10-1031

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Filed April 6, 2012
No. 10-1031
LE PAGE ’ S 2000, I NC . AND LE PAGE ’ S PRODUCTS , I NC .,
PETITIONERS
V .
POSTAL REGULATORY COMMISSION ,
RESPONDENT
Consolidated with 10-1033, 10-1279, 10-1294
__________
On Petitioners’ Motion for Attorneys’ Fees
__________
Before SENTELLE , Chief Judge; GRIFFITH , Circuit Judge;
and SILBERMAN , Senior Circuit Judge.
Opinion for the Court filed PER CURIAM.
PER CURIAM: 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

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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.
Background
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

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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

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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

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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 EAJA, LePage’s is not entitled
to fees in the amount of $41,028.76 incurred in the underlying
administrative proceedings. The PRC also states that if the court
disagrees with these positions, the PRC does not contest the
amount of fees requested.

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Discussion
The Equal Access to Justice Act, 28 U.S.C. § 2412(d),
states in pertinent 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 . . . incurred by that party in
any civil action . . . including proceedings for judicial
review of agency action, brought by or against the United
States in any court having jurisdiction of that action, 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). Our first task in deciding whether
LePage’s meets the requirements of the EAJA is an easy one:
we must determine whether fee petitioner LePage’s is a
“prevailing party.” LePage’s argues, and the PRC does not
dispute, that our disposition in LePage’s establishes that
LePage’s is a prevailing party within the meaning of the EAJA.
We agree. In LePage’s we found the PRC’s Phase II order
arbitrary and capricious, vacated it, and remanded the case for
further proceedings. 642 F.3d at 234. We conclude that
LePage’s is a prevailing party for purposes of the EAJA.
Our next task is somewhat more difficult: we must
determine whether, pursuant to the EAJA, the position the
United States (the PRC) took during the litigation was
“substantially justified.” The Supreme Court has explained that
the most naturally conveyed connotation of the phrase
“substantially justified” is “justified in substance or in the main
– that is, justified to a degree that could satisfy a reasonable
person.” Pierce v. Underwood, 487 U.S. 552, 565 (1988)
(quotation marks omitted). As already noted, in LePage’s we

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found the PRC’s Phase II order arbitrary and capricious. Such
a finding, however, does not necessarily mean that the United
States’ position was not substantially justified. See FEC v.
Rose, 806 F.2d 1081, 1087 (D.C. Cir. 1986) (in discussion of
‘substantially justified’ standard, court stated that “a finding in
the merits phase that the Government’s underlying action was
‘arbitrary and capricious’. . . does not compel an award of fees”
under the EAJA). The court in Rose implied that, when
considering whether conduct is substantially justified, we should
look to the reason the agency action was invalidated as arbitrary
and capricious. The court went on to give two examples in
which it may be difficult to demonstrate that an agency’s
arbitrary and capricious actions are substantially justified: “an
agency’s unjustifiably disparate treatment of two similarly
situated parties works a violation of the arbitrary-and-capricious
standard”; and “an agency’s failure to apply a rule in a situation
to which the rule obviously pertains.” 806 F.2d at 1089.
Furthermore, in Hill v. Gould, 555 F.3d 1003 (D.C. Cir. 2009),
we noted that although we had previously found the particular
decision of the Secretary of the Interior at issue to be arbitrary
and capricious, see Hill v. Norton, 275 F.3d 98 (D.C. Cir. 2001),
that decision did not “suffer from the defects common to
positions that are not substantially justified”; i.e., it was neither
“flatly at odds with controlling case law,” nor “in the face of an
unbroken line of authority.” 555 F.3d at 1008 (quotation marks
omitted).
We note that “[t]he Government has the burden of proving
that its position . . . was ‘substantially justified’ within the
meaning of the Act.” Halverson v. Slater, 206 F.3d 1205, 1208
(D.C. Cir. 2000). In arguing that its position was substantially
justified, the PRC begins with the standards set forth in Rose and
Hill. Citing Hill, the PRC claims that its position was neither
“flatly at odds with controlling case law” nor “in the face of an
unbroken line of authority.” The PRC argues instead that the

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Phase I and Phase II proceedings constituted the only time that
any agency or court interpreted the portion of the Act at issue.
And concerning the standards set forth in Rose, the PRC
contends that in this case it never treated similar parties
differently or failed to apply a rule to a situation where the rule
obviously pertains.
The PRC argues that instead it was substantially justified in
distinguishing programs based on the identity of the seller as
well as the nature of the products at issue. First, the PRC notes
that it distinguished the ReadyPost program from the
Bubblewrap program by who was making the sale, i.e., the
Postal Service for the ReadyPost program and private parties for
the Bubblewrap program. The PRC argues that it was
substantially justified in making this distinction because during
Phase I it had been determined that the ReadyPost program was
a postal service and the commercial licensing program (i.e., the
Bubblewrap program) a nonpostal service. Furthermore, argues
the PRC, it was also substantially justified in distinguishing the
Bubblewrap program from the Bears and Scales program based
on the identity of the seller, because any impression that the
Postal Service stands behind its products would be stronger with
respect to products that the Postal Service sells itself. Second,
the PRC notes that it focused on the nature of the products at
issue when it distinguished between licensing for products
related to Postal Service operations and licensing for purely
promotional products. The PRC argues that it was substantially
justified in making this distinction as well because licensing
agreements in and of themselves have little effect on the public,
and instead it is the licensee’s marketing of a product bearing
the Postal Service’s brand that serves the public at large.
Although the PRC argues forcefully that its positions were
substantially justified, we cannot agree. In our discussion in
LePage’s of the PRC’s argument distinguishing programs based

