# Petition for Writ of Certiorari — Park Manor Manor, Ltd. v. Department of Health and Human Services (No. 07-537) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386009_1613%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 2007 ## Text me Court, U.S. Suprey ILED nog 7-537 007 19 2007 OFFICE OF THE CLERK In The Supreme Court of the Anited States ¢ PARK MANOR, LTD.., Petitioner, V. U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AND CENTERS FOR MEDICARE AND MEDICAID SERVICES, Respondents. On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Seventh Circuit o PETITION FOR A WRIT OF CERTIORARI ® ROBERT M. HESSLINK, JR. HESSLINK LAW OFFICES, S.C. State Bar No. 1013876 Counsel of Record for Petitioner P.O. Box 930005 Verona, WI! 53593-0005 (608) 845-3775 (OOCRKLE LAW BRIEF PRINTING Con seer 225 ened ORCALL COLLECT 2) 342-25.3 QUESTIONS PRESENTED 1. Is a non-governmental party who prevails in an administrative rule enforcement proceeding thereby barred from obtaining an award of attorneys fees under the “excessive demand” provisions of 5 U.S.C. §504(a\(4)? 2. What legal standard should be applied in determining whether an agency’s demand is substan- tially in excess of the decision and is unreasonable when compared with such decision, within the mean- ing of 5 U.S.C. §504( a4)? 3. Is an agency required to establish that its actions that prompted administrative litigation had a reasonable basis in fact and law in order to avoid an award of the attorneys fees incurred in that proceed- ing under 5 U.S.C. §504(a)(1) if the agency’s actions were designed to advance public health or safety? 4. Is an agency's position substantially justified if some of its position has a reasonable basis in fact and law but the larger portion of it does not? li CORPORATE DISCLOSURE STATEMENT Park Manor, Ltd. is a Wisconsin corporation. There is no parent corporation. There is no publicly held company that has an ownership interest in Park Manor, Ltd. ill TABLE OF CONTENTS Page QUESTIONS PRESENTED.................cccessceseseees i CORPORATE DISCLOSURE STATEMENT ...... il EPS BIE FE Nini stkcesevorcveveneiesivnseesectns Vv TABLE OF AUTHORITIES. ........c0cccscsescoccesecsveess vi Ce eae UE SG OE pxntadenvntccecsdvenindcdenicocsemnntouncons 1 STATEMENT OF JURISDICTION. .................... 1 STATUTES AND REGULATIONS INVOLVED ..... 2 STATEMENT OF THE CASE................cccsecceseees 2 REASONS FOR GRANTING THE PETITION... 8 I. THE CIRCUIT COURT’S INTERPRETA- TION OF 5 U.S.C. §504(a)(4) WAR- RANTS REVIEW BY THIS COURT......... 10 A. Whether Prevailing Litigants Should Be Barred From Recovering Under 5 U.S.C. §504(a)(4) Is An Important Is- sue Of Federal Law That Should Be SOUL Fy TS CGS S oaccsnecsesescssncncienss 11 B. The Decision Of The Seventh Circuit Is Based On A Standard For Deter- mining When A Demand Is Excessive That Does Not Represent The Only Reasonable Construction Of 5 U.S.C. IIE MIT scs cincedincicies nmin ed dbaseaieeteoweeceens 17 iv TABLE OF CONTENTS -— Continued Page Il. THE HOLDING THAT AN AGENCY WHICH ENFORCES PUBLIC HEALTH OR SAFETY REQUIREMENTS CAN BE RELIEVED OF ITS OBLIGATION TO PROVE THAT ITS PRE-LITIGATION PO- SITION WAS SUBSTANTIALLY JUSTI- FIED WARRANTS REVIEW A. The Creation Of A Separate Standard Of Reasonableness For Agencies Which Regulate In The Areas Of Pub- lic Health Or Safety Should Only Be Done After A Thorough Review By This Court . The Circuit Court’s Holding That CMS Is Not Required To Investigate Prior To Imposing Remedies Is In Ap- parent Conflict With Principles Es- tablished By A Decision Of Another Circuit Court THE DAB’S CONCLUSION, THAT AN AGENCY’S POSITION IS SUBSTAN- TIALLY JUSTIFIED IF SOME ALLE- GATIONS HAVE A REASONABLE BASIS IN FACT AND LAW BUT THE LARGER PORTION DOES NOT, CON- FLICTS WITH DECISIONS OF OTHER CIRCUIT COURTS CONCLUSION TABLE OF APPENDIX Opinion of the United States Court of Appeals for the Seventh Circuit Decided July 23, December 16, 2005 Decision of the Departmen- tal Appeals Board Presiding Board Member Judith A. Ballard and Board Members Ce- cilia Sparks Ford and Donald F. Garrett, Decision No. 2005 March 31, 2006 Addendum to Decision No. 2005 of the Departmental Appeals Board Presiding Board Member Judith A. Ballard and Board Members Cecilia Sparks Ford and Donald F. Garrett June 17, 2004 Decision of the Departmental Appeals Board Presiding Board Member Ju- dith A. Ballard and Board Members Cecilia Sparks Ford and Donald F. Garrett, Decision No. 1926 5 U.S.C. §504 Page rN NB visirnccenandcecianec th badeceseeinieneroatouieves App. rs ks hiccatascn'd saa onacenctscrenataaenians App. er isin nly todtecanidenaenrcnrnconedians App. ar i a icsicnieai Neacidicsavactnnipvecipicinioes App. ee Se aiticcethin ks App. ee I isaac cs acd yccidcansuainpegshiedaenin ain App. vl TABLE OF AUTHORITIES Page CASES Air Transp. Ass’n of Can. v. Fed. Aviation Admin., 156 F.3d 1329 (D.C. Cir. 1998)........... 30, 31 Alphin v. Nat'l Transp. Safety Bd., 839 F.2d Fs, MOE UID caiesacacsauaceencninecaensevicieesuebiamesenais 30 American Wrecking Corp. v. Sec’y of Labor, 364 F.3d 321 (D.C. Cir. 2004)........ ibehiabiieenitiatien 12, 13, 14 Baldi Bros. Constructors v. U.S., 52 Fed. Cl. 78 I ica stihl aca accion tbe kk dine inca aeiediidtion 22 Clermont Nursing and Convalescent Ctr. v. CMS, DAB No. CR1087, 2003 WL 22326547 II EIUEEIITIIED vii ssnWousscgnosssoeausiveeecmnssueieicbunlesernees 24 Commissioner, I.N.S. v. Jean, 496 U.S. 154 INIT schichinticuesiiavisdbehanttateonsimuaneeunaareaiens 8, 9, 26, 27, 29 Community Hosp. of Long Beach v. CMS, DAB No. 1938 (08/18/04), 2004 WL 2102876 (HHS)......... 24 Contractor’s Sand and Gravel, Inc. v. Federal Mine Safety and Health Review Comm’n, 199 F.36 1996 (D.C. Civ. SO0D)....nccccccscoccccscsvesess 23, 27, 28 Delta Air Lines, Inc. v. August, 450 U.S. 346 8 RENE RETA Pap On ler Cone eee ee enor Ora LT 15, 16 Donovan v. Dialamerica Marketing, Inc., 757 Be BT CO GAT, FBG) on cecccceeivctinnsecevnepispenccestccen 21 Dougherty v. Lehman, 711 F.2d 555 (3rd Cir. LEAR ery See Oe On ERT Raine RE? neC ane NT 20 Enerhaul, Inc. v. N.L.R.B., 710 F.2d 748 (11th Ey | SEER eee eee orev TO Genesee aers ony 21 TABLE OF AUTHORITIES - Continued EuroPlast, Ltd. v. N.L.R.B., 33 F.3d 16 (7th Cir. FJ. Vollmer Co., Inc. v. Magaw, 102 F.3d 591 (D.C. Cir. 1996) Hanover Potato Prod., Inc. v. Shalala, 989 F.2d 123 (3rd Cir. 1993) Harmony Court v. CMS, DAB Dec. No. 1968 (2005), Medicare and Medicaid Guide (CCH) { 120803, 2005 WL 835751 Iowa Express Distribution, Inc. v. N.L.R.B., 739 F.2d 1305 (8th Cir. 1984) KMS Fusion, Inc. v. U.S., 39 Fed. Cl. 593 (1997) Marcus v. Shalala, 17 F.3d 1033 (7th Cir. 1994) Mobil Oil Exploration & Producing Southeast, Inc. v. United Distribution, 498 U.S. 211 (1991) Park Manor, Ltd. v. U.S. Dept. of Health and Human Services, 495 F.3d 433 (7th Cir. 2007) Park Manor Nursing Home v. Centers for Medicare & Medicaid Services, DAB No. 2005 (2005), 2005 WL 3753088 (HHS) Park Manor Nursing Home v. Centers for Medicare & Medicaid Services, DAB No. 1926 (2004), Med & Med GD (CCH) { 120676, 2004 WL 1764725 (HHS) Pennsylvania Dep't of Public Welfare v. Daven- port, 495 U.S. 552 (1990) vill TABLE 6: AUTHORITIES — Continued Pettyjohn v. Chater, 888 F.Supp. 1065 (D.C. Colo. 1995) Phil Smidt & Son, Inc. v. N.L.R.B., 810 F.2d 638 (7th Cir. 1987) Pierce v. Underwood, 487 U.S. 552 (1988).....8, 9, 20, 22 Prod. & Maint. Employees’ Local 504 v. Road- master Corp., 954 F.2d 1397 (7th Cir. 1992) 20 Roanoke River Basin Ass’n v. Hudson, 991 F.2d 132 (4th Cir. 1993) Sec’y of Labor v. Wolkow Braker Roofing Corp., 19 O.S.H. Cas. (BNA) 1267, 2000 O.S.H.D. (CCH) 132199, 2000 WL 1466087 Sec’y of Labor, Mine Safety and Health Admini- stration (MSHA) v. L & T Fabrication & Constr, Inc., 22 FMSHRC 509, 2000 O.S.H.D. (CCH) 732092, 2000 WL 687693 (FF EB Net ioc bisceausedcdedaaibadvebetaiedtmiaaianaaans 9,18 U.S. v. Hallmark Constr. Co., 200 F.3d 1076 (7th Cir. 2000) U.S. v. One 1997 Toyota Land Cruiser, 248 F.3d 899 (9th Cir. 2001) U.S. v. Jones, 125 F.3d 1418 (11th Cir. 1997) STATUTES AND REGULATIONS 5 U.S.C. §504 5 U.S.C. §504(a)(1) passim Dy UL, BRNO) wovinccctcisttiosanciccntecssecneceedeumaaae 2 iX TABLE OF AUTHORITIES — Continued Page I I on vccevenncsseensssevevesvsssesescenseeve passim BUB.C. SBOE INE) .......0..cccsccccvesesrersers 20, 23, 25, 26 ss wc onsen npestberronervectesesnsnnes 2 ec sccsseuunenssaneterssncecesscssseseseceecers 1 IE BID sco cesccsverscnvecvccsssvescnvceesoosesecoeens 8 Rs, EE PEA ERED) caso cevecsevevscesesesveeseveseessonss 13, 14 SC 2 Nees sss scuvwnneescvevennsiversvers 4 Neen Lac cccivensusbsstvenseverensesceeseseseeeseses 2 nn a. insncansssevesnsesousncesvesesrseeoress 3 Teens irdas cickendseuvevevereesvedvercerveses 2 es Ly svin esse cbsetinsevionvevecnusveececcenes 2 ass icssudaxtueregvesivedssseesaccovcesesesosrevens 2 Neen id as ccvwknneensuavenesecstevenescssees 2 Nee ee ds ccsuseveaeurseencvesceessaecousececeueveseee 2 I EIN osc. ccusenivnsencesesescecnsecescccscccsvecececeosees 11 EE cs cvvecsanucvrsceseversseccscovecescorcevecsvecesceessese 2 OTHER AUTHORITIES ccs can cuvexsnvocscevevsecsevescssscscecvosscssecesess 15 Pub. L. No. 104-121, 110 Stat 847... 8 1 OPINIONS BELOW The opinion of the United States Court of Ap- peals for the Seventh Circuit is reported at Park Manor, Ltd. v. U.S. Dept. of Health and Human Services, 495 F.3d 433 (7th Cir. 2007). (App. 1) The Seventh Circuit affirmed decisions of the Department of Health and Human Services Depart- mental Appeals Board. The primary decision is Park Manor Nursing Home v. Centers for Medicare & Medicaid Services, DAB No. 2005 (2005), 2005 WL 3753088 (HHS). (App. 9) The DAB’s supplemental decision dated March 31, 2006 is unreported. (App. 135) The decision on the merits of the case by the Departmental Appeals Board is Park Manor Nursing Home v. Centers for Medicare & Medicaid Services, DAB No. 1926 (2004), Med & Med GD (CCH) 4120676, 2004 WL 1764725 (HHS). (App. 157) ¢ STATEMENT OF JURISDICTION This Court’s jurisdiction is invoked under 28 U.S.C. §1254(1) to review the circuit court’s decision on a writ of certiorari. This case seeks review of the final decision of the Court of Appeals for the Seventh Circuit affirming a decision of the Department of Health and Human Services Departmental Appeals Board (DAB) on an application for attorneys fees under the Equal Access to Justice Act. The DAB had 2 jurisdiction over the fee claim under 5 U.S.C. §504(a)(2). The circuit court had jurisdiction to review the agency decisions under 5 U.S.C. §504(c)(2) and 42 U.S.C. §$1320a-7a(e). The circuit court’s decision was issued on July 23, 2007. ¢ STATUTES AND REGULATIONS INVOLVED The statute involved in this case is 5 U.S.C. §504, the Equal Access to Justice Act and, because it is lengthy, it is printed verbatim in the appendix at pages 177-182. The regulations involved are 45 C.F.R. §§13.1-13.6, which are also printed verbatim in the appendix at pages 183-191. + STATEMENT OF THE CASE 42 C.F.R. §488.308 requires that all nursing homes who provide services to Medicare eligible individuals be surveyed at least annually to deter- mine if they are being operated in compliance with federal requirements. The Department of Health and Human Services (HHS) contracts with a state agency in Wisconsin to conduct these surveys of Wisconsin nursing homes on HHS’s behalf. Centers for Medicare and Medicaid Services (CMS) administers this pro- gram within HHS. 3 _ Following a March 2001 annual survey, the state survey agency issued a 123-page statement of defi- ciency (SOD) to Park Manor, a Wisconsin nursing home. That SOD alleged 22 deficiencies, or failures to comply with federal requirements. Six deficiencies alleged actual harm to residents and one alleged a situation of immediate jeopardy (IJ), the most severe form of deficiency. A substandard care allegation imme- diately suspended Park Manor’s nurse aide training and competency evaluation program (NATCEP) for two years. CMS approved all of these recommended find- ings by the state survey agency and imposed the NATCEP suspension, a $12,400 civil money penalty (CMP) for the IJ, and a continuing CMP of $250 per day for the other alleged deficiencies. Following a June 2001 verification visit (VV), the state agency recommended, and CMS approved, six additional deficiencies, including one that was a “repeat” of a deficiency cited in the March survey. CMS then imposed the remedy of a suspension of reimbursement for new admissions, and it continued the accrual of the daily CMPs. Park Manor timely appealed all of these deficiencies and remedies. The IJ and substandard care determinations, and a number of the alleged deficiencies, were dismissed in informal dispute resolution (IDR) proceedings while the appeal process was pending.’ This dismissal ’ IDR proceedings represent an opportunity for a facility to informally dispute survey findings. 42 C.F.R. §488.331. 