786 F.2d 1171
86-1 USTC  P 9282
Unpublished DispositionNOTICE:  Eighth Circuit Rule 28A(k) governs citation of unpublished opinions and provides that no party may cite an opinion not intended for publication unless the cases are related by identity between the parties or the causes of action.United States of America, Appellantv.Sidney Estridge, James F. O'Crowley, Jr., Appellee, Herbert Maslin.
85-1706.
United States Court of Appeals, Eighth Circuit
March 13, 1986.

Before LAY, Chief Judge, FLOYD R. GIBSON, Senior Circuit Judge, and ROSS, Circuit Judge.
PER CURIAM
This is an appeal from a district court1 award of costs and attorneys' fees under the Equal Access to Justice Act (EAJA), 28 U.S.C. Sec. 2412(d) (1982) (amended 1985).  In the underlying action, the United States sought to hold O'Crowley and three other individuals liable under 26 U.S.C. Sec. 6672(a) (1982)2 for unpaid employment taxes that Arlen Trophy Company, Inc.  (Arlen) had withheld from the wages of its employees for the last quarter of 1975 and the first quarter of 1976.3   O'Crowley prevailed in the action, and the district court awarded him attorneys' fees and expenses under the Equal Access to Justice Act.4   The government appeals only the award of costs and attorneys' fees to O'Crowley.  We affirm.

Section 2412(d)(1)(A) provides:

1
Except as otherwise specifically provided by statute, a court shall award to a prevailing party other than the United States fees and other expenses, in addition to any costs awarded pursuant to subsection (a), incurred by that party in any civil action (other than cases sounding in tort), including proceedings for judicial review of agency action, brought by or against the United States in any court having jurisdiction of that action, unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.


2
28 U.S.C.A. Sec. 2412(d)(1)(A) (West 1985 Supp. & 1986 Supp.  IV).5  In a detailed and thoughtful opinion, the district court concluded that the government had not carried its burden of proving that its position against O'Crowley was "substantially justified."6   In reaching this conclusion, the district court emphasized that the government did not furnish O'Crowley with any specific statement of fact or law on which the government based its claim against O'Crowley, thus preventing O'Crowley from demonstrating that the government's position against him was factually and legally untenable.  The court also noted that the government failed to investigate the truth of evidence offered by O'Crowley that would have supported O'Crowley's position, gave unwarranted credence to obviously biased witnesses, and failed to reevaluate whether to continue prosecuting O'Crowley after the government's claim against Moats had been resolved in Moats' favor and the district court had awarded Moats costs and attorneys' fees under the EAJA.  The district court therefore concluded that the government had not carried its burden of proving that its position against O'Crowley was "substantially justified" and awarded O'Crowley costs and attorneys' fees.


3
Our role on review is limited to determining whether the district court abused its discretion in finding that the government's position against O'Crowley was not substantially justified.    Keasler v. United States, 766 F.2d 1227, 1231 (8th Cir.1985).  Under this standard of review, the district court's conclusions of law are reviewable on a de novo basis;  its findings of fact are of course subject to the clearly erroneous rule.    United States v. 2,116 Boxes of Boned Beef, 726 F.2d 1481, 1486 (10th Cir.), cert. denied sub nom.  Jarboe-Lackey Feedlots, Inc. v. United States, 105 S.Ct. 105 (1984);  Spencer v. NLRB, 712 F.2d 539, 563-64 (D.C.Cir.1983), cert. denied, 466 U.S. 936 (1984).7   In this regard, to the extent that the district court's findings concerning the strength of positions taken in litigation by the United States are based on assessments of the probative value of the evidence offered by the government, they can be reversed only if clearly erroneous.    2,166 Boxes of Boned Beef, 726 F.2d at 1486;  Spencer, 712 F.2d at 564.


4
The government does not challenge any particular findings of the district court as clearly erroneous.  Nor does the government point to any particular error of law made by the district court in concluding that the government's position was not substantially justified.  Rather, the thrust of the government's argument on appeal is that the merit of its claim against O'Crowley turned solely on the credibility of certain witnesses.  The district court's application of the EAJA to this case, the government argues, in effect requires the government to second-guess the district court in determining whose version of the facts the court would ultimately find credible.  The district court's opinion makes clear, however, that O'Crowley's ultimate liability under 26 U.S.C. Sec. 6672(a) turned on far more than witness credibility.  The district court's primary reason for finding the government's position against O'Crowley not substantially justified was the fact that the government did not diligently investigate who was responsible for paying Arlen's taxes.  Instead, the government brought claims against several officers and directors of Arlen and Gateway, including O'Crowley, who might possibly have been responsible for collecting or paying Arlen's employee withholding taxes, hoping that the court would ultimately find one or more of those individuals liable for Arlen's taxes.


