Motor Transport Association of Connecticut, Inc

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IN THE MATTER OF MOTOR TRANSPORT ASSOCIATION OF CONNECTICUT, INC. Docket 9186. Interlocutory Order, November, 198. ORDER DENYING REQUEST FOR AN AWARD UNDER THE EQUAL ACCESS TO JUSTICE ACT This case was dismissed by the Commission s Final Order dated August 25 , 1989. Respondent Motor Transport Association of Connecticut, Inc. (the "Association ) now requests attorney s fees and costs under the Equal Access to Justice Act ("the Act"), 5 U. C. 504. The Act provides such an award for eligible parties that prevail in a Commission proceeding unless the "Commission s position in the proceeding was substantially justified or special circumstances make " 1the award unjust.

On September 18 , 1984, the Commission issued a complaint alleging that the Association had violated Section 5 by fixing prices for the intrastate transportation of property in Connecticut. By a Joint Stipulation dated November 17, 1986, the parties stipulated the facts. The Initial Decision to dismiss the complaint was filed on January 9 1987 , and affirmed by the Commission s Final Order. A. The Act Under the Equal Access to Justice Act, an eligible party that prevails in a Commission proceeding may receive attorney s fees and other expenses unless the Commission s position was "substantially justified. " Congress passed the Act "in response to its concern that persons 'may be deterred from seeking review of, or defending against, unreasonable government action because of the expense involved in securing the vindication of their rights.''' Sultivan v. Hudson 109 S. Ct. 2248, 2253 (1989). The government has the burden of proving that its position was substantially justified by a preponderance of the evidence. Sierra Ctub v. Secretary of Army, 820 2d 513, 517 (1st Cir. 1987). An award under the Act does not follow automatically in every case where the private party prevails over the government, however, and the fact that the government lost in the underlying litigation does not create a presumption that its position I Dn OJ 0'11"

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574 Interlocutory Order was not substantially justified. Kali v. Bowen 854 F.2d 329, 334 (9th Cir. 1988).

B. The Applicant The Association is a prevailing party and a tax -exempt organization with ten employees. It is an eligible applicant. Rule 3.81(d)(2)(iii). C. The Commission s Position 1. "Substantially justified"

Government action is substantially justified "if a reasonable person could think it correct, that is, if it has a reasonable basis in law and fact. Pierce v. Underwood 108 S.Ct. 2541, 2550 , n.2 (1988). The test is met when there is "such relevant evidence as a reasonable mind might accept adequate to support a conclusion if there is a 'genuine dispute; or "if reasonable people could differ as to (the appropriateness of the contested action). Id. at 2550. While the standard requires more than conduct that is "merely undeserving of sanctions for frivolousness " it does not require that the action be "justified to a high degree; the action need only "satisfy a reasonable person. Id. 2. U ncertain law Novel or difficult issues of law are evidence of a "genuine dispute and "substantial justification. (I)f the governing law is unclear or in flux, it is more likely that the government's position wil be substantially justified. Martinez v. Secretary of Health Human Serves 815 F. 2d 1381 , 1383 (10th Cir. 1987). The existence of important and doubtful questions of law, the fact that the matter represents a case of first impression and the absence of adverse precedent may be considered. Edwards v. McMahon 834 F.2d 796 802- 03 (9th Cir. 1987); see also Jean v. Nelson 863 F. 2d 759, 767 (11th Cir. 1988) (clarity of existing law a factor to be considered). 3. The complaint At the time the complaint in this case was issued, two circuit courts had held that price fixing pursuant to state statutes such as existed in 2 The govemmenl "need only show that it; theory. . . was a good faith extension of existing-in laworder to be substantially justified. S.Ee. v. Kluesr, 834 F. 2d 1438, 1443 (8th Cir. 1987). 3 Complaint counsel' s theory in this case would also seem to involve the "special circumstances" standard of the Act and Rule 3.81(a). That provision is a "safety valve" designed to "insure that the Government is not deterrd from advancing in good faith the novel but credible extensions and interpretations of the law that oftn underlie vigorous enforcement cfCons. Russell v. Naiioal Mediatian Board 775 F.2d 1284, 1290 (5th Cir. 1985).

576 FEDERA TRADE COMMISSION DECISIONS Interlocutory Order 112 F.

Connecticut was per se unlawful. United States v. Southern Motor 2d 532 (5th Cir. 1983); UnitedCarrs Rate Conferene, Inc. 702 F. States v. Title Insurance Rating Bureau of Arizon, Inc. 700 F. 1247 (9th Cir. 1983), cert. denied 467 U.S. 1240 (1984). The state action defense in both instances had been rejected because the price fixing was not required by state law. At the time the complaint was issued here, the Association s conduct would have been considered per se unlawful in those circuits. That the Fifth Circuit's opinion in Southern Motor Carrers was later reversed by the Supreme Court 471 U. S. 48 (1985), 4 does not affect the reasonableness of the issuance of the complaint. Smith by Smith v. Bowen 867 F.2d 731 735 (2d Cir. 1989).

