[00:00:02] Speaker 02:
Case number 14-5171, National Security Counselors Appellant versus Central Intelligence Agency and L. Mr. Moss for the Appellant, Mr. Pinnock for the Appellate.

[00:00:46] Speaker 01:
Good morning, Your Honors, and may it please the Court.

[00:00:48] Speaker 01:
My name is Bradley P. Moss, counsel for the Appellant, National Security Counselors, Inc.

[00:00:53] Speaker 01:
With me at the counsel table is Cal McClanahan, who, as the Court is aware, handled the litigation at the district court level.

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There are three primary issues I'd like to be able to address this morning that I believe are substantively important to the adjudication of this case.

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The government in their opposition brief has raised several tangential procedural issues.

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Unless any members of the court have specific questions on those matters, I'm simply going to let the reply brief speak for itself on them.

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It is NSC's position that under the ruling in Baker and Hofstetler and the standards set forth therein, it qualifies as being eligible as an organizational litigant to recover attorney's fees for work performed by in-house counsel.

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Of course, the Baker case implemented footnote seven of the Supreme Court's ruling in K. K. had concluded that pro se attorney litigants could not recover attorney's fees

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However, in footnote seven of that majority opinion, Justin Stevens drew a distinction between pro se attorney litigants and organizational litigants, finding that organizational litigants are automatically, inherently represented by in-house counsel.

[00:02:06] Speaker 03:
But the – you know, I hear – I see the language there, but the background music in Kay was all about Alieska, right, a big corporation with a big in-house counsel's office.

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That's with the court.

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I mean, it didn't say that, but it talks about in-house counsel.

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And in Baker, it was a big law firm.

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So I guess my question is, when we try to understand what this language means, do we have to take into account that?

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In other words, what wasn't before either court was a situation like we face here.

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which is a lawyer with his own corporation.

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Prior to that, I think, I believe CUNIO would have been the controlling precedent, which actually found that even pro se attorney litigants could recover, let alone a small organization or corporation represented by a lawyer who is the primary official.

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Burka doesn't say that a pro se attorney can't recover?

[00:03:08] Speaker 01:
Correct, Berka came after, sorry, Berka overruled Cunio because it came after Kay.

[00:03:13] Speaker 01:
I'm sorry, I was confused with your question then.

[00:03:16] Speaker 03:
So under Berka, a pro se lawyer can't, well let me ask you this.

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Under your view of Kay and Baker, could a lawyer in sole practice incorporate and by that way become eligible for fees?

[00:03:35] Speaker 01:
Is the way I read Baker at the moment, yes, I believe there's a rebuttable presumption.

[00:03:39] Speaker 01:
Rebuttable, not per se, but a rebuttable presumption.

[00:03:42] Speaker 03:
So then under your view, what happens to all the language in Kay about the need for independent legal advice?

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I believe that the language in K is expressed in that majority opinion was much more concerned with when it's strictly a pro se lawyer, when it's strictly the question of effective separation in terms of its actual attorney-client relationship.

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So to expand upon it for purposes of this case,

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If the government had believed that Mr. McClanahan had incorporated NSC for the sole purpose of being a one-man shop, sole practitioner, just incorporated, running FOIA cases to get fees, putting aside that I'm standing here and I'm obviously not Mr. McClanahan,

[00:04:23] Speaker 01:
putting aside that the record shows that there were other individuals working for NSC, but even if you put all that aside, the burden would have been on the government to have properly raised the alter ego argument at the district court to justify piercing that corporate veil.

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Under Baker, as far as I read the language set forth by that panel,

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An organization is an organization is an organization.

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They're not going to slice and dice what is an organization and what is not organization for purposes of footnote seven.

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What do you do with the language in Baker?

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It says, it says footnote seven suggests that in-house counsel for a corporation is sufficiently independent.

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In other words,

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Baker is viewing footnote seven as saying that in-house counsel is sufficiently independent.

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In other words, you still have to have independence.

[00:05:21] Speaker 03:
Correct.

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And so doesn't Baker require that we ask the same question here?

[00:05:29] Speaker 01:
I don't believe that Baker, and at least that's not the way I read the subsequent language in terms of making clear they're not going to slice and dice what is an organization.

[00:05:37] Speaker 00:
Well, don't you?

[00:05:37] Speaker 00:
I thought you just said that if the government had made, that it basically creates a presumption of independence where there is a legally separate entity, and then there's a burden on the challenger or the government to say, no, no, we're not giving fees.

[00:05:52] Speaker 00:
This doesn't fall under K. This doesn't fall under Baker because here,

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there isn't independence, notwithstanding the formal independence of the natural person and the organization.

[00:06:03] Speaker 01:
Correct, it was their burden to do so, but they had to still, it had to properly raise the alter ego argument itself as a legal matter before jumping ahead and piercing the veil.

[00:06:13] Speaker 03:
Well, see, that really does undermine your argument about what Kane means.

[00:06:18] Speaker 03:
I'm not sure what he means with what he just said.

[00:06:21] Speaker 01:
Sure, let me clarify.

[00:06:24] Speaker 01:
The way it occurred in the district court was that Mr. McClanahan, on behalf of NSC, submitted the motion for fees, establishing his eligibility under Baker.

