Libas, Ltd. v. United States

Slip Op. 03-103

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: RICHARD W. GOLDBERG, SENIOR JUDGE

LIBAS, LTD.,

Plaintiff,

v. Court No. 95-00014

UNITED STATES,

Defendant.

[Upon remand, Plaintiff is awarded attorneys’ fees and costs
under the Equal Access to Justice Act.]

Dated: August 13, 2003

Law Offices of Elon A. Pollack (Elon A. Pollack and Eugene
P. Sands) for plaintiff.

Peter D. Keisler, Assistant Attorney General; John J. Mahon,
Acting Attorney in Charge, Bruce N. Stratvert, Attorney, Civil
Division, Commercial Litigation Branch, United States Department
of Justice; Edward Maurer, Office of Assistant Chief Counsel,
International Trade Litigation, United States Bureau of Customs
and Border Protection, Of Counsel, for defendant.

OPINION

This case concerns Plaintiff Libas, Ltd.’s (“Libas”) claim

for attorneys’ fees and costs from Defendant United States

pursuant to 28 U.S.C. §2412(d), the Equal Access to Justice Act

(“EAJA”). Libas brought the original action to challenge a

United States Customs Service1 (“Customs”) classification of

1
The United States Customs Service has since become the
Bureau of Customs and Border Protection per the Homeland Security
Act of 2002, § 1502, Pub. L. No. 107-296, 116 Stat. 2135, 2308-09
Court No. 95-00014 Page 2

fabric imported by Libas from India. Familiarity with the

history of the original case is presumed. See Libas, Ltd. v.

United States, 24 CIT 893, 118 F. Supp. 2d 1233 (2000), Libas,

Ltd. v. United States, 193 F.3d 1361 (Fed. Cir. 1999), Libas,

Ltd. v. United States, 20 CIT 1215 (1996). This Court previously

denied Libas’s petition for attorneys’ fees and other expenses.

Order Denying Plaintiff’s Application for Attorneys’ Fees and

Other Expenses under the Equal Access to Justice Act (May 16,

2001). On January 7, 2003, the Court of Appeals for the Federal

Circuit vacated the denial and remanded to this Court for further

proceedings. Libas, Ltd. v. United States, 314 F.3d 1362, 1366

(Fed. Cir. 2003).2 Upon remand, the Court holds that the United

States was not substantially justified in the classification

determination. Further, Libas is entitled to attorneys’ fees,

and can recover those fees in excess of the $75 per hour base

provided by the EAJA. However, not all fees and expenses sought

by Libas are recoverable.

(Nov. 25, 2002), and the Reorganization Plan Modification for the
Department of Homeland Security, H.R. Doc. 108-32, p. 4 (Feb. 4,
2003).
2
Libas’s petition for attorneys’ fees and costs was
unopposed because the Court refused to accept Customs’ untimely
submission of its brief in opposition to Libas’s motion.
Court No. 95-00014 Page 3

I. Customs was not substantially justified in its
classification of the fabric

28 U.S.C. § 2412(d)(1)(A) reads, in part: “Except as

otherwise specifically provided by statute, a court shall award

to a prevailing party other than the United States fees and other

expenses . . . unless the court finds that the position of the

United States was substantially justified or that special

circumstances make an award unjust.” 28 U.S.C. § 2412(d)(1)(A)

(2000) (emphasis added). The Supreme Court has defined

substantial justification as “justified to a degree that could

satisfy a reasonable person.” Pierce v. Underwood, 487 U.S. 552,

566 (1988). This has been interpreted as requiring the United

States to “show that it was clearly reasonable in asserting its

position . . . in view of the law and the facts.” Gavette v.

Office of Personal Management, 808 F.2d 1456, 1467 (Fed. Cir.

1986) (emphasis in original). Therefore, the burden of proving

either substantial justification or special circumstances lies

with the United States. Traveler Trading Co. v. Untied States,

13 CIT 380, 381, 713 F. Supp. 409, 411 (1989) (“Should the

government be unable to bear this burden, the court must award

fees and expenses.”). In addition, the United States’ position

must be substantially justified not only in litigation, but at

the administrative level as well. Gavette, 808 F.2d at 1467.

