[Congressional Record Volume 151, Number 152 (Wednesday, November 16, 2005)]
[Senate]
[Pages S12950-S12954]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. FEINGOLD (for himself and Ms. Snowe):
  S. 2017. 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; to the Committee on the Judiciary.
  Mr. FEINGOLD. Mr. President, today I plan to introduce the Equal 
Access to Justice Reform Act of 2005.
  This legislation contains adjustments to the Equal Access to Justice

[[Page S12951]]

Act (EAJA) that will streamline and improve the process of awarding 
attorneys' fees to private parties who prevail in litigation against 
the Federal Government. This is the fifth Congress in which I have 
introduced EAJA reform. I believe this reform is an important step 
toward reducing the burden of defending government litigation for many 
individuals and small businesses.
  I am very pleased to be joined in introducing this legislation this 
year by my friend from Maine, Senator Olympia Snowe, who chairs the 
Small Business Committee. We hope that by working together on a 
bipartisan basis, we will increase the chances that this important 
project will become law.
  The legislation we are proposing today deals directly with a problem 
that affects small businesses and individual Americans across this 
country who face legal battles with the Federal Government. Even if 
they win in court, they may lose financially because they incur the 
great expense of paying their attorneys.
  It is important to understand what the Equal Access to Justice Act 
is, and why it exists. The premise of this statute is very simple. EAJA 
seeks to level the playing field for individuals and small businesses 
that face the United States government in litigation. It establishes 
guidelines for the award of attorneys' fees when the individual or 
small business prevails in a case brought by the government. Quite 
simply, EAJA acknowledges that the resources available to the Federal 
Government in a legal dispute far outweigh those available to most 
Americans. This disparity is lessened by requiring the government, in 
certain instances, to pay the attorneys' fees of successful individual 
and small-business parties. By giving successful parties the right to 
seek attorneys' fees from the United States, EAJA seeks to prevent 
individuals and small business owners from having to risk their family 
savings or their companies' financial well-being to seek justice in 
court.
  My interest in this issue predates my election to the Senate. It 
arises from my experience as both a private attorney and a Member of 
the State Senate in my home State of Wisconsin. While in private 
practice, I became aware of how the ability to recoup attorneys' fees 
is a significant factor, and often one of the first considered, when 
parties decide whether to defend a case. Upon entering the Wisconsin 
State Senate, I authored legislation modeled on the Federal law, which 
had been championed by one of my predecessors in this body from 
Wisconsin, Senator Gaylord Nelson. Today, Wisconsin statutes contain 
provisions similar to the federal EAJA statute.
  It seemed to me then, as it does now, that we should do all that we 
can to help ease the financial burdens on people who need to have their 
claims reviewed and decided by impartial decision makers. The bill 
Senator Snowe and I are introducing today does a number of things to 
make EAJA more effective for individuals and small business owners 
across this country.
  First, this legislation eliminates the restrictive provision in 
current law that prevents successful parties from collecting attorneys' 
fees unless they can show the government's position was ``not 
substantially justified.'' I believe that this high threshold for 
obtaining attorneys' fees is unfair. If an individual or small business 
battles the Federal Government in an adversarial proceeding and 
prevails, the government should pay the fees incurred. Imagine a small 
business that spends time and money fighting the government and wins, 
only to find out that it must undertake the additional step of 
litigating the justification of government's litigation position just 
to recover attorneys' fees. For the government, with its vast 
resources, this second litigation over fees poses little difficulty, 
but for the small business or individual, it may simply not be 
financially feasible.
  This additional step presents more than a financial burden on the 
individual or small business litigant. A 1992 study also reveals that 
it is unnecessary and a waste of government resources. University of 
Virginia Professor Harold Krent reviewed EAJA cases in 1989 and 1990 
and released a study on behalf of the Administrative Conference of the 
United States. Professor Krent found that only a small percentage of 
EAJA awards were denied because of the substantial justification 
defense. While it is impossible to determine the exact cost of 
litigating the issue of substantial justification, Professor Krent 
found that the money saved by the government was not enough to justify 
the cost of the additional litigation. In short, eliminating this 
often-burdensome second step is a cost-effective step that will 
streamline recovery under EAJA and may very well save the government 
money in the long run.
  A second improvement this bill makes to EAJA are modifications to the 
definition of a small business. Small businesses are currently defined 
for purposes of EAJA as businesses with a net worth of less than $7 
million. We update that number to $10 million and also provide for an 
inflation adjustment every five years based on the Producer Price 
Index. This provision will ensure that EAJA continues to serve the 
small businesses it is intended to protect.
  Another part of this legislation that will streamline and improve 
EAJA is a provision designed to encourage settlement and avoid costly 
and protracted litigation. Under the bill, the government can make an 
offer of settlement after an application for fees and other expenses 
has been filed. If the government's offer is rejected and the 
prevailing party seeking recovery ultimately wins a smaller award, that 
party is not entitled to the attorneys' fees and costs incurred after 
the date of the government's offer. Again, this will encourage 
settlement and speed the claims process. It will reduce the time and 
expense of the litigation.
  This bill also requires the government agency that brought the case 
against the small business or individual to pay attorneys' fees from 
their own budgets. This provision ensures federal agencies will 
consider the financial impact of the actions they choose to bring 
against individuals and small businesses. OSHA, NLRB, EEOC, and the 
Mine Safety and Health Administration are exempt from this provision 
because they play a unique role in acting on behalf of workers to 
enforce the laws.
  Finally, this bill will modify the definition of prevailing party to 
ensure that if claims filed against the government are the catalyst for 
a change in the position by the government that results in the 
individual or small business achieving a significant part of the relief 
sought, the individual or small business will be considered the 
prevailing party even if the case settles rather than going to a 
judgment. This reverses, in cases where fees are available under EAJA, 
the 2001 decision of the Supreme Court in Buckhannon Board and Care 
Home, Inc. v. West Virginia Department of Health and Human Resources.
  We all know that the American small business owner faces many 
challenges. Government regulation can be a formidable obstacle to 
conducting business, and litigation can be costly. The Equal Access to 
Justice Act was conceived and implemented as a check on the formidable 
power of the federal government. It has already helped many individual 
Americans and small businesses. The legislation we are offering today 
will make EAJA more effective and more fair. I want to thank Senator 
Snowe for agreeing to work with me on this important bill. I hope our 
colleagues can support it.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2017

