Journeymen & Apprentices
of Plumbing & Pipe Fitting Indus. of U.S. & Can., 39 F.3d
821, 826 (7th Cir. 1994) (upholding denial of attorney's fee
award because "this case presents at least a colorable ques-
tion of law" and court "c[ould] not conclude, therefore, that
[the plaintiff's] arguments before the district court and on
appeal were frivolous or in bad faith").
Second, the district court found that the Magaziner Decla-
ration was "dishonest" in representing that "people are em-
ployees when there was never a piece of paper created that
said they were employees--with or without pay." 997
F. Supp. at 11. Again there is an insufficient basis for a bad
faith finding. The Declaration did not claim employment
paperwork had been created and there is no evidence in the
record that Magaziner knew at the time of his Declaration
whether it had been. He described a "special government
employee" simply as one who had been "employed" by the
government "for less than 130 days in a 365-day period,
either with or without compensation," with no mention of
employment formalities such as paperwork. As the govern-
ment notes, such paperwork, while perhaps the norm, is not a
condition of special government employment as statutorily
defined. See 18 U.S.C. s 202(a) ("[T]he term 'special Govern-
ment employee' shall mean an officer or employee of the
executive or legislative branch of the United States Govern-
ment, of any independent agency of the United States or of
the District of Columbia, who is retained, designated, appoint-
ed, or employed to perform, with or without compensation,
for not to exceed one hundred and thirty days during any
period of three hundred and sixty-five consecutive days,
temporary duties either on a full-time or intermittent basis, a
part-time United States commissioner, a part-time United
States magistrate ...").
Third, the district court found that the Declaration, "in an
effort to avoid discovery and block live testimony, improperly
represented as a fact that all 'members' of the working group
were federal employees." 997 F. Supp. at 11. As we noted
above, there is no clear and convincing evidence that the
Declaration's drafters did not reasonably believe the repre-
sentation to be true when made.
Fourth, the district court found bad faith in that the
Declaration "was actually false because of the implication of
the declaration that 'membership' was a meaningful concept
and that one could determine who was and was not a 'mem-
ber' of the working group." 997 F. Supp. at 11. It is not
clear on what basis the district court found that membership,
either when the Declaration was written or through the life of
the working group, was not a meaningful concept. Holder
found only that membership was a "fuzzy" concept. In its
discovery responses the government conceded simply that
membership was not a "significant" or "operative" concept,
but never that it was not meaningful (in the sense that one
could not distinguish members from non-members). Al-
though the concept of membership may not have been crystal
clear, it did have meaning--indeed, the district court applied
the concept in choosing the government's list of 630 members
over the list of 1000 alleged members presented by AAPS.
See AAPS, 879 F. Supp. at 105. The Declaration may have
given the impression that determining membership was easy;
nevertheless, because there is insufficient evidence that, in
distinguishing between members and non-members, the Dec-
laration's drafters intended to mislead the court, it was
clearly erroneous for the court to find bad faith based on the
distinction.
For the preceding reasons, we hold that the district court's
findings of bad faith, both in the Magaziner Declaration's
drafting and in the government's litigation conduct, are with-
out clear and convincing evidentiary support and that the
attorney's fee award therefore cannot be upheld insofar as it
rests on bad faith. We further hold that the court's award
cannot be sustained under the EAJA on the basis that the
government's litigation position was not substantially justified
because the court expressly based the award on its predicate,
and inadequately supported, bad faith findings. Accordingly, we re-
verse the attorney's fee award and remand for further consid-
eration by the district court. While our decision forecloses an
award based on the government's alleged assertion of the
federal employee exemption (whether for bad faith or under
the EAJA), the district court may, if it finds the evidence so
warrants, award fees under the EAJA or Fed. R. Civ. P. 11
based on another asserted defense (such as the government's
argument that the working group was not a FACA committee
because it "d[id] not offer advice or recommendations directly
to the President," JA 120, which the record suggests may not
be true, see, e.g., JA 2262). In addition or in the alternative,
the district court may consider assessing the sanctions (under
Fed. R. Civ. P. 37) to which the court found AAPS was
entitled in its November 9, 1993 order granting AAPS's
motion to compel. See AAPS, 837 F. Supp. at 354.
So ordered.