United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Filed September 6, 2005
Division No. 94-1
IN RE: MADISON GUARANTY SAVINGS & LOAN
(WATT FEE APPLICATION)
Division for the Purpose of
Appointing Independent Counsels
Ethics in Government Act of 1978, As Amended
Before: SENTELLE, Presiding, FAY and REAVLEY, Senior
Circuit Judges.
ORDER
This matter coming to be heard and being heard before the
Special Division of the Court upon the application of William
Watt for reimbursement of attorneys' fees and costs pursuant to
section 593(f) of the Ethics in Government Act of 1978, as
amended, 28 U.S.C. § 591 et seq. (2000), and it appearing to the
court for the reasons set forth more fully in the opinion filed
contemporaneously herewith, that the petition is not well taken,
it is hereby
2
ORDERED, ADJUDGED, and DECREED that the
petition of William Watt for attorneys’ fees that he incurred
during the Independent Counsel’s investigation be denied.
PER CURIAM
For the Court:
Mark J. Langer, Clerk
By:
Marilyn R. Sargent
Chief Deputy Clerk
1
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Filed September 6, 2005
Division No. 94-1
IN RE: MADISON GUARANTY SAVINGS & LOAN
(WATT FEE APPLICATION)
Division for the Purpose of
Appointing Independent Counsels
Ethics in Government Act of 1978, As Amended
Before: SENTELLE, Presiding, FAY and REAVLEY, Senior
Circuit Judges.
ON APPLICATION FOR ATTORNEYS' FEES
Opinion for the Special Division filed PER CURIAM.
PER CURIAM: William Watt petitions this Court under
section 593(f) of the Ethics in Government Act of 1978, as
amended, 28 U.S.C. §§ 591-599 (2000) (the Act), for
reimbursement of attorneys' fees in the amount of $72,229.00
that he claims were incurred during and as a result of the
investigation conducted by independent counsel. Because we
conclude that Watt has not carried his burden of showing that
the fees would not have been incurred but for the requirements
of the Act, we deny the petition in its entirety.
2
BACKGROUND1
In 1978, then-Arkansas Attorney General William Jefferson
Clinton, his wife Hillary Rodham Clinton, and Jim and Susan
McDougal purchased 230 acres of undeveloped property in
Arkansas. To develop the property, they formed a partnership
known as the Whitewater Development Company. In 1982, Jim
McDougal purchased a savings and loan and renamed it
Madison Guaranty Savings and Loan Association. Over the
next few years, Jim McDougal and Madison Guaranty were
involved in questionable financial transactions, some of which
benefitted Whitewater Development. One of these questionable
transactions was a fraudulent property loan by Madison
Guaranty based on an inflated appraisal of the property.
William Watt, the fee petitioner here, apparently was
instrumental in obtaining the appraisal.
All of these activities eventually drew the attention of
federal bank regulators, who made a criminal referral in 1992 to
the U.S. Attorney’s Office in Little Rock. The U.S. Attorney’s
Office undertook an investigation, and in late 1993 transferred
the case to the Criminal Division of the Department of Justice.
Then, following Mr. Clinton’s inauguration as President in
January of 1993, public pressure began mounting for the
appointment of an independent prosecutor to investigate Mr.
Clinton’s role in the Madison Guaranty matters. The Ethics in
Government Act,2 which had provided the mechanism for
1
A substantial portion of this background material has been
adopted verbatim from In re Madison Guaranty Savings & Loan
(Clinton Fee Application), 334 F.3d 1119, 1126 (D.C. Cir., Spec. Div.,
2003) (per curiam).
2
In 1978 the Congress, in response to concerns about the
impartiality of the Executive Branch during the investigation of the
3
appointing statutory independent prosecutors to investigate
allegations of wrongdoing by high government officials, lapsed
by its terms in 1992 and had not been reenacted by the
Congress. Consequently, in early 1994, the Attorney General
appointed Robert B. Fiske, Jr., as regulatory independent
counsel to continue the investigation of all matters relating to
Madison Guaranty. During the approximately eight months of
Fiske’s investigation, his office conducted hundreds of
interviews, subpoenaed millions of pages of documents, and
obtained three guilty pleas. Subsequently, in June of 1994, the
independent counsel statute was reauthorized by the Congress.
Pursuant to the statute, in August of that year the court
appointed Kenneth Starr as statutory independent counsel
(hereinafter “IC” or “OIC”) to take over the investigation.
Watt was apparently a focus of these various investigations.
In 1989 he was served a subpoena for documents by the U.S.
