Free Response to Motion - District Court of Arizona - Arizona

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DANIEL G. KNAUSS United States Attorney District of Arizona SUE A. KLEIN Assistant U.S. Attorney Arizona State Bar No. 11253 Two Renaissance Square 40 North Central Ave., Ste. 1200 Phoenix, Arizona 85004-4408 Telephone: (602) 514-7500 E-mail: [email protected]

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA United States of America, Plaintiff, v. 192.019 Acres of Land, more or less, located in Yuma County, State of Arizona; Glen G. Curtis, Trustee of Curtis Family Trust; Sam Perricone, Trustee of Amended and Restated Declaration of Revocable Trust of Sam Perricone and Mary Louise Perricone; Earl O. Zion and Esther E. Zion; Yuma County Tax Assessor, Yuma Hospital District No. 1; Yuma County Citrus Pest Control District; Yuma County Pest Abatement District; Yuma County Flood Control District; Farm Credit Services Southwest; Intangible property rights, Yuma Mesa Irrigation and Drainage District; and Unknown Owners, Defendants. The United States responds to Cha Cha, L.L.C.'s Application for Fees and Expenses

CIV-03-2006-PHX-SRB

UNITED STATES' RESPONSE TO APPLICATION FOR FEES AND EXPENSES UNDER THE EQUAL ACCESS TO JUSTICE ACT

21 Under the Equal Access to Justice Act (EAJA), 28 U.S.C. § 2412. This response is 22 supported by the attached Memorandum of Points and Authorities. 23 24 25 26 27 28 Respectfully submitted this 1st day of March, 2007. DANIEL G. KNAUSS United States Attorney District of Arizona s/Sue A. Klein ____________________________ SUE A. KLEIN Assistant U.S. Attorney

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MEMORANDUM OF POINTS AND AUTHORITIES The EAJA provides that a court shall award attorney's fees to eligible

3 prevailing parties in a civil suit where the United States is the party. To be eligible, 4 the party requesting fees must establish qualifications of certain net worth 5 standards; must establish that the judgment was closer to its valuation of the 6 property; must allege that the United States' position was not substantially 7 justified; and must provide billing information in compliance with the hourly rates 8 set forth in EAJA. 9 The United States does not dispute that the Curtis Family Trust and the

10 Irrevocable Trust of Sam Perricone and Mary Louise Perricone were prevailing 11 parties in this action. By this response, the United States will establish the 12 following: 1) that its position was substantially justified; 2) that Cha Cha, L.L.C. is 13 not entitled to the full amount of fees requested; and 3) that many of the hourly 14 rates charged exceed the statutory cap provided for in EAJA of $125 per hour. 15 16 I. The United States' Position was Substantially Justified EAJA provides for an award of attorney's fees to prevailing parties. However,

17 fees are not be awarded if the position of the United States was substantially 18 justified. The United States believes that its position in this case was substantially 19 justified. The government bears the burden of showing that its position was 20 substantially justified. Gutierrez v. Barnhart, 274 F.3d 1255, 1258 (9th Cir. 2001); 21 Bay Area Peace Navy v. United States, 914 F.2d 1224, 1230 (9th Cir. 1990). The 22 legislative history of the EAJA indicates that: 23 24 25 26 27 28 The test of whether or not a government action is substantially justified is essentially one of reasonableness. Where the government can show that its case has a reasonable basis both in law and fact, no award will be made . . . The standard, however, should not raise a presumption that the government position was not substantially justified simply because it lost the case. Nor, in fact, does the standard require the government establish that its decision to litigate was based on a substantial probability of prevailing.
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H.R. Rep. No. 1418, 96 Cong., 2nd Sess., §§ 10-11 (1980), reprinted in 1980 2 U.S.C.C.A.N. 4953, 4989-4990. The Supreme Court has determined that to be substantially justified is to be 3 "justified to a degree that could satisfy a reasonable person." Pierce v. Underwood, 4 487 U.S. 522, 565 (1988). The Supreme Court has further clarified that "a position 5 can be justified even though it is not correct and . . . it can be substantially . . . 6 justified as if a reasonable person could think it correct . . ." Pierce v. Underwood, 7 487 U.S. 522, 566 n.2 (1988). "That the government lost does not raise a 8 presumption that its position was not substantially justified." Oregon Environmental 9 Council v. Kunzman, 817 F.2d 484, 498 (9th Cir. 1987). A loss on the merits is not 10 dispositive of the government's liability for attorney's fees because "conceivably, 11 the government could take a position that is not substantially justified, yet win; 12 even more likely, it could take a position that is substantially justified, yet lose." 13 Pierce v. Underwood, 487 U.S. at 569. 14 In condemnation cases, the Ninth Circuit has articulated the following 15 considerations that should form the basis of the court's reasoning when deciding 16 whether or not the government's position was substantially justified: 17 1) The reasonableness and reliability of the government's appraisal introduced 18 into 19 evidence based on the following: 20 a) the qualifications of the appraiser, 21 b) the impartiality or lack thereof, of the appraiser (for example, it might 22 be important to know how often he or she was employed by the 23 government), 24 c) the factual basis of the appraisal; specifically, the reasons the appraisal 25 differs from that of landowner, 26 27 28
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d)