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When the government raised its objection, it went right to the factual issues of whether or not Mr. McClanahan and NSC are one and the same.

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It went right into the factual details.

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what would be akin to an alter ego argument, but it never addressed the two-pronged test set forth that the government has to meet first.

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In its essence, the government asked Mr. McClennahan... You mean the FOIA two-pronged test?

[00:06:55] Speaker 00:
What two-pronged test are you talking about?

[00:06:56] Speaker 01:
What are you talking about?

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Give me one moment, Your Honor, as we find it from the brief, in our reply brief, because it was only raised for the first time by the government in their opposition.

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I'm saying that there's a legal requirement that's imposed on the government first before they can pierce that, yes.

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I'm not a I don't believe there's been a case law.

[00:07:27] Speaker 05:
I'm confused about your argument because the government certainly did raise the claim below that they're one in the same.

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And if that's essentially the same as alter ego, then I don't know what you think they didn't do.

[00:07:38] Speaker 01:
I think that'd be elevating form over function almost the sense here.

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Citation I was looking for for the two prongs.

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I think form is your friend in this case So I apologize.

[00:07:48] Speaker 01:
I'm mixing up my anecdotes with a two-hour commute in this morning the citation for the two-prong test is North American steel connections and I'm looking I can't find the long I sorry North American steel connections incorporated versus Watson which was actually from the Third Circuit but it was the only one that provided any details of this test because this circuit has not and

[00:08:07] Speaker 05:
Wait, tell me, what's this two-pronged test?

[00:08:09] Speaker 01:
Two-pronged test.

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First, there must be such unity of interest and ownership that the separate personalities of the corporation and individual no longer exist.

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And second, adherence to the fiction of separate corporate existence would sanction a fraud or promote injustice.

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And as we outlined in our reply brief, even if we assume for the sake of argument the government could have met its burden on the first prong,

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its entire argument on the second problem, which is, again, only being brought up in this appeal, is simply that to allow NSC to recover fees for the work performed by Mr. McClanahan would frustrate statutory policy.

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For such a serious issue of piercing a corporate veil, the entire argument is a one-line throwaway sentence without any further detail.

[00:08:52] Speaker 05:
Well, it's interesting they're raising you.

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I mean, you're quibbling with how they did it.

[00:08:56] Speaker 05:
That's why I was curious what you're talking about.

[00:09:00] Speaker 05:
They didn't do the two-part prom test first.

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They are essentially saying one and the same, and they're essentially saying all to ego.

[00:09:08] Speaker 05:
You seem to be arguing, no, they just didn't need it.

[00:09:10] Speaker 05:
Whatever they said about that below was too spare, and they can't add facts here, and their argument here is still too spare.

[00:09:20] Speaker 05:
They raised something like what you're talking about.

[00:09:24] Speaker 05:
You're saying they didn't do it well enough.

[00:09:26] Speaker 01:
I'm saying that they raised the factual issues.

[00:09:30] Speaker 01:
They did not raise the legal one that they had to satisfy before they could get to the matter.

[00:09:34] Speaker 01:
Did you cite this case?

[00:09:35] Speaker 01:
They didn't mention it.

[00:09:36] Speaker 01:
The words alter ego are not found anywhere in their briefs in the lower courts or the district courts.

[00:09:40] Speaker 00:
OK, so just giving the district judge the benefit of the doubt,

[00:09:45] Speaker 00:
She holds that Mr. McClanahan is both NSC's counsel and the executive director of NSC.

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In effect, both the counsel and the party.

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So that is sort of your finding of lack of separation.

[00:10:00] Speaker 00:
And then she says, in terms of what public policy this contravenes, it contravenes the policy that Judge Tatel was pointing to that's expressed in

[00:10:11] Speaker 00:
K, which is a policy of having fees be awarded and create an incentive for representation in a case where attorney and client are separate, and therefore where you get arm's length independent legal advice.

[00:10:26] Speaker 00:
And so as I read her opinion in the way most sympathetic to the government, and I'm saying this not because I've decided it, but to ask you to respond, if you read it that way, why isn't it responding exactly to the standard that you're

[00:10:40] Speaker 00:
that you're saying they haven't met, and meeting it by saying, you know, this is not what the few statutes about.

[00:10:46] Speaker 00:
There's not the independence that the Supreme Court has required in Kay.

[00:10:50] Speaker 00:
So why is there independence just because there's a formal separation here of organization and man?

[00:10:56] Speaker 01:
Well, those are two separate questions.

[00:10:57] Speaker 01:
Are we asking the separation question or how she actually did, more or less, Judge Henderson did what you think I should?

[00:11:03] Speaker 01:
Okay.

[00:11:04] Speaker 01:
From the formal separation standpoint, putting aside that there are other, there's Mr. Conahan was in-house counsel and he's not the only managing director.

[00:11:12] Speaker 01:
There's other lawyers, as we noted, who have participated, aside from, for instance, myself, I've participated in the lower district opinions.

[00:11:20] Speaker 01:
We obviously

[00:11:22] Speaker 01:
didn't have the opportunity to necessarily outline every particular detail of every billing invoice I could have pulled to show where I did work that wasn't built at the government for other cases.

