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SIERRA CLUB v. UNITED STATES ARMY CORPS OF ENGRS.

June 27, 1984

SIERRA CLUB, THE CITY CLUB OF NEW YORK, BUSINESS FOR MASS TRANSIT, COMMITTEE FOR BETTER TRANSIT, INC., NYC CLEAN AIR CAMPAIGN, INC., WEST 12th STREET BLOCK ASSOCIATION, HUDSON RIVER FISHERMEN'S ASSOCIATION, HUDSON COUNTY CITIZENS FOR CLEAN AIR, SEYMOUR DURST, OTIS BURGER, MARY ROWE, and HOWARD SINGER, Plaintiffs,
v.
UNITED STATES ARMY CORPS OF ENGINEERS, JOHN MARSH, as Secretary of the Army of the United States, JOSEPH K. BRATTON, as Chief of Engineers, WALTER M. SMITH, JR., as New York District Engineer of the United States Army Corps of Engineers, WILLIAM C. HENNESSY, as Commissioner of the New York State Department of Transportation, UNITED STATES DEPARTMENT OF TRANSPORTATION, ANDREW L. LEWIS, JR., as Secretary of Transportation of the United States, FEDERAL HIGHWAY ADMINISTRATION, RAYMOND A. BARNHART, as Administrator of the Federal Highway Administration, THE CITY OF NEW YORK, Defendants, and CITY OF NEW YORK, Defendant-Intervenor.



The opinion of the court was delivered by: GRIESA

GRIESA, J.

Plaintiffs have applied for an award of attorneys' fees and disbursements. *fn1" The application is made against all defendants except the defendant-intervenor, City of New York.

 Defendants fall into three categories -- (1) the United States Army Corps of Engineers and certain officials connected with the Corps; (2) the Federal Highway Administration, the United States Department of Transportation and certain officials connected with those agencies; and (3) William C. Hennessy, who was Commissioner of the New York State Department of Transportation at the relevant times. These groups of defendanta will sometimes be referred to as the "Corps defendants," the "FHWA defendants," and the "State defendant."

 Plaintiffs assert two grounds for the award they seek.

 First, plaintiffs seek to recover against all defendants under the common law. In connection with the federal defendants, plaintiffs rely upon a provision of the Equal Access to Justice Act ("EAJA"), 28 U.S.C. § 2412(b), which in effect waives sovereign immunity as to the United States and its agencies and officials in an application for attorneys' fees and expenses under the common law.

 Second, they seek to recover against the Corps defendants and the FHWA defendants under another provision of the EAJA, 28 U.S.C. § 2412(d), which allows recovery of attorneys' fees and other expenses by a prevailing party against the United States in a civil action, other than a tort action, unless the court finds that the position of the United States "was substantially justified or that special circumstances make an award unjust."

 Summary of Rulings

 The court concludes that plaintiffs are entitled to recover certain amounts for attorneys' fees and disbursements under the common law. As will be explained, certain issues were tried and appealed regarding which the defendants who were involved had no colorable basis for their positions. Attorneys' fees are awarded in the amount of $261,205 plus disbursements of $29,049, or a total of $290,254. This entire amount is assessed against the State defendants. However, for reasons to be described, the various federal defendants are only liable for part of this sum. The Corps defendants are liable for $155,870 fees and $21,245 disbursements, or a total of $177,115. The FHWA defendants are liable for $76,335 fees plus $5,004 disbursements, or a total of $81,339.

 Plaintiffs' application under 28 U.S.C. § 2412(d) is denied. Although plaintiffs were prevailing parties on the major issue in the litigation and the court finds that on this issue the positions of the federal defendants were not substantially justified, it appears that plaintiffs include a person whose net worth exceeds $1,000,000. Therefore, recovery under this statutory provision is precluded by 28 U.S.C. § 2412(d) (2) (B).