To be substantially justified, the United States’ position

is not required to be correct, as long as it is reasonably based.
Court No. 95-00014 Page 4

Pierce, 487 U.S. at 566, Consolidated Int’l Automotive, Inc., v.

United States, 16 CIT 692, 696, 797 F. Supp. 1007, 1011 (1992).

In Consolidated, for example, incorrect calculations of the

foreign market value for chrome-plated lug nuts from the People’s

Republic of China were deemed substantially justified because

Commerce was adopting a novel methodology for determining the

market value of goods in a non-market economy. 16 CIT at 697,

797 F. Supp. at 1012. However, when the United States offers

“‘no plausible defense, explanation, or substantiation for its

action,’” its position is not reasonably based. Consolidated, 16

CIT at 696, 797 F. Supp. at 1011 (quoting Griffin & Dickenson v.

United States, 21 Cl.Ct. 1, 6-7 (1990)), see also Beta Systems,

Inc. v. United States, 866 F.2d 1404, 1406 (Fed. Cir. 1989) (when

“[n]o authority for [its] position is offered by the government .

. .”, its position is not substantially justified)(quoting Beta

Systems, Inc. v. United States, 838 F.2d 1179, 1182 (Fed. Cir.

1988)).

The only authority cited by Customs in the previous Libas

case was its own test to distinguish between hand-loomed and

power-loomed fabric. Because of severe deficiencies in Customs’

fabric test for distinguishing between hand-loomed and power-

loomed fabric, and the flawed procedure it used to arrive at that

fabric test, Customs’ incorrect categorization of Libas’s fabric

as power-loomed was not substantially justified. The test was so
Court No. 95-00014 Page 5

scientifically unsupportable that it was tantamount to offering

no authority at all. In Daubert v. Merrell Dow Pharmaceuticals,

the Supreme Court set forth certain factors to consider when

determining the reliability of a scientific test: (1) whether the

technique in question has been tested; (2) whether the test has

been published or otherwise evaluated by peers; (3) the tests’

known or potential rate of error; and (4) whether the test has

been generally accepted. Daubert v. Merrell Dow Pharmaceuticals,

509 U.S. 579, 593-94 (1993). The previous Libas opinion

delivered by the Court detailed how Customs’ testing method

failed to meet any of the Daubert factors. Libas, 188 F. Supp.

2d. at 1235-1237.

Customs’ failure to meet the first Daubert factor, whether

the test itself has been scrutinized, is the most relevant

hindrance to its claim of substantial justification. In

Consolidated, although no Daubert-like analysis was employed, the

court was sympathetic to the United States’ “erroneous”

conclusions because Commerce was dealing with complex,

“previously unaddressed issues.” Consolidated, 16 CIT at 697.

Although there is testimony which indicates that distinguishing

between hand and power-loomed fabric is also troublesome, such

testing is clearly distinguishable from Consolidated. In

Consolidated, Commerce was trying to determine an inherently

intricate and imprecise figure: the foreign market value of goods
Court No. 95-00014 Page 6

in a non-market economy. Commerce was aware that a degree of

error was to be expected; their test was one in a series of

attempts by the United States to foster more accurate valuations.

On the other hand, in the instant case, the fabric test can

be effectively scrutinized. Either the fabric was hand or

machine-woven; the goal is not estimation or approximation as in

Consolidated. Therefore, although it may not be more reasonable

to expect a more exact testing method than in Consolidated, it is

reasonable to expect an understanding by Customs of the accuracy

of its fabric test. This could have been achieved through

double-blind testing: evaluating whether examiners, not

previously informed of a sample’s composition, could reliably

distinguish hand and machine woven fabric by using Customs’

fabric test. Instead, Customs’ evaluation involved examiners who

already knew of the material’s composition, obviously an

inappropriate testing method. Libas, 24 CIT at 896, 118 F. Supp.

2d at 1236. Reliance on such a fabric test was unreasonable at

the administrative level. Customs failed to recognize the

scientific unreliability of using the fabric test without any

type of testing to validate the fabric test. It was also

unreasonable in litigation because Customs should have been aware

of the Daubert analysis to which any scientific test would be

subjected.
Court No. 95-00014 Page 7

In light of the fact that Customs’ fabric test is not in

accordance with Daubert, yet another roadblock to Customs’

substantially justified argument is Customs’ evident failure to

appropriately consider the testimony of S. Ponnuswamy and Mary

Jane Leland. Ponnuswamy, partner of JLC International of Madras,

India, previously testified that JLC purchased the fabric at

issue from hand-weavers in Kovur, India, and that he observed

similar fabric being hand-woven. Libas, 24 CIT at 898, 118 F.

