Xue Lu v. United States

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

XUE LU; JIE HAO, Nos. 17-55040

Plaintiffs-Appellees/ 17-55087

Cross-Appellants,

D.C. No.

v. 2:01-cv-01758-

CBM-EX

UNITED STATES OF AMERICA,

Defendant-Appellant/ OPINION

Cross-Appellee.

Appeal from the United States District Court

for the Central District of California

Consuelo B. Marshall, District Judge, Presiding

Argued and Submitted October 9, 2018

Pasadena, California

Filed April 17, 2019

Before: Sandra S. Ikuta and John B. Owens, Circuit

Judges, and Haywood S. Gilliam, Jr.,* District Judge.

Opinion by Judge Ikuta

*

The Honorable Haywood S. Gilliam, Jr., United States District

Judge for the Northern District of California, sitting by designation.

2 LU V. UNITED STATES

SUMMARY**

Equal Access to Justice Act / Attorneys’ Fees

The panel vacated the district court’s award of attorneys’

fees under the Equal Access to Justice Act (“EAJA”), and

remanded.

The panel held that because the district court did not have

the benefit of Goodyear Tire & Rubber Co. v. Haeger, 137 S.

Ct. 1178 (2017), when it issued an award of attorneys’ fees,

it failed to apply the appropriate legal framework. The panel

further held that it could not determine whether the court’s

error was harmless, and the panel vacated the award and

remanded to allow the district court to reconsider its fee

award under the Goodyear standard. On remand, Goodyear’s

causation standard requires the district court to identify those

expenses that the plaintiffs would not have incurred but for

the specific conduct that abused the judicial process, or to

determine that the government’s conduct so permeated all or

a portion of the suit that “all fees in the litigation, or a phase

of it, meet the applicable test: They would not have been

incurred except for the misconduct.” 137 S. Ct. at 1188.

**

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

LU V. UNITED STATES 3

COUNSEL

Karen Schoen (argued) and Charles W. Scarborough,

Appellate Staff, Civil Division, United States Department of

Justice, Washington, D.C., for Defendant-Appellant/Cross-

Appellee.

V. James DeSimone (argued), V. James DeSimone Law,

Marina del Ray, California; Douglas Grant Ingraham, Law

Offices of Douglas G. Ingraham, Santa Monica, California;

Colleen M. Mullen and Michael D. Seplow, Schonbrun

Seplow Harris & Hoffman LLP, Los Angeles, California; for

Plaintiffs-Appellees/Cross-Appellants.

OPINION

IKUTA, Circuit Judge:

The Equal Access to Justice Act, 28 U.S.C. § 2412(b),

waives the government’s sovereign immunity for the

imposition of attorneys’ fees “to the same extent that any

other party would be liable under the common law.” The

district court exercised its common law authority to award

attorneys’ fees to the plaintiffs under this section. But

because the district court did not have the benefit of

Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178

(2017), when it issued the award, it failed to apply the

appropriate legal framework. Because we cannot determine

whether the court’s error was harmless, we vacate the award

and remand to allow the district court to reconsider its fee

award under the Goodyear standard. On remand, Goodyear’s

causation standard requires the district court to identify those

expenses that the plaintiffs would not have incurred but for

4 LU V. UNITED STATES

the specific conduct that abused the judicial process, or to

determine that the government’s misconduct so permeated all

or a portion of the suit that “all fees in the litigation, or a

phase of it, meet the applicable test: They would not have

been incurred except for the misconduct.” 137 S. Ct. at 1188.

I

We begin with a brief description of the relevant facts and

procedural history of this case, which has spanned over

fourteen years and three appeals.

A

Xue Lu, a Chinese national, arrived in the United States

in 1997 and applied for political asylum. Her asylum

application was assigned to asylum officer Thomas Powell,

who interviewed her with her immigration attorney on

February 15, 2000. Powell later arranged an appointment

with Lu to meet her alone at her apartment. At this meeting,

Powell fondled Lu and told her that he would approve her

application only if she accepted his sexual demands. Lu

rejected Powell’s advances, and shortly after learned that her

asylum application had been denied.1

Jie Hao, also a Chinese national, arrived in the United

States in 1999 and likewise applied for asylum. Powell

interviewed her with her attorney on May 22, 2000, and a few

days later attempted to arrange a meeting alone with Hao in

her home. Hao’s attorney, who had also represented Lu,

contacted the Department of Justice (DOJ) to report Powell’s

conduct. Hao met with a DOJ agent, and agreed to cooperate

1

Lu returned to China in 2009.