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on the identity of the seller, we first noted not only that the PRC
“did not set [the argument] forth below” but also that the
argument was “inconsistent with the position it took below.”
642 F.3d at 231. Furthermore, we noted that distinguishing
programs based on the rationale the PRC offered below was
“untenable.” Id. Next, in our discussion of the PRC’s
conclusion that there was no public need for the Bubblewrap
program, we stated that the PRC’s assessment of the benefits of
the Bubblewrap program was “flawed” in that the PRC had
determined that commercial licensing served a public need but
that the Bubblewrap program, a commercial licensing venture,
did not. Id. at 232. We further stated that we did not understand
how the PRC could find a public need for the Bears and Scales
program but not the Bubblewrap program when the programs
were substantially similar. Id. We noted that the PRC’s
assessment of public need in its Phase II order departed from its
Phase I order, and that this change had happened “subtly, and
without explanation.” Id. at 233. Finally, we agreed that in its
Phase II order the PRC had “departed without explanation from
its Phase I conclusion that the private sector could not possibly
meet the public need for commercial licensing.” We went on to
state that we did not “see how the [PRC] could adopt the
position it does in its Phase II order.” Id. Taking all of the
above into consideration, we found “[t]he Commission’s order
[] rife with anomalies,” all of which demonstrated that the
Commission “proceed[ed] in a slapdash manner.” Id. at 230-31.
All in all, we concluded that the Phase II order was “arbitrary
and capricious,” and remanded the order to the Commission
stating that “[t]he Commission has much work to do on remand
remedying the abundant inconsistencies in its order.” Id. at 234
& n.7. Consequently, we cannot conclude that the PRC’s
position was substantially justified.
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Having determined that under § 2412(d)(1)(A) of the EAJA
LePage’s is entitled to an award of attorneys’ fees because it
was the “prevailing party” and the PRC was not “substantially
justified” in its position, we must next determine the amount to
which LePage’s is entitled. To begin, LePage’s has requested
a total award of $143,693.49, of which $41,028.76 is for fees
paid in connection with proceedings before the PRC wherein the
PRC required LePage’s to discontinue the Bubblewrap program.
The PRC argues that even if we find that the PRC’s position was
not substantially justified (as we have), LePage’s is only entitled
to fees incurred in connection with proceedings before this court
and not to the $41,028.76 in fees incurred in connection with
proceedings before the PRC. We agree.
It is true, as LePage’s argues, that the EAJA provides for
recovery of fees and other expenses in the context of an
administrative proceeding, but only in the case of “an adversary
adjudication.” 5 U.S.C. § 504. The Act defines “adversary
adjudication” as “an adjudication under section 554 of this title.”
Section 554 (“Adjudications”) of title 5 provides that “[t]his
section applies . . . in every case of adjudication required by
statute to be determined on the record after opportunity for an
agency hearing . . . .” The upshot is that whether LePage’s may
recover fees incurred during the proceedings before the PRC
depends on whether those proceedings meet this definition of an
“adversary adjudication.” The proceedings before the PRC were
governed by 39 U.S.C. § 404 (e)(3), which requires that the PRC
“review each nonpostal service offered by the Postal Service on
the date of enactment of that Act and determine whether that
nonpostal service shall continue.” The section does not require
a “hearing,” and consequently the proceedings before the PRC
would not appear to meet the above definition of an “adversary
adjudication.” LePage’s nevertheless argues that because the
PRC’s enabling statute, 39 U.S.C. § 503, states that the PRC
“shall promulgate rules and regulations and establish

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procedures, subject to chapters 5 and 7 of title 5,” then Congress
intended that proceedings conducted by the PRC be governed
by, inter alia, § 554 and its formal adjudication procedures. But
the fact that the PRC’s enabling statute says that the PRC shall
establish procedures subject to chapter 5 of title 5 is irrelevant
because generic provisions of chapter 5 may apply even if the
formal adjudication procedures in § 554 do not. We conclude
that the proceedings before the PRC do not meet the above
definition of an “adversary adjudication,” and LePage’s is
therefore not entitled to the $41,028.76 in fees incurred in
connection with those proceedings.
Deducting the amount of $41,028.76 from the total amount
requested, $143,693.49, leaves $102,664.73. Other than the
argument that its position was substantially justified, the PRC
does not contest this amount. Accompanying LePage’s petition
for attorneys’ fees are detailed billing records of the time spent
by LePage’s attorneys on the matter. LePage’s states that before
submission to us the records were reviewed and any fees
ineligible for reimbursement removed. We have also reviewed
the records for any fees not reimbursable, for example those
incurred for unnecessary travel, duplication of effort and media
relations. Finding none, we conclude that LePage’s is entitled
to an attorneys’ fees award in the amount of $102,664.73.
Conclusion
For the reasons set forth above, we hold that the petition for
attorneys’ fees be granted in part in the amount of $102,664.73.

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