awards and sales of similar property in the area at or about the time in question,

e)

whether the comparable sales used by the appraiser were, in fact, comparable;

2) A comparison of the government's appraisal, the offer made, and proof of valuation at trial; 3) Any explanation offered by the government as to discrepancies between its offer, the appraisals, and trial evidence; 4) The good faith or lack of it, of the government in trying to reconcile the dispute prior to litigation; and 5) Any other relevant evidence.

12 United States v. 313.34 Acres of Land, 897 F.2d 1473, 1476 (9th Cir. 1990); United 13 States v. 68.94 Acres of Land, 736 F. Supp 541, 548 (D. Del. 1990). A review of these 14 criteria indicates that the government's position in this case was substantially 15 justified. 16 17 A. Reasonableness and Reliability of Government Appraisal The United States employed Don Dorchester to appraise the property acquired

18 in this case. Mr. Dorchester has been a real estate appraiser for 50 years. (Trial 19 Ex. No. 5, Dorchester Curriculum Vitae). He has appraised property throughout 20 Arizona and the United States. He is a certified appraiser in Arizona and a member 21 of The Appraisal Institute. He has performed appraisal work for both condemnors 22 and condemnees. (Trial Ex. No. 25). 23 Mr. Dorchester's report and opinion were reasonable. Mr. Dorchester's highest

24 and best use for the property was interim agricultural with future use as industrial. 25 (Tr. Ex. No. 67). The property was zoned RA-10 at the time of the acquisition. 26 Mr. Dorchester made his highest and best use determination after analyzing the 27 market. There is a presumption in favor of the existing use of the property being 28
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1 the highest and best use. That a presumption can be overcome if the landowner can 2 show a reasonable probability that the land is adaptable and needed for the 3 potential use in the reasonably near future. United States v. 62.50 Acres of Land, 953 4 F.2d 886, 890 (5th Cir. 1992). Mr. Dorchester's highest and best use analysis 5 incorporated both the property's current use at the time of taking with his potential 6 future use. Although Mr. Dorchester's analysis of the highest and best use was 7 different from Mr. Sanders, the landowners' appraiser, it is not an unreasonable 8 opinion. 9 The evidence at trial showed that the area surrounding the project was suitable

10 for agricultural/industrial purposes pursuant to the Joint Land Use Plan. (Trial Ex. 11 Nos. 17, 103). The evidence further showed that much of the property in the 12 project area was still planted to citrus. (Trial Ex. No. 92). The subject property 13 was planted to citrus and zoned RA-10 at the time of the acquisition. The subject 14 property was also a large piece of property which both appraisers agreed usually 15 sell for less than smaller pieces of property. Mr. Dorchester analyzed the value of 16 the subject property by looking at other larger pieces of property with the same 17 potential for future industrial use. Mr. Dorchester's method of bracketing the sales 18 use is an acceptable valuation method. The Appraisal of Real Estate, Twelfth Edition, 19 p. 430 (2001). Mr. Dorchester's methods were reasonable and reliable. 20 21 B. Government's Valuation Position was Appropriate When the United States filed the Declaration of Taking in this case, it

22 simultaneously deposited $2,108,000 as its estimate of just compensation. The 23 deposit was based on the pre-condemnation appraisal of the property. The United 24 States subsequently hired Mr. Dorchester to prepare a date-of-taking appraisal of 25 the property. Mr. Dorchester's opinion of value for the subject property was 26 $2,400.000. Both value estimates obtained by the government were supported by 27 an analysis of the highest and best use of the property as interim agricultural with 28
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1 future use as industrial. The government's trial evidence was consistent with the 2 basis for the amount of the original deposit. While not in accord with the 3 landowners' opinion of value, the amount of the deposit and value evidence 4 presented at trial were consistent with the position that agriculture was still a viable 5 use in Yuma in October of 2003 with future transition to industrial. The 6 government is required to pay for what it takes, not for opportunities the owner 7 may lose. United States v. Powelson, 319 U.S. 266, 282 (1943). 8 9 C. Efforts to Resolve the Case Prior to Litigation The United States pre-filing offer to the landowners of approximately 2.2