5
In light of the district court's lengthy and well-reasoned opinion explaining its conclusion that the government's position against O'Crowley was not substantially justified and the government's failure to point to any error in the district court's factual findings or application of the law to those findings, we cannot say that the district court abused its discretion in awarding O'Crowley costs and attorneys' fees under the Equal Access to Justice Act.  Accordingly, we affirm the judgment of the district court.8

Dissenting Opinion
ROSS, Circuit Judge, dissenting

6
I disagree with the result reached by the majority in this case because I believe that the position of the government in this case was "substantially justified" within the meaning of the Equal Access to Justice Act.


7
This court has heretofore accepted a test of reasonableness in Iowa Express Distribution v. NLRB, 739 F.2d 1305 (8th Cir.1984).  Merely losing the case does not satisfy a determination of lack of reasonableness.  Id.


8
Here the court's decision depended almost entirely on the determination of the credibility of the witnesses.  In such a case, when the government is unable to determine which party is telling the truth, it is reasonable to do what it did here:  It sued all the "responsible" parties and let the court decide the credibility issue.



1
 The Honorable John W. Oliver, United States District Judge for the Western District of Missouri, presiding


2
 Section 6672(a) provides:
Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.  No penalty shall be imposed under section 6653 for any offense to which this section is applicable.
26 U.S.C. Sec. 6672(a).


3
 During the period in question, O'Crowley was chairman of Arlen and president, director, and chief executive officer of Arlen's holding company, Gateway Sporting Goods Company (Gateway).  Of the three other individuals from whom the government sought to collect Arlen's unpaid taxes, Sidney Estridge was chairman and forty percent shareholder of Gateway, Robert L. Moats was controller of Gateway, and Herbert Maslin was president of Arlen


4
 The case against Moats was resolved in his favor on cross motions for summary judgment, see Moats v. United States, 564 F.Supp. 1330 (W.D.Mo.1983), and the district court granted Moats' application for attorneys' fees and expenses under the EAJA, see Moats v. United States, 576 F.Supp. 1537 (W.D.Mo.1984).  The government did not appeal either of those decisions.  The district court, however, found Estridge and Maslin personally liable for Arlen's unpaid taxes under 26 U.S.C. Sec. 6672(a)


5
 We are aware that Congress amended section 2412(d) on August 5, 1985, after the district court had awarded O'Crowley costs and attorneys' fees.  Equal Access to Justice Act, Extension and Amendment, Pub.L. No. 99-80, Sec. 2, 99 Stat. 183, 184-86 (1985) (codified as amended at 28 U.S.C.A. Sec. 2412(d) (West 1985 Supp. & 1986 Supp.  IV).  Pursuant to the amendments' express terms, the amended version governs this case on appeal.  Id. at Sec. 7, 99 Stat. at 186-87.  Although the basic standard for the award of costs and attorneys' fees under section 2412(d) remains the same, the legislative history makes clear that the amendments were intended to give section 2412(d) a broader sweep, see H.R.Rep. No. 120, Part 1, 99th Cong., 1st Sess. 8-10, reprinted in 1985 U.S.Code Cong. & Ad.News 132, 137-38 (Aug. pamphlet).  The amendments thus would not have affected the district court's decision.  Therefore, with one exception noted supra note 7, the 1985 amendments to the EAJA do not affect our review of this case


6
 The government does not contend that this case was one in which "special circumstances make an award unjust."    See 28 U.S.C. Sec. 2412(d)(1)(A)


7
 Although the 1985 amendments to the EAJA overrule certain aspects of 2,166 Boxes of Boned Beef and Spencer, see H.R.Rep. No. 120, Part 1, 99th Cong., 1st Sess. 8-10, reprinted in 1985 U.S.Code Cong. & Ad.News at 137-38 (Aug.pamphlet), the amendments do not affect the discussion of the proper standard for appellate review contained in those opinions


8
 The government shall pay interest on the district court's award of costs and attorneys' fees to O'Crowley pursuant to section 2412(f), a provision added by the 1985 amendments to the EAJA.  See Equal Access to Justice Act, Extension and Amendment, Pub.L. No. 99-80, Sec. 2(e), 99 Stat. at 185-86 (to be codified at 28 U.S.C. Sec. 2412(f))


