[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 435 Introduced in House (IH)]






109th CONGRESS
  1st Session
                                H. R. 435

    To amend the provisions of titles 5 and 28, United States Code, 
  relating to equal access to justice, award of reasonable costs and 
  fees, and administrative settlement offers, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            February 1, 2005

Mr. Manzullo (for himself and Mr. Blumenauer) introduced the following 
  bill; which was referred to the Committee on the Judiciary, and in 
    addition to the Committee on Small Business, for a period to be 
subsequently determined by the Speaker, in each case for consideration 
  of such provisions as fall within the jurisdiction of the committee 
                               concerned

_______________________________________________________________________

                                 A BILL


 
    To amend the provisions of titles 5 and 28, United States Code, 
  relating to equal access to justice, award of reasonable costs and 
  fees, and administrative settlement offers, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Equal Access to Justice Reform Act 
of 2005''.

SEC. 2. FINDINGS AND STATEMENT OF PURPOSE.

    (a) Findings.--The Congress finds that--
            (1) the Equal Access to Justice Act (Public Law 96-481; 94 
        Stat. 2325 et seq.) (in this section referred to as ``EAJA'') 
        was intended to make the justice system more accessible to 
        individuals of modest means, small businesses, and nonprofit 
        organizations (in this section collectively referred to as 
        ``small parties'') through limited recovery of their attorneys 
        fees when they prevail in disputes with the Federal Government;
            (2) although EAJA has succeeded, at modest cost, in 
        improving access to the justice system for small parties, EAJA 
        retains formidable barriers to attorneys' fees recovery (even 
        for small parties that completely prevail against the 
        Government), as well as inefficient and costly mechanisms for 
        determining the fees recovery;
            (3) among the barriers retained by EAJA are--
                    (A) EAJA's ``substantial justification defense'', 
                whereby the Government can deny attorneys' fees 
                recovery to prevailing small parties if the Government 
                can show that its position, although proven illegal, 
                was not abusive or entirely unreasonable;
                    (B) EAJA's hourly rate cap on attorneys' fees of 
                $125, which is well below the market rate for competent 
                legal services in many legal markets (especially for 
                complex and high-risk litigation against the Federal 
                Government) and thus prevents fair reimbursement of 
                attorneys' fees for small parties and discourages 
                competent counsel from undertaking meritorious cases on 
                a contingency or reduced-fee basis; and
                    (C) EAJA's outdated small business eligibility 
                requirements, which have not increased or indexed for 
                inflation the net worth threshold of $7,000,000 
                established in 1985;
            (4) among the inefficiencies retained by EAJA are--
                    (A) EAJA's substantial justification defense, which 
                initiates collateral litigation over attorneys' fees 
                recovery that both consumes significant Federal 
                resources and prolongs the time, expense, and risk of 
                pursuing fees recovery to the prevailing small party;
                    (B) EAJA's omission of any mechanism (such as the 
                offer in compromise feature of Federal Rule of Civil 
                Procedure 68) that would apply after a small party has 
                prevailed on the merits of its claim to encourage both 
                sides to reach a prompt and reasonable settlement of 
                attorneys' fees;
                    (C) EAJA's failure to create an educational and 
                technical assistance function within an appropriate 
                agency to facilitate more efficient use, settlement, 
                and payment of claims under EAJA; and
                    (D) EAJA's failure to reassign congressional 
                reporting obligations to an appropriate, existing 
