NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                                 ____________

                                      No. 10-1494
                                     ____________

                                  MODESTO CRUZ,

                                            Appellant

                                           v.

                      COMMISSIONER OF SOCIAL SECURITY
                                ____________

                    On Appeal from the United States District Court
                       for the Eastern District of Pennsylvania
                               (D.C. No. 2-08-cv-00204)
                     District Judge: Honorable Lynne A. Sitarski
                                    ____________

                    Submitted Pursuant to Third Circuit LAR 34.1(a)
                                 September 17, 2010

              Before: SCIRICA, RENDELL and FISHER, Circuit Judges.

                               (Filed: October 22, 2010 )
                                     ____________

                              OPINION OF THE COURT
                                   ____________

FISHER, Circuit Judge.

      Modesto Cruz appeals from an order denying his motion for attorney‟s fees under

the Equal Access to Justice Act (“EAJA”), 28 U.S.C. § 2412, and an order denying his

motion to alter or amend judgment. For the reasons stated herein, we will affirm.
                                             I.

       We write exclusively for the parties, who are familiar with the factual context and

legal history of this case. Therefore, we will set forth only those facts necessary to our

analysis.

       On January 11, 2008, Mr. Cruz filed a third civil action seeking judicial review of

the final decision of the Commissioner of the Social Security Administration denying his

claim for Disability Insurance Benefits under Title II of the Social Security Act, 42

U.S.C. § 401, et seq. Mr. Cruz sought benefits for the closed period from November 23,

1996 to November 15, 2000. Both parties consented to jurisdiction before the Magistrate

Judge. In his claim, Mr. Cruz argued that the Administrative Law Judge (“ALJ”)

misinterpreted a statement submitted by his treating physician, Dr. Melanie Ice. Dr. Ice‟s

April 2007 Medical Source Statement Concerning Nature and Severity of Impairments

(“Dr. Ice‟s Statement”) referred to the closed period from November 23, 1996 to

November 15, 2000, and supported a finding that Mr. Cruz was disabled. In its decision

to deny benefits for this period, the ALJ cited to Dr. Ice‟s Statement but applied it to Mr.

Cruz‟s benefits claim for the period from 2005 onward.

       On January 30, 2009, the Magistrate Judge issued an order granting in part and

denying in part Mr. Cruz‟s request for review and remanded the case to the ALJ.

According to the Magistrate Judge, the ALJ misread Dr. Ice‟s Statement as applying from

2005 onward instead of the closed period from 1996 to 2000. Therefore, the Magistrate

Judge remanded the case to the ALJ for a determination based on a proper reading of Dr.

Ice‟s Statement.


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       On March 17, 2009, following remand, Mr. Cruz filed a motion for attorney‟s fees

under the EAJA, 28 U.S.C. § 2412. Mr. Cruz alleged that he was entitled to attorney‟s

fees because the ALJ improperly considered Dr. Ice‟s Statement and the Commissioner‟s

defense of the ALJ‟s decision was not substantially justified. According to the

Commissioner, the ALJ realized that Dr. Ice‟s Statement applied to the closed period

from 1996 to 2000. The Commissioner maintained, however, that the ALJ found it more

relevant to the period from 2005 onward.

       On June 22, 2009, the Magistrate Judge denied Mr. Cruz‟s motion for attorney‟s

fees. Viewing the totality of the circumstances, the Magistrate Judge concluded the ALJ

reasonably analyzed the facts of the case. Furthermore, in its examination of the

Commissioner‟s position, the Magistrate Judge focused on the inconsistencies in Dr.

Ice‟s notes for the closed period from November 1996 to November 2000. Contrary to

Dr. Ice‟s Statement, her other notes from this time frame did not support a disability

finding. Considering these notes and other medical records, the Magistrate Judge found

that the Commissioner‟s position regarding the ALJ interpretation of Dr. Ice‟s Statement

was substantially justified. Accordingly, the Magistrate Judge denied Mr. Cruz‟s motion

for attorney‟s fees.

       On July 7, 2009, Mr. Cruz filed a motion to alter or amend judgment. Mr. Cruz

alleged the Magistrate Judge improperly denied his motion for costs, improperly intruded

upon the Commissioner‟s role in the fact finding process by making a credibility

determination as to Dr. Ice‟s Statement, and erred by failing to apply Third Circuit

precedent.


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       On December 18, 2009, the Magistrate Judge denied the motion. First, addressing

Mr. Cruz‟s claim for costs, the Magistrate Judge interpreted the applicable statutory

language and explained that, given the broad statutory discretion in awarding costs, it did

not commit clear error of law. Furthermore, the Magistrate Judge found it had not made

a credibility determination as to Dr. Ice‟s Statement. Instead, the Magistrate Judge

concluded it correctly applied Third Circuit precedent for assessing EAJA claims.

       On April 21, 2010, Mr. Cruz timely filed the instant appeal alleging that the

Magistrate Judge abused its discretion by denying his claim for attorney‟s fees pursuant

to 28 U.S.C. § 2412(d)(1)(A) and costs pursuant to 28 U.S.C. § 2412(a)(1).

                                              II.

       The Magistrate Judge exercised jurisdiction pursuant to 42 U.S.C. § 405(g). We

have jurisdiction over this appeal pursuant to 28 U.S.C. § 1291. “The district court‟s

determination of substantial justification in a suit under the EAJA is reviewed for abuse

of discretion.” Morgan v. Perry, 

, 682 (3d Cir. 1998) (citing Pierce v.

