Anthony John Mendez and Dorothy Mae Mendez

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
ANTHONY JOHN MENDEZ and
DOROTHY MAE MENDEZ,
Debtors. 	No. 7-07-11092 SA
MEMORANDUM OPINION ON DEBTORS’ STATUS
AS PREVAILING PARTIES UNDER
THE EQUAL ACCESS TO JUSTICE ACT
The sole issue decided in this memorandum opinion is whether
Debtors qualify as “prevailing parties” under the Equal Access to
Justice Act, 28 U.S.C. 2412, when the United States Trustee filed
a motion to dismiss their chapter 7 petition pursuant to 11
U.S.C. 707(b), withdrew the motion and then Debtors received
their chapter 7 discharge. 	The Court concludes that Debtors are
“prevailing parties.”
Background
Debtors filed their chapter 7 petition on May 8, 2007. 	Doc
1. 	The United States Trustee (“UST”) filed a Motion to Dismiss
under 11 U.S.C. 707(b) (“Motion”) on July 23, 2007, doc 25, to
which Debtors objected. 	Doc 32. 	The UST on November 9, 2007
withdrew the Motion after the deadline had passed for filing
complaints to object to discharge, doc 38, and Debtors received
their discharge shortly thereafter. 	Doc 39.
This matter is now before the Court on Debtors’ Application
for Attorney’s Fees Pursuant to 28 U.S.C. 2412 of the Equal
Access to Justice Act (“EAJA”) (“Application”), doc 41, which
seeks attorney fees for defending against the Motion. 	The UST
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1 Objections to discharge are core proceedings. 	28 U.S.C. §
157(b)(2)(J). 	A request for fees arising out of a core
proceeding is also a core proceeding. 	In re Chambers, 140 B.R.
233, 238 (N.D. Ill. 1992). 	Furthermore, the Debtors’ Application
does not depend on state law for its resolution and it could not
have existed prior to the filing of this bankruptcy case. 	The
Application arose in the context of the bankruptcy proceeding and
is therefore core.
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filed a Response and Objection to the Application. 	Doc 46. 	At
the preliminary hearing on the Application the Court requested
briefs from the parties on the issue of whether Debtors were
“prevailing parties” under the EAJA; if they cannot obtain this
status the Court need not address the Application any further.
The parties filed briefs (UST, doc 54; Debtors, doc 56; UST
reply, doc 57). 	The Court has considered the briefs of the
parties and consulted relevant authorities, and finds that the
Debtors qualify as EAJA “prevailing parties.” 	Therefore, Debtors
meet the first requirement of their claim, and the Court will
schedule a hearing on resolution of the remaining issues. 	This
is a core proceeding 1.
Analysis
As a general rule, in the United States litigants must pay
their own attorney fees in the absence of a statute providing
otherwise. 	Christiansburg Garment Co. v. Equal Employment
Opportunity Comm., 434 U.S. 412, 415 (1978)(citing Alyeska
Pipeline Co. v. Wilderness Society, 421 U.S. 240 (1975)).
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Congress has provided only limited exceptions to the general
rule. 	Id.
Some of these statutes make fee awards mandatory for
prevailing plaintiffs; others make awards permissive
but limit them to certain parties, usually prevailing
plaintiffs. 	But many of the statutes are more
flexible, authorizing the award of attorney’s fees to
either plaintiffs or defendants and entrusting the
effectuation of the statutory policy to the discretion
of the district courts.
Id. (Footnotes omitted.)
The EAJA Application in this case is based on the fee
shifting authorized by 28 U.S.C. 2412, which provides in part:
(b) Unless expressly prohibited by statute, a court may
award reasonable fees and expenses of attorneys, in
addition to the costs which may be awarded pursuant to
subsection (a), to the prevailing party in any civil
action brought by or against the United States or any
agency or any official of the United States acting in
his or her official capacity in any court having
jurisdiction of such action. 	The United States shall
be liable for such fees and expenses to the same extent
that any other party would be liable under the common
law or under the terms of any statute which
specifically provides for such an award.
...
(d)(1)(A) Except as otherwise specifically provided by
statute, a court shall award to a prevailing party
other than the United States fees and other expenses,
in addition to any costs awarded pursuant to subsection
(a), incurred by that party in any civil action (other
than cases sounding in tort), 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.
(B) A party seeking an award of fees and other expenses
shall, within thirty days of final judgment in the
action, submit to the court an application for fees and
other expenses which shows that the party is a
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prevailing party and is eligible to receive an award
under this subsection, and the amount sought, including
an itemized statement from any attorney or expert
witness representing or appearing in behalf of the
party stating the actual time expended and the rate at
which fees and other expenses were computed. 	The party
shall also allege that the position of the United
States was not substantially justified. 	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 for
which fees and other expenses are sought.
(C) The court, in its discretion, may reduce the amount
to be awarded pursuant to this subsection, or deny an
award, to the extent that the prevailing party during
the course of the proceedings engaged in conduct which
unduly and unreasonably protracted the final resolution
of the matter in controversy.