                agency (EAJA lodges annual congressional reporting with 
                the Administrative Conference of the United States, an 
                agency which ceased to exist in 1995);
            (5) none of these barriers or inefficiencies exists in the 
        primary Federal fee-shifting statute applicable to State and 
        local governments, Revised Statutes section 722 (42 U.S.C. 
        1988(b)), resulting in--
                    (A) an unequal level of accountability to Federal 
                law among governments in the United States (shielding 
                the Federal Government to a greater degree than State 
                and local governments from the consequences of 
                violating Federal law);
                    (B) an uneven playing field for small party victims 
                of Federal law violations (discouraging resistance to 
                illegal action by the Federal Government); and
                    (C) an inefficient use of Federal agency resources 
                (burdening the Federal budget);
            (6) a further barrier and inefficiency is the practice of 
        Federal agencies of paying their EAJA liabilities from the 
        General Treasury rather than their own agency budgets, 
        relieving those agencies of the financial consequences of their 
        misconduct (i.e., EAJA liability) and burdening the Federal 
        budget unnecessarily;
            (7) it is in the national interest to remove these barriers 
        and inefficiencies for small parties, particularly small 
        business owners, involved in disputes with the Federal 
        Government in order to develop sound policies relative to the 
        national economy in which small businesses play a significant 
        and strategic role; and
            (8) the removal of these barriers and inefficiencies is 
        essential to--
                    (A) equalize the level of accountability to Federal 
                law among governments in the United States;
                    (B) discourage marginal or abusive Federal 
                enforcement actions directed at small parties;
                    (C) stop the practice of paying EAJA liabilities 
                from the General Treasury, which has insulated agencies 
                from the financial consequences of their misconduct and 
                burdened the Federal budget unnecessarily;
                    (D) refine and improve Federal policies through 
                adjudication;
                    (E) promote a fair and cost-effective process for 
                prompt settlement and payment of attorneys' fees 
                claims; and
                    (F) provide a fairer opportunity for full 
                participation by small businesses in the free 
                enterprise system, further increasing the economic 
                vitality of the Nation.
    (b) Purpose.--It is, therefore, the purpose of this Act to remove 
existing barriers and inefficiencies in EAJA in order to--
            (1) equalize the level of accountability to Federal law 
        among governments in the United States;
            (2) discourage marginal or abusive Federal enforcement 
        actions directed at small parties;
            (3) stop the practice of paying EAJA liabilities from the 
        General Treasury, which has insulated agencies from the 
        financial consequences of their misconduct and burdened the 
        Federal budget unnecessarily;
            (4) refine and improve Federal policies through 
        adjudication;
            (5) promote a fair and cost-effective process for prompt 
        settlement and payment of attorneys' fees claims; and
            (6) provide a fairer opportunity for full participation by 
        small businesses in the free enterprise system, further 
        increasing the economic vitality of the Nation.
    (c) Compliance Policy.--In complying with the statement of 
congressional policy expressed in this section, each Federal agency, to 
the maximum extent practicable, should--
            (1) avoid unjustified enforcement actions directed at small 
        parties covered by EAJA;
            (2) alleviate unnecessary burdens of compliance with 
        justified enforcement actions directed at small parties covered 
        by EAJA; and
            (3) minimize impediments to prompt resolution and payment 
        of reasonable attorneys' fees to prevailing small parties 
        covered by EAJA.