[00:11:31] Speaker 01:
I hold actually three hats technically in my professional life, one of them being the Deputy Executive Director of NSC.

[00:11:38] Speaker 01:
As we outlined in the lower court, there are interns, there were of-counsel attorneys who performed work that wasn't built in the government because it wasn't done for cases, it was done for administrative actions.

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NSC is not simply a FOIA firm.

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It's a non-profit public interest law firm that in addition to representing itself in FOIA cases, represents clients in FOIA cases.

[00:12:00] Speaker 01:
personnel actions.

[00:12:01] Speaker 01:
Mr. McClanahan himself was before a separate panel of this circuit just last week to argue on behalf of a client.

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It wasn't an NSC case.

[00:12:09] Speaker 01:
It was a Sharif Mobley verse.

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I can't remember the agencies.

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I think CIA at all case.

[00:12:15] Speaker 01:
So there are clients.

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And so that was the difference.

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That was where I viewed the notion that there wasn't sufficient independence.

[00:12:23] Speaker 01:
There are multiple attorneys who work for this firm.

[00:12:25] Speaker 01:
Is it a Baker and Hostetler global firm with 200 lawyers and multiple offices?

[00:12:31] Speaker 01:
No.

[00:12:31] Speaker 01:
But as far as I read that circuit case law, that wasn't required.

[00:12:36] Speaker 01:
Baker case wasn't saying if you are a major firm, you qualify in all little startup firms.

[00:12:42] Speaker 05:
Sorry, you don't.

[00:12:47] Speaker 05:
by the government and the district court, I think that is.

[00:12:50] Speaker 05:
It's a one-person operation.

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Let's assume that, okay?

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And they're essentially positing the suggestion that in such an operation, whether it's incorporated or not, you cannot possibly have a presumption of independence.

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If the person who is the operation is the attorney, you can't have

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What's your response?

[00:13:14] Speaker 05:
Because that's at the heart of what the district court is saying and that's certainly what the government is arguing.

[00:13:18] Speaker 01:
Forget the quibble over whether you're right that the organization is more than just a single person.

[00:13:32] Speaker 01:
That's where the alternative argument that we raised in both our opening and reply brief that was not, it would have been futile to raise it at district court, because the district court wouldn't have had any authority to address it.

[00:13:41] Speaker 01:
What we are raising here on appeal is whether or not the premise underlying BRCA, the concept of why in a FOIA case, a pro se attorney litigant should not be allowed to recover fees, the work performed by in-house counsel remains valid law in the lineup.

[00:13:56] Speaker 03:
But you can't make that argument before this panel.

[00:13:58] Speaker 03:
Correct.

[00:13:59] Speaker 03:
You're not going to get anywhere with that.

[00:14:02] Speaker 05:
response.

[00:14:07] Speaker 01:
If Burka holds that Mr. McClanahan is a one-man shop and NSC is Mr. McClanahan, then quite simply NSC loses.

[00:14:18] Speaker 01:
There's no dispute.

[00:14:18] Speaker 01:
If the holding is that Mr. McClanahan and NSC are one in the same, then there is no argument.

[00:14:24] Speaker 01:
It's never been our argument that he could, under existing law, recover as a pro se attorney.

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That was the alternative we raised here.

[00:14:31] Speaker 05:
The attorney assumes the answer to the question.

[00:14:34] Speaker 05:
Because to say that is to just say, for example, the question is, are you conceding that if the record is that there is a clean entity and it does work,

[00:14:49] Speaker 05:
But it consists of one person who is also the person who does the legal work and the seeking fees.

[00:14:56] Speaker 05:
That's the end of it.

[00:14:57] Speaker 00:
But it's a legally separate entity that's set up as an LLC that has a legal status as a separate entity.

[00:15:06] Speaker 00:
legal entity.

[00:15:07] Speaker 01:
Senator is a corporation, not as an LLC.

[00:15:09] Speaker 01:
I was making the assumption that Judge Ed was the question you would ask if we assumed that the conclusion was that he is a one-man shop.

[00:15:18] Speaker 05:
I'm saying if we assume it's a situation where you have nothing but one man or one woman

[00:15:28] Speaker 05:
What's your answer to that question?

[00:15:30] Speaker 01:
My answer to that would be that would be most likely yes, a pro se attorney litigant.

[00:15:35] Speaker 01:
Because that would be to pierce that corporate veil, I believe the government would be able to meet its burden in that circumstance.

[00:15:41] Speaker 01:
If there is just one attorney, if it's just me and I incorporate as Bradley P. Moss incorporated, then that would be a justifiable argument.

[00:15:48] Speaker 00:
The government pierces the corporate veil simply by pointing out that there's only one person?

[00:15:53] Speaker 00:
Or they have to make a showing that there's not a separation?

[00:15:57] Speaker 01:
They would have to make a showing both in the first prong, which would address this issue of the separate person, but also meeting the second prong of the sanctioning of fraud.

[00:16:07] Speaker 01:
I would want to mention that I also just got past the, sorry.

[00:16:10] Speaker 03:
Suppose I don't agree with you that Baker now means that there's a sharp distinction between

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that any organization now qualifies.

[00:16:26] Speaker 03:
Suppose I don't agree with that.

