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


HALVERSON, PAUL D.

v.

SLATER, RODNEY E.


99-5115a

D.C. Cir. 2000


*	*	*


Tatel, Circuit Judge: After a previous panel of this court  invalidated
a final rule issued by the Department of Trans- portation, the
prevailing parties, appellants herein, filed an  application for
attorneys' fees and costs pursuant to the  Equal Access to Justice
Act. The district court denied the  application, finding the
Department's defense of the rule,  though unsuccessful, "substantially
justified" within the  meaning of the Act. Because the district court
failed ade- quately to explain its decision, and because we find
unpersua- sive the Department's argument that its position was
substan- tially justified, we grant appellants' application for fees
and  expenses and remand for the district court to calculate the 


I


The Great Lakes Pilotage Act of 1960, 46 U.S.C. ss 9301 et  seq.,
requires that foreign ships traveling the Great Lakes  take on an
experienced American or Canadian pilot. Id.  s 9302(a). The Act
directs the Secretary of Transportation  to set standards for pilot
qualifications, selection, registration,  training, and working
conditions. Id. s 9303.


Until 1995, the Secretary had delegated Pilotage Act re- sponsibilities
to the United States Coast Guard as permitted  by 46 U.S.C. s 2104(a):
"The Secretary may delegate the  duties and powers conferred by this
subtitle [Subtitle II,  titled 'Vessels and Seamen'] to any officer,
employee, or  member of the Coast Guard, and may provide for the sub-
delegation of those duties and powers." Pilotage Act respon-
sibilities are among the Secretary's Subtitle II duties. Pursu- ant to
a final rule issued on December 11, 1995, the Secretary  transferred
certain Great Lakes pilot responsibilities from the  Coast Guard to
the St. Lawrence Seaway Development Cor- poration. Organization and
Delegation of Powers and 


Duties; Transfer of Great Lakes Pilotage Authority From  the Coast
Guard to the Saint Lawrence Seaway Development  Corporation, 60 Fed.
Reg. 63,444 (Dec. 11, 1995). In support  of this transfer, the
Secretary invoked his general delegation  authority under 49 U.S.C. s
322(b): "The Secretary may  delegate, and authorize successive
delegations of, duties and  powers of the Secretary to an officer or
employee of the  Department."


Troubled by the safety implications of the transfer, appel- lants, two
Great Lakes pilots and two associations of Great  Lakes pilots, filed
suit in the United States District Court for  the District of Columbia
claiming that the delegation exceed- ed the Secretary's authority
under section 2104(a). Accord- ing to the Pilots, that provision
permits the Secretary to  transfer Pilotage Act responsibilities only
to the Coast Guard,  not to the St. Lawrence Seaway Development
Corporation.  The Department responded that section 2104(a) does not
limit  the Secretary's general authority to delegate responsibilities 
pursuant to section 322(b). Granting summary judgment for  the
Department, the district court found section 2104(a) "fully 
consistent with [section 322(b)'s] broader language." Halver- son v.
Pena, 1996 WL 217885, *6 (D.D.C. 1996).


This court reversed. Halverson v. Slater, 129 F.3d 180  (D.C. Cir.
1997). Applying step one of the Chevron frame- work, see Chevron,
U.S.A., Inc. v. Natural Resources Defense  Council, Inc., 467 U.S.
837, 842 (1984), the panel "conclude[d]  that the plain meaning of
section 2104(a) limits delegation of  [Pilotage Act] functions to the
United States Coast Guard and  that section 322(b) cannot fairly be
construed to expand the  limitation." 129 F.3d at 181. The panel found
that the  Secretary's interpretation of section 2104(a) violated three
 separate canons of construction: it "plainly violates the famil- iar
doctrine that the Congress cannot be presumed to do a  futile thing,"
id. at 185; it "runs afoul of the cardinal canon of  statutory
construction that '[w]e must read the statutes to  give effect to each
if we can do so while preserving their  sense and purpose,' " id.
(quoting Watt v. Alaska, 451 U.S.  259, 267 (1981)); and it is
"irreconcilable with the statutory  construction principle, expressio


that is, the 'mention of one thing implies the exclusion of  another
thing,' " 129 F.3d at 185 (quoting Ethyl Corp. v. EPA,  51 F.3d 1053,
1061 (D.C. Cir. 1995)). The Secretary's asser- tion that section
2104(a) has wartime significance, the panel  said, was "patently
erroneous." 129 F.3d at 185. Concluding  that "even if section
322(b)'s scope is ambiguous, requiring  recourse to Chevron step two,
we would be compelled to  reject the Secretary's interpretation as
unreasonable because  it 'would deprive [section 2104(a)] of virtually
all effect,' " the  panel remanded to the district court with
instructions to  vacate the final rule. Id. at 189 (quoting American
Fed'n of  Gov't Employees v. FLRA, 798 F.2d 1525, 1528 (D.C. Cir. 
1986)) (alternation in original).


