Article by Reuben B. Robertson and Mary Candace Fowler
Under the "American rule" generally applied by federal courts in the United States, the winners as well as the losers in litigation have to pay their own attorneys' fees. The Equal Access to Justice Act, which took effect for a three-year test period starting October 1, 1981, significantly increases the opportunities for small businesses, charitable organizations and other parties involved in court or agency litigation with the federal government to recoup their attorneys' fees and other litigation expenses. While the courts have traditionally found that the doctrine of sovereign immunity precludes fee shifting to the United States even under existing exceptions to the American rule, absent a statute explicitly permitting such awards, the very fact that the government has lost creates the basis for an award to a party eligible under the new law.
The Act authorizes the award of attorneys' fees and expenses against the government in civil court actions brought by or against the United States, except for tort cases and those covered by some other statutory provision authorizing attorneys' fees to be awarded. It also provides for fee awards to be made against the government in "adversary adjudications" conducted by federal agencies, defined as adjudications under section 554 of the Administrative Procedure Act in which the position of the United States is represented by counsel or otherwise, but not including proceedings conducted "for the purpose of establishing or fixing a rate or for the purpose of granting or renewing a license."
To be entitled to an award of attorneys' fees and expenses, a party must prevail over the United States. The legislative history explains that "prevailing" is to be defined as it is under existing statutes providing for attorneys' fee awards to prevailing parties, which means that parties may prevail by obtaining favorable settlements or voluntary dismissals or by winning on some significant, separable issues even if not on all issues in the case. The party must also meet certain eligibility standards, since the Act is not intended to benefit parties with unlimited resources, but only those for whom financial considerations may be a significant deterrent to pursuing litigation. Thus parties who may receive awards are limited to four categories: individuals whose net worth does not exceed $ 1 million; businesses, entities, and public or private organizations (including sole owners of unincorporated businesses) with $ 5 million or less in net worth and no more than 500 employees; tax-exempt organizations under section 501(c)(3) of the Internal Revenue Code with no more than 500 employees; and agricultural cooperatives under section 15(a) of the Agricultural Marketing Act with no more than 500 employees.
Even eligible prevailing parties will be denied awards if the position of the United States was substantially justified, or if special circumstances make an award unjust. An award may also be reduced or denied if the party seeking it has unduly protracted the proceedings. The "substantially justified" standard is borrowed from the provisions of the Federal Rules of Civil Procedure establishing sanctions for failure to make discovery. The "special circumstances" clause is also based on the discovery provisions of the Federal Rules. In addition, the Supreme Court has stated that special circumstances may justify denial of an award of attorneys' fees under civil rights fee-shifting statutes. This option has seldom been relied on by courts to deny awards under these statutes, although many cases have identified factors that do not constitute "special circumstances." According to the congressional committee reports on the Equal Access to Justice Act, the clause "helps to insure that the Government is not deterred from advancing in good faith the novel but credible extensions and interpretations of the law that often underlie vigorous enforcement efforts," as well as permitting awards to be denied where equitable considerations so dictate.
A party who clears these hurdles is entitled to recover "reasonable" attorneys' fees, to be calculated at prevailing market rates up to seventy-five dollars an hour. In addition, the party may receive the reasonable expenses of expert witnesses, up to the highest fee that may be paid such experts by the agency involved in the litigation, and the reasonable cost of any studies, tests, projects, analyses or engineering reports that were necessary to the preparation of the party's case. A party seeking a fee award must file an application with the court or agency that decided the case within thirty days after final disposition of the proceeding. One court has held that this time limit is jurisdictional and cannot be waived or extended.
Potentially, the Act may have a dramatic impact in terms of awards made, the transfer of costs from private parties to the federal government, and, if awards are paid out of individual agency budgets, restructuring of agency litigation programs. A 1980 Congressional Budget Office estimate set the cost of the Act at about $ 100 million per year. However, its assumptions about the number of prevailing litigants who will be eligible for awards and the frequency with which the United States' position will be found to lack substantial justification were necessarily speculative. In fact, as discussed below, examination of statutory terms such as the substantially justified standard suggests that awards may be less common than one might initially suppose. If the Act encourages federal litigators to act responsibly, however, it will have an important impact even if it does not result in a large number of awards.
Initially, in any event, the costs of implementing the Act may be very high. At the federal agency level, the cost of administering the Act may equal or exceed the actual cost paid out in awards, since agencies must process applications for awards themselves and are generally less familiar with this task than the federal courts.
In both agency and court proceedings, litigation over the terms and applicability of the Act is likely to be extensive. Its provisions raise a number of questions. For many of them, there are no clear precedents or analogues under previous fee-shifting statutes. While the Act builds on the principles developed under other statutes providing for the award of attorneys' fees, and its legislative history explicitly cites case law under such statutes to explain some of the Act's provisions, it also differs significantly from these statutes. It requires first that parties seeking awards meet financial eligibility standards. It also applies to a broad range of administrative proceedings as well as to court cases. Moreover, the Act's provisions are ambiguous on many important issues, affording ample fuel for disputes between federal agencies and parties seeking awards.
The purpose of this article is to provide some initial guidance to those who seek to use or implement the Act on the more challenging issues likely to confront them—applying the eligibility standards, interpreting the "substantially justified" test, and determining what is included in the fees and expenses recoverable under the Act. Separate sections deal with the unique problems of implementing the Act in administrative proceedings and with the Act's convoluted provisions on the source of funds for the payment of awards. Because these issues should be viewed against the larger background of attorneys' fee awards in the United States courts, the historical context of the American rule and its exceptions will also be discussed.
About the Author
Reuben B. Robertson. B.A. 1961, Yale University; J.D. 1964, Yale Law School. Chairman, Administrative Conference of the United States, 1980-81. Member of the Washington, D.C. Bar.
Mary Candace Fowler. B.A. 1971, Wellesley College; J.D. 1974, Harvard Law School. Staff attorney in the Office of the Chairman, Administrative Conference of the United States.
The views expressed in this article are those of the authors and have not been reviewed or approved by the Administrative Conference of the United States or by the Office of the Chairman.
Citation
56 Tul. L. Rev. 903 (1982)