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Association of American Physicians and Surgeons, Inc.
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Omnia pro aegroto

v.)Civil Action No. 98-5048 et al.


Thursday, November 12, 1998
Washington, D.C.

THE CLERK: Case No. 98-5048 et al.

Association of American Physicians and Surgeons, Inc., v.

Hillary Rodham Clinton, et al.

ORAL ARGUMENT OF Jacob M. Lewis, Esq.


MR. LEWIS: May it please the Court, Jacob Lewis for the Department of Justice representing the Appellants. I would like to reserve three minutes for rebuttal, if I might.

The district court's determination of bad faith in the government's of the conduct of the litigation in this case was based on two conclusions. First, that Mr. Magaziner's March 3rd, 1993 declaration was false and second, that the government failed to timely inform the Court and the parties that it did not intend to rely on the full-time employee exception to the Federal Advisory Committee Act. Both determinations are based on fundamental misconceptions of law and have no basis in this record.

The district court's charge that Mr. Magaziner's declaration was false was based on a single sentence in paragraph 11 of that declaration which is at the Joint Appendix at page 135. That sentence states only federal government employees serve as members of the interdepartmental working group. The district court thought it was dishonest for the government to argue that a person could be an employee if there was no piece of paper attesting to that status. That is incorrect as a matter of law. Our brief cites a number of cases both for permanent employees and for special governmental employees which was a category of employees that was detailed in the Magaziner declaration that paperwork is not dispositive. There are cases in which an employee can be working for the federal government. The paperwork might be filled out incorrectly or not at all and nonetheless that employee can have a claim for compensation, so the controller general has held in a number of cases.

And it is also the case that a special government employee or employees for limited purposes of the federal ethics rules and that employment relationship can arise even if there is no paperwork. Indeed it would make no sense so far as the ethics rules are concerned to have those laws applied or not applied just depending on whether the personnel paperwork had been filled correctly or not.

So the district court was absolutely and fundamentally wrong when it said that it was false for the government to argue that a person could be an employee without paperwork.

THE COURT: Even if we threw that out, isn't it clear from the district court's opinion that the remaining grounds would be all that would be required to find bad faith.

MR. LEWIS: Well I'm not sure about that, Your Honor. The falsity of the Magaziner declaration from the district court's mind, if one reads the district court opinion is -- THE COURT: In the end he says but the most outrageous conduct by the government in this case is what happened when it never corrected or updated the Magaziner declaration.

MR. LEWIS: Well because the Magaziner declaration was not false, there was no need to correct or update it. The district court focused on this single sentence. And its complaint about the government's failure to correct the declaration is directed at that sentence. Only federal government employees serve as members in the interdepartmental working group. That sentence was not false. There was no reason to correct it.

The district court seemed to be under, at points under misimpression that the sentence said something he did not say. That it talked about full-time employees. The sentence nowhere says and the declaration nowhere says that only federal government full-time employees serve as members of the interdepartmental working group. Indeed, the declaration goes on to explain that in discussing the employee question, first, the federal employees fall into two categories.

The first category includes full-time permanent employees. This is on page 135 of the Joint Appendix. The second category includes special government employees. And those special government employees are defined by statute in Title 18 of the U.S. Code with the federal ethics rules to include employees that work for no more than 130 days and in 365-day period, either on a full-time or intermittent basis.

Mr. Magaziner's reference to special government employees, he suggests that when he talked about full-time employees that he was, excuse me, when he talked about employees that he was including both the permanent full-time and employees it states so directly, and special government employees. So, there was no reason and there was not outrageous conduct when the government did not correct Mr. Magaziner's declaration because the Magaziner declaration was not false. The district court --

THE COURT: Wasn't the Judge's concern that the government knew that he interpreted the remand to require him to attest whether or not the statement that only full-time employees were being hired were members of the working force was true. Yet, by that time, the government had abandoned any thought of using that theory and failed to bring that fact to the Judge's attention for a period of six months. Isn't that the core of the concern of the declaration.

MR. LEWIS: The district court did also criticize the government for its failure to timely disclose the district court's words, the government's decision not to rely on the full-time employee exception of FACA. That decision was disclosed and it was disclosed at the first time after remand that the parties joined issue on the matter in the government's summary judgment papers. The district court doesn't take issue with --

THE COURT: Six months later in a footnote.

MR. LEWIS: Six months after the discovery process had basically been completed and it is true that the district court in the district court's decision in November of '93, I believe, stated that one of the task for it was to inquire into the government's claim that all the members working were full-time employees. That was not an argument that the government had actually asserted at that point. But it was an issue that had been raised by this Court's prior opinion on the merits.

When this case went up to this Court initially on the merits, this Court rejected the government's argument that the working group was staff and therefore exempted from FACA. But it directed the parties to address on remand and remanded the case for the purpose of addressing two additional issues.

First, whether all of the members of the working group could be termed full-time employees. Something the Magaziner declaration did not state. And that the colloquies before government counsel and this Court make clear that the Magaziner declaration was insufficient for that purpose.

And second, that the working group had a fluidity of structure that was sufficient that it lacked the required fixed purpose specific membership and organized structure that this Court suggested would bring it outside FACA. And it was that defense, the so called horde defense that the government actually did press in its summary judgment papers.