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And I think that we still have to find evidence, as Baker said, of sufficient independence.

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There has to be something in the relationship between the lawyer and the entity to show that there's room for independent judgment.

[00:16:44] Speaker 03:
Assume that that's what I think.

[00:16:46] Speaker 03:
What's your best argument that this record shows that?

[00:16:49] Speaker 03:
Remembering that it's not only that,

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but that the district court abused her discretion by finding that it didn't.

[00:16:58] Speaker 01:
Sure, Judge.

[00:16:59] Speaker 03:
There are... You see my question?

[00:17:01] Speaker 01:
No, I understand the question.

[00:17:02] Speaker 03:
So what's your best evidence that in the relationship between Mr. McClanahan and the entity, there is a structure within which independent judgment of some kind can be exercised?

[00:17:15] Speaker 01:
There are three managing directors.

[00:17:17] Speaker 01:
There are, at least at any given time, two attorneys who are operating under the firm's name.

[00:17:23] Speaker 03:
But are they the client?

[00:17:27] Speaker 03:
I mean, does Mr. McClenahan, when he brought this case, did he have to clear it with those three lawyers?

[00:17:35] Speaker 01:
I think that's beyond the records.

[00:17:38] Speaker 01:
I don't think that was ever addressed.

[00:17:40] Speaker 03:
Where is the independent judgment?

[00:17:42] Speaker 03:
It doesn't mean, why would there be independent judgment if there's another lawyer in the organization?

[00:17:48] Speaker 03:
McClanahan's operating independently of that lawyer?

[00:17:51] Speaker 03:
I don't think that's what the Supreme Court meant.

[00:17:52] Speaker 03:
For the same reason that a... I think the Supreme Court was talking about an attorney-client-like relationship, one where there's an entity making ultimate decisions, or at least involved in the decision-making.

[00:18:11] Speaker 03:
Where is that in this record?

[00:18:13] Speaker 01:
In this record, in minding that all we had was the opportunity of one reply brief to address that.

[00:18:20] Speaker 01:
In the record, it shows that other lawyers are consulted, that inherently there is an attorney-client relationship because it's a corporation, which is, I believe... Now you're going back.

[00:18:30] Speaker 03:
My question is based on the assumption that I don't accept that.

[00:18:35] Speaker 03:
that there is no, it's, corporations, my hypothetical is, I don't assume that I don't agree with you that corporations are automatically.

[00:18:46] Speaker 03:
eligible because there's a presumed attorney-client relationship.

[00:18:50] Speaker 03:
Assume I don't agree with that because I view Kay and Baker is focusing on completely different situations where you have a huge corporation with in-house counsel and a huge law firm with some of the partners acting as counsel.

[00:19:03] Speaker 03:
Assume I think that that's a different case than this one.

[00:19:07] Speaker 03:
What's the evidence in the record that shows, to use the language of Baker's sufficient independence?

[00:19:17] Speaker 01:
The evidence that I would put forward is the simple fact that he is not the only decision-maker who gets to decide.

[00:19:24] Speaker 01:
Just like with any other law firm, just like with Baker & House, or any other firm that is representing itself, there are multiple lawyers involved in decision-making, making that decision on behalf of the law firm.

[00:19:34] Speaker 01:
That is the same circumstance here, that Mr. McClanahan is not the only one who has the authority to make decisions for NSC.

[00:19:42] Speaker 01:
He's not the only one who's serving as a lawyer for NSC.

[00:19:44] Speaker 05:
So you're saying that this report was clearly a room in your center of findings?

[00:19:47] Speaker 01:
As a matter of law, yes, but for a factual matter, it's abuse of discretion.

[00:19:51] Speaker 01:
It's abuse of discretion, correct?

[00:19:53] Speaker 01:
The district court was just wrong.

[00:19:54] Speaker 01:
Correct, Your Honor.

[00:19:55] Speaker 03:
Abuse of discretion.

[00:19:57] Speaker 05:
Correct.

[00:19:57] Speaker 05:
In her view of a factual right.

[00:19:59] Speaker 05:
Correct.

[00:20:01] Speaker 03:
Okay.

[00:20:01] Speaker 03:
Do you have anything else?

[00:20:02] Speaker 03:
No.

[00:20:03] Speaker 03:
Okay.

[00:20:03] Speaker 03:
Thank you.

[00:20:04] Speaker ?:
Thank you.

[00:20:11] Speaker 02:
May it please the court, Mark Penning, on behalf of the defendant, please, the CIA and the Department of Defense.

[00:20:20] Speaker 02:
I think that the central issue here is what the court has already grappled with, and that is whether, as a matter of law, the district court was prohibited by footnote 7 in K and this court's decision in Baker and Hosteler from conducting a factual inquiry into the separateness of NSC apart from Mr. McCannahan.

[00:20:43] Speaker 02:
And to say that poses the question in its most poignant form, because that would truly be a unique holding, as this Court's decisions in Shatner, Valley Finance, and Quinn all point out.

[00:20:59] Speaker 02:
there are the district courts, trial courts, traditionally insistent equity to conduct that very sort of factual inquiry in a whole canopy of legal areas.

