Henry Ruffin Broaddus v.  United States Army Corps of Engineers

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
 HENRY RUFFIN BROADDUS,
Plaintiff-Appellant,
and
FRANCES BROADDUS CRUTCHFIELD,
Plaintiff,
v. No. 03-2257 
UNITED STATES ARMY CORPS OF
ENGINEERS,
Defendant-Appellee,
and
COUNTY OF HANOVER, VIRGINIA,
Defendant. 
Appeal from the United States District Court
for the Eastern District of Virginia, at Richmond.
Robert E. Payne, District Judge.
(CA-00-525)
Argued: May 7, 2004
Decided: August 13, 2004
Before WIDENER and GREGORY, Circuit Judges,
and C. Arlen BEAM, Senior Circuit Judge of the
United States Court of Appeals for the Eighth Circuit,
sitting by designation.
Reversed and remanded with instructions by published opinion. Judge
Gregory wrote the opinion, in which Senior Judge Beam joined.
Judge Widener wrote a separate concurring opinion.

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COUNSEL
ARGUED: Benjamin Adelbert Thorp, IV, ELLIS, THORP & JEW-
ETT, P.L.L.C., Richmond, Virginia, for Appellant. Michael Thomas
Gray, UNITED STATES DEPARTMENT OF JUSTICE, Washing-
ton, D.C., for Appellee. ON BRIEF: William B. Ellis, ELLIS,
THORP & JEWETT, P.L.L.C., Richmond, Virginia, for Appellant.
Thomas L. Sansonetti, Assistant Attorney General, Environment &
Natural Resources Division, UNITED STATES DEPARTMENT OF
JUSTICE, Washington, D.C.; Paul J. McNulty, United States Attor-
ney, Alexandria, Virginia, M. Hannah Lauck, Assistant United States
Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Rich-
mond, Virginia; John A. Bryson, UNITED STATES DEPARTMENT
OF JUSTICE, Washington, D.C., Katherine Will, ARMY CORPS OF
ENGINEERS, for Appellee.
OPINION
GREGORY, Circuit Judge:
This appeal arises from the district court’s denial of Henry Ruffin
Broaddus’s ("Broaddus" or "Appellant") petition for attorney’s fees,
pursuant to the Equal Access to Justice Act ("EAJA" or "Act"), 28
U.S.C. § 2412. Broaddus successfully challenged a condemnation
action brought by the United States Army Corps of Engineers (the
"Corps" or "Appellee") and Hanover County (together, "Defendants")
against land owned by Broaddus and his mother, Frances Broaddus
Crutchfield ("Crutchfield") (together, "Plaintiffs"). The statute allows
persons who have successfully sued the government to collect attor-
ney’s fees, provided they meet certain eligibility requirements, the
relevant provision here being that the individual have a net worth of
less than $2 million. The district court determined that Broaddus
failed to establish financial eligibility under the statute and denied his
petition for attorney’s fees. Broaddus appeals. For the following rea-
sons, we reverse and remand this matter to the district court for a
determination of appropriate attorney’s fees.
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I.
On June 14, 2000, Hanover County condemned a portion of New-
castle Farm ("Newcastle"), two-thirds of which Broaddus inherited
upon his father’s death.1 The County sought to build, on a portion of
Newcastle, "a sewage forcemain and outfall/diffuser for the Totopoto-
moy wastewater treatment plant." Br. of Appellant at 6. In total, the
County condemned "1.1 acres in fee simple, 5.719 acres for a perma-
nent access and utility easement, and 10.66 acres for a temporary con-
struction easement," id. at 6, and offered to compensate Broaddus
$12,000 for the taking.
On August 8, 2000, Broaddus and Crutchfield filed suit against
Defendants, challenging the amount of compensation offered for the
condemnation proceeding and challenging the Corps’s verification of
three Nationwide Permits ("NWPs"), pursuant to Section 404 of the
Clean Water Act ("CWA"), 33 U.S.C. § 1344. The NWPs served as
the basis for the condemnation proceeding. Broaddus contended that
the NWPs violated the CWA, the National Environmental Policy Act,
42 U.S.C. § 4321, et seq., and the National Historic Preservation Act,
16 U.S.C. § 470. The district court set aside the verifications and
remanded the matter to the Corps for further proceedings. See Crutch-
field v. U.S. Army Corps of Eng’rs, 154 F. Supp. 2d 878 (E.D. Va.
2001). Thereafter, the court enjoined the construction project, pending
the Corps’s consideration on remand. See Crutchfield v. U.S. Army
Corps of Eng’rs, 192 F. Supp. 2d 444 (E.D. Va. 2001). We dismissed
Hanover County’s appeal as moot on May 31, 2002. Crutchfield v.
