On Petitioner’s Application for Attorneys’ Fees
Before CLARK, Chief Judge, GOLDBERG and GARWOOD, Circuit Judges.
[52]*52BY THE COURT:
IT IS ORDERED that petitioner’s Application for Attorneys’ Fees and Expenses Under, the Equal Access to Justice Act, 28 U.S.C. § 2412, is DENIED.
Petitioner, having prevailed for the reasons set out in our opinion on the merits herein, Griffon v. United States Department of Health, 802 F.2d 146 (5th Cir.1986), seeks attorneys’ fees under the Equal Access to Justice Act (EATJA), 28 U.S.C. § 2412, and is entitled to recover them “unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust,” 28 U.S.C. § 2412(d)(1)(A). The position of the United States for this purpose includes its underlying action as well as its litigation position. § 2412(d)(2)(D). The United States has the burden to demonstrate that its position was substantially justified, and we have said that “[t]he touchstone of substantial justification is reasonableness,” and that government meets its burden “if it shows that its position has a reasonable basis both in law and fact.” U.S. Life Title Insurance Company of Dallas v. Harbison, 784 F.2d 1238, 1242 (5th Cir.1986). Here, however, reasonableness in fact is not in issue, as the only question presented was purely one of law, namely, whether the regulations of the Secretary of Health and Human Services retroactively applying the procedural aspects of the Civil Monetary Penalties Law (CMPL), 42 U.S.C. § 1320a-7a, were consistent with that statute. While we held they were not, that does not end the matter, for as we have recognized:
“ ‘The standard, however, should not be read to raise a presumption that the Government position was not substantially justified, simply because it lost the case. Nor, in fact, does the standard require the government to establish that its decision to litigate was based on a substantial probability of prevailing.’ H.R.Rep. No. 1418, 96th Cong., 2d Sess. 11, 1980 U.S.Code Cong. & Admin.News 4953, 4989-90.” US. Life Title Insurance Company, 784 F.2d at 1242.
Although our quoted language was directed to the litigation position of the government, in the circumstances of this case there is no reason not to similarly apply it also to the adoption of the regulations themselves.
Our decision on the merits invalidating the regulations in a sense determined that they amounted to an unreasonable interpretation of the statute, as “[a] court of appeals can only invalidate an administrator’s interpretation if that interpretation is unreasonable,” Griffon, 802 F.2d at 148. Nevertheless, we do not regard this as conclusive on the substantial justification question, else in this class of case the substantial justification issue would always simply merge with the decision on the merits. That, however, would be contrary to the above-quoted language of US. Life Title Insurance Company. As is pointed out in Federal Election Commission v. Rose, 806 F.2d 1081, 1087 (D.C.Cir.1986), the EATJA “substantially justified” question is governed by a standard “that is separate and distinct from whatever legal standards governed the merits phase of the case.” Merely because the government’s underlying action was held legally invalid as being “arbitrary and capricious” does not necessarily mean that the government acted without substantial justification for purposes of the EATJA, despite “the apparent anomaly in this result.” Id. We also observe that the same sort of distinction, though in a different context, was made by Justice Scalia in Anderson v. Creighton, — U.S. -, 107 S.Ct. 3034, 3041, 97 L.Ed.2d 523 (1987), where he recognized that the fact that a warrantless search was substantively invalid because unreasonable did not necessarily mean that the officer making it acted unreasonably for purposes of qualified immunity, even though this could be characterized as saying that the officer was “ ‘reasonably unreasonable.’ ”
Exercising our judgment in this matter, cf. Rose at 1089, we conclude that the government’s position was “substantially justified” within the meaning of the EATJA. The case was one of first impression, not only with respect to the CMPL [53]*53but also as to the more general question of administrative action retroactively applying the procedural aspects of a statute which, though predominately procedural, is nevertheless partially substantive. As we noted:
