IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OHIO EASTERN DIVISION UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) CIVIL ACTION NO. 5:93CV2306 ) ONE DLO MODEL A/C, 30.06 ) JUDGE DAVID D. DOWD, JR. MACHINE GUN, etc., et al., ) ) Defendants, ) ) v. ) ) LOUIS EDWARD KATONA, III, ) ) Claimant. ) CLAIMANT'S MEMORANDUM IN SUPPORT OF AN AWARD OF COSTS AND ATTORNEY FEES At the evidentiary hearing in this matter on May 5, 1995, the Court requested the parties to brief the issue of the claimant's entitlement to an award of costs and attorney fees under the Equal Access to Justice Act, 28 U.S.C. section 2412 (hereafter "EAJA"). This memorandum is respectfully submitted in compliance with that request on behalf of Louis E. Katona, III, the successful claimant in this firearms forfeiture action. The government correctly conceded at the hearing on May 5 that an award of attorney fees is not barred by the issuance of a certificate of reasonable cause under the provisions of 28 U.S.C. section 2465. That is so because the term "costs" as used in that statute is a term of art which does not include within its meaning -- and therefore does not bar an award of -- attorney fees. United States v. Parcels of Real Property, etc.[FN1] Mr. Katona continues, of course, to assert his unequivocal entitlement to attorney fees and costs under the terms of 18 U.S.C. section 924(d)(2)(A) (the Firearm Owners' Protection Act of 1986) because of its direct and unequivocal applicability to firearms forfeitures such as this.[FN2] We have briefed the applicability of the FOPA attorney fees provision at great length in previous submissions and will not further belabor the point here. In any event, and alternatively, we submit that Mr. Katona, if not granted an award of fees under Title 18, U.S.C., is entitled to an award under the EAJA.[FN3] At the outset we note that the government has never disputed the amounts documented in this Court by Mr. Katona as his attorney fees and litigation costs,[FN4] nor contended that they are excessive or unreasonable in terms of the services provided and the results obtained.[FN5] The EAJA was a historic reversal of the "American rule" that parties to litigation bear their own costs and expenses, as distinguished from the "English rule" that the prevailing litigant is made whole for his costs in achieving that result. The EAJA was also significant in that it was an unequivocal waiver of sovereign immunity in an area that had traditionally been one-sided and out of balance for the individual confronted with the awesome litigation resources of the government. The legislative history of the Act, and its amendments, is replete with evidence of the congressional intent to adjust the terrible imbalance of resources chillingly encapsulated in the caption of every such lawsuit: [The Entire] United States of America [and all its lawyers, officers, agents, employees, horseholders, spear carriers, bystanders, supernumeraries, and others, plus all its laboratories, libraries, computers, experts, money, materiel, credit and powers of coercion] v. John Q. Citizen. That sort of power is easily subject to abuse and Congress intended to level the playing field to some degree. In its original EAJA enactment Congress stated its intent clearly: (a) The Congress finds that certain individuals, partnerships, corporations, and labor and other organizations may be deterred from seeking review of, or defending against, unreasonable governmental action because of the expense involved in securing the vindication of their rights in civil actions and in administrative proceedings. (b) The Congress further finds that because of the greater resources and expertise of the United States the standard for an award of fees against the United States should be different from the standard governing an award against a private litigant, in certain situations. (c) It is the purpose of this title-- (1) to diminish the deterrent effect of seeking review of, or defending against governmental action by providing in specified situations an award of attorney fees, expert witness fees, and other costs against the United States; and (2) to insure the applicability in actions by or against the United States of the common law and statutory exceptions to the "American rule" respecting the award of attorney fees.