Matthew E. Steger, III v. Defense Investigative Service Department of Defense

717 F.2d 1402, 230 U.S. App. D.C. 345, 1983 U.S. App. LEXIS 16983

• Court: Court of Appeals for the D.C. Circuit
• Decided: September 13, 1983
• Docket: 82-1226
• Status: Published

Opinions

Opinion PER CURIAM.

Dissenting opinion filed by Circuit Judge SCALIA.

PER CURIAM:

Petitioner, Matthew Steger, seeks review of a decision of the Merit Systems Protection Board (MSPB or Board) denying him attorneys’ fees which Steger incurred in successfully challenging his discharge from employment from the Defense Investigative Service (DIS). Specifically, Steger argues that the Board’s decision cannot be squared with two factors that the Board has identified elsewhere as warranting an award of attorney’s fees: first, that the agency’s discharge was clearly without merit; and second, that the discharging agency knew or should have known that it would not prevail on the merits. Because we agree that, in light of MSPB precedent, the Board’s decision as to Steger is arbitrary and capricious, we reverse the MSPB’s denial of attorneys’ fees and remand to the Board for further consideration of all the relevant factors and a determination of the appropriate fee award, if any, due petitioner.

Background

Steger is an investigator with the DIS and also the owner of an automobile parts store which he manages after hours and on weekends. On December 14, 1979, the DIS issued Steger a Notice of Proposed Removal, advising him of three charges of misconduct: (1) unauthorized use of a government-owned vehicle, (2) unauthorized absence, and (3) submission of false information on official documents. The first two charges stemmed from the sworn statements of two couples, the Davises and the Thorntons, who claimed to have seen Steger repeatedly drive his government vehicle to his store or to his home during regular working hours. The third charge stemmed from an agency audit of Steger’s office records and alleged that Steger had overstated the amount of time that he worked on his government investigations.

Steger, through his attorney, filed a written reply to the Notice of Proposed Removal and requested a hearing. Pursuant to this request, Steger and his attorney held an oral conference with the regional director of Steger’s office. At this conference, Steger presented the written, signed statements of eleven individuals stating that Steger had neither misused his government car nor gone to his home or business during working hours and casting doubt on the motives and credibility of the two couples who had indicated otherwise. See Petitioner’s Appendix (PA) 86-98. Because permission of these eleven individuals had not been obtained, however, Steger did not formally submit the statements into the record or allow them to be copied. Instead, he permitted the regional director to study the statements and to take notes on them, and urged the director to contact the eleven individuals for further corroboration. The director, however, made no further investigation. Rather, he forwarded to the DIS’ “deciding official” a conference report which alluded to the eleven statements and which, in an accompanying memorandum, summarized their content. PA 7-12, 13. In this conference report, the regional director stated that he found no reason to disbelieve the validity of the charges against Steger and therefore recommended Steger’s removal. The DIS’ deciding official accepted the director’s recommendation, made no independent inquiry into the eleven exonerating statements, and ordered Steger’s discharge.

On April 23, 1980, Steger appealed his discharge to the MSPB. After a hearing at which the eleven signed statements were submitted for the record, and at which oral testimony supporting Steger was heard, a MSPB presiding official reversed Steger’s removal. The presiding official concluded that the charges based on the affidavits of the Davises and Thorntons were contradicted by the overwhelming weight of Steger’s eleven signed statements and corroborating oral testimony. Presiding Official’s Decision, reprinted in PA 26, 29. The third charge, falsifying government records, was found to be unsupported by a preponderance of the evidence. Id. at 30. The agency did not appeal the presiding official’s decision which, in September 1980, became the final decision of the MSPB.

Following his administrative victory, Steger applied to the Board for attorneys’ fees. His application specified the $8,084.00 in total fees and expenses he had incurred in recovering his job and stated that:

Payment is warranted in the interest of justice. The agency did not support its removal action with competent evidence. Its investigation was incomplete and insufficient to justify the adverse action it took. The agency’s attempt to terminate the appellant was improper, and its case clearly lacked merit.

PA 34. In January 1981, the same presiding official who had reversed Steger’s removal denied his motion for attorneys’ fees. Addendum Decision, reprinted in PA 37-39. Steger appealed this decision to the full Board which, in January 1982, upheld its presiding official. Essentially, the Board found attorneys’ fees properly denied in this case because Steger had not submitted the eleven signed exculpatory statements into the DIS’ administrative record: “Because the signed statements did not become a part of the agency’s record and the agency deciding official did not have an opportunity to review them, appropriate officials within the agency had no reason to believe that the agency would not prevail.” PA 47. This petition for judicial review followed.

Discussion

The Civil Service Reform Act of 1978 (the Act) provides the MSPB with statutory authority to award attorneys’ fees to employees who successfully challenge adverse personnel actions:

[T]he Board ... may require payment by the agency involved of reasonable attorney fees incurred by an employee or applicant for employment if the employee or - applicant is the prevailing party and the Board ... determines that payment by the agency is warranted in the interest of justice, including any ease in which a prohibited personnel practice was engaged in by the agency or any case in which the agency’s action was clearly without merit.