Supp. 2d at 1237. Leland, a Professor Emeritus at California

State University at Long Beach, testified that the fabric is

“typical of fabric produced on a hand-powered fly shuttle loom in

the Madras area of India.” Id. The Court of Appeals for the

Eighth Circuit has held, “the government’s position [cannot] be

deemed reasonable in fact when it relied on an isolated part of

the evidence and ignored other overwhelming evidence . . . .”

Cornelia v. Schweiker, 728 F.2d 978, 984 (8th Cir. 1984), see

also John Doe v. United States, 16 Cl.Ct. 412, 420 (1989)

(“Absence of thorough familiarity with the facts and the

implications of those facts . . . is unreasonable.”). Ponnuswamy

and Leland’s testimony may not have been “overwhelming” in the

face of a validated, accurate Customs’ fabric test. However,

their testimony, along with the inherent weakness of Customs’

test, lends itself to the conclusion that Customs was not

substantially justified.
Court No. 95-00014 Page 8

II. Amount of Attorneys’ Fees to be Awarded Per Hour

28 U.S.C. § 2412 (d)(1)(D)(2)(A)(ii) (2000) provides that:

“attorney fees shall not be awarded in excess of $125 per hour,

unless the court determines that an increase in the cost of

living or a special factor, such as the limited availability of

qualified attorneys for the proceedings involved, justifies a

higher fee.” The $125 base, however, was the result of a 1996

amendment to the EAJA; for cases initiated before March 29, 1996,

the base award is $75. See Contract with America Advancement Act

of 1996, Pub.L. 104-121. Since the original Libas suit was

initiated in January of 1996, the lower figure applies to the

instant case.

The Supreme Court in Pierce held that “. . . the exception

for ‘limited availability of qualified attorneys for the

proceedings involved’ must refer to attorneys ‘qualified for the

proceedings’ in some specialized sense, rather than just their

legal competence. We think it refers to attorneys having some

distinctive knowledge or specialized skill needful for the

litigation in question . . .” Pierce, 487 U.S. at 572. In this

case, it is apparent that elevated attorneys’ fees are

appropriate. Although cases involving customs law are not

automatically worthy of elevated attorneys’ fees, in this case

specialized skills in customs law were necessary for the instant

case, and Libas produced affidavits that there was a shortage of
Court No. 95-00014 Page 9

lawyers in the Los Angeles area capable of handling like cases.

Theoretically, any legal practice area can be labeled as a

“specialized skill” within the Pierce definition. However, such

an expansive view, “would serve to emasculate the effectiveness

of the $75 cap. . .” Esprit Corp., Inc. v. United States, 15

Cl.Ct. 491, 494 (1988). Instead, courts have read Pierce as

attempting to curtail a broad interpretation. Cox Construction

Co. v. United States, 17 Cl.Ct 29, 36 (1989) (“. . . Pierce’s

choice of ‘patent law’ as an example of a specialty probably

indicates an intent to be more restrictive in its interpretation

of ‘limited availability of qualified attorneys.”). As such,

needing general expertise in a specific field, by itself, is

insufficient for an award of attorneys’ fees above the $75 base.

See Lozon v. Commissioner of Internal Revenue, 1997 Tax Ct. Memo

LEXIS 622, at 16. Therefore, in the case at hand, although

Libas’s credentials and expertise are undisputed, that alone will

not affect the amount of attorneys’ fees.

Beyond simply possessing expertise, “the test seems to be

whether the specialized skills are required to competently

litigate the case.” Esprit, 15 Cl.Ct. at 494. If that is the

case, attorneys’ fees above $75 may be awarded. Nakamura v.

Heinrich, 17 CIT 119, 121 (1993) (attorney’s knowledge of customs

law, applied in a broker license case, led to additional fees

being awarded). In this case, as in Nakamura, the attorney’s
Court No. 95-00014 Page 10

knowledge of customs law was necessary to litigate this case.

Therefore, the Court will award fees above the statutory $75

minimum.

