On Petitioners' Motion for Attorneys' Fees
Before SENTELLE, Chief Judge; GRIFFITH, Circuit Judge; and SILBERMAN, Senior Circuit Judge.
Opinion for the Court filed
In LePage's 2000, Inc. v. Postal Regulatory Commission, 642 F.3d 225 (D.C. Cir. 2011), we vacated an order of the Postal Regulatory Commission and remanded the case for further proceedings consistent with our opinion. We now consider a petition by LePage's 2000, Inc. and LePage's Products, Inc., for attorneys' fees and expenses incurred in the litigation leading up to our decision. Because we find that the Commission was not substantially justified in issuing its order, but that fees and expenses requested for proceedings before the Commission are not reimbursable, we award a portion of the fees and expenses sought in the petition for reasons more fully set forth below.
Details of the factual background of this controversy can be found in LePage's 2000, Inc. v. Postal Regulatory Commission, 642 F.3d 225 (D.C. Cir. 2011), and USPS v. Postal Regulatory Commission, 599 F.3d 705, 706 (D.C. Cir. 2010). To summarize: In 2006 Congress passed the Postal Accountability and Enhancement Act ("the PAEA" or "the Act"), Pub. L. No. 109-435, 120 Stat. 3198 (2006), which limited the ability of the United States Postal Service ("the Service" or "the USPS") to engage in nonpostal services. The Act created the Postal Regulatory Commission ("the PRC" or "the Commission"), which could approve for continuation of a nonpostal service if the Commission concluded that there was a public need for the service and the private sector could not meet the public need for the service. In carrying out its mission, the PRC divided its proceedings into two parts, Phase I and Phase II. During Phase I the Service argued that several of its programs should be classified as postal services and therefore permitted to continue. One of these was the ReadyPost program, in which the USPS sells USPS-branded shipping supplies in postal retail locations. The PRC agreed that this was a postal service and therefore could continue. Also during Phase I the Service sought to have several nonpostal services continue. One of these was a program in which the Service sells licensee-made USPS- branded and USPS-themed products, such as teddy bears and scales, at USPS retail locations ("the Bears and Scales program"). The Commission found that this service could continue because the private sector could not meet the public need for these items as only the Service could provide the Service's intellectual property to manufacturers. During Phase I the Commission also looked at the Service's commercial licensing program in general. The Commission determined that as a general matter the commercial licensing program could continue because it served a public need by generating revenues for the Service, benefitted mailers, and promoted and gave recognition to the Service's brand. The Commission noted, however, that this determination was not unqualified.
The Commission then commenced Phase II, during which it more closely examined the commercial licensing program. In particular, the Commission looked at the commercial license held by LePage's 2000, Inc. and LePage's Products, Inc. ("LePage's") to sell USPS mailing and shipping supplies (bubblewrap, for example) that bore the USPS brand at non- USPS retail locations ("the Bubblewrap program"). The Commission found that there was no public need for the Bubblewrap program and that the USPS had failed to demonstrate that the private sector was unable to meet any public need for the program. The PRC ordered the USPS to terminate the Bubblewrap program. The USPS and LePage's appealed the Commission's Phase II order to this court.
In LePage's 2000, Inc., we vacated the Commissions's Phase II order and remanded the case to the PRC. 642 F.3d 225. We stated that the Commission's order was "rife with anomalies, any one of which is sufficient to justify a remand, and all of which, when considered together, demonstrate the Commission was proceeding in a slapdash manner." Id. at 230- 31. We went on to state that it was "untenable" that the ReadyPost program was considered a postal service but the Bubblewrap program was not, when both programs fostered use of the mail and enhanced consumers' convenience. Id. at 231. We remanded the Phase II order to the Commission to, inter alia, adopt a reasoned rationale if it intended to continue classifying the Bubblewrap program as a nonpostal service. Id.
We also reviewed the Commission's conclusion that there was no public need for the Bubblewrap program. We found that the Commission's determination, that any benefits of the Bubblewrap program were outweighed by the disadvantages of selling USPS-branded products that could confuse consumers and disrupt markets, was flawed. In making this determination, we noted that in its Phase I order the Commission determined that for various reasons commercial licensing as a general matter served a public need, but in its Phase II order noted these reasons were without sufficient evidentiary support for the Bubblewrap program. We further noted that the Commission in Phase I did not distinguish between different types of commercial licensing, and that the Commission did not explain how it could read the same evidence differently when applied to different aspects of the same program. Id. at 232.
Also concerning the Commission's conclusion that there was no public need for the Bubblewrap program, we noted that the Commission had found a public need for the Bears and Scales program because that program leveraged the Postal Service's brand and helped support its core mission. We then stated that we did "not understand why these same benefits would not accrue to the Bubblewrap program, which aside from the seller's identity, is substantially similar to the Bears and Scales program." We further stated that at the least the Commission must explain this differential treatment of seemingly like cases. Id.
Finally, we reviewed the Commission's holding that the private sector could meet any public need for the Bubblewrap program. We noted that in Phase I the Commission held that licensing could not be met by the private sector because no other entity other than the Service could license its intellectual property, but then in Phase II explained that other entities were able to provide substitutes for the licensed mailing and shipping products. We further noted that the Commission offered no reason for this departure, and stated that we did not see how the Commission could adopt the position it did in its Phase II order. Id. at 233. At the end of the decision, we found the Phase II order arbitrary and capricious, and stated that the Commission had "much work to do on remand remedying the abundant inconsistencies in its order." Id. at 234.
LePage's now petitions for an award of attorneys' fees and expenses in the amount of $143,693.49, relating both to the litigation in this court and to the underlying administrative proceedings. LePage's seeks the award under the Equal Access to Justice Act, 28 U.S.C. § 2412(d)(1)(A) ("EAJA"), which provides in pertinent part that attorneys' fees and expenses shall be awarded to a "prevailing party . . . unless the court finds that the position of the United States was substantially justified." In its brief LePage's argues that it was the "prevailing party" in this case and that the position of the PRC was not substantially justified. In its opposing brief the PRC agrees that LePage's was the prevailing party but argues that the PRC was substantially justified in its position and consequently LePage's is not entitled to any award of attorneys' fees. The PRC further argues that even if this court finds its position to not be substantially justified, under the ...