4. "Active supervsion During the course of the adjudication of this case, the law at issue was unsetted. Afr Souther Motor Carrers the law with respect to the "active supervsion" prong of the state action defense remained unclear. In Southern Molor Carrrs because the government had stipulated that active supervsion existed based on the implementation of formal state hearing procedures, the Court expressly refused to resolve the issue of what constitutes "active supervsion." In this case in its supplementary brief to the Commission, the Association itself argued that the Supreme Court "did not set forth any boundaries or definition of ' active supervision'" and that each case involved a judgement call" because "there is no possible, overall description of what constitutes ' active supervsion.' " "Answer To Complaint Counsel' s Supplementary Brief On The Impact of Patrick v. Burget " at 3- 4. In formulating its standard for "active supervsion " the Commission noted in its opinion that "neither judicial nor Commission precedent precisely establishes how the (active supervsion) requirement should apply to the facts of this case." Slip Opinion at 10. 5. Complaint counsel' s position Complaint counsel prosecuted this price fixing case vigorollsly but 5 They arguedwith a consistent and meticulously designed theory. 4 The Supreme Court granted certiorari before the complaint was issued in this cas, 467 U.S. 1240 (June , 1984). However, since the Court's opinion on the merits did not resolve the "active supervision" issue infra, this fact is immaterial.

G This is not a cas where the government arged inconsistent theories in nearly identical cases or where the gtvernment action was inconsistent with and contrary to the agency s own rules. Rama-Seplved v. LN.S. 863 F.2d 1458, 1460-62 (9th Cir. 1988). Complaint counsel's proposed standard was the same standard proposed in the New England and Ticor cases. New Englawl Motor Rate Bureau, Inc. Docket 9170, Aug. 18 19.1IJ Slio Onioioo. n. 1!) n- Firm-14: Title lns-nrarue Comvan1/.Docket 9190. SeDt. 19. 1989. Slid ODinion. D. 574 Interlocutory Order that the Association s collective rate making is not actively supervsed unless the state agency acts affirmatively with respect to each proposed rate to ensure that the state has in fact acted to insert its judgment in place of market forces. (Complaint Counsel's Appellate Brief ("CCAB") at 17.) They argued that such active supervision occurred only when the state agency provided notice and an opportunity to be heard to all interested parties, and a written explanation of its decision, in order to provide countervailng information and a reviewable record each time that rates are fixed and filed with the state agency. (CCAB at 21 , 24 , 26. Complaint counsel conceded that, with the exception of the 1983 order, minimum rate orders issued by DPUC for general commodities were the result of active state supervsion through notice hearings and reasoned decisions. (CCAB at 39). They argued, however, that similar procedures should have been followed in each joint application for a rate increase above the minimum in general commodities, and in all joint rate filings for household goods, bulk liquids and dump truck tariffs. (CCAB at 37-42.) The Commission commented on this argument (Slip Opinion at p. 13):

In a thoughtful brief, complaint counsel propose that unless the state agency provides public notice of each pending rate proposed and opportunity for interested persons to comment and publishes a reasoned explanation of its decision, active supervision cannot be found.

We conclude that a hearing and a written opinion with respect to every rate proposed are not a necessary precondition for finding active state supervision. . . . While the Commission in this case chose not to adopt complaint counsel' s credible and articulate proposed standard, there was a genuine dispute" as to the appropriateness of the standard on which reasonable minds could differ. 6 Accordingly, the position was substantially justified.

D. Conlusion The Commission s issuance of the complaint and complaint counsel' s prosecution of this case (the "Commission s position" under Rule 81(a)), were reasonable. The case involved a diffcult issue of law on which the decided cases provided no fixed standard. The standard for 11 n. 9. Consistency of the government' s position is a factor to be considered.Jean v. Nelson 863 F.2d 759 767 (11th Cir. 1988).

6 As perhaps evidenced by the several opinions concerning this issue in New England Motor Rate Bureau Inc. and Ticor Title Insurance Company, supra n. 4. Interlocutory Order 112 F.

active supervision" proposed by complaint counsel was a consistently applied standard about which reasonable minds could differ. The action was "substantially justified " and the Association s application for attorney s fees and other expenses under the Equal Access to Justice Act must be denied.

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