May 12: In the U.S. Court of Appeals, Sixth Circuit, Case No. 09-6422. Appealed from Eastern District of Kentucky at Covington. The Appeals Court explained that this is an appeal from an award of attorney fees
in the amount of $116,038.03, assessed against U.S. EPA under the Equal Access to Justice Act (EAJA), 28 U.S.C. § 2412(b). The award was premised on the district court's findings that the EPA acted arbitrarily and not in accordance with law in responding to efforts by plaintiff Griffin Industries, Inc. (Griffin) to prevent the EPA's disclosure of Griffin's confidential business information to third parties pursuant to requests under the Freedom of Information Act. On appeal, the EPA contends the district court erred in two respects: by awarding fees based on pre-litigation conduct; and by failing to make the required finding that the EPA acted in bad faith. The Appeals Court agreed with the EPA's latter argument and reverse the award of attorney fees.
In brief background on the case which is important to understanding the decision, Griffin Industries is a Kentucky corporation engaged in the "rendering" business, recycling inedible animal parts for animal feed and biodiesel fuel. Griffin operates in approximately 20 states and has a plant in Dublin, Georgia. In 2003 and 2004, the Dublin facility was subject to investigation and criminal prosecution for violation of the Clean Water Act. The prosecution culminated in the dismissal of several felony charges as Griffin pled guilty in November 2004 to a misdemeanor offense of negligent discharge of waste water and paid a $50,000 fine.
During the course of the investigation, the EPA acquired possession of voluminous records and documents relating to Griffin's business operations. Some of the materials were seized pursuant to search warrants, some were obtained by grand jury subpoenas, some were obtained from state agencies, and some were generated by the EPA. Shortly after the criminal prosecution was closed, the EPA received two requests from third parties under the Freedom of Information Act (FOIA) for disclosure of all documents pertaining to Griffin Industries. It was the EPA's handling of these requests that came to form the basis for the attorney fees award.
The EPA advised Griffin on January 12, 2005 that the requests had been received and would be initially denied pending review of the voluminous materials to determine whether they contained confidential information exempt from the FOIA disclosure requirements. In response, on January 27, Griffin lodged its objection to the release of any information. Over the next three months, the parties exchanged various communications. In short, the EPA determined: (1) that documents in its criminal investigative files obtained pursuant to search warrant or grand jury subpoena were exempt from the FOIA disclosure requirements; (2) that other materials in its investigative files had to be reviewed to determine whether exemptions applied (but denied that Griffin had the right to pre-screen the investigative files before the EPA released what it identified as non-exempt records); and (3) that "publicly available" documents (i.e., documents obtained from court dockets and state agencies) are not privileged or exempt from disclosure.
Griffin objected, maintaining that it was entitled to review the EPA's investigative files before release of any information, and that confidential business information contained in the so-called "publicly available" documents is exempt from disclosure. Although no documents were in fact released to the requesters, Griffin was not satisfied with the EPA's assurances that its interests would be duly protected.
The Appeals Court ruled, ". . .we hold the district court abused its discretion when it granted the motion for attorney fees without making an actual finding of subjective bad faith or improper purpose. Because the relied-on exception [i.e. "bad faith"] to the American Rule [i.e each party bears its own attorney fees] provided in the EAJA has not been shown to be applicable, the order awarding attorney fees to Griffin Industries must be and is reversed." In a footnote, the Appeals Court explained, "This ruling obviates the need to address the EPA's second argument, that the district court erred as a matter of law by awarding fees based on pre-litigation conduct. In Shimman, 744 F.2d at 1230-33, the Sixth Circuit held attorney fees may not be awarded based solely on pre-litigation conduct giving rise to the underlying claim, but left open the possibility of awarding fees based on pre-litigation misconduct "in causing an action to be brought." Because the district court clearly erred by failing to find bad faith misconduct at all, we need not decide whether the EPA's pre-litigation conduct was of the sort that could form the basis for an award of fees."
Access the complete opinion (click here). [*All, *CA6]
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