The government was not, there is no evidence that the government made a final determination to abandon the full-time employee exception defense until the summary judgment stage. And in any event the government --

THE COURT: Actually, Mr. Lewis, correct me here perhaps. But you said it was what you are pursuing in your opposition to summary judgment which was when?

MR. LEWIS: The government's papers on summary judgment were filed in May. Plaintiffs had filed --

THE COURT: In May of?

MR. LEWIS: -- a motion for summary judgment in April of '94 I believe.

THE COURT: In June of '93, which is after the remand, you filed your memorandum regarding further proceedings in the case. And in that case, in that stage it seemed to me you were arguing, I thought in your brief, had already narrowed the case to the horde theory.

MR. LEWIS: Well, there is no question and indeed this is one of the, we had not abandoned the full-time employee exception, but it was clear from this Court's opinion that the horde defense presented far fewer problems in its assertion than the full-time employee exception. After all while this Court remanded for further development on the status of the working group it had distinctly questioned the application of the full-time employee exception to the working group on the facts that it had even at that point.

The government in order to press that exception, as it explained in its summary judgment papers, would have required the government to engage in a person by person assessment of each member of the working group to determine whether they worked full-time.

THE COURT: Well is it your position that in November of '93, when Judge Lamberth said that this Court's task is to inquire into number one, the horde theory; number two, the truth of the government's claim that all members of the working groups are full-time officers or employees of the government. You had no obligation to say first of all we never said that. And second, we're not pursuing that or what is your position?

MR. LEWIS: Well to take the points in series. It would have been better with hind sight to have corrected the Court on its statement that the government claimed the full-time employee exception because the government had not, as the U.S. Attorney found, had not till that point claimed it and indeed decided not to claim it.

THE COURT: Well not only would it have been better but if the Court is saying my task is to do one, two, three, four, five. And you don't say to the Court, you don't have to do task two because we're not arguing --

MR. LEWIS: Well but that's not true, Your Honor. He did still the Court, the fact that the government had until that point pressed the argument, didn't mean that it wasn't a task for remand. Because this Court in its decision had identified that issue and directed the parties to address it on remand. In fact, the discovery was in part the purpose of expedited discovery on remand was in part to explore that very issue. The government, when it decided it would make clear in its summary judgment papers in May that it was not going to express the full-time employee exception, explained that it would be unduly burdensome for it to do so, but also, in the motion for summary judgment pointed out that with respect to certain of the cluster groups, parts of the working group, that they were composed of permanent full-time federal employees. And the exception would apply to those portions of the working group.

Even then, the record shows the government had not abandoned the full-time employee exception for all purposes.

THE COURT: And is it your position that in May when you said in the summary judgment motion it's too burdensome for us to figure out who's full time, that you didn't know that in November because you hadn't engaged in discovery or what?

MR. LEWIS: Well no, Your Honor. All that there was in November was that the question of, because after all that it was still the task with respect to those cluster groups that were composed of permanent full-time employees as to whom there was no question about their full- time status. So in November, even in November, even if the government had made the decision to finally abandon the argument, and there's no evidence in this record that that's the case. But even then, it still would have been a task before the district court.

The only corrections would have been made in the November order would have been for the government to say Your Honor, we haven't claimed that argument although it's still an issue that's in play because the Court of Appeals has remanded for resolution of that issue.

The fact is we could, the government isn't under an obligation to give the opposing counsel sort of a tactical, a preview of its tactical decisionmaking process.

THE COURT: Well, but you're saying, now wait you're saying that the Court, the district court still had this task whether you urged it as a ground or not. And the Court of Appeals opinion says the government claims this full time. Now whether you did or not is a disputed issue, but the district court --

MR. LEWIS: I think the district court would have been, it would have been correct for the district court to say one of the tasks before me is to consider, that's still before me is to consider whether the working group is composed wholly of full-time employees because the government is still considering whether or not to make that argument, and the Court of Appeals has raised and not foreclosed that argument. So, it's still before the parties as an issue in the case.

And the fact is the government, there is no evidence that the government actually made a decision by that point to abandon the argument. It would be strange for the government to make a final decision as to that matter in the absence of any substantive briefing on plaintiff's part. It's not the usual case that one makes, it's not the usual case even in the summary judgment paper for the government to abandon or disclaim reliance on an argument that the Court of Appeals has suggested could still be made. Although there might be -

THE COURT: All right. Let me just stop you and say. Then what, just answer this question. What would have stopped you from saying to Judge Lamberth in November, with 13 respect to task 2, we can make your job easier because with respect to some of the working groups, yes we still want to urge that they're full-time federal employees. With respect to others, it's either too burdensome or it's in fact not the case. What stopped you from doing that? You didn't know --

MR. LEWIS: Well, the first thing that stopped us is that there's no evidence in the record that a final decision had been made by the government by that time. So we couldn't make the representation that we could make in May. Which was after all the filing we made after plaintiffs had asserted their claims and made their arguments. And the second is --

THE COURT: I couldn't understand that. Will you rephrase that.

MR. LEWIS: I mean the first point, the first reason that we wouldn't have been able to send a letter to the Judge or inform the Judge that we can make their life easier because we're not going to make the running full-time employee exception argument is that there's no evidence in the record that the government had made a final decision at that point. A final decision to abandon that argument for all purposes.