 The Proceedings

 The relevant proceedings in this litigation are described in the following opinions: Action for Rational Transit v. West Side Highway Project, 536 F. Supp. 1225 (S.D.N.Y. 1982); Sierra Club v. United States Army Corps of Engineers, 541 F. Supp. 1367 (S.D.N.Y. 1982); Sierra Club v. United States Army Corps of Engineers, 701 F.2d 1011 (2d Cir. 1983).

 The first of the above captions was handed down on March 31, 1982.This opinion actually dealt with two actions, Action for Rational Transit v. West Side Highway Project, and Sierra Club v. United States Army Corps of Engineers. Part of the opinion contained rulings dismissing the Action for Rational Transit case on motion. The present fee application does not relate to that action or these rulings.

 The March 31, 1982 opinion also dealt with the Sierra Club action, in which the present fee application is made. That opinion confirmed that a number of the claims made by plaintiffs had been dismissed on motion. However, a trial ("the first trial") had been held on plaintiffs' claim regarding alleged violations of law by the Corps defendants and the State defendant in regard to the impact of Westway on fisheries and the alleged improper grant of a landfill permit by the Corps to the State. In the March 31, 1982 opinion the court nullified the landfill permit subject to further administrative proceedings.

 There was a second trial dealing with the fisheries issues as they related to funding approvals granted by FHWA to the State. The June 30, 1982 opinion nullified the basic funding approvals, again subject to further administrative proceedings.

 The various parties appealed and cross-appealed.The Corps defendants and the FHWA defendants did not appeal from the basic rulings of the district court on the merits, although they appealed in respect to certain terms of the judgments. The State defendant appealed on the merits. The Court of Appeals affirmed the district court decision in all essential respects as to the merits, although it reversed on certain of the points related to the terms of the judgments. *fn2"

 Plaintiffs' application for attorneys' fees and disbursements was originally made on May 12, 1982. A number of events occurred which caused the decision on the fee motion to be deferred, including the second trial, the appeal, litigation in 1982 and 1983 regarding design and engineering activity during the further administrative proceedings, and unsuccessful efforts to resolve the fee application by settlement.

 Moreover, in January of this year the court determined that the various papers submitted on the motion, while extensive, did not satisfactorily address the issues. Consequently the court requested new briefs.

 Legal Standard Under the Common Law

 What is referred to as the normal American Rule is that the prevailing party in a litigation may not recover his attorneys' fees from the loser. Normally each litigant pays his own attorneys' fees. Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 245, 247, 257, 44 L. Ed. 2d 141, 95 S. Ct. 1612 (1975). However, certain exceptions have been recognized. In Vaughan v. Atkinson, 369 U.S. 527, 8 L. Ed. 2d 88, 82 S. Ct. 997 (1962), the Court held in an admiralty action that the libellant, the prevailing party, was entitled to recover counsel fees. The Court stated that such an award should be considered as part of the damages, since respondents had refused to honor an obligation to libellant which "was plainly owed him." The Court commented that respondents had been callous and recalcitrant in their approach to libellant's claim, had failed to investigate it, and had committed a willful and persistent default.Id. at 530-31. In F.D. Rich Co. v. Industrial Lumber Co., 417 U.S. 116, 129, 40 L. Ed. 2d 703, 94 S. Ct. 2157 (1974), the Court stated:

 We have long recognized that attorneys' fees may be awarded to a successful party when his opponent has acted in bad faith, vexatiously, wantonly, or for oppressive reasons, . . .

 Vaughan v. Atkinson, supra, was cited as authority for this proposition. The Supreme Court again discussed the various exceptions to the American Rule in Alyeska, supra, citing Vaughan and quoting the language from F.D. Rich about an award of attorneys' fees being proper where the losing party has "acted in bad faith, vexatiously, wantonly, or for oppressive reasons." 421 U.S. at 258-59.