4 caused the $12,400 CMP for the IJ to be set aside. Following a subsequent VV which found Park Manor in substantial compliance, the amount of the daily CMP imposed by CMS for the remaining deficiencies was set at $250 per day for 124 days, or $31,000. The ALJ issued a prehearing order which re- quired each party to disclose the evidence it had to support its position(s). CMS elected to go forward to hearing with six deficiencies from the initial survey and one from the VV and it reduced its demand for a CMP to $150 per day. Two of those seven deficiencies were subsequently dismissed on Park Manor’s motion for summary disposition, including the only remain- ing VV deficiency. That ruling set aside the suspen- sion of reimbursement for new admissions. It also reduced the number of days on which a daily CMP could be imposed to the days between the date of the survey and the date of the June VV. After an evidentiary hearing on the remaining five allegations, the ALJ upheld that daily CMP. His decision was based on one deficiency, an alleged failure to consult with a doctor concerning a signifi- cant change of condition. The ALJ concluded that this one deficiency was sufficient to sustain the remaining remedy. Since the total amount of the CMP was greater than $5,000, the NATCEP suspension was also upheld. See 42 C.F.R. §483.151. The ALJ’s deci- sion did not address the remaining four deficiencies, which had been alleged at a lesser degree of serious- ness. 3) On review, the DAB dismissed the physician consultation deficiency. It concluded that CMS and the ALJ had misapplied the regulations and that there was undisputed evidence that the changes at issue had occurred before Park Manor’s previous report to the physician and the resident wanted comfort measures only. It also concluded that CMS had failed to make a prima facie case on the potential for more than minimal harm, one of the required elements necessary to show a lack of substantial compliance. (App. 158) All of the remaining enforce- ment remedies imposed by CMS were set aside. Jd. The DAB chose to dismiss all the remedies, rather than address or remand the remaining allega- tions to the ALJ for a determination. It did so, in part, because all were at a level of seriousness such that CMS would not have been required to impose any remedy if they were the only findings CMS had made in the first instance. (App. 174-176) It also found that CMS had not continued to pursue those deficiencies beyond the ALJ level. CMS’s motion for a rehearing on this issue was denied. Park Manor then applied for attorneys fees and costs under the Equal Access to Justice Act (EAJA), basing its application on both 5 U.S.C. §§504(a)(1) and (4). In responding to that motion, CMS did not present any evidence in support of either the facts or the legal theories for the 21 deficiencies which it had alleged and which were either dismissed in IDR or which it had elected not to pursue. It contended only that it was entitled to reasonably rely on the 6 allegations made in the SODs. The ALJ denied the fee applications in their entirety without addressing these 21 deficiencies. The DAB partially reversed the ALJ’s complete denial of fees but concluded that, with the exception of one VV cite and its attendant remedies (the VV cite dismissed on summary disposition), the position of CMS was substantially justified. (App. 11) In doing so, it adopted CMS’s arguments that its position was substantially justified if there were some deficiencies sufficient to support a remedy that were reasonably supported by the facts and law, regardless of whether the remainder were not. The DAB also held CMS was entitled to rely upon the allegations in the SODs themselves and no further evidence of reasonableness was necessary. In determining that CMS’s position was sub- stantially justified with respect to the physician notification deficiency which it had previously dis- missed, the DAB concluded that CMS was justified in relying on the allegations in the SOD, even though at the hearing it provided no evidence sup- porting many of these factual allegations. (App. 59- 63) (“CMS had a reasonable basis in fact for its initial determination, relying in part on these find- ings in the SOD. .. .”) (App. 59) The DAB concluded that Park Manor was not entitled to a fee award under §504(a)(4) because “CMS did not obtain any part of its initial demand,” and the provisions of §504(a)(4) were unavailable to 7 provide relief to prevailing parties. (App. 126) After directing Park Manor to allocate its fees between the claim found not to be substantially justified and the other claims, it awarded Park Manor a small portion of the fees which it had originally sought under §504(a)(1). (App. 156) On a petition for review, the Seventh Circuit Court of Appeals affirmed the decision of the DAB. It concluded that CMS had no obligation to demonstrate that its initial positions in approving the SODs and imposing the remedies had a reasonable basis in fact and law. It reasoned that requiring CMS to verify the facts and legal theories upon which the SODs were based prior to approving them and imposing remedies would undermine the efficiency of the survey proce- dures and “retard the correction of the deficiencies found by the state agency.” (App. 6) That court also concluded that allowing prevail- ing litigants to recover under the excessive demand theory of §504(a)(4) was contrary to the purpose of EAJA because it would undermine the substantial justification analysis embodied in §504(a)(1). (App. 7- 8) Embodied in that holding was the conclusion that, unless barred from applying, a prevailing party would automatically qualify for fees under §504(a)(4) be- cause the amount of the agency’s demand that it would have recovered would be zero. S 8 REASONS FOR GRANTING THE PETITION This Court has twice before had occasion to construe the EAJA in Pierce v. Underwood, 487 U.S. 552 (1988) and Commissioner, I.N.S. v. Jean, 496 U.S. 154 (1990). In both of those cases, the Court con- strued the EAJA provisions which are applicable to court proceedings, 28 U.S.C. §2412(d)(1)(A), rather than those governing administrative proceedings. This case would provide the Court with an opportu- nity to address those EAJA provisions which are incorporated in the Administrative Procedure Act (APA). It would also provide the Court with an oppor- tunity to construe the 1996 amendments, Pub. L. No. 104-121, 110 Stat 847, 862-863, which expanded the basis for recovery of fees to include, not only cases in which the government’s position on th: merits was not substantially justified, but also where the gov- ernment seeks a penalty that is unreasonable when compared to the final result. EAJA is designed to provide a climate of fairness in which federal agencies and officers will make their decisions. 5 U.S.C. §§504(aX1) and (4) are designed to insure that federal agencies who enforce federal requirements will base their decisions on a reason- able factual and legal basis and that they do not seek unreasonable penalties in code enforcement proceed- ings. Since government positions that are not rea- sonably based on fact or law, or which seek excessive penalties, are those most likely to be challenged, the ultimate result of a fully effective EAJA would there- fore be a reduction in the amount of litigation. 9 This Court should grant this petition for certio- rari in order to address and resolve four important questions involving the interpretation of EAJA that, unless resolved, are likely to recur in administrative proceedings in the future. This case squarely presents the question of whether an administrative litigant who prevails in an administrative enforcement pro- ceeding should be thereby barred from recovering its attorneys fees and costs under the excessive demand provisions, 5 U.S.C. §504(a)(4). The Seventh Circuit’s holding that the provisions of §504(a)(4) are unavail- able to a prevailing party also rests on its implied holding that eligibility for fees under §504(a)(4) is governed exclusively by a single quantitative analysis which compares the demand to the result. This implied holding conflicts with the two-part test developed in Sec’y of Labor, Mine Safety and Health Administration (MSHA) v. L & T Fabrication & Constr., Inc., 22 FMSHRC 509, 2000 0.S.H.D. (CCH) 732092, 2000 WL 687693 (F.M.S.H.R.C.). This case also squarely presents the question, not addressed in Pierce v. Underwood, supra, of whether an agency's duty to fairly evaluate whether its actions which lead to litigation are reasonable in law and fact can be abrogated when the agency’s mission includes the protection of public health or safety. Finally, though not addressed by the circuit court, this case presents the question left unanswered in Commis- sioner, I.N.S. v. Jean, supra, of whether a position that is substantially justified, in part, can serve as a basis for a fee award under 5 U.S.C. §504(a\1). 10 THE CIRCUIT COURT'S INTERPRETA- TION OF 5 U.S.C. §504(a)(4) WARRANTS REVIEW BY THIS COURT. The excessive demand provisions of EAJA were adopted as part of the 1996 amendments, and have never before been construed or addressed by this Court. The excessive demand provisions of EAJA included in the APA are contained in 5 U.S.C. §504(a)(4). They provide that, in a proceeding in which an agency seeks to enforce a statute or admin- istrative rule and the penalty it seeks to impose was unreasonable when compared to the result, the target of the proceeding can recover the attorneys fees asso- ciated with defending against the excessive penalty. This case presents two distinct issues concerning the interpretation of 5 U.S.C. §504(a)(4) that are worthy of this Court’s review. First, is a party who prevails in the enforcement proceeding foreclosed from relief under §504(a)(4) and limited to relief under §504(a)(1) [the substantial justification stan- dard], regardless of whether the penalties sought to be imposed would otherwise be considered excessive? Second, what is the proper test for the agencies and the courts to apply in determining whether the penal- ties sought by the agency were, in fact, excessive? 11 A. Whether Prevailing Litigants Should Be Barred From Recovering Under 5 U.S.C. §504(a)(4) Is An Important Issue Of Federal Law That Should Be Set- tled By This Court. The Seventh Circuit held that the reach of 5 U.S.C. §504(a)(4) is confined “to the case in which the government prevails but the relief it obtains is mea- ger in comparison to the relief it had sought.” (App. 7) It based this conclusion upon a belief that allowing prevailing litigants to get a second bite at the same apple would undercut the “substantially justified” standard set out in 5 U.S.C. §504(a)\(1). Id. This holding was grounded on policy considerations, rather than upon the language of the statute itself. If al- lowed to stand without review, such a holding could result in a substantial narrowing of the scope of §504(a)(4). The primary guide in construing a statute or rule is normally its plain language. “[S]tatutory interpre- tation begins with the language of the statute itself.” Pennsylvania Dep't of Public Welfare v. Davenport, 495 U.S. 552, 557-58 (1990) and Mobil Oil Explora- tion & Producing Southeast, Inc. v. United Distribu- tion, 498 U.S. 211, 223 (1991). Neither 5 U.S.C. $504(a)(4) nor 45 C.F.R. §13.5(b), the rule which applies it to DAB cases, contain any language which would limit their reach to non-prevailing parties. Section 504(a)(4) states that: 12 If, in an adversary adjudication arising from an agency action to enforce a party’s compli- ance with a statutory or regulatory require- ment, the demand by the agency is substantially in excess of the decision of the adjudicative officer and is unreasonable when compared with such decision, under the facts and circumstances of the case, the adjudicative officer shall award to the party the fees and other expenses related to de- fending against the excessive demand. ... (Emphasis added.) In addition, §§504(a)(1) and (a)(4) appear to direct themselves to different potential administra- tive abuses. Section (a)(1) addresses agency positions that are not substantially justified. Section (a4) addresses demands for penalties in code enforcement actions that are excessive. These two scenarios are not necessarily mutually exclusive. Agencies can, and often do, litigate cases in which they take positions that are both not substantially justified and seek penalties that are unreasonable and excessive. Ab- sent the Seventh Circuit’s policy concerns, subsec- tions (a)(1) and (a)(4), on their face, would appear to allow a successful litigant to pursue either or both theories in an appropriate case. Section 504(a)(4) does not have the significant history of interpretation by the courts that §504(a)(1) enjoys. The only other circuit court decision dealing with the excessive demand provisions of the EAJA, American Wrecking Corp. v. Sec’y of Labor, 364 F.3d 13 321 (D.C. Cir. 2004), interpreted the language of 28 U.S.C. §2412(d)(1)(D), not 5 U.S.C. §504(a)(4). Though the court below relied on American Wrecking Corp. and the two decisions are not incon- sistent, an analysis of the existing legal authority on which the American Wrecking Corp. court relied shows that its analysis of the issue was not extensive. By the point in its analysis where the American Wrecking Corp. court was deciding whether to apply §2412(d)(1D), it had already approved an award of fees based on the lack of substantial justification for the government’s position. Jd. at 327-328. The circuit court then went on to conclude that the excessive demand provision did not permit the recovery of a larger award than the litigant was entitled to under the substantial justification standard. /d. This statement in American Wrecking Corp., which appears in the decision almost as an after- thought, is simply stated in terms of the court’s inability to “imagine Congress to have intended” such a result, id. at 328, followed by citation to U.S. v. One 1997 Toyota Land Cruiser, 248 F.3d 899, 904 (9th Cir. 2001) and Sec’y of Labor v. Wolkow Braker Roofing Corp., 19 O.S.H. Cas. (BNA) 1267, 2000 O.S.H.D. (CCH) 132199, 2000 WL 1466087. Neither of these _ two decisions cited as authority in American Wrecking Corp., however, adopted the proposition for which the American Wrecking Corp. court cited them. In Toyota Land Cruiser, the issue was whether fees under 28 U.S.C. §2412(d)\1)(D) could be awarded 14 where the case had settled prior to judgment. The issue of whether a party could recover fees based on an excessive demand theory when the government did not obtain any relief was not in the case. In concluding that the claimant was entitled to fees, the Ninth Circuit Court merely acknowledged that “(d1)(D) awards fees to parties against whom the United States obtains a judgment, with no exception for substantial justification.” 248 F.3d at 904. The court did not conclude, because it was not called upon to conclude, that fees were not obtainable on an excessive demand theory where the government had been totally unsuccessful on the merits. Wolkow can be fairly construed to hold that being a prevailing party is not a bar to recovery under 5 U.S.C. §504(a)(4). After a review of the legislative history, Wolkow concluded that “the test for attorney fees under 504(a)(4) requires a showing that the demand by the Agency taken as a whole was unrea- sonable in relation to the final outcome taken as a whole without regard as to which litigant was the prevailing party.” Sec’y of Labor v. Wolkow Braker Roofing Corp., supra, at 5. (Emphasis in original and added.) The precedent from which the American Wreck- ing Corp. holding is derived is therefore less than clear and compelling. If anything, these cases demon- strate that the lower courts and agencies are strug- gling to come to grips with a relatively new addition to a statute which has yet to be definitively construed 15 by this Court. A decision on this issue by this Court would therefore provide needed guidance to the lower courts and administrative agencies forced to address attorneys fee requests under the 1996 amendments. Accepting review would also allow this Court to fully explore the policy considerations upon which the Seventh Circuit’s decision rests. Those considera- tions, while stated, were neither fully analyzed nor based on fully accurate assumptions. The circuit court’s “second bite at the same apple” analogy (App. 7), for example, is not a totally accurate portrayal of the relief available to a prevailing litigant under §504(a)(4). To the extent that §504(aX4) may provide a prevailing party with a second bite at all, it would usually be a bite of a smaller, rather than the same, apple. While §504(a)(1) provides for the recovery of all reasonable fees incurred, §(a)(4) only provides for a recovery of fees “related to defending against the excessive demand.” The circuit court also reasoned that the purpose of §504(a\(4) is “parallel ... to Rule [FRCP] 68” because it “penalizes the greedy winning plaintiff but is inapplicable if the defendant wins.” (App. 7-8) In support of this analogy, the court cited this Court’s decision in Delta Air Lines, Inc. v. August, 450 U.S. 346 (1981). In effect, the circuit court extended Delta Air Lines and the rationale underlying Rule 68 into an administrative proceeding in which the fee request is not based upon a refused settlement offer. 