In Re Samuel R. PIERCE, Jr. (Kisner Fee Application)

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Filed June 22, 1999

Division No. 89-5

In re: Samuel R. Pierce, Jr.

(Kisner Fee Application)

Division for the Purpose of

Appointing Independent Counsels

Ethics in Government Act of 1978, as Amended

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Before: Sentelle, Presiding, Fay and Cudahy, Senior

Circuit Judges.

O R D E R

This matter coming to be heard and being heard before the

Special Division of the Court upon the petition of Gerald D.

Kisner for reimbursement of attorneys' fees and costs pursu-

ant to Section 593(f) of the Ethics in Government Act of 1978,

as amended, 28 U.S.C. s 591 et seq. (1994), and it appearing

to the court for the reasons set forth more fully in the opinion

filed contemporaneously herewith that the petition is not well

taken, it is hereby

ORDERED, ADJUDGED, and DECREED that the peti-

tion of Gerald D. Kisner for attorneys' fees he incurred

during the investigation by Independent Counsels Arlin M.

Adams and Larry D. Thompson be denied.

Per curiam

For the Court:

Mark J. Langer, Clerk

by

Marilyn R. Sargent

Chief Deputy Clerk

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Filed June 22, 1999

Division No. 89-5

In re: Samuel R. Pierce, Jr.

(Kisner Fee Application)

Division for the Purpose of

Appointing Independent Counsels

Ethics in Government Act of 1978, as Amended

Before: Sentelle, Presiding, Fay and Cudahy, Senior

Circuit Judges.

ON APPLICATION FOR ATTORNEYS' FEES

Opinion for the Special Court filed Per Curiam.

Concurring opinion filed by Senior Circuit Judge Cudahy.

Per curiam: Gerald D. Kisner petitions this court under

Section 593(f) of the Ethics in Government Act of 1978, as

amended, 28 U.S.C. s 591 et seq. (1994) (the "Act"), for

reimbursement of attorneys' fees in the amount of $2,759.39

that he incurred during and as a result of the investigation

conducted by Independent Counsels ("IC") Arlin M. Adams

and Larry D. Thompson. Because we conclude that Kisner

has not carried his burden of showing that the fees would not

have been incurred but for the requirements of the Act, we

deny the petition in its entirety.

Background1

In 1978 Congress established the moderate rehabilitation

("mod rehab") program within the U.S. Department of Hous-

ing and Urban Development ("HUD"). This program encour-

aged developers to upgrade moderately substandard housing

units for occupation by low income families. In 1988 HUD's

Inspector General conducted an audit of the mod rehab

program as administered from 1984 through 1988 and found

that the program was not being administered efficiently,

effectively, or economically. The Inspector General's audit

report triggered congressional investigations into abuses, fa-

voritism, and mismanagement at HUD during the 1980's

under the tenure of HUD Secretary Samuel R. Pierce, Jr.

Gerald D. Kisner, the fee petitioner here, was Deputy Gener-

al Counsel of HUD during a portion of the time that Pierce

was Secretary. In May of 1990 Kisner was called to testify

before the Employment and Housing Subcommittee of the

Committee on Government Operations of the United States

House of Representatives (the "Lantos Committee") about his

activities as Deputy General Counsel.

Based on information elicited during the congressional

investigations, the House Judiciary Committee wrote to At-

torney General Richard Thornburgh seeking the appointment

of an independent counsel to investigate the matter. Follow-

ing a preliminary investigation, Attorney General Thornburgh

applied to this court for appointment of an independent

counsel. On March 1, 1990, we appointed former United

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1 We have had recent occasion to review the facts of this matter

in In re: Samuel R. Pierce, Jr. (Olivas Fee Application, No. 89-5

(D.C. Cir., Spec. Div., June 22, 1999) (per curiam). Rather than re-

plow recently tilled ground, we have adopted much of the language

in the background portion of this opinion, and, where applicable, a

portion of the analysis from that decision.

States Circuit Judge Arlin Adams2 as independent counsel "to

investigate ... whether Samuel R. Pierce, Jr., and other

[HUD] officials may have committed the crime of conspiracy

to defraud the United States or any other Federal crimes ...

relating to the administration of the selection process of the

Department's Moderate Rehabilitation Program from 1984

through 1988." Order Appointing Independent Counsel,

March 1, 1990.

The IC conducted a comprehensive investigation ultimately

confirming a widespread pattern of corruption at HUD dur-

ing Pierce's tenure. Although the IC announced on January

11, 1995, that he would not seek indictment of Pierce, during

the course of the investigation seventeen (17) other persons

were charged with and convicted of federal crimes as a result

of the IC's investigation. That investigation and the indict-

ments ranged well beyond the core facts of the original

application for appointment of independent counsel. Of par-

ticular reference to the petitioner before us, in November of

1993 the IC apparently called Kisner before the grand jury to

ask again about his activities as Deputy General Counsel.