 The "bad faith" exception to the American Rule can apply to either pre-litigation bad faith or to conduct in the course of the litigation. In Hall v. Cole, 412 U.S. 1, 15, 36 L. Ed. 2d 702, 93 S. Ct. 1943 (1973), the Court stated:

 It is clear, however, that "bad faith" may be found, not only in the actions that led to the lawsuit, but also in the conduct of the litigation.

 It is obvious that bad faith conduct by a party prior to litigation may be part of a pattern of misconduct which carries forward into the litigation. However, it is the law that a party's bad faith, either prior to or during the litigation, may be the basis for an award of attorneys' fees under the common law rule. In the Second Circuit, Class v. Norton, 505 F.2d 123 (2d Cir. 1974), and Stolberg v. Board of Trustees, 474 F.2d 485 (2d Cir. 1973), were cases where the court awarded attorneys' fees to the successful plaintiffs on the ground that willful violations of obvious rights of the plaintiffs had required the bringing of unnecessary lawsuits. See also Republic of Cape Verde v. A & A Partners, 89 F.R.D. 14 (S.D.N.Y. 1980).

 Certain leading Second Circuit decisions illustrate how the bad faith rule is applied to conduct occurring during litigation. In Browning Debenture Holders' Committee v. DASA Corp., 560 F.2d 1078 (2d Cir. 1977), the district court had awarded attorneys' fees to the defendant on the basis that the action was commenced in bad faith and also on the basis that the attorney for some of the plaintiffs had acted in bad faith in taking certain procedural steps during the litigation. The court of appeals reversed the award of fees on the basis of the improper commencement of the action, holding that, under the uncertain state of the law as it existed when the action was instituted, the claim was a colorable one. The court stated (p. 1088):

 An action is brought in bad faith when the claim is entirely without color and has been asserted wantonly, for purposes of harassment or delay, or for other improper reasons.

 However, the court held that the attorney's procedural bad faith might be the basis for a limited award of attorneys' fees, and remanded the case for specific findings on this issue.

 In Nemeroff v. Abelson, 620 F.2d 339 (2d Cir. 1980), the district court had been presented with a motion by the defendants to assess attorneys' fees against plaintiff and plaintiff's attorneys for bad faith commencement of the action and improper conduct during the litigation. The district court had assessed attorneys' fees on the first ground, but had made no finding regarding the second. The court of appeals reversed the award, holding that the action was commenced in good faith, and remanded the case to the district court for a determination of the propriety of the conduct of plaintiff and his attorneys during the litigation. The decision contains a discussion of the normal American Rule regarding attorneys' fees and the various exceptions, including the bad faith exception. The court stated:

 Browning Debenture Holders", supra, clarified the requirements for a finding of bad faith in this Circuit. We held that there must be "clear evidence" that the claims are "entirely without color and made for reasons of harassment or delay or for other improper purposes." 560 F.2d at 1088 (emphasis added). In the instant case we find it unnecessary to reach the question of the motives of Nemeroff or his counsel, for we hold that the claims were not "entirely without color" at the time the action was commenced.

 A claim is colorable, for the purpose of the bad faith exception, when it has some legal and factual support, considered in light of the reasonable beliefs of the individual making the claim. The question is whether a reasonable attorney could have concluded that facts supporting the claim might be established, not whether such facts actually had been established.

 620 F.2d at 348.Upon remand, the district court held that, although the action was commenced in good faith, at a certain point it became clear that there was no colorable basis for the plaintiff's claims and that thereafter the suit was continued in bad faith. The district court also held that plaintiff's attorneys prosecuted the case in an intentionally dilatory fashion. The court of appeals affirmed the attorneys' fee award on the first ground and did not reach the second ground. Nemeroff v. Abelson, 704 F.2d 652 (2d Cir. 1983).

 It should be noted that the discussions by the Second Circuit regarding bad faith claims asserted by a plaintiff have been applied to bad faith defenses asserted by a defendant. Republic of Cape Verde v. A & A Partners, 89 F.R.D. 14 (S.D.N.Y. 1980).