16 The holding in Delta Air Lines was based upon this Court’s reading of the clear language of Rule 68, which limited its scope to a situation in which the defendant had lost on the merits. (“[T]he words ‘judgment ... obtained by the offeree’ — rather than words like ‘any judgment’... confines its effect to” a case in which the offeror lost on the merits. 450 U.S. at 351. Section 504(a)(4), in contrast, uses the more general term “decision,” which does not connote either a win or a loss for the moving party. Whether this Court’s holding in Delta Air Lines, which was based on the clear language of a procedural rule designed to encourage settlement, should be extended to govern the construction of a statute which is de- signed to encourage parties to vindicate their rights, and which contains language much less suggestive of a similar result, is an issue that should best be re- solved by this Court. Accepting review would also allow this Court to address a policy concern that the Seventh Circuit did not address in its opinion. Should an agency be liable under §504(a)(4), where it takes a legally and factu- ally correct position, but makes an excessive demand for a remedy, but not be so liable where it made that same excessive demand, and based it on a position that was legally and/or factually incorrect (but not so incorrect as to not be substantially justified)? A “yes” answer to this question is, in fact, one of the practical effects of the Seventh Circuit’s construction of 5 U.S.C. §504(a)4). 17 Given the absence of any statutory language which appears to limit the scope of §504(a)(4) in the manner suggested by the Seventh Circuit, such a substantial narrowing of a remedial statute for policy reasons should only be done after careful review by this Court, if at all. This Court should therefore grant the petition for certiorari to determine if a potential avenue of relief under §(a)(4) does exist for prevailing parties. B. The Decision Of The Seventh Circuit Is Based On A Standard For Determining When A Demand Is Excessive That Does Not Represent The Only Reasonable Construction Of 5 U.S.C. §504(a)(4). In reaching its conclusion that allowing fee recoveries under §504(a)(4) would undercut the “substantially justified” standard of §(a)(1), the Seventh Circuit also necessarily concluded that, absent such a holding, losing on the merits would automatically trigger a finding that any demand for relief was substantially in excess of the decision and unreasonable, because the agency would have recov- ered no relief at all. (App. 7-8) The Seventh Circuit therefore, in effect, held that fee awards under §(a)(4) are governed by a single quantitative test in which the final result is mathematically compared to the demand. While not in conflict with any other circuit court decisions on this point, this holding is in apparent 18 conflict with another published, and plausible, inter- pretation of §(a)(4). Sec’y of Labor, Mine Safety and Health Administration (MSHA) v. L & T Fabrication & Constr., Inc., supra. The two-part test adopted by MSHRC is also traceable to the language of §504(a)(4), which indicates that fees are recoverable when the demand was “unreasonable when compared with such decision ... under the facts and circum- stances of the case... .” 22 FMSHRC at 513. (Empha- sis in original.) In L & T Fabrication & Constr., Inc., the Federal Mine Safety and Health Review Commission, after a careful analysis of the statutory language and legisla- tive history of §504(a)(4), concluded that the 1996 amendments to EAJA “set forth a two-part test for determining whether fees should be awarded.” Jd. at 514. The first part of the test is a purely quantitative analysis — a mathematical comparison of the results with the demand. The second part of the test, how- ever, is qualitative. It consists of an individual factual analysis to determine if the administrative decision- maker acted reasonably under the circumstances in setting the penalty to be sought. While the L & T two-part test might make recov- ery more difficult for some litigants, it also directly undercuts the entire premise upon which the Seventh Circuit concluded that it was necessary to limit the availability of §504(a)(4) to non-prevailing litigants. For, if a win on the merits does not automatically translate to a finding that any penalty that was sought was excessive, the substantial justification 19 analysis under §504(a)(1) would not be undermined by allowing prevailing parties to seek relief under it, as the Seventh Circuit feared. The Seventh Circuit, however, undertook no analysis to determine what the actual standard of recovery under §504(a\4) is. It simply assumed that any litigant who won on the merits would automati- cally qualify for a fee award under §(a)(4) unless they were disqualified at the outset.’ This Court should grant the petition for certiorari because the circuit court’s decision and reasoning below could lead to the adoption by the courts of the single quantitative test under 5 U.S.C. §504(a)(4), @n preference to the two-part test, without a thorough appellate court analysis of the two alternatives. * The circuit court decision suggests that Park Manor had argued for the one-part test. In fact, Park Manor had argued in its reply brief that while §(aX4) does not provide for a fee award ‘based solely on the absolute disparity between the initial demand and the outcome ... ,’ as DAB concluded in finding it inapplicable ... the disparity between the final result and the initial demand is one major factor the decision maker must consider in determining whether a fee award is appropriate. 20 II. THE HOLDING THAT AN AGENCY WHICH ENFORCES PUBLIC HEALTH OR SAFETY REQUIREMENTS CAN BE RELIEVED OF ITS OBLIGATION TO PROVE THAT ITS PRE-LITIGATION POSITION WAS SUB- STANTIALLY JUSTIFIED WARRANTS RE- VIEW. In Pierce v. Underwood, 487 U.S. 552 (1988), this Court determined that the standard of “substantially justified” as set forth in EAJA requires that the position of the agency must be “justified to a degree that would satisfy a reasonable person.” 487 U.S. at 553. The Court likened this standard to the “reason- able basis both in law and fact” standard which had been adopted by the lower court in that case. Id. Substantially justified means more than just not frivolous. Pierce v. Underwood, supra, Prod. & Maint. Employees’ Local 504 v. Roadmaster Corp., 954 F.2d 1397, 1404 (7th Cir. 1992); and Dougherty v. Lehman, 711 F.2d 555, 563 (3rd Cir. 1983). Under the language of EAJA, the agency’s “posi- tion” encompasses both its pre-litigation actions which prompted the litigation and the positions it takes after the litigation has commenced. (“‘[Plosition of the agency’ means, in addition to the position taken by the agency in the adversary adjudication, the action or failure to act by the agency upon which the adversary adjudication is based;....”) 5 U.S.C. §504(b)(1)(E). Both before and since Pierce v. Underwood was decided, courts have held that, to avoid a fee award 21 under 5 U.S.C. §504(a)(1), both the agency’s litigation positions and its actions leading up to the litigation must be substantially justified. U.S. v. Hallmark Constr. Co., 200 F.3d 1076, 1081 (7th Cir. 2000); KMS Fusion, Inc. v. U.S., 39 Fed. Cl. 593, 597 (1997); Fe. Vollmer Co., Inc. v. Magaw, 102 F.3d 591, 595-596 (D.C. Cir. 1996); Marcus v. Shalala, 17 F.3d 1033, 1036 (7th Cir. 1994); and, lowa Express Distribution, Inc. v. N.L.R.B., 739 F.2d 1305, 1309 (8th Cir. 1984). A prevailing party may recover its fees and expenses under EAJA “where the government’s prelitigation conduct was not substantially justified even though its litigating position may have been substantially justified and vice versa.” Marcus, 17 F.3d at 1036 and Hallmark, 200 F.3d at 1080-81. Once a prevailing party moves for fees under EAJA, “the government bears the burden of proving that its position was substantially justified.” Marcus v. Shalala, supra; KMS Fusion, Inc. v. U.S., supra; Roanoke River Basin Ass'n v. Hudson, 991 F.2d 132, 138-139 (4th Cir. 1993); Donovan v. Dialamerica Marketing, Inc., 757 F.2d 1376, 1389 (3rd Cir. 1985); Enerhaul, Inc. v. N.L.R.B., 710 F.2d 748, 750 (11th Cir. 1983); and, EuroPlast, Lid. v. N.L.R.B., 33 F.3d 16, 17 (7th Cir. 1994). (“‘[Tlo satisfy its burden the government must demonstrate (1) a reasonable basis in truth for the facts alleged; (2) a reasonable basis in law for the theory propounded; and (3) a reasonable connection between the facts alleged and the legal theory advanced.’”) Phil Smidt & Son, Inc. v. N.L.R.B., 810 F.2d 638, 642 (7th Cir. 1987). 22 Because the government has the burden of proof on substantial justification, CMS’s failure to provide any factual or legal justification for the bulk of the deficiencies alleged and remedies imposed as part of its pre-litigation position would have been conclusive in the absence of the construction of the EAJA by the Seventh Circuit. Pettyjohn v. Chater, 888 F. Supp. 1065, 1067 (D.C. Colo. 1995) and Baldi Bros. Con- structors v. U.S., 52 Fed. Cl. 78, 82 (2002). (“Defen- dant remains silent on the issue of its prelitigation conduct.... *** Defendant cannot prove that the Government’s conduct was substantially justified when it does not address its conduct at all.”) In this case, the Seventh Circuit concluded that CMS was relieved of its obligation to establish the reasonableness of the factual allegations and legal theories embodied in its pre-litigation position be- cause requiring it to investigate prior to acting would undermine the efficiency of its enforcement proce- dures and “retard the correction of the deficiencies found by the state agency.” (App. 6) This holding was made without citation to any appellate court case law and apparently based upon the court’s view that CMS’s actions were analogous to “the interim reme- dies available in ordinary civil litigation such as temporary restraining orders.” /d. This conclusion is in apparent tension with both the language and policies embodied in 5 U.S.C. §504 and with this Court’s holding in Pierce v. Underwood, supra. To the extent it relies on CMS’s mission of protecting public health or safety, it is also in apparent 23 conflict with an earlier decision of the circuit court for the District of Columbia in Contractor’s Sand and Gravel, Inc. v. Federal Mine Safety and Health Re- view Comm’n, 199 F.3d 1335, 1339 (D.C. Cir. 2000). This Court should therefore grant certiorari in this case to resolve these conflicts and issues. A. The Creation Of A Separate Standard Of Reasonableness For Agencies Which Regulate In The Areas Of Public Health Or Safety Should Only Be Done After A Thorough Review By This Court. The agency’s pre-litigation position is its “action or failure to act ... upon which the adversary adjudi- cation is based.” 5 U.S.C. §504(b)(1)E). CMS’s pre- litigation position in this case consisted of the 28 alleged deficiencies it approved. It also consisted of all the remedies which is imposed, including the $12,400.00 CMP for the IJ, the daily CMP for the other cites, the NATCEP suspension, and the suspen- sion of reimbursement for new admissions. These were the governmental actions which prompted Park Manor’s appeal and which therefore “gave rise to the litigation” within the meaning of 5 U.S.C. §504(b)(1)E) and Marcus, 17 F.3d at 1036. Twenty-one of those deficiencies supporting the remedies were either rescinded in IDR or abandoned by CMS after Park Manor undertook the costs of investigation and filing an appeal. After Park Manor prevailed in all aspects of the litigation and moved for 24 fees under EAJA, CMS chose not to introduce any evidence to support any of these allegations during the EAJA proceedings. In its answer to the fee appli- cation, CMS contended only that it “reasonably relied upon the findings and recommendations of the State survey agency... .” The state survey agency’s actions, however, are subject to approval by CMS. They may also, in fact, be the actions of CMS. The DAB has held in other con- texts that a state survey agency is the “agent” of CMS and its acts are attributable to it. Clermont Nursing and Convalescent Ctr. v. CMS, DAB No. CR1087, 2003 WL 22326547 (HHS), at n. 10 (09/25/03) (“It]he State agency acted as an agent of CMS in this survey process and references to CMS may be read to include its agent”) and Community Hosp. of Long Beach v. CMS, DAB No. 1938 (08/18/04), 2004 WL 2102876 (HHS), pp. 1-2 (“CMS and its agents (such as state survey agencies)... ”). The circuit court concluded that CMS was enti- tled to rely on the allegations in the SOD’ and had no * The Seventh Circuit’s comment that the SOD itself establishes a prima facie case is based upon its reading of Harmony Court v. CMS, DAB Dec. No. 1968 (2005), Medicare and Medicaid Guide (CCH) ¥ 120803, 2005 WL 835751. Har- mony Court, however, did not hold that the allegations in an SOD are always sufficient to establish a prima facie case. It held only that they will do so where the assertions in the SOD have not been disputed by the provider. (“‘ ... CMS may make a prima facie showing of noncompliance based on that document if the factual findings and allegations it contains are specific, (Continued on following page) 25 duty to investigate or test the legal viability of any of these allegations. (App. 5-6) It likened CMS’s approv- ing these deficiencies and imposing the remedies without any evaluation of the facts and law upon which they may have been based to interim remedies which are routinely available in court proceedings. (App. 6) The exact meaning intended by this analogy is not clear, since the issuance of a temporary re- straining order presupposes the evaluation of the facts and law, based on defined legal standards, by a neutral magistrate. This holding, that an agency is excused from insuring that its positions are reasonably based upon the facts and law when it determines that conducting such an analysis prior to acting might cause the agency's enforcement process to lose “economy” or “retard the correction of the [alleged] deficiencies,” is in substantial tension with Congress’ directive in 5 U.S.C. §§504(a)(1) and (b)(1)E) that an agency’s actions must have a reasonable basis in fact and law. This holding by the Seventh Circuit also, by necessity, would limit any review of the government’s “position” to a review of the position it takes after the litigation is underway. Such a limitation would not comport with other court decisions construing the undisputed, and not inherently unreliable.’”) Harmony Court, DAB Dec. No. 1968 at Westlaw 11. (Emphasis added.) “ How forcing providers to expend resources to correct deficiencies that do not exist furthers CMS’s goal of protecting resident health and welfare is not explained. 