10 million dollars was met with a response that the landowner would take 5 million 11 dollars for both related cases. The acquiring agency felt that the difference of 12 opinion in value was too great to overcome prior to filing and, therefore, the cases 13 were filed. There was a settlement conference set in both cases for May of 2006. 14 Like the landowners' attorney, the undersigned and representatives of agency spent 15 time preparing for and planning to attend the settlement conference. Only shortly 16 before the scheduled conference was the undersigned informed that due to 17 budgetary restraints at the time, there were no funds available to engage in 18 meaningful settlement negotiations. For this reason, the United States requested 19 that the settlement conference be vacated. The request to vacate the settlement 20 conference was not made because the government does not settle condemnation 21 cases. The undersigned believed that this reason had been effectively 22 communicated to the landowners' attorney. If not, it should not be held against the 23 acquiring agency as a reason to award attorney's fees. 24 While not the prevailing position, the United States' position in this case was

25 substantially justified. Cha Cha, L.L.C.'s request for fees should, therefore, be 26 denied. 27 28
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II.

Cha Cha, L.L.C. Has Not Fully Complied With the Requirements Qualifying it to Receive Attorney's Fees

Without conceding that a fee award is appropriate in this case, the United States

4 addresses some deficiencies in the fee request submitted. Cha Cha, L.L.C. was not 5 a named defendant landowner in this case because at the time of filing, the title 6 report did not reflect any ownership interest of Cha Cha, L.L.C. It appears that this 7 inter-family transfer of ownership occurred just prior to the filing of the case. 8 However, unlike United States v. 33.845 Acres of Land, where ownership was 9 transferred to G-12, L.L.C., the United States was notified and the Complaint in 10 Condemnation was amended to add G-12, L.L.C., as such actions were requested 11 in this case. Based upon the representations of the landowners' attorney, the 12 United States agreed that the condemnation award in this case could be distributed 13 to Cha Cha, L.L.C. The application for attorney's fees states that Cha Cha, L.L.C. 14 has paid the attorney's fees to the landowner's attorney in this case. 15 In support of the eligibility of the fee award, defendants attach a copy of the

16 Affidavit of Kathy McCloud, Comptroller of Cha Cha, L.L.C. The affidavit 17 merely states that at the time of the acquisition, Cha Cha, L.L.C. did not have a net 18 worth in excess of $7,000,000 or over 500 employees. No financial statements are 19 provided to support this claim. The party seeking the fee award must do more than 20 just make a mere assertion that it meets the statutory criteria. Broaddus v. U.S. Army 21 Corps of Engineers, 308 F.3rd 162, 168 (4th Cir. 2004) (citing Shooting Star Ranch v. 22 United States, 230 F.3d 1176, 1178 (10th Cir. 2000)). 23 While a sworn affidavit has been held acceptable, in order for the affidavit to

24 be acceptable it must include documentation of the applicant's liabilities and assets. 25 Broaddus, 308 F.3d at 169. (See also United States v. 88.88 Acres of Land, 907 F.2d 26 106, 108 (9th Cir. 1990). The affidavit provided in this case is not sufficient to 27 establish eligibility for the fee award. 28
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III. Fee Award Requested is in Excess of That Allowable Under EAJA While the application indicates the amount requested in this case is $89,342.50

3 in fees and $8,743.83 in costs, some statements in the application and supporting 4 affidavit appear inconsistent. Initially, it does not appear as though a statement of 5 costs for the costs incurred in this case was submitted. It appears that defendants 6 inadvertently attached 2 copies of the attorney's fees request. The United States 7 would request that a statement of costs be provided. 8 Second, the affidavit of Lori Butler indicates that fees were billed on an hourly

9 basis and the rates are comparable to prevailing rates in Yuma. Nowhere in the 10 application are hourly rates for Mr. Weil or Ms. Butler listed. It appears that Mr. 11 Weil billed at an hourly rate of between $175 - $225 per hour and Ms. Butler billed 12 at an hourly rate of between $125 - $150 an hour during the course of this case. 13 The statutory rate provided for in EAJA is $125 an hour which can be adjusted for 14 inflation. "[T]he EAJA set a maximum fee of $75 per hour, which was increased 15 by amendment in 1996 to $125 per hour for cases commenced on or after March 16 29, 1996. District courts may adjust that fee to compensate for an increase in the 17 cost of living. 28 U.S.C. § 2412(d)(2)(A). District courts have been determining 18 the cost-of-living adjustment by multiplying the basic EAJA rate by the current 19 consumer price index for urban consumers (CPI-U), and then dividing the product 20 by the CPI-U in the month that the cap was imposed." Sorenson v. Mink, 239 F.3d 21 1140, 1148 (9th Cir. 2001). 22 Applying this formula to the instant case, and using the annual CPI-U rates for

