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I.
Introduction
to condemnation; basic principles:
A. The power to condemn private
property by the process of eminent domain is an inherent attribute of
sovereignty. Boom v. Patterson, 98 U.S. 403, 406 (1878).
B. A condemnation proceeding is in
rem; it is against the thing; hence the style, United States v. 21.21
Acres.....
C. Federal substantive (40
U.S.C.A. § 258a) and procedural (Rule 71A, Fed.R. Civ. P.) law
apply; state condemnation law and procedure are irrelevant. See,
United States v. Miller, 317 U.S. 369, 380 (1943).
D. Once the condemnation case is
filed, the federal district court is without
jurisdiction to expand the estate taken. Sweet v. Rachel, 159
U.S. 380, 395 (1895).
E. There are only two issues in a
condemnation case, the right to take and the amount of just
compensation (see further discussions, infra).
F. Where title to the property is
in issue, the determination of the parties entitled to share in the
distribution of the award of just compensation may be in issue.
In this proceeding, the United States is not an opposing party.
The United States will only participate in a distribution hearing as
amicus curiae
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II.
Procedure for Filing Case and Answer/Response to Complaint:
A. U.S. Attorney's office prepares
complaint in condemnation and related pleadings and files case.
If a Declaration of Taking is filed and a deposit of estimated
compensation is made with the clerk of he court, title to the land
passes to the United States upon the filing of the Declaration of
Taking and deposit of funds.
B. Service of process is by mail
on all persons having or claiming an interest in the property.
Normally this will be determined by preliminary title search. If
service cannot be made by mail (as where addresses are unknown), then
service is by publication.
C. After service is made, owners
have 20 days to file an objection to the taking. If no objection
is made within 20 days, the right to object to the taking is waived.
D. Owners who do not object to the
taking should file a Notice of Appearance to formally notify the Court
and the government attorneys of the appearance of the owner as a party
to the suit and to identify counsel for service purposes.
E. The right to a
jury trial is not presumed; you must affirmatively ask for a jury or
you will not get one. (You may not get a jury trial anyway, but
more about that later.) Rule 38 of the Federal Rules of Civil
Procedure requires all persons who want a jury to hear their case to
demand a trial by jury "not later than 10 days after service of the
last pleading directed to such issue." F.R.Civ.P. 38(b).
Therefore, if you want a jury trial, you must ask for it. The
most logical time for a landowner to ask for a trial by jury is at the
time you file your Answer to the Complaint or Notice of Appearance.
F. Upon motion of the United
States, the court will order "an orderly transfer of possession."
United States v. Miller, 317 U.S. 369 (1943). If the government is
already in possession of the interest acquired, a motion for delivery
of possession need not be filed. If the government is not in
possession and files the motion, courts vary as to how quickly they
grant the motion.
G. In a declaration-of-taking
case, the landowner should move for an order of distribution of the
deposit. A landowner does not waive the right to ask for
additional compensation by withdrawing the deposit. If ownership
of the property is disputed, the government may act as amicus curiae to
aid the court in making proper distribution to the parties entitled to
the monies. At the time you ask for a distribution of the
deposit, be aware that if it is later determined that the fair market
value of the property is less than the amount deposited as estimated
compensation and withdrawn, the landowner could be required to repay
the difference plus interest. This is not likely, but it can
happen and you should so advise your client.
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III.
Whether the taking
is valid:
1. There are only two possible challenges to the
validity of the taking:
a. The taking was not authorized by Congress.
Since the Department of Justice will not file the case without
authorization, which must include an appropriation sufficient to pay
the judgment, this should not be an issue. The Notice of
Condemnation (filed with the Complaint in Condemnation) will contain
the legislative authority for the taking.
b. The taking was not for a public purpose. This is
virtually impossible to show in light of the decision in Hawaii Housing
Authority v. Midkiff, 467 U.S. 229 (1984). See also Berman v. Parker,
348 U.S. 26 (1954).
2. The
following are not valid grounds on which to challenge the taking:
a. Failure to comply with the National Environmental
Policy Act (NEPA) or the National Historic Preservation Act
(NHPA). See, United States v. 162.20 Acres of Land, More or
Less, Etc., (Uithoven) 639 F.2d 299 (5th Cir. 1981); United States v.