26 requirements of EAJA. See, Jowa Express Distribu- tion, Inc. v. N.L.R.B., supra, at 1309. (“The litigation position approach does not address what we must conclude is at least a significant purpose of the EAJA ~— to encourage government regulatory agencies only to take actions that have a reasonable basis in law and in fact.”) In deciding that an agency was excused from determining substantial justification prior to acting in this type of case, the Seventh Circuit reasoned that “lijmposing interim sanctions in advance of full investigation is a sensible procedure with familiar analogs in the interim remedies available in ordinary civil litigation, such as temporary restraining orders.” (App. 6)’ Not only has this analogy never before been used in evaluating whether the government’s position was substantially justified, but if adopted by the lower courts, it has the potential to create an excep- tion to the definition of an agency’s position in §504(b)(1)(E) which would swallow the rule. The EAJA is a federal statute designed, at least in significant part, to reduce or eliminate unreason- able government action that leads to litigation. See Commissioner I.N.S. v. Jean, supra. “The Govern- ment’s general interest in protecting the federal fisc * The court did not explain its characterization of the remedies sought by CMS as “interim remedies.” Absent a successful appeal by Park Manor, all of the remedies, including the CMPs, would have been enforced. 27 is subordinate to the specific statutory goals of en- couraging private parties to vindicate their rights and ‘curbing excessive regulation and the unreasonable exercise of Government authority.’” 496 U.S. at 164- 165. Since governmental actions that do not have a reasonable basis in fact or law are those most likely to be challenged, EAJA also serves to reduce the volume of litigation. A construction of EAJA which significantly limits its reach, and which is not based upon the language of the statute, should therefore not be adopted without a thorough analysis by this Court. B. The Circuit Court’s Holding That CMS Is Not Required To Investigate Prior To Imposing Remedies Is In Apparent Con- flict With Principles Established By A Decision Of Another Circuit Court. The circuit court determined that requiring CMS to verify the accuracy of the allegations before impos- ing remedies would “retard the correction of the deficiencies....” This method of analysis, which seeks to temper the requirements of the EAJA with the perceived mission of the agency, was previously rejected by the circuit court for the District of Colum- bia in Contractor’s Sand and Gravel, Inc., 199 F.3d 1335, 1339 (D.C. Cir. 2000). 6 . . ° pala . How imposing remedies for, and requiring nursing homes to divert resources to correct, non-existent deficiencies protects resident health or safety is not explained. 28 In Contractor’s Sand and Gravel, Inc., the agency initiated an enforcement proceeding against a mine operator for failing to properly ground equipment. Without offering any evidence that the equipment was not, in fact, grounded, the agency argued that the frame grounding employed by the company was inherently unsafe. After that position was rejected in the litigation, the agency defended the EAJA claim, not on the reasonableness of its factual and legal position, but on its need to act to protect public safety. The court rejected this argument. (“The Commission’s determination that the Secretary’s position had a reasonable basis in law is based entirely on an analy- sis which examines the purpose of the regulations in terms of the overriding objective of safety in the mine... .”) 199 F.3d at 1340. While CMS undoubtedly does have, as its mis- sion, the goal of promptly remedying deficient nurs- ing home practices, the same could be said about the numerous other federal agencies which serve to protect public health and safety. The implications of the holding by the Seventh Circuit therefore go well beyond the nursing home enforcement process. It is at least reasonable to conclude that Con- gress was aware of the tension between agencies’ need to sometimes act promptly, and a requirement that they verify the legal and factual reasonableness of its position prior to acting, when it adopted the EAJA. In opting for the requirement of substantial justification, Congress appears to have decided to balance these two competing policies in favor of the 29 goals embodied in the EAJA. This Court should therefore accept this case to resolve this conflict between the two circuit court decisions. Ill. THE DAB’S CONCLUSION, THAT AN AGENCY’S POSITION IS SUBSTANTIALLY JUSTIFIED IF SOME ALLEGATIONS HAVE A REASONABLE BASIS IN FACT AND LAW BUT THE LARGER PORTION DOES NOT, CONFLICTS WITH DECISIONS OF OTHER CIRCUIT COURTS. This Court in Commissioner, I.N.S. v. Jean, 496 U.S. 154 (1990), held that in determining substantial justification, the position of the government is to be viewed as an inclusive whole. 496 U.S. at 158-159. The DAB, in applying that principle, held that CMS could pursue numerous deficiencies and remedies so long as it could later demonstrate that one or more deficiencies, that could arguably support the reme- dies imposed, had a reasonable basis. “CMS’s pre- adjudication actions can be considered reasonable for EAJA purposes if there are some legally sufficient grounds for the actions regardless of whether other allegations were made that might have affected how CMS exercised its discretion.” (Emphasis in original.) (App. 47) This holding was appealed to the circuit court, but, due to that court’s holding that CMS was entitled to rely on the allegations in the SOD, it was not addressed. This holding by the DAB, however, is contrary to other established circuit court precedent 30 construing the EAJA. See United States v. Jones, 125 F.3d 1418, 1428-1429 (11th Cir. 1997); Hanover Potato Prod., Inc. v. Shalala, 989 F.2d 123, 131 (3rd Cir. 1993); and Alphin v. Nat'l Transp. Safety Bd., 839 F.2d 817, 822 (D.C. Cir. 1988). In Alphin, the FAA initiated a proceeding to suspend an inspector’s certificate. It alleged a num- ber of code violations and, as in the present proceed- ings, the private party had the burden of proof to show compliance. When the FAA’s allegations were dismissed, the inspector moved for fees. The NTSB concluded that one of the charges, the failure to detect a cracked crankshaft, was substantially justi- fied and would have supported the suspension sought and it denied fees. 839 F.2d at 821-822. In reversing that denial, the court reasoned: Although we agree with the Board that the cracked crankshaft alone validated the FAA’s decision to proceed against Alphin, we can not condone the shotgun approach used by the FAA. Simply because the cracked crank- shaft, if proved, could have supported the suspension, the FAA is not entitled to tack on other meritless allegations. Each allegation had to be disproved by Alphin.... Alphin at 822. The reasoning in Alphin was reaffirmed in Air Transp. Ass’n of Can. v. Fed. Aviation Admin., 156 F.3d 1329 (D.C. Cir. 1998). In Air Transp. Ass’n all but one of the government’s allegations had been 31 found to be substantially justified. The court never- theless found a fee award appropriate under the EAJA: Virtually any government action is either grouped with other actions or is a component of some greater action. *** If a litigant who has successfully challenged a govern- ment action as substantially unjustified and achieved a complete victory in terms of the relief prayed cannot recover EAJA fees be- cause of this well-nigh universal grouping, then Congress’ enactment of the EAJA be- comes a virtual nullity. Id. at 1332. Since the DAB’s decision has been published, it serves as a basis for deciding fee applications within HHS, and may influence the analysis of such cases in other settings. This Court should therefore grant the petition for certiorari to resolve this conflict and determine the standards which should apply when some of the government’s position is substantially justified, but an equal or larger portion is not. 6 32 CONCLUSION For all of the above reasons, petitioner respect- fully requests that the Supreme Court grant this petition for certiorari to review the decision of the Seventh Circuit Court of Appeals. Executed on October 19, 2007. Respectfully submitted, ROBERT M. HESSLINK, JR. HESSLINK Law OFFICES, S.C. State Bar No. 1013876 Counsel of Record for Petitioner P.O. Box 930005 Verona, WI 53593-0005 (608) 845-3775 App. 1 495 F.3d 433 United States Court of Appeals, Seventh Circuit. PARK MANOR, LTD., Petitioner, v. UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Respondent. No. 06-3521. Argued May 4, 2007. Decided July 23, 2007. Robert M. Hesslink, Jr. (argued), Verona, WI, for Petitioner. Michael O. Leavitt, Department of Health and Human Services, Washington, DC, Donna Morris Weinstein, Barbara F. Altman (argued), Department of Health and Human Services, Office of the General Counsel, Chicago, IL, Richard D. Humphrey, Office of U.S. Attorney, Madison, WI, for Respondent. Before POSNER, MANION, and KANNE, Circuit Judges. POSNER, Circuit Judge. The petitioner, Park Manor, a nursing home, asks us to reverse the denial by HHS’s Departmental Appeals Board of an award of attorneys’ fees under two provisions of the Equal Access to Justice Act, 5 U.S.C. §§ 504(a1) and (4). We have jurisdiction because, had Park Manor lost before the Board and sought judicial review, we would have had jurisdic- tion of that review proceeding. 42 U.S.C. § 1320a- Tale). App. 2 The first subsection of section 504(a) provides that “an agency that conducts an adversary adjudica- tion shall award, to a prevailing party other than the United States,” the party’s reasonable attorney’s fees unless the government’s position was “substantially justified.” An agency within the Department of Health and Human Services called CMS (Centers for Medicare & Medicaid Services) is responsible for making sure that nursing homes that receive reim- bursement under the Medicare program comply with the various rules that HHS has issued for the protec- tion of the residents of nursing homes. Fairfax Nurs- ing Home, Inc. v. HHS, 300 F.3d 835, 836 (7th Cir.2002); Mimiya Hospital, Inc. v. HHS, 331 F.3d 178, 179 (1st Cir.2003). To this end CMS conducts annual “surveys” (inspections of nursing homes). Only it doesn’t conduct the inspections itself; it has delegated the task to state health agencies that employ nurses, nutritionists, and other health profes- sionals to inspect nursing homes for violations of applicable rules. Jd. at 179. If the state agency re- ports to CMS that it has found violations, CMS can forthwith impose sanctions, such as civil penalties and denial to the nursing home of reimbursement for the expenses of new residents. 42 U.S.C § 1395i- 3(h)(2). The nursing home can challenge the sanc- tions, as Park Manor did here, and the ruling of the first-level decider, an administrative law judge in HHS, is reviewable by the Departmental Appeals Board and then by the court of appeals. App. 3 Inspections of Park Manor conducted by the Wisconsin health agency in 2001 yielded a 123-page report to CMS. The agency had found 28 violations. CMS responded by imposing temporary sanctions but later suspended them because Park Manor was back in compliance. By the time the case came before the administrative law judge for a determination of the validity of the charges and the possible imposition of permanent sanctions, CMS had dropped all but seven of the charges. The administrative law judge dis- missed two more on summary judgment. He then decided that if he sustained just one of the five re- maining charges, this would support the sanctions that CMS was seeking and he wouldn’t have to con- sider the other four charges. So he picked one, sus- tained it, and disregarded the rest. The Departmental Appeals Board reversed the ruling sustaining the one charge, but declined to remand the case for the ad- ministrative law judge to rule on the other four charges because CMS had not made an issue before the Board of the administrative law judge’s declining to consider them. That would have ended the proceeding had not Park Manor sought reimbursement under the Equal Access to Justice Act of $289,000 in attorneys’ fees. The administrative law judge denied the claim in its entirety, finding that all the charges brought by CMS, including those that CMS had dropped and those he had dismissed on summary judgment, had been substantially justified. The Departmental Appeals Board affirmed except with respect to one of the two App. 4 charges that had been dismissed on summary judg- ment, and so awarded Park Manor a portion of the fees it sought, but a tiny portion — less than $7,000. Park Manor Nursing Home v. Centers for Medicare & Medicaid Services, DAB No. A-05-37, 2005 WL 3753088 (DAB Dec. 16, 2005). The Board ruled that it did not have to review the merits of the 21 charges that CMS had dropped before the hearing conducted by the administrative law judge. It ruled that way because it rejected Park Manor’s contention that “CMS may not reasonably rely on state survey findings in making its remedy decisions but must investigate — or look behind - those findings to verify their correctness before deciding to impose remedies.” The Board said that “this premise is inconsistent with the enforcement process. ... Reliance by CMS on state survey findings is precisely what this process permits and encour- ages. Requiring CMS to investigate every facility before imposing remedies would frustrate the goals of protecting residents and encouraging facilities to correct quickly any deficiencies that jeopardize resi- dent health and safety.” Jd. The Board found that all but one of the charges that CMS had ultimately pursued were substantially justified by the information contained in the detailed report of Wisconsin’s health agency. That finding is supported by substantial evidence and thus binds us. But that leaves the other 21 charges, the ones CMS dropped before the hearing. If any of those charges were not substantially justified, Park Manor App. 5 is entitled to be reimbursed for the portion of its attorney’s fees that is reasonably allocable to them. EuroPlast, Ltd. v. NLRB, 33 F.3d 16, 16-17 (7th Cir.1994); American Wrecking Corp. v. Secretary of Labor, 364 F.3d 321, 325-26 (D.C.Cir.2004) (per curiam). They were dropped early in the process initiated by the survey, but