And indeed in the summary judgment papers, we didn't abandon it at least or disclaim it at least with regard to those cluster groups that were composed of permanent full-time employees. Now, it's true that there's nothing that would have prevented, with the benefit of hind sight we could have perhaps sent a letter along the lines of gee it seems difficult and we're considering whether or not we will ultimately not press that point. But we did give every indication both in the papers, regarding the motion for further proceedings and in our interrogatory responses that the main issue in the case on remand was going to be the horde theory.

And the government isn't responsible for plaintiff's decision to devote the lion share of its efforts to the full-time employee exception. They had the same Court of Appeals decision --

THE COURT: So your position is that it's a perfectly bona fide litigating position, I'm not saying it's not, to say during discovery we're going to keep open all our options and we'll let you know what our position is when we file our dispositive motion.

MR. LEWIS: Generally, that's what lawyers do. They keep their options open.

THE COURT: Well that, I'm asking is that your position?

MR. LEWIS: Yes. That is our position. But for the purposes of this case, the district court can only be affirmed if it was bad faith for the government not to do that. And that's a much higher standard. It's not simply that one could quibble with or with the benefit of hind sight 15 say that it would have been better for the government to do "x" or "y" It's that the government's failure to do "x" or "y" that consists of bad faith.

THE COURT: This same representation in the Magaziner first declaration was the subject, was it not of a Rule 11 objection?


THE COURT: And the district court determined that that was moot and the case was moot.

MR. LEWIS: It's a little bit unclear from the district court's opinion. The district court I think disposed of all the pending motions before it which were based on any number of grounds by rendering judgment against the United States for attorneys.

THE COURT: Cause it does seem to this nonlitigator that the nature of the objection made to that declaration fits better in the Rule 11 framework than it does in a either contempt or bad faith framework. That is to say was there any basis for this assertion?

MR. LEWIS: Well, I don't mean to suggest that Rule 11 is any better ground for the district court to impose sanctions, but --

THE COURT: I understand that. I understand that. But the, this is peculiarity here there was a Rule 11 objection and then the whole thing gets litigated in terms of bad faith instead. And I wonder if that Rule 11 objection is still alive somewhere?

MR. LEWIS: I don't think so, Your Honor. I think the district court made it clear that it was disposing of all of those motions in front of it. I do think that it's inappropriate on Rule 11 grounds, though. The basic problem with the --

THE COURT: Well if they were sent off on a fools errand into six months of discovery on the basis of an assertion for which there was no foundation, and I'm not suggesting that there wasn't, that would probably support sanction.

MR. LEWIS: But there's absolutely no evidence in this case that plaintiffs were mislead or sent off on a fools errand because the filings by the government and this Court's opinion made it absolutely clear that the primary focus of the case on remand should have been the horde defense. And in fact that's what the government ended up pressing.

And it shouldn't have been no surprise that the government disclaimed reliance ultimately on the full-time employee exemption.

THE COURT: The district court itemized several grounds for concluding that the government acted in bad faith. If the Court agrees that the district court was within its discretion as to any one of those grounds, don't we have to remand the matter for the district court to decide whether on that limited basis it would reach the same conclusion regarding sanction?

MR. LEWIS: The district court was not within its discretion on any of the grounds and so there is no need for a remand.

THE COURT: Now fall back to assuming it was with regard to one.

MR. LEWIS: It's not clear to me that there is, well, for example, Your Honor --

THE COURT: It's a chenery type problem. Isn't it?

MR. LEWIS: To some extent, yes. We do not know that if, for example if this Court were to find that the Magaziner declaration was not false, there's certainly a serious question whether or not the government's failure to otherwise inform the district court of its tactical litigation judgments would have supported even in the district court's own mind bad faith award of attorneys fees.

But our position is this Court is free here and now to examine this record which after all has closed because this litigation has been ended for years and determine that there was no basis for the district court to award bad faith fees on any of the grounds that it --

THE COURT: Well, that would, yes. If we however that we determine that any, he enumerated several different specific, independent grounds. I grant you that there's some argument for the failure to update being dependent upon the initial or is it, yes your position is it's dependent upon the initial falsity of the affidavit.

MR. LEWIS: I think that's right. If Your Honor's question is is there any way that any of these grounds can be termed independent and affirmance can be made on that independent ground, I think the answer is "no." I don't think there --

THE COURT: Well of that independent ground requiring therefore ore remand. No?

MR. LEWIS: Yes. I think that, we think that this Court has the ability to examine all the issues in this case and make a determination about whether the record in this case supports a bad faith award on any of the grounds. If this Court were to disagree and find it clear on certain grounds but not so clear on other grounds, then a remand would be appropriate, certainly an affirmance would be inappropriate just before this Court found some but not all --

THE COURT: We ask for the same reason that reversal would be if it's within the district court's discretion to recalibrate its conclusion to the narrower foundation.

MR. LEWIS: That's if, and that's precisely the point. If it's within his discretion, our position is that it was not within his discretion taken in combination or singly or any of the specific grounds that he identified.

THE COURT: Okay. Thank you, Mr. Lewis.

THE COURT: Are you saying that we couldn't affirm on the government's position not being substantially justified?

MR. LEWIS: No, Your Honor. I think that substantial justification question is even clear as so far as the government is concerned.

THE COURT: Okay. Well now as of, I mean in May of '94, we found out that your defense is the horde theory. Right?