County of Hanover, Va., No. 01-2488 (4th Cir. May 31, 2002), and
issued an order awarding costs to the Plaintiffs, (4th Cir. July 23, 2002).2
1Broaddus’s mother inherited an undivided one-third interest in New-
castle.
2Subsequently, Hanover County amended its proposal for the waste-
water treatment project and submitted a revised permit application to the
Corps, after which the Corps reissued the NWP verification based on the
amended proposal. Plaintiffs filed another suit challenging that amended
proposal. See Crutchfield v. U.S. Army Corps of Eng’rs, 214 F. Supp. 2d
593 (E.D. Va. 2002). In the second lawsuit, the district court again set
aside the Corps’s verification of the NWPs, but we reversed that decision
on appeal, see Crutchfield v. County of Hanover, 325 F.3d 211 (4th Cir.
2003). That related case, however, is not relevant to our determination
of the fees issue.
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Accordingly, Broaddus filed an application with the district court
for attorney’s fees and costs pursuant to EAJA. The Corps opposed
his application, maintaining that Broaddus was ineligible to receive
fees under EAJA because his net worth exceeded the $2 million statu-
tory cap. On August 6, 2003, the district court entered an order deny-
ing Broaddus’s application for attorney’s fees, holding that he failed
to meet his burden of establishing eligibility for fees under EAJA.
This appeal followed.
II.
Pursuant to EAJA, we review a district court’s award or denial of
attorney’s fees for an abuse of discretion. Reich v. Walter W. King
Plumbing & Heating Contractor, Inc., 98 F.3d 147, 151 (4th Cir.
1996). We review legal errors in construing EAJA de novo. Thomas
v. Nat’l Science Found., 330 F.3d 486, 491 (D.C. Cir. 2003) (citing
Nat’l Ass’n of Mfrs. v. Dep’t of Labor, 159 F.3d 597, 599 (D.C. Cir.
1998)); Levernier Constr., Inc. v. United States, 947 F.2d 497, 499
(Fed. Cir. 1991).
III.
A.
EAJA provides as follows:
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). Congress’s aim in adopting this statute
was "‘to ensure that certain individuals, partnerships, corporations
. . . or other organizations will not be deterred from seeking review
of, or defending against, unjustified governmental action because of
the expense involved.’" Scarborough v. Principi, ___ U.S. ___, 124
S. Ct. 1856, 1861 (2004) (quoting H.R. Rep. No. 120, 99th Cong., 1st
Sess., at 4 (1985)). See also Kelly v. Bowen, 862 F.2d 1333, 1134-35
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(8th Cir. 1999) ("‘The very purpose of the EAJA is to ensure that per-
sons aggrieved by unreasonable governmental actions are not pre-
vented from vindicating their claims by the potentially high costs
involved in doing so.’") (quoting Trichilo v. Sec’y of HHS, 823 F.2d
702, 707 (2d Cir. 1987)). In 1980, Congress enacted EAJA "to elimi-
nate the barriers that prohibit small businesses and individuals from
securing vindication of their rights in civil actions and administrative
proceedings brought by or against the Federal Government." Scarbor-
ough, 124 S. Ct. at 1860 (internal quotation marks and citations omit-
ted).
In order to establish eligibility for an award of attorneys fees,
SEAJA requires: (1) that the claimant be a "prevailing
party"; (2) that the government position was not "substan-
tially justified"; (3) that no "special circumstances make an
award unjust"; and, (4) that the fee application be submitted
to the court within 30 days of final judgment and be sup-
ported by an itemized statement.
Crawford v. Sullivan, 935 F.2d 655, 656 (4th Cir. 1991) (quoting 28
U.S.C. § 2412). The government neither argues that its position was
"substantially justified" nor that any special circumstances exist to
make the award unjust; nor does it assert that Broaddus did not pre-
vail. Instead the government maintains that Broaddus was not a
"party" as defined by the statute. EAJA defines a "party" as "an indi-
vidual whose net worth did not exceed $2,000,000 at the time the civil
action was filed." 28 U.S.C. § 2412(d)(2)(B). Accordingly, the sole
issue in dispute on appeal is whether Broaddus sufficiently demon-
strated financial eligibility pursuant to EAJA.
B.
The text of EAJA does not define "net worth" or give instructions
on how to calculate an applicant’s net worth; the statute merely unam-
biguously states that an award of EAJA fees is dependent upon one’s
net worth falling below the statutory maximum. Id. § 2412(d)(2)(B).