Attorney’s office. He was also interviewed. Nevertheless,
according to Watt, the U.S. Attorney’s office “required nothing
further of [him].” Subsequently, in 1994, he was apparently
served another subpoena by regulatory independent counsel
Fiske’s office seeking similar documents. After Fiske’s
investigation was taken over by statutory independent counsel
Starr, Watt was told that he was a subject of that investigation,
eventually being conferred with immunity. He was never
indicted. Pursuant to § 593(f)(1) of the Act, Watt now petitions
the court for reimbursement of attorneys’ fees in the amount of
$72,229.00 that he claims were incurred during and as a result
Watergate matter, enacted the Ethics in Government Act, which
authorized a special court to appoint an independent counsel to
prosecute violations of the criminal law involving high government
officials, including the President. As its name implies, this counsel
was to function independent of any federal government agency.
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of the IC’s investigation.
DISCUSSION
Unique in the criminal law structure of the United States,
the Ethics in Government Act provides for reimbursement of
attorneys’ fees expended by subjects in defense against an
investigation under the Act. Specifically, 28 U.S.C. § 593(f)(1)
states:
Upon the request of an individual who is the subject of
an investigation conducted by an independent counsel
pursuant to this chapter, the division of the court may,
if no indictment is brought against such individual
pursuant to that investigation, award reimbursement for
those reasonable attorneys' fees incurred by that
individual during that investigation which would not
have been incurred but for the requirements of this
chapter.
Because the Act “constitutes a waiver of sovereign
immunity it is to be strictly construed.” In re Nofziger, 925 F.2d
428, 438 (D.C. Cir., Spec. Div., 1991) (per curiam). Therefore,
the Act provides reimbursement only for attorneys’ fees that
survive an elemental analysis determining whether the petitioner
is the “subject” of the independent counsel’s investigation,
incurred the fees “during” that investigation, and would not have
incurred them “but for” the requirements of the Act. The
petitioner “bears the burden of establishing all elements of his
entitlement.” In re North (Reagan Fee Application), 94 F.3d
685, 690 (D.C. Cir., Spec. Div., 1996) (per curiam). Although
there are several minor areas of contention among the parties as
to Watt’s eligibility for reimbursement, the one major issue is
whether or not Watt has satisfied the “but for” requirement.
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As we have held, "[a]ll requests for attorneys' fees under the
Act must satisfy the 'but for' requirement of" the Act. In re
Sealed Case, 890 F.2d 451, 452 (D.C. Cir., Spec. Div., 1989)
(per curiam). The purpose of awarding only fees that would not
have been incurred “but for” the Act is to ensure that "officials
who are investigated by independent counsels will be subject
only to paying those attorneys' fees that would normally be paid
by private citizens being investigated for the same offense by"
federal executive officials such as the United States Attorney.
Id. at 452-53 (citing S. REP. NO. 97-496, 97th Cong., 2d Sess. 18
(1982), reprinted in 1982 U.S.C.C.A.N. 3537, 3554 (referring to
"fees [that] would not have been incurred in the absence of the
special prosecutor [independent counsel] law")).
As we have stated, “[t]he most difficult element for a fee
applicant to establish under the Act is that the fees ‘would not
have been incurred but for the requirements of [the Act].’” In re
North (Bush Fee Application), 59 F.3d 184, 188 (D.C. Cir.,
Spec. Div., 1995) (per curiam) (quoting In re North (Dutton Fee
Application), 11 F.3d 1075, 1079 (D.C. Cir., Spec. Div., 1993)
(per curiam)). In part this is so because the element requires a
petitioner to prove a negative - one with a high component of
speculation. In part, though, it is difficult because the law
contemplates that it should be difficult and that such fees will
not be a common thing. In re Olson, 884 F.2d 1415, 1420 (D.C.
Cir., Spec. Div., 1989) (“The court is admonished to award
reimbursement for attorneys’ fees ‘in only rare instances’ for
‘extraordinary expenses,’ ‘sparingly’ ”) (quoting S. Rep. 97-496,
97th Cong., 2d Sess. 19 (1982)). As we stated above, the
contemplation of the legislation is not that subjects of
independent counsel investigations will be reimbursed for all
legal fees, but only that they will be reimbursed for those legal
fees that would not have been incurred by a similarly-situated
subject investigated in the absence of the Act.
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Watt puts forth a short and simple reason for fulfilling the
“but for” requirement: before the IC was appointed to
investigate the Whitewater matter, his “questioned actions and
activities had previously been reviewed by a U.S. Attorney and
said U.S. Attorney found no culpability on” his part.
