                      UNITED STATES COURT OF APPEALS
Filed 11/5/96
                               FOR THE TENTH CIRCUIT



    MONTVIEW PARK PARTNERSHIP;
    HUDSON REAL ESTATE
    COMPANY; GINGER KLIETZ,

                Petitioners,                             No. 95-9536
                                                   (HUDALJ 08-93-9421-8)
    v.                                               (Petition for Review)

    UNITED STATES DEPARTMENT
    OF HOUSING AND URBAN
    DEVELOPMENT,

                Respondent.


                               ORDER AND JUDGMENT *


Before BRISCOE and MURPHY, Circuit Judges, and VAN BEBBER, ** District
Judge.

         After examining the briefs and appellate record, this panel has determined

unanimously to grant the parties’ request for a decision on the briefs without oral

argument. See Fed. R. App. P. 34(f) and 10th Cir. R. 34.1.9. The case is

therefore ordered submitted without oral argument.

*
      This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
**
      Honorable G. Thomas Van Bebber, Chief Judge, United States District
Court for the District of Kansas, sitting by designation.
      Petitioners Montview Park Partnership, Hudson Real Estate Company, and

Ginger Klietz seek review of a decision by respondent United States Department

of Housing and Urban Development (HUD) denying their application for attorney

fees pursuant to the Equal Access to Justice Act (EAJA), 5 U.S.C. § 504(a)(1).

Petitioners filed their application for attorney fees following settlement of a

lawsuit brought by HUD claiming petitioners engaged in illegal discrimination by

refusing to rent an apartment to Nancy Williams because of her childrens’ race, in

violation of 42 U.S.C. § 3604(a), and by making discriminatory remarks to

Williams, in violation of 42 U.S.C. § 3604(c). In their petition for review,

petitioners argue HUD erred in holding they were not prevailing parties under the

EAJA and therefore not entitled to an award of attorney fees. We agree that

petitioners are not entitled to attorney fees and deny their petition for review.

                                           I.

      This matter arises from a complaint filed with HUD by Williams, alleging

Klietz, an employee of Montview Park Partnership, refused to rent an apartment

to her because her children were of mixed race. Williams further alleged Klietz

told her that “she did not allow Blacks in her apartments and would prefer to keep

them out.” R. Vol. I, tab 1, Determination of Reasonable Cause and Charge of

Discrimination, at 3. Following conciliation attempts and investigation, HUD

issued its charge of discrimination. Williams did not elect to have the case tried


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in court, and the matter was set for hearing before an administrative law judge

(ALJ).

      Following discovery, but prior to hearing, the parties entered into a consent

agreement whereby petitioners denied they discriminated against Williams, but

agreed to (1) refrain from future discrimination based on race, color, religion, sex,

national origin, handicap, or familial status; (2) provide a questionnaire to all

persons making rental inquiries, and maintain records and report all rental

inquiries to HUD; (3) require Klietz to participate in a training session on the Fair

Housing Act to be provided by HUD; (4) prominently display a HUD fair housing

poster in offices where rental inquiries are taken; and (5) pay the sum of $1,000

to Williams. R. Vol. II, tab 59 at 2-4. Following entry of the agreement,

petitioners applied for attorney fees under 5 U.S.C. § 504. The ALJ denied the

application and petitioners filed a petition for review with this court pursuant to

42 U.S.C. § 3612(i).

                                          II.

             In reviewing an agency’s decision not to award fees under the EAJA,

we will modify that determination only if we find “that the failure to make an

award of fees . . . was unsupported by substantial evidence.” 5 U.S.C. §

504(c)(2). However, to the extent an appeal requires us to decide the proper

interpretation of the EAJA, our scope of review is de novo. See Pierce v.


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Underwood, 487 U.S. 552, 558 (1988) (noting questions of law are typically

reviewed de novo); Director, O.W.C.P., U.S. Dept. of Labor v. Ball, 826 F.2d

603, 604 (7th Cir. 1987) (“For matters of law, the APA mandates de novo

review.”).

      Under the provisions of the EAJA pertaining to adversary administrative

proceedings, prevailing parties may recover attorney fees from the Government.