Our sister circuits, however, have determined that generally accepted
accounting principles3 ("GAAP") should be used when determining
3"The term ‘generally accepted accounting principles’ is a technical
accounting term that encompasses the conventions, rules, and procedures
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one’s net worth for EAJA fee purposes. For example, the Seventh
Circuit acknowledged Congress’s failure to define net worth, and
responded as follows:
[I]f [Congress] had thought about the question, it would
have wanted the courts to refer to generally accepted
accounting principles. What other guideline could there be?
Congress would not have wanted us to create a whole new
set of accounting principles just for use in cases under the
Equal Access to Justice Act.
Cont’l Web Press, Inc. v. NLRB, 767 F.2d 321, 323 (7th Cir. 1985);
see also Am. Pac. Concrete Pipe Co. v. NLRB, 788 F.2d 586, 590-91
(9th Cir. 1988) (agreeing with Continental Web Press). More
recently, the Tenth Circuit confirmed that "generally accepted
accounting principles apply to the net worth inquiry." Shooting Star
Ranch, LLC v. United States, 230 F.3d 1176, 1178 (10th Cir. 2000)
(citing Am. Pac. Concrete Pipe, 788 F.2d at 591); see also Kuhns v.
Bd. of Governors of Fed. Reserve Sys., 930 F.2d 39, 41 (D.C. Cir.
1991) (applying GAAP to EAJA); City of Brunswick, Ga. v. United
States, 849 F.2d 501, 503 (11th Cir. 1988) (holding that GAAP
applies to EAJA, and stating that Congress intended "net worth" to be
determined by subtracting total liabilities from total assets). Cf.
United States v. Heavrin, 330 F.3d 723, 732 (6th Cir. 2003) (follow-
ing Shooting Star Ranch and applying GAAP to calculation of net
worth in the analogous Hyde Amendment, 18 U.S.C. § 3006(A), con-
text). We agree with our sister circuits that GAAP applies to EAJA,
and net worth is calculated by subtracting total liabilities from total
assets.
necessary to define accepted accounting practices at a particular time. It
includes not only broad guidelines of general application, but also
detailed practices and procedures. Those conventions, rules, and proce-
dures provide a standard by which to measure financial presentations."
American Institute of Certified Public Accountants, Statement of Audit-
ing Standards No. 69, ¶ 69.02 (1992), quoted in Sanders v. Jackson, 209
F.3d 998, 1001 n.3 (7th Cir. 2000) (internal quotation marks and cita-
tions omitted) (emphasis added).
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While the district court recognized, in its order denying attorney’s
fees, that it must use "generally accepted accounting principles" to
determine Broaddus’s net worth, it did not correctly apply those prin-
ciples. In support of his application for EAJA attorney’s fees, Broad-
dus presented the court with a sworn affidavit, in which he asserted
that his net worth at the time he instituted the civil action was less
than $2 million, and stated that he inherited Newcastle from his
father. Additionally, Broaddus submitted a sworn affidavit from his
personal accountant, Walter H. Rock, Jr., C.P.A. (hereinafter the
"CPA"), who documented all of Broaddus’s assets and liabilities,
which amounted to less than $2 million. Broaddus also provided the
district court with a sworn affidavit from a licensed real estate
appraiser, Harrison M. Chavis,4 who documented the value of Broad-
dus’s two-third interest in Newcastle. Despite Broaddus’s extensive
evidentiary proffer, the district court concluded that he failed to estab-
lish financial eligibility for an award of EAJA attorney’s fees. Specif-
ically, the court stated that "the value of an applicant’s assets are
determined by subtracting total liabilities from total assets, and the
acquisition cost of an asset, not its fair market value, is used to set
the value of the asset." J.A. 280 (emphasis added) (citations omitted).
Regarding acquisition cost, the district court held as follows:
Under generally accepted accounting principles, the acquisi-
tion cost of an asset is the actual incurred cost. This princi-
ple dictates that the acquisition cost for determining the net
worth of Newcastle Farm is to be determined when Broad-
dus inherited his property interest from his father’s estate.
Broaddus’s assertion that his acquisition cost was zero
because he inherited Newcastle Farm is at odds with these
fundamental precepts and it is unsupported.
Id. at 280-81 (internal citations omitted). The court further concluded
that because Broaddus "failed to provide the Court with the acquisi-
tion cost of . . . his personal assets and has made only an unsupported,
4While before the district court, the government disputed the admissi-
bility of Chavis’ affidavit regarding the appraisal of Newcastle, see
Gov’t Opp’n to Pl.’s Fees Application at 5-8 (J.A. 205-08), that issue is
immaterial to our disposition because Hanover County conducted sepa-
rate appraisals of Newcastle’s value during the relevant time period, and
it appears that the government has never disputed those appraisals.
