No one contests that when it condemned property in Norfolk, Virginia to expand the Federal courthouse, the federal government made unreasonable pretrial offers to the property owner. The owner's appraisals valued the property at $36.1 and $30.7 million, but the government valuation resulted in a $6.175 pretrial offer. After the pretrial dance, the final offers were $9.4 million from the government, compared to $15.4 million by the property owner.
Fortunately, the property owner had the good sense to seek advice from our good friends at Waldo & Lyle, and the jury returned a verdict for $13.4 million. As one of the prevailing parties, the property owner sought attorneys fees under the Equal Access to Justice Act. The government objected on the basis that its final offer was substantially justified, even though its pretrial offer may not have been, and thus "the position of the United States" as used in EAJA was, on the whole, okay. The District Court concluded that the government's reasonable trial offer cut off any liability for its unreasonable pretrial conduct, and denied EAJA fees.
After acknowledging the circuit split -- some courts hold that a reasonable trial position can never cure an unreasonable pretrial posture, while others eschew bright-line rules and hold that its a matter of degree (see slip op. at 10) -- the Fourth Circuit rejected the District Court's ruling and adopted the latter approach, "as consistent with our precedent generally and truer to the dual purposes of the EAJA: providing incentives for private parties to vindicate their rights in the judicial system and creating a check on government action." Slip op. at 11.
Thus, the District Court got it wrong when it didn't even weigh the government's unreasonable pretrial posture, and the Fourth Circuit sent the case back. While it did not adopt the Second and Third Circuit's approach that unreasonable conduct cannot be cured by later good behavior, the Fourth Circuit also rejected the opposite per se rule.
The legislative history of those amendments [the 1985 EAJA amendments] specifically notes that the EAJA was designed to prevent the government from unjustifiably forcing litigation, then avoiding liability by acting reasonably during the litigation. H.R. Rep. No. 98-992, at 9 (1984); see also Jean, 496 U.S. at 159 n.7. Such a strategy of “curing” a purposefully unreasonable prelitigation position would be particularly problematic in the context of an eminent-domain proceeding because the government is required to pay just compensation for a taking under the Fifth Amendment and 42 U.S.C. § 4651.
Slip op. at 12-13.
The Fourth Circuit sent the case back to the District Court "to properly weigh the effect of the government's unreasonable prelitigation position, particularly given the government's burden of proof. ... If the district court finds that the government’s prelitigation valuation position was unreasonable but its litigation posture reasonable, the court must then assess the effect of the prelitigation position on the action for just compensation. One important, but not determinative, factor is the extent to which the government misconduct 'compell[ed] a party to resort to litigation or to prolong litigation.'" Slip op. at 13 (footnote omitted).
United States v. 515 Granby, LLC, 1.604 Acres of Land, No. 12-2161 (4th Cir. Nov. 20, 2013)