[FN6] The EAJA sets forth two different circumstances and four conditions under which a litigant against the United States may be reimbursed his attorney fees, and, under one of the sets of circumstances, his litigation costs. We submit that Mr. Katona meets the most rigorous of those conditions and is therefore entitled to an award under either provision of the Act and under any interpretation of the facts. Mr. Katona clearly meets each of the four predicate conditions of a valid EAJA claimant: (1) He is a "party" as defined in section 2412(d)(2)(B) in that he is a statutorily authorized intervening claimant[FN76] and an individual whose net worth on October 28, 1993, the date of commencement of this action, did not exceed $2,000,000, and who was not the owner of an unincorporated business, or any partnership, corporation, association, unit of local government, or organization, the net worth of which exceeded $7,000,000, or had more than 500 employees.[FN8] (2) He is a "prevailing party" as that term is universally understood. He obtained the only substantive relief he sought in the action, the return of his firearms. The only other real party to the lawsuit -- the government failed to obtain the only substantive relief it sought, title to the same firearms. Indeed, the government, the initial aggressor here, abandoned its assault and fled the field in the face of the claimant's counterattack, seeking only to tend its wounds and to immunize itself from further hostilities. In war those circumstances are denominated victory and defeat, and the combatant remaining in the field, the prevailing party. The Department of Justice's EAJA monograph states: The legislative history indicates that Congress intended the interpretation of "prevailing party" to be consistent with interpretations of that term developed in case law. [Citations omitted.] Under statutes such as Titles II and VII of the Civil Rights Act of 1964, as amended, and the Civil Rights Attorney's Fees Awards Act of 1976, 42 U.S.C. section 1988, as well as under the EAJA itself, a party who gains sufficient relief through full litigation of issues or through a favorable settlement is considered to be the prevailing party.[FN9] We do not understand the government to contest Mr. Katona's claim to be a prevailing party. (3) This action is self-evidently a "civil action brought by or against the United States."[FN10] (4) There is no specific statutory provision otherwise preventing an award of fees here.[FN11] The government has cited none. The two circumstances whereby the EAJA provides for awards of fees to the prevailing non-government party are, first: Unless expressly prohibited by statute, a court may award reasonable fees and expenses of attorneys ... to the prevailing party in any civil action brought by ... the United States.... The United States shall be liable for such fees and expenses to the same extent that any other party would be liable under the common law or under the terms of any statute which specifically provides for such award.[FN12] and, second: Except as otherwise specifically provided by statute, a court shall award to a prevailing party other than the United States fees and other expenses, in addition to any costs awarded pursuant to subsection (a), incurred by that party in any civil action ... brought by or against the United States in any court having jurisdiction of that action, unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.[FN13] These two separate and mutually exclusive provisions differ in some important respects. An award under subsection (b) is discretionary and requires a showing (presumably by the claimant) of an equitable or statutory basis for the award;[FN14] an award under subsection (d)(1)(A) is not discretionary -- the court shall award fees and (other expenses) absent a showing of substantial justification by the government for its litigation position. An award under subsection (b) is limited only to the "reasonable" attorney fees and expenses actually incurred by the prevailing party; attorney fees under subsection (d)(1)(A) may not exceed $75 dollars per hour absent a finding by the court of special circumstances.[FN15] Subsection (b) does not provide for expenses for expert witness fees, or for the costs of studies, analyses, reports and projects necessary for preparation of the prevailing party's case; subsection (d)(1)(A) does.[FN16] Fees and costs awarded under subsection (b) are paid from the government's general judgment fund[FN17]; fees and expenses awarded under subsection (d)(1)(A) are paid from the appropriation of the agency over which the party prevails.[FN18] Procedurally, the party seeking an award under subsection (d)(1)(A) must file his application within 30 days of entry of the final judgment; must show he is a prevailing party eligible to receive an award and show the amount sought by an itemized statement from any attorney(s) and expert witness(es) of actual time spent; and must allege that the position of the United States was not substantially justified.[FN19] The claimant here has met all these requirements other than entry of a final judgment which presumably will follow shortly. The legislative history of the Act provides that a previously filed fee application is to be "treated as if it were filed during the thirty-day period following the final decision."