ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA.
Hunter and Garth, Circuit Judges and Weber*fn* , District Judge. Hunter, Circuit Judge, dissenting.
This appeal requires that we determine whether the phrase "unless . . . the position of the United States was substantially justified" in the Equal Access to Justice Act, 28 U.S.C. § 2412(d) (1) (A) (Supp. IV 1980), requires that a plaintiff be denied attorneys' fees when, in an action against the United States, the United States succeeds in its defense against one of plaintiff's claims, but does not prevail in its defense against the second of plaintiff's claims.
Because we conclude that the substantial justification of the United States in defending against one of plaintiff's claims does not render the position of the United States "substantially justified" when a litigant obtains the desired relief under a second claim, we reverse.
Appellants Katz and Mattis [hereinafter Katz] are reporters for the bankruptcy court for the Eastern District of Pennsylvania. They*fn1 initiated this action against William Foley, Director of the Administrative Office of the United States Courts ("A.O."), and two other court reporters, Abovitz and Nitchie, seeking an injunction restraining the A.O. from engaging Abovitz and Nitchie as reporters for the bankruptcy court. Katz advanced two theories in support of an injunction. He maintained (1) that Congress vested the authority to hire bankruptcy court reporters in the bankruptcy courts, not in the A.O., and (2) that the A.O. acted arbitrarily, capriciously, and in disregard of its own bid specifications in hiring Abovitz and Nitchie.
The district court rejected Katz's "authority" claim, but approved of Katz's second claim, finding that Abovitz and Nitchie "fail[ed] to meet any of the three standards set forth in . . . the bid solicitation under Item 5, Qualifications of Reporters." Goldhaber v. Foley, 519 F. Supp. 466, 471 (E.D. Pa. 1981).*fn2 Accordingly, the district court preliminarily enjoined the A.O. from awarding a contract for court reporting services to Abovitz, Nitchie, or any other bidder that did not qualify under the bid solicitation. Shortly thereafter the bid solicitation expired, and Katz and the A.O. stipulated that the action should be dismissed as moot. Katz has remained in his position as a court reporter for the bankruptcy court.
Katz then sought attorneys' fees and expenses under the Equal Access to Justice Act, 28 U.S.C. § 2412 (Supp. IV 1980). Section (d) (1) (A) of the Act provides that the court "shall award to a prevailing party other than the United States" fees and expenses, "unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust."*fn3 Katz contended that he was the "prevailing party" within the meaning of the Act and that the A.O. was not "substantially justified" in litigating the action. The government lacked substantial justification, Katz reasoned, because, on three occasions prior to the initiation of the action, the A.O. had been advised that Abovitz and Nitchie were unqualified to serve as bankruptcy court reporters. Katz argued that because the government "had notice that it was acting arbitrarily and capriciously" prior to the institution of the action, the A.O. was unjustified in defending the suit.
In an opinion delivered from the bench on March 19, 1982, the district court disposed summarily of Katz's contention that the government acted without "substantial justification" because the A.O. had been notified before trial that Abovitz and Nitchie were unqualified as reporters. "It is the government's reasonableness as a litigant that we must assess," the district court concluded, "not whether the [government's] prior actions which gave rise to the case were unreasonable." App. at 142.
The district court did not decide whether Katz was a "prevailing party" or whether the government was "substantially justified" in defending against Katz's claim that the A.O. acted arbitrarily and capriciously in hiring Abovitz and Nitchie because they did not qualify under the bid specifications. Rather, the district court concluded, the A.O. was plainly justified in defending against the first claim advanced by Katz: that Congress vested the authority to hire bankruptcy court reporters in the bankruptcy courts, not in the A.O. Because the government was substantially justified in defending against Katz's threshold claim of "no authority," the district court reasoned that the government was substantially justified in defending the entire action. The court reasoned that:
the mere fact that the government lost on this one issue does not mean that their position in the entire case was not substantially justified. We believe the Act contemplates a view of the entire proceedings, not an issue-by-issue analysis. The government need not produce a flawless case. Congress' choice of the word "substantially" indicates that there is some room for error. Taken as a whole, it is ...