 In the present case, plaintiffs contend that they are entitled to an award of attorneys' fees against all defendants under the above authorities. They do not contend that the Corps defendants were guilty of pre-litigation bad faith, but they do make such a contention against the FHWA defendants and the State defendant. Plaintiffs claim that all defendants acted in bad faith in the litigation.

 Although the ensuing discussion will cover events both before and during the litigation, it is necessary to start with a description of the issues raised by the parties in the litigation.

 Factual Findings on Common Law Claim

 The present suit was commenced in March 1981. It was originally brought against the Corps defendants and the State defendant. Plaintiffs claimed that the Corps had failed to issue a proper environmental impact statement ("EIS") in connection with the State's landfill application for Westway, that the Corps had failed to give due consideration to environmental factors, and that the issuance of the landfill permit was not in compliance with the law. Plaintiffs raised the fisheries issue as well as a number of other issues.All the non-fisheries claims were dismissed on motion in November 1981. However, it was determined that a trial would be necessary on the fisheries issue.

 On the latter issue, plaintiffs' case rested largely upon the alleged inadequacy of an EIS which had been issued by FHWA and the New York State Department of Transportaton ("NYSDOT") in January 1977.This EIS had been relied upon by the Corps to fulfill its responsibility under the National Environmental Policy Act ("NEPA"), 42 U.S.C. §§ 4321 et seg. The January 1977 EIS and an accompanying water quality report had described the proposed landfill area, known as the interpier area, as "biologically impoverished" and as a "biological wasteland." These documents indicated that there was no fish life of any significance in the interpier area. Plaintiffs claimed that these descriptions were incorrect and that indeed, prior to issuing the landfill permit, the Corps had obtained the results of a fish study, conducted by Lawlor Matusky & Skelly at the behest of the State in 1979-80 ("LMS study"), which showed that the interpier area was a habitat for a variety of fish, particularly young striped bass. Plaintiffs claimed that the Corps violated NEPA in failing to issue a Supplemental Environmental Impact Statement ("SEIS"). Plaintiffs further claimed that, in considering the landfill permit application, the Corps gave no proper consideration to the fisheries information.

 For purposes of analysis, it must be borne in mind that, in connection with the landfill permit application, the Corp's responsibilities included compliance with two statutes -- i.e., NEPA and section 404 of the Clean Water Act, 33 U.S.C. § 1344. As stated, the EIS obligation arose under NEPA. The Clean Water Act required the Corps to give notice of the landfill permit application, hold hearings, make its assessment of the impacts of the project in relation to the public interest, and create a reasoned administrative record for its decision. See 701 F.2d at 1031-33.

 At the trial, the Corps conceded that the LMS study had produced different information from what was contained in the January 1977 EIS. However, the Corps defendants took the position that the LMS study had not altered the conclusion of the January 1977 EIS -- i.e., that the landfill would not have a significant impact on the overall striped bass resources of the Hudson River. On this basis, according to the Corps defendants, the Corps made a valid exercise of discretion in deciding not to issue an SEIS. Also, the Corps defendants took the position at trial that the Corps had properly considered the fisheries issue, including the LMS data, in connection with its public interest review under the Clean Water Act. The Corps defendants' Trial Memorandum of January 15, 1982 summarized their argument (p. 2):

 The Army Corps expressly and carefully addressed the very issue now relied upon by the plaintiffs as their last remaining challenge to the Westway project [the fisheries issue]. The Corps, after considering the LMS study, which specifically addresses the issue of striped bass overwintering, * as well as the comments of NMFS, FWS and EPA and members of the public . . . concluded that there would not be a significant impact on the overall striped bass resources of the Hudson River.

 The asterisk in the above quotation referred to the following footnote:

 Volume I of the LMS study, at page 4.0-17, concludes that:

 For the striped bass population, the project area appears to represent one of many available habitats that various portions of the population occupy during the winter months in years when ...


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