                                PUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT


                               No. 14-2363


THE NATIONAL ORGANIZATION FOR MARRIAGE, INC.,

                Plaintiff - Appellant,

           v.

THE UNITED STATES OF AMERICA, Internal Revenue Service,

                Defendant - Appellee.



Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. James C. Cacheris, Senior
District Judge. (1:13−cv−01225−JCC−IDD)


Argued:   September 16, 2015                 Decided:   December 2, 2015


Before GREGORY, AGEE, and DIAZ, Circuit Judges.


Affirmed by published opinion. Judge Diaz wrote the opinion, in
which Judge Gregory and Judge Agee joined.


ARGUED: William Earl Davis, PUBLIC INTEREST LEGAL FOUNDATION,
Plainfield, Indiana, for Appellant. Ivan C. Dale, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.         ON
BRIEF:   Kaylan   L.   Phillips,  Noel   H.  Johnson,  Joseph  A.
Vanderhulst, ACTRIGHT LEGAL FOUNDATION, Plainfield, Indiana;
John C. Eastman, CENTER FOR CONSTITUTIONAL JURISPRUDENCE,
Orange, California; Jason Torchinsky, Shawn Toomey Sheehy,
HOLTZMAN   VOGEL   JOSEFIAK,   PLLC,   Warrenton,  Virginia,  for
Appellant.     Caroline D. Ciraolo, Acting Assistant Attorney
General, Richard Farber, Tax Division, UNITED STATES DEPARTMENT
OF JUSTICE, Washington, D.C.; Dana J. Boente, United States
Attorney, OFFICE OF THE   UNITED   STATES   ATTORNEY,   Alexandria,
Virginia, for Appellee.




                              2
DIAZ, Circuit Judge:

        The National Organization for Marriage (“NOM”) appeals the

district       court’s      denial    of     its     motion     under    26     U.S.C.

§ 7431(c)(3)       to    collect     attorneys’       fees    from    the     Internal

Revenue Service.           NOM contends that the district court abused

its discretion by determining that NOM was not a “prevailing

party” under 26 U.S.C. § 7430(c)(4)(A) because (1) it did not

“substantially prevail[] [in litigation against the IRS] with

respect       to   the     amount    in     controversy,       or . . . the       most

significant . . . issues presented,” and, alternatively, (2) the

government’s       position     in    the        litigation    was   “substantially

justified” under § 7430(c)(4)(B).                   We agree with the district

court      that      the     government’s           litigation       position      was

“substantially justified,” which, by itself, is sufficient to

find that NOM was not a “prevailing party” under the statute.

Consequently, we affirm.



                                            I.

                                            A.

       NOM is a tax-exempt, nonprofit organization whose mission

is “to protect marriage and the faith communities that sustain

it across the United States.”                   J.A. 11.      Each year, NOM must

file    IRS   Form   990,    which   includes        the   names,    addresses,   and

contribution amounts of donors who gave $5,000 or more during

                                            3
the year.       26 U.S.C. § 6033(a)(1); 26 C.F.R. § 1.6033-2(a)(2).

While federal law requires the IRS to make information in a tax-

exempt organization’s return available to the public, the IRS

must redact the names and addresses of donors listed in a Form

990 filing.       26 U.S.C. § 6104(b); 26 C.F.R. § 301.6104(b)-1(b),

(d).

       Despite these rules, an IRS clerk released NOM’s unredacted

donor list from its 2008 filing after receiving a request in

January 2011 for NOM’s publicly available tax information.                     The

IRS destroyed the request after forty-five days per its standard

policy.      Consequently, little is known about it other than that

it was made by a Matthew Meisel, who identified himself as a

member of the media.

       Meisel gave NOM’s Form 990 information to the Human Rights

Campaign (the “HRC”)—an ideological opponent of NOM.                      The HRC

then forwarded the information to the Huffington Post.                    Both the

HRC and the Huffington Post published the donor list online.