THE COURT: Does it, and the district court never, as far as I can tell never decides one way or the other whether that was substantially justified or not.

MR. LEWIS: That's right.

THE COURT: Because it's settled.

MR. LEWIS: Right. But our basis for substantial justification on the horde theory is this Court discussed the horde theory at length.

THE COURT: We gave, I mean did we come up with it or did you?

MR. LEWIS: Well, Your Honor, I suppose it was a joint effort. It derives from arguments the government made, but it certainly was a gloss on those arguments and, but our point is simple. Ordinarily, I mean almost invariably if I would think that if a litigant takes Court of Appeal's invitation to press an argument that the Court of Appeals put the gloss on or creates that that would be substantially justified. I would at least hope so.

THE COURT: All right. That's your argument.

THE COURT: The term was ours but I thought the thought was yours, that the --

MR. LEWIS: The government did emphasize and point out that the Federal Advisory Committee Act is to suppose to apply to those groups that present advise as a group, consensus advice. That is a phrase that's used in the regulation and the government didn't point that out. I think the horde, the word horde may have sprung from the Court's opinion.

But any event, it was, the government in the initial phase of the case argued that the working group was exempt from FACA because it was staff. The district court accepted that argument but this Court did not. This Court suggested though that the fact that the working group might be exempt because it was a horde and not a lesser group than a horde.

THE COURT: So even though Judge Lamberth didn't reach a decision on whether the horde theory was substantially justified because we sent it back for an inquiry into that that makes it substantially justified. I mean that's your position.

MR. LEWIS: Well, and it was entirely, well not entirely legal argument, but if one examines the government's summary judgment papers that that Court's suggestion was supported by an enormous amount of material in the record which showed the fluidity and lack of structure. That issue was never decided, but for present purposes this Court can decide that it was reasonable and substantially justified to run the argument. It doesn't have to decide that we would have won before Judge Lamberth or even hear.

If the Court has no other questions.

THE COURT: Mr. Lewis you used your time, but we'll give you two minutes for rebuttal.

MR. LEWIS: Thank you.

THE COURT: Mr. Spencer.

ORAL ARGUMENT OF Thomas R. Spencer, Esq.


MR. SPENCER: May it please the Court, my name is Tom Spencer and together with Robert Guild we represent the Association of American Physicians and Surgeons.

The district court should be affirmed because it had more than adequate basis to make the determinations it did that the government engaged in outrageous conduct in this case and that the language that it used in expressing its frustration with the tactics used by the government were substantially justified by the record in this case. And that there is abundant evidence that the determinations made by the government in this case to engage in the tactics that it did should not be reversed by this Court. And in fact, it should be affirmed in strong language.

It is our position that essentially what the government's position is is that the litigation gain with respect to a FACA case such as this is pin the tail on the donkey. And that essentially what it is the function of plaintiffs counsel to do is to grope in the dark until the facts are determined and pinned down as the government moves the target left and right.

Now essentially what the government argues and has argued this morning is a changing scenario. And the truth of the matter is that the facts in this case never changed. There were three declarations over a period of time from March the 1st, 1993 through June of 1993 through May of 1994 when Magaziner deposited his third and final declaration. The facts had already been closed. The factual scenario of this entire situation had already occurred. Yet, when one takes Magaziner three and lays it over Magaziner one, it's a completely different scenario and essentially what the government argues here is that not one of its representations in terms of the Magaziner I declaration in March of 1993 upon which Judge Lamberth had to rely in order to make his first determination.

Not one of those statements of fact, are statements of fact but in fact are opinion. What they argue is that the word membership is not any longer a statement of fact, it was an opinion. In other words, Magaziner should more accurately have said in my opinion these working groups are composed solely of federal employees. And that really what they intended to say. Because there was so much confusion about the words. But there was no confusion at the time that Judge Lamberth received the Magaziner I declaration and made his determination.

As a matter of fact, they argue that Judge Lamberth never relied on the Magaziner I declaration for his finding. He says he did. And I believe that there's abundant evidence in the record to demonstrate that he did. In March of 1993 when they deposited the Magaziner I declaration, the government was making the argument and made the representation I should say to the Court below that only federal government employees are members of the working groups. And they said it time and time again while they stonewalled the plaintiffs in terms of discovery and being able to present live testimony. As a matter of fact, for the temporary injunction hearing at the initiation of the lawsuit, we attempted to bring in live testimony to demonstrate to the Court that there was some funny shenanigans going in the secret health care task force. What they said in their representations to the Court was you don't need any live testimony. We have a high government official here who's a very very busy man. He's working on the President's highest priority. You don't need to take his testimony and they don't need to take his deposition because we have given them a declaration which fairly, adequately, and completely discloses and explains the function of these working groups and the task force. And that should be adequate enough. This is simply a matter of law.

And they handed in that declaration to the Court. And the Court based upon that and reliance upon that did not allow the live testimony; did not allow discovery; and basically said and I think footnote 11 in his initial opinion is pretty telling in this regard that he is relying upon the declaration of Magaziner.

THE COURT: But footnote 11 is attached to the discussion of Magaziner saying that it will have any recommendation power in this working group. It will simply gather facts. And he doesn't mention the status of the members of the working group, whether they're full-time federal employees or not.