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and highly implausible, assertion as to the acquisition cost of Newcas-
tle Farm," id. at 281, he was ineligible for attorney’s fees under
EAJA.
We find that the district court erred in two ways: (1) by requiring
a heightened proffer of evidence necessary to establish an applicant’s
net worth; and (2) by rejecting Broaddus’s claim based on his proffer
regarding acquisition cost. We discuss these errors in turn.
1.
We turn first to an applicant’s required proffer of evidence in order
to establish financial eligibility for an award of EAJA attorney’s fees.
We recognize that under EAJA, the applicant bears the burden of
establishing eligibility for attorney’s fees. Reich, 98 F.3d at 150.
While this Court has never specifically addressed how an applicant
sufficiently establishes eligibility for attorney’s fees pursuant to
EAJA, several of our sister circuits have engaged the issue. For exam-
ple, the Tenth Circuit affirmed a district court’s decision to deny an
applicant’s request for EAJA attorney’s fees, holding that "[w]hen
challenged as to eligibility for an EAJA award, the party seeking such
an award must do more than make a bare assertion that it meets the
statutory criteria." Shooting Star Ranch, 230 F.3d at 1178 (emphasis
added). In Shooting Star Ranch, the applicant’s "sole evidence regard-
ing its net worth" was "an unverified and unsworn letter from its
accountant," and the court concluded that it was not "possible to cal-
culate net worth by subtracting total liabilities from total assets based
merely on the accountants letter." Id. (emphasis added). The court
implied that had the applicant provided a sworn letter or affidavit
from an accountant, which included a list of the applicant’s assets and
liabilities, the district court would have had ample information to
determine net worth. Id. To be sure, the court noted that the applicant
"failed to produce even an affidavit in the district court on an issue
on which it had the burden of proof." Id. (citations omitted). Based
on the applicant’s weak record, the court determined it could not con-
clude that the district court’s denial of attorney’s fees was an abuse
of discretion. Id.
Likewise, the Ninth Circuit, in reviewing a government appeal
from a district court’s decision to award EAJA fees, held that
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although "[t]he standard of proof is not articulated[,] [t]he Supreme
Court has stated that a ‘request for attorney’s fees should not result
in a second major litigation.’ Consequently, some informality of proof
is appropriate." United States v. 88.88 Acres of Land, 907 F.2d 106,
108 (9th Cir. 1990) (quoting Hensley v. Eckerhart, 461 U.S. 424, 437
(1983)). See also Cont’l Web Press, 767 F.2d at 323 ("The proceeding
to recover fees under the [Equal Access to Justice] Act is intended to
be summary; it is not intended to duplicate in complexity a public
utility commission’s rate of return proceeding."). Ultimately, the
Ninth Circuit upheld the district court’s decision to grant the prevail-
ing party attorney’s fees because the applicant produced financial
statements that were "qualified by his accountant," and the accountant
then "made a separate affidavit under penalty of perjury that the bal-
ance sheets reflected [the applicant’s] ‘true and accurate net worth.’"
88.88 Acres of Land, 907 F.2d 106 at 108.
Here, Broaddus, unlike the applicant in Shooting Star Ranch, did
produce sufficient documentation to allow the district court to deter-
mine his net worth. His evidence included a sworn affidavit by his
CPA, who had been preparing Broaddus’s tax returns since 1982. The
CPA averred that Broaddus’s net worth fell below $2 million. J.A. 80-
82. Moreover, in the CPA’s affidavit, he informed the district court
that Hanover County ordered two appraisals of Newcastle as of June
14, 2000, id. at 81, which valued the land after the condemnation and
at the time the lawsuit was filed, the crucial date under EAJA, see 28
U.S.C. § 2412(d)(2)(B) (requiring applicant’s net worth to be deter-
mined for EAJA purposes "at the time the civil action was filed").
One appraisal valued the land at $1,488,000.00 ("Caul appraisal"),
and the other appraisal valued the land at $1,609,420.00 ("Dorin
appraisal"). J.A. 81.5 Because Broaddus has only a two-third interest
in the property, the value of his interest after condemnation ranged
between $992,000.00 (two-thirds of the Caul appraisal) to
$1,072,946.67 (two-thirds of the Dorin appraisal). The CPA calcu-
lated Broaddus’s non-real estate assets to have a total value of
$430,407.00. Id. at 81. Adding those assets to Newcastle’s value,
Broaddus’s total assets amounted to between $1,422,407.00 and
5Furthermore, prior to condemnation, as of January 1, 2000, Hanover
County valued all of Newcastle at $2,275,700 for tax appraisal purposes.
J.A. 81.
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$1,503,353.67 (depending on which appraisal was used). Even if the
pre-condemnation tax appraisal of Newcastle was employed, which it
should not have been given the statute’s command, see 28 U.S.C.