SEC. 3. REPORTING AND TECHNICAL ASSISTANCE BY OFFICE OF ADVOCACY.

    (a) Functions of Office of Advocacy.--Section 202 of Public Law 94-
305 (15 U.S.C. 634b) is amended--
            (1) in paragraph (3), by inserting before the semicolon at 
        the end the following: ``and for ensuring that the justice 
        system remains accessible to small businesses for the 
        resolution of disputes with the Federal Government;''; and
            (2) by striking paragraph (11) and inserting the following:
            ``(11) advise, cooperate with, and consult with the 
        President and Attorney General with respect to section 303(b) 
        of the Small Business Economic Policy Act of 1980 (15 U.S.C. 
        631b(b)) and section 504(e) of title 5, United States Code; 
        and''.
    (b) Duties of Office of Advocacy.--Section 203 of Public Law 94-305 
(15 U.S.C. 634c) is amended--
            (1) in paragraph (2), by inserting before the semicolon at 
        the end the following: ``, including the resolution of disputes 
        with the Federal Government and the role of procedures 
        established by the Equal Access to Justice Act (Public Law 96-
        481; 94 Stat. 2325) in such disputes''; and
            (2) in paragraph (3), by inserting after ``the Small 
        Business Act'' the following: ``, including those related to 
        the Equal Access to Justice Act,''.
    (c) Reports to Congress.--
            (1) In general.--Not later than 180 days after the date of 
        the enactment of this Act, the Attorney General, in cooperation 
        with the Chief Counsel for Advocacy of the Small Business 
        Administration, shall transmit to the congressional committees 
        specified in paragraph (2) a report containing--
                    (A) an analysis of the effectiveness of the Equal 
                Access to Justice Act (Public Law 96-481; 94 Stat. 
                2325) (in this paragraph referred to as ``EAJA'') in 
                achieving its purpose to ease the burden upon small 
                businesses and other small parties covered by EAJA of 
                engaging in dispute resolution with the Federal 
                Government, including--
                            (i) the relative awareness of EAJA in the 
                        small business community;
                            (ii) the relative awareness of EAJA's 
                        requirements among Federal agencies;
                            (iii) the extent and quality of rules and 
                        regulations adopted by each Federal agency for 
                        processing, resolving, and paying attorneys' 
                        fees claims under EAJA;
                            (iv) the extent to which each Federal 
                        agency claims any exemptions in whole or in 
                        part from EAJA's coverage;
                            (v) the frequency or degree of use of 
                        EAJA's procedures by prevailing small 
                        businesses; and
                            (vi) an analysis of the costs and benefits 
                        of EAJA generally;
                    (B) an analysis of the variations in the frequency 
                and amounts of fee awards paid by specific Federal 
                agencies and within specific Federal circuits and 
                districts under section 504 of title 5, United States 
                Code, and section 2412 of title 28, United States Code, 
                including the number and total dollar amount of all 
                claims filed with, and all claims processed, settled, 
                litigated, and paid by, each agency under EAJA; and
                    (C) recommendations for congressional oversight or 
                legislative changes with respect to EAJA, including any 
                recommendations for promulgation or amendment of 
                regulations issued under EAJA by specific Federal 
                agencies.
            (2) Specified committees.--The congressional committees 
        referred to in paragraph (1) are the following:
                    (A) The Committee on the Judiciary and the 
                Committee on Small Business of the House of 
                Representatives.
                    (B) The Committee on the Judiciary and the 
                Committee on Small Business and Entrepreneurship of the 
                Senate.
            (3) Report on small business and competition.--Section 303 
        of the Small Business Economic Policy Act of 1980 (15 U.S.C. 
        631b) is amended--
                    (A) in subsection (a) by striking paragraph (5) and 
                inserting the following:
            ``(5) recommend a program for carrying out the policy 
        declared in section 302 (including a policy to ensure that the 
        justice system remains accessible to small business enterprises 
        for the resolution of disputes with the Federal Government), 
        together with such recommendations for legislation as the 
        President may deem necessary or desirable.'';
                    (B) in subsection (b)--
                            (i) by striking ``(b)'' and inserting 
                        ``(b)(1)''; and
                            (ii) by adding at the end the following:
    ``(2) The President, after consultation with the Chief Counsel for 
Advocacy of the Small Business Administration and the Attorney General, 
shall transmit simultaneously as an appendix to such annual report, a 
report that describes, by agency and department--
            ``(A) the total number of claims filed, processed, settled, 
        and litigated by small business concerns under section 504 of 
        title 5, United States Code, and section 2412 of title 28, 
        United States Code (originally enacted pursuant to the Equal 
        Access to Justice Act (Public Law 96-481; 94 Stat. 2325));
            ``(B) the total dollar amount of all outstanding awards and 
        settlements to small business concerns under such sections;
            ``(C) the total dollar amount of all claims paid to small 
        business concerns under such sections;
            ``(D) the underlying legal claims involved in each 
        controversy with small business concerns under such sections; 
        and
            ``(E) any other relevant information that the President 
        determines may aid Congress in evaluating the impact on small 
        business concerns of such sections.
    ``(3) Each agency shall provide the President with such information 
as is necessary for the President to comply with the requirements of 
this subsection.''; and
                    (C) in subsection (d)--
                            (i) by striking ``(d)'' and inserting 
                        ``(d)(1)''; and
                            (ii) by adding at the end the following:
    ``(2) All reports concerning the Equal Access to Justice Act 
(Public Law 96-481; 94 Stat. 2325), or the congressional policy to 
ensure that the justice system remains accessible to small business 
enterprises for the resolution of disputes with the Federal Government, 
shall be transmitted to the following congressional committees:
            ``(A) The Committee on the Judiciary and the Committee on 
        Small Business of the House of Representatives.
            ``(B) The Committee on the Judiciary and the Committee on 
        Small Business and Entrepreneurship of the Senate.''.

SEC. 4. EQUAL ACCESS FOR SMALL PARTIES IN CIVIL AND ADMINISTRATIVE 
              PROCEEDINGS.