MR. SPENCER: That's right. In his opinion, he never says well you told me that this is what you were relying upon, this federal exemption employee with respect to the working groups. What he does instead and I think in his opinion here, he says that is appealed here, he says as to the working group, this Court concluded that it was engaged in fact gathering and did not provide advice directly to the President based on a sworn declaration dated March 3rd, 1993.

And so they squirmed around that in saying therefore eureka it demonstrates that Judge Lamberth never relied upon this declaration in order to deposit some federal exemption for working groups. But, as Judge Lamberth said in his opinion, he relied upon that declaration for the factual background, not only as to whether they were fact gathering, but what the status of these people are. They also say --

THE COURT: What did he do in reliance on that?

MR. SPENCER: Essentially what he did was enter a judgment with respect to the working groups in which he said that these are fact gatherers and therefore they're staff and therefore they're not the type of people, and this is not the type of group which is a FACA committee.

THE COURT: So all that goes to the staff exemption --

MR. SPENCER: Exactly.

THE COURT: -- not to the full-time employee exemption.

MR. SPENCER: Exactly. But what they are arguing is that therefore demonstrates that they did not engage in any conduct which could be criticized because the Judge didn't say that he relied upon that for reaching a legal decision. But as Judge Lamberth said, what's the purpose of providing to a Court and adequate factual background with regard to a case if it isn't for me to rely upon it. I've got to rely on this Court was given and argued to that wasn't accurate.

THE COURT: Well let's go back to whether it's accurate or not. He says the Court is convinced that Mr. Magaziner and the drafters of his declaration improperly represented as a fact that all "members" of the working group were federal employees. That fact was not true then or later by any reasonable definition of the word member. What is there, on what can he rely foreor that determination? What is the evidence that that was not true?

MR. SPENCER: Membership didn't mean a thing. And they admitted it not only to him but also to you. In their brief on page 33, they said that membership is a meaningful concept and was a meaningful concept. On page 34 they also said it's also accurate to say because they had said it under oath and Mr. Magaziner.

THE COURT: As I, maybe I'm misreading the Judge here. But I think what he was saying is that however you want to define members, it is not true that they were federal employees.

MR. SPENCER: Correct.

THE COURT: So let's not go over how we define members. He's saying however you define it they weren't all federal employees.


THE COURT: What is the evidence of that?

MR. SPENCER: The evidence is, Your Honor, that none of tnem had really, had done anything to comply with the federal laws. For example, 350 --

THE COURT: Is there evidence on this?

MR. SPENCER: Well, Your Honor, we have presented evidence and there is evidence in the record upon which the Court relied which a substantial --

THE COURT: I don't see that reliance either. Where is the, this case, this issue was not litigated as I understood. The government ultimately folded on this issue. Right? Were settled, the case, it was never litigated. And in this collateral proceeding, I don't see any evidence being created or being created to plump whether this fact was true or false.

MR. SPENCER: Yes, Your Honor, there was. There was substantial evidence. In fact, in terms of the --

THE COURT: What is it? Give me an example.

MR. SPENCER: Sure. I'll give you the example of the filing of motion for summary judgment in which they had a change of heart.

THE COURT: That's not, I want evidence. That's not, a motion for summary judgment is not evidence.

MR. SPENCER: Well in --

THE COURT: Evidence that these employees were not, these people were not employees. Is there any evidence of that?

MR. SPENCER: Yes, Your Honor. In the motion for summary judgment together with the proof which was attached to it, the affidavits, the lists of the people who attended as participants, they were not under any reasonable definition a federal employee Unless you define a federal employee as anybody who attended the working groups. If a person is --

THE COURT: Well, the government's argument is that they were special government employees. And that all one needs to be a special government employee is to conduct, act in such a way as to trigger the somewhat lesser level, ethical canons applicable to special government employees. So the question then is well did they do the things to trigger that or did they not? But that was never resolved I thought because everyone agreed it would be a very burdensome inquiry and the government collapsed on it.

MR. SPENCER: Well that's not exactly accurate, Your Honor. Because in connection with the proof which was submitted in support of the motion for summary judgment and as the U.S. Attorney himself concluded, there were many, many, many of those people who had not filled out the first conflict of interest form; had not filed the first --

THE COURT: But under the government's theory that's not dispositive. Right?

MR. SPENCER: Well, Your Honor --

THE COURT: And the Court hasn't said well it is. It hasn't disagreed on the law or determined as a matter of fact that they weren't acting as special government employees.

MR. SPENCER: I think, Your Honor, it's dangerous to disagree with the Court, but I must disagree --

THE COURT: No. Not if you can point to evidence, it's not.

MR. SPENCER: I must disagree and say that Judge Lamberth says that in his opinion that they were not federal employees under any reasonable definition of --

THE COURT: I know. That's what I'm asking you about. Where's the evidence to support that? If there's no evidence to support that we can't affirm here.

MR. SPENCER: There is substantial evidence to support it. There is evidence from the United States Attorney; and there's evidence from --

THE COURT: Well that evidence is that not all of them filled out the forms

MR. SPENCER: Correct.

THE COURT: But why is that dispositive as a legal question?

MR. SPENCER: Well, Your Honor, because if the federal government can simply make an argument for the purposes of FACA that anybody who shows up for a meeting, regardless of whether they comply with any federal law not the first scintilla of federal law, which we've demonstrated under oath

THE COURT: They may have complied with everything except filling out the form. That's what you're saying, they didn't fill out the form.