[00:21:12] Speaker 02:
So this would be the only area in the law in which the district court was bound by law from conducting that equity inquiry.

[00:21:19] Speaker 00:
I think that the appellant is making quite that aggressive an argument.

[00:21:23] Speaker 00:
I think that the key may be whose burden is it and what's the presumption.

[00:21:28] Speaker 00:
And there are many, many areas in the law in which the formal presence of an entity is deemed to be

[00:21:37] Speaker 00:
sort of prime official evidence of separation.

[00:21:40] Speaker 00:
And so then the question is, did the district court just sort of barrel right over that and not actually put the burden on the government to show there's a lack of independence here?

[00:21:51] Speaker 00:
Or is it the burden, or was the district court completely within her own rights?

[00:21:58] Speaker 00:
There's an affirmative need to show independence under Kaye.

[00:22:01] Speaker 00:
So that's sort of the question.

[00:22:03] Speaker 00:
What's the burden?

[00:22:04] Speaker 02:
One is the need of the fee applicant to show eligibility.

[00:22:09] Speaker 02:
Now it makes, it makes clear that a pro se attorney is not eligible and Berkha as well.

[00:22:15] Speaker 02:
Then that's plaintiff's burden.

[00:22:17] Speaker 02:
And let's assume, are you under that we have the burden to take?

[00:22:20] Speaker 05:
But wait a minute, wait a minute.

[00:22:22] Speaker 05:
I'm not sure what you're thinking about that.

[00:22:23] Speaker 05:
They're meeting that, at least facially, by saying we fit in Baker.

[00:22:27] Speaker 05:
There's an entity and there's an attorney.

[00:22:29] Speaker 02:
Yes.

[00:22:30] Speaker 02:
And at that point, the government in this case actually came forward with evidence.

[00:22:35] Speaker 02:
Right.

[00:22:35] Speaker 05:
So you agree they met that burden?

[00:22:36] Speaker 02:
We think we met that burden.

[00:22:38] Speaker 05:
Absolutely.

[00:22:41] Speaker 05:
I'm willing to assume that for purposes of the case.

[00:22:45] Speaker 05:
I understand, Your Honor.

[00:22:47] Speaker 02:
So we bet the burden of coming forward with evidence that shows, in fact, that there is no independence.

[00:22:54] Speaker 02:
And I need go no further than what Mr. McCanahan said to Judge Howe months after NSC was incorporated, when he firmly represented, and this is important, so I'm going to quote it to the court,

[00:23:07] Speaker 02:
With respect to the general rule that it's not good practice to provide information to a party's counsel that cannot be shared with the party itself, such is not the case here, since the underside, Mr. McCanahan, is both NSC's counsel and the executive director of NSC in effect both the counsel and stress

[00:23:26] Speaker 00:
Right, and that is in a different context.

[00:23:28] Speaker 00:
That's in the context of confidentiality.

[00:23:31] Speaker 00:
Whereas here we're talking about the context of decision making, and we're talking about is there an interest under the law that an entity has that's distinct from the interest of the person.

[00:23:41] Speaker 00:
And I could set up an LLC that's for, you know, the promotion of trees in DC, and that LLC could be, that could be its one and only interest.

[00:23:50] Speaker 00:
And I, as a human being, have a lot of other interests.

[00:23:52] Speaker 00:
And so even though I'm the only person around, my LLC and I are actually legally distinct.

[00:23:59] Speaker 00:
And that's ubiquitous in the law that we understand that.

[00:24:01] Speaker 00:
So then the question, I think, for you is the same question that we were asking of Appellant, which is, what's your best evidence, in addition to what you just read, is the quote which I take

[00:24:13] Speaker 00:
you know, potentially to be not as strong as you think it is.

[00:24:16] Speaker 00:
What other evidence is there of lack of independence?

[00:24:19] Speaker 02:
Yeah.

[00:24:19] Speaker 02:
And indeed, the district court identified that evidence.

[00:24:22] Speaker 02:
We have that Mr. McCahan was, in fact, his only founder.

[00:24:27] Speaker 02:
He is the only officer, as reflected in the corporate reports filed with the Commonwealth of Virginia.

[00:24:34] Speaker 02:
He is, in fact, in charge of paying himself his fees, whatever fees he may have.

[00:24:39] Speaker 02:
We have no evidence here that there was any sort of actual collaboration with outside counsel with respect to the case before you.

[00:24:49] Speaker 02:
Indeed, I want to bring to the Court's attention the Berker holding, in which the Court not only talked about Mr. Berker himself, but also denied fees to the co-counsel of Mr. Berker, who were in the same firm and who acted under the direction

[00:25:04] Speaker 02:
and control of Mr. Burkett.

[00:25:06] Speaker 02:
And the court nonetheless held that fees for that co-counsel were likewise barred.

[00:25:11] Speaker 02:
So it better not accute that there are other individuals in NSC other than Mr. McCallaghan.

[00:25:19] Speaker 03:
Let me go back to a different point.

[00:25:21] Speaker 03:
I understood the plaintiff's argument to be that they don't even have to get to any of those questions, because they view Kay as interpreted by Baker as saying, this is an organization that ends the matter.

[00:25:39] Speaker 03:
That's their position.