LU V. UNITED STATES 5

with the government, including by allowing the government

to record her meeting with Powell. The agent told Hao to

signal him during the meeting if Powell engaged in improper

conduct or attempted to touch her, and the agent would

protect her.

At the meeting on June 4, 2000, Powell told Hao that he

would approve her asylum application for $2,000. At some

point in the meeting, he also slapped Hao’s buttocks multiple

times and kissed her on the cheek. The DOJ agent did not

intervene during the meeting. At a follow up meeting on

June 8, Hao gave $2,000 (which she had previously received

from DOJ agents) to Powell. Powell took the money, touched

Hao on the knee, asked for a hug, and again kissed Hao on the

cheek.

As a result of this sting operation, the United States

indicted Powell for violating Lu’s civil rights under color of

law, in violation of 18 U.S.C. § 242, and for seeking bribes

from both Lu and Hao in violation of 18 U.S.C.

§ 201(B)(2)(A). See Xue Lu v. Powell, 621 F.3d 944, 946

(9th Cir. 2010). In 2004, Powell was convicted of both

charges. Id.

B

While the criminal case against Powell was pending, Lu

and Hao filed a civil action under the Federal Tort Claims Act

(FTCA) against Powell, his supervisor, various unknown

agents, and the United States in connection with Powell’s

conduct. Their complaint alleged: (1) deprivation of

constitutional rights, (2) negligence, (3) sexual battery,

(4) assault and battery, (5) intentional infliction of emotional

distress, (6) cruel and inhumane and degrading treatment,

6 LU V. UNITED STATES

(7) interference with the right to seek asylum, and (8) gender

discrimination, harassment, and violence against women. In

2005, after Powell’s conviction and sentencing, the court

granted the government’s motion to dismiss the action against

the United States for failure to state a claim, on the ground

that Powell was acting outside the scope of his employment

when he perpetrated the sexual assaults on the plaintiffs, and

therefore the United States could not be held liable on a

respondeat superior theory.2

On appeal, we reversed in part and remanded two claims

for trial. Xue Lu, 621 F.3d 944, 951. Contrary to the district

court’s determination, we held that Powell acted within the

scope of his employment because his conduct was “incidental

to the asylum system.” Id. at 949. Next, we held that

although the United States is “immune from liability for an

assault or battery by its employee,” see 28 U.S.C. § 2680(h),

Lu and Hao could bring claims for “infliction of emotional

distress,” because “[t]he emotional distress suffered as a

result of the demand for sexual favors is an injury distinct

from the battery,” Xue Lu, 621 F.3d at 950. We also held that

Powell had attempted to interfere with Lu and Hao’s statutory

right to asylum, and therefore they could bring claims for

interference with their civil rights under section 52.1 of the

California Civil Code.3 Id.

2

Hao and Lu’s claims against the individual defendants were

dismissed through a combination of settlement and stipulation after an

additional three years of litigation.

3

Section 52.1(c) of the California Civil Code provides that “[a]ny

individual whose exercise or enjoyment of rights secured by the

Constitution or laws of the United States, or of rights secured by the

Constitution or laws of this state, has been interfered with, or attempted

to be interfered with [in a specified manner] may institute and prosecute

LU V. UNITED STATES 7

On remand, Lu and Hao’s claims for violation of section

52.1 and intentional infliction of emotional distress proceeded

to a bench trial. In an August 5, 2013 order, the district court

ruled in favor of the plaintiffs on both claims, reasoning that

Powell interfered with the plaintiffs’ right to asylum or their

due process right to a meaningful hearing for asylum relief,

and that Powell’s offensive touching constituted intentional

infliction of emotional distress. The district court awarded

$500,000 in damages to Lu and $700,000 in damages to Hao.

After the verdict, the plaintiffs moved for attorneys’ fees.

The district court determined it could award “attorney fees at

market rates in cases involving bad faith by the United

States” if it “finds that the fees incurred during various phases

of litigation are in some way traceable to the [defendant’s]

bad faith.” Xue Lu v. United States, No. 2:01-cv-1758, 2014

WL 2468826, at *1 (C.D. Cal. May 23, 2014) (quoting Brown

v. Sullivan, 916 F.2d 492, 495, 497 (9th Cir. 1990)). Based

on this standard, the court found that the government’s

conduct resulted in two incidents of pre-litigation bad faith

conduct and two incidents of bad faith conduct during the

litigation.

First, the court held the DOJ agent’s “failure to come to

[Hao’s] aid after Powell touched Plaintiff[’s] buttocks”

constituted bad faith pre-litigation conduct. Id. at *3.