The Pilots then applied for attorneys' fees and expenses  under the
Equal Access to Justice Act, 28 U.S.C. s 2412(d).  The EAJA provides
that "a court shall award to a prevailing  party other than the United
States fees and other expenses  ... 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 ... unless the court finds that the
position of the  United States was substantially justified or that
special cir- cumstances make an award unjust." 28 U.S.C.  s
2412(d)(1)(A). The Secretary neither contested the Pilots'  status as
prevailing parties nor claimed the existence of  "special
circumstances." Instead, the Secretary argued that  his interpretation
of section 322(b) as authorizing the delega- tion of Pilotage Act
responsibilities to the St. Lawrence  Seaway Development Corporation
was "substantially justi- fied." The district court agreed. Describing
the issue as a  "straightforward, almost textbook, administrative law
prob- lem that was resolved by using well-established general prin-
ciples of statutory interpretation," it denied the Pilots' EAJA 
application. Halverson v. Slater, No. 96-0028, Mem. Op. at 9  (D.D.C.


II


Standards for resolving EAJA fee applications have  emerged from a
growing body of case law. The Government 


has the burden of proving that its position, including both the 
underlying agency action and the arguments defending that  action in
court, was "substantially justified" within the mean- ing of the Act.
See Wilkett v. ICC, 844 F.2d 867, 871 (D.C.  Cir. 1988).
"Substantially justified" means "justified in sub- stance or in the
main--that is, justified to a degree that could  satisfy a reasonable
person. That is no different from ...  [having] a reasonable basis
both in law and fact." Pierce v.  Underwood, 487 U.S. 552, 565 (1988)
(internal quotation  marks and citation omitted). While a court's
"merits reason- ing may be quite relevant to the resolution of the
substantial  justification question," we have cautioned that "[t]he
inquiry  into the reasonableness of the Government's position ... may 
not be collapsed into our antecedent evaluation of the merits,  for
the EAJA sets forth a distinct legal standard." F.J.  Vollmer Co.,
Inc. v. Magaw, 102 F.3d 591, 595 (D.C. Cir.  1996) (internal quotation
marks omitted). For example, "be- cause 'unreasonable' may have
different meanings in different  contexts, even the presence of that
term or one of its syn- onyms in the merits decision does not
necessarily suggest  that the Government will have a difficult time
establishing  that its position was substantially justified." Id. "The
rele- vance of a court's reasoning on the merits to the reasonable-
ness inquiry under the Equal Access Act thus depends on the  nature of


Appellate courts review district court EAJA decisions for  abuse of
discretion. See Pierce, 487 U.S. at 563. Giving  substantial deference
to the district court, we will reverse if  we have "a definite and
firm conviction that the court below  committed a clear error of
judgment in the conclusion it  reached upon a weighing of the relevant
factors." Vollmer,  102 F.3d at 596 (internal quotation marks and
citations omit- ted). In exercising our appellate responsibility, we
recognize  the awkward position in which the EAJA sometimes places 
our district court colleagues. Where, as here, the district  court
originally accepts the Government's position and is then  reversed on
appeal, the EAJA requires the district court to  determine whether the
very Government argument it previ- ously accepted was not
substantially justified, i.e., unreason-


able. Yet district courts have awarded fees just in such  delicate
circumstances. See, e.g., Kooritzky v. Herman,  6 F. Supp. 2d 1, 4
(D.D.C. 1997), rev'd in part on other  grounds, 178 F.3d 1315 (D.C.
Cir. 1999).