5 U.S.C. § 7701(g)(1) (Supp. V 1981). See also 5 C.F.R. § 1201.37(a) (1982) (employing same language). As this statutory grant indicates, the Board enjoys considerable discretion in deciding when an award of attorneys’ fees “is warranted in the interest of justice.” The MSPB’s discretion is not, however, absolute. The applicable standard of judicial review requires this court to set aside the Board’s attorneys’ fees decisions that are arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. See 5 U.S.C. § 7703(c)(1) (Supp. V 1981). Although the nature of our review is admittedly narrow, we must inter alia satisfy ourselves that the Board, in reaching its decision, has considered the “relevant factors.” See Motor Vehicle Manufacturers Association of the United States v. State Farm Mutual Automobile Insurance Co., — U.S. —, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983); Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971).

The factors relevant to the Board’s determination of attorney’s fees were established by the MSPB itself in Allen v. Postal Service, 2 MSPB 582 (1980). In Allen, the Board identified several circumstances that may warrant attorneys’ fees under the “interest of justice” standard:

1. Where the agency engaged in a “prohibited personnel practice”;

2. Where the agency’s action was “clearly without merit,” or was “wholly unfounded,” or the employee is “substantially innocent” of the charges brought by the agency;

3. Where the agency initiated the action against the employee in “bad faith,” including:

a. Where the agency’s action was brought to “harrass” the employee;

b. Where the agency’s action was brought to “exert improper pressure on the employee to act in certain ways.”

4. Where the agency committed a “gross procedural error” which “prolonged the proceeding” or “severely prejudiced” the employee;

5. Where the agency “knew or should have known that it would not prevail on the merits” when it brought the proceeding.

2 MSPB at 593 (citations and footnotes omitted). Given this interpretation of the Act, we reject at the outset the suggestion by DIS that the Board may only award attorneys’ fees if a claimant proves “bad faith or some comparable motive prompting the agency action.” Respondent’s Brief at 12. Such a position is wholly at odds with the well-supported conclusion reached by the Board in Allen that the “warranted in the interest of justice” standard, as enacted in the final version of the Act, was “intended to be broader than that provided [in an earlier Senate bill] which would have limited awards to cases involving agency bad faith.” 2 MSPB at 591 (citing Transcript of House-Senate Committee’s Mark-up Session on S. 2640, 95th Cong., 2d Sess. 50-51 (Sept. 27, 1978) and 11, 30 (Sept. 28, 1978)). See Erdman v. Department of Labor, 6 MSPB 54, 55 (1981) (“Contrary to the agency’s contention, there does not have to be a finding of bad faith and ill will in order to grant fees. Bad faith is only one of the circumstances to be considered in awarding fees”). Indeed, in the present case, the Board’s presiding official found that the circumstances listed in Allen as items 1, 3, and 4 (including the “bad faith” situation) were not even factually relevant elements of Steger’s case. Addendum to Decision No. DC07528010017 (Addendum Decision), reprinted in PA 38. Instead, both the presiding official and the full Board found that Steger’s case implicated only items 2 and 5: whether DIS’ action against Steger was “clearly without merit” and whether DIS “knew or should have known that it would not prevail on the merits” when it sought to terminate Steger’s employment. Id. at 2, reprinted in PA 38; MSPB Opinion and Order, DC07528010017 (Final Decision), reprinted in JA 46. We turn now to the MSPB’s treatment of these two relevant factors.

We begin the analysis by noting that the factors deemed relevant by the Board involve two relatively distinct situations. First, there is the situation where an agency’s adverse action against an employee is virtually groundless. In making this determination, the Board examines “the degree of fault on the employee’s part and the existence of any reasonable basis for the agency’s action.” Allen, 2 MSPB at 593 n. 35. Generally speaking, this inquiry is categorized under Allen factor 2 (agency action that is “clearly without merit,” “wholly unfounded,” or taken against an employee who is “substantially innocent” of the charges), although it may also be appropriate in part to factor 5 (where an agency knows “that it would not prevail on the merits”). Second, there is the state of affairs identified in the remaining part of factor 5, where an agency takes action against an employee even though it “should have known that it would not prevail on the merits.” Id. at 593 (emphasis added). The relevant determination here focuses in large measure on an agency’s failure to investigate exonerating facts brought to its attention by the affected employee. As the Board has stated, attorneys’ fees may be warranted when an agency fails to make such reasonable inquiry and “obdurately presse[s] on with the charges . .. . ” O’Donnell v. Department of Interior, 2 MSPB 604, 609 (1980); accord Cicero v. Postal Service, 4 MSPB 145 (1980); Stout v. Postal Service, 3 MSPB 440 (1980).