[00:25:41] Speaker 02:
I read their brief as saying that, as a matter of law, you require no further loaners of corporations.

[00:25:47] Speaker 03:
So what's the matter with that, given the language of Baker?

[00:25:50] Speaker 02:
Well, I think neither Bertha nor Baker and Hustler, nor Kay, in a disaster of a dictum in Kay, ever addressed a situation where it is factually open to attack whether there was, in fact, a separate entity of Horton.

[00:26:11] Speaker 05:
in Baker to whom fees are given exercises more independent judgment than the individual in question here.

[00:26:22] Speaker 05:
Because one way to read the district court's ruling is if it's a one-person operation, as a matter of law, you lose, which I find very troublesome.

[00:26:32] Speaker 05:
So to get at my concern, what is it?

[00:26:34] Speaker 05:
We're talking about your arguing that there's got to be evidence of independent judgment.

[00:26:41] Speaker 05:
Why do we know that the attorney in Baker is doing that better than a person in the so-called one-person operation?

[00:26:49] Speaker 02:
Well, one huge distinction, of course, is the distinction that Judge Taylor alluded to earlier, that Baker and Husser included many attorneys of equal standing.

[00:26:58] Speaker 02:
So what?

[00:26:59] Speaker 02:
That's not my question, Baker.

[00:27:00] Speaker 02:
That's not my question.

[00:27:01] Speaker 05:
This question is how do you know there's independent judgment of the sort that you're trying to rely on that is more sufficient

[00:27:11] Speaker 02:
The court was willing to assume, in the context of the Baker and Huffstetter, that on the particular facts that are presented, that that particular attorney represented an entity beyond itself.

[00:27:22] Speaker 02:
Now, we're... Mr. McCallahan... Why can't I assume that about the individual here?

[00:27:26] Speaker 02:
No, I don't think you can.

[00:27:27] Speaker 02:
Why?

[00:27:28] Speaker 02:
Unless you're willing to assume as a matter of law there's no further inquiry, which is the legal holding that this plaintiff wants the court to adopt, which would be unprecedented when you think about alter ego law saying that there is no test is a matter of the circumstances presented.

[00:27:42] Speaker 05:
Your answer is... I thought this is where we were going.

[00:27:45] Speaker 05:
I'm really trying to... the two of you are confusing with your arguments now.

[00:27:49] Speaker 05:
So your answer is, yeah, I'm willing to accept the presumption.

[00:27:52] Speaker 05:
If there is a legal entity and there's an individual, it presumptively fits Baker.

[00:27:59] Speaker 05:
But I have the defense or I have the burden to show all the ego, and I think that's met here.

[00:28:05] Speaker 05:
That's what you're saying.

[00:28:06] Speaker 02:
I am saying that, Your Honor.

[00:28:07] Speaker 05:
Okay.

[00:28:07] Speaker 05:
And suppose I say to you, I don't think the District Court really addressed it carefully that way.

[00:28:11] Speaker 05:
And even if you're right, that you can come back, and the other side seems to be agreeing with

[00:28:17] Speaker 05:
If you are right, doesn't the district court now have to make findings of a sort that would address that question?

[00:28:26] Speaker 05:
I think the district court did that.

[00:28:27] Speaker 05:
I'm sorry, I'm throwing out a number of things at once.

[00:28:31] Speaker 05:
Can you raise the alter ego question in Baker?

[00:28:34] Speaker 02:
Well, it wasn't raised in Baker.

[00:28:36] Speaker 02:
Can you, under your theory?

[00:28:38] Speaker 02:
I suppose theoretically you could, but it doesn't seem like it would be applicable there, since you have a giant law firm, hundreds and hundreds of lawyers.

[00:28:46] Speaker 05:
But that assumes that the independence being exercised is different there than in this situation.

[00:28:51] Speaker 02:
And I think it obviously is, Judge Edwin.

[00:28:54] Speaker 00:
Well, that's interesting, though, because this is a little, this is why

[00:28:58] Speaker 00:
I think the law is so persistent and consistent in honoring the formality of the corporate firm because actually it seems like under your analysis you would have to do the alter ego analysis in a case like Baker so you have a big law firm but we also all know that partners have their own practice areas and you could have a situation which a partner decides to represent herself

[00:29:21] Speaker 00:
And anybody who's working under her absolutely has no independent say.

[00:29:26] Speaker 00:
She's the, you know, the emir of the whole thing.

[00:29:29] Speaker 00:
And she doesn't have independence.

[00:29:33] Speaker 00:
She recklessly has bias and self-interested and blinded judgment.

[00:29:39] Speaker 00:
And she does a bad job and she seeks fees.

[00:29:43] Speaker 00:
And you're saying,

[00:29:45] Speaker 00:
just because it's a big law firm and a lot of people around who could be checking her, you could make that inquiry, but you won't.

[00:29:52] Speaker 00:
But I think what I'm concerned about, I know I'm saying this in a long-winded way, but what I'm concerned about is that if we don't accept the formality as the presumptively satisfactory and put a real burden on the government to show lack of independence, then we're going to look at every case like this.

[00:30:11] Speaker 02:
As practical matter, you won't, because the government won't raise it on FOIA litigation.