Second, the court found that the government had engaged

in pre-litigation bad faith conduct by delaying consideration

in his or her own name and on his or her own behalf a civil action for

damages . . . .”

8 LU V. UNITED STATES

of Hao’s asylum application for seven years, until the

criminal case against Powell was resolved.4 Id.

Third, the court found the government had engaged in bad

faith conduct by arguing during the litigation that Hao could

not claim she suffered an injury from Powell’s touching

because Hao gave “express, voluntary written consent” to

participate in the sting operation, and had assumed the

potential risks associated with the operation. Id. The court

found that Hao had consented only to assisting in the sting,

not to being a victim of offensive touching, and therefore this

argument was in bad faith. Id. at *4.

Finally, the district court held that the government had

engaged in bad faith conduct by arguing that Hao and Lu’s

claims were barred by the intentional tort exception under the

FTCA5 even though we had previously held on appeal that Lu

and Hao could bring claims for intentional infliction of

emotional distress. Id.

The district court did not, however, agree that all of the

conduct identified by Lu and Hao before or during the

litigation constituted bad faith. For instance, the

government’s reliance on an immigration judge’s findings did

not constitute bad faith. Nor did the government engage in

bad faith conduct by making a reference to Lu and Hao’s

claims as “mere allegations” during the proceedings. Id. at *4

n.1.

4

Hao’s asylum application was granted in 2007.

5

The FTCA excludes any claim “arising out of” eleven categories of

torts, including assault or battery, but not including intentional infliction

of emotional distress. 28 U.S.C. § 2680(h).

LU V. UNITED STATES 9

The district court concluded that “[u]nder the totality of

the circumstances” the government’s bad faith “has affected

all portions or phases of the litigation since June 8, 2000,” the

date of the sting operation. Id. at *4. The district court

therefore held that the plaintiffs were entitled to some

$877,563 in fees under 28 U.S.C. § 2412(b). It also awarded

$4,112 in fees under 28 U.S.C. § 2412(d), which provides for

the award of fees to a prevailing party under specified

circumstances,6 for fees incurred prior to the sting operation.

See id. at *5. In total, the district court awarded $881,675 in

fees. Id. at *8.

C

On appeal, we affirmed the district court’s judgment in an

unpublished decision, but vacated the fee award. See Xue Lu

v. United States, 638 F. App’x 614 (9th Cir. 2016). In

considering the district court’s ruling on attorneys’ fees, we

upheld three of the district court’s bad faith findings. First,

we held that the district court had not clearly erred in holding

that the government engaged in bad faith conduct when the

DOJ agent failed to come to Hao’s aid, although “we might

6

28 U.S.C. § 2412(d)(1)(A) provides:

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.

10 LU V. UNITED STATES

well have come to a different conclusion on de novo review.”

Id. at 618–19. Nor did the district court clearly err in finding

the government’s delay in considering Hao’s asylum

application was bad faith conduct, at least for the first five

years. Id. at 619 n.2. We held that the final two years of

delay (from 2005 to 2007), which “occurred in the ordinary

course of processing” Hao’s asylum application, did not rise

to the level of bad faith. Id. at 619 n.2. Likewise, the district

court did not clearly err in holding the government engaged

in bad faith by arguing that Hao had consented or assumed

the risk of Powell’s sexual touching, although we noted that

a finding of bad faith was not compelled. Id. at 618.

We reversed, however, the district court’s fourth finding

“that the government argued in bad faith that the intentional

tort exception barred Plaintiffs’ claims in spite of our first

opinion.” Id. We noted that “[w]henever the government

presented an intentional tort exception-based theory, it

provided a non-frivolous way to reconcile the argument with

our previous decision.” Id. We concluded that “[b]ad faith

has a high threshold and the district court’s finding of it here

is without support in the record.” Id. We therefore vacated

the fee award and remanded “to allow the district court to

decide what, if any, changes should be made to the award of

fees incurred after June 8, 2000.” Id. at 619.7

D

On remand, the district court again articulated its

understanding that it “may award attorney fees at market rates

7

We also vacated the district court’s fee award to the extent it relied

on 28 U.S.C. § 2412(d)(2)(A), because that section does not apply to tort

actions like this one. Id.