178.15 Acres, 543 F.2d 1391 (4th Cir. 1976). N.B.: Even though
compliance with these acts is not a defense to the taking, this does
not mean these acts are to be disregarded. As the court in
Uithoven pointed out, failure to comply, while not a defense to the
taking, could result in a project being halted until there is
compliance.
b. Taking more than is necessary for the project.
Berman v. Parker, 348 U.S. 26 (1954).
c. The estate taken is not recognized at state law.
United States v. Certain Interests in Champaign County, 271 F.2d 379
(7th Cir.), cert. denied, 362 U.S. 974 (1959).
d. The taking is arbitrary, capricious, and in bad
faith. United States v. 2,606.84 Acres, 432 F.2d 1286, 1289 (5th
Cir. 1970).
e. Failure to negotiate and otherwise comply with the
Uniform Relocation Act, 42 U.S.C. § 4601 et seq. Paramount Farms,
Inc. v. Morton, 527 F.2d 1301, 1304 (7th Cir. 1975).
f. Other property was more suitable for the project
needs. Berman v. Parker, supra.
3. Any
challenge to the taking must be raised within 20 days of service or is
waived. Rule 71A(e), Fed. R. Civ. P. Despite this plain language,
many courts are quite flexible in interpreting this rule.
IV.
Scope of the Issues Before the Court After it is Determined that the
Taking was Valid:
A. If is decided that the taking
was valid, the only issue before the Court is just compensation for the
taking.
1. Definition:
Just compensation is defined as fair market value, that is, the most
probable price, in cash or terms reasonably equivalent to cash, which a
willing buyer and a willing seller would agree to when neither is under
compulsion and each is fully informed. See, United States v. Miller,
317 U.S. 369 (1943); Olson v. United States, 292 U.S. 246 (1934).
2. Just
compensation is for the land, and does nor vary with the circumstances
of the property owner. Monongahela Navigation Co. v. United States, 148
U.S. 312, 325-326 (1893).
a. As a result, damages personal to the owner are not
included in just compensation. Such damages are deemed to be
consequential in nature and include such damages as loss of good will
and frustration of business plans. See e.g., Mitchell v. United States,
267 U.S. 341 (1925); Omnia Co. v. United States, 261 U.S. 502 (1923).
b. It can be difficult to distinguish a disallowed
consequential damage from an allowed severance damage (see discussion,
infra).
i. The government condemns a
leasehold interest in part of a building that is otherwise vacant. The
owner claims this precludes him from going forward with his planned
renovation, the highest and best use of the building. Severance or
consequential damage?
ii. The government condemns a
small store at the main street intersection of a small town. In valuing
the property, especially in an income approach to value, how do you
distinguish value arising from a prime commercial location from value
arising from established good will?
3. In
determining just compensation, highest and best use is of critical
importance.
a. Definition: "The highest and most profitable use
to which the property is adaptable and needed or likely to be needed in
the reasonably near future is to be considered, not necessarily as the
measure of value, but to the full extent that the prospect of demand
for such use affects the market value while the property is privately
held." Olson v. United States, 292 U.S. 246, 255 (1934).
b. There is a presumption that the highest and best
use is the current use. See, United States v. Buhler, 305 F.2d
319, 328 (5th Cir. 1962).
c. If the landowner claims a higher and better use
than the existing use, he has the burden of convincing the court that
the use is a reasonably probable one within the foreseeable future. If
he meets this legal burden, he can then go forward with evidence of his
claimed use as a matter of fact. The government can request the court
to make a preliminary ruling as to reasonable probability. See, United
States v. 320.0 Acres of Land, More or Less, Etc., 605 F.2d 762,
814-817 (5th Cir. 1979).
4. In
determining just compensation, a delineation of the parent tract is
also extremely important. In order to have a given parent tract, there
must be unity of use and of ownership and of ownership and title. See,
United States v. Honolulu Plantation Co., 182 F.2d 172 (9th Cir.
1950).
5. Date of
valuation:
a. In a case in which a declaration of taking is
filed, the date of valuation will be the date of taking, that is, the
date the declaration of taking and deposit were filed/deposited. United
States v. Dow, 357 U.S. 17 (1958).
b. In a "straight" complaint-only case, the date of
taking is the date of payment of the award. Kirby Forest
Industries v. United States, 467 U.S. 1 (1983). Accordingly, the date
of valuation will be the date of trial, the closest possible date to
the date of payment. If significant time elapses between the date
of trial and ultimate payment, the award may have to be adjusted for
the passage of time. The adjustment is done either through a
hearing as to the change in value or, if the parties agree, by a
payment of interest in lieu of an update on value.
