In the case of Adkins v. US (which we argued) the Court of Federal Claims defined substantially justified in the context of the findings of the Court of Appeals for the Federal Circuit.
“The court begins by examining the “objective indicia” of the strength of defendant’s position. Pierce, 487 U.S. at 568; Nat’l Org. for Marriage, 807 F.3d at 597. Those indicia include the trial and remand decisions that this court issued in defendant’s favor, the existence of supporting precedent from other circuit courts of appeals (namely Jeppsen), the lack of contrary precedent from other appellate courts, and the Federal Circuit’s resounding rejection of defendant’s position in its most recent decision in this case. It is this final factor that tips the balance in plaintiffs’ favor.”

“Additionally, the Federal Circuit concluded, upon its review of the record, that this court’s fact findings regarding whether plaintiffs had a reasonable prospect of recovering their losses in 2004 were “clearly erroneous.” Id. at 1366.”

“The Federal Circuit considered the avenues of recovery discussed by this court—and which had been raised by defendant—and concluded that there was “overwhelming evidence” that plaintiffs lacked a reasonable prospect of recovering their losses in 2004. Adkins, 960 F.3d at 1366-68.”

“In this case, the Federal Circuit based its denunciation of the United States’ position
(adopted by this court) on its conclusion that the United States (and this court) plainly misinterpreted the relevant Treasury regulation. Misinterpretation of a regulation has been found by other courts to render the United States’ position unreasonable. See, e.g., Huckaby v. U.S. Dep’t of the Treasury, 804 F.2d 297, 299 (5th Cir. 1986) “

“This issue was the main subject of a summary judgment decision, a trial, two trial decisions, and two appeals. It therefore stands to reason that whether defendant’s position on this issue was substantially justified deserves the greatest weight in determining whether the United States’ overall position was substantially justified. Adopting this reasoning, the court concludes that because defendant’s position regarding the proper year for plaintiffs to claim a theft loss was not substantially justified, defendant’s overall position was not substantially justified. Consequently, plaintiffs are prevailing parties entitled to an award of attorney’s fees under I.R.C. § 7430. “

As one can see the Court went to great pains to show that where the Court of Appeals rules that the findings of the Trial Court were clearly erroneous and that the Court at the urging of the Government misinterpreted the Government’s own regulation, 7430 attorneys fees are allowable.