LU V. UNITED STATES 11

for the entire course of litigation, including time spent

preparing, defending, and appealing . . . awards of attorneys’

fees, if it finds that the fees incurred during various phases of

litigation are in some way traceable to the [defendant’s] bad

faith.” Xue Lu v. United States, No. 2:01-cv-1758, 2016 WL

11087106, at *2 (C.D. Cal. Nov. 10, 2016) (quoting Brown,

916 F.2d at 495, 497) (alterations and emphasis in district

court order). Because we had rejected the conclusion that the

government’s intentional tort argument constituted bad faith

conduct, the court set out to calculate which fees were

“traceable to the three findings of bad faith affirmed by the

Ninth Circuit,” namely the DOJ agent’s failure to come to

Hao’s aid, the government’s delay in considering Hao’s

asylum application, and the government’s argument that Hao

had consented or assumed the risk of Powell’s sexual

touching. Id.

To trace these fees, the district court relied on a

declaration submitted by plaintiffs’ counsel, which provided

two alternatives for calculating attorneys’ fees. Id. First,

counsel argued that “all work performed in this case is

traceable to Powell’s bad faith” and so all fees should be

awarded. As an alternative, however, counsel traced the

hours incurred by each attorney or staff member to one or

more of the district court’s three surviving findings of bad

faith. The plaintiffs took a broad view of traceability. For

instance, the declaration claimed that two incidents of bad

faith conduct—the DOJ agent’s failure to assist Hao after

Powell touched her, and the government’s delay in

consideration of Hao’s asylum application—“existed from the

inception of the litigation so the majority of Plaintiffs’

counsels’ work was in some way traceable to that bad faith

conduct.” Further, the declaration claimed that the

government’s argument about the FTCA’s exception for

12 LU V. UNITED STATES

intentional torts related to Powell’s offensive touching, and

therefore work addressing the intentional tort argument was

also traceable to bad faith. Finally, the declaration claimed

that because work for both Hao and Lu substantially

overlapped, only work performed solely for Lu was not

recoverable. Based on this analysis, the declaration

concluded that the work traceable to bad faith amounted to

$676,751 in fees, see id., some $200,000 less than the amount

the district court had previously awarded for the entire

litigation.

Without undertaking any independent analysis, the district

court adopted the declaration, and concluded that “[t]he

evidence submitted by Plaintiffs demonstrates $676,751 in

fees expended in the underlying action is traceable to one or

more of the three findings of bad faith by the Government,”

and awarded the entire amount to plaintiffs. Id. at *2, *4.

Plaintiffs also moved for attorneys’ fees incurred on the

appeal of the previous fee award and post-remand. Although

this fee motion was not timely under Ninth Circuit

Rule 39-1.6, the district court held that the untimely filing

was a result of excusable neglect under Pincay v. Andrews,

389 F.3d 853 (9th Cir. 2004) (en banc). The district court

granted the motion in full, holding that “[t]he evidence

submitted by plaintiffs demonstrates $314,651 in fees

expended on the second appeal and post-remand is traceable

to one or more of the three findings of bad faith by the

Government.” Xue Lu, 2016 WL 1108716, at *4. In total, the

court awarded $993,758 in attorneys’ fees. The government

appealed.

LU V. UNITED STATES 13

II

After the district court ruled, the Supreme Court issued its

opinion in Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct.

1178 (2017). Goodyear shed a new light on the framework

for awarding attorneys’ fees as sanctions, which is equally

applicable to an award of fees under § 2412(b). Therefore,

we begin by explaining this framework in light of Goodyear.

A

In Goodyear, three plaintiffs claimed that the failure of a

Goodyear tire caused their motorhome to drive off the road

and flip over. 137 S. Ct. at 1184. During discovery, the

plaintiffs repeatedly asked Goodyear to provide internal test

results for the tire, but Goodyear delayed its responses or

refused to turn over requested documents. Id. The plaintiffs

finally settled with Goodyear before trial. Months after the

settlement, the plaintiffs learned that Goodyear had withheld

a crucial set of test results for the tires. Id. The plaintiffs

then moved the district court for an award of attorneys’ fees

and costs as sanctions for discovery fraud. Id. The district

court found that Goodyear “had engaged in a ‘years-long

course’ of bad-faith behavior,” making “repeated and

deliberate attempts to frustrate the resolution of this case on

the merits.” Id. The court therefore ordered Goodyear to

reimburse the plaintiffs for attorneys’ fees and costs paid

during the suit, reasoning that due to Goodyear’s egregious

behavior, “all of the attorneys’ fees incurred in the case [can]

be awarded without any need to find a causal link between

[those expenses and] the sanctionable conduct.” Id. at 1185

(internal quotation marks omitted). We upheld this award on

appeal. Id. The Supreme Court reversed, holding that the

14 LU V. UNITED STATES

award was inconsistent with the proper framework for

imposing such sanctions.