6. In the case
of a partial taking, just compensation includes possible severance
damages to the remainder. United States v. Miller, 317 U.S. 369
(1943).
a. Definition of severance damage: diminution in
value to the remainder caused by the taking. It can arise either
from the resulting configuration of the remainder (e.g., the fee taking
of a part of the property that landlocks or makes less desirable for
development the remainder of the tract) or from the use of the
part taken (e.g., an avigation easement for noisy flights over a
residential area).
b. Severance damages are not normally allowed
for a diminution in value that results from the taking of the lands of
a third party. See, United States v. Campbell, 266 U.S. 368, 372
(1924); United States v. 45.50 Acres of Land, More or Less, 634 F.2d
405 (8thCir. 1980).
c. Calculation of severance damages:
i. The preferred method is the
"before and after" method. The value of the entire property
before the taking is calculated and then the value of the remainder is
calculated and deducted from the "before" value. The result will
automatically yield the value of the part taken plus severance
damages. See, United States v. 8.41 Acres, in Orange County,
Texas, 680 F.2d 388 (5th Cir. 1982).
ii. An alternative method is to
calculate separately the value of the part taken and severance
damages. See, United States v. 97.19 Acres (Hopkins), 582 F.2d
878, 880-881, (4th Cir. 1978).
7. Ways to
calculate just compensation. Approaches to value:
a. Comparable sales are considered the best evidence
of value. See, United States v. New River Collieries, 262 U.S. 341
(1923).
i. The very best comparable sale
is a recent sale of the subject property. Baetjer v. United
States, 143 F.2d 391, 397 (1st Cir. 1944), cert. den. 323 U.S. 772.
ii. Using a comparable sales
approach, the appraiser compares the comparable sales directly to the
subject property, making adjustments deemed necessary for such items as
time, location, and size. The adjustments should be as supported as
possible with market data.
b. Income or discounted cash flow approach.
i. Used with an income-producing
property or to value raw land whose highest and best use is development
and sale.
ii. With this approach to an
income-producing property, the appraiser will derive the fee value
based on the expected income stream that the property will produce
during its expected life. With a property proposed for development and
sale, the appraiser will start with the final lot sales prices, and
working backward, derive the raw land value.
c. Cost approach:
i. Used when value cannot be
determined by one of the two methods described above. Also
sometimes used to determine the value of specific improvements.
ii. Appraiser determines value by
estimating replacement cost and then deducting depreciation.
iii. Considered the least reliable
approach to value. United States v. Certain Interests in Property in
Champaign County, Ill., 271 F.2d 379, 382 (7th Cir. 1959), cert. denied
362 U.S. 974.
8. Valuation of
temporary takings; leaseholds and temporary easements:
a. Just compensation is fair rental value, the best
evidence of which is comparable leases. See, United States v.
General Motors, 323 U.S. 373 (1945).
b. Severance damages are possible with temporary
takings, as they are in any partial taking.
c. If the government holds over on its lease the
landowner may sue in the U.S. Court of Federal Claims. The owner
will be entitled, in addition to just compensation, to any contract
damages the owner can show for the government's failure to
vacate. See, Prudential Ins. Co. v. United States, 801 F.2d 1295
(Fed. Cir. 1986), cert. denied, 479 U.S. 1086 (1987). The owner may
also claim as part of just compensation a premium for the uncertainty
of the duration of the holdover (recently landowners have claimed daily
rents), and he will be entitled to attorney's fees, expenses, and
costs (42 U.S.C. § 4654).
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V.
Pretrial Activities:
A. Get the reports of all of the
experts who will be needed for trial.
B. Federal Rule of Civil Procedure
26. Be aware of the Rule and the extent to which the disclosure
provisions in Rule 26(a) 1-4 relating to required disclosures
apply. Be aware of the manner in which Rule 26 is being applied
in the district in which you are appearing.
B. Discovery:
1. Expect the
government's attorneys to advocate broad discovery. The government
attorneys will probably have an appraisal report when the case is filed
and may ask you to agree to a mutual exchange of reports.