Of interest to courts in determining whether to consider

higher lawyer’s fees is the availability of regional lawyers who

can litigate the case at hand. Nakamura v. Heinrich, 17 CIT at

121. (“The Court takes judicial notice of the relatively small

Customs bar that practices before this Court. . .”). Libas

submitted affidavits of attorneys from the Los Angeles area who

stated that the customs bar was very small in that area.

Therefore, the Court will award Libas fees of $125 per hour. The

Court declines to award the excessive fees claimed by Libas, up

to $260 an hour, because those were calculated based on the $125

statutory minimum which does not apply in this case.

III. Totals Attorneys’ Fees and Expenses Awarded

Before proceeding, it is important to note that the burden

is on the party seeking fees to detail with a degree of

specificity the hours sought, and the activities conducted during

those hours. As stated in Esprit, “[a] party who seeks payment

must keep records in sufficient detail that a neutral judge can

make a fair evaluation of the title expended, the nature and the

need for the service, and the reasonable fee to be allowed.”

Esprit Corp., 15 Cl.Ct. at 494. Failure to meet these minimal

standards of specificity may result in a forfeiture of the claim
Court No. 95-00014 Page 11

for additional fees. See Lozon, 1997 Tax Ct., at *22 (fees not

awarded for hours which there was “no detailed explanation of the

services provided . . .”), Bonanza Trucking Corp. v. United

States, 11 CIT 436, 443, 664 F. Supp. 1453, 1458 (“When fees are

sought at the expense of a losing party in court, no amount of

work, or money claimed therefore, is too small to obviate

explanation.”).

A. Attorneys’ fees

Section 2412 applies only to “civil actions.” 28 U.S.C. §

2412(a)(1). It is well grounded that attorneys’ fees apply only

to the proceedings surrounding the action at hand, Gavette, 808

F.2d at 1461, Cox Construction, 17 Cl.Ct at 36. Thus, fees and

expenses that predate the summons and complaint, including those

amassed at the administrative level, are not recoverable.

Traveler Trading Co., 13 CIT at 385. Hence, any hours billed

before December 30, 1994, the date Libas’s administrative protest

was denied, shall be excluded from the total award.

Libas lists two employees, “JS” and “TP,” in the invoices

regarding billable hours.3 Yet the amount of money sought for

both is considerably lower that of the other attorneys listed.

Furthermore, TP was given research assignments similar to those

given to a summer associate or other non-attorneys. Since the

3
Although the rates for JS and TP are quoted for the
Court’s benefit, only the hourly rate for TP is relevant. JS
accumulated no hours preparing for litigation.
Court No. 95-00014 Page 12

Court has no detailed description is provided for either JS or

TP, the Court is left to assume that they are law clerks, summer

associates, or some sort of consultants. Since we have no

information that establishes any of these employees as members of

the bar, they do not fall within the parameters of the $75

minimum. Bonanza, 11 CIT at 444. Courts have come up with

several different solutions for dealing with like situations,

ranging from (1) awarding the amount paid to the employee by the

law firm, (2) awarding the amount that the client was billed, or

(3) awarding no payment at all. Id. The situation presented in

this case is analogous to Esprit, where fees sought for a

consultant were decreased by two thirds, centrally because no

description of the consultant’s importance to the trial was

provided. Therefore, as in Esprit, we grant Libas one third of

the requested for fees from TP’s services. Esprit, 15 Cl.Ct. at

494.

Three invoices from the Law Offices of Elon A. Pollack to

its client, Libas, were presented to the Court to substantiate

Libas’s claims for attorneys’ fees. Invoice #5932 covered

attorneys’ fees from December 8, 1994, to June 24, 1996. The

total hours claimed in Invoice #5932 are 688.29, for a total of

$148,767.90 in attorneys’ fees. The Court has modified those

totals. First, 28.5 hours of pre-litigation work (prior to

December 30, 1994) were subtracted from the total, resulting in a
Court No. 95-00014 Page 13

total of 659.79 hours. Second, instead of the claimed hourly

rates varying from $175 to $250, the hourly rates were all

adjusted to $125. Therefore, Libas is awarded $82,473.75 for

attorneys’ fees under Invoice #5932.