B

In explaining the proper framework, Goodyear began

with first principles: that “[f]ederal courts possess certain

‘inherent powers,’ not conferred by rule or statute, ‘to

manage their own affairs so as to achieve the orderly and

expeditious disposition of cases.’” Id. at 1186 (quoting Link

v. Wabash R. Co., 370 U.S. 626, 630–31 (1962)). Indeed, the

Supreme Court has long made clear that “[c]ourts of justice

are universally acknowledged to be vested, by their very

creation, with power to impose silence, respect, and decorum,

in their presence, and submission to their lawful mandates.”

Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991) (quoting

Anderson v. Dunn, 6 Wheat 204, 227 (1821)). Among the

inherent powers recognized by the Supreme Court is the

power “to fashion an appropriate sanction for conduct which

abuses the judicial process.” Goodyear, 137 S. Ct. at 1186

(quoting Chambers, 501 U.S. at 44–45). Such a sanction may

include the assessment of attorneys’ fees against “a party that

has acted in bad faith.” Id.; see also Chambers, 501 U.S.

at 45–46 (“[A] court may assess attorney’s fees when a party

has ‘acted in bad faith, vexatiously, wantonly, or for

oppressive reasons.’”).8

Goodyear emphasized that a bad faith fee award, “when

imposed pursuant to civil procedures, must be compensatory

rather than punitive in nature.” 137 S. Ct. at 1186 (citing

8

Such fee awards are an exception to “the so-called ‘American

Rule,’” which “prohibits fee shifting in most cases.” Chambers, 501 U.S.

at 45.

LU V. UNITED STATES 15

Mine Workers v. Bagwell, 512 U.S. 821, 826–30 (1994)). “In

other words, the fee award may go no further than to redress

the wronged party ‘for losses sustained’; it may not impose an

additional amount as punishment for the sanctioned party’s

misbehavior.” Id. (quoting Bagwell, 512 U.S. at 829). If a

fee award goes beyond a compensatory purpose, “a court

would need to provide procedural guarantees applicable in

criminal cases, such as a ‘beyond a reasonable doubt’

standard of proof.” Id.; see also Miller v. City of Los Angeles,

661 F.3d 1024, 1030 (9th Cir. 2011) (noting that “non-

compensatory sanctions” may be “akin to criminal contempt

and may be imposed only by following the procedures

applicable to criminal cases, including appointment of an

independent prosecutor, proof beyond a reasonable doubt and

a jury trial”).

Because the imposition of attorneys’ fees against a party

who abused the judicial process is limited to compensation

for the wronged party, “the court can shift only those

attorney’s fees incurred because of the misconduct at issue.”

Goodyear, 137 S. Ct. at 1186. “[A] sanction counts as

compensatory only if it is calibrated to the damages caused by

the bad faith acts on which it is based.” Id. (cleaned up).

Therefore, the court must “establish a causal link—between

the litigant’s misbehavior and legal fees paid by the opposing

party.” Id.; see also Miller, 661 F.3d at 1029. Goodyear

rejected our determination that “the trial court could grant all

attorney’s fees incurred during the time when [Goodyear was]

acting in bad faith.” Id. at 1189 (emphasis and internal

quotation marks omitted). According to the Court, “that is a

temporal limitation, not a causal one,” and therefore “it is

wide of the mark.” Id. Instead, “[a] sanctioning court must

determine which fees were incurred because of, and solely

16 LU V. UNITED STATES

because of, the misconduct at issue (however serious, or

concurrent with a lawyer’s work, it might have been).” Id.

Goodyear framed this causal link “as a but-for test”: a

party “may recover ‘only the portion of his fees that he would

not have paid but for’ the misconduct.” Id. at 1187 (quoting

Fox v. Vice, 563 U.S. 826, 836 (2011)). If an expense would

have been incurred even absent any bad faith conduct, it

cannot be part of a bad faith fee award. Id. A court may not

shift fees if “the same work would have been done (for

example, the same deposition taken) to contest the non-

frivolous claims in the suit.” Id. In other words, a district

court making a bad faith fee award must determine “whether

a given legal fee—say, for taking a deposition or drafting a

motion—would or would not have been incurred in the

absence of the sanctioned conduct.” Id. Thus, a court must

generally engage in “the grind of segregating individual

expense items (a deposition here, a motion there)” or

“categories of such items (again, like expert discovery)” in

order to determine which fees “would not have been incurred

except for the misconduct.” Id. at 1188.