Kisner Application at 2.

Subsequently, in March of 1994, Kisner received a letter

from the IC's office which stated, in pertinent part, "that you

were not truthful about several matters on which you testified

in the grand jury and in front of the Lantos Committee."

March 3, 1994 Letter from Roscoe C. Howard, Jr., Esq.,

Associate Independent Counsel. Upon receipt of the letter

Kisner retained legal counsel. Although he states that he

was informed by the IC's office that he would be indicted, see

Kisner Application at 3, no charges were ever filed against

him.

The IC's investigation is now complete. Pursuant to the

statute, the IC submitted a final report to this court on

March 30, 1998. See 28 U.S.C. s 594(h)(1)(B). We ordered

the report made public by order of October 27, 1998. There-

__________

2 Independent Counsel Adams resigned in May of 1995. This

court appointed his deputy, Mr. Larry D. Thompson of the Atlanta

bar, to succeed him.

after, Kisner, pursuant to Section 593(f)(1) of the Act, peti-

tioned this court for reimbursement of his attorneys' fees.

As directed by Section 593(f)(2) of the Act, we forwarded

copies of Kisner's fee petition to the Attorney General and

the IC and requested written evaluations of the petition. The

court expresses its appreciation to the IC and the Attorney

General for submitting these evaluations, which we have

given due consideration in arriving at the decision announced

herein.

Analysis

Unique in the criminal law structure of the United States,

the Ethics in Government Act provides for reimbursement of

attorneys' fees expended by subjects in defense against an

investigation under the Act. Specifically, 28 U.S.C.

s 593(f)(1) states:

Upon the request of an individual who is the subject of

an investigation conducted by an independent counsel

pursuant to this chapter, the division of the court may, if

no indictment is brought against such individual pursuant

to that investigation, award reimbursement for those

reasonable attorneys' fees incurred by that individual

during that investigation which would not have been

incurred but for the requirements of this chapter.

Because the Act "constitutes a waiver of sovereign immuni-

ty it is to be strictly construed." In re Nofziger, 925 F.2d

428, 438 (D.C. Cir., Spec. Div., 1991) (per curiam). Therefore,

the Act provides only reimbursement for attorneys' fees that

survive an elemental analysis determining whether the peti-

tioner is the "subject" of the independent counsel's investiga-

tion, incurred the fees "during" that investigation, and would

not have incurred them "but for" the requirements of the Act.

The petitioner "bears the burden of establishing all elements

of his entitlement." In re North (Reagan Fee Application),

94 F.3d 685, 690 (D.C. Cir., Spec. Div., 1996) (per curiam).

We conclude that Kisner has met the "subject" and "during"

requirements. However, we agree with the evaluations of the

Independent Counsel and the Attorney General that Kisner

has not carried his burden of establishing that he would not

have incurred the fees "but for" the requirements of the

Ethics in Government Act.

As we have held, "[a]ll requests for attorneys' fees under

the Act must satisfy the 'but for' requirement of" the Act. In

re Sealed Case, 890 F.2d 451, 452 (D.C. Cir., Spec. Div., 1989)

(per curiam). The purpose of awarding only fees that would

not have been incurred "but for" the Act is to ensure that

"officials [and here derivative 'subjects'] who are investigated

by independent counsels will be subject only to paying those

attorneys' fees that would normally be paid by private citi-

zens being investigated for the same offense by" federal

executive officials such as the United States Attorney. Id. at

452-53 (citing S. Rep. No. 97-496, 97th Cong., 2d Sess. 18

(1982), reprinted in 1982 U.S.C.C.A.N. 3537, 3554 (referring

to "fees [that] would not have been incurred in the absence of

the special prosecutor [independent counsel] law")).

As we have stated "the most difficult element for a fee

applicant to establish under the act is that the fees 'would not

have been incurred but for the requirements of [the Act].' "

In re North (Bush Fee Application), 59 F.3d 184, 188 (D.C.

Cir., Spec. Div., 1995) (quoting In re North (Dutton Fee

Application), 11 F.3d 1075, 1079 (D.C. Cir., Spec. Div., 1993)

(per curiam)). In part this is so because the element requires

a petitioner to prove a negative and one with a high compo-

nent of speculation. In part, though, it is difficult because the

law contemplates that it should be difficult, that such fees will

not be a common thing. As we stated above, the contempla-

tion of the legislation is not that subjects of independent

counsel investigations will be reimbursed for all legal fees,

but only that they will be reimbursed for those legal fees that

would not have been incurred by a similarly-situated subject

investigated in the absence of the Act.