Invoice #4264 covered attorneys’ fees from July 8, 1996, to

October 14, 1999, and claimed 521.04 hours for a total bill of

$105,371.98. The Court subtracted from the total claimed hours

25.5 hours for work on drafting complaints for other cases before

the Court of International Trade, and work on other protests

before Customs. See, e.g., Invoice #4264, on 4/3/97, “Edit

complaint in case No. 95-10-01320” (claiming attorneys’ fees for

work on another case). Again, adjusting the attorneys’ fees

downward to $125, the Court awards Libas $61,942.50 for Invoice

#4264.

Invoice #5934 covered attorneys’ fees from December 8, 1999,

to November 17, 2000, and also included $750.00 for an

administrative charge to compile time records. The total bill

was for 250.50 hours, or $60,591.25. The Court subtracted eight

hours for work on other matters, such as “Review case files re

Reserve Calendar” on December 17, 1999. The Court also

subtracted seventeen hours by “tp”. The result is 225.5 attorney

hours, or $28,187.50 in attorneys’ fees. After adding in the

$481.67 for tp’s work (17 hours X $85 per hour, reduced by two-

thirds), and the $750.00 for compiling the time records, the
Court No. 95-00014 Page 14

Court awards $29,419.17 in attorneys’ fees for Invoice #5934.

B. Expenses

“The EAJA permits recovery of all reasonable and necessary

expenses incurred or paid in preparation for trial of the

specific case before court, which are customarily charged to the

client.” Traveler Trading Co., 13 CIT at 386. However, several

of the expenses sought by Libas are neither “reasonable” nor

“necessary.” First, plaintiff seeks reimbursement for numerous

uses of “Federal Express” and messenger services without

explaining why those services were necessary. As other courts

have held, we find that costs for Federal Express and messenger

services are not reimbursable, without an explanation as to why

the United States Postal Service was inadequate. Lozon, 1997 Tax

Ct., at *23. Second, plaintiff seeks awards for several vaguely

described “meals.” The Court does recognize Libas’s need for

sustenance, however we see no reason to allow remuneration for an

expensive palate. Thus, meals at House of Shish Kabob for

$115.00 on June 23, 2000, and Yang Chow Restaurant for $109.16 on

June 4, 1996 shall not be remitted. Additionally, the meal

claimed on July 26, 1996, at Brewski’s for $33.78 is not

permitted because no corresponding attorney hours or other

expenses were billed out that date. The Court cannot attribute

that meal as necessary to perform any service for the client.

Perhaps these meals were necessary group meetings; however,
Court No. 95-00014 Page 15

without any detail of the company or of the subject matter

discussed, the expenses claimed fail Libas’s burden of proof.

Third, plaintiff seeks payment for a stay at Doubletree

Hotels on May 30, 1996. Claims for hotel costs, without

explanation, have been denied in the past. John Doe, 16 Cl.Ct.

at 422. Although this expense took place around the time of

trial, we are given no explanation regarding its necessity.

Failure to overcome Plaintiff’s burden of proof, plus the Court’s

confusion as to why accommodations were necessary for a locally

held trial, supports a denial for additional fees.

Fourth, plaintiff seeks payment for certain expenses

incurred prior to December 30, 1994, the date when litigation

began for purposes of calculating fees and expenses. Therefore,

the Court subtracts $94.67 from the expense invoice. Finally,

Libas submitted a supplemental declaration on December 22, 2000,

claiming that additional fees for expert witness Mary Jane Leland

had been omitted from the original claim for expenses. The

amount claimed is $9,563. The Court will grant Libas’s petition

for the additional fees attributable to Leland. However, because

it is not clear if the amount claimed on the supplemental

declaration includes previous claims for Leland’s services, and

to avoid double-counting Leland’s fees, the Court will subtract

the $2308.35 claimed for Leland’s services in the original

invoice. Therefore, while all other expenses remain valid, the
Court No. 95-00014 Page 16

Court denies additional fees for charges of Federal Express and

messenger services, the three discussed meals, the hotel stay,

expenses incurred prior to December 30, 1994, and overlapping

witness fees for Leland.

IV. Conclusion

Based on the previous evidence regarding attorneys’ fees and

expenses, the total awarded to Libas is $199,723.87.

Richard W. Goldberg
Senior Judge

DATED: August 13, 2003
New York, New York