UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


ASSN AMER PHYSN

v.

CLINTON, HILLARY R.


98-5048c

D.C. Cir. 1999


*	*	*


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


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 




__________

n 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


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


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'


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


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




__________

n 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


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 




__________

n 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


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


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 




__________

n 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


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


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


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.