Consequently, reasons Watt, “since no culpability was found on
his part in 1989 after producing identical documents and
cooperating fully with the authorities [then] but for the
Whitewater investigation” he would not have incurred the
attorneys’ fees for which he seeks reimbursement.
In her evaluation of Watt’s fee application, the IC disputes
his claim that he passes the “but for” test. First, the IC notes that
although Watt may be asserting his right to reimbursement
under the duplication of investigations theory, he “does not
explain his theory of the law” beyond contending that the U.S.
Attorney found no culpability on his part. The IC further notes
that although Watt claims that he would not have incurred the
sought after fees “ ‘but for’ the Whitewater investigation,” the
investigation of him by regulatory independent counsel Fiske
shows conclusively that in the absence of the Act his actions not
only would have been, but were investigated by the Department
of Justice.
The DOJ in its evaluation also contends that Watt has failed
to pass the “but for” requirement. First, in similar fashion to the
IC, the DOJ argues that it is obvious that Watt would have been
investigated by the DOJ in the absence of the Act, as shown by
the investigations undertaken prior to the re-enactment of the
Act by the U.S. Attorney, the Criminal Division of the DOJ, and
regulatory counsel Fiske. Next, the DOJ addresses what it
describes as Watt’s duplication of investigations theory, arguing
that prior decisions of this court have “made clear that the ‘but
for’ test is not met when an investigation is duplicative of other
federal criminal investigations, but only when it is duplicative
7
of the preliminary investigation required by the Independent
Counsel statute.” Since Watt is not claiming that the IC’s
investigation of him was duplicative of the preliminary
investigation, the DOJ contends that his argument under this
theory must fail.
* * * * * * * * *
In claiming that he passes the “but for” test, Watt is arguing
that prior to the IC’s investigation he was investigated by the
U.S. Attorney’s office, which “found no culpability on [his]
part,” and that that would have been the end of the matter with
respect to him if the IC had not been appointed. It was, then, the
independent counsel’s appointment and subsequent
reinvestigation of the matter that led him to incur the fees for
which he now seeks reimbursement.
Given this argument, Watt has not met his burden of
proving that his situation satisfies the “but for” requirement.
First, Watt’s recitation of the facts does not appear to be entirely
accurate: although he claims that the U.S. Attorney’s office
found “no culpability” on his part, there is no evidence that the
U.S. Attorney’s office came to a conclusion either way about
Watt’s conduct. The case instead was apparently transferred to
another DOJ entity.
It does appear to be accurate, however, that Watt was
investigated at least twice for the same matter: once by the U.S.
Attorney’s office and once by the office of IC Starr. But
although an independent counsel’s investigation may look into
the same matter as a former investigation, the Act does not
contemplate attorneys’ fees reimbursement for the cost of
defending against the second investigation. In re Nofziger, 925
F.2d 428 (D.C. Cir., Spec. Div., 1991) (per curiam), offers
support for this proposition.
8
In Nofziger the court noted that in 1983 Congress made
certain major changes to the Act, one of which provided for the
reimbursement of attorneys’ fees subject to certain
qualifications. The court then addressed the issue of the
inherent differences in independent counsel investigations and
whether these differences could be grounds for attorneys’ fees
reimbursement. Citing to the Senate Report accompanying the
1983 changes, the court quoted from the testimony of Lloyd
Cutler wherein he stated that “one inevitable consequence of the
appointment of a special prosecutor or independent counsel is a
repetition of going over ground that has already been gone over,
and a very substantial increase in the amount of time the target
and his lawyer must spend on the matter.” Id. at 445 (citation
and emphasis omitted). In highlighting this testimony, the court
explained that Cutler was arguing to the Congress “that the
appointment of an independent counsel necessarily increases the
costs to the subject of the investigation . . . .” Id. (original
emphasis). The court pointed out that Congress was therefore
aware of this contention, but nevertheless refused to allow
reimbursement simply on account of the Act; instead, Congress
allowed for reimbursement only for those attorneys’ fees that
“would not have been incurred but for the requirements of [the
Act].” Id. (original emphasis). And, the court noted, the term
“‘[r]equirements’ refers to the special limitations and procedures
established by the Act.” Id. Watt’s argument for passing the
“but for” test does not reference any requirements of the Act;
instead, Watt relies only on the Act itself, i.e., the appointment
of the independent counsel. As explained in Nofziger, the
Congress did not provide for reimbursement of attorneys’ fees
on this basis alone.
9
CONCLUSION
The petition of William Watt for reimbursement of
attorneys’ fees is denied for failure to satisfy the “but for”
requirement of the Act.