they gave rise to interim sanctions, and Park Manor incurred attorney’s fees in getting the sanctions lifted and argues that CMS should not have imposed the interim sanctions with- out independently determining whether the report of the state agency — the source of the findings on which the sanctions were based — was accurate. HHS must show that CMS was substantially justified in taking the steps it took that led up to the formal proceeding before the administrative law judge, as well as in the steps it took in that proceed- ing. 5 U.S.C. § 504(b)1)E); United States v. Hall- mark Construction Co., 200 F.3d 1076, 1080-81 (7th Cir.2000); Roanoke River Basin Ass’n v. Hudson, 991 F.2d 132, 138-39 (4th Cir.1993); Natural Resources Defense Council, Inc. v. EPA, 703 F.2d 700, 706-07 (3d Cir.1983). But CMS has delegated on-site inspection of nursing homes to responsible state agencies, and the delegation is not only lawful, 42 U.S.C. § 1395aa(a), but sensible. The states impose their own rules on nursing homes, and it is efficient to have the same agency investigate compliance with both sets of rules rather than to have two inspections of the same nursing home by two agencies. The economy achieved by delegation would be lost if App. 6 before acting on the results of the state agency’s report the federal government had to duplicate the agency’s investigation on pain of having to reimburse the nursing home’s attorney’s fees should the state report prove to contain critical errors. That would also retard the correction of the deficiencies found by the state agency, here quickly achieved when CMS imposed interim sanctions. Park Manor argues that the state agency’s re- ports are one-sided, nonadversary, and therefore unreliable. It might as well argue that the govern- ment cannot put a person to the expense of defending against a criminal charge on the basis of a grand jury’s indictment, as proceedings before a grand jury are one-sided too; an indictment establishes probable cause to believe the defendant guilty of crime, and no more is required to justify instituting a criminal proceeding. The state agency’s report of violations establishes probable cause for CMS to impose interim sanctions and seek permanent ones, and no more is required to establish substantial justification under section 504(a)(1). Park Manor Nursing Home uv. Centers for Medicare & Medicaid Services, supra; Harmony Court v. Centers for Medicare & Medicaid Services, DAB-No. 1968, 2005 WL 835751 (DAB Mar. 28, 2005). Imposing interim sanctions in advance of full investigation is a sensible procedure with famil- iar analogs in the interim remedies available in ordinary civil litigation, such as temporary restrain- ing orders. App. 7 Park Manor has another arrow in its quiver. Section 504(a)(4) provides that if “the demand [made of a party] by the agency is substantially in excess of the decision of the adjudicative officer and is unrea- sonable when compared with such decision, under the facts and circumstances of the case,” the party is entitled to the attorneys’ fees that it reasonably incurred in resisting the demand. Park Manor argues that since HHS awarded the government no relief at all, CMS’s demand for sanctions must have been “substantially in excess of the decision” and “unrea- sonable when compared with” the decision. Park Manor admits that this interpretation would undercut the “substantially justified” standard of subsection (1) by giving litigants a second bite at the same apple under a different (but seemingly not a more demanding) standard. The sensible interpreta- tion, which avoids this anomaly, confines subsection (4) to the case in which the government prevails but the relief it obtains is meager in comparison to the relief it had sought. American Wrecking Corp. v. Secretary of Labor, supra, 364 F.3d at 327-28; see Judith E. Kramer, “Equal Access to Justice Act Amendments of 1996: A New Avenue for Recovering Fees from the Government,” 51 Admin. L.Rev. 363, 376 (1999). By seeking excessive relief, an agency forces the party against which it is proceeding to incur an excessive expense to defend itself. The proceeding is justified, so far as the party’s liability is concerned; it is only the relief demanded that is unjustifiable. The parallel is to Rule 68 of the Federal App. 8 Rules of Civil Procedure, which relieves a defendant from having to pay the plaintiff’s costs if having refused the defendant’s offer of judgment the plaintiff obtains a smaller judgment. The rule penalizes the greedy winning plaintiff but is inapplicable if the defendant wins. See Delta Air Lines, Inc. v. August, 450 U.S. 346, 101 S.Ct. 1146, 67 L.Ed.2d 287 (1981). Subsection (4) has a similar office, and thus has no application to this case because the entity against which the government was proceeding, Park Manor, prevailed. The petition for review is DENIED. App. 9 2005 WL 3753088 (H.H.S.) Department of Health and Human Services (H.H.S.) Departmental! Appeals Board Appellate Division IN THE CASE OF: PARK MANOR NURSING HOME, PETITIONER V. CENTERS FOR MEDICARE & MEDICAID SERVICES Civil Remedies CR1263 App. Div. Docket No. A-05-37 Decision No. 2005 December 16, 2005 DECISION ON REVIEW OF ADMINISTRATIVE LAW JUDGE EAJA DECISION In March and June 2001, the State of Wisconsin conducted surveys of Park Manor Nursing Home (Park Manor) and found noncompliance with Medi- care participation requirements. Based on the survey findings, the Centers for Medicare & Medicaid Ser- vices (CMS) imposed civil money penalties and other remedies on Park Manor. Park Manor requested a hearing before an Administrative Law Judge (ALJ) at the Departmental Appeals Board (Board). After the State withdrew some of the noncompliance findings, CMS chose to go forward based on six findings from the March survey and one finding from the June survey. The ALJ granted summary judgment in Park Manor’s favor on two of these findings, overturning App. 10 the remedies from the June survey as a result. He conducted a hearing on the remaining five findings and issued an initial decision in CMS’s favor, based on one of the findings. On review, the Board reversed the ALJ, issuing a final decision in Park Manor’s favor. CMS did not timely pursue before the Board the other four findings. Thus, during the proceedings, all of the noncompliance findings were withdrawn, not pursued, or reversed, and all of the enforcement remedies were overturned. Having obtained a favorable result on the merits, Park Manor applied for attorneys’ fees and other expenses pursuant to the Equal Access to Justice Act (EAJA), 5 U.S.C. §504. Among other things, the EAJA requires a federal agency to pay the reasonable fees and other expenses incurred by an eligible “pre- vailing party,” unless the “position of the agency” in the underlying “adversary adjudication” was “sub- stantially justified” or “special circumstances” make an award unjust. On December 28, 2004, the ALJ (Steven T. Kes- sel) issued a decision denying Park Manor’s EAJA application. Park Manor Nursing Home, DAB No. CR1263 (2004) (ALJ EAJA Decision). The ALJ found (among other things) that CMS was substantially justified in pursuing enforcement remedies against Park Manor. Before us now is Park Manor’s appeal of the ALJ EAJA Decision. As discussed below, the ALJ EAJA Decision does not properly apply EAJA standards, is incomplete, App. 11 and does not accurately reflect our decision on the merits. Because of the lengthy history of this case and other factors, we are issuing a modified decision, rather than remanding to the ALJ. Our major conclu- sions are: ¢ CMS had a reasonable basis for issuing the ini- tial determinations that led to the proceedings. ¢ CMS also had a reasonable basis for pursuing a reduced civil money penalty for the period March 22 through June 10, 2001 (even though CMS was no longer relying on all of the findings from the March survey). Therefore, CMS’s overall position regarding that matter was substantially justified. ¢ By obtaining summary judgment in its favor, Park Manor prevailed in its appeal of CMS’s ini- tial determination imposing remedies based on the June revisit survey — a separate matter for EAJA purposes. CMS did not show that its over- all position regarding that matter was substan- tially justified, however. In particular, CMS did not show that it had a reasonable basis for its po- sition that remedies for the period beginning June 11 were warranted based solely on a finding of noncompliance that the State had withdrawn during informal dispute resolution. Accordingly, Park Manor is entitled to an EAJA award for the reasonable attorneys fees and expenses it in- curred in connection with the proceedings to re- solve that matter (up to receipt of the summary judgment ruling), unless “special circumstances” make an award unjust. App. 12 ¢ None of the events that CMS alleges constitute “special circumstances” relates to adjudication of the remedies arising from the June revisit survey and bars an award in connection with that mat- ter. ¢ The ALJ correctly concluded that Park Manor is not entitled to an award on the basis that CMS sought excessive remedies. Our decision below sets further procedures to enable us to promptly determine the amount to which Park Manor is entitled under our decision (if the parties cannot agree on an amount within a specified time period, as we encourage them to do). If the parties agree on the amount, our decision will become final on the matters decided herein. Otherwise, we will issue a supplementary decision which, together with this decision, will constitute final agency action on the matters. Case Background This case has a long and convoluted history. We set out here only the background required to under- stand generally how the proceedings arose, how and why the issues narrowed over the course of the pro- ceedings, and what steps were taken at key stages of the proceedings. ' ' The record before the ALJ in the EAJA proceeding in- cluded: (1) briefs submitted in support of or opposition to Park Manor’s EAJA application, including an opening brief by Park (Continued on following page) App. 13 A skilled nursing facility (SNF) such as Park Manor must comply with the requirements in 42 C.F.R. Part 483, subpart B, if it wishes to participate in the Medicare program. Compliance is verified through surveys performed by state survey agencies under contract with CMS. 42 C.F.R. Part 488, subpart E. A survey agency reports any “deficiency” (failure to meet a participation requirement) it finds on a stan- dard form called a “Statement of Deficiencies” (SOD). See, e.g., CMS Ex. 1. Each deficiency cited in the SOD is identified by an alpha-numeric “tag” relating to a requirement in Part 483. The survey agency also rates the seriousness of each reported deficiency by assessing scope and severity (whether it has placed residents in “immediate jecpardy,” caused “actual harm,” or created only the “potential for more than minimal harm”). Id.; see adso 42 C.F.R. § 488.404.’ Manor, a CMS “Answer’” to the application (CMS Answer), and a reply to the CMS Answer; (2) various exhibits in support of or opposition to the EAJA application (PM EAJA Ex. __ and CMS EAJA Ex. ___}; and (3) the record of the merits proceeding initiated by Park Manor to challenge CMS’s determinations. The record of the merits proceeding includes: the parties’ exhibits (PM Ex._ and CMS Ex. __); the hearing transcript (Tr. ___); and the pleadings, briefs, and other related pre- and post- hearing material listed (by number) in chronological sequence on a December 30, 2003 document prepared by the Civil Reme- dies Division (R. 1 to R. 92). Our record on appeal of the ALJ EAJA Decision also includes Park Manor's opening brief (PM Brief), a CMS response brief (CMS Response), and reply briefs filed by both parties (PM Reply and CMS Reply). * Noncompliance levels are denoted by letters: D, E, and F refer to deficiencies with the potential for more than minimal (Continued on following page) App. 14 A SNF is subject to enforcement remedies, in- cluding termination of its Medicare participation, if it is not in “substantial compliance.” 42 C.FR. § 488.402(b),(c). A SNF is not in substantial compli- ance if it has one or more deficiencies that create the potential for more than minimal harm. 42 C.FR. § 488.301. “Noncompliance” means “any deficiency that causes a facility to not be in substantial compli- ance.” Id. CMS determines whether to impose an enforce- ment remedy on a SNF, generally after approving a state survey agency certification of noncompliance. 42 C.F.R. §§ 488.330(a); 488.330(e)(2). In lieu of termina- tion, CMS may impose civil money penalties (CMPs) and other intermediate remedies to encourage the SNF to come back into substantial compliance promptly.’ See 42 C.F.R. §§ 488.406 and 488.408. This scheme is based on section 1819 of the Social Security Act (the Act), 42 U.S.C. 1395i-3. A SNF is entitled to an ALJ hearing to contest a federal enforcement action only if CMS issues an harm”; G, H, and I refer to deficiencies that have caused “actual harm” to residents; and J, K, and L identify deficiencies that place residents in immediate jeopardy. CMS State Operations Manual (SOM), Pub. 7, App. P, sec. V. ’ If CMS finds immediate jeopardy, CMS may impose a CMP in the range of $3,050-$10,000 per day; for other noncom- pliance, CMS may impose a CMP in the range of $50-$3,000 per day. 42 C.F.R. § 488.438(ax1). ACMP accrues until the SNF has achieved substantial compliance or its provider agreement is terminated. 42 C.F.R. § 488.454(a). App. 15 appealable “initial determination.” 42 C.FR. §§ 498.3(b), 498.5, 488.330(e3). The definition of “initial determination” includes a finding of noncom- pliance that results in the imposition of a remedy specified in section 488.406, a finding of substandard quality of care that results in the loss of approval of a nurse aide training program, and the level of non- compliance found by CMS if a successful challenge on this issue would affect the range of CMP amounts that CMS may collect. 42 C.F.R. § 498.3(b)(13), (14), and (16). A hearing on a CMP typically requires an ALJ to make findings on two issues: first, whether the SNF was, as alleged by CMS, not in substantial compli- ance with participation requirements during the period for which CMS imposed the CMP; and second, whether the amount of the CMP is reasonable in view of the seriousness of the noncompliance, the SNF’s compliance history, and other factors. See, e.g., 42 C.F.R. § 488.438." On March 22, 2001, the Wisconsin Department of Health and Family Services (WDHFS) completed a standard survey and extended survey of Park Manor (the March survey). CMS Ex. 1, at 1; CMS Ex. 3, at 1. * Contrary to what Park Manor suggests, however, it did not have a right to review of CMS’s exercise of discretion to impose remedies, rather than giving Park Manor an opportunity to correct them, nor did Park Manor’s right to appeal arise before CMS issued its initial determinations. 