With these considerations in mind, we turn first to an  examination of
the reasons the district court gave in support  of its finding that
the Department's position at the agency  level was substantially
justified. The district court attributed  great significance to the
Department's reasons for transfer- ring Pilotage Act functions to the
St. Lawrence Seaway  Development Corporation, pointing out that two
studies, one  by the Department's Inspector General, had raised
serious  questions about the Coast Guard's stewardship. See Halver-
son, Mem. Op. at 4. The district court also relied heavily on  the
process that led to the promulgation of the final rule:


Thus, what this rather extended discussion of the Secre- tary's
delegation decision shows is a history of wide- spread criticism from
internal staff studies, as well as  members of Congress and the
industry, of the failure of  the Coast Guard to carry out its
responsibilities under  [the Pilotage Act], administrative changes to
remedy the  problem, of the failure of those administrative changes to
 improve the situation, formation of an interagency task  force to
study the issue, recommendations by that task  force (concurred in by
the Coast Guard) to delegate  certain functions to [the St. Lawrence
Seaway Develop- ment Corporation], and a formal rule-making process 
noticed in the Federal Register with submission of more  than 100
comments, before the Secretary made the final  decision to transfer
functions, which was then challenged  by Plaintiffs in this lawsuit.


Id. at 6. Had the Pilots prevailed on a claim that the transfer  was
arbitrary and capricious, such factors would indeed have  been
relevant to whether the Department's position was  substantially
justified. But the merits panel invalidated the  final rule at Chevron
step one, so neither the policy reasons  motivating the transfer nor
the process by which the decision  was made has anything at all to do
with evaluating the 


strength of the Department's claim that section 322(b) autho- rized the
delegation.


Also in support of its conclusion that the Department's  position at
the agency level was substantially justified, the  district court said
that "there was virtually no question raised  about the legal
authority of the Secretary to proceed with the  delegation of
functions, and certainly no serious legal question  raised by the
Plaintiffs themselves." Id. at 7. Of course, had  no one questioned
the Department's authority, that fact might  well have been relevant
to the substantial justification analy- sis. But that isn't what
happened. True, the Pilots did not  file written comments challenging
the Department's legal  authority, but two groups of Congressmen did,
and the De- partment discussed the issue at some length in the final
rule.  See Organization and Delegation of Powers and Duties;  Transfer
of Great Lakes Pilotage Authority From the Coast  Guard to the Saint
Lawrence Seaway Development Corpora- tion, 60 Fed. Reg. at


Turning to the second stage of the EAJA analysis--the  district court's
evaluation of the Department's position before  the merits panel--we
are guided by our decision in Vollmer.  There, we concluded that the
district court, having "[s]imply  repeat[ed] arguments made ... before
the merits panel with- out offering any explanation why those
arguments showed the  [Government's] position was reasonable," had
"largely failed  to grapple with the reasoning underlying this court's
merits  decision." Vollmer, 102 F.3d at 596. In this case, the
district  court explained the issue before the merits panel: "The 
question to be decided in the case was whether the broad  grant of
authority in Section 322(b) was limited by the specific  provisions of
Section 2104(a)...." See Halverson, Mem. Op.  at 8. The district court
repeated the Department's position  before the merits panel: "The
Secretary argued, in essence,  that Section 322(b) should be read
expansively to give him  largely unfettered discretion to delegate
duties and powers to  agency officers and employees." Id. The district
court  characterized the issue: "[T]his case presented a rather 
straightforward, almost textbook, administrative law prob- lem...."
Id. at 9. The district court described the panel's 


holding: "In its opinion, the Court of Appeals then engaged  in a
rather lengthy, detailed Chevron analysis, concluding,  under both
step one and step two of Chevron, that 'the  language of section
2104(a) compels the conclusion that the  Congress did not intend to
authorize the delegation of [Pilot- age Act] functions to a non-Coast
Guard official.' " Id. (quot- ing Halverson, 129 F.3d at 185). But
Vollmer requires that  the district court do more than explain,
repeat, characterize,  and describe the merits panel decision. Under
Vollmer, the  district court must analyze the merits panel's reasoning
to  determine whether the Department's position, though reject- ed,
was substantially justified.


The closest the district court comes to such an analysis are  three
observations: "There was no existing case law as to the 
interpretation of either [section 322(b) or section 2104(a)]."  "[T]he
legislative history was sparse and not dispositive."  "There was
nothing egregious, extreme, frivolous, or foolish  in the positions
taken by either party." Halverson, Mem. Op.  at 7, 9. Although each of
these observations may well be  true, none answers the question before
the district court-- was the Department's position before the merits
panel sub- stantially justified within the meaning of EAJA?