Underwood, 

, 560 (1988)). According to this standard, “[a]n abuse of

discretion arises when the district court‟s decision „rests upon a clearly erroneous finding

of fact, an errant conclusion of law or an improper application of law to fact.‟” 

(quoting Hanover Potato Prods., Inc. v. Shalala, 

, 127 (3d

Cir. 1993)). Likewise, “[a]n abuse of discretion can also occur „when no reasonable

person would adopt the district court‟s view.‟” 

(citation

omitted). As a result, “we will not interfere with the district court‟s exercise of discretion

„unless there is a definite and firm conviction that the court . . . committed a clear error of


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judgment in the conclusion reached upon a weighing of the relevant factors.‟” 

                                               III.

       Mr. Cruz advances two arguments on appeal. First, Mr. Cruz contends that the

Magistrate Judge abused its discretion by finding that the Commissioner‟s position was

substantially justified, and therefore he is entitled to attorney‟s fees under the EAJA, 28

U.S.C. § 2412(d)(1)(A). Second, Mr. Cruz argues that the Magistrate Judge abused its

discretion in denying his claim for costs other than attorney‟s fees pursuant to 28 U.S.C.

§ 2412(a)(1). We address each argument in turn.

                                               A.

       Pursuant to the EAJA, “a court shall award to a prevailing party . . . fees and other

expenses . . . incurred by that party . . . unless the court finds that the position of the

United States was substantially justified or that special circumstances make an award

unjust.” 28 U.S.C. § 2412(d)(1)(A) (2006). The Supreme Court has defined substantial

justification under the EAJA as “justified in substance or in the main – that is, justified to

a degree that could satisfy a reasonable person.” 

. In EAJA

claims, the government bears the burden of demonstrating substantial justification. See

(citation omitted). To satisfy this burden and defeat a

prevailing party‟s application for fees, the government must establish that there is

substantial justification for its position by demonstrating “(1) a reasonable basis in truth

for the facts alleged; (2) a reasonable basis in law for the theory it propounded; and (3) a

reasonable connection between the facts alleged and the legal theory advanced.”


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(citation omitted). Furthermore, “a court cannot assume that the

government‟s position was not substantially justified simply because the government lost

on the merits.” 

Rather, when deciding whether the government is

substantially justified, courts should determine whether the government‟s position has a

reasonable basis in both fact and law. See 

       Mr. Cruz argues that the Magistrate Judge abused its discretion when it found the

Commissioner‟s position was substantially justified and denied his claim for attorney‟s

fees. Specifically, Mr. Cruz claims that the Commissioner‟s defense of the ALJ‟s

treatment of Dr. Ice‟s Statement had no basis in fact or law and, therefore, was not

substantially justified. We disagree.

       In proceedings below, the Magistrate Judge correctly analyzed the

Commissioner‟s position under the three-step substantial justification test set forth in

Morgan. First, the Magistrate Judge noted that the Commissioner did not believe that the

ALJ misread the dates of Dr. Ice‟s Statement. Rather, the Commissioner reasonably

maintained that the ALJ knew that Dr. Ice‟s Statement applied to the period from

November 1996 to November 2000, but determined that it better represented the period

from 2005 onward. Second, the Magistrate Judge reviewed the record as a whole,

including Dr. Ice‟s inconsistent notes and other medical records, and determined that it

supported a finding of no disability for the closed period. As such, the Magistrate Judge

found that the Commissioner‟s position had a reasonable basis in law. Third, after

examining the Commissioner‟s position and the record, the Magistrate Judge found a

reasonable connection between the facts and the Commissioner‟s legal theory. In


                                              6
concluding that the Commissioner was substantially justified, the Magistrate Judge

correctly applied the relevant facts to the law and therefore did not “commit a clear error

of judgment.” 

Accordingly, the Magistrate Judge did not abuse its discretion.

                                             B.

       Second, Mr. Cruz argues that the Magistrate Judge abused its discretion by

denying his claim for costs other than attorney‟s fees. The pertinent language of the

EAJA instructs that, “[e]xcept as otherwise specifically provided by statute, a judgment

for costs . . . may be awarded to the prevailing party in any civil action brought by or

against the United States or any agency or any official of the United States acting in his

or her official capacity in any court having jurisdiction of such action.” 28 U.S.C.

§ 2412(a)(1) (2006).

       Although we have not addressed the issue of a district court‟s discretion to award

or deny costs under the EAJA, the decision of the Federal Circuit in Neal & Company,

Inc., v. United States is instructive.1 In Neal, the court noted that 28 U.S.C. § 2412(a)(1)

“does not create a presumption in favor of an award of costs to the prevailing party.” 

, 687 (Fed. Cir. 1997). Instead, broad discretion rests with the trial court in

awarding costs. See 

with the reasoning of the Federal Circuit in this regard.

The plain language of the statute provides that costs “may be awarded.” 28 U.S.C.

§ 2412(a)(1). Accordingly, it is appropriate for a district court to exercise discretion in

       1
        In Morgan, we briefly discussed a claim for costs under 28 U.S.C. § 

. We declined to reach a decision on the merits of the claim, however,
because the party asking for costs failed to properly appeal from the district court=s
decision not to award costs. See 

or denying costs depending on the particular circumstances. In the case at

hand, the Magistrate Judge considered all the facts and circumstances surrounding Mr.

Cruz‟s claims. After careful deliberation, the Magistrate Judge declined to award costs.

Given this reasoning, the Magistrate Judge did not abuse its discretion in denying Mr.

Cruz‟s motion for costs.

                                           IV.

      For the foregoing reasons, we will affirm the orders of the Magistrate Judge.




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