[00:30:15] Speaker 02:
Secondly, by the way, that's the sort of inquiry the Your Honor is talking about.

[00:30:18] Speaker 02:
The government won't what?

[00:30:19] Speaker 02:
Raise it.

[00:30:20] Speaker 03:
The government won't what?

[00:30:21] Speaker 03:
Raise it.

[00:30:21] Speaker 02:
Normally raise it when we have a big firm that falls within a lifetime.

[00:30:25] Speaker 03:
But that's not the case you were just asked about.

[00:30:27] Speaker 03:
Well, you have a small firm with two lawyers.

[00:30:30] Speaker 03:
I mean, it's going to come up in every case.

[00:30:33] Speaker 03:
Your Honor, that's- The government isn't going to start paying fees just because.

[00:30:36] Speaker 03:
The government's going to raise this in every case.

[00:30:38] Speaker 02:
Your Honor, that is the very sort of inquiry that the Fourth Circuit contemplated in Bond v. Brom, the very case that you, Your Honor, this Court cited in Baker v. Hubbard.

[00:30:48] Speaker 05:
They were pondering out loud.

[00:30:50] Speaker 05:
They didn't have the situation before them, and they said they didn't clearly indicate what to do, and they weren't laying out what to test, what does the government have to show.

[00:30:58] Speaker 02:
Well, no, Your Honor, it is helpful that this Court in Baker talked about the very analysis that the Fourth Circuit talked about in that case when it said that the Fourth Circuit had acknowledged that there was independence.

[00:31:15] Speaker 02:
There was a non-independence in the sense that the facts didn't present it.

[00:31:19] Speaker 02:
So I think the factual inquiry is certainly open.

[00:31:22] Speaker 03:
Suppose in this case the three lawyers, Mr. Moss, Mr. McClanahan, and who was the third one?

[00:31:28] Speaker 03:
Suppose there was evidence in this case that in the structure of the corporation, that those three were functioning as a board of directors with decision-making responsibility.

[00:31:39] Speaker 03:
Would that be enough?

[00:31:42] Speaker 02:
By itself, it may or may not be, Your Honor, but I think that's the... Why wouldn't it be enough?

[00:31:47] Speaker 03:
You have an independent board running the entity, making decisions, and then you have a lawyer.

[00:31:54] Speaker 03:
Now, true, the lawyer's on the board, but he's not a majority.

[00:31:56] Speaker 03:
There's three members, the lawyer's only one.

[00:31:58] Speaker 03:
Why wouldn't that be enough?

[00:32:00] Speaker 02:
Well, we still have to have a factual inquiry of the type contemplated in BRCA itself as to whether or not the other lawyers were working under the direction and control of the person who's seeking fees.

[00:32:11] Speaker 02:
That's the holding of BRCA.

[00:32:13] Speaker 02:
So if in fact they're independents and in fact there is a... Is that the holding of Baker?

[00:32:17] Speaker 02:
Well, the Burka, actually.

[00:32:18] Speaker 05:
Baker.

[00:32:19] Speaker 05:
Well, Baker.

[00:32:20] Speaker 05:
That's what I'm not getting.

[00:32:21] Speaker 05:
I really don't know.

[00:32:22] Speaker 05:
I know you want to assume, because it's more than a one-person operation.

[00:32:26] Speaker 05:
There must be independence.

[00:32:28] Speaker 02:
No, I don't want to assume that.

[00:32:29] Speaker 05:
The Burka is the worst example to prove that point.

[00:32:32] Speaker 05:
It seems to me, more likely than not, in many cases proves just the opposite.

[00:32:43] Speaker 05:
I'm not willing to assume independence.

[00:32:45] Speaker 05:
And you seem to say, well, we have to assume it because more than one.

[00:32:48] Speaker 02:
No, I'm not saying you have to assume it at all.

[00:32:50] Speaker 02:
I'm saying it's a factual inquiry that the District Court needs to undertake in every case subject to abuse of discretion reviewed by this court.

[00:32:58] Speaker 02:
Now, precisely because it's a factual inquiry under a standard of review, by the way, does not the North American Steel Act case

[00:33:07] Speaker 02:
was a non-reported Third Circuit decision applying New Jersey law on piercing the corporate bill for the purpose of holding the shareholder liable.

[00:33:18] Speaker 02:
Not the situation here at all.

[00:33:19] Speaker 02:
And the standard articulated there was a New Jersey standard.

[00:33:23] Speaker 02:
So that's not the test.

[00:33:24] Speaker 02:
The test is outlined in Valley Finance and Quinn and Shatner here where there is no standard.

[00:33:29] Speaker 02:
It is what the district court undertakes to inquire as to the factual sufficiency of the independence.

[00:33:35] Speaker 00:
I think this question is more vexing, I think, in the case situation than honestly it is to me, at least under FOIA, because under FOIA you have the eligibility prong, which we're talking about here, but you also have the entitlement prong, and isn't it enough, even if the eligibility prong is,

[00:33:54] Speaker 00:
relatively generous to a one-person firm, there's a check against fees to someone who just runs around D.C., foyer, foyer, foyer, under the entitlement prong.

[00:34:08] Speaker 02:
Well, yes there is, and we certainly make that argument that the court never got to hear, but that doesn't necessarily excuse the court from applying the underlying policy considerations articulated in Kay and Burka.