Nonetheless, we have found that petitioners qualify for an

award of fees in the face of the but-for test in at least four (4)

circumstances:

1. When the independent counsel's investigation sub-

stantially constituted duplication of the preliminary in-

vestigation conducted by the Department of Justice. In

re Olson, 884 F.2d 1415, 1420 (D.C. Cir., Spec. Div., 1989)

(per curiam); In re North (Dutton Fee Application) 11

F.3d at 1080.

2. When the petitioning subject has been "prejudiced

by the Department of Justice's failure to comply with the

substantial protective features of the Act." In re Nofzig-

er, 925 F.2d at 438 (citing In re Meese, 907 F.2d 1192

(D.C. Cir., Spec. Div., 1990)).

3. When in the absence of the requirements of the Act

"'the case could have been disposed of at an early stage

of the investigation,"' without subjecting the petitioning

subject to the conditions that led to his incurring the fees

sought. In re Segal (Sagawa Fee Application), 151 F.3d

1085, 1089 (D.C. Cir., Spec. Div., 1998) (quoting In re

Nofziger, 925 F.2d at 438.

4. Not wholly distinct from No. 3, supra, when "high

public officials [or derivative subjects] were investigated

under the Act in circumstances where private citizens

would not [have been] investigated." In re Nofziger, 925

F.2d at 442; In re North (Dutton Fee Application), 11

F.3d at 1080.

Kisner fits none of the four categories. Granted, these

categories are not exhaustive, and probably could not be,

given the "fact-specific nature of each independent counsel's

undertakings." In re North (Dutton Fee Application), 11

F.3d at 1080. Nonetheless, if Kisner is to establish his

entitlement under the Act he must establish some sort of

"unique special factual features that but for the requirement

of the Act would have permitted a quick termination" of the

investigation or otherwise not have subjected him to the fees

for which he petitions. In re Nofziger, 925 F.2d at 439.

There can be no serious argument that Kisner's claim fits

in either of the first two categories previously identified by

the court. As to the first, the Independent Counsel's investi-

gation ranged far beyond the preliminary investigation not

only in depth but breadth. The matters investigated as to

Kisner are far beyond anything in the preliminary investiga-

tion. He cannot fit category one. As to category two there

is neither allegation nor evidence of the Department's failure

to comply with substantial protective features and thereby

pretermit the investigation that cost Kisner his counsel fees.

He cannot fit this category either. Therefore, in order to

establish eligibility for counsel fees under the "but for" test,

Kisner must either put his facts within category three or four

or otherwise establish the necessary unique special features.

This he has not done.

Kisner argues that he satisfies the "but for" requirement

because "if the statute had not authorized the appointment of

the Independent Counsel, then the grand jury before whom

Rev. Kisner testified would not be in existence." Kisner

Response at 3. We have repeatedly held, however, that

subjects of an independent counsel investigation do not auto-

matically meet the "but for" test simply because the investi-

gation was conducted by an independent counsel under the

Act. As we stated in Olivas, "If the investigative act generat-

ing the defensive costs would, in the absence of the Act, have

been pursued by other authorities--'had the case been han-

dled by the Department of Justice or other executive authori-

ties rather than the Independent Counsel,'--then Congress

did not contemplate the award of counsel fees." In re Pierce,

(Olivas Fee Application), slip op. at 7 (quoting In re North

(Dutton Fee Application), 11 F.3d at 1080). We have found

this requirement to be met where, as in Dutton, among other

cases, the independent counsel has treated as criminal acts

that would not have been investigated by a political or

professional attorney in the Department of Justice. Similar-

ly, in In re Segal (Sagawa Fee Application), 151 F.3d 1085

(D.C. Cir., Spec. Div., 1998) (per curiam), we awarded fees

where the investigation would have been terminated by a

political or professional Department of Justice attorney with-

out the incurrence of the fees sought. Here, in contrast, it is

the case that if the grand jury that Kisner testified before

had not been in existence then some other would have been

employed to investigate the HUD matter, i.e., the Attorney

General or other investigative authority would have pursued

allegations of corruption as deep and widespread as those

occasioning the Independent Counsel's investigation.

In a similar vein, Kisner makes the argument that the Act

"prohibits the Attorney General from actually calling a grand

jury to make his or her preliminary determination of whether

an investigation is warranted.... Thus, the Attorney Gener-

al could not have investigated whether or not Rev. Kisner had

committed perjury before the Lantos Committee, and the

DOJ was not empowered to call Rev. Kisner before a grand

jury." Kisner Response at 3. But as we noted above, if the

Independent Counsel had not called a grand jury to investi-

gate the HUD matter, then the Attorney General or some

other government entity would likely have done so. Conse-

quently, if Kisner's argument has any force at all it would

seem to work against him, i.e., but for the Act the grand jury

would have been in use sooner and his attorneys' fees would

have been incurred at an earlier date.