       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; and
       (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

[[Page S12952]]

     (even for small parties that completely prevail against the 
     Government), as well as inefficient and costly mechanisms for 
     determining the fees recovery.
       (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 Federal enforcement actions 
     directed at small parties;
       (3) reduce the practice of paying EAJA liabilities from the 
     General Treasury, to ensure that Federal agencies properly 
     consider the financial consequences of their actions and 
     subsequent impact on the Federal budget;
       (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) encourage settlement of 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 
     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.--
       (A) In general.--Section 504(b)(1)(B)(ii) of title 5, 
     United States Code, is amended by striking ``$7,000,000'' and 
     inserting ``$10,000,000''.
       (B) Adjustment in net worth limitation.--Section 504(b) of 
     title 5, United States Code, is amended by adding at the end 
     the following:
       ``(3) Beginning on January 1 of the 5th year following the 
     date of enactment of this paragraph, and on January 1 every 5 
     years thereafter, the dollar amount under paragraph 
     (1)(B)(ii) shall be adjusted by the Producer Price Index as 
     determined by the Secretary of the Treasury, in collaboration 
     with the Bureau of Labor Statistics.''.
       (2) Judicial proceedings.--
       (A) In general.--Section 2412(d)(2)(B)(ii) of title 28, 
     United States Code, is amended by striking ``$7,000,000'' and 
     inserting ``$10,000,000''.
       (B) Adjustment in net worth limitation.--Section 2412(d) of 
     title 28, United States Code, is amended by adding at the end 
     the following:
       ``(5) Beginning on January 1 of the 5th year following the 
     date of enactment of this paragraph, and on January 1 every 5 
     years thereafter, the dollar amount under paragraph 
     (2)(B)(ii) shall be adjusted by the Producer Price Index as 
     determined by the Secretary of the Treasury, in collaboration 
     with the Bureau of Labor Statistics.''.
       (c) Elimination of Rate Cap.--

[[Page S12953]]

       (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 to read as follows:
       ``(d)(1) Fees and other expenses awarded under this section 
     shall be paid by any agency over which the party prevails 
     from any funds made available to the agency by appropriation 
     or otherwise.
       ``(2) 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.
       ``(3) Paragraph (2) shall not apply to the National Labor 
     Relations Board, the Occupational Safety and Health 
     Administration, the Mine Safety and Health Administration, or 
     the Equal Employment Opportunity Commission.''.
       (2) Judicial proceedings.--Section 2412(d)(4) of title 28, 
     United States Code, is amended to read as follows:
       ``(4)(A) Fees and other expenses awarded under this 
     subsection shall be paid by any agency over which the party 
     prevails from any funds made available to the agency by 
     appropriation or otherwise.
       ``(B) 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.
       ``(C) Subparagraph (B) shall not apply to the National 
     Labor Relations Board, the Occupational Safety and Health 
     Administration, the Mine Safety and Health Administration, or 
     the Equal Employment Opportunity Commission.''.
       (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:
       ``(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:
       ``(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.