       After    discovering    its    unredacted         donor     list   on   the

Internet,      NOM   sought   to   mitigate       any    potential    harm.     It

undertook its own investigation of the unauthorized disclosure

and attempted to have its tax-return information removed from

the HRC’s and the Huffington Post’s websites.                    Additionally, it

urged the Treasury Inspector General for Tax Administration as

well    as     certain   members     of       Congress    to   investigate     the

                                          4
disclosure.       NOM    also       was    forced     to    mount    a   defense        to    a

complaint     filed     with        California’s         Fair    Political        Practices

Commission by a man named Fred Karger.                           The complaint, which

alleged violations of California election law, referenced the

unredacted information contained in NOM’s 2008 Form 990.

                                             B.

      NOM filed suit against the IRS “seeking damages pursuant to

26   U.S.C.   § 7431     for        unlawful      inspection       and   disclosure          of

confidential tax information by agents of the [IRS] in violation

of 26 U.S.C. § 6103.”               J.A. 9.       NOM sought statutory damages,

actual damages, punitive damages due to “willful and grossly

negligent disclosures and inspections of NOM’s return and return

information,”     and    costs       and    attorneys’      fees     under    § 7431(c).

J.A. 31–32.

      In    its   answer,       the       government       admitted      that      on    one

occasion—the      response          to     Meisel’s      request—it        inadvertently

disclosed an unredacted copy of NOM’s Form 990 information.                              The

government conceded this act entitled NOM to a single recovery

of statutory damages.           It denied, however, that NOM was entitled

to actual or punitive damages, costs, or attorneys’ fees.

      After   a   period       of     discovery,      the       government    moved      for

summary     judgment.          It    argued       that     NOM    failed     to     present

sufficient evidence that (1) the IRS conducted any unauthorized

inspections, (2) NOM was entitled to punitive damages because

                                             5
the IRS’s disclosure was willful or grossly negligent, and (3)

NOM was entitled to actual damages. 1            With regard to this final

contention,    the    government     maintained    that    the    unauthorized

disclosure    was    neither   the   “but-for”    nor   proximate    cause   of

NOM’s alleged damages.         Additionally, the government argued that

NOM mitigated its claims for actual damages through aggressive

and successful fundraising.

     The district court granted partial summary judgment to the

government.    As to NOM’s punitive damages claim, the court found

that NOM failed to present sufficient evidence showing that the

IRS acted willfully or with gross negligence.                The court also

ruled for the government on NOM’s claim of unlawful inspection

because NOM failed to present sufficient evidence to carry its

burden.

     The   district    court,    however,   denied      summary   judgment   on

NOM’s claim for actual damages.             The court explained that it

     1 By this point in the litigation, NOM’s basis for actual
damages, and consequently the amount it sought to recover, had
changed.   NOM’s complaint sought “actual damages according to
proof,” and specifically identified lost donations in the amount
of $50,000 as well as damages based on defending the Karger
complaint in California in the amount of $10,500.    J.A. 31–32.
Later in the litigation, however, NOM elected to withdraw its
claim for the $50,000 in lost donations. NOM then added $2,000
to the damages it sought for defending the Karger complaint and
$46,086.37 in additional legal expenses arising from NOM’s
efforts to prevent the further dissemination of its donor
information.   This brought the total revised amount of claimed
actual damages to $58,586.37.



                                       6
“ha[d]       little      trouble           concluding      that     the     unlawful

disclosure . . . was           the     actual     cause     of    [NOM’s]       claimed

damages.”      Nat'l Org. for Marriage, Inc. v. United States, 24 F.

Supp. 3d 518, 529 (E.D. Va. 2014).                As for proximate cause, the

court noted that the question was “a closer call” given that

“proximate cause is a ‘flexible concept’ not easily defined or

implemented.”         Id. at 530 (quoting Paroline v. United States,

134    S.    Ct.     1710,   1719     (2014)).          Nevertheless,     the     court

explained, “[t]he independent actions of Meisel, the HRC, and

others      cannot    immunize       the   IRS   from    responsibility     in    this

case,” and therefore “[t]he fact that a third-party was involved

in [the] chain of events does not foreclose finding proximate

cause on the[] facts [presented].”                 Id. at 531.          Finally, the

district     court     rejected      the    government’s     mitigation     argument

because there was “a continuing factual dispute as to whether

the cited contributions were caused by the disclosure, and if

so, in what amount.”         Id. at 532.

