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unreasonably burden the federal fisc. Brief for Petitioners 26-31. The terms of the statute, as well as its structure and purpose, identify at least two responses to these arguments.

First, no award of fees is "automatic." Eligibility for fees is established upon meeting the four conditions set out by the statute, but a district court will always retain substantial discretion in fixing the amount of an EAJA award. Exorbitant, unfounded, or procedurally defective fee applications — like any other improper position that may unreasonably protract proceedings-are matters that the district court can recognize and discount. 10 Petitioners' fear that such requests will receive "automatic" approval is unfounded. In contrast, requiring courts to make a separate finding of "substantial justification" regarding the Government's opposition to fee requests would multiply litigation. "A request for attorney's fees should not result in a second major litigation." Hensley, 461 U. S., at 437. As petitioners admit, allowing a "substantial justification" exception to fee litigation theoretically can spawn a "Kafkaesque judicial nightmare" of infinite litigation to recover fees for the last round of litigation over fees. Brief for Petitioners 29; Cinciarelli v. Reagan, 234 U. S. App. D. C. 315, 324, 729 F. 2d 801, 810 (1984).

Second, the specific purpose of the EAJA is to eliminate for the average person the financial disincentive to challenge unreasonable governmental actions. See Sullivan v. Hudson, 490 U. S., at 883.11 The EAJA applies to a wide range of

10 Because Hensley v. Eckerhart, 461 U. S. 424, 437 (1983), requires the district court to consider the relationship between the amount of the fee awarded and the results obtained, fees for fee litigation should be excluded to the extent that the applicant ultimately fails to prevail in such litigation. For example, if the Government's challenge to a requested rate for paralegal time resulted in the court's recalculating and reducing the award for paralegal time from the requested amount, then the applicant should not receive fees for the time spent defending the higher rate.

"Congress prefaced the EAJA with this statement of its findings and purposes:

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awards in which the cost of litigating fee disputes would equal or exceed the cost of litigating the merits of the claim. 12 If the Government could impose the cost of fee litigation on prevailing parties by asserting a "substantially justified” defense to fee applications, the financial deterrent that the EAJA aims to eliminate would be resurrected. The Government's general interest in protecting the federal fisc 13 is subordinate to the specific statutory goals of encouraging private parties to

""(a) The Congress finds that certain individuals, partnerships, corporations, and labor and other organizations may be deterred from seeking review of, or defending against, unreasonable governmental action because of the expense involved in securing the vindication of their rights in civil actions and in administrative proceedings.

"(b) The Congress further finds that because of the greater resources and expertise of the United States the standard for an award of fees against the United States should be different from the standard governing an award against a private litigant, in certain situations.

"(c) It is the purpose of this title

""(1) to diminish the deterrent effect of seeking review of, or defending against, governmental action by providing in specified situations an award of attorney fees, expert witness fees, and other costs against the United States; and

"(2) to insure the applicability in actions by or against the United States of the common law and statutory exceptions to the 'American rule' respecting the award of attorney fees."" Congressional Findings and Purposes, note following 5 U. S. C. § 504.

12 Ninety percent of EAJA fee awards are made in cases involving the Department of Health and Human Services. In 1989, these awards averaged less than $3,000 each. 1989 Report of Fees, p. 100, Table 32.

13 EAJA awards have remained comfortably under the Congressional Budget Office's 1985 Cost Estimate of 1,000 awards annually, averaging $6,000 each, by 1990. H. Supp. Rep. No. 99-120, pt. 2, p. 3 (1985). Although this case involves an exceptionally large award (the District Court's initial fee award totaled more than $1 million, 646 F. Supp., at 1323), in 1986 the average fee award under the EAJA, prior to appellate review, was $3,821. Annual Report of the Director of the Administrative Office of the U. S. Courts, Report of Fees and Expenses Awarded Under the Equal Access to Justice Act 93, Table 31 (1986). The average of the 413 awards granted in 1989, prior to appellate review, was $4,482. 1989 Report of Fees, p. 97, Table 31.

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vindicate their rights and "curbing excessive regulation and the unreasonable exercise of Government authority.

99 14

The "substantial justification" requirement of the EAJA establishes a clear threshold for determining a prevailing party's eligibility for fees, one that properly focuses on the governmental misconduct giving rise to the litigation. The EAJA further provides district courts discretion to adjust the amount of fees for various portions of the litigation,

1H. R. Rep. No. 96-1418, p. 12 (1980). The Committee Reports of both the House and the Senate reflect the dual concerns of access for individuals and improvement of Government policies.