“This case wages a conflict of first impression, which simultaneously sounds two canons: first, that in the absence of congressional intent, substantive legislation is to be given prospective application, and; second, that procedural legislation is to be given retroactive application. When a statute of mixed procedural and substantive character appears in the midst of the fray, no single rule reveals the faction to which it belongs.” Griffon, 802 F.2d at 147.1
We noted that the legislative history was not helpful one way or the other (id. at 150-51; “deafening congressional silence”), but, as the above set-out quotation indicates, we nevertheless recognized that regulations giving retroactive application to a procedural statute were proper even without affirmative support in the legislative history. Id. at 150-51. We further noted that “Congress generally intended the CMPL to be a procedural, civil alternative to ameliorate the pattern of underenforcement of criminal statutes,” and that “it is not wholly unreasonable to adopt the Secretary’s interpretation that the CMPL was also intended to provide a procedural alternative to the FCA [False Claims Act]. Most of the CMPL provisions are procedural.” Id. at 151. However, we went on to point out that the CMPL made one change expanding substantive liability, and we stated that therefore the question before us was “[w]hether this change so colors the nature of the Act as to make the CMPL substantive law for retroactivity purposes.” Id. While we answered affirmatively, we also observed in this respect that “[l]ittle guidance exists on whether the statute as a whole can be characterized as procedural.” Id. We also had to deal with the likewise essentially res nova question of whether retroactive application of the procedural aspects only of a mixed statute, and not its substantive aspects, was permissible, as it most likely would have been had the statute been entirely procedural with the substantive changes being made by separate enactment. We concluded that this was not permissible, despite “the lack of unfairness to petitioner.” Id. at 155.
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On Petitioner’s Application for Attorneys’ Fees
Before CLARK, Chief Judge, GOLDBERG and GARWOOD, Circuit Judges.
[52]*52BY THE COURT:
IT IS ORDERED that petitioner’s Application for Attorneys’ Fees and Expenses Under, the Equal Access to Justice Act, 28 U.S.C. § 2412, is DENIED.
Petitioner, having prevailed for the reasons set out in our opinion on the merits herein, Griffon v. United States Department of Health, 802 F.2d 146 (5th Cir.1986), seeks attorneys’ fees under the Equal Access to Justice Act (EATJA), 28 U.S.C. § 2412, and is entitled to recover them “unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust,” 28 U.S.C. § 2412(d)(1)(A). The position of the United States for this purpose includes its underlying action as well as its litigation position. § 2412(d)(2)(D). The United States has the burden to demonstrate that its position was substantially justified, and we have said that “[t]he touchstone of substantial justification is reasonableness,” and that government meets its burden “if it shows that its position has a reasonable basis both in law and fact.” U.S. Life Title Insurance Company of Dallas v. Harbison, 784 F.2d 1238, 1242 (5th Cir.1986). Here, however, reasonableness in fact is not in issue, as the only question presented was purely one of law, namely, whether the regulations of the Secretary of Health and Human Services retroactively applying the procedural aspects of the Civil Monetary Penalties Law (CMPL), 42 U.S.C. § 1320a-7a, were consistent with that statute. While we held they were not, that does not end the matter, for as we have recognized:
“ ‘The standard, however, should not be read to raise a presumption that the Government position was not substantially justified, simply because it lost the case. Nor, in fact, does the standard require the government to establish that its decision to litigate was based on a substantial probability of prevailing.’ H.R.Rep. No. 1418, 96th Cong., 2d Sess. 11, 1980 U.S.Code Cong. & Admin.News 4953, 4989-90.” US. Life Title Insurance Company, 784 F.2d at 1242.
Although our quoted language was directed to the litigation position of the government, in the circumstances of this case there is no reason not to similarly apply it also to the adoption of the regulations themselves.
