specially concurring:
I concur specially only to underline my agreement with two points made in the majority’s fine opinion: first, that under The Equal Access to Justice Act (the “EAJA”), 28 U.S.C. § 2412, an award of attorneys’ fees is appropriate when either the government’s litigating position, or the underlying governmental action which spawned the litigation is “unreasonable”; and second, that a determination that a regulation is “unreasonable,” or “arbitrary and capricious,” for the purposes of invalidation, does not in and of itself determine whether the underlying government action was “unreasonable” for the purposes of a fee award under the EAJA.
Though the EAJA does not mandate a fee award every time the government loses a lawsuit, USLIFE Title Ins. Co. of Dallas v. Harbison, 784 F.2d 1238, 1242 (5th Cir.1986), in most cases where a regulation is invalidated, the narrow scope of appellate review of agency action, and the deference accorded to agency interpretations will mean that invalidation will result in an award of attorneys’ fees. In a small group of particularly close cases, however, the two uses of the word “reasonable” may diverge. This is just such a case. Here, we hold an agency action to be unreasonable and therefore invalid, while at the same time holding that same action to be reasonable for the purposes of a fee award. I concur to further explain why this result is not anomalous.
I. Position of the Government
The EAJA provides for an award of attorneys’ fees to the prevailing party in suits against the United States, its agencies and officials, except when the position taken by the government is “substantially justified” or when special circumstances would render such an award unjust. 28 U.S.C. 2412(d)(1)(A). Originally the statute did not define the term “position of the government,” and two lines of cases developed. One focused on the underlying action of the government, while the other focused on the government’s litigation position. Spencer v. N.L.R.B., 712 F.2d 539, 546 (D.C.Cir.1983). The courts adopting the “litigation position” approach did so at least in part to prevent EAJA from becoming an automatic fee shifting provision where agency action was involved. Id. at 552.
To deal with the confusion engendered by this split in circuits, Congress amended the statute in 1985 to provide that “Whether or not the position of the United States was substantially justified shall be determined on the basis of the record (including the record with respect to the action or failure to act by the agency upon which the civil action is based) which is made in the civil action.” 28 U.S.C. 2412(d)(1)(B). Instead of choosing between the approaches, Congress adopted both.
Congress obviously intended to increase the number of cases where courts would award fees, but the statute and the legislative history leave it unclear how far Congress wanted to go. Russell v. National Mediation Bd., 775 F.2d 1284, 1289 (5th Cir.1985). This court has held though, that prior to amendment the term “substantial justification” referred only to the government’s litigation position, and that after the amendment, if the underlying agency action was not “substantially justified” as well, fees were to be awarded. Id. As a result, where the underlying agency action was characterized as “playing games with the plaintiffs,” fees were awarded even though this court had previously held that the government’s litigation position was substantially justified. Id.
II. Resolving the Anomaly
The congressional mandate to award fees whenever the underlying agency action is *55unreasonable, as required by the 1985 amendments, forces us to wrestle with the problem that the courts adopting the “litigation position” approach sought to avoid. Examining the underlying action as well as the litigation position creates an apparent anomaly. Courts must grant deference to agency interpretations of statutes. Chevron, U.S.A., Inc. v. N.R.D.C., 467 U.S. 837, 844, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694 (1984). It is therefore difficult to imagine a situation where it would be appropriate to reverse an agency interpretation while denying attorneys’ fees. This apparent anomaly was ably explained away by the D.C.Circuit in Federal Election Commission v. Rose, 806 F.2d 1081, 1088 (D.C.Cir.1986). That court noted that “arbitrary and capricious” is a term of art. Agency action may be deemed arbitrary and capricious for a number of reasons which are “logically unrelated to whether the underlying agency action is justified under the organic statute.” Id. For example, a statute may be held to be arbitrary and capricious either because it is accompanied by inadequate explanation or because the agency made the decision without considering a relevant factor. Id. Neither of these issues goes to the kind of reasonableness which determines whether litigation should be encouraged under the policies of the EAJA. The majority is absolutely correct when it says that finding the underlying governmental action reasonable for EAJA purposes has no bearing whatsoever upon the holdirfg that even applying deferential standards for review of agency action, the regulation was invalid.
In determining whether an underlying governmental action is substantially justified, one must look to the policies which the EAJA seeks to further. The preamble to the act states that the purpose of the EAJA is to encourage the objects of agency action to pursue litigation without undue fear of staggering legal expenses. Pub.L. No. 96-481 § 202, 94 Stat. 2321, 2325 (1980). But the legislative history is also clear that award of attorneys’ fees is not to be automatic whenever the government loses. H.R.Rep. No. 1418, 96th Cong., 2nd Sess. 11, 1980 U.S.Code Cong. & Admin.News 4953, 4990. The legislative history of the 1985 amendments provides words, but not guidance as to whether Congress intended to alter that understanding. Russell, 775 F.2d at 1289. In defining the term reasonableness under the EAJA, a court must, therefore, balance the goal of encouraging litigation against the chilling effect of encouraging an excessive number of challenges to agency action. See USLIFE, 784 F.2d at 1245.
Whether to award attorneys’ fees in this case is a close question. Determining the validity of the regulation involved difficult issues of statutory interpretation. Furthermore, appellant had sufficient incentive to challenge the action without a governmental subsidy. I view the class of cases where the action is meritorious but not worthy of subsidy as exceedingly small, but I do not read the majority as undertaking to state a rule for all times, all places and all cases. I think that the majority has come up with the correct answer for the specific facts of this case.