Take the district court's first point. Had contrary case law  existed,
that fact certainly would have been relevant to the  issue before the
district court, for the Department's position  most likely would not
have been substantially justified. But  the absence of contrary case
law does not necessarily lead to  the opposite conclusion, i.e., that
the Department's position  was substantially justified. There may be
no contrary case  law for reasons having nothing at all to do with
whether the  Department's position had merit. Perhaps until now secre-
tarial delegations under sections 2104(a) or 322(b) had never  been
challenged. Or perhaps it had never occurred to the  Department to
argue that section 2104(a) permitted delega- tion to any agency other
than the Coast Guard.


The district court's observation about the sparseness of  legislative
history likewise tells us nothing about whether the  Department's
position was substantially justified. Recall that 


the merits panel's decision rested on its conclusion that "the  plain
meaning of Section 2104(a) limits delegation of [Pilotage  Act]
functions." Halverson, 129 F.3d at 181. As we have  explained,
"[c]ryptic" legislative history "surely is not enough  to overcome the
plain meaning of the statute." Ethyl Corp.,  51 F.3d at 1063. Although
at the Department's urging the  merits panel did consider section
2104(a)'s legislative history,  it concluded that "[t]he Secretary's
attempts to overcome the  plain meaning of section 2104(a) by
reference to its legislative  history are equally unsuccessful."


Finally, a Government position that is neither "foolish,"  "egregious,"
"extreme," nor "frivolous" is not necessarily  substantially
justified. For EAJA purposes, substantially  justified means
"justified in substance or in the main--that is,  justified to a
degree that could satisfy a reasonable person."  Pierce, 487 U.S. at
565 (internal quotation marks and citation  omitted). Although a
frivolous Government argument is obvi- ously neither reasonable nor
substantially justified, the oppo- site is not necessarily true: an
unreasonable--not substantial- ly justified--argument need not be
frivolous. Words like  "foolish," "egregious," and "extreme" are
equally weak mea- sures of EAJA fee liability.


For all of these reasons, we cannot sustain the district  court's
finding that the Department's position either at the  agency level or
in litigation was substantially justified. We  thus turn to our own
analysis of the Department's argument  that its reliance on section
322(b) was substantially justified.  See Jacobs v. Schiffer, No.
99-5217 (D.C. Cir. March 7, 2000),  Slip. Op. at 7-8 ("Because the
question of whether the  Department's position was substantially
justified can be an- swered as a matter of law, a remand is


In its brief here and in the district court, the Department  identified
three factors it claims show that its position was  reasonable. Two of
these--the absence of previous chal- lenges to the Secretary's
delegation authority and section  2104(a)'s legislative history--were
unsuccessfully relied on by  the district court. For its third
justification, the Department 


states that "the interpretation the government espoused with  respect
to the meaning of section 2104(a) was supported  under the precedent
cited in the Federal Register notice and  also argued in Court." What
precedents? Reviewing the  final rule ourselves, we can find no
citations to relevant  decisions of either this court or any other
court. If the  Department means to refer to precedents cited in its
brief  before the merits panel, the Department should have identi-
fied the cases and explained why they show that its position  was
substantially justified. Having done neither, and falling  far short
of sustaining its burden of proof, the Department's  brief simply
repeats in summary fashion the arguments made  before the merits


The Department has failed to demonstrate that its position  was
substantially justified for a very good reason: the merits  panel, as
even a cursory review of its opinion reveals, found  the Department's
position entirely without merit. Rejecting  the Department's section
322(b) argument on Chevron step  one grounds, the panel held that "the
plain meaning of section  2104(a) limits delegation of [Pilotage Act]
functions to the  United States Coast Guard and that section 322(b)
cannot  fairly be construed to expand the limitation." Halverson, 129 
F.3d at 181. The panel reached this conclusion through an  elementary
application of three standard canons of statutory  construction,
finding resort to other tools of statutory con- struction or
legislative history entirely unnecessary. "[E]ven  if section 322(b)'s
scope is ambiguous, requiring recourse to  Chevron step two," the
panel concluded, it was "compelled to  reject the Secretary's
interpretation as unreasonable because  it 'would deprive [section
2104(a)] of virtually all effect.' " Id.  at 189 (quoting American
Fed'n of Gov't Employees, 798 F.2d  at 1528).


