I think if they lose a few times in a generic way, they will look more carefully at everything they do and I think that is good. In their specific area of domain, if they lose a few more, they will slow up, and look, and listen, before they act.

Senator DECONCINI. Do you think there is any benefit to consider having the award deducted from the agency's budget?

Senator DOMENICI. In the first bill we drew, that is the process I

used.

Senator DECONCINI. Why did you change it?

Senator DOMENICI. It appeared to me that from the standpoint of the orderly budget process that it could penalize the entire operation of an agency, many of which might be very good and not even involved significantly in the regulatory process. I was not willing to penalize an entire agency in that manner.

On the other hand, for accountability, it certainly would be more effective. It might also, looking at it from the negative side, cause them not to do the job as well as they could. I am speaking of the good programs that they administer and maybe these programs would be cut for a couple of years because the agency has to spend $8 or $10 million in attorneys' fees.

Of course, as a sponsor, I would have no objection to that application.

Senator DECONCINI. Have you given any thought, Senator, to this: When you actually find and it has been held that the decision is arbitrary and capricious and without any grounds whatsoever of attaching liability to the Federal bureaucrat who has exercised such a decisionmaking power?

Senator DOMENICI. Well, Mr. Chairman, I have given it some thought also. Even though I am a lawyer as you are, I really am not adequately prepared in the law as to liability under those circumstances. That is, the personal kind of liability without the protection of the agency's relationship to the Federal Government. However, I would have no objection. I do not think it is necessarily a quality of this law that is needed in the first instance. I think we ought to try what I have suggested for 3 or 4 years and see if it does not have an effect, even on that arbitrary person, because he is accountable to that

agency.

Senator DECONCINI. My concern is how do you get the responsibility back? If it were passed and funds were appropriated for it, would the agency really get the message back that they have some arbitrary decisionmakers in the field, or in the regional office, that they need to be able to exercise some control over?

I just raise that as a thought process of how do you bring that responsibility to bear on the actual area that is causing the problem. I have not heard many good things abut OSHA, but let's assume that some place in New England OSHA doesn't operate that way. They interpret a little differently, and if OSHA is found quilty and there is an award to a taxpayer and the funds are paid out of the general revenue or out of some other line item but not out of the OSHA budget, how is OSHA going to respond to that, except for maybe the bad publicity?

Senator DOMENICI. Mr. Chairman, in discussing the bill with other Senators and staff people here, we do have a new section. Section (f), within the new numbering sequence, generally provides that at the end of each fiscal year, the Comptroller General shall submit a report to the Congress setting forth the amount, costs, and attorneys' fees expended for awards during that year by the United States under the provision of this law. Each such report shall describe the nature and the amount of the award, the claims involved in controversy, and other relevant information which will aid the Congress in evaluating the impact and scope.

Mr. Chairman, what I think that will do is this. We have been saying that we must have more oversight. That has been our claim or contention, but when we get right down to it, we could not possibly have oversight over every regulation proposed. But I believe that in the second or the third year of having this kind of law in effect, if the yearly report continues to show that certain agencies of the government were getting stuck pretty good for attorneys' fees, then this would give a red flag for oversight, and it would certainly red flag the top administrator of that particular agency and then maybe a committee could find out what, why, and how.

Senator DECONCINI. It would tie in, too, with sunset legislation if the Congress ever adopted it where agencies had to justify themselves as they certainly would have to justify why they had so many violations of this statute.

Senator DOMENCINI. I think it would also tie in to reauthorization even under the normal process without the sunset laws. But certainly with the sunset laws, it would be something to look at very carefully. It would be something to grasp in the inquiry about the need for major changes in the authorizing legislation.

Senator DECONCINI. Thank you.

Mr. HERTZLER. Senator, may I say this?
Senator DECONCINI. Certainly.

Mr. HERTZLER. I don't know if you are aware of it, but OSHA can lose the case in the lower court, in a district court, but when it goes to the appeals court, the Department of Justice follows it though. So, it goes out of the OSHA agency, that is, the cost of the litigation does, and OSHA is no longer concerned with it.

