SecurityPoint Holdings, Inc. v. Transportation Security Administration

         On Motion for Attorneys' Fees under the Federal Equal Access to Justice Act

          Don J. Pelto, Bradley Graveline, and Laura M. Burson were on the motion for attorneys' fees under the Federal Equal Access to Justice Act and the supplemental briefs for petitioner.

          Benjamin C. Mizer, Principal Deputy Assistant Attorney General, and Mark B. Stern and John S. Koppel, Attorneys, U.S. Department of Justice, were on the response in opposition and the supplemental briefs for respondent.

          Before: Henderson and Srinivasan, Circuit Judges, and Williams, Senior Circuit Judge.

          OPINION

          Williams, Senior Circuit Judge.

         In SecurityPoint Holdings, Inc. v. TSA, 769 F.3d 1184 (D.C. Cir. 2014), we vacated an order of the Transportation Security Administration for want of reasoned decisionmaking and remanded the case for further proceedings. SecurityPoint now seeks an award of attorneys' fees as a prevailing party under the Equal Access to Justice Act ("EAJA"), 28 U.S.C. § 2412(d)(1)(A) (2012). We conclude that SecurityPoint is a prevailing party and, in doing so, overrule Waterman Steamship Corp. v. Maritime Subsidy Board, 901 F.2d 1119 (D.C. Cir. 1990), as inconsistent with the Supreme Court's later decision in Shalala v. Schaefer, 509 U.S. 292 (1993).^[1]We also conclude that the challenged order was not substantially justified. But because SecurityPoint achieved only a partial success in the litigation, we award only a portion of the fees sought.

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         Our merits decision in SecurityPoint Holdings concerned an advertising program at airport security checkpoints in which participating airports, under a Memorandum of Understanding ("MOU") with TSA, would contract with private companies like SecurityPoint to obtain bins and other equipment for use at checkpoints. In exchange, the private companies would receive a portion of the revenue from advertisements displayed inside the checkpoint bins.

         In 2012 TSA amended its template for such MOUs to include, among other things, a provision requiring airports to indemnify TSA from liability for intellectual property claims. SecurityPoint opposed these changes and requested that TSA cease and desist from implementing them. TSA refused, prompting SecurityPoint to seek review in this court. We granted SecurityPoint's petition for review, vacated the denial of the cease-and-desist request as arbitrary and capricious, and remanded the case to TSA. We didn't reach SecurityPoint's principal claim-that TSA had amended the MOU template in retaliation for SecurityPoint's patent infringement lawsuit against TSA-but held that "TSA's explanation for persisting in the change, in the face of SecurityPoint's arguments that the change was unnecessary and self-defeating for TSA, failed to satisfy the minimum requirements of reasoned decisionmaking." SecurityPoint Holdings, 769 F.3d at 1186.

         After our decision issued, SecurityPoint filed a timely application for attorneys' fees under the EAJA. We deferred consideration of the application pending TSA's actions on remand. After the proceedings on remand were completed, the parties submitted additional briefs on the fee motion and, at our request, filed briefs discussing whether the Waterman case should be overruled.^[2]

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         The EAJA directs a court to award "fees and other expenses" to a "prevailing party" in a civil action against the United States unless the government's position was "substantially justified" or "special circumstances make an award unjust." 28 U.S.C. § 2412(d)(1)(A). "[F]ees and other expenses" include "reasonable attorney fees." Id. § 2412(d)(2)(A). A fee application must be filed within 30 days from entry of final judgment, id. § 2412(d)(1)(B), defined under the EAJA as "a judgment that is final and not appealable, " id. § 2412(d)(2)(G). (A final judgment is not appealable within the meaning of this provision if the time for appeal has expired without one being filed. Melkonyan v. Sullivan, 501 U.S. 89, 96 (1991); see also Al-Harbi v. INS, 284 F.3d 1080, 1083-84 (9th Cir. 2002) (considering the opportunity to apply for certiorari).)

         In determining whether a litigant is a prevailing party, we apply a three-part test: "(1) there must be a court-ordered change in the legal relationship of the parties; (2) the judgment must be in favor of the party seeking the fees; and (3) the judicial pronouncement must be accompanied by judicial relief." Initiative & Referendum Inst. v. USPS, 794 F.3d 21, 23-24 (D.C. Cir. 2015) (citation and internal quotation marks omitted). Our 2014 decision clearly satisfies the second and third requirements. The question is whether the decision effected "a court-ordered change in the legal relationship of the parties."

         Relying principally on Waterman, TSA argues that SecurityPoint is not a prevailing party because it achieved a "purely procedural victory." TSA Original Br. 3. That appears to be a correct reading of Waterman. There the Maritime Subsidy Board granted U.S. Lines authority to conduct unsubsidized around-the-world shipping service without giving competing companies an opportunity to contest the grant. The competitors sued the Board in district court, which found an abuse of discretion in the Board's refusal to entertain their objections; the district court remanded the case and thereby afforded the competitors the missed opportunity to contest the grant. While the remand was pending before the Board, the district court awarded the competitors attorneys' fees under the EAJA. This court reversed, holding that such a procedural victory didn't make the plaintiffs prevailing parties. We reasoned that "[f]rom a party's viewpoint . . . correct procedures and use of correct substantive standards are largely (if not entirely) instruments to a desired end-a change in someone's primary conduct in the real world: relief from a restriction, grant of a benefit, imposition of a restriction on others, etc." 901 F.2d at 1122. The remand in Waterman ...