§ 2412(d)(2)(B), Broaddus’s net worth — $1,517,133.33 for his inter-
est in Newcastle; $430,407.00 for his non-real estate assets; and zero
liabilities — would amount to only $1,947,540.33, which is still more
than $50,000 less than the statutory maximum.
After considering the evidence Broaddus presented to the district
court, we agree with our sister circuits who have held that a determi-
nation of eligibility for EAJA fees should not result in a second trial,
and that some informality of proof should be allowed. We further
hold that a district court is capable of determining an applicant’s net
worth based upon a sworn affidavit by the applicant’s CPA, provided
that the affidavit includes documentation of the applicant’s liabilities
and assets. If the CPA’s affidavit allows the court to subtract liabili-
ties from assets, thereby enabling the court to determine an appli-
cant’s net worth, then no further documentation is required.
Accordingly, because Broaddus’s evidence was nearly identical to
that provided to the Ninth Circuit’s in 88.88 Acres of Land, and far
exceeded that required by the Tenth Circuit in Shooting Star Ranch,
we hold that such documentation was more than ample to demonstrate
Broaddus’s eligibility for an EAJA award.
2.
Turning now to the district’s court’s use of acquisition cost in
determining net worth, we find that it was an abuse of discretion to
hold that Broaddus failed to establish eligibility for an EAJA award,
solely because he stated that the acquisition cost of Newcastle was
zero. We find that the district court committed a legal error in its
application of "acquisition cost." As discussed above, a party’s eligi-
bility for attorney’s fees under EAJA is determined by ascertaining
his or her "net worth," a statutory term which Congress did not define,
but is determined by employing GAAP. Supra at 6 (citing cases).
In this case, the district court held that for net worth purposes under
EAJA, assets are calculated by using "acquisition cost," not fair mar-
ket value.6 J.A. 280-81. Because Broaddus claimed his acquisition
6Throughout the district court proceedings both sides argued over the
correct valuation of Broaddus’s assets, using fair market value as their
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cost of Newcastle was zero — specifically, he inherited the property
and did not pay for it7 — the district court held that he was ineligible
to recover fees. Id. at 281. The district court correctly recognized that
in this context "acquisition cost" is not simply what Broaddus paid for
the asset (or in this case, did not pay due to inheritance), but is the
"price (at the date of death) at which the property would have
changed hands between a willing buyer and a willing seller," i.e., fair
market value of the property at the time of inheritance. Id. (citing 26
C.F.R. § 20.2031-1(b) (setting forth how valuation of property is
determined for the purposes of estate taxation)). As we illustrate,
however, the district court’s conception of "acquisition cost" under
EAJA is flawed, and regardless of whether Broaddus had supplied an
acquisition cost, i.e., fair market value figure for the property at the
time of his father’s death, for Newcastle that was greater or less than
its valuation at the time he filed suit, the record shows that he is none-
theless eligible for attorney’s fees.
calculus. See J.A. 62-82 (Broaddus’s fee application relying on Newcas-
tle’s appraised value); id. at 201-210 (government’s opposition disputing
calculation of fair market value). Only in his reply to the government’s
opposition to his fee application did acquisition cost ever arise. In that
filing, Broaddus argued that an additional reason why he was entitled to
fees was that acquisition cost was to be employed in determining his
assets, and he proffered that his acquisition cost for Newcastle was zero
because he inherited the property. Id. at 237. In fact, Appellee continues
to argue that the fair market value of Newcastle, not Broaddus’s acquisi-
tion cost, should be used in determining his net worth. See Br. of Appel-
lee at 26 ("Broaddus’s assets should be valued according to their fair
market value as of the date this lawsuit was filed.").
7In making this argument, Broaddus’s contention is indeed identical to
those made by parties in cases in which our sister circuits have consid-
ered "cost of acquisition." Namely, Broaddus proffered what he paid for
the property: nothing. See e.g., 88.88 Acres of Land, 907 F.2d at 107
(determining "cost of acquisition" based on what individual originally
paid for his land); Am. Pac. Concrete Pipe, 788 F.2d at 590 (considering
as "cost of acquisition" the original cost of a company’s assets minus
depreciation); Cont’l Web Press, 767 F.2d at 323 (deriving net worth fig-
ure from a company’s books then subtracting depreciation). In this case,
however, Broaddus’s seemingly good faith proffer as to the amount he
paid for the land is obviously insufficient for an accurate net worth calcu-
lus under EAJA.