Put simply, not only did the merits panel think the issue  before it
was easy, but we can find not even a wisp of a  suggestion that it
gave any credence to the Department's  argument that section 322(b)
authorized delegation of Pilot- age Act responsibilities to the St.
Lawrence Seaway Develop- ment Corporation. And most important, the
Department has  offered us no persuasive reason for believing that


issue over "which reasonable minds could differ." Halverson,  Mem. Op.
at 9. If the Department's position in this case was  substantially
justified, we can hardly imagine an EAJA case  that the Government
will ever lose.


In reaching our conclusion, we emphasize that we have not  relied
solely on the fact that the merits panel resolved this  case on
Chevron step one grounds. As we made clear in  Vollmer, because the
EAJA has its own standard, "[t]he  inquiry into the reasonableness of
the Government's position  ... may not be collapsed into our
antecedent evaluation of  the merits...." Vollmer, 102 F.3d at 595
(internal quotation  marks omitted); see also Cooper v. United States
R.R. Retire- ment Bd., 24 F.3d 1414, 1417 (D.C. Cir. 1994) (finding an
 agency's decision, which was overturned as unsupported by 
substantial evidence, not substantially justified because it  "lacked
a reasonable factual basis") (emphasis omitted);  Wilkett, 844 F.2d at
871 (noting that some arbitrary and  capricious agency actions, such
as an agency's "failure to  provide an adequate explanation for its
actions or failure to  consider some relevant factor in reaching its
decision, may  not warrant a finding that an agency's action lacked
substan- tial justification") (citing Federal Election Comm'n v. Rose,
 806 F.2d 1081, 1089 (D.C. Cir. 1986)). Just as Vollmer's  EAJA
determination did not rest entirely on the merits  panel's conclusion
that the agency's position was unreason- able, we have not based our
EAJA determination solely on  the merits panel's conclusion that
Congress has "directly  spoken to the precise question at issue."
Chevron, 467 U.S.  at 842. While this Chevron case turned out to be
quite easy,  other Chevron step one cases have presented quite
difficult  issues and involved "substantially justified" arguments on 
both sides. A prime example is our decision in Martini v.  Federal
National Mortgage Ass'n, 178 F.3d 1336 (D.C. Cir.  1999). A Title VII
case in which the Government ultimately  prevailed, Martini considered
whether the statute requires  complainants to wait one hundred eighty
days after filing a  complaint with the Equal Employment Opportunity
Commis- sion before suing in federal court. Finding that it did, we 


considered the relevant statute and surrounding provisions,  evaluated
the legislative history, found inconclusive the appli- cation of
several canons of construction, and inquired into the  purpose of the
statute before resting our decision on an  ancillary provision that
made Congress's intent sufficiently  clear to resolve the case at
Chevron step one. Id. at 1340-48.  By comparison, the merits panel's
rejection of the Depart- ment's argument in this case rested on the
easily ascertain- able plain meaning of one provision, section


A final point about our analysis of the merits panel's  decision. The
panel characterized the Department's position  in various ways,
including "patently erroneous" and "irrecon- cilable with" canons of
construction. Halverson, 129 F.3d at  185. Of course, not all panels
use language the same way.  Another panel equally unpersuaded by the
Department might  have used words like "unsupported," "unconvincing,"
or sim- ply "without merit." We thus think it would be unwise for a 
prevailing party's eligibility for EAJA fees to turn solely on  the
particular words a particular merits panel uses to de- scribe the
Government's position. Thus in Vollmer, although  we took account of
the merits panel's characterization of the  Government's position as
"incredible," we ultimately rested  our award of EAJA fees on our own
conclusion that the  Government had offered nothing to demonstrate
that its  position was substantially justified. Here too we have cer-
tainly considered the merits panel's words, but our EAJA  conclusion
rests primarily on our view, informed by an analy- sis of the merits
panel's opinion, that the case was easy and  the Department's
arguments worthy of little credence, as well  as on the Department's
failure to offer any convincing rea- sons for believing that its
interpretation of section 322(b) was  substantially justified.


The decision of the district court is reversed, and the case  is
remanded for the district court to calculate the amount of  fees and
expenses the Department must pay to the Pilots.


So ordered.