"[T]he Government with its greater resources and expertise can in effect coerce compliance with its position. Where compliance is coerced, precedent may be established on the basis of an uncontested order rather than the thoughtful presentation and consideration of opposing views. In fact, there is evidence that small businesses are the target of agency action precisely because they do not have the resources to fully litigate the issue. This kind of truncated justice undermines the integrity of the decisionmaking process.

"The exception created by [the EAJA] focuses primarily on those individuals for whom cost may be a deterrent to vindicating their rights. The bill rests on the premise that a party who chooses to litigate an issue against the Government is not only representing his or her own vested interest but is also refining and formulating public policy. An adjudication or civil action provides a concrete, adversarial test of Government regulation and thereby insures the legitimacy and fairness of the law. An adjudication, for example, may show that the policy or factual foundation underlying an agency rule is erroneous or inaccurate, or it may provide a vehicle for developing or announcing more precise rules. . . . Where parties are serving a public purpose, it is unfair to ask them to finance through their tax dollars unreasonable Government action and also bear the costs of vindicating their rights." Id., at 10.

"Providing an award of fees to a prevailing party represents one way to improve citizen access to courts and administrative proceedings. When there is an opportunity to recover costs, a party does not have to choose between acquiescing to an unreasonable Government order or prevailing to his financial detriment. . . . By allowing a decision to contest Government action to be based on the merits of the case rather than the cost of litigating, [the EAJA] helps assure that administrative decisions reflect informed deliberation." S. Rep. No. 96-253, p. 7 (1979).

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guided by reason and statutory criteria. The purpose and legislative history of the statute reinforce our conclusion that Congress intended the EAJA to cover the cost of all phases of successful civil litigation addressed by the statute.

The judgment of the Court of Appeals is affirmed.

It is so ordered.

Syllabus

AMERICAN TRUCKING ASSOCIATIONS, INC., ET AL. v. SMITH, DIRECTOR, ARKANSAS HIGHWAY AND TRANSPORTATION DEPARTMENT, ET AL.

CERTIORARI TO THE SUPREME COURT OF ARKANSAS

No. 88-325.

Argued March 22, 1989-Reargued December 6, 1989-
Decided June 4, 1990

In 1983 petitioners brought suit in an Arkansas Chancery Court, alleging that the flat tax portion of that State's Highway Use Equalization (HUE) tax discriminated against interstate commerce in violation of the Commerce Clause by imposing on out-of-state truckers greater permile costs than those imposed on in-state truckers, who are likely to drive many more miles on the State's highways. Petitioners sought a refund of all HUE taxes paid. In affirming the Chancery Court's ruling that the tax was constitutional, the State Supreme Court relied on this Court's decisions upholding flat taxes in Capitol Greyhound Lines v. Brice, 339 U. S. 542, Aero Mayflower Transit Co. v. Board of Railroad Comm'rs of Mont. 332 U. S. 495, and Aero Mayflower Transit Co. v. Georgia Public Service Comm'n, 295 U. S. 285, and explicitly rejected petitioners' argument that Complete Auto Transit, Inc. v. Brady, 430 U. S. 274, overruled the Aero Mayflower line of cases. On June 23, 1987, this Court ruled, in American Trucking Assns., Inc. v. Scheiner, 483 U. S. 266, that unapportioned flat highway use taxes penalize travel within a free trade area among the States in violation of the Commerce Clause. Subsequently, this Court vacated the Arkansas Supreme Court's judgment and remanded the case for further consideration in light of Scheiner. After that court denied petitioners' motion seeking, inter alia, an order to escrow the HUE taxes to be collected pending a final decision on the merits, JUSTICE BLACKMUN, as Circuit Justice, ordered such an escrow on August 14, 1987. The State Supreme Court then reconsidered the HUE tax in light of Scheiner and ruled it unconstitutional. However, the court declined to order refunds for taxes paid before the August escrow order, holding that under the test enunciated in Chevron Oil Co. v. Huson, 404 U. S. 97, 106-107, Scheiner should not be applied retroactively. The court nevertheless determined that the tax money paid into escrow after the August order should be refunded. Held: The judgment is affirmed in part and reversed in part, and the case is remanded.

295 Ark. 43, 746 S. W. 2d 377, affirmed in part, reversed in part, and remanded.

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