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Although we have not previously addressed the issue, we find that
the district court’s inclination to determine the value of assets based
on "acquisition cost," rather than fair market value was a reasonable
reading of the statute. In so holding, we simply join our sister circuits
in applying this prevailing, indeed uncontradicted, view of asset
determination under EAJA. See, e.g., 88.88 Acres of Land, 907 F.2d
at 107 (using acquisition cost to determine the value of assets); City
of Brunswick, 849 F.2d at 503 (same); Am. Pac. Concrete Pipe Co.,
788 F.2d at 590 (same); Cont’l Web Press, Inc., 767 F.2d at 323
(same). Our sister circuits have applied acquisition cost because of
their reliance on a single sentence in the legislative history of EAJA:
"In determining the value of assets, the cost of acquisition rather than
fair market value should be used." H.R. Rep. No. 1418, 96th Cong.,
2d Sess. 15 (1980), reprinted in 1980 U.S.C.C.A.N. 4953, 4994; S.
Rep. No. 253, 96th Cong., 1st Sess. 17 (1979); see also 88.88 Acres
of Land, 907 F.2d at 107 (quoting the legislative history); City of
Brunswick, 849 F.2d at 503 (same); Am. Pac. Concrete Pipe Co., 788
F.2d at 590 (same); Cont’l Web Press, Inc., 767 F.2d at 323 (same).
The district court erred, however, when it seized upon that legisla-
tive history to reject Broaddus’s claim when, in fact, the "cost of
acquisition" calculus was included by Congress to aid applicants, not
hinder them from pursuing attorney’s fees under EAJA. See George
C. Sisk, The Essentials of the Equal Access to Justice Act: Court
Awards of Attorney’s Fees for Unreasonable Government Conduct
(Part One), 55 La. L. Rev. 217, 299-300 (1994); Risa L. Lieberwitz,
Attorney’s Fees, the NLRB, and the Equal Access to Justice Act:
From Bad to Worse, 2 Hofstra Labor L.J. 1, 42 (1984) (noting that
the Model Rules of the Administrative Conference of the United
States cited the "cost of acquisition" provision as "expressing con-
gressional intent to permit the low valuation of assets, thereby enlarg-
ing the set of eligible parties"); Reuben B. Robertson & Mary
Candace Fowler, Recovering Attorney’s Fees from the Government
Under the Equal Access to Justice Act, 56 Tul. L. Rev. 903, 925
(1982) (noting that "acquisition cost will often be easier to prove than
market value, which might require expert appraisals or similar evi-
dence, particularly since the relevant market value will be that on the
date the proceeding began and not at the time the evidence of net
worth is presented[,] [and] in an inflationary economy, the acquisition
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cost approach will enable more parties to meet the Act’s eligibility
standards"). Professor Sisk writes that
the acquisition cost measure is consonant with the "legisla-
tive design to equalize litigating resources" between private
parties and the government. The alternative fair market
value approach might exclude from eligibility a party of
modest means that owns real property that has appreciated
significantly in value, notwithstanding the likely unavaila-
bility of that asset to support the individual’s or business’
efforts to resist unjustifiable government action.
55 La. L. Rev. at 299 (footnotes omitted). Indeed, both legislative
committee reports recognize EAJA’s purpose was to empower indi-
viduals and small businesses in litigation against the government. See
H.R. Rep. No. 1418, 96th Cong., 2d Sess. 15 (1980), reprinted in
1980 U.S.C.C.A.N. 4953, 4984 ("The bill rests on the premise that
certain individuals . . . may be deterred from seeking review of, or
defending against unreasonable governmental action because of the
expense involved in securing the vindication of their rights."); S. Rep.
No. 253, 96th Cong., 1st Sess. 1 (1979) ("The purpose of the bill is
to reduce the deterrents and the disparity [between the resources and
expertise of these individuals and their government] by entitling cer-
tain prevailing parties to recover an award of attorney fees . . . .").
As such, the district court rejected Broaddus’s claim for fees
despite the fact that Broaddus supplied the court with the fair market
value of his assets — the more difficult and burdensome figure to
ascertain — rather than the "cost of acquisition," which Congress con-
ceived of as easier for the layperson, who lacks access to accountants
and audits, to obtain.8 Besides being an unjust result under EAJA, it
8It is certainly the unintended consequence of the legislative history
that the "cost of acquisition" language prejudiced Broaddus at the district
court in this case simply because he did not purchase Newcastle. Indeed,
it would be a bitter irony if this language — intended to make an appli-
cant’s burden easier than that he face in establishing fair market value —
made Broaddus’s showing extraordinarily more difficult because of the
coincidence that he did not buy the property, and thus had no direct
knowledge of the "cost of acquisition." If this were the case, Broaddus
would instead be forced to determine the fair market value of that prop-
erty at the time of his father’s death, an even more burdensome showing
than the "fair market value" showing which Congress frowned upon.
