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When the Government Must Pay Attorneys' Fees

In the case of United States v. Hallmark Construction Company, 200 F.3d 1076 (7th Cir. 2000), the United States Court of Appeals for the Seventh Circuit set forth in detail how a trial court is to determine whether the United States should pay attorneys fees for a defendant who has prevailed in a case brought against it by the United States. In this case, the United States had claimed that Hallmark violated the Clean Water Act by filling a wetland without a permit. The defendant won at the trial level when the Court found that the claim that Hallmark had violated the Clean Water Act "was arbitrary and capricious, because it was not based on a consideration of the relevant factors in evidence." It also added that "much of the government evidence rested on speculation and conjecture." The District Court ruled against Hallmark's request for attorneys' fees under the Equal Access to Justice Act ("EAJA") but the Circuit Court of Appeals remanded the matter back to the District Court with instructions on how to decide the case. It said that the burden should be on the United States to demonstrate if there was "substantial justification" for its position. To do that the government must show that its position was grounded in (i) a reasonable basis in truth for the facts alleged, (ii) a reasonable basis in law for the theory propounded and (iii) a reasonable connection between the facts alleged and the legal theory advanced. Furthermore, in making a determination of whether the government's case was substantially justified, the District Court is to examine the government's conduct in both the pre-litigation and litigation contexts. "We would expect the District Court's attorney's fees opinion to address, among other things, whether it was reasonable for the government to proceed to trial if it had adequately assessed Hallmark's computer modeling and eye-witness testimony as compared to its own evidence on this issue. . . We would expect the District Court's attorney's fees opinion to also address whether the government was substantially justified in pressing forward with the suit given the factual support it had for the legal elements it was required to prove."

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