Government appraisal reports are generally extensive and complete.
2. Expect the
government attorneys to send out general interrogatories early in the
case. They may be supplemented later with more specific interrogatories.
3. Expect the
government's attorneys to make broad use of depositions.
4. Anticipate
requests for admissions. See Rule 36, Fed.R.Civ.P. If the matter
requested to be admitted is not denied within 30 days, the matter is
deemed admitted. If the matter is denied and later proven to be true,
then the government attorneys may attempt to recover their costs
incurred in proving that matter.
C. Pretrial rulings:
1. Any
questions of law that may affect just compensation can be brought out
with a motion for pretrial rulings. You can expect the government to
file motions for pretrial rulings.
a. Procedure is set out in United States v. 320
Acres, of Land, More or Less, Etc., 605 F.2d 762 (5th Cir. 1979).
b. Examples of situations where pretrial rulings may
be sought.
i. The landowner claims severance
damages to a larger parcel to which there is not the requisite unity of
ownership.
ii. The landowner claims a higher
and better use which is so speculative as to be inadmissible or which
would require an assemblage which is not reasonably probable.
c. Advantages of seeking pretrial rulings:
i. The ultimate case will be
simplified.
ii. Judges do not like it when
counsel wait until trial and then move to strike all or a significant
portion of one party’s testimony.
D. Instructions for the fact finder:
1. Usually each party submits its
proposed instructions of law, with a supporting memorandum and has an
opportunity to respond to the other side's's proposed instructions.
2. Important, as the instructions
contain the exact language that the fact finder will use as a guide for
determining just compensation.
3. Proposed instructions can be an
alternative to pretrial rulings, as where each side's proposed
instructions illuminates the respective theories of the case. See
discussion in United States v. 1735 N. Lynn St., Situated in Rossyn,
VA., 676 F.Supp. 693 (E.D. Va. 1987).
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VI. Trial
Procedure:
A. Landowner has the burden of
proof as to just compensation, United States ex rel. T.V.A. v.
Powelson, 319 U.S. 266, 273 (1943); therefore, the landowner usually
has the first and the last word at trial. Landowner will present
his case first.
B. Modes of trial. See Rule 71A
(h), Fed.R.Civ.P.
1. Judge alone.
2. Jury.
a. Either party can request a jury trial but there is
no constitutional right to a jury trial. Experience in Southern
District of California has been that if landowner asks for a jury, the
court will appoint a commission; if landowner does not ask for a jury,
the trial will be to the court. Bauman v. Ross, 167 U.S. 548, 593
(1897).
b. A jury is only supposed to determine the question
of just compensation "narrowly defined'. Unites States v.
Reynolds, supra.
3. Commission
of three persons appointed by the court.
a. Appointment of a commission is within the
discretion of the court; consideration for appointment of a commission
include the character, location, or quantity of property to be
condemned. Rule 71A(h).
b. The trial is conducted to the commission alone;
the judge is not present for the trial. For this reason, judges
favor commissions for the conduct of lengthy proceedings, e.g. those
involving large numbers of parcels and/or witnesses. When the
trial is complete, the commission must write a report. Either
party can file objections to the report, which are then ruled upon by
the Court.
c. To be sufficient, the commission's report must
trace the path by which the commission reached its decision; mere
conclusory statements are insufficient. United States v. Merz, 376 U.S.
192 (1964).
d. As with a jury, a commission may only
determine the narrow question of the amount of just compensation.
United States v. Reynolds, supra,
C. Evidence
1. Evidence as
to value is usually presented through the opinion of expert witnesses,
especially appraisers.
a. The opinion is subject to being stricken if it is
totally unsupported, i.e., based only on "education and
experience." See, United States v. Twin City Power Co., 248 F.2d
108 (4th Cir. 1957), cert. denied, 356 U.S. 918 (1958), "Elements
affecting value that depend upon events or combinations of occurrences
which while within the realm of possibility, are not fairly shown to be
reasonably probable should be excluded from consideration for that
would be to allow mere speculation and conjecture to become a guide for
the ascertainment of value." Olsen v. United States, 292 U.S. 246, 257
(1934). N.B: If there is no market data, the court will likely be
liberal in admitting mere opinion. See, United States v. 33.5 Acres,
Okanogan County, State of Wash., 789 F.2d 1986 (9th Cir. 1986).
b. Expert witnesses may testify to hearsay if it is
the type of hearsay normally relied upon by experts in the field.
