Does a Dissenting Vote for the Government Prove its Position was “Substantially Justified”?

Taxpayers who prevailed on appeal in their challenge to the IRS’s scheme for refunding an unlawful telephone excise tax won’t get attorneys’ fees from the Government. After the district court initially held their claims were nonjusticiable, the taxpayers won before a divided panel of the D.C. Circuit, and again before the full court. Judge Kavanaugh dissented both times, and was joined in his en banc dissent by Chief Judge Sentelle and Judge Henderson.

On the basis of the original district court decision and the dissenting votes on appeal, Chief Judge Lamberth held that the Government’s position was substantially justified:

Judges of this Court and the Court of Appeals have written opinions finding that the [refund scheme] was not subject to judicial review. This fact provides an adequate basis to allow this Court to conclude that the government was substantially justified both in issuing the [refund scheme] Notice and defending it in court.

The order offers no further analysis of the opinions it relies on, though it does call them “well-reasoned.”  Although the thorough dissents in this case surely prove that reasonable minds can differ on the justiciability question, the brevity of the district court’s discussion is surprising.

One might think that a dissenting opinion in favor of the Government should always immunize the Government against an Equal Access to Justice Act fee petition.  But it ain’t necessarily so.

As the Supreme Court said in Pierce v. Underwood, 487 U.S. 552, 569 (1988),

Obviously, the fact that one other court agreed or disagreed with the Government does not establish whether its position was substantially justified. Conceivably, the Government could take a position that is not substantially justified, yet win.

This does not mean a court should close its eyes to dissenting judicial opinions when deciding whether the Government’s position was substantially justified. Under the right circumstances, a losing argument’s power to persuade one or more judges might be strong evidence that the Government had good cause to advance it.

Presumably Chief Judge Lamberth found the logic of Judge Urbina and of Judge Kavanaugh sufficiently strong to support the Government’s burden of proof on the substantial justification prong. But under Pierce, the fact that an argument persuaded one or more judges is not, by itself, conclusive proof that the Government was substantially justified in raising it.

In any event, Pierce also implies that the abuse-of-discretion standard entitles the district court to a high degree of deference in its finding of substantial justification vel non.  Judge Lamberth’s decision is therefore unlikely to raise many eyebrows in the D.C. Circuit if it is appealed.

Cohen v. United States, No. 08-5088+, 578 F.3d 1 (July 1,  2011) (en banc) (Brown, J., joined by GinsburgRogersTatelGarlandGriffith, JJ., with Kavanaugh, J., dissenting, joined by Sentelle, C.J., & Henderson, J.)

Cohen v. United States, No. 08-5088+, 578 F.3d 1 (Aug. 7, 2009) (Brown, J., joined by Garland, J., with Kavanaugh, J., dissenting)

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