In certain exceptional cases, the but-for test allows a court

to “shift all of a party’s fees, from either the start or some

midpoint of a suit, in one fell swoop.” Id. at 1187.

According to the Court, Chambers offered “one illustration”

of this situation where “literally everything the defendant

did—‘his entire course of conduct throughout,’ and indeed

preceding, the litigation—was ‘part of a sordid scheme’ to

defeat a valid claim.” Id. at 1187–88 (quoting Chambers,

LU V. UNITED STATES 17

501 U.S. at 51, 57).9 Under these circumstances, “the district

court could reasonably conclude that all legal expenses in the

suit ‘were caused . . . solely by [his] fraudulent and brazenly

unethical efforts.’” Id. at 1188 (quoting Chambers, 501 U.S.

at 58). Similarly, “[i]f a plaintiff initiates a case in complete

bad faith, so that every cost of defense is attributable only to

sanctioned behavior, the court may again make a blanket

award.” Id. This “exceptional case” rule is consistent with

our prior cases holding that where the entirety of the action is

attributable to bad faith abuse of the judicial process, a

district court can award fees “for the entire course of

litigation,” so long as all fees are “in some way traceable to”

bad faith activity. Brown, 916 F.2d at 497.

In short, Goodyear clarified that when awarding

attorneys’ fees as a sanction for bad faith conduct, a district

court must identify the conduct that abused the judicial

process and, applying Goodyear’s but-for standard, identify

only those expenses that the wronged party would not have

9

In Chambers, the director of a television station had entered into a

contract to sell the station’s facilities and license to NASCO, and then

changed his mind. 501 U.S. at 35–36. When NASCO filed a lawsuit, the

director embarked on a scheme to prevent NASCO from using the court

to enforce the contract. Id. at 36–37. In his initial conference with the

district court, the director deliberately concealed the fact that he was

taking steps to transfer the station to a third party for the purpose of

evading the court’s reach. Id. at 37–38. The director “continued to abuse

the judicial process”; he refused to provide essential discovery materials,

made “a series of meritless motions and pleadings and delaying actions,”

and secretly sought permission from the applicable regulatory agency to

relocate the station’s operations. Id. at 38–39 (internal quotation marks

omitted). The district court found that the defendant deliberately misused

the judicial process “to defeat NASCO’s claim by harassment, repeated

and endless delay, mountainous expense and waste of financial resources.”

Id. at 57.

18 LU V. UNITED STATES

incurred but for the misconduct. See 137 S. Ct. at 1187.

Because the fee award must be compensatory, rather than

punitive, the award “may go no further than to redress the

wronged party for losses sustained.” Id. at 1186 (internal

quotation marks omitted). In an exceptional case such as

Chambers, where fees associated with the entirety of an

action, or an entire portion of the action, would not have been

incurred but for the bad faith conduct of a litigant, the district

court may shift “all of a party’s fees, from either the start or

some midpoint of a suit, in one fell swoop.” Id. at 1187.

C

Goodyear’s framework is applicable in our case. In

Goodyear, the Court reaffirmed that courts have inherent,

common law authority to assess attorneys’ fees as a sanction

for bad faith conduct. A court would be precluded from

assessing attorneys’ fees against the United States unless it

waived its sovereign immunity. Accordingly, the EAJA

provided such a waiver for attorneys’ fees awards in civil

cases in which the United States is a party.10 Under the

10

The relevant section provides:

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.

LU V. UNITED STATES 19

EAJA, “[u]nless expressly prohibited by statute, a court may

award reasonable fees and expenses of attorneys . . . to the

prevailing party in any civil action brought by or against the

United States . . . .” 28 U.S.C. § 2412(b). In such cases,

“[t]he 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.” Id. (emphasis

added).

We have interpreted the statute’s reference to the common

law as including the common law authority of courts to assess

attorneys’ fees pursuant to their inherent powers. See Barry

v. Bowen, 825 F.2d 1324, 1334 (9th Cir. 1987), overruled on

other grounds as recognized in Mt. Graham Red Squirrel v.

Madigan, 954 F.2d 1441, 1462 (9th Cir. 1992). Said

otherwise, “[s]ection 2412(b) codified the bad faith exception

to the ‘American rule’ against the award of attorney’s fees

and made that exception applicable in suits against the United

States.” Id. Because the ability of a court to award attorneys’

fees against the government for bad faith conduct is the same

as the court’s inherent power to do so against other litigants,

absent another statute that confers additional powers, any

analysis of the bad faith exception under the EAJA “draws

upon the well of cases decided in other contexts.” Id.11

28 U.S.C. § 2412(b).

11

The inquiry under 28 U.S.C. § 2412(b) differs from that undertaken

by courts deciding whether to award fees under 28 U.S.C.