23 the time period in question results in the following adjusted hourly rates: 24 25 26 27 28 1) 2003 = $150.70/hour 2) 2004 = $154.25/hour 3) 2005 = $158.96/hour 4) 2006 = $164.40/hour
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1 See Exhibit A, U.S. Department of Labor CPI-U rates. To the extent that the 2 landowners' attorneys' hourly rates exceed that provided for in EAJA, the fee 3 application must be modified. Some verification of the hourly rates and 4 clarification of billing procedures should be provided as well. It is unclear exactly 5 how the time was split between the two related cases. It appears that the 6 landowners' attorneys attributed the same amount of time to each case and applied 7 half of their hourly rates to each case. This is far from clear, however. 8 Third, the affidavit of Kathy McCloud states that Cha Cha, L.L.C. is

9 responsible for one-half of the attorney's fees in this case. The other landowner, 10 the Sam and Mary Louis Perricone Irrevocable Trust, does not join in the fee 11 application. As Cha Cha, L.L.C. has paid one-half of the invoices, it should 12 receive only one-half of the fees requested. EAJA is not intended to provide a 13 windfall to the fee applicant. There is no statement in the fee application indicating 14 that the request is for one-half of the fees expended. Based upon the amount 15 requested in United States v. 33.845 Acres, it appears that the total request is for all of 16 the fees incurred. Any award to Cha Cha, L.L.C. should be only one-half of the 17 total award in this case. 18 Fourth, numerous entries in the fees and expenses indicate that the amount is

19 split with United States v. 33.845 Acres. However, in reviewing the application in 20 both cases, it is not apparent how the fees and expenses have been split. For 21 example, the entries for the trial dates indicate that Mr. Weil spent 12 hours 22 working on the trial for a total of $1,350. This amount would indicate a rate of 23 $112.50. However, as the same entries appear in United States v. 33.845 Acres, it 24 would seem that Mr. Weil split his hourly rate of $225 between the two cases. An 25 hourly rate of $225 exceeds that statutory rate provided for in EAJA. 28 U.S.C. § 26 2412(d)(2)(A). EAJA provides that an increase in the $125 per hour rate should 27 not be awarded unless the court determines that an increase in the cost of living or 28
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1 a special factor, such as the limited availability of qualified attorneys for the 2 proceedings involved, justifies a higher fee. Nothing has been presented which 3 would indicate the fee award should exceed $125 per hour. It appears that Ms. 4 Butler charged between $125 - $150 per hour for work performed on this case. If 5 adjustments for inflation are applied, Ms. Butler's rates fall within the guidelines of 6 EAJA. 7 A revised billing statement using the statutory hourly rate provided for in

8 EAJA and accounting for Cha Cha, L.L.C.'s one-half ownership interest in the 9 property should be provided in order to make an accurate determination as to an 10 award, if any, of attorney's fees in this case. 11 WHEREFORE, the United States respectfully requests that the Court deny the

12 attorney's fee application as the United States' position was substantially justified. 13 In the event that the Court determines that fees are to be awarded, the United States 14 requests that any fees paid to Cha Cha, L.L.C. be reduced by one-half of the 15 request as Cha Cha, L.L.C. was only responsible for one-half of the fees. The 16 United States further requests that the applicant re-submit its billing statement 17 reflecting the hourly rate provided for in EAJA and submit a statement of costs 18 associated with this case. 19 20 21 22 23 24 25 26 27 28
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Respectfully submitted this 1st day of March, 2007. DANIEL G. KNAUSS United States Attorney District of Arizona s/Sue A. Klein ________________________ SUE A. KLEIN Assistant U.S. Attorney

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CERTIFICATION I hereby certify that on March 1, 2007, I electronically transmitted the attached

3 document to the Clerk's Office using the CM/ECF System for filing and transmittal of a 4 Notice of Electronic Filing to the following CM/ECF registrants: 5 6 John A. Weil 7 Attorneys at Law 8 Yuma, Arizona 85364 9 10
1600 S. Fourth Ave., Ste. C Weil & Weil

s/Nancy Stotler

11 _____________________ 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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