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PRACTICE

Federal Land Condemnation Procedure


 Introduction to condemnation; basic principles
 Procedure for Filing Case and Answer/Response to Complaint
 Whether the taking is valid
 Pretrial Activities
 Trial Procedure
 Post-trial events


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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