Typical admissible hearsay in a condemnation case includes what zoning
officials told the appraiser and also what parties to a sale said in
confirming the sale. See Rule 703, Federal Rules of Evidence.
c. Comparable sales are admissible both as direct
evidence of value and as the basis for the appraiser's opinion.
Courts in condemnation cases are generally quite liberal in ruling on
questions of the admissibility of evidence. They frequently rule that
an objection goes to the weight of the contested evidence rather than
its admissibility.
D. For purposes of the record on
appeal, the parties during the course of the trial frequently renew
objections made in unsuccessful pretrial motions.
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VII. Post-trial
events:
A. Entry of final
judgment.
B. The parties can file motions for reconsideration.
C. Payment of the judgment.
1. In a complaint-only case,
payment is of the amount awarded plus any amount found necessary to
compensate for the delay between the date of valuation (the date of
trial) and the date of payment.
2. In a Declaration of Taking
case, payment is the amount of the deficiency plus interest thereon
from the date of taking to the date of payment. The interest rate
is that set forth in the Declaration of Taking Act at 40 U.S.C. §
258a(e). Basically, the rate is that of 52-week Treasury bills,
rolled over annually.
D. Notice of appeal must be filed within 60 days of
entry of judgment.
VIII. Attorneys Fees Under the Equal Access to Justice
Act, 28 U.S.C.
§ 2412:
A.
EAJA provides, generally, that, in addition to costs, a private
prevailing party shall recover attorneys fees and expenses unless the
position of the United States was substantially justified or special
circumstances would make an award unjust. 28 U.S.C. § 2412 (d).
B. Definitions under EAJA:
1. "Prevailing party" in a
condemnation case is the party who obtains a final judgment (other than
by settlement), exclusive of interest, the amount of which is closer to
the valuation of the property contended for at trial than that value
contended for at trial by the party opponent.
a. This means
you look to the relationship of the award to the testimony of the
respective appraisers to determine the prevailing party.
b. In the case
of an exact split, the benefit goes to the landowner.
c. Prevailing
party status is not available to the party who settles a case; the
presumption is that settlements are inclusive of all claims that arise
in the proceeding.
2. "Substantial justification"
generally means reasonableness in fact and law. Pierce v. Underwood,
108 S.Ct. 2541, 2549 (1988). For how courts determine
reasonableness in a condemnation action, see the discussion below.
3. "Party" means an individual
whose net worth did not exceed $2,000,000 as of the filing of the case
or an entity whose net worth did not exceed $7,000,000 and which did
not employ more than 500 employees (excepted from these requirements
are certain charities and cooperative associations). 28 U.S.C. §
2412 (d)(2)(B).
4. "Position of the United States"
means, in addition to the position taken by the United States in the
civil action, the action or failure to act by the agency upon which the
civil action is based; except that fees and expenses may not be awarded
to a party for any portion of the litigation in which the party has
unreasonably protracted the proceedings. 28 U.S.C. § 2412
(d)(2)(D).
5. Recoverable "fees and other
expenses" mean the reasonable expenses of expert witnesses, the
reasonable cost of any study, analysis, engineering report, test, or
project which is found by the court to be necessary for the preparation
of the party's case and reasonable attorney fees. The amount of
fees awarded are to be based upon prevailing market rates for the kind
and quality of the services furnished, except that: (i) no expert
witness shall be compensated at a rate in excess of the highest rate of
compensation for expert witnesses paid by the United States; and; (ii)
attorney fees shall not be awarded in excess of $125 per hour unless
the court determines that an increase in the cost of living or a
special factor, such as the limited availability of qualified attorneys
for the proceedings involved, justifies a higher fee. 28 U.S.C. §
2412(d)(2)(A).
6. "Final judgment" means a
judgment that is final and not appealable, and includes an order of
settlement [in non-condemnation cases]. 28 U.S.C. § 2412 (d)(2)(G).