[00:34:21] Speaker 03:
Which of the factors under the entitlement prong would you apply to this?

[00:34:26] Speaker 03:
I'm sorry, Your Honor.

[00:34:27] Speaker 03:
I mean, I don't even – you said you dealt with this in your brief.

[00:34:31] Speaker 03:
If we were to deal with this, suggest that this be dealt with under the entitlement section, what would help factors would apply?

[00:34:38] Speaker 02:
One of the things would be whether it's in the public interest to award fees to this individual, for example.

[00:34:43] Speaker 03:
I mean, some of these fees – Well, what would you – you would say, well, it's not because he doesn't have sufficient independence from the entity?

[00:34:50] Speaker 02:
I don't think that would be part of the inquiry that eligibility contemplates.

[00:34:54] Speaker 03:
Right.

[00:34:54] Speaker 03:
That's why I asked you the question.

[00:34:55] Speaker 02:
I don't think that contemplates it at all.

[00:34:57] Speaker 02:
I think that falls under the eligibility criteria, not the... The alter ego, that would be part of the eligibility fight in your view.

[00:35:06] Speaker 02:
Yes.

[00:35:08] Speaker 05:
I'm not contesting.

[00:35:09] Speaker 05:
I'm trying to figure out what you all are arguing.

[00:35:11] Speaker 02:
I understand Judge Edwards, because eligibility means that he has to show that he's not a prosaic litigant.

[00:35:17] Speaker 02:
And the district court made factual findings on this case based on the record that he was indistinct from the corporation itself.

[00:35:24] Speaker 03:
Anything else?

[00:35:26] Speaker ?:
OK.

[00:35:27] Speaker 03:
Pardon me?

[00:35:28] Speaker ?:
OK.

[00:35:28] Speaker 03:
Thank you.

[00:35:29] Speaker 02:
Thank you, Your Honor.

[00:35:29] Speaker 03:
I think Mr. Moss was of all times.

[00:35:31] Speaker 03:
Mr. Moss was of all times.

[00:35:35] Speaker 03:
OK.

[00:35:35] Speaker 03:
You can take two minutes if you'd like it.

[00:35:40] Speaker 01:
I appreciate your honor.

[00:35:41] Speaker 01:
I actually just have a couple of really quick quotes just to address some cases.

[00:35:44] Speaker 03:
You have two minutes.

[00:35:45] Speaker 03:
Do as quickly as you can within those two minutes.

[00:35:47] Speaker 01:
For the alter ego argument and in terms of government counsel's comment that this is not that's not the North America Steel is not DC Circuit case law.

[00:35:55] Speaker 01:
Here's the two quotes from DC Circuit from Shatner.

[00:35:57] Speaker 01:
Veil piercing is an extraordinary procedure that is not to be used lightly.

[00:36:02] Speaker 01:
This is from Quinn.

[00:36:03] Speaker 01:
If any general rule can be laid down in the present state of authority, it is that a corporation can be looked upon as a legal entity, as a general rule, and until sufficient reason to the contrary appears.

[00:36:14] Speaker 01:
But when the notion of legal entities used to defeat public convenience, justify wrong, protect fraud, or defend crime,

[00:36:21] Speaker 01:
the law will regard the corporation as an association of persons, which is the same concept of the second prong from North American Steel connections.

[00:36:29] Speaker 01:
They have to meet that type of a burden to demonstrate sanctioning fraud, defending crime, something serious.

[00:36:35] Speaker 05:
What do you think the district court views the discretion in finding, essentially finding, that you lose on all three?

[00:36:41] Speaker 01:
Well, when it came to the, as a matter of law, we've indicated that we believe it's not an abusive discretion review, it's de novo.

[00:36:48] Speaker 01:
That she, as a matter of law, that she misinterpreted the case law.

[00:36:52] Speaker 01:
So this should not be an abusive discretion issue.

[00:36:55] Speaker 01:
That she applied the incorrect legal standard when she applied Baker.

[00:37:00] Speaker 01:
I believe we set that forth in both our opening and our reply brief.

[00:37:04] Speaker 01:
And just for one last thing to address, because I believe the question was asked, and the Bond case was mentioned in terms of the attorney-client relationship with a firm with a small number.

[00:37:12] Speaker 01:
This is again a quote from Bond, which is in our opening brief.

[00:37:14] Speaker 01:
When a member of an entity who is also an attorney represents the entity, he is in an attorney-client relationship with the entity.

[00:37:21] Speaker 01:
And even though interested in the affairs of the entity, he would not be so emotionally involved in the issues of the case so as to distort the rationality and competence

[00:37:29] Speaker 01:
that comes from independent representation.

[00:37:32] Speaker 05:
What are you citing there?

[00:37:33] Speaker 01:
That's Bond v. Bloom.

[00:37:34] Speaker 01:
That's the Fourth Circuit case that government counsel also mentioned, which is on page 25 of our opening brief.

[00:37:41] Speaker 01:
Thank you, Your Honors.

[00:37:43] Speaker 03:
Okay.

[00:37:44] Speaker 03:
Thank you.

[00:37:45] Speaker 03:
The case is submitted.