§ 2412(d)(1)(A), which allows a court to shift all fees and expenses

incurred by a prevailing party (other than the United States) in an action

brought by or against the United States, unless the court determines that

the position of the United States in the litigation was “substantially

justified.” 28 U.S.C. § 2412(d)(1)(A); see also INS v. Jean, 496 U.S. 154,

20 LU V. UNITED STATES

III

We now consider what Goodyear means for this case. As

in Goodyear itself, we must consider whether the district

court’s ruling complied with the Goodyear framework, or

otherwise passes a but-for test. We review the district court’s

fee award for abuse of discretion. See Rodriguez v. United

States, 542 F.3d 704, 709 (9th Cir. 2008). And “in light of

the trial court’s superior understanding of the litigation,” its

judgment is “entitled to substantial deference on appeal.”

Goodyear, 137 S. Ct. at 1187 (internal quotation marks

omitted).

Because the district court did not have the benefit of

Goodyear when it issued its ruling, it is not surprising that the

court’s fee award does not comply with Goodyear’s

framework. There are several inconsistencies. First, the

district court did not expressly apply Goodyear’s but-for

standard or undertake the granular inquiry indicated by that

opinion, i.e., segregating individual expense items or

categories of such items and establishing that they would not

have been incurred except for the government’s misconduct.

Rather, the court relied on the plaintiffs’ declaration, which

provided only broad generalizations about causation, and did

not calibrate a close “causal link,” id. at 1186, between the

sanctionable conduct and specific legal tasks. Further, in

indicating that the majority of plaintiffs’ fees were

recoverable merely because the government’s bad faith

158–60 (1990). A court’s determination whether the government’s

position was substantially justified is made for a particular action as a

whole. See Jean, 496 U.S. at 161–62. Section 2412(d)(1)(A) is not

applicable here because the plaintiffs’ claims “sound[] in tort.” 28 U.S.C.

§ 2412(d)(1)(A).

LU V. UNITED STATES 21

conduct “existed from the inception of the litigation,” the

declaration appeared to adopt the temporal approach rejected

in Goodyear. Moreover, the declaration encompassed fees

for work done for both Hao and Lu, contrary to Goodyear’s

clarification that it is inappropriate to grant fees “for all legal

work relating to” specified claims “regardless of whether the

same work would have been done (for example, the same

depositions taken) to contest the non-frivolous claims in the

suit.” Id. at 1187.

Although the district court failed to provide the close

analysis generally required by Goodyear, we must still

consider whether this is one of the “exceptional cases”

identified in Goodyear where the “grind” of tracing each

legal fee to a specific bad faith act is not required. Id. at

1187–88. The court did not make any finding to that effect,

but certain of the district court’s statements suggest that it

deemed the case to be one where the government’s

misconduct was such that it was appropriate to shift all or a

portion of the plaintiffs’ fees “in one fell swoop.” Id. at 1187.

First, in stating that under the “totality of the circumstances”

the government’s bad faith “has affected all portions or

phases of the litigation since June 8, 2000,” the date of the

sting operation, the district court suggested that the

government’s bad faith conduct “so permeated the suit as to

make that misconduct a but-for cause of every subsequent

legal expense,” id. at 1189. Second, the district court held it

could award attorneys fees “if it finds that the fees incurred

during various phases of litigation are in some way traceable

to the [defendant’s] bad faith,” Xue Lu, 2016 WL 11087106,

at *2 (quoting Brown, 916 F.2d at 497) (alteration and

emphasis in district court order), a standard that may be

applicable in exceptional cases, see Brown, 916 F.2d at 497.

Finally, the district court’s bad faith findings included the

22 LU V. UNITED STATES

government’s prelitigation conduct (i.e., the failure to come

to Hao’s aid during the sting and five of the seven years of

delay in processing Hao’s asylum application), which

Goodyear indicated is a consideration in exceptional cases,

see 137 S. Ct. at 1187–88 (stating it had approved the award

in Chambers because “literally everything the defendant

did—‘his entire course of conduct’ throughout, and indeed

preceding, the litigation—was ‘part of a sordid scheme’”).