  Ms. SNOWE. Mr. President, as Chair of the Senate Committee on Small 
Business and Entrepreneurship, I have fought to ensure that small 
businesses across the country are treated fairly by the Federal 
Government. Unfortunately, in far too many cases, Federal agencies take 
arbitrary or abusive enforcement actions against small businesses. Few 
repercussions deter the Federal Government from taking these 
unwarranted and unjust actions, which can irreparably injure the 
reputation and financial viability of a small business.
  Enacted in 1980 on a bipartisan basis, the Equal Access to Justice 
Act (EAJA) intended to allow small businesses to collect legal fees 
after prevailing in litigation against the Federal Government. However, 
a number of barriers and inefficiencies exist within EAJA that prevent 
its effectiveness.
  For example, EAJA currently requires a small business that has 
prevailed in litigation against the Federal Government to enter into a 
costly second proceeding with the government. At the second proceeding, 
the government can assert a ``substantial justification'' defense to 
prevent the small business from recovering its legal costs, even though 
the small business prevailed on the merits of the underlying case in 
court. Even in instances when the Federal Government based its actions 
entirely on erroneous facts or without any legal basis, if the Federal 
Government can show that it was ``substantially justified'' in taking 
its actions, then a small business will be barred from EAJA recovery.
  In practice, courts typically give a very wide berth to the 
government's substantially justified defense--a reality that means that 
prevailing small businesses can rarely, if ever, recover their legal 
fees under EAJA. And while

[[Page S12954]]

a second proceeding may be in the best interest of the Federal agency--
especially because its case is being funded by the General Treasury--
the second proceeding may ultimately be more costly and more time 
consuming to the small business than the original, underlying case.
  I believe that this is a flawed system. Small businesses are a 
driving force of the United States economy, representing 99.7 percent 
of all employer firms and generating approximately 75 percent of net 
new jobs annually. It is in our Nation's best interest to protect and 
watch over small businesses, as their success and vitality are key to 
America's economy and job growth.
  It's plain and simple: We should not idly stand by while the Federal 
Government mistreats our Nation's small businesses.
  That is why today I introduce with my colleague Senator Feingold the 
Equal Access to Justice Reform Act of 2005 (EAJRA). This bill would 
ensure that small businesses are adequately protected from unreasonable 
regulations and actions, as well as update EAJA to better serve today's 
small businesses.
  Under our legislation, small parties would be more likely to recover 
their legal fees when they prevail in litigation against the Federal 
Government. First, the EAJRA would eliminate the ``substantial 
justification'' defense, which would increase the likelihood that small 
businesses will be able to recover their legal costs after their 
winning their case.
  Second, our legislation would modernize the EAJA by updating 
eligibility qualifications for small businesses. It would raise the 
threshold for qualifying small businesses from $7 million to $10 
million net worth, and index that threshold for inflation. Given modern 
economic realities, a net worth of $7 million is no longer sufficient.
  Third, the EAJRA would remove the hourly rate cap on attorney's fees. 
The current hourly rate cap of $125 was set during EAJA's enactment in 
1980, and has yet to be adjusted for inflation. However, the market 
rate for competent legal services, especially for complex and high-risk 
litigation against the Federal Government, is far greater than the cap 
of $125 per hour. This limit prevents small businesses from receiving 
fair and just reimbursement of attorney's fees, placing them at a 
notable disadvantage.
  Finally, the EAJRA would require agencies that lose lawsuits, other 
than the National Labor Relations Board, the Occupational Safety and 
Health Administration, the Mine Safety and Health Administration, and 
the Equal Employment Opportunity Commission, to pay legal fees awarded 
under EAJA out of their own budgets and not the General Treasury. This 
would eliminate inefficient uses of Federal agency resources and would 
discourage marginal or abusive Federal enforcement actions directed at 
small parties. In addition, the Federal budget would no longer be 
unnecessarily burdened.
  The EAJRA creates a fair and even playing field. It would equalize 
the level of accountability to Federal law among governments in the 
United States. It is a ``good government'' statute that would promote 
justice and equality of treatment between small and large entities, and 
would greatly increase transparency in the Federal Government.
  This legislation is absolutely necessary. I urge my colleagues to 
support the Equal Access to Justice Reform Act so that we can ensure 
that our nation's small businesses are protected from unfair and 
unreasonable governmental actions.
                                 ______