Relying on In re Donovan, 877 F.2d 982 (D.C. Cir., Spec.

Div., 1989) (per curiam), Kisner further claims that the extent

of the IC's investigation "added to the complexity of the

investigation ... and exceeded anything the DOJ would have

undertaken merely to review his actions." Kisner Response

at 4. In Donovan we held that the "but for" requirement was

satisfied where the alleged wrongdoing was based upon a

single allegation by a single witness of extremely questionable

credibility, and the Attorney General, because of the stric-

tures of the Act, could not convene a grand jury, plea bargain,

or issue subpoenas, and therefore could not evaluate the

credibility of the witness, and consequently was required to

refer the matter to an independent counsel. In re Donovan,

877 F.2d at 990. In that case if the charges had been made

against an ordinary citizen then the Attorney General could

have disposed of the case much sooner and at much less cost.

Here, as we have noted, the allegations concerning fraud at

HUD would in all probability have been extensively investi-

gated by the Executive Branch in the absence of the indepen-

dent counsel statute.

The most that Kisner can argue under this theory is that

the complexity of the investigation lengthened his need for

representation and increased the attorneys' fees involved.

The difficulty for Kisner is that the complexity and length of

the investigation was not caused by the requirements of the

Independent Counsel Act. The convoluted nature of the

corruption involved and the high profile identity of the sus-

pects and defendants would no doubt have resulted in a

complex and lengthy investigation with or without the ap-

pointment of an independent counsel. Kisner's difficulties

were occasioned by his being suspected of having done mis-

chief in high company, not by the identity of the authority

investigating the allegations of mischief.

Further, as we pointed out in Nofziger, Congress when it

was first considering reimbursement of attorneys' fees in

1982 was aware that the inherently different nature of the

independent counsel process could result in added legal ex-

penses to subjects of independent counsel investigations, but

"[n]evertheless ... refused to authorize reimbursement for

such alleged 'inherent' costs of subjects." In re Nofziger, 925

F.2d at 445. If Congress had wanted to so provide, it could

have authorized reimbursement for those fees incurred for no

other reason than the triggering of the Act itself. Instead,

Congress provided only for reimbursement of those attor-

neys' fees that "would not have been incurred but for the

requirements of [the Act]." Id. And requirements "refers to

the special limitations and procedures established by the

Act," e.g., the two-step investigatory procedure by the Attor-

ney General and the restrictions on the Attorney General in

complying with that procedure, id., which we discern as

having no bearing on Kisner's situation here. Investigation

and potential prosecution of Kisner by the IC for perjury

"does not satisfy the 'but for' requirement since it is a type of

prosecution that is not uniquely related to the Act." In re

North (Corr Fee Application), 56 F.3d 261, 264 (D.C. Cir.,

Spec. Div., 1995) (per curiam).

Finally, Kisner attempts to bring his situation within the

precedential sphere of In re North (Shultz Fee Application),

8 F.3d 847 (D.C. Cir., Spec. Div., 1993) (per curiam). In

Shultz, we awarded counsel fees to a petitioner who had been

converted from witness to subject status far along in a

lengthy investigation, stating that "it is not reasonable to

expect that a professional prosecutor, as opposed to an inde-

pendent counsel under the Act, would have been making

subjects out of persons theretofore treated as witnesses four

and one-half years after the commencement of an investiga-

tion." Id. at 851. Kisner contends that that same reasoning

should benefit him, pointing out that the investigation by the

IC began on March 1, 1990, that the IC called Kisner as a

witness in November of 1993, and that "[i]t was not until

March, 1994, that Rev. Kisner was notified by the IC that he

was, at that point, a subject of their investigation." Kisner

Response at 4. These facts are not by any means governed

by the Shultz reasoning.

We entered the opinion in Shultz in the context of a witness

who had actually been interviewed five times at broad inter-

vals as a regular part of the investigation, and then informed

that his status was being changed to subject. Kisner, on the

other hand, was simply an existing potential witness or

potential subject for the first three and one half years of the

investigation. He had no status as witness. From the time

of his testimony in November of 1993, until he was notified of

his status as subject was a period of only four months.

Kisner has shown nothing to establish that a professional

prosecutor would have handled his case any differently than

did the IC. Therefore, absent some showing not made by

Kisner, we cannot say that the fees would pass the "but for"

test.

CONCLUSION

The petition of Gerald D. Kisner for reimbursement of

attorneys' fees is denied for failure to comply with the "but

for" requirement of 28 U.S.C. s 593(f)(1).

Cudahy, Senior Circuit Judge, concurring in the judgment:

The result here is dictated by the extensive Special Division

precedent establishing an extraordinarily demanding test for

eligibility for attorneys' fees. Whether Congress originally

intended that the bar for eligibility be set this high is to me

unclear. But we are not writing on a clean slate.