Our decision on the merits invalidating the regulations in a sense determined that they amounted to an unreasonable interpretation of the statute, as “[a] court of appeals can only invalidate an administrator’s interpretation if that interpretation is unreasonable,” Griffon, 802 F.2d at 148. Nevertheless, we do not regard this as conclusive on the substantial justification question, else in this class of case the substantial justification issue would always simply merge with the decision on the merits. That, however, would be contrary to the above-quoted language of US. Life Title Insurance Company. As is pointed out in Federal Election Commission v. Rose, 806 F.2d 1081, 1087 (D.C.Cir.1986), the EATJA “substantially justified” question is governed by a standard “that is separate and distinct from whatever legal standards governed the merits phase of the case.” Merely because the government’s underlying action was held legally invalid as being “arbitrary and capricious” does not necessarily mean that the government acted without substantial justification for purposes of the EATJA, despite “the apparent anomaly in this result.” Id. We also observe that the same sort of distinction, though in a different context, was made by Justice Scalia in Anderson v. Creighton, — U.S. -, 107 S.Ct. 3034, 3041, 97 L.Ed.2d 523 (1987), where he recognized that the fact that a warrantless search was substantively invalid because unreasonable did not necessarily mean that the officer making it acted unreasonably for purposes of qualified immunity, even though this could be characterized as saying that the officer was “ ‘reasonably unreasonable.’ ”
Exercising our judgment in this matter, cf. Rose at 1089, we conclude that the government’s position was “substantially justified” within the meaning of the EATJA. The case was one of first impression, not only with respect to the CMPL [53]*53but also as to the more general question of administrative action retroactively applying the procedural aspects of a statute which, though predominately procedural, is nevertheless partially substantive. As we noted:
“This case wages a conflict of first impression, which simultaneously sounds two canons: first, that in the absence of congressional intent, substantive legislation is to be given prospective application, and; second, that procedural legislation is to be given retroactive application. When a statute of mixed procedural and substantive character appears in the midst of the fray, no single rule reveals the faction to which it belongs.” Griffon, 802 F.2d at 147.1
We noted that the legislative history was not helpful one way or the other (id. at 150-51; “deafening congressional silence”), but, as the above set-out quotation indicates, we nevertheless recognized that regulations giving retroactive application to a procedural statute were proper even without affirmative support in the legislative history. Id. at 150-51. We further noted that “Congress generally intended the CMPL to be a procedural, civil alternative to ameliorate the pattern of underenforcement of criminal statutes,” and that “it is not wholly unreasonable to adopt the Secretary’s interpretation that the CMPL was also intended to provide a procedural alternative to the FCA [False Claims Act]. Most of the CMPL provisions are procedural.” Id. at 151. However, we went on to point out that the CMPL made one change expanding substantive liability, and we stated that therefore the question before us was “[w]hether this change so colors the nature of the Act as to make the CMPL substantive law for retroactivity purposes.” Id. While we answered affirmatively, we also observed in this respect that “[l]ittle guidance exists on whether the statute as a whole can be characterized as procedural.” Id. We also had to deal with the likewise essentially res nova question of whether retroactive application of the procedural aspects only of a mixed statute, and not its substantive aspects, was permissible, as it most likely would have been had the statute been entirely procedural with the substantive changes being made by separate enactment. We concluded that this was not permissible, despite “the lack of unfairness to petitioner.” Id. at 155.
While we have no doubt as to the correctness of our conclusion on the merits, the foregoing nevertheless demonstrates that petitioner correctly characterizes the questions presented as “both novel and difficult” (see note 1, supra). We conclude that the government’s position, though ultimately erroneous, was nevertheless “substantially justified.” We are also mindful in this regard that the “special circumstances” provision of section 2412(d)(1)(A) was in part designed to “ ‘insure that the Government is not deterred from advancing in good faith ... novel but credible ... interpretations of the law that often underlie vigorous enforcement efforts.’ ” Russell v. National Mediation Board, 775 F.2d 1284, 1290 (5th Cir.1985). We think the same considerations may legitimately influence to some extent our determination of whether the government is “substantially justified” in respect to a res nova legal position, at least where, as here, we conceive a contrary result to be unjust. Here there is no question of good faith, and as we pointed out, the CMPL was intended to “ameliorate the pattern of underenforcement,” and the regulations were in furtherance of this intent and were crafted not to trample on substantive rights. Of course, “res nova ” is not a safe harbor for stupidity, callousness, or bad faith. Russell. But here the situation is wholly different from Russell, where we noted that the merits determination had characterized a key government contention as “ ‘playing games [54]*54with the plaintiffs and with this court,’ ” and another government argument as “ ‘a perversion of the truth,’ ” and had held that the government “breached its clear statutory mandate.” Russell at 1290.
We conclude that the government’s position was substantially justified within the meaning of the EATJA so that petitioner is not entitled to attorneys’ fees thereunder.