MR. SPENCER: What I'm saying is that their definition is a self fulfilling prophecy. Anybody who they say is a federal employee for purposes of FACA as a special government emplo-

THE COURT: They might be wrong about that. That's a, this Court proposed a functional test for that. Right? We said well it depends. Did they participate and at what level and how regularly.

MR. SPENCER: Absolutely, Your Honor. And the only proof which is in the record that is not even controverted by the other side. They don't dispute this whatsoever. People who were on these working groups had not even complied with a scintilla of conflict of interest forms which they themselves require under the criminal statute. And so, we are left with and we are left with and the Court was left with a situation in which on the eve of trial after having put their faces into the wall, the government folds and says we're going to release all these documents. The only evidence in this record is uncontroverted that these people didn't comply in anyway, shape or form.

Now they say, uh, it doesn't matter. I'd like to see what they would be arguing under a federal court claims act if somebody coming out of the White House was run over. They'd be screaming bloody murder that there's a different test for employees. And there is nothing that they have pointed to except a criminal statute with regard to their --

THE COURT: The opinion of the Attorney General.

MR. SPENCER: Exactly, Your Honor. And it's their opinion. It's simply their opinion that they --

THE COURT: It's an opinion of 20-year standing.

MR. SPENCER: I understand, Your Honor. But it is an opinion which is under these circumstances, FACA would be turned on its head if --

THE COURT: The term employee has a different meaning in different contexts. In the FTCA it has a different meaning. In fact I think it's a defined term in that statute than in FACA. In FACA employees not even a relevant term, it's full-time federal employee I think is the relevant phrase. Right?

MR. SPENCER: Right. Exactly.

THE COURT: And I don't understand how you can dismiss or ask the Court to dismiss so facile the government's showing that whether and the Court's own indication in the prior opinion, that whether someone is a full-time government employee turns upon conduct, not paperwork.

MR. SPENCER: Well, your Honor --

THE COURT: Or may, that they may turn out to be a full-time government employee even though there's no paperwork.

MR. SPENCER: precisely and --

THE COURT: If they were to turn around and seek compensation, for instance, or indemnification, they might be able to prove that they were full-time government employees notwithstanding the absence of paperwork. That's the argument and I don't see how that's been resolved. There's the matter of ruling by law by the Judge or by showing facts saying that that's not their circumstance. They didn't measure up to the standard for being an employee.

MR. SPENCER: your Honor, the only evidence in the record that is uncontroverted is the evidence we presented which demonstrated that there are 100's of them who --

THE COURT: Who didn't fill out the paperwork.

MR. SPENCER: Who did not fill out the paperwork.

THE COURT: Right. But, how, the multiplication of instances doesn't bridge the gap. Does it? There's lots of them there, but if they all participated at the level of employees, there's just that many instances of missing paperwork.

MR. SPENCER: Well, Your Honor, for purposes of FACA, I think we can all agree that there is no definition of employee in fact, a special definition of employee.

THE COURT: Well, but it's really, that may be but special government employee is in a different statute. But it's also the phrase used in the declaration. Right? That's what he said, they were either government employees or special government employees.

MR. SPENCER: Exactly. And how can one argue and --

THE COURT: Never said they were full time.

MR. SPENCER: No, sir. But how could one possibly with a straight face argue in view of the purposes of FACA and the fact that that gives an exemption from disclosure that --

THE COURT: They didn't argue with it at the time. And when it finally came down to it, they said we're going to abandon that argument.

MR. SPENCER: Your Honor, they said that they were going to side step it for the purposes of summary judgment, not for the purposes of trial.

THE COURT: No, they might want to go on to preserve it. But that's no sin. Isn't it?

MR. SPENCER: It absolutely is no sin except if you have one people around the mulberry bush for a couple of hundred thousand dollars to try to run them --

THE COURT: Well you drew the inference from that fact. And clearly the Judge did too that the government was going to be making the full time argument which they later determined not to try to make. Right? And your discovery was directed to that, to defeating that.

MR. SPENCER: Correct.

THE COURT: And you spent a lot of resources doing that.

MR. SPENCER: Exactly.

THE COURT: Here's what the government said in their first filing after the remand from this Court. The Court made it clear that the applicability of the fact it requires case-by-case consideration. This is on the structural question, the horde theory. Then they listed a bunch of facts relevant to structural, administrative and procedural aspects of the working groups efforts. They've starred itemization by each things. Defendants are prepared to cooperate fully and expedite discovery on these relevant issues. Never came back to the full-time implication at all.

MR. SPENCER: Sure. I wouldn't either.

THE COURT: And you didn't say to them well does this mean you're arguing the full- time argument. You went ahead with discovery in anticipation that they were not abandoning it.

MR. SPENCER: Exactly.

THE COURT: But they never said anything one way or the other.

MR. SPENCER: No, Your Honor. I think that there was a footnote which caused them some problems later on which they said was a mistake by fresh counsel from the Department of Justice.

THE COURT: That was later on looking back. But at the time when you were pursuing this discovery that you say they sent you running around the mulberry bush for no purpose, it seems that you were doing it under your own steam. I'm looking for where the government mislead you on this.