[FN20] Even pending entry of a final judgment, the court may make an "interim award" to a party who has prevailed on a significant, separable claim on the merits.[FN21] As stated above, we believe the claimant is entitled to an award under either provision of the EAJA. The government's conduct of this action, both at the agency level (BATF), and the litigation level (DOJ), has been consistently and persistently pursued in bad faith, vexatiously, wantonly and for oppressive reasons. The record before this Court, including the depositions, the testimony here, the exhibits to the joint depositions and at the evidentiary hearing here, and those appended to the various submissions of the parties here, as well as the transcript and exhibits in the criminal case (which the Court is invited to judicially notice), coupled with the government's explicit declination to produce further evidence, here or elsewhere, all combine to support the following strong indicators of bad faith:[FN22] (1) The BATF's investigation of Louis E. Katona, III, reached the questionable height of any reasonableness it could be claimed to possess well before completion of the raid on his home on May 8, 1992. As the Court is now well aware, the investigation went straight down hill from that point forward. On May 8, 1992, the BATF learned there was a serious credibility problem with its sole witness/ informant.[FN23] (2) The BATF took no further visible or documented action for 10 months, except to attempt to illegally forfeit Mr. Katona's firearms by administrative fiat and to improperly force him to post a cash bond in order to protect his interest in his property. (3) With a looming statute of limitations on any personal injury action, the Katonas, in March, 1993, commenced a tort suit against the federal agents responsible for the miscarriage of their child, and against BATF's informant, the chief of police. The very next day the United States Attorney's office commenced a grand jury investigation of Mr. Katona, initiated by the very same Assistant United States Attorney who had authorized the original search warrant. The case agent's monthly reports thereafter are laced with remarks that Katona (and his father) must be indicted because of the pending civil suit. (4) During the ensuing months, undersigned counsel for Mr. Katona conducted extensive discussions, oral and written, with the prosecutor and the case agent which are in evidence in this case. Every scrap of evidence possessed by the defense was voluntarily provided to the government. The Katona family's fingerprints, handwriting exemplars, forensic reports, original documents, comparison documents, and documentary evidence of Katona's credibility and the government witness' lack of it were all shared with the prosecution.[FN24] Extensive briefing of the legal flaws in the government's theory of prosecution was also provided the prosecutor (an analysis based on the plain language of the statute and the underlying regulations and simple common sense; and a view subsequently upheld by both judges of this Court who were assigned to the criminal case). In a classic sandbag attempt, the prosecutor, professing an interest in fairness to Mr. Katona, offered him the opportunity to testify before the grand jury. When Mr. Katona declined on advice of counsel to appear, the very next day the government presented to the grand jury a 32-page, 19-count indictment which had obviously been weeks in the preparation. The indictment was drafted in a manner whereby Mr. Katona was guilty of 19 federal felonies whether or not he had committed any forgeries -- a prosecutorial malfeasance which was summarily cured by both Judge Battisti and Judge White. In summary, there was no possible situation or set of circumstances where Mr. Katona was not going to be indicted, even if it took 15 months from the date of the original seizure. (5) In rapid order, a month later, Mr. Katona's father was indicted on an even more spurious charge. A month thereafter, and more than 17 months after the original seizure, the government suddenly felt a compulsion to commence a judicial forfeiture against the firearms, a tactic which, no doubt by mere coincidence, required a defendant in criminal jeopardy to intervene and file verified pleadings in order to preserve his ownership to more than $100,000 dollars of personal property.