       The parties subsequently entered into a consent judgment.

The government agreed to pay NOM $50,000 to resolve its claims

for actual damages and costs.                Additionally, the parties agreed

that   the    court    would     retain      jurisdiction    so   NOM     could    seek

attorneys’ fees under § 7431(c)(3).

       NOM moved for $691,025.05 in attorneys’ fees.                    The district

court denied the motion.             This appeal followed.

                                             7
                                       II.

      Under § 7431(a)(1), a taxpayer may bring suit against the

United States if an “employee of the United States knowingly, or

by reason of negligence, inspects or discloses any return or

return information with respect to a taxpayer in violation of

any provision of section 6103.” 2             Reasonable attorneys’ fees are

potentially available under § 7431(c)(3), but “if the defendant

is the United States, reasonable attorneys fees may be awarded

only if the plaintiff is the prevailing party (as determined

under section 7430(c)(4)).”            Section 7430(c)(4)(B)(i) mandates

that if the government is the defendant, the plaintiff “shall

not   be   treated   as    the    prevailing      party . . . if    the    United

States establishes that [its] position . . . in the proceeding

was substantially justified.”

      The district court held that the government’s position was

substantially      justified      under       § 7430(c)(4)(B).      The     court

reasoned    that     the    government        “reasonably     contested     NOM’s

unfounded     conspiracy         allegations,       and     unfounded     willful

disclosure and inspection allegations that would have supported

a claim for punitive damages if properly proven.”                   Nat'l Org.

for   Marriage,    Inc.    v.    United   States,    No.    13cv1225,     2014   WL

      2 26 U.S.C. § 6103 generally provides that tax-return
information should be kept confidential. It is undisputed that
by releasing NOM’s unredacted Form 990, the IRS violated § 6103.



                                          8
5320170, at *6 (E.D. Va. Oct. 16, 2014).                       The court did not

comment,     however,      on       whether       the   government’s         position

respecting actual damages was substantially justified.

     NOM seizes on the district court’s silence on this issue,

arguing that it amounts to an abuse of discretion. 3                         NOM also

argues that once the government’s contention on actual damages

is taken into account, it becomes clear that the government’s

position was not substantially justified.                     We will assume the

district     court      abused      its     discretion        as    NOM     contends.

Therefore, we turn directly to whether the government’s position

in this litigation was substantially justified in light of its

arguments regarding actual damages.

     The     government’s       litigation         position    is    “substantially

justified”    if   it   has     a   “reasonable      basis    in    law    and   fact,”

United States v. 515 Granby, LLC, 736 F.3d 309, 315 (4th Cir.

2013) (quoting Cody v. Caterisano, 631 F.3d 136, 141 (4th Cir.

2011)), or if it is “justified to a degree that could satisfy a

reasonable    person,”     Pierce      v.       Underwood,    487   U.S.    552,   565

(1988). 4    It is not necessarily enough that the government’s



     3 We review the district court’s denial of attorneys’ fees
for abuse of discretion. Bowles v. United States, 947 F.2d 91,
94 (4th Cir. 1991).
     4 A number of the cases we cite in this opinion, including
Granby and    Pierce,  deal  with   a  provision  analogous  to
§ 7430(c)(4)(B) in the Equal Access to Justice Act (“EAJA”), 28
(Continued)
                                            9
position    is     “more     than      merely     undeserving       of    sanctions     for

frivolousness” to qualify as “substantially justified.”                            Granby,

736 F.3d at 315 (quoting Pierce, 487 U.S. at 566).                          On the other

hand, the government’s position need not necessarily carry the

day.    Pierce, 487 U.S. at 569.                The burden is on the government

to   show—based      on    the    totality        of   the    circumstances—that        its

position     was     substantially           justified.            § 7430(c)(4)(B)(i);

Bowles,     947    F.2d    at     94    (noting        that   “‘all      the    facts   and

circumstances surrounding the proceeding[]’ provide guidance to

the court” (quoting In re Testimony of Arthur Andersen & Co.,

832 F.2d 1057, 1060 (8th Cir. 1987))).

       To    assess        whether        the      government’s           position      was

substantially       justified,          we   first       consider        “the    available