C. A walk through an EAJA application:
1. A prevailing landowner must
apply within 30 days of entry of final judgment. In the application,
which is usually done by motion, the landowner must show that he meets
the definition of party and that he is the prevailing party. He
need only allege that the position of the United States was not
substantially justified. He must also include an itemized
statement as to the amounts claimed. 28 U.S.C. § 2412
(d)(1)(A).
a. The 30 days
is jurisdictional. See, Haitian Refugee Center v. Meese, 791 F.2d
1489, 1494 (11th Cir. 1986). If the landowner's filing comes more
than 30 days after the judgment became final, he is barred. By
contrast, if the application is filed prematurely, there is no
jurisdictional problem but the government can move to have the matter
stayed until the judgment becomes final.
2. The United States Responds.
a. The
government may move to expand the time for response, especially when
they want to conduct discovery as to the amounts requested and the
financial status of the party.
b. The
government bears the burden of proof on the issue of substantial
justification. The government's response should include factual
arguments as to why they believe they meet the definition of
substantial justification in a condemnation action.
c. The
government's response should include any objection it has to the
amounts sought.
3. The Landowner replies.
4. The court rules.
5. Appeals from an EAJA ruling are
rare. The court's substantial justification ruling is reviewed
under an abuse-of-discretion standard in ruling one way or the
other. See Pierce v. Underwood, 108 S. Ct. 2541 (1981).
D. Substantial justification in a condemnation case:
1. There are basically two tests:
a. Eighth
Circuit test. Per United States v. 1,378.65 Acres of Land, More
or Less, Situated in Vernon County, Mo., 794 F.2d 1313, 1317 (8th Cir.
1986), the test for substantial justification is: "If the government's
appraisers are qualified or the other evidence of valuation is
sufficient, the government's prelitigation position or offer is
substantially justified if it is based upon and consistent with the
appraisals or other evidence of valuation. Similarly, the
government's litigation position is substantially justified if the
amount established by the government during trial is based upon and
consistent with the appraisals or other evidence of valuation.
The district court should focus upon the relationship between the
government's offer, the appraisals, and the valuations established by
the government's expert witnesses during trial, rather than the
relationship between the government's offer or deposit and the property
owner's counteroffer, if any, or the jury award..." If this test
is used, the court will probably find substantial justification, i.e.,
the government will probably win.
b. Eleventh
Circuit test. Per United States v. 640.00 Acres of Land, in Dade
County, Fla., 756 F.2d 842, 850 (11th Cir. 1985), the "substantially
justified" standard requires a determination of whether the government
should have made greater efforts to settle the case before deciding to
litigate. To answer this question, the court "should explore what
offers were made by the government to the landowners prior to trial,
whether the price per acre offered was comparable to other awards being
made on similar tracts in the area at that time, whether the
government's appraisal of the land which formed the basis of its offer
was by a neutral and impartial expert appraiser or one regularly
employed by the government, whether the appraisal was based on sound
comparable sales and such other facts that may be presented by the
parties which will illuminate the issue of the good faith of the
government in trying to reconcile the dispute prior to subjecting the
landowners to litigation." If this test is applied , the court
will probably not find substantial justification, i.e., the landowner
will probably win.
c. The Ninth
Circuit has adopted the Eleventh Circuit criteria. United
States, v. 313.34 Acres of Land, 889 F.2d 814 (9th Cir. 1990).
E. Amounts claimed:
1. Note that, per the statute, the
amount to be paid for expert witnesses shall not exceed the highest
rate of compensation for expert witnesses paid by the United States. 28
U.S.C. § 2412 (d)(2)(A).
2. The statutory rate for
attorney’s fees is $125 per hour. 28 U.S.C. § 2412
(d)(2)(A)(ii) This amount is subject to change so check for the
current rate in effect before you file your application. The
amount may also be increased if “the court determines that an increase
in the cost of living or a special factor, such as the limited
availability fo qualified attorneys for the proceedings involved,
justifies a higher fee. 28 U.S.C. § 2412 (d)(2)(A)(ii)
3. The phrase "limited
availability of qualified attorneys for the proceedings involved," as
used in the statute, refers to attorneys with distinctive knowledge or
a specialized skill (such as patent law or knowledge of a foreign
language) as opposed to an extraordinary level of legal skills,
knowledge and ability. Pierce v. Underwood, 108 S.Ct. 2541 (1988).
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questions,
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and I will be glad to assist you.
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