    (a) Elimination of Substantial Justification Standard.--
            (1) Administrative proceedings.--Section 504 of title 5, 
        United States Code, is amended--
                    (A) in subsection (a)(1), by striking ``, unless 
                the adjudicative officer'' and all that follows through 
                the period at the end and inserting a period; and
                    (B) in subsection (a)(2), by striking ``The party 
                shall also allege that the position of the agency was 
                not substantially justified.''.
            (2) Judicial proceedings.--Section 2412 of title 28, United 
        States Code, is amended--
                    (A) in subsection (d)(1)(A), by striking ``, unless 
                the court'' and all that follows through the period at 
                the end and inserting a period;
                    (B) in subsection (d)(1)(B), by striking ``The 
                party shall also allege'' and all that follows through 
                the period at the end and inserting a period; and
                    (C) in subsection (d)(3), by striking ``, unless 
                the court'' and all that follows through the period at 
                the end and inserting a period.
    (b) Eligibility of Small Businesses for Fee Award.--
            (1) Administrative proceedings.--Section 504(b)(1)(B)(ii) 
        of title 5, United States Code, is amended by striking 
        ``$7,000,000'' and inserting ``$10,000,000''.
            (2) Judicial proceedings.--Section 2412(d)(2)(B)(ii) of 
        title 28, United States Code, is amended by striking 
        ``$7,000,000'' and inserting ``$10,000,000''.
    (c) Elimination of Rate Cap.--
            (1) Administrative proceedings.--Section 504(b)(1)(A) of 
        title 5, United States Code, is amended--
                    (A) by striking ``(i)''; and
                    (B) by striking ``by the agency involved'' and all 
                that follows through ``a higher fee'' and inserting 
                ``by the agency involved''.
            (2) Judicial proceedings.--Section 2412(d)(2)(A) of title 
        28, United States Code, is amended--
                    (A) by striking ``(i)''; and
                    (B) by striking ``by the United States'' and all 
                that follows through ``a higher fee'' and inserting 
                ``by the United States''.
    (d) Offers of Settlement.--
            (1) Administrative proceedings.--Section 504(a) of title 5, 
        United States Code, as amended by this section, is further 
        amended by adding at the end the following:
    ``(5)(A) At any time after an agency receives an application 
submitted under paragraph (2), the agency may serve upon the applicant 
a written offer of settlement of the claims made in the application. If 
within 10 business days after such service the applicant serves written 
notice that the offer is accepted, either the agency or the applicant 
may then file the offer and notice of acceptance together with proof of 
service thereof.
    ``(B) An offer not accepted within the time allowed shall be deemed 
withdrawn. The fact that an offer is made but not accepted shall not 
preclude a subsequent offer. If any award of fees and expenses for the 
merits of the proceeding finally obtained by the applicant is not more 
favorable than the offer, the applicant shall not be entitled to 
receive an award for fees or other expenses incurred (in relation to 
the application for fees and expenses) after the date of the offer.''.
            (2) Judicial proceedings.--Section 2412(d)(1) of title 28, 
        United States Code, as amended by this section, is further 
        amended by adding at the end the following:
    ``(E)(i) At any time after an agency receives an application 
submitted under subparagraph (B), the agency may serve upon the 
applicant a written offer of settlement of the claims made in the 
application. If within 10 business days after such service the 
applicant serves written notice that the offer is accepted, either the 
agency or the applicant may then file the offer and notice of 
acceptance together with proof of service thereof.
    ``(ii) An offer not accepted within the time allowed shall be 
deemed withdrawn. The fact that an offer is made but not accepted shall 
not preclude a subsequent offer. If any award of fees and expenses for 
the merits of the proceeding finally obtained by the applicant is not 
more favorable than the offer, the applicant shall not be entitled to 
receive an award for fees or other expenses incurred (in relation to 
the application for fees and expenses) after the date of the offer.''.
    (e) Declaration of Intent to Seek Fee Award.--
            (1) Administrative proceedings.--Section 504(a)(2) of title 
        5, United States Code, as amended by this section, is further 
        amended by inserting before the first sentence the following: 
        ``At any time after the commencement of an adversary 
        adjudication, the adjudicative officer may (and if requested by 