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is also one that is directly contrary to that which would have followed
whether the actual "cost of acquisition" figure for Newcastle at the
time of Broaddus’s father’s death was revealed to be higher or lower
than the current fair market values provided by Appellant. We thus
proceed to illustrate the proposition that on these facts whether the
initial "cost of acquisition" figure was higher or lower than its fair
market value at the time Broaddus filed suit proves inconsequential
in determining Broaddus’s net worth.
First, were the proper "cost of acquisition" figure for Newcastle, at
the time of Broaddus’s father’s death, lower than $1,609,420.00 (the
higher appraisal of fair market value at the time of filing suit), Broad-
dus’s net worth would have clearly fallen within the plain language
of the statute and he would be entitled to fees. In fact, in 88.88 Acres
of Land, the Ninth Circuit confronted precisely such a situation, and
we find our sister circuit’s resolution of the issue to be well-reasoned.
See 907 F.2d at 107-08. In that case, an individual prevailed in a con-
demnation proceeding and his land was valued at $1,404,190. Id. at
107. However, in his application for the EAJA award, the landowner
submitted figures that the acquisition cost of the land was $43,001. Id.
The government argued, as it has both here and at the district court
level in the instant case, supra note 6, that the value of the land should
have been set at the higher figure as appraised at the time suit was
filed. See 88.88 Acres of Land, 907 F.2d at 107. The Ninth Circuit
explicitly rejected the government’s argument, id. ("The government
is wrong."), and relied on the legislative history and its language of
"cost of acquisition" to find the lesser figure controlling, id. at 107-08.9
9Additionally, the government argues that we should not employ "cost
of acquisition" because it could produce absurd results. See Br. of Appel-
lee at 20 (providing example of Babe Ruth having invested $7,000 in
Coca-Cola stock in 1919, which would have been worth $875 million in
2000). Because the facts in the instant case do not threaten an absurd
result, and as is made clear, Broaddus’s net worth satisfies EAJA even
if we employ fair market value, we will save the question of whether the
"cost of acquisition" calculus may produce absurd results for another
day. But cf. Sisk, 55 La. L. Rev. at 300 (noting that cost of acquisition
helps the court fulfill EAJA’s purpose where the applicant, like a family
farmer, is "land rich but cash poor," and "land is committed to an ongo-
ing use as part of the farming enterprise [where] [a]n appreciation of land
value on paper, which has not been realized in a true gain through sale,
is a poor measure of an individual’s or entity’s true resources available
to cope with legal expenses").
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On the other hand, had the "cost of acquisition," i.e., the fair market
value of Newcastle at the time of the father’s death, been higher,
Broaddus would still be entitled to attorney’s fees under EAJA.10
Assuming arguendo that the "cost of acquisition" of Newcastle alone
was over $2 million dollars, on these facts Broaddus’s claim would
not fail because it is clear that when the acquisition cost is properly
reduced by depreciation of the asset, Broaddus’s net worth does not
exceed the EAJA maximum. Writing for the Seventh Circuit in Conti-
nental Web Press, Judge Posner illustrated why an acquisition cost
which exceeded the EAJA maximum would not defeat a claim for
attorney’s fees, so long as the net worth at the time suit was filed was
below the statutory maximum.
In Continental Web Press, the NLRB challenged a company’s
claim for attorney’s fees under EAJA on the basis that the company’s
net worth, as demonstrated by its acquisition costs, was well above
the statutory maximum before depreciation, although it was apparent
that after depreciation its net worth fell well below the limit. See 767
F.2d at 322. The Seventh Circuit called the NLRB’s argument "ridic-
ulous," holding that depreciation must be coupled with an asset’s
acquisition cost to determine net worth. Id. at 322-23. Judge Posner
employed the following example to illustrate the basis for his conclu-
sion:
Suppose a firm in 1965 buys a printing press for $1 million
dollars that is expected to last 20 years. In 1984, when the
10Indeed, the district court appears to have been troubled by the possi-
bility that the cost of acquisition of Broaddus’s assets was higher than
their fair market value. In a footnote describing the effect of Broaddus’s
lack of presentation of the acquisition costs of his property and person-
alty, the district court remarked: "Considering the significant decline in
the value of stocks over the past several years and the fact that market-
able securities comprise part of Broaddus’s assets, failure to show the
acquisition cost of the marketable securities is a significant omission."
J.A. 282 n.2. For the reasons that follow, it is clear that even a "signifi-
cant decline" in the value of Broaddus’s securities or property would not
cause his net worth to exceed the EAJA maximum. To the contrary, such
a "significant decline" in the value of assets — i.e., depreciation — of
which the district court was wary increased the likelihood that Broaddus
would qualify for fees under the statute.