In the present case, the Board considered the first of these factors and concluded that, because Steger failed to submit his eleven exonerating statements into the record, the DIS had at least a colorable reason for pursuing its charges against him. Specifically, the Board found that “appropriate officials within the agency had no reason to believe that the agency would not prevail” given that the agency decisionmaker had before him actual, sworn statements supporting the charges and only the regional director’s hearsay summary of the eleven counter-statements, denying them. See Final Decision, PA 47; Addendum Decision, PA 39. We do not take issue with the Board’s judgment, as far as it goes. But the Board’s explanation for denying fees in this case clearly does not complete its required task — it nowhere discusses or even acknowledges the agency’s separate obligation to make reasonable inquiries into the exonerating facts which Steger brought to its attention. This is especially troubling in light of MSPB decisions holding, on factual patterns remarkably similar to those presented here, that attorneys’ fees are warranted because an agency “should have known” that it would not prevail on the merits.

In O’Donnell v. Department of Interior, 2 MSPB 604 (1980), the Board awarded attorneys’ fees to a private in the United States Park Police who had successfully contested his removal. In that case, the Park Service, relying on the expert diagnoses of the Board of Police and Fire Surgeons and several physicians of the Public Health Service, notified O’Donnell of its decision to terminate his employment for absence from duty due to a work-related knee injury and for his failure to submit to recommended corrective surgery. Although O’Donnell, in his written reply to these charges, referred to a recent arthroscopy indicating that the Park Service’s experts had misdiagnosed his condition, the Park Service failed to investigate the arthroscopy’s results and terminated O’Donnell’s employment. Later, after O’Donnell had successfully challenged his removal on the merits, the Board awarded him attorneys’ fees because “if the agency had properly inquired into the facts presented by appellants’ written reply to the charges, the agency would have — and certainly should have — ascertained at the outset that the central charge against appellant was without merit.” 2 MSPB at 608. We find Steger’s position analogous to that presented in O’Donnell; in particular, we note that the agency in O’Donnell was found to have failed in its duty of proper inquiry even though O’Donnell had apparently only “referred” to certain exonerating evidence in his written reply to the agency. See 2 MSPB at 605 n. 2. Given the Board’s decision in O’Donnell, it is difficult to see why, in the present case, the regional director’s written reference to the existence of the eleven exonerating statements did not serve to trigger the agency’s duty to investigate to the same extent that the Board found O’Donnell’s reference to the arthroscopy to have done. Indeed, we find the Board’s rationale in this case — focusing on Steger’s failure to provide the agency with copies of the eleven statements — to be fairly inexplicable in light of other decisions of the Board as well. In Batchelder v. Department of Treasury, Docket No. BN07528010070ADD (Nov. 22, 1982), for example, the Board suggested that an agency’s duty of prudent inquiry could be triggered by providing it with facts in an oral reply that would prompt it to inquire further into the merits of the charge. Id., slip op. at 4. Similarly, in Stout v. Postal Service, 3 MSPB 440 (1980), the Board held that an agency’s deciding official should have known that he could not succeed against an employee had he “properly considered the [employee’s] response and investigated any questions it provoked in his mind.” Id. at 441 — 42 (emphasis added).

Given that the DIS’ deciding official in the present case was provided with clear, written indication that evidence exonerating Steger existed, his failure to inquire into this evidence is difficult to square with the Board’s decisions in O’Donnell, Batchelder, and Stout. See also Cicero v. Postal Service, 4 MSPB 145 (1980) (attorneys’ fees awarded when agency disregarded credible evidence of employee’s presence at work where employee had been charged with not being at work). And, as this court had indicated before, an agency is under an obligation to follow, distinguish, or overrule its own precedent. See, e.g., Local 777, Democratic Union Organizing Comm. v. NLRB, 603 F.2d 862, 872 (D.C.Cir.1978). The Board cannot, despite its considerable discretion, treat similar situations dissimilarly and, indeed, can be said to be at its most arbitrary when it does so. See Etelson v. OPM, 684 F.2d 918, 926-27 (D.C.Cir.1982). When the Board not only fails to distinguish its precedent, but wholly fails to even consider it, the agency’s arbitrariness is compounded. Such is the case here. The Board never once discussed any of its cases describing an agency’s duty of inquiry, even though it expressly identified Allen’s “should have known” factor as a particularly relevant consideration in the present case. Nor did the Board suggest that the DIS properly proceeded against Steger solely on the questionable strength of the third charge (filing misleading investigative reports). Thus, the Board’s failure to. consider the “should have known” factor, as to the two main charges leveled against Steger, forces us to reject its decision in this case as arbitrary and capricious.

Conclusion

Since its. seminal opinion in Allen, the Board has determined that attorneys’ fees may be warranted when an agency blindly continues with an adverse personnel action despite the presentation of exonerating facts by the employee — facts which, had the agency only inquired into them, would have spared the employee the considerable expense of hiring an attorney. In the present case, the Board’s unexplained failure to apply an agency’s duty of prudent inquiry to the DIS forces us to reverse the Board’s decision as arbitrary and capricious and to remand to the Board for further consideration of whether, in light of this relevant factor, a fee award is due Steger and, if so, in what amount.

It is so ordered.