        a party shall) require a party to declare whether such party 
        intends to seek an award of fees and expenses against the 
        agency should such party prevail.''.
            (2) Judicial proceedings.--Section 2412(d)(1)(B) of title 
        28, United States Code, as amended by this section, is further 
        amended by inserting before the first sentence the following: 
        ``At any time after the commencement of an adversary 
        adjudication, as defined in subsection (b)(1)(C) of section 504 
        of title 5, United States Code, the court may (and if requested 
        by a party shall) require a party to declare whether such party 
        intends to seek an award of fees and expenses against the 
        agency should such party prevail.''.
    (f) Payment of Attorneys' Fees From Agency Appropriations.--
            (1) Administrative proceedings.--Section 504(d) of title 5, 
        United States Code, is amended--
                    (A) by striking ``subsection'' and inserting 
                ``section''; and
                    (B) by adding at the end the following: ``Fees and 
                expenses awarded under this section may not be paid 
                from the claims and judgments account of the Treasury 
                from funds appropriated pursuant to section 1304 of 
                title 31.''.
            (2) Judicial proceedings.--Section 2412(d)(4) of title 28, 
        United States Code, is amended by adding at the end the 
        following: ``Fees and expenses awarded under this subsection 
        may not be paid from the claims and judgments account of the 
        Treasury from funds appropriated pursuant to section 1304 of 
        title 31.''.
    (g) Eligibility of Taxpayers for Fee Award.--
            (1) Administrative proceedings.--Section 504 of title 5, 
        United States Code, as amended by this section, is further 
        amended by striking subsection (f).
            (2) Judicial proceedings.--Section 2412 of title 28, United 
        States Code, as amended by this section, is further amended by 
        striking subsection (e) and redesignating subsection (f) as 
        subsection (e).
    (h) Conforming Amendment Relating to Reporting Requirement Under 
Small Business Act.--Section 504(e) of title 5, United States Code, is 
amended to read as follows:
    ``(e)(1) The Attorney General, after consultation with the Chief 
Counsel for Advocacy of the Small Business Administration, shall report 
annually to the Congress on the amount of fees and other expenses 
awarded to individuals during the preceding fiscal year pursuant to 
this section and section 2412 of title 28. The report shall describe 
the number, nature, and amount of the awards, the claims involved in 
the controversy, and any other relevant information which may aid the 
Congress in evaluating the scope and impact of such awards for 
individuals engaged in disputes with Federal agencies. Each agency 
shall provide the Attorney General with such information as is 
necessary for the Attorney General to comply with the requirements of 
this subsection.
    ``(2) A requirement that the President report annually on 
proceedings affecting small business concerns under this section and 
under section 2412 of title 28 is provided in section 303(b) of the 
Small Business Economic Policy Act of 1980 (15 U.S.C. 631b(b)).''.
    (i) Applicability.--The provisions of this section and the 
amendments made by this section shall apply to any proceeding pending 
on, or commenced on or after, the effective date of this Act.

SEC. 5. DEFINITION OF PREVAILING PARTY IN EAJA CASES.

    (a) Title 5.--Section 504(b)(1) of title 5, United States Code, is 
amended by adding at the end the following new paragraph:
            ``(G) `prevailing party' includes, in addition to a party 
        who prevails through a judicial or administrative judgment or 
        order, a party whose pursuit of a nonfrivolous claim or defense 
        was a catalyst for a voluntary or unilateral change in position 
        by the opposing party that provides any significant part of the 
        relief sought.''.
    (b) Title 28.--Section 2412 of title 28, United States Code, is 
amended--
            (1) in subsection (d)(2)(H), by inserting after ``means'' 
        the following: ``, subject to subsection (g),''; and
            (2) by adding at the end the following new subsection:
    ``(g) For the purposes of this section, the term `prevailing party' 
includes, in addition to a party who prevails through a judicial or 
administrative judgment or order, a party whose pursuit of a 
nonfrivolous claim or defense was a catalyst for a voluntary or 
unilateral change in position by the opposing party that provides any 
significant part of the relief sought.''.

SEC. 6. EFFECTIVE DATE.

    The provisions of this Act and the amendments made by this Act 
shall take effect 30 days after the date of the enactment of this Act.
                                 <all>