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press has another year of life, as it were, it would be unreal-
istic to say that the company had a printing press worth $1
million; for unless there has been an enormous increase in
the price of printing presses over the period, no one will pay
$1 million for a press that is about to wear out. . . . It would
be arbitrary to say that because depreciation may sometimes
result in understating a company’s net worth it should be
disregarded, and the company valued as if every piece of its
capital equipment were brand-new, which is the Board’s
position.
Id. at 322-23. In so reasoning, the court rejected the Board’s position
that "cost of acquisition" alone was controlling. The court held that
"[t]here is no indication that Congress meant by ‘the cost of acquisi-
tion’ the undepreciated cost of acquisition." Id. at 323. Likewise, we
follow the reasoning of the Seventh Circuit and hold that to determine
the EAJA value of an asset, as is consistent with GAAP, its acquisi-
tion cost must be reduced by any accumulated depreciation of that
asset. See id.; see also Am. Pac. Concrete Pipe Co., 788 F.2d at 590-
91 (following Continental Web Press and rejecting NLRB’s argument
that depreciation was irrelevant in determining acquisition cost); Cf.
City of Brunswick, 849 F.2d at 503 (citing the depreciation discus-
sions of Continental Web Press and American Pacific Concrete with
approval).11
11Professor Sisk has elaborated on the rationality of subtracting depre-
ciation from the cost of acquisition, reiterating that such a calculus
accords with GAAP, and "[u]nless the statute were to clearly indicate
otherwise, one would not expect a party to be obligated to create a spe-
cial balance sheet crafted under peculiar accounting methods unique to
the EAJA." 55 La. L. Rev. at 300. Furthermore, "because net worth is a
rough measure of the resources available to pay legal expenses, the fact
that assets have declined in value is further evidence of the limited
resources the individual or entity may apply to attorney’s fees." Id. at
301; see also Robertson & Fowler, 56 Tul. L. Rev. at 926 (stating that
when "parties can demonstrate that the market value of their assets when
the proceeding began was significantly lower than the acquisition cost,
they should be permitted to use market value. In this way, eligibility will
turn on the actual financial condition of a party, as it should, rather than
on a technicality."
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Applying this method of asset calculation, we find that Broaddus
is eligible for attorney’s fees. Even if the initial "cost of acquisition"
of Broaddus’s assets exceeded the EAJA maximum, it is apparent that
when depreciation is subtracted from such sums, the value of Broad-
dus’s assets, as demonstrated by his sufficient evidentiary proffers
regarding their present value, makes him eligible for fees. In making
the more burdensome showing of his assets’ fair market value at the
time he filed suit, Broaddus sufficiently demonstrated their value for
the purposes of EAJA. Here, the fair market value of Newcastle is,
in fact, the sum that results after subtracting accumulated depreciation
since Broaddus inherited the property from the "cost of acquisition"
of that property. In that light, the initial acquisition cost of Newcastle,
or Broaddus’s other assets for that matter, is inconsequential to this
disposition, as his evidentiary proffer far exceeds that required by
EAJA and, under any calculus, the results of that economic analysis
show that his net worth does not exceed $2 million.12
IV.
For the foregoing reasons, we conclude that the record reveals that
Broaddus was a "party" as defined by EAJA, and the district court
abused its discretion in holding otherwise. Therefore, we reverse the
judgment of the district court and remand with instructions to award
appropriate attorney’s fees.
REVERSED AND REMANDED
WITH INSTRUCTIONS
WIDENER, Circuit Judge, concurring:
I concur in the result and largely in the opinion of the court, but
I would add a word.
12Additionally, Appellee argues that Broaddus failed to include the
value of his condemnation claim in his assets. Br. of Appellee at 23-26;
see also J.A. 278 (the district court noted, somewhat misleadingly, "[t]he
record does not reflect the value of Broaddus’s condemnation claim
which, of course, must be counted among his assets"). That claim fails,
however, because the above discussion makes clear that Broaddus’s
assets amount to only $1,947,540.33 even when the pre-condemnaton tax
appraisal of Newcastle is included in the net worth calculus.
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I cannot understand why the record in this case does not reveal the
date of death of the owner of Newcastle, whose property has brought
about this litigation by his descendants. The estate or inheritance tax
return, or any appraisal filed in connection with that estate, should the
same have been filed, would have settled the acquisition cost so far
as I am concerned, subject only to some presently undisclosed reason
why the same should not be used.
Also, as I understand it, the panel is in agreement that our use of
the word depreciation does not indicate any opinion of ours that land
is a depreciable asset, which I understand is contrary to the general
rule of income tax law.
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