‘objective        indicia’       of    the      strength      of    the     Government’s

position.”        United States v. Paisley, 957 F.2d 1161, 1166 (4th

Cir. 1992) (citing Pierce, 487 U.S. at 568–71).                            The pertinent

indicia will change depending on the case, but as relevant here




U.S.C. § 2412(d)(1)(A). We have said that the EAJA’s definition
of “substantially justified” is “essentially the same” as in
§ 7430.   Bowles, 947 F.2d at 94; see also Kenagy v. United
States, 942 F.2d 459, 464 (8th Cir. 1991) (“The ‘not
substantially justified’ standard was copied by Congress from
the EAJA provisions.    Thus, where the wording is consistent,
courts read the EAJA and § 7430 in harmony.”). Consequently, we
rely on judicial interpretations of the EAJA’s “substantially
justified” language.



                                             10
they include “the terms of the settlement agreement that ended

the underlying litigation, the stage at which the merits were

thereby decided, and the views of other courts on the strength,

hence     reasonableness,          of    the        Government’s         position.”          Id.

(citing Pierce, 487 U.S. at 568–71).

       The fact that the parties reached a settlement cannot alone

establish    the     unreasonableness               of   the     government’s        position.

Pierce,    487     U.S.      at   568.         Additionally,        the    fact       that   the

government’s       position        survives         or    dies    during       the     pleading

stage—or even makes it all the way to the Supreme Court—does not

conclusively establish the strength or weakness of the position.

See id. at 568-69 (“At least where, as here, the dispute centers

upon    questions       of   law    rather      than      fact,     summary      disposition

proves only that the district judge was efficient.”); Paisley,

957 F.2d at 1166 (concluding that a final merits decision before

the    Supreme     Court      could      not    establish         the    strength       of   the

prevailing position because “unfounded claims sometimes, for a

variety of reasons, survive beyond their just desserts”); see

also Pierce, 487 U.S. at 569 (“[The government] could take a

position that is substantially justified, yet lose.”).

       If the “objective indicia” are inconclusive, we “turn[] to

an    independent       assessment       of     the      merits    of    the    Government’s

position.”         Paisley,        957   F.2d       at    1166.         Here   too,     “merits

decisions     in    a     litigation,          whether         intermediate       or     final,

                                               11
cannot, standing alone, determine the substantial justification

issue.”        Id. at 1167.       Nevertheless, “they—and more critically

their rationales—are the most powerful available indicators” of

whether the government’s position was “substantially justified.”

Id.

       Moving to the first step of the analysis, we consider three

indicia       bearing     on   the     reasonableness        of     the    government’s

position.        The first two are (1) the fact that the parties

ultimately settled the actual damages claim, and (2) the fact

that     the     claim     survived      summary         judgment.              These    are

insufficient to carry the day without more.                       The third objective

factor    that      NOM    asks   us    to        consider   is     the    District        of

Nebraska’s decision in Jones v. United States, 9 F. Supp. 2d

1119 (D. Neb. 1998).            See Appellant’s Br. at 26.                 Specifically,

NOM argues that Jones demonstrates that third parties abusing

confidential tax-return information is a reasonably foreseeable

consequence of an unauthorized disclosure.                    Id. at 33–34.

       We find NOM’s reliance on Jones unavailing.                              First, one

other district court’s view is not enough to establish or refute

the reasonableness of the government’s position.                             See Pierce,

487    U.S.    at   569   (“Obviously,       the     fact    that    one    other       court

agreed    or    disagreed      with    the    Government       does       not    establish

whether its position was substantially justified.”); see also

§ 7430(c)(4)(B)(iii)           (directing         that   courts     “shall      take    into

                                             12
account whether the United States has lost in courts of appeal

for     other     circuits          on    substantially       similar     issues”       in

undertaking       the    substantial         justification        inquiry    (emphasis

added)).

      Second, Jones involves distinguishable facts, rendering it

a weak objective indicator of the merits of the government’s

position in this case.                   In Jones, an IRS agent investigating

criminal    violations         unlawfully         disclosed      to   a   confidential

informant       that    the    government         planned   to    execute    a    search

warrant at the plaintiffs’ business.                    Jones, 9 F. Supp. 2d at

1123.    The confidential informant then told the media, resulting

in videotaped news coverage of the day-long execution of the

warrant.    Id. at 1124–25.