42 C.F.R. $$ 488.438, 498.3. App. 16 As initially issued, the SOD for the March survey contained noncompliance findings under 20 tags, two of which we identify at this point. CMS Ex. 1, at 1. First, surveyors found that Park Manor had failed to consult immediately with a resident’s physician about a “significant change” in the resident’s status (tag F157). Id. at 1-9. Second, surveyors found that Park Manor had not ensured that a resident received adequate supervision to prevent accidents (tag F324). Id. at 86. The surveyors also found that for two days, March 20 and 21, the deficiency under tag F324 placed residents in immediate jeopardy and therefore also constituted “substandard quality of care.” Id. at 1: see also CMS Ex. 8, at 2. In April 2001, before CMS made any determina- tion based on the March survey, Park Manor filed two hearing requests. R. 1; R. 3. The first was dismissed as premature. R. 2; R. 37. The second responded to a WDHFS notice advising Park Manor that, due to the substandard quality of care finding, it would no longer be allowed to offer or conduct a nurse aide training and competency evaluation program (NAT- CEP). * “Substandard quality of care” means one or more deficien- cies (under 42 C.F-R. §§ 483.13, 483.15, or 483.25) that consti- tute either: immediate jeopardy to resident health or safety; a pattern of or widespread actual harm that is not immediate jeopardy; or a widespread potential for more than minimal harm (but less than immediate jeopardy, with no actual harm). 42 C.F.R. § 488.301. App. 17 On May 4, 2001, CMS issued a “Notice of Imposi- tion of Remedies.” CMS Ex. 2. This notice informed Park Manor that CMS was imposing the following remedies based on the March survey: (1) a CMP of $6,200 per day for two days of immediate jeopardy; and (2) a CMP of $250 per day, which would accrue from March 22, 2001 until the facility achieved sub- stantial compliance. Jd. This notice also indicated that the alleged noncompliance with section 483.25 (tag F324) constituted “substandard quality of care,” and that Park Manor was therefore prohibited from offering a NATCEP for two years. Jd. at 1. Park Manor then filed its third hearing request. R. 12. In early May 2001, WDHFS held an informal dispute resolution (IDR) conference regarding the March survey findings.” CMS Ex. 5, at 2. Park Manor submitted extensive documentation to WDHFS in support of its presentation at this conference. On June 11, 2001, WDHFS completed a revisit survey (June revisit survey) of Park Manor and found continued noncompliance. CMS Ex. 6. The SOD for the June revisit survey cited the facility for deficiencies * States must offer facilities an opportunity to informally dispute adverse findings in a SOD. 42 C.FR. § 488.331(aX1). The pendency of IDR does not toll or delay the effective date of enforcement action by CMS. 42 C.FR. § 488.331(bX2). However, “ti]f a provider is subsequently successful, during the {IDR} process, at demonstrating that deficiencies should not have been cited, the deficiencies are removed from the [SOD] and any enforcement actions imposed solely as a result of those cited deficiencies are rescinded.” 42 C.F.R. § 488.331(c). App. 18 under six tags. Jd. (This included a finding under tag F157 involving a different resident than the finding under that tag from the March survey.) Park Manor filed a fourth hearing request. R. 18. On June 15 and 19, 2001, CMS and Park Manor filed Reports of Readiness in the pending appeals. R. 15-R. 17. These reports, like similar reports submit- ted in September, contained general assertions, but no detailed arguments. Id.; R. 30, R. 31, R. 33. On June 21, 2001, WDHFS informed Park Manor that, as a result of IDR, WDHFS had amended the March survey findings under tag F324, placed the amended findings under tag F309, and reduced the noncompliance level from J (immediate jeopardy) to D (potential for more than minimal harm). CMS Ex. 7, at 1. WDHFS also agreed during IDR to withdraw or amend other March survey findings. Id.; see also R. 18, Att. 1. WDHFS then issued an amended SOD for the March survey, with 15 noncompliance findings (including one under tag F157). CMS Ex. 4; CMS Ex. 5, at 2. On July 3, 2001, CMS issued a Notice of Imposi- tion of Remedies based on the June revisit survey. CMS Ex. 7. This notice advised Park Manor that CMS was continuing the $250 per day CMP previ- ously imposed, and imposing a denial of payment for new admissions (DPNA) starting July 15, 2001. Jd. at 2. The notice also said that CMS had accepted WDHFS’s recommendation to rescind the $6,200 per day CMP previously imposed for two days of immediate jeopardy. App. 19 Id. Park Manor then filed its fifth hearing request. R. 20 and R. 25. On August 2, 2001, WDHFS notified Park Manor that, as a result of IDR, it was rescinding two find- ings from the June revisit survey — tags F157 and F281 — and amending one other finding from that survey. PM Exs. 34 and 66. On September 20, 2001, CMS notified Park Manor by letter that it was back in substantial com- pliance and that all remedies had been discontinued as of July 24, 2001 (the date WDHFS conducted a second revisit survey). CMS Ex. 8. CMS also said that the IDR decision to withdraw the immediate jeopardy finding (from the March survey) had effectively overturned the substandard quality of care finding. Id. at 2.’ Meanwhile, the March survey had led WDHFS to levy fines against Park Manor for allegedly violating State nursing home requirements that are similar but not identical to the federal requirements. See PM Ex. 54. Park Manor contested these fines, and the resulting proceeding included a 13-day hearing before ” At this point, the following were at issue: (1) 15 noncom- pliance findings from the March survey, resulting in the $250 per day CMP effective March 22, 2001; and (2) six noncompli- ance findings from the June revisit survey, resulting in continu- ing the $250 per day CMP through July 23, 2001 and a DPNA for the period July 15 through July 23, 2001. The total CMP was $31,000 ($250 per day for the 124 days from March 22 to July 23, 2001). App. 20 a State ALJ. Jd. at 2. In March 2002, while the fed- eral ALJ proceeding was pending, the State ALJ issued a decision overturning the fines. Jd. Shortly afterward, CMS reviewed the State ALJ decision and the evidence developed in the State proceeding. CMS Answer at 16. Based in part on that review, CMS decided not to pursue some of the related federal findings. CMS Answer at 16-17. The federal ALJ did not issue orders setting deadlines for exchanging and submitting proposed exhibits, written testimony, and pre-hearing briefs until February and May 2002. R. 37; R. 43. CMS submitted proposed exhibits (including written direct testimony), a witness list, and a pre-hearing brief on July 15, 2002. The pre-hearing brief advised the ALJ and Park Manor that CMS had elected to go forward on only six of the March survey findings (tags F157, F279, F309, F332, F444, and F496) and on only one finding from the June revisit survey (tag F157). R. 44 (Brief at 3, n.3). Accordingly, CMS reduced the $250 CMP to $150 per day for the period March 22 through June 10, 2001, and $100 per day for the period June 11 through July 23, 2001. Jd. On August 9, 2002, Park Manor moved for sum- mary judgment on all of the findings and remedies at issue in the proceedings. R. 47. Among other things, Park Manor asserted that the sole remaining non- compliance finding from the June revisit survey — the finding under tag F157 — had been rescinded during IDR and thus could not be used to support the reme- dies imposed for the period June 11 through July 23, App. 21 2001. Jd. at 11-13, 39-43. While the motion was pending, Park Manor filed its exhibits, written direct testimony, and list of proposed witnesses. R. 50. Some of the testimony addressed the findings under tag F157 in the original SOD from the June revisit sur- vey. See, e.g., P. Ex. 61, at 23; P. Ex. 68, at 32. On October 8, 2002, the ALJ ruled that Park Manor was entitled to summary judgment concerning tag F157 because CMS had not taken the steps necessary to overrule the IDR decision. R. 60, at 3-6. The ALJ also ruled that no CMP or other remedy could be imposed for the period June 11 through July 23, 2001 because CMS had abandoned its reliance on all findings from the June revisit survey except for tag F157. Id. at 6. As a result, there was, as of Octo- ber 8, 2002, no longer an issue about remedies for the period June 11 through July 23, 2001. The ALJ also granted summary judgment to Park Manor with respect to tag F444 from the March survey, but denied summary judgment with respect to the other five remaining tags from that survey (F157, F279, F309, F332, and F496). R. 60, at 8. The ALJ held a hearing in February 2003 to permit cross- examination regarding these five tags. The parties then filed post-hearing briefs setting out their argu- ments regarding each tag. R. 83, R. 86, R. 87-88. CMS argued that Park Manor was not in substantial compliance with the requirements associated with the five remaining tags, and that noncompliance with any one of these requirements was sufficient to support a $150 per day CMP. App. 22 On September 30, 2003, the ALJ issued a deci- sion upholding the $150 per day CMP for the period March 22 through June 10, 2001. Park Manor Nurs- ing Home, DAB CR1090 (2003) (ALJ Merits Deci- sion). In that decision, the ALJ made findings on only one of the five remaining tags — tag F157. Regarding that tag, the ALJ found that Park Manor was not in substantial compliance with 42 C.F.R. § 483.10(b)(11) because it had failed to consult with a physician immediately about a change in Resident 20’s condi- tion. The ALJ also found that the amount of the CMP was reasonable based on his findings regarding tag F157, and therefore he did not need to address issues regarding the other four tags. Park Manor appealed the ALJ’s decision to the Board. On June 17, 2004, the Board reversed the ALJ’s finding of noncompliance with section 483.10(b)(11) and set aside the $150 per day CMP. Park Manor Nursing Home, DAB No. 1926 (2004). The Board did not remand the case to the ALJ to address the remaining noncompliance findings be- cause CMS had not pursued those findings before the Board and because further proceedings would not serve the remedial purpose of the regulations. CMS asked the Board to reconsider its decision, and the Board denied the request. Then, on July 14, 2004, Park Manor filed an EAJA application seeking reimbursement of about $290,000 in attorneys fees and other expenses. Park Manor requested an award under an EAJA provision that requires a federal agency to pay the reasonable App. 23 fees and other expenses of an eligible “prevailing party” in an “adversary adjudication” conducted by the agency unless the “position of the agency” in the adjudication was “substantially justified” or “special circumstances make an award unjust.” Park Manor also contended that it was entitled to an award under an EAJA provision that authorizes an award when an agency makes an “excessive demand” in enforcing the party’s compliance with a statutory or regulatory requirement. The ALJ denied the EAJA application in its entirety. He found that although Park Manor was a “prevailing party” and an eligible entity under the EAJA, Park Manor was not entitled to an award because CMS was substantially justified in determin- ing to impose remedies, specifically, in: (1) alleging that Park Manor failed to comply with the require- ments of section 483.10(b)(11) (tag F157); (2) alleging four additional deficiencies (tags F279, F309, F332, and F496) that might, in themselves, have served as a basis for imposing remedies; and (3) determining to impose a $150 per day CMP. The ALJ also rejected Park Manor’s request for an award on the basis that CMS had made an excessive demand, finding that this basis does not apply when the party opposing the federal agency “prevails entirely” in the underlying proceeding, as Park Manor did. /d. at 16-19. The ALJ noted that, in any event, the $150 per day CMP was not excessive. /d. at 18. Park Manor now objects to most of the ALJ’s key findings and conclusions, asserting that the ALJ App. 24 failed to apply, or misapplied, relevant legal stan- dards and that CMS’s pursuit or defense of enforce- ment remedies was unjustified at every stage of the merits proceeding. In response to Park Manor’s appeal, CMS also takes exception to several aspects of the ALJ’s decision. Discussion We begin our discussion by briefly addressing, in section A, the parties’ dispute about the appropriate standard for our review. Next, in section B, we address whether the ALJ correctly determined that Park Manor was not enti- tled to an award as a prevailing party, as follows: ° In section B.1, we set out the prerequisites for awarding a “prevailing party” fees and expenses, with particular emphasis on the legal standard that must be applied in determining whether the agency’s “position” is “substantially justified.” e In section B.2, we explain why we conclude that the ALJ’s substantial justification analysis is not adequate and why we consider it appropriate to issue a modified and supplemented decision, rather than remanding this case to the ALJ. e In section B.3, we explain why we find that CMS had a reasonable basis for issuing the ini- tial determinations that were the basis for the merits proceedings, even though CMS revised, withdrew, or chose not to rely on some of the sur- vey findings during the proceedings. App. 25 ¢ In section B.4, we explain why we find that CMS had a reasonable basis for continuing to pursue six findings from the March survey in the proceeding and was substantially justified in its overall position that a CMP was warranted based on noncompliance findings from the March sur- vey. ¢ In section B.5, we explain why we find that CMS did not have a reasonable basis for seeking remedies based on the finding under tag F157 that WDHFS had withdrawn during IDR, that CMS’s overall position seeking remedies based on the June revisit survey was not substantially jus- tified, and that Park Manor is entitled to an award for the reasonable fees and expenses it in- curred to overturn the remedies from the June revisit survey because there are no special cir- cumstances that make such an award unjust. In section C, we explain why we uphold the ALJ’s conclusion that Park Manor is not entitled to an award on the basis that CMS made an “excessive demand.” In section D, we explain why we uphold the ALJ’s ruling denying Park Manor’s request to withhold certain financial records from public disclosure. Finally, in section E, we establish a schedule for further submissions on the amount of the allowable award. App. 26 A. The Board’s standard of review in EAJA cases Park Manor argues that a substantial justifica- tion determination is a legal conclusion that the Board should review de novo. PM Reply at 10-12. CMS, on the other hand, asserts that the issues of whether an agency position is substantially justified, or whether “special circumstances” make an EAJA award unjust, are questions of fact whose resolution by the ALJ should be reviewed under a “substantial evidence” standard. CMS Reply at 3-8. The Department of Health and Human Services (HHS) has issued regulations to implement the EAJA. 45 C.F.R. Part 13. These regulations were last amended in January 2004. 