See Ardestani v. I.N.S., 502 U.S. 129, 132 (1991). Specifically, 5 U.S.C. §

504(a)(1) provides that “[a]n agency that conducts an adversary adjudication shall

award, to a prevailing party other than the United States, fees and other expenses

incurred by that party in connection with that proceeding, 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.”

      The question faced by HUD in this case, and presented to us on appeal, is

how to determine when a defendant is a prevailing party under § 504(a)(1) if the

administrative proceedings are resolved prior to a hearing on the merits. 1 In

answering this question, the ALJ turned to Farrar v. Hobby, 506 U.S. 103 (1992),

in which the Supreme Court announced that “a plaintiff ‘prevails’ when actual



1
       Because we ultimately determine petitioners are not entitled to attorney
fees, we find it unnecessary to decide whether settlements of administrative
claims fall within the scope of “adversary administrative adjudications” as
defined under 5 U.S.C. § 504(b)(1)(C).

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relief on the merits of his claim materially alters the legal relationship between

the parties by modifying the defendant’s behavior in a way that directly benefits

the plaintiff.” Id. at 111-12. The ALJ applied the Farrar standard to the facts

before her and concluded HUD was the prevailing party. Accordingly, the ALJ

concluded petitioners had not achieved prevailing party status and denied their

application for fees. On appeal, petitioners contend the ALJ erred in relying on

the Farrar standard because it is applicable only to cases falling under 42 U.S.C. §

1988. According to petitioners, the appropriate standard is whether they

succeeded on any significant issues in the litigation.

      In light of the underlying facts of this case, we find it unnecessary to

conclusively decide what the proper standard is for determining whether a

defendant in an adversary administrative adjudication has achieved prevailing

party status. Under any conceivable answer to this question, whether it be

answering the question indirectly, as the ALJ did, by applying the Farrar test to

determine if plaintiff is the prevailing party, or whether it involves directly

answering the question by applying a separate standard to the defendant who

seeks fees as a prevailing party, see, e.g., Commissioner, I.N.S. v. Jean, 496 U.S.

154, 160 (1990) (“In EAJA cases, the court first must determine if the applicant is

a ‘prevailing party’ by evaluating the degree of success obtained.”); Kelly v.

Secretary, U. S. Dept. of Housing & Urban Dev., 97 F.3d 118, 121 (6th Cir. 1996)


                                          -5-
(concluding that, because defendants in FHA discrimination case had prevailed on

several significant issues, they were entitled to an award of fees under the EAJA);

Marquart v. Lodge 837, Intern. Ass’n of Machinists & Aerospace Workers, 26

F.3d 842, 851-52 (8th Cir.1994) (holding that, in order to obtain prevailing party

status, a defendant in a Title VII case must be able to point to a favorable judicial

declaration on the merits), it is obvious to us that petitioners are not prevailing

parties in the present case, and have therefore not satisfied the initial threshold

for fee eligibility. Although petitioners spend considerable time in their appellate

brief describing the positive benefits petitioners obtained through the settlement,

we agree with the ALJ that “[t]he terms of the Settlement Agreement altered the

legal relationship between the parties by forcing [petitioners] to pay [Williams] a

sum of money and to undergo training and keep records they otherwise would not

have.” R. Vol. III, tab 68 at 5. Further, the factual record clearly indicates that

petitioners did not receive a single favorable determination from the ALJ prior to

the settlement. The fact that petitioners were able to reduce their potential

liability through settlement does not equate to their becoming prevailing parties

under the terms of this settlement. Accordingly, even assuming the ALJ adopted

and applied the wrong standard, we agree with the ultimate resolution of the issue

and conclude any such error was harmless. See generally Intercargo Ins. Co. v.

United States, 83 F.3d 391, 394 (Fed. Cir. 1996) (holding that, under the


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Administrative Procedure Act, 5 U.S.C. § 706, principles of harmless error apply

to the review of agency proceedings).

      The petition for review is DENIED.
                                              Entered for the Court

                                              Mary Beck Briscoe
                                              Circuit Judge




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