[FN25] Government counsel has never denied this repeated charge of improper purpose for the "coincidental" timing of the commencement of the forfeiture action, and expressly refused to respond to the Court's question about it at the May 5 hearing. (6) During the conduct of this charade of an investigation and prosecution the government's case got progressively weaker; indeed, it positively hemorrhaged. The government's principal witness, a chief of police, refused to give the government handwriting exemplars (which could only have exculpated the defendant)! The government also received positive evidence that its witness had a horrible credibility problem. The government possessed forensic reports from both its own handwriting examiner and the defendant's that there was a possibility the chief was lying about as many as a third of the questioned documents and that neither expert could identify Mr. Katona as the author of the remaining questioned signatures.[FN26] The government also knew that Mr. Katona's examiner, a respected former FBI laboratory chief,[FN27] excluded Mr. Katona as the author of any of the questioned signatures. The government never possessed, never acquired, and never produced any evidence that Mr. Katona was the author of or knew that any of the questioned signatures was not signed by the chief. The indictment was unsupported by any probable cause that Mr. Katona had committed a federal crime. The same shortcomings were present, available to, and chargeable to the government attorney who filed this action.[FN28] (7) The case agent throughout the investigation and prosecution, and despite repeated and formal requests of the defense, avoided preserving the forensic sterility of original government documents (which could only have exculpated the defendant and incriminated his principal accuser). The prosecutor lied about the government's possession of handwriting exemplars of its principal witness, exemplars which had been in the government's possession (at, of all places, the FBI's central fingerprint repository) for more than 25 years. (8) The government has never presented any evidence of its good faith, other than simply to proclaim it. It has never explained the numerous "coincidences" of timing and sequence among these actions. It suffers from an inability to answer the unanswerable, defend the indefensible or explain the inexplicable. Instead, it seeks refuge in sovereign immunity, official immunity, "reasonable cause," official secrecy, superior resources. It forgets that the maxim that the king can do no wrong does not mean the king is incapable of doing wrong. It means the king must do no wrong, else he forfeits his right to be king and justly commands no allegiance. This recitation of governmental bad faith also demonstrates compellingly why an award of fees is available to the claimant under subsection (d)(1)(A) of the EAJA. By the plain language of the statute the burden of proof for a subsection (d)(1)(A) claim is borne by the government.[FN29] The government has conceded as much: When a prevailing party has submitted an application for an award, the burden of proving that an award should not be made rests with the government.[FN30] Moreover, Certain types of cases may indicate that the Government action was not substantially justified. A court should look closely at cases, for example, where there has been a judgment on the pleadings or where there is a directed verdict or where a prior suit on the same claim has been dismissed. Such cases clearly raise the possibility that the Government was unreasonable in pursuing the litigation.[FN31] We have here the interesting and powerful confluence of all three elements which Congress deemed evidence of a lack of substantial governmental justification: the resolution of the merits of this case (the right to possession of the firearms) was for all practical purposes a judgment on the pleadings, the clear alternative facing the government being a grant of summary judgment for the claimant[FN32]; it was a direct product of the directed verdict in the companion criminal case; and the government "voluntarily" dismissed its claim, not just in a previous case, but in this one. CONCLUSION For all the foregoing reasons the Court should enter an order awarding the payment of the claimant's attorney fees and costs of litigation in protecting, preserving and securing the return of his lawful property. Respectfully submitted, JAMES H. JEFFRIES, III (North Carolina Bar No. 18502) 3019 Lake Forest Drive Greensboro, North Carolina 27408 Telephone: (910) 282-6024 Counsel for Claimant CERTIFICATE OF SERVICE I, James H. Jeffries, III, counsel for the claimant Louis Edward Katona, III, hereby certify that service of the foregoing Claimant's Memorandum in Support of an Award of Costs and Attorney Fees has been made upon the United States this 18th day of May, 1995, by mailing a true copy, postage prepaid, to James L. Morford, Esquire, and Lynne H. Buck, Esquire, Assistant United States Attorneys, 1800 Bank One Center, 600 Superior Avenue, East, Cleveland, Ohio 44114-2600. JAMES H. JEFFRIES, III (North Carolina Bar No. 18502) 3019 Lake Forest Drive Greensboro, North Carolina 27408 Telephone: (910) 282-6024 Counsel for Claimant [FN1]. 