Legal Definitions - substantially justified

The term substantially justified refers to a position, action, or argument that has a strong and reasonable foundation based on both the relevant legal principles and the available factual evidence.

It means that a party's stance or conduct, while not necessarily proven correct or ultimately successful, was not frivolous, baseless, or unreasonable at the time it was taken. There must be a solid, credible reason for it, supported by what the law allows or requires and by the facts as they were reasonably understood.

Here are some examples to illustrate this concept:

• Example 1: A Business's Employment Decision

  Imagine a company fires an employee for alleged serious misconduct, such as violating a strict company policy against sharing confidential client information. The employee then sues the company for wrongful termination. The company defends its decision, presenting evidence from an internal investigation, witness statements, and copies of the company's confidentiality policy that the employee acknowledged.

  How it illustrates "substantially justified": The company's *conduct* (firing the employee) and its *position* (defending the lawsuit) would be considered substantially justified if its actions were based on a reasonable interpretation of its employee handbook and company policies (the "law" in this context) and credible evidence gathered during its investigation (the "facts"). Even if a jury later finds in favor of the employee, the company's initial decision and defense had a strong, reasonable basis, rather than being arbitrary or malicious.

• Example 2: A Property Owner's Construction Project

  Consider a homeowner who decides to build an addition to their house. Before starting, they consult with an architect, obtain a professional survey of their property, and secure all necessary permits from the local planning department, ensuring their plans comply with zoning ordinances and building codes. A neighbor later sues, claiming the addition encroaches on their property or violates a neighborhood covenant.

  How it illustrates "substantially justified": The homeowner's *conduct* (building the addition) and their *position* in defending the lawsuit would be substantially justified. Their actions were supported by official permits, a professional survey (the "facts"), and adherence to local laws and regulations (the "law"). Even if a court eventually finds a minor technical violation or a different interpretation of a covenant, the homeowner's initial approach was reasonable and well-founded, not reckless or without basis.

• Example 3: A Regulatory Agency's Enforcement Action

  Suppose a state consumer protection agency issues a cease-and-desist order against a business for allegedly engaging in deceptive advertising practices. The agency's decision is based on numerous consumer complaints, an investigation that included reviewing the business's advertisements, and a clear understanding of state laws prohibiting false advertising.

  How it illustrates "substantially justified": The agency's *action* (issuing the order) and its *position* if the business challenges it in court would be substantially justified. The agency relied on concrete evidence from consumer complaints and its investigation (the "facts") and applied specific state statutes designed to protect consumers (the "law"). Even if the business later presents new evidence that mitigates some claims, the agency's initial enforcement action was based on a reasonable and well-supported assessment of the situation.