69 Fed. Reg. 2843 (Jan. 21, 2004). The January 2004 amendments became effective on February 20, 2004, before Park Manor filed its EAJA application, and both parties cited them as applicable here. The regulations provide that the “adjudicative officer” who presided in the proceeding, such as an ALJ, shall issue an “initial decision” containing written “findings” on, among other things, whether the agency’s position was substantially justified and whether special circumstances make the award unjust. 45 C.F.R. § 13.26. The regulations designate the Board (the HHS “component that would have jurisdiction over an appeal of the merits”) as the “appellate authority” responsible for “review of the adjudicative officer’s decision on the fee applica- tion[.]” 45 C.F.R. § 13.27(a), (b). App. 27 It is clear, then, that the Board is in an appellate posture with respect to the ALJ’s findings about whether to make an EAJA award. Accordingly, our guidelines on review of ALJ EAJA decisions provide that the standard of review on a disputed factual issue is whether the ALJ’s decision is supported by substantial evidence in the whole record, and that the standard of review on a disputed issue of law is whether the ALJ’s decision is erroneous.” As CMS argues, there are sound reasons for us to defer to an ALJ on EAJA issues that involve evaluat- ing the parties’ behavior during the proceedings before the ALJ (such as whether that behavior is a special circumstance making an EAJA award unjust), or on other matters with respect to which the ALJ is best situated to make a judgment. Park Manor argues, however, that the “substan- tial justification” test (which we discuss below) is a purely legal standard and not a factual matter to evaluate under the substantial evidence test, as CMS argues that we should. As explained below, the “sub- stantial justification” test requires an analysis of whether CMS’s position had a reasonable basis in law and fact. Whether CMS had a reasonable basis in law is a matter that we review for legal error under our guidelines — a de novo review. Whether CMS had a " Guidelines — Review of Initial Decisions on Fee Applica- tions Under the Equal Access to Justice Act, http://www. hhs.gov/dab/guidelines/eaja. html. App. 28 reasonable basis in fact does not generally require either the ALJ or us to determine what the facts were; instead, the analysis focuses on whether CMS had a reasonable factual basis, given the undisputed facts and the evidence regarding disputed facts, for the position CMS took. This is not a purely factual question. Since, however, the substantial evidence standard calls for us to defer to an ALJ’s inferences drawn from the evidence so long as those inferences were reasonable, even if we may not have drawn those inferences ourselves, we similarly in an EAJA case defer to an ALJ’s reasonable judgment on whether there was a reasonable basis in fact for the agency position (so long as the ALJ did a correct analysis under the EAJA). Also, if the ALJ makes findings of fact regarding disputed factual issues such as what evidence an agency had available at a par- ticular stage of the proceedings, we apply the sub- stantial evidence standard to review those findings. We note, however, that where, as here, a party raises threshold issues about whether an ALJ applied the correct legal standards under the EAJA in deter- mining whether the agency position was substan- tially justified, those issues are purely legal ones that we review de novo. Hanover Potato Products, Inc., v. Shalala, 989 F.2d 123, 127 (3rd Cir. 1993). If we agree that the ALJ made a prejudicial legal error, then we must determine whether to remand the case or to resolve it ourselves, applying the correct test and addressing any material issue the ALJ did not ad- dress. If applying that test requires us to address App. 29 factual disputes on which the ALJ made findings, however, we then apply the substantial evidence standard. B. Park Manor’s request for an EAJA award under 5 U.S.C. § 504(a)(1) 1. Requirements for an award to a “prevailing party” Under the EAJA, a federal agency that conducts an “adversary adjudication” must award to an eligible “prevailing party” the “fees and other expenses in- curred by that party in connection with that proceed- ing, unless the adjudicative officer of the agency finds that the position of the agency was substantially Justified or that special circumstances make an award unjust.” 5 U.S.C. § 504(a)(1) (emphasis added). In this case, CMS does not deny that there was an “adversary adjudication” and that Park Manor met the requirements for award eligibility. Also, although Park Manor asserts that the ALJ failed to consider all of the issues on which Park Manor pre- vailed, CMS does not challenge the ALJ’s finding that Park Manor was a “prevailing party.” Park Manor is therefore entitled to fees and expenses in connection with the proceedings unless CMS’s “position” was “substantially justified” or “special circumstances” make an award unjust. According to the EAJA statute (as amended in 1996), the “position of the agency” refers not only to the “position taken by the agency in the adversary App. 30 adjudication,” but to “the action or failure to act by the agency upon which the adversary adjudication is based.” 5 U.S.C. § 504(b)1)(E). Similarly, HHS’s EAJA regulations state that the agency’s position “includes, in addition to the position taken by the agency in the proceeding, the agency action or failure to act that was the basis for the proceeding.” 45 C.F.R. § 13.5(b)(1). The EAJA does not define the term “substantially justified.” The regulations, however, provide that an agency’ position is substantially justified if it “was reasonable in law and fact.” 45 C.F.R. § 13.5(b)(1). The regulations further provide that a substantial justification finding must be based on the administra- tive record as a whole, and that a party’s status as a prevailing party does not create a presumption that the agency’s position in the proceeding was not sub- stantially justified. Jd. However, the agency’s litigat- ing party (here CMS) has the burden of proving that its position was substantially justified. Jd. These regulatory criteria reflect court decisions on the EAJA. The Supreme Court has said that the government’s position “can be justified even though it is not correct, and... it can be substantially (7.e., for the most part) justified if a reasonable person could think it correct, that is, if it has a reasonable basis in law and fact.” Pierce v. Underwood, 487 U.S. 552, 566, n.2 (1988). The courts emphasize that, in performing a substantial justification analysis, a tribunal applies a different standard than the standard used to adju- dicate the prevailing party’s rights in the underlying App. 31 merits proceeding. United States v. Hallmark Const. Co., 200 F.3d 1076, 1080 (7th Cir. 2000). Conse- quently, the findings or conclusions that support the decision on the prevailing party’s merits claim, and other circumstances relevant to that decision (such as the stage of the proceeding when it was made), are rarely conclusive factors in a substantial justification analysis.” Id. at 1079-80; FJ. Vollmer Co. v. Magaw, 102 F.2d 591, 595-96 (D.C. Cir. 1996). According to one court, a proper substantial justification analysis focuses on “‘the actual merits of the Government’s litigating position’” and is global or comprehensive in scope, examining “not simply whether the govern- ment was substantially justified at the beginning or end of the proceedings, but whether the government was substantially justified in continuing to push forward at each stage.” Hallmark, 200 F.3d at 1080 (quoting Pierce, 487 U.S. at 569). Because a substantial justification inquiry fo- cuses on the agency’s litigation position in the merits proceeding, the context in which that proceeding arose and was conducted may be relevant in evaluat- ing the agency’s position. We found no court opinion applying the EAJA to a case arising from the nursing facility enforcement process. Based on our experience ” “Conceivably, the Government could take a position that is not substantially justified, yet win; even more likely, it could take a position that is substantially justified, yet lose.” Pierce, 487 US. at 569. App. 32 with this process, we consider the following factors to be important to an EAJA analysis in this context: ¢ The enforcement process is based on the as- sumption that all participation requirements must be met. Thus, the enforcement regulations in 42 C.F.R. Part 488 authorize CMS to impose a CMP or other remedy based on any finding of noncompliance. 42 C.F.R. § 488.408(d)(3)i). The goal of the requirements is to protect the health and safety of vulnerable facility residents. For this reason, the facility has the ultimate burden of persuasion in an enforcement proceeding to show substantial compliance once CMS has made a prima facie case of noncompliance. Batavia Nurs- ing and Convalescent Center, DAB No. 1911 (2004). ¢ The enforcement process contemplates that CMS will usually rely on state surveys to deter- mine whether a facility is in substantial compli- ance and whether to impose remedies to compel corrective action. CMS may approve or disap- prove a state survey agency’s certification of non- compliance. 42 C.F.R. § 488.330(a)1)(C). If CMS approves, CMS then “imposes remedies promptly” after “promptly notifying the facility of the deficiencies and impending remedy or reme- dies[.]” 42 C.F.R. § 488 331(e)(2\i). This process is intended, by design and statutory mandate, to “minimize the time between the identification of violations and final imposition of the remedies[.]” Section 1819(h\(2XB) of the Act; see also 59 Fed. Reg. 56,116, 56,156 (Nov. 11, 1994). The process also contemplates corrective action and revisit surveys to determine whether substantial App. 33 compliance has been achieved. 42 C.FR. § 488.330(g)(4). ¢e The participation requirements seek to ensure positive resident care outcomes and to give facili- ties flexibility in how to achieve those outcomes. See, e.g., 54 Fed. Reg. 5316, 5332 (1989). A facil- ity is given an opportunity during a survey, through state IDR, and at the ALJ hearing to produce evidence to show that an adverse resi- dent outcome was unavoidable. e The hearing procedures at 42 C.F.R. Part 498 reflect the expectation that issues may be added or eliminated as the proceedings progress, new survey results are issued, survey findings are re- solved through IDR or settlement discussions, and remedies are added or rescinded. ¢ Some of the participation requirements contain modifiers such as “significant” or “adequate” that require judgment to apply. Even experts may disagree on whether these modifiers apply to a given set of facts. ¢ Evaluating compliance often involves interpret- ing medical records, made by caregivers whose writing may be partially illegible and who often use abbreviations and symbols, including nota- tions the relevance of which may not be readily apparent until a case is fully presented and the legal requirements have been parsed in context. ¢ Evaluating compliance may also involve bal- ancing the goal of one provision (such as protect- ing residents’ rights) with the goal of another provision (such as ensuring quality of care). App. 34 e The regulations contain a general requirement for services consistent with professional stan- dards of quality. 42 C.F.R. § 483.20(k\3). Those standards, although not explicit on the face of the regulations, often inform CMS’s judgment about whether a facility is in compliance, but may be disputed or raise notice questions. e Evidence in these cases often is not direct evi- dence but evidence from which a party seeks to have the adjudicator draw inferences of material facts. These factors inform our analysis below. 2. The ALdJ’s substantial justification analysis did not comply with applicable requirements. The ALJ denied an award to Park Manor as a prevailing party because he concluded that CMS’s position was substantially justified. Park Manor contends that this conclusion is invalid because the ALJ failed to evaluate CMS’s position in its totality. In particular, Park Manor contends that the ALJ failed to consider the agency actions that were the bases for the merits proceeding (actions that Park Manor claims were unreasonable) and erroneously confined his discussion to the issues addressed at the in-person hearing. Park Manor also contends that the ALJ inadequately analyzed whether CMS had rea- sonable bases for seeking affirmance of four findings of noncompliance (under tags F279, F309, F332, and F496) from the March survey that were not addressed in the ALJ Merits Decision. According to Park Manor, App. 35 the ALJ EAJA Decision “merely recites the allega- tions in the SOD” regarding these four findings and provides “[nJo analysis of the supporting and contrary evidence” and little or no “explanation of the ALJ’s reasoning|.]” PM Brief at 20. Park Manor also con- tends that the ALJ erred in failing to consider whether CMS was justified in seeking remedies based on tag F157 from the June revisit survey, and in failing to determine whether CMS had a reasonable basis for pursuing tag F444 from the March survey. (CMS also takes exception to the ALJ’s failure to address tag F444.) We find that the ALJ did not do a substantial justification analysis that comports with the statute and regulations. As noted, the EAJA and HHS’s January 2004 regulations define the phrase “position of the agency” to include the agency actions (or fail- ures to act) that were the bases for the proceeding. The ALJ did not consider or evaluate these predicate agency actions. The ALJ EAJA Decision quotes a superseded provision that describes the substantial justification inquiry as an evaluation of whether the agency’s “position in the proceeding was substantially justified at the time the proceeding was initiated.” ALJ EAJA Decision at 6-7, quoting unamended 42 C.F.R. § 13.5(a). Yet, the ALJ’s discussion of CMS’s position in fact focused entirely on the issues ad- dressed at the in-person hearing. In addition, the ALJ did not adequately support his findings that CMS’s position on tags F279, F309, F332, and F469 had a reasonable basis in law and App. 36 fact. Regarding each of these tags, the ALJ EAJA Decision contains a single, short paragraph that briefly states the basis for CMS’s allegation of non- compliance. ALJ Merits Decision at 14-16. Although the ALJ indicated in each paragraph that his finding was based on evidence in the record, the ALJ did not describe or evaluate that evidence in any detail. Given the difficulty of applying the EAJA reasonable- ness standard, the significant amount of evidence introduced by the parties, and the fact that there was no previous ruling on the merits of these four tags, the ALJ should have thoroughly explained the rea- sons for his finding on each tag. Hallmark Const. Co., 200 F.3d at 1080 (decision should contain an “evalua- tion of the factual and legal support for the govern- ment’s position”). Another problem is that the ALJ focused only on the evidence tending to support CMS’s position, indicating in each instance that this evidence was sufficient to prove Park Manor’s noncompliance. Such a cursory, one-sided evaluation does not satisfy EAJA requirements and gives no assurance that the ALJ in fact considered the opposing evidence. The statute and regulations require an adjudicative officer to evaluate the agency position in light of the entire administrative record, including rebuttal evidence known to the agency. 