(Emphasis added.)
To recover attorney fees under the EAJA a petitioner must
satisfy four elements. 	First, petitioner must be the prevailing
party in litigation subject to the court's jurisdiction. 	28
U.S.C. § 2412(d)(1)(B); Comm'r Immigration & Naturalization
Service v. Jean, 496 U.S. 154, 158 (1990); United States
Securities and Exchange Comm. v. Zahareas, 374 F.3d 624, 626 (8 th
Cir. 2004).
Second, the Government's position in pursuing the litigation
cannot have been substantially justified. 	28 U.S.C. §
2412(d)(1)(B); Jean, 496 U.S. at 158; Zahareas, 374 F.3d at 626.
To be substantially justified, the Government's position must
have a “reasonable basis in both law and fact.” 	Pierce v.
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2 The Motion was withdrawn on November 9, 2007, doc 38, the
discharge issued November 15, 2007, doc 39, and the first
iteration of the Application filed December 6, 2007, doc 41. 	No
issue arises concerning the timeliness of the Application.
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Underwood, 487 U.S. 552, 565 (1988). 	A loss on the merits does
not itself render the Government's position not substantially
justified. 	Zahareas, 374 F.3d at 626. 	The Government bears the
burden of demonstrating the substantial justification of its
position. 	See id. at 627 (citing Friends of Bounty Waters
Wilderness v. Thomas, 53 F.3d 881, 885 (8 th Cir. 1995)). 	The
substantial justification inquiry by the Court must focus on
whether the government's position was “justified in substance or
in the main-that is, justified to a degree that could satisfy a
reasonable person.” 	Pierce, 487 U.S. at 565. 	(Internal
punctuation omitted.)
The third element under EAJA requires an applicant's motion
for attorneys' fees and costs to be timely filed. 	28 U.S.C. §
2412(d)(1)(B); Jean, at 158. 2 	The fourth element under EAJA
requires that no special circumstances exist that would render an
award of fees unjust. 	28 U.S.C. § 2412(d)(1)(A); Jean at 158.
The only issue currently before the Court is the first
element, i.e., whether the Debtors are “prevailing parties.” 	If
they are, then the Court must consider whether the remaining
issues of whether the UST’s position was substantially justified
or whether special circumstances make an award of fees unjust.
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In that case, the Court would conduct an evidentiary hearing to
determine justification or special circumstances.
Despite the United States Supreme Court's view that the
term “prevailing party,” recurrent in federal
fee-shifting statutes, has a “rather clear meaning,”
Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep't of
Health & Human Res., 532 U.S. 598, 607, 121 S.Ct. 1835,
1841, 149 L.Ed.2d 855 (2001) (5-4 decision), courts
have long struggled to define and apply the term in
harmony with the intent of Congress. 	To be sure, the
term encompasses a party “ ‘in whose favor a judgment
is rendered,’ ” id. at 603, 121 S.Ct. at 1839 (quoting
Black's Law Dictionary 1145 (7th ed.1999)), or who “
‘has prevailed on the merits of at least some of his
claims,’ ” id. (quoting Hanrahan v. Hampton, 446 U.S.
754, 758, 100 S.Ct. 1987, 1989, 64 L.Ed.2d 670 (1980)).
However, “[t]he touchstone of the prevailing party
inquiry must be the material alteration of the legal
relationship of the parties in a manner which Congress
sought to promote in the fee statute.” 	Tex. State
Teachers Ass'n v. Garland Indep. School Dist., 489 U.S.
782, 792-93, 109 S.Ct. 1486, 1494, 103 L.Ed.2d 866
(1989); see also Buckhannon, 532 U.S. at 604, 121 S.Ct.
at 1840 (citing Texas State Teachers Ass'n, 489 U.S. at
792-93, 109 S.Ct. at 1494). 	In other words, “the
plaintiff must be able to point to a resolution of the
dispute which changes the legal relationship between
itself and the defendant.” 	Tex. State Teachers Ass'n,
489 U.S. at 792, 109 S.Ct. at 1493.
Martin v. Secretary of Army, 463 F.Supp.2d 287, 290-91 (N.D. N.Y.
2006).
Most cases dealing with fee shifting statutes deal with
plaintiffs as the prevailing party. 	See, e.g., Buckhannon, 532
U.S. at 600:
Numerous federal statutes allow courts to award
attorney's fees and costs to the “prevailing party.”
The question presented here is whether this term
includes a party that has failed to secure a judgment
on the merits or a court-ordered consent decree, but
has nonetheless achieved the desired result because the
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3 To be clear, the “piece of paper” is not a literal
prerequisite to be a prevailing party. 	The statute requires only
that applicant be a “prevailing party in any civil action brought
by or against the United States....” 	For example, in these
circumstances were the UST to have withdrawn the Motion with
prejudice, Debtors would have become prevailing parties even
before the issuance of their discharge.
4 For example, in dismissed cases.
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lawsuit brought about a voluntary change in the
defendant's conduct. 	We hold that it does not.
