ALJ's Dismissal With Prejudice After FAA Voluntary Dismissal Satisfies EAJA "Prevailing Party" Requirement

The United States Court of Appeals for the D.C. District recently reversed the FAA Administrator's determination that an applicant seeking attorney's fees under the Equal Access to Justice Act ("EAJA") was not a prevailing party after the FAA withdrew its complaint before hearing, even though an ALJ then entered an order dismissing the case with prejudice. In Green Aviation Management Co., LLC v. Federal Aviation Administration, the FAA filed a complaint alleging that Green Aviation operated a flight with 10 passengers when the aircraft was only approved for 9 passengers. The FAA was seeking to assess a $33,000 civil penalty against Green.

Prior to the hearing, the FAA withdrew its complaint. Based upon the FAA's withdrawal, the ALJ entered an order dismissing the case with prejudice as required by 14 C.F.R. § 13.215. Green Aviation then submitted an EAJA application for attorney's fees. Although the ALJ found that Green Aviation was a prevailing party, as required by EAJA, he nonetheless found that the FAA was substantially justified in pursuing its case and, as a result, the ALJ denied Green Aviation's EAJA application.

Green Aviation appealed the ALJ's denial to the FAA Administrator. However, contrary to the ALJ, the Administrator determined that Green Aviation was not a prevailing party. The Administrator reasoned that the ALJ's dismissal was required by the regulations and, since the ALJ had no discretion, his order did not make Green Aviation a prevailing party. Green Aviation then appealed the Administrator's decision to the D.C Circuit.

On appeal, the Court initially observed that a prevailing party in an EAJA fee case must meet two requirements: the judgment must be in favor of the party seeking the fees; and the judicial pronouncement must be accompanied by judicial relief. The Court found that the ALJ's dismissal order easily satisfied the first requirement.

With respect to the second requirement, the noted that the ALJ's dismissal order was "with prejudice", which resulted in a "res judicata effect" on the parties. That is, it protected Green Aviation from having to pay damages or alter its conduct based upon the same facts and circumstances alleged in the FAA's withdrawn complaint. The Court observed "[t]he dismissal order is thus not a mere formality or a housekeeping measure; rather it is the means by which Green Aviation can obtain res judicata protection."

The Court concluded that Green Aviation obtained sufficient judicial relief to be a prevailing party. As a result, the Court sent the case back to the FAA Administrator to determine whether the FAA's filing of its complaint against Green was substantially justified. If it was not, Green should be entitled to an award of attorney's fees under EAJA.

This is a great decision for parties facing unjustified civil penalty actions. Although it may not prevent the FAA from withdrawing a complaint on the eve of hearing, after a respondent has incurred significant fees, it does allow a respondent the opportunity to hold the FAA accountable.