                        UNPUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT


UNITED STATES OF AMERICA,              
                 Plaintiff-Appellee,
                 v.
MARTHA BEAVERS MCHAN; JOHN
DAVIS MCHAN, Son of Charles W.
McHan; CHARLES WILLIAM MCHAN,
SR.; CHARLES WILLIAM MCHAN, JR.,
Son of Charles W. McHan, Sr.,
             Defendants-Appellants,            No. 00-2081
                and
MAC, INCORPORATED, d/b/a
Cherokee Land Company and other
assets; CHEROKEE LANES; GEORGIA
FREIGHT DISPOSAL, INCORPORATED;
SAMUEL RAY MCHAN, Brother of
Charles W. McHan,
                        Defendants.
                                       
           Appeal from the United States District Court
    for the Western District of North Carolina, at Bryson City.
              Richard L. Voorhees, District Judge.
                         (CA-90-173-2-V)

                      Argued: April 5, 2001

                      Decided: June 8, 2001

    Before WILKINS, KING, and GREGORY, Circuit Judges.



Vacated and remanded by unpublished per curiam opinion.
2                     UNITED STATES v. MCHAN
                             COUNSEL

ARGUED: David Benjamin Smith, ENGLISH & SMITH, Alexan-
dria, Virginia, for Appellants. Clifford Carson Marshall, Jr., OFFICE
OF THE UNITED STATES ATTORNEY, Asheville, North Carolina,
for Appellee. ON BRIEF: William A. Brafford, OFFICE OF THE
UNITED STATES ATTORNEY, Charlotte, North Carolina, for
Appellee.



Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).


                             OPINION

PER CURIAM:

   We must decide whether claimants in this civil forfeiture action are
entitled to attorney’s fees and expenses under the Equal Access to
Justice Act, 28 U.S.C. § 2412 (1994) ("EAJA"). Finding that the dis-
trict court abused its discretion in holding that the claimants waived
their right to fees and expenses and that further proceedings are nec-
essary to determine whether they are, in fact, entitled to fees and
expenses, we vacate the district court’s decision and remand for fur-
ther proceedings.

                                  I.

   The government filed three civil forfeiture actions between 1988
and 1993 regarding various pieces of property. Following consolida-
tion, the government moved for summary judgment against the claim-
ants, arguing that "the complaints in forfeiture were based on
probable cause and the claimants have failed to meet their burden to
come forward with proof that the property in question was not
acquired with drug proceeds or did not facilitate drug trafficking."
The district court denied the motion, explaining that "[t]o grant the
government’s motion here would be tantamount to granting summary
                       UNITED STATES v. MCHAN                           3
judgment on the basis of the ex parte determination of probable
cause."

   The district court set the case for trial in February 1999. On Febru-
ary 2, 1999, though, the government informed the district court that
it was dismissing the action with prejudice, with "each side bear[ing]
their own costs[.]" The claimants’ counsel responded that this was
"agreeable."

   On March 2, 1999, the claimants filed a motion for attorney’s fees,
costs, and expenses under the EAJA. The government opposed the
motion and the district court denied it on June 16, 2000. In its Order,
the district court stated:

    First, it is clear to the Court that the parties agreed that each
    side would bear the costs associated with this case at the
    time the parties consented to it’s [sic] dismissal with preju-
    dice. Second, the Government’s response makes it clear that
    Defendants cannot establish a right under the EAJA to
    recover fees and costs. The Fourth Circuit’s decision in
    United States v. B&M Used Cars clearly controls this case
    as the Government had a reasonable likelihood of prevailing
    in this action despite it’s [sic] eventual consent to the dis-
    missal of the civil forfeture proceeding. 860 F.2d 121, 123-
    25 (4th Cir. 1988).

                                   II.

   We review for abuse of discretion a district court’s denial of an
EAJA award. United States v. One Parcel of Real Property, 960 F.2d
200, 208 (1st Cir. 1992); United States v. Real Property Located at
2323 Charms Road, 946 F.2d 437, 440 (6th Cir. 1991). We review
interpretations of legal standards de novo. See, e.g., Salve Regina Col-
lege v. Russell, 499 U.S. 225 (1991).

                                  III.

   Under 28 U.S.C. § 2412(a)(1), "a judgment for costs, as enumer-
ated in section 1920 of this title, but not including the fees and
4                     UNITED STATES v. MCHAN
expenses of attorneys, may be awarded to the prevailing party in a
civil action brought by or against the United States[.]" (emphasis
added). 28 U.S.C. § 1920 defines "costs" as

    (1) Fees of the clerk and marshal;

    (2) Fees of the court reporter for all or any part of the steno-
    graphic transcript necessarily obtained for use in the case;

    (3) Fees and disbursements for printing and witnesses;

    (4) Fees for exemplification and copies of papers necessarily
    obtained for use in the case;

    (5) Docket fees under section 1923 of this title; [and]

    (6) Compensation of court appointed experts, compensation
    of interpreters, and salaries, fees, expenses, and costs of spe-
    cial interpretation services under section 1828 of this title.