45 C.F.R. § 13.5(b)(1); Alphin v. National Transp. Safety Board, 839 F.2d 817, 822 (D.C. Cir. 1988). Most significantly, the ALJ did not determine whether CMS was substantially justified in pursuing App. 37 remedies based on findings from the June revisit survey. The ALJ acknowledged that his summary judgment ruling had “affected the remedies that remained at issue.” ALJ EAJA Decision at 19. He did not recognize, however, that Park Manor’s successful effort to overturn the remedies based on findings from the June revisit survey was a potential basis for award. HHS’s EAJA regulations provide: When two or more matters are joined together for one hearing, each of which could have been heard separately ... and an applicant has prevailed with respect to one or several of the matters, an eligible applicant may re- ceive an award for expenses associated only with the matters on which it prevailed if the Department’s position on those matters was not substantially justified. 45 C.F.R. § 13.5(b)(2) (italics and emphasis added). In this context, a “matter,” for purposes of section 13.5(b)(2), could be a request for hearing on a CMS “initial determination.” While arguably CMS made four “initial determinations” (set out below), the parties litigated only two “matters” on which Park Manor was a “prevailing party.” The first matter was the appeal from the finding of noncompliance result- ing in the CMP for the period March 22 to June 10, 2001. This matter stemmed from CMS’s May 4, 2001 determination, which Park Manor appealed on May 5, 2001. R. 12. Resolving that matter required the App. 38 ALJ to assess the merits of findings from the March survey. The second matter was the appeal from the noncompliance finding resulting in a CMP and DPNA for the pericd June 11 to July 23, 2001. This matter stemmed from CMS’s July 3, 2001 determination, which Park Manor appealed on July 12, 2001. R. 20. Resolving that matter required the ALJ to assess the merits of findings from the June revisit survey. It is apparent, then, that these two matters - having arisen from separate appeals of noncompli- ance findings based on different surveys and result- ing in different remedies — “could have been heard separately” by the ALJ. Consequently, the fact that Park Manor succeeded in overturning the remedies for the period June 11 to July 23, 2001 was a poten- tial ground for an EAJA award.” CMS’s position on that matter was, of course, that the remedies were proper. As of July 2002, this position was based entirely on the June revisit sur- vey’s finding under tag F157. Park Manor opposed this position in its motion for summary judgment, contend- ing that because the IDR decision had rescinded tag Indeed, had Park Manor appealed only the July 3, 2001 initial determination and obtained a summary judgment ruling disposing of the matter in Park Manor’s favor (or had the appeals not been consolidated), Park Manor could have sought an EAJA award as prevailing party, regardless what happened with respect to CMS’s May 4, 2001 determination App. 39 F157, CMS could not rely on that tag to support the remedies. The ALJ concluded that CMS had not followed proper procedures to overrule the IDR result on tag F157, and therefore set aside the remedies that CMS had imposed based on the June revisit survey. Having obtained this favorable ruling by the ALJ, Park Manor was the prevailing party on this matter." In the EAJA proceeding before the ALJ, Park Manor argued that CMS was not justified in seeking remedies based on tag F157. The ALJ should have addressed that argument and determined whether Park Manor was entitled to an award for the reason- able fees and expenses it incurred to overturn those remedies. Citing Commissioner, INS v. Jean, 496 U.S. 154 (1990) and other cases, CMS asserts that an award should not be based on a piecemeal examination of the litigation, and that we must make a single sub- stantial justification finding encompassing the entire merits proceeding. CMS Response at 21, 27. In Jean, ' The Supreme Court has said that a party is a prevailing party if it “‘succeed|s! on any significant issue in (the) litigation which achieves some of the beriefit [it] sought in bringing suit.’” Hensley v. Eckerhart, 461 U.S. 424, 433 (1983) (quoting Nadeau v. Helgemoe, 581 F.2d 275, 278-79 (1st Cir. 1978)). In another formulation, the Court has said that a party prevails when the litigation has resulted in a “material alteration of the legal relationship of the parties in a manner which Congress sought to promote in the fee statute.” Texas State Teachers Ass'n v. Garland Indep. Sch. Dist., 489 U.S. 782, 792-93 (1989). App. 40 the Supreme Court stated that “[wJhile the parties’ postures on individual matters may be more or less justified, the EAJA ~ tike other fee-shifting statutes — favors treating a case as an inclusive whole, rather than as atomized line items.” 496 U.S. at 161-62. The relevance of that statement to this situation is un- clear because the issue in Jean was fairly narrow — namely, whether an EAJA award could include fees and expenses incurred by the prevailing party in the fee litigation. Jean did not indicate the scope of a substantial justification inquiry with respect to a proceeding in which the prevailing party sought relief from multiple government actions, any one of which was sufficient to support remedies that the party sought to avoid by participating in the proceeding. Some courts that have confronted these or similar circumstances have required the government to justify each such action and, when appropriate, have approved a partial award relating to the unjustified actions. See, e.g., Alphin, 839 F.2d at 822-823; Ameri- can Wrecking Corp. v. Secretary of Labor, 362 F.3d 321, 325-26 (D.C. Cir. 2004). This approach, which HHS adopted in section 13.5(b)(2), is consistent not only with how courts define the term “prevailing party” in fee-shifting cases, but also with the purpose of the EAJA, which is “to eliminate for the average person the financial disincentive to challenge unrea- sonable government actions.” Jean, 496 U.S. at 164. We do not imply here that a substantial justifica- tion analysis must address the reasonableness of every single argument an agency makes during a App. 41 proceeding. Roanoke River Basin Ass’n v. Hudson, 991 F.2d 132, 138-139 (4th Cir.), cert. denied, 510 U.S. 864 (1993); Hanover Potato Products, 989 F.2d at 131 (noting that not every argument made by an agency must be substantially justified, but that a district court must evaluate every “significant argument” in order to determine whether the government’s position “as a whole” was substantially justified). The analysis must, however, be consistent with the EAJA statute and regulations and must provide more than a cur- sory or one-sided review of the evidence. Our finding that the ALJ did not perform a legally adequate substantial justification analysis means that we must either remand the case to the ALJ or modify the analysis. Given the history of this case, we deter- mined that remand would take additional time and money, without contributing substantially to the result, and therefore be inconsistent with EAJA goals. Thus, we instead modify or supplement the ALJ’s analysis as necessary to apply the appropriate standards. We also modify the decision to include analyses of issues raised before the ALJ that he did not address. Finally, we find it necessary to modify the ALJ’s analysis regarding tag F157 from the March survey to correctly reflect our decision on the merits regarding that tag. 3. CMS acted reasonably in taking the actions that were the bases for the proceeding. Having founda that the ALJ did not consider the “agency actions (hat were the bases for the proceeding App. 42 in evaluating the “position of the agency,” we consider those actions here. CMS contends that it reasonably relied on the survey findings in the SODs in taking these actions, and that the reasonableness of its reliance can be discerned from the face of those findings. We find merit in this contention. Park Manor’s right to a hearing arose when it timely appealed the following four “initial determina- tions” by CMS: e The determination that Park Manor was not in substantial compliance as of March 22, 2001 (the date the March survey was completed), which re- sulted in the imposition of a $250 per day CMP effective on that date; e The determination that Park Manor continued to be in a state of noncompliance on June 11, 2001 (the date of the first revisit survey), which resulted in a continuation of the previously im- posed $250 per day CMP and a DPNA effective on July 15, 2001; e The determination that on March 20 and 21, 2001, Park Manor had a deficiency, described un- der tag F324 in the initial SOD for the March survey, that placed one or more residents in “im- mediate jeopardy,” which resulted in the imposi- tion of a $6,200 per day CMP for those two days; and e The determination, based on the immediate jeopardy finding under tag F324, that Park Manor had provided a “substandard quality of App. 43 care,” which resulted (temporarily at least) in loss of approval of its NATCEP. As discussed below, Park Manor was not a pre- vailing party in its appeal of the latter two determi- nations and for that and other reasons is not entitled to an award based on them. Thus, we examine CMS’s pre-adjudication actions only with respect to the first two determinations. Given the goal and structure of the enforcement process we outlined above, CMS’s pre-adjudication actions are properly judged reasonable as long as (1) the SOD issued by the state survey agency contains factual allegations that provide a reasonable basis for a finding of noncompliance under the relevant re- quirements, (2) there are one or more findings of noncompliance that are legally sufficient to support the remedy imposed, and (3) CMS does not know or have reason to know of credible evidence that would undermine the legality of its remedy determination. Applying these criteria, we find that each of CMS’s pre-adjudication actions was justified: ¢ The determination resulting in the imposition of a $250 CMP as of March 22, 2001. This determi- nation was based initially on the March survey. In the merits proceeding, CMS presented evi- dence supporting six findings from that survey and reduced the per day amount to $150. As we discuss in the next section, CMS had a reasonable basis for defending those findings in the merits proceeding, and any one of them was legally suffi- cient to support the $150 CMP. Together, they App. 44 were also sufficient to support a $250 CMP. See 42 C.F.R. § 488.408(d\3) (authorizing CMS to impose a CMP of $50-$3,000 per day for any defi- ciency that causes the facility not to be in sub- stantial compliance). In short, CMS acted reasonably in issuing the determination that re- sulted in the imposition of a CMP as of March 22, 2001. e The determination resulting in continuation of the $250 per day CMP as of June 11, 2001 and the imposition of a DPNA effective July 15, 2001. This determination was based on the June revisit survey's findings of noncompliance under six tags. The survey findings under at least four of those tags — tags F250, F281, F329, and F501 — gave CMS reasonable grounds to determine that Park Manor continued to be in a state of non- compliance as of June 11, 2001.” See CMS Ex. 6. These findings in turn authorized CMS to con- tinue the $250 per day CMP and to impose a DPNA as well. 42 C.F.R. §§ 488.417(a)(1) and 488.408(d\3)i) (authorizing CMS to impose a * For example, the SOD found noncompliance with 42 C.F.R. § 483.15(g) (tag F250). This section requires a facility to provide “medically-related social services to attain or maintain the highest practicable physical, mental, and psychosocial well- being of each resident.” The survey agency found that Park Manor had failed to provide Resident 12 with services to help him in the dying process. Among other things, the survey agency found that Park Manor had not followed up on a physician- recommended hospice referral. The surveyors determined that this deficiency had the potential for more than minimal harm. CMS Ex. 6, at 3-4. a a App. 45 DPNA for days on which a facility is not in sub- stantial compliance). Consequently, CMS acted reasonably in issuing this determination. Park Manor points out that after it appealed, the State survey agency modified or withdrew a number of the deficiency findings during IDR; that CMS rescinded the immediate jeopardy finding and associ- ated CMP; and that CMS elected not to rely on other findings. Park Manor contends that this abandon- ment, rescission, or modification of findings and remedies shows that the actions leading to the pro- ceeding were not reasonable on the whole. Park Manor further contends that in order to avoid liabil- ity for an EAJA award, CMS was obliged to establish, with evidence and argument, that each and every citation and remedy emanating from the two surveys, not just the ones it pursued before the ALJ, had a reasonable basis. In addition, Park Manor suggests that independent investigation by CMS would have revealed the weakness of the abandoned or modified deficiency citations, and that CMS was unreasonable in not performing one before deciding to impose the remedies it did. In short, Park Manor contends that CMS’s failure to justify its approval of these other survey findings warrants an EAJA award regardless of whether CMS had a [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386009_1613%3A1. Public record. Not legal advice.