Therefore, under Buckhannon, it would seem that the prevailing
party needs a “paper”, either a judgment or a court-approved
consent decree, to establish his or her prevailing party status.
Of course, this paper simply evidences the “material alteration
of the legal relationship of the parties necessary to permit an
award of attorney’s fees.” 	Id. at 604. 	(Internal punctuation
omitted.) 3
The EAJA does not distinguish between plaintiffs or
defendants as “prevailing parties”. 	Nevertheless, were there any
doubt about it, many federal fee shifting statutes are available
to prevailing defendants as well. 	Christiansburg Garment Co.,
434 U.S. at 416 and n.7. 	(Civil Rights Act.) 	Defendants will
often 4 lack a judgment or court-approved consent decree as their
“piece of paper.” 	The courts, therefore, have established an
additional standard for the award of attorney fees and costs to
prevailing defendants.
Hence, a plaintiff should not be assessed his
opponent's attorney's fees unless a court finds that
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his claim was frivolous, unreasonable, or groundless,
or that the plaintiff continued to litigate after it
clearly became so. 	And, needless to say, if a
plaintiff is found to have brought or continued such a
claim in bad faith, there will be an even stronger
basis for charging him with the attorney's fees
incurred by the defense.
Christiansburg Garment Co., 434 U.S. at 422. 	(Footnote omitted,
emphasis in original.) 	See also Equal Employment Opportunity
Comm. v. PVNF, L.L.C., 487 F.3d 790, 807 (10 th Cir. 2007)
(Defendant entitled to fees if claim was frivolous, unreasonable,
or groundless, or that plaintiff continued to litigate after it
became so.) 	Courts interpret the various federal fee-shifting
statutes consistently. 	Manning v. Astrue, 510 F.3d 1246, 1250
n.5 (10 th Cir. 2007).
The concept of prevailing party may be even more elusive in
the bankruptcy context. 	The Debtor is a “person or municipality
concerning which a case under title 11 has been commenced”, 11
U.S.C. § 101(13), by the filing of a “petition”, 11 U.S.C. §
101(42). 	As a general rule, the Debtor receives a discharge
absent certain behaviors. 	11 U.S.C. § 727 (“The court shall
grant the debtor a discharge, unless ...”) “Abuse” of the
provisions of Title 11 is one such behavior. 	11 U.S.C. § 707(b).
By statute, the UST must monitor for this abuse, 11 U.S.C. §
704(b)(1)(A), and take steps to remedy it if found (or explain
why the office is not taking further action), 11 U.S.C. §
704(b)(2). 	If the UST files a motion under 707(b), discharge is
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delayed until resolution of the matter. 	Fed.R.Bank.P.
4004(c)(1)(D).
In this case, however, the concept is not elusive. 	The UST,
from his perspective, found abuse and took the required steps.
Then, when the UST withdrew his 707(b) motion, the Clerk could
and did enter Debtors’ discharge (doc 39), which is their “piece
of paper.” 	The legal status between the parties changed: the UST
can no longer prevent the discharge of these Debtors and they
achieved the result they set out to get. 	They prevailed. 	The
Court disagrees with the UST that all he did was withdraw his
motion and thereby should escape all liability.
The Court also disagrees with the UST’s position that
Debtor’s opposition was merely the “catalyst” for the UST to
change his position. 	See Buckhannon, 532 U.S. at 599:
Numerous federal statutes allow courts to award
attorney’s fees and cost to the “prevailing party.”
The question presented here is whether this terms
includes a party that has failed to secure a judgment
on the merits or a court-ordered consent decree, but
has nonetheless achieved the desired result because the
lawsuit brought about a voluntary change in the
defendant’s conduct. 	We hold that it does not.
See also Biodiversity Conservation Alliance v. United States
Forest Service, ___ F.3d ___, ___ (10 th Cir. 2008).
Whether one views Debtors in this case as plaintiffs or as
defendants, the Court finds that they can easily be classified as
“prevailing parties.” 	See In re Terrill, 2006 WL 2385236 (Bankr.
N.D. Tx. 2006).
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The Court stresses that the only issue addressed in this
memorandum opinion is whether Debtors are “prevailing parties”
under EAJA. 	Substantial questions still exist about whether “the
position of the United States [Trustee] was substantially
justified or that special circumstances make an award [of fees]
unjust”. 	28 U.S.C. §2412(d)(1)(A). 	For example, Debtors’
assertion that the withdrawal of the Motion by itself constitutes
an admission that the Motion was not substantially justified is
simply incorrect.
The Court will set a further preliminary hearing on Debtors’
Motion by separate notice.
Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	September 26, 2008
copies to:
Dennis M Feld
PO Box 45116
Rio Rancho, NM 87174-5116
Leonard K Martinez-Metzgar
PO Box 608
Albuquerque, NM 87103-0608
Ronald Andazola
Assistant US Trustee
PO Box 608
Albuquerque, NM 87103-0608
Philip J. Montoya
Trustee
PO Box 159
Albuquerque, NM 87103
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