Moreover, Section 2412(d) provides that "a court shall award to a pre-
vailing party other than the United States fees and expenses, in addi-
tion to any costs awarded pursuant to subsection (a), incurred by that
party in any civil action . . . brought by or against the United
States[.]" (emphasis added). The plain language of the EAJA estab-
lishes that Congress expressly distinguished between "costs" and
"fees and expenses." At the February 2 hearing, the parties agreed to
"bear their own costs" but made no agreement regarding fees and
expenses. Considering the explicit distinction made in the EAJA
between "costs" and "fees and expenses", and the parties’ explicit
agreement regarding only "costs", we hold that the district court
abused its discretion by holding that the claimants waived their right
to fees and expenses.

                                  IV.

  Next, we turn to the district court’s decision that United States v.
B&M Used Cars precludes the claimants from recovering fees and
expenses from the government. The EAJA provides in pertinent part:
                       UNITED STATES v. MCHAN                          5
    Except as otherwise specifically provided by statute, a court
    shall award to a prevailing party other than the United States
    fees and other expenses . . . incurred by that party in any
    civil action . . . brought by or against the United States . . .
    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 term "substantially justified" means
"‘justified in substance or in the main’ — that is, justified to a degree
that could satisfy a reasonable person." Pierce v. Underwood, 487
U.S. 552, 564 (1988). To be "substantially justified", the government
must be "more than merely undeserving of sanctions for frivolous-
ness; that is assuredly not the standard for government litigation of
which a reasonable person would approve." Id. at 566.

   In B&M Used Cars, this Court reversed a ruling granting a motion
for EAJA fees in a dismissed forfeiture action. The government dis-
missed the forfeiture action after approximately six months and after
an adversarial proceeding establishing probable cause. This Court
explained that

    the district court conducted an adversarial proceeding and
    issued a [ ] warrant, which included an express statement
    that the government had established probable cause to sup-
    port the seizure. It is difficult to understand how the district
    court could later find the government’s position lacking in
    substantial justification when it had previously acknowl-
    edged that the government had satisfied the initial evidenti-
    ary burden of a full-scale forfeiture trial. 860 F.2d at 124.

    This case is markedly different than B&M Used Cars. In B&M
Used Cars, only about six months passed between the filing and dis-
missal of the action. Here, on the other hand, more than 10 years
passed between filing and dismissal. Moreover, in B&M Used Cars,
the court held an adversarial hearing to determine the existence of
probable cause. Here, on the other hand, nothing in the record sug-
gests that the court held such a hearing. Rather, only ex parte determi-
nations of probable cause support the government’s filing and
litigation of the action. While an ex parte determination of probable
6                       UNITED STATES v. MCHAN
cause suffices to establish that the government had substantial justifi-
cation for filing the forfeiture actions against the claimants, they can-
not alone substantially justify the government’s continued litigation of
the consolidated action. See also United States v. Real Property
Known as 22249 Dolorosa Street, 190 F.3d 977, 982 (9th Cir. 1999)
(holding that "the government’s position that the property is forfeit-
able must remain substantially justified throughout the action");
United States v. Parcels of Property, With Building Appurtenances
and Improvements Located at 255 Broadway, Hanover, 9 F.3d 1000,
1007 (1st Cir. 1993) (ruling that the government’s "litigation posi-
tion" remained justified throughout the litigation; "the claimant points
to no intervening evidence that might have given the government
pause over whether to continue onward with the case"); United States
v. One 1985 Chevrolet Corvette, 914 F.2d 804 (6th Cir. 1990) (ruling
that the government had substantial justification for filing the action
and for prosecuting it).

   The district court failed to consider whether the government had
substantial justification for litigating this action. On remand, the dis-
trict court must determine whether the government had substantial
justification for filing the civil forfeiture actions and whether its liti-
gation position remained substantially justified throughout their litiga-
tion.

                                    V.

  For the foregoing reasons, the judgment of the district court is
vacated and the suit remanded for further proceedings.*

   *Congress passed remedial legislation on April 25, 2000 that signifi-
cantly altered the standards and procedures applicable to civil forfeiture
proceedings. Civil Asset Forfeiture Reform Act of 2000, 18 U.S.C. § 983
(2000). Among other things, the legislation reallocates the burden of
proof so that the government now must "establish, by a preponderance
of the evidence [as opposed to probable cause], that the property is sub-
ject to forfeiture." 18 U.S.C. § 983(c) (emphasis added). While retroac-
tive application of statutes typically is disfavored, in some situations, "a
                         UNITED STATES v. MCHAN                             7
                                           VACATED AND REMANDED

court should ‘apply the law in effect at the time it renders its decision.’"
Landgraf v. USI Film Products, 511 U.S. 244, 272 (1994) (citing Bradley
v. School Bd. of City of Richmond, 416 U.S. 696, 711 (1974)). Neither
party in this case raised the issue of the applicability of this statute below
and did not raise it in this appeal until the date of oral argument. On
remand, the district court should decide whether the statute applies to this
action.