795 F.Supp. 1225 (Mass. 1992), aff'd on other grounds, 9 F.3d 1000 (1st Cir. 1993). [FN2]. Undersigned counsel's conceded at the hearing that the applicability of 18 U.S.C. section 924(d) to an unsuccessful government attempt to forfeit Title II (i.e., Title 26, U.S.C.) firearms was not "black and white" but required judicial interpretation. Such concession does not properly shift the focus to EAJA as a reasonable alternative or compromise. Either an award is available under Title 18 or it is not. If it is appropriate under Title 18, it is necessarily inappropriate under EAJA. The distinction is not meaningless since there are different consequences flowing from awards under the two statutes, including the amounts reimbursable to the prevailing party. Section 206(a) of Public Law 99-80, 99 Stat. 186 (Aug. 5, 1985), an amendment to the EAJA, provided: Except as provided in subsection (b) [pertaining to Social Security claims], nothing in section 2412(d) of title 28, United States Code, as added by section 204(a) of this title, alters, modifies, repeals, invalidates,, or supersedes any other provision of Federal law which authorizes an award of such fees and other expenses to any party other than the United States that prevails in any civil action brought by or against the United States. Presumably, this language operates prospectively to include the attorney fee awards later authorized by FOPA. [FN3]. Title II of Pub. L. 96-481, 94 Stat. 2325 (Oct. 1, 1981), as amended by Pub. L. 97-248, 96 Stat. 574 (Sept. 3, 1982), reauthorized and made permanent by Pub. L. 99-80, 99 Stat. 183 (Aug. 5, 1985), as amended by Pub. L. 99-514, 100 Stat. 2095 (Oct. 22, 1986), as amended by Pub. L. 102-572, 106 Stat. 4511-4513 (Oct. 29, 1992). [FN4]. Figures we expect to supplement by virtue of the government's continued prolongation of this matter. Reasonable time spent litigating a fee award itself has been deemed normally to be compensable by most circuits. Weisenberger v. Huecker, 593 F.2d 49, 53-54 (6th Cir. 1979), cert. denied, 444 U.S. 880 (1979); Cinciarelli v. Reagan, 729 F.2d 801, 804 (D.C. Cir. 1984); Copeland v. Marshall, 641 F.2d 880, 896 (D.C. Cir. 1980); Lund v. Affleck, 587 F.2d 75 (1st Cir. 1978); Gagne v. Maher, 594 F.2d 326, 334-344 (2d Cir. 1979), aff'd, 448 U.S. 122 (1980); Prandini v. National Tea Co., 585 F.2d 47, 52-53 (3d Cir. 1978); Johnson v. Mississippi, 606 F.2d 635, 637-639 (5th Cir. 1979); Bond v. Stanton, 630 F.2d 1231, 1233-1235 (7th Cir. 1980); Gurule v. Wilson, 635 F.2d 782, 792 (10th Cir. 1980). [FN5]. The government seeks to quibble with some fees claimed here because they were attributable to Mr. Katona's criminal defense. As previously demonstrated by our briefs those same exact expenses were necessary to a successful conclusion of the forfeiture action whether or not the criminal trial had eventuated or intervened. It was the government which chose to simultaneously hold Mr. Katona in criminal jeopardy and to force his compelled testimony in this action, a tactic which this Court properly repudiated. The government ought not to gain a litigation advantage here through its own shabby tactics. Moreover, under one prong of section 2412, attorney fees would be limited to $75 per hour absent certain findings by the Court. [FN6]. Section 202, Pub. L. 96-481 (tit. II), 94 Stat. 2231, 2325 (October 1, 1981). [FN7]. I.e., Rule 24(a), Federal Rules of Civil Procedure. [FN8]. Because these financial/employment details are questions of fact, a declaration by Mr. Katona evidencing these facts is being prepared and will be filed within a few days. It is not believed the government will dispute these facts or the contention that Mr. Katona is a "party." [FN9]. Award of Attorneys' Fees and Other Expenses in Judicial Proceedings Under the Equal Access to Justice Act at 30-31 (U.S. Department of Justice, Office of Legal Policy; Washington, D.C.; rev. ed. 1985), citing Senate Report No. 96-253, 96th Cong., 1st Sess. at 7-8 (ordered to be printed by the Senate Committee on the Judiciary on July 20, 1979, to accompany S. 265); H.R. report No. 96-1418, 96th Cong., 2d Sess. at 11 (ordered to be printed by the House Committee on the Judiciary on September 26, 1980, to accompany S. 265). [FN10]. 28 U.S.C. section 2412(a)(1) and (d)(1)(A). [FN11]. Ibid. [FN12]. 28 U.S.C. section 2412(b). [FN13]. 28 U.S.C. section 2412(d)(1)(A). [FN14]. E.g., the creation by the prevailing party of a common fund or common benefit, or the existence of bad faith as where "the losing party has 'acted in bad faith, vexatiously, wantonly, or for oppressive reasons'." Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 258 (1975), quoting F.D. Rich Co. v. Industrial Lumber Co., 417 U.S. 116, 129 (1974). [FN15]. 28 U.S.C. section 2412(d)(2)(A). [FN16]. Ibid. [FN17]. 28 U.S.C. section 2414. [FN18]. 28 U.S.C. section 2412(d)(4). Whether that would be the Department of Justice or the Bureau of Alcohol, Tobacco and Firearms, or both, in this case we leave to the government to sort out. [FN19]. 28 U.S.C. section 2412(d)(1)(B). It is not clear either structurally or textually that the requirements of this provision also pertain to claims under subsection (b). [FN20]. H.R. Report No. 99-120, 99th Cong., 1st Sess. (1985) at 18, n. 26. [FN21]. See, e.g., Hanrahan v. Hampton, 446 U.S. 754, 757 (1980); Bradley v. Richmond School Bd., 415 U.S. 696 (1974); Grubbs v. Butz, 548 F.2d 973, 976 (D.C. Cir. 1976); Van Hoomissen v. Xerox Corp., 503 F.2d 1131, 1133 (9th Cir. 1974). [FN22]. In the absence of any teachings to the contrary, we believe the proper quantum of proof on this issue is the standard civil preponderance of the evidence. [FN23]. That is to say, allegations from a member of his own force that he was a felon, a thief, a drunk, a child molester, and a vengeful man who always got even. The BATF agents also learned that their informant had a grudge against Mr. Katona and that Mr. Katona was a highly respected businessman with an impeccable reputation in the community. [FN24]. One may legitimately ask how often a truly guilty defendant will spend thousands of dollars on forensic examinations by reputable experts with the inevitable consequence that the testing will be physically evident to the government and the certain knowledge that any incriminating results will be available to the prosecution. [FN25]. This occurred eleven months after the statute of limitations contended for by the defense had expired. It occurred almost four years before the statute of limitations the government contends for would have run. Some timing. [FN26]. One may legitimately inquire whether the government attorneys even heard of the maxim, "Falsus in uno, falsus in omnibus." How many lies does it take to destroy a witness' credibility? This is also the legal rationale for our continued emphasis on the BATF perjury concerning the tire-flattening incident -- an event trivial in itself and perhaps only proof, standing alone, of poor judgment or an overly aggressive attitude, but ominous when it rises to perjury in a United States District Court. This Court has before it persuasive evidence that the agents are liars. If they will lie about the trivial, they will assuredly lie about the significant. The Court also has evidence that the only discernible result of BATF's internal affairs investigation into the tire-flattening was a bootlegged copy of Patrolman Agee's sworn statement being faxed from BATF to the Bucyrus Police Department, ensuring the firing of a police officer who had turned into a witness for the defense. "Sue us and be indicted. Testify against us and be fired." [FN27]. Including an on-the-record, under-oath tribute by the government's own expert. [FN28]. It would seem so basic as to be trivial that proof of a person's -- for example, the Court's -- possession of a counterfeit or forged document does not prove, nor even tend to prove, indeed, even suggest the Court is a counterfeiter or forger. For federal attorneys to engage in this kind of stretch there are only two plausible explanations: gross incompetence or improper motive. Either explanation would appear to compel a finding of "bad faith, vexatiousness, wantonness or oppressive conduct." [FN29]. 28 U.S.C. section 2412(d)(1)(A): "... the court shall award to a prevailing party ... fees and other expenses ... unless the court finds that the position of the United States was substantially justified...." The Court would seemingly be hard pressed to render such a finding absent an undertaking by the United States to justify its position. We recall that the United States declined (in fact objected) to producing evidence at the May 5 evidentiary hearing. [FN30]. DOJ EAJA monograph, supra at 43, citing Senate Report No. 96-253, supra at 21, and H. Report No. 96-1418, supra at 18. [FN31]. Senate Report No. 96-253, supra at 6-7; H.R. Report No. 96-1418, supra at 11. (Emphasis added.) [FN32]. In this connection it is procedurally significant that a motion for judgment on the pleadings is treated as one for summary judgment if matters outside the pleadings are presented to, and not excluded by, the court. Rule 12(c), Federal Rules of Civil Procedure. The only matter presented outside the pleadings by the claimant's motion was the disposition of the companion criminal case, a proper matter of judicial notice of the Court's own records, and not, strictly speaking, a "matter outside the pleadings."