On the other hand, there are several indications that this

case is not such an exceptional case. Our prior opinion makes

clear that not all of the government’s activity is part of a

“sordid scheme.” We concluded that the government’s

argument that the FTCA’s intentional torts exception barred

plaintiffs’ claims did not constitute bad faith, and that the

district court’s contrary finding was “without support in the

record.” Xue Lu, 638 F. App’x at 618. We also held that the

final two years of delay in processing Hao’s asylum

application “occurred in the ordinary course” and did not rise

to the level of bad faith. Id. at 619 n.2. Nothing in the record

suggests that the government engaged in needless delay of the

litigation, attempted to harass the plaintiffs with unwarranted

depositions or discovery, defied the letter or spirit of a court

order, or otherwise attempted to hamper the judicial process.

Cf. Chambers, 501 U.S. at 37–42. Moreover, the district

court itself chose to ignore the declaration’s assertion that all

work performed in the case was traceable to the government’s

bad faith, and ultimately declined to award some $200,000 in

attorneys’ fees. Such a ruling would be inconsistent with a

conclusion that the government’s misconduct “so infected the

lawsuit as to account for each and every expense the

[plaintiffs] subsequently incurred.” Goodyear, 137 S. Ct.

at 1188.

LU V. UNITED STATES 23

We therefore conclude that, as in Goodyear, there is too

much uncertainty regarding the record and the district court’s

reasoning to determine whether the district court’s fee award

is consistent with the Goodyear standard. Our uncertainty

“points toward demanding a do-over, under the unequivocally

right legal rules.” Id. at 1190.

We reach the same conclusion with respect to the

government’s challenge to the district court’s award of fees

incurred by plaintiffs during the previous appeal of the initial

fee award and after remand. In general, the Supreme Court

has rejected the argument that costs incurred appealing the

award of a sanction or defending against such an appeal are

incurred “because of” the sanctioned party’s bad faith

conduct in the trial court. See Lockary v. Kayfetz, 974 F.2d

1166, 1177–78 (9th Cir. 1992) (citing Cooter & Gell v.

Hartmarx Corp., 496 U.S. 384, 406 (1990)). As explained in

the context of Rule 11 sanctions, the expenses incurred in

defending a sanctions award on appeal “are directly caused

by the district court’s sanction and the appeal of that sanction,

not by the plaintiff’s” bad faith conduct in the district court.

Cooter & Gell, 496 U.S. at 407. Thus, if the appeal itself is

not frivolous, then a fee award is generally not appropriate.

See id. This conclusion is consistent with the Goodyear

standard, which requires a direct, but-for relationship between

the bad faith conduct and the fees. Nevertheless, there may

be exceptional cases where bringing or defending an appeal

is part of a single “sordid scheme” and is likewise

compensable. The district court may also reconsider this

issue under the correct standard on remand.12

12

The government argues that the district court abused its discretion

in considering the untimely motion for appeal fees under the doctrine of

excusable neglect because it did not give the government leave to file a

24 LU V. UNITED STATES

We conclude that it is most prudent to vacate the fee

award and remand to the district court to determine, under the

standard set out in Goodyear and this opinion. The district

court must identify the abuse of judicial process that is

sanctionable, and apply the but-for standard to determine

which fees would not have been incurred but for that conduct.

See Goodyear, 137 S. Ct. at 1187. If the district court

determines that this is an exceptional case, it must explain

why the entirety of the case, or some portion of the case, was

initiated in “complete bad faith,” so that the court may

appropriately make a blanket award.13

VACATED AND REMANDED.14

sur-reply responding to plaintiffs’ excusable neglect argument. We reject

this argument, and affirm the district court’s ruling, because the

government cannot show that it was prejudiced; the evidence it sought to

provide in its sur-reply was already before the district court, and the

government had the opportunity to present its argument orally at a hearing.

The government also argues that the plaintiffs erred by filing their request

in district court, instead of in the Ninth Circuit. Because the government

did not raise this argument to the district court, it is waived. See Exxon

Shipping Co. v. Baker, 554 U.S. 471, 487 (2008).

13

We reject the plaintiffs’ argument on cross-appeal that the district

court erred in declining to award attorneys’ fees for Powell’s conduct. A

bad faith fee award is not a remedy for the conduct giving rise to the cause

of action, see Chambers, 501 U.S. at 53, and therefore cannot be “based

solely upon a finding of bad faith in the conduct underlying the lawsuit,”

Rodriguez, 976 F.2d at 712 (emphasis and internal quotation marks

omitted). The district court may consider such prelitigation conduct,

however, if raised as evidence that the government’s conduct before the

court was in bad faith or vexatious. See id.

14

The parties shall bear their own costs on appeal.