This matter has come before us again, following a remand from the United States Supreme Court. See Dubose v. Pierce, --- U.S. ----, 108 S. Ct. 2890, 101 L. Ed. 2d 924 (1988). The Supreme Court vacated our earlier decision, see Dubose v. Pierce, 761 F.2d 913 (2d Cir.1985), and remanded the case to us for reconsideration in light of the Court's recent decision in Pierce v. Underwood, --- U.S. ----, 108 S. Ct. 2541, 101 L. Ed. 2d 490 (1988). See --- U.S. ----, 108 S. Ct. at 2890.

The facts and procedural history of this case are laid out in detail in our earlier opinion, see 761 F.2d at 915-17, and we will not repeat them here. This case originally came to us on appeal from a judgment of the United States District Court for the District of Connecticut, Blumenfeld, J., granting the motion of the plaintiffs-appellees for attorney's fees pursuant to the Equal Access to Justice Act (EAJA), 28 U.S.C. Sec. 2412(d) (1982 & Supp. IV 1986). Judge Blumenfeld awarded the fees after the underlying cases were settled pursuant to an agreement negotiated in related actions involving the Secretary of Housing and Urban Development (the Secretary) and the distribution of subsidies pursuant to the Housing and Community Development Act of 1974, Pub.L. No. 93-383, 88 Stat. 633 (1974). See 761 F.2d at 916-17; see also Dubose v. Harris, 82 F.R.D. 582, 592-605 (D.Conn.1979) (Stipulation for Settlement reproduced at Appendix). Judge Blumenfeld concluded that the government's position below was not substantially justified, see Dubose v. Pierce, 579 F. Supp. 937, 948-51 (D.Conn.1984), and that a provision in the stipulated settlement barring the award of attorney's fees from the settlement fund would not preclude the payment of EAJA fees by the government, see id. at 951-52.

On appeal, we reversed. We reviewed Judge Blumenfeld's conclusion that the government's position was not substantially justified as a matter of law, see 761 F.2d at 917, and we concluded that he had erred in holding the government liable for EAJA fees, see id. at 917-20. While review of our decision was pending before the Supreme Court, however, the Court decided Pierce v. Underwood. In Underwood, a case involving issues and facts virtually indistinguishable from those present here, the Court held that a district court's determination of whether or not the government's position has been substantially justified for purposes of the EAJA must be reviewed under an abuse of discretion standard, not as a matter of law. See --- U.S. ----, 108 S. Ct. at 2547-48. In so ruling, the Court specifically rejected the approach that we had employed in our earlier decision in this case. See id. at ----, 108 S.Ct. at 2545-48. Moreover, the Court affirmed the Ninth Circuit's conclusion that the district court in that case had not abused its discretion in deciding that the government's position was not substantially justified. See id. at ----, 108 S. Ct. 2551.

Upon reconsideration, in light of the similarity between Underwood and our cases and the Court's conclusions in Underwood concerning the justification for the government's position, we now affirm Judge Blumenfeld's conclusion that the government's position below was not substantially justified. In our earlier decision we did not have to reach two other issues on appeal: (1) whether the settlement agreement provision barring an award of fees from the settlement fund affects a fee award under EAJA; and (2) the plaintiff's cross-appeal concerning the amount and calculation of the fees. See 761 F.2d at 920. We must now address those issues.

The stipulation in the settlement agreement provided that "[n]one of the sums distributed may be used to pay attorney's fees." See Stipulation for Settlement at p 3(f), reprinted at 82 F.R.D. at 594. It also provided that "distribution of the settlement fund shall involve no other substantial costs or expenditures by [the Secretary]." Id. at p 4(d), reprinted at 82 F.R.D. at 595. As Judge Blumenfeld noted, the EAJA was not yet in effect at the time these terms were agreed upon; thus, the parties could not have intended to preclude such an award. See 579 F. Supp. at 952. Moreover, the EAJA, which was intended to have retroactive effect on any matters "pending" at the time of its effectiveness, see Pub.L. No. 96-481, Sec. 208, 94 Stat. 2321, 2330 (1980); 579 F. Supp. at 947-48, expressly provides that attorney's fees shall be payable by government agencies "from any funds made available to the agency by appropriation or otherwise," 28 U.S.C. Sec. 2412(d)(4). The provisions of the stipulation for settlement quoted above simply reflect an intention that no fees would be paid from the settlement fund itself and that the Secretary would bear limited administrative costs in the fund's distribution, not that the EAJA would not apply. The Ninth Circuit, considering this same issue on essentially the same facts, has reached a similar conclusion. See Underwood v. Pierce, 761 F.2d 1342, 1345 (9th Cir.1985) (per curiam), aff'd, --- U.S. ----, 108 S. Ct. 2541, 101 L. Ed. 2d 490 (1988). Therefore, for the reasons stated herein and in Judge Blumenfeld's opinion below, see 579 F. Supp. at 951-52, we affirm the district court's holding in this matter.

Finally, we must consider the plaintiffs' cross-appeal, in which they claim that Judge Blumenfeld erred in his calculation of the fees. In sum, the plaintiffs argue that the district court erred in failing to enhance the fee awards to reflect such "special factor[s]" as the success achieved and the skill of the attorneys. See 28 U.S.C. Sec. 2412(d)(2)(A). Moreover, they argue that the district court erred in subtracting a penalty for failure to keep contemporaneous time records. We would only disturb Judge Blumenfeld's calculation of the fee awards if he committed an abuse of discretion. See Underwood, --- U.S. at ----, 108 S. Ct. at 2553. Moreover, the Supreme Court in Underwood made it clear that the "special factor[s]" language in 28 U.S.C. Sec. 2412(d)(2)(A) should be construed narrowly and is not intended to include the types of factors at issue here. See id. ----, 108 S. Ct. at 2553. In light of the standards set out in Underwood, and in light of the reasoning set out in Judge Blumenfeld's lengthy and detailed discussion of the fee calculation in his opinion below, see 579 F. Supp. at 952-66, we affirm the judgment of the district court.