Here's their first, what is it, this is their responses and objections to plaintiffs first set of interrogatories and second set of request for production of documents. This is August '93, so now we're just a few months into the discovery process. And they say their general objection, the question remaining in this action, this is the first paragraph in this document. The question remaining in this action is whether the interdepartmental working group or its cluster groups or subgroups were advisory committees subject to the FACA. The D.C. circuit instructed that the relevant factors for resolving this question are structure, personnel and purpose. Nothing about full-time employees. Right?

MR. SPENCER: And nothing that said that they were going to abandon it.

THE COURT: Right. They just didn't pursue it. They just dropped it at that point. In response to your request number two, identify all persons who served as members or participated in meetings or invited to attend meetings of the task force, the working group or cluster groups, etc. They say the identities of persons who served are provided in response to request number one. Defendants specifically object to the request for identification of persons who attended meetings or were invited to attend meetings of the task force on the grounds that such request calls for information irrelevant to the remaining issues in this case.

MR. SPENCER: Sure. They --

THE COURT: They have all but said that they're not going to pursue the full-time argument. Right?

MR. SPENCER: Your Honor, parapsychology is not really a weapon that we bring to the litigation room. And essentially in November what then happened was after we went through the discovery and the Court issued its opinion, Judge Lamberth said look this is one of my functions and this is one of the things that we're going to have to talk about. Matter of fact in the record --

THE COURT: That was after, that was in November. I just read to you from an August filing.

MR. SPENCER: I know, Your Honor.

THE COURT: So the Judge, like you, persisted in the misapprehension, the implication drawn from the original declaration that they were going to pursue this.

MR. SPENCER: And like this Court.

THE COURT: They didn't say we're not, they just hadn't done anything to say they were.

MR. SPENCER: Well, that's right, Your Honor. And just like this Court, as a matter fact they in, on their Appendix 2056 they say in a brief that the filed with Judge Lamberth, unfortunately the Court of Appeals opinion contained a factual misstatement in dictum. As a first holder letter has now pointed out, that Court erred in stating the government claims that all members of the working groups are full-time officers and employees of the government. And for that reason alone, the working groups are not FACA advisory committees.

Later on, during the Spring, government counsel reiterates that they had made that argument. So, they were, if we look back on the totality of the circumstances and I really believe this is what raised the stakes with respect to Judge Lamberth. It was that there was gamesmanship from the very beginning. There was spinning of words. There was omission. There was stonewalling. There was obstruction of discovery. There were tactics and at the final end when they couldn't run us out and they couldn't run out the clock, they simply folded and now they say that they had every substantial justification to take the position that they did. And I think that the evidence --

THE COURT: The government was guilty of a number of missteps for which they've been sanctioned and fined before the ruling under review. There's no, right? Isn't that right? You had discovery sanctions earlier on.

? MR. SPENCER: They were never assessed, Your Honor.

THE COURT: Well, the Court said it intended to.

MR. SPENCER: Exactly. And that was --

THE COURT: Under Rule 37.

MR. SPENCER: Exactly. And that was one of the --

THE COURT: I mean there's no question this was hard fought and in some instances perhaps the government stepped over the line. But the question is whether the grounds that the Judge adduced for this current ruling can be substantiated. And that's a fairly narrow question. I grant you also that it's fair to answer that question with the context in mind in order to resolve ambiguities. But I also think it was reasonable for counsel and for the district court to be dismayed when the government finally said well we never, we've never invoked this and we're not invoking it.

MR. SPENCER: Well, Your Honor --

THE COURT: And looking back at the record, they may have been right.

MR. SPENCER: Well I don't know that they're right, Your Honor. They certainly, their counsel didn't think that they were right when in the Spring he said that they had made that argument.

THE COURT: Well this Court made the same statement. But it clearly isn't in the record. Is it? I mean clearly we heard in that remark in the opinion. Isn't that right?

MR. SPENCER: I don't think that you did. I think that the colloquy from the Court was clear that this was an issue. As a matter of fact and I don't, it was prophetic that one of the judges, it may have been Judge Buckley who said we're going to see whether the affidavit matches reality. That was an astounding statement in view of the facts which unraveled.

THE COURT: Well I haven't gone back and looked at the brief that the government filed in that case. Will I find in there that they were asserting the full-time argument?

MR. SPENCER: I believe that you will.

THE COURT: I will check.

MR. SPENCER: And Your Honor, with respect to the question that you asked about Rule 11, we filed a motion predicated not only on the Equal Access to Justice Act, but also based upon Rule 11. And --

THE COURT: And was that resolved by the Court or dismissed by the Court?

MR. SPENCER: No. It was not resolved. I think that this determination that he made was I believe intended by him to subsume that. But it was never specifically denied and it certainly was never withdrawn.

THE COURT: So if the current judgment is vacated your position is if this Court were to reverse the current judgment, it's your position that you would then be in a position to renew with the district court your Rule 11 motion or to call the Court's attention as pendency.

MR. SPENCER: Well, Your Honor, it would be my position that all of our options are open with respect to it, depending upon how the Court rules including Rule 11. But in our view, obviously by virtue of the tenor of our argument, this is not just a question of hard tactics and missteps by the government. This in our view and I believe in the view of the Judge was outrageous conduct especially in view of the determination not to at any time correct the record or to bring him up to speed as to what the facts were.