      The court held that the IRS agent’s disclosure proximately

caused the damage resulting from the media’s coverage because

(1) the IRS agent should have known that even “the suggestion of

criminal    activity”         can    have    devastating      consequences       for   the

person or business implicated, id. at 1143–44 (quoting Diamond

v. United States, 944 F.2d 431, 434 (8th Cir. 1991)), and (2)

based on his personal knowledge regarding the informant and the

plaintiffs,       the    IRS        agent    should    have      foreseen    that      the

confidential       informant             “harbored    bad     feelings”      for       the

plaintiffs and therefore might seek to harm them, id.



                                             13
     In this case, in contrast, there is no evidence that the

IRS knew whether Meisel held any ill will toward NOM.                   Nor did

it have any reason to think that the disclosure of NOM’s tax-

return information would implicate NOM criminally.                    In short,

the IRS did not have as clear of a reason as in Jones to believe

disclosure would cause NOM damage.               Consequently, we find the

objective indicia inconclusive.

     We next conduct an independent assessment of the merits of

the government’s position with respect to actual damages.                   Our

analysis of proximate cause in this case leads us to conclude

that the government’s position was substantially justified.                  As

the Supreme Court recently noted, proximate cause “defies easy

summary” and is a “flexible concept.”              Paroline, 134 S. Ct. at

1719 (quoting Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639,

654 (2008)).     We think it reasonable for the government to have

argued that the third-party intervening conduct of Meisel, the

Huffington   Post,     and   the   HRC   broke    the   chain   of    proximate

causation.     While this contention was not a winner at the end of

the day, it need not be to qualify as “substantially justified.”

See Pierce, 487 U.S. at 569 (“[The government] could take a

position that is substantially justified, yet lose.”); see also

Kaffenberger v. United States, 314 F.3d 944, 960 (8th Cir. 2003)

(“[D]isputes    that   preclude    summary   judgment     do    not   establish



                                     14
that    the      moving           party’s     position       is        not   substantially

justified.”).

       The    district           court’s    ruling    on    proximate        cause    further

confirms       that        the     government’s       position         was   substantially

justified.       While the court easily disposed of the government’s

“but-for” causation argument regarding actual damages, it found

the    question       of    proximate       causation       to    be    “a   closer    call.”

Nat'l Org. for Marriage, 24 F. Supp. 3d at 529–30.                              Thus, like

us, the district court identified this issue as a more difficult

legal       question,       suggesting       that     the    government’s       litigation

position was substantially justified.

       Finally, the context in which the government asserted its

defense       respecting           actual        damages     further         bolsters      our

conclusion.           Because        we     assess    the     reasonableness          of   the

government’s          position        in     light     of    the       totality       of   the

circumstances, we must take care not to view the government’s

position on a single issue in a vacuum.

       In     this    litigation,          NOM    sought     statutory,       actual,      and

punitive damages.                We conclude that the government adopted a

reasonable       strategy           in     conceding        statutory        damages,      but

challenging the existence and amount of both actual and punitive

damages.       Conceding actual damages prematurely could have harmed

the government’s position later if NOM had been able to submit



                                                 15
evidence enabling it to proceed on the punitive damages issue. 5

In addition, prior to the district court’s ruling on summary

judgment, NOM added and subtracted different categories and sums

of actual damages to its calculation, thus keeping the type and

extent of actual damages in flux.              See supra n.1.      Moreover, NOM

bore the burden of proving any actual damages.                      In light of

these considerations, we cannot say that the government acted

unreasonably      prior   to     the    summary      judgment   stage    of    the

litigation by waiting to see what NOM’s evidence was and then

challenging its sufficiency.

     In    sum,   we   conclude    that       the   government’s   position    was

substantially justified.          As a result, NOM is not a “prevailing

party” and is therefore not entitled to attorneys’ fees.



                                        III.

     For    the   reasons      given,    we    affirm   the   judgment    of   the

district court.

                                                                         AFFIRMED




     5 Of course, the government ultimately prevailed on NOM’s
unfounded claim for punitive damages.



                                         16