THE COURT: Can I ask you. When Judge Ginsburg was going over the government's submissions between the time of the remand and the November order of Judge Lamberth which seems to at least indicate that they may not be pursuing that. Did you feel any obligations when Judge Lamberth puts in his order in November one of the things we've got to establish the truth of is whether these are full time employees. Did you feel there was any obligation on you, and I'm not saying there was, but to say it looks like they may be vacillating on that?

MR. SPENCER: No. Because --

THE COURT: I mean, is the reason that you felt like Judge Lamberth that they were pursuing that?

MR. SPENCER: Absolutely. The opinion demonstrated it would confirm it. The activities that they were engaged in; the obstruction of the discovery demonstrated it. They were trying to keep those lists and the members spin it and give us as little as they possibly could. Which resulted in the sanctions determination in November.

Thank you.

THE COURT: Thank you, Mr. Spencer.

ORAL ARGUMENT OF Jacob M. Lewis, Esq. (DOJ)


MR. LEWIS: Just a couple of points, Your Honor. If plaintiffs had any doubts about the government's tactical judgments the government was going to making on remand, there is a process by which they could have asked the government They could have filed the contention interrogatories at any point during that Fall and asked --

THE COURT: Have you ever received such an interrogatory?

MR. LEWIS: Well, Your Honor, I do an appellant practice, so no, the answer is no. But there is such a thing that is provided in the rules and there are cases that discuss under what circumstance they can and cannot be filed, and require in certain circumstances that they be filed if the argument is that the government didn't disclose it's trial litigation strategy or didn't close it in a timely manner. It obviously has to enter into the mix about whether or not plaintiffs could have triggered or asked the government that very question. They could have. And there was no, plaintiffs are in part the masters. They has responsibilities you know, to conduct the litigation as well as the government.

And in this case they just simply did not ask. And there was, you're right, Judge Ginsburg, there was every indication. Perhaps you have to read between the lines but you don't have to read far between the lines to understand that the government's filing had recognized this Court had shift the focus with a case on remand from the full-time employee exemption towards the horde theory. And that's in fact what happened when the government filed its motion for -

THE COURT: But at the same time you were doing that, you also felt that you did not have to inform the district judge who said one of my tasks is to find out the truth about this that whether they were full time, that you were easing away from that. And maybe not much discovery needed to be done in that area.

MR. LEWIS: Well, Your Honor, the U.S. Attorney had a phrase that the government, it seemed to the U.S. Attorney that the government had pretty much abandoned the argument. But by the same token, the evidence shows that the government was still considering the argument even though it gave every indication that the full-time employee exception was not something that it ultimately was going to find. The government was ultimately disclaimed the argument. But it wasn't for lack of considering whether or not to run it.

My only other point would be this case and the district court sanctioned the government for bad faith conduct. It found that the Magaziner declaration was false. Those determinations are based on erroneous conceptions of law. This Court is free to determine that there was no bad faith conduct in this litigation without a remand.

THE COURT: Can I ask one question. Forgetting whatever the Attorney General said in the letter about whether they were employees. Did you put any evidence in, was there any evidence about that they were federal employees? I know Mr. Spencer said there was no evidence about the conflict of interests. Did you get to the stage where you had any evidence that they were?

MR. LEWIS: The case was not tried. So that there was not a full blown trial on these questions. The government did submit motion for summary judgment. But by that point, the government was not pressing the full-time employee exemption for precisely the reason that it felt it would be an undue burden.

THE COURT: How about in the discovery that preceded it?

MR. LEWIS: Well the discovery process generated an enormous amount of documents which presumably plaintiffs would have used to their advantage at trial.

THE COURT: Well I mean did you submit paychecks for these federal employees when they asked you for documents?

MR. LEWIS: There were discovery requests for that kind of material. I think the short answer to Your Honor's question is the U.S. Attorney recognized that a convincing legal argument could be made that evey participant in the working group process was at least a special government employee for ethics purposes. The membership category was obviously some narrow subset of that.

THE COURT: Okay. I'm asking you about the documents. If they asked for them, did you give them to them?


THE COURT: And did they include --

MR. LEWIS: That's, one thing is clear in this case, Your Honor. If they asked for it, we ultimately gave it to them.

THE COURT: All right. So there was in response to discovery documentation that at least some of these people were federal employees?

MR. LEWIS: Oh yes. It is no dispute that --

THE COURT: And what was the documentation?

MR. LEWIS: Well some of the --

THE COURT: Was it paychecks?

MR. LEWIS: It was some of it. I mean some of the people, a large portion of the people were permanent full-time federal government employees that had no other --

THE COURT: And how did you show that? How did you show that?

MR. LEWIS: Well you can show that by paystubs or time records or their employment.

THE COURT: Well how did you show it?

MR. LEWIS: Well, Your Honor, we didn't show anything. We disclosed --

THE COURT: What did you disclose?

MR. LEWIS: That kind of material I think the discovery request were broad ranging about going to the level of detail. In fact, that's what much of the discovery contention was about, about how much information and detail and private in certain cases, private information about financial records or paystubs or salary statements were necessary. Time and attendance records were obviously among the materials that were asked for by plaintiffs. But --

THE COURT: And were they given to the plaintiffs?


THE COURT: All right.

MR. LEWIS: If the Court has no further questions. Thank you.

THE COURT: Thank you, Mr. Lewis. Case is submitted.