The Department of Justice lawyers then take the case and take it through the appeals procedure. So the money then, of course, is coming from different places. I think OSHA might be able to hide their losses by having it appear that the Department of Justice is losing. Senator DECONCINI. That is a good point.

Thank you, Mr. Hertzler, and Senator Domenici. We thank you both very much.

Senator DECONCINI Our next witness is our panel representing the Department of Justice and the Department of the Treasury. We have Mr. Donald Lubick and Mr. Paul Nejelski. We thank you gentlemen for coming this morning.

Mr. NEJELSKI. Mr. Senator, the Department of Justice will go first with a more general case and then the Department of the Treasury has a special application.

Senator DECONCINI. That's fine. Please proceed.

TESTIMONY OF PAUL NEJELSKI, DEPUTY ASSISTANT ATTORNEY GENERAL, OFFICE FOR IMPROVEMENTS IN THE ADMINISTRATION OF JUSTICE, DEPARTMENT OF JUSTICE, ACCOMPANIED BY WARREN KING, ATTORNEY

Mr. NEJELSKI. Mr. Chairman, I would like to introduce to you Mr. Warren King from our office. He has worked on this project for me and for the Department. He may be of some assistance to us as we go along.

Senator DECONCINI. Welcome.

Mr. NEJELSKI. With your permission, I would like to read my statement rather than sumarize it, partly because it represents a consensus within the Department of Justice and with the Office of Management and Budget and the White House. I would rather not stray from the wording. Also, we have taken some pains to pull together the data which is available on the size of the total claims that we anticipate will be made under this bill.

Senator DECONCINI. Certainly. Go right ahead.

Mr. NEJELSKI. As you know, assuring access to effective justice to all citizens is the primary goal of our Office. We were particularly fortunate to have worked with you and your staff in the early days of our existence on the proposed Magistrate Act of 1978, a measure which should markedly improve access to justice in the Federal courts.

Our interest in that subject is a continuing one and as a result, we have commenced an examination of the costs of civil litigation generally. This study includes asking how those costs might be reduced to insure that justice is not priced out of the reach of many citizens or perhaps reallocated to insure more equitable use of court resources. We are very concerned, for example, that the high costs of bringing or defending civil actions may have the effect of denying access to the courts for persons whose means do not permit the payment of substantial attorneys' fees.

The intial phase of our costs of litigation project involves a study of the issue now before this subcommittee: Whether attorneys' fees should be awarded more frequently in civil cases and, if so, under what circumstances. Our primary goal in this endeavor is to facilitate access to justice for those with meritorious claims or defenses and discourage frivolous litigation by those with spurious claims or defenses. We look forward to working with you and your staff to achieve this goal and hope to be able to assist your inquiry by providing answers to specific questions in areas within our knowledge and experience.

Before addressing the specific issues raised by S. 2354 it might be useful to review briefly the state of the law in this area and to mention some of the problems that have arisen, in order to provide a context for later discussion.

As you know, under the so-called American rule, the prevailing litigant is not ordinarily entitled to recoup his legal expenses from the loser. However, there are three general exceptions to this rule. First, under the "equitable trust" or "common fund" exception, a litigant whose legal action has the effect of preserving or recovering a fund for the benefit of others in addition to himself may be awarded

29-886-78- -3

attorneys' fees either from the fund or from the other parties enjoying the benefits.

Second, the court may award fees against a losing party who has willfully disobeyed a court order or has acted in bad faith, vexatiously, wantonly or for oppressive reasons.

And third, attorneys' fees may be awarded where a statute expressly so provides. See Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240 (1975).

Congressional authorization for fee award presently exists in a number of statutes, but until recently there were very few reported cases in which prevailing litigants in the Federal courts were permitted to recover attorneys' fees. Prior to this decade, the Clayton Act, 15 U.S.C. 15, was the basis for most fee awards. Within the past dozen years or so, however, Congress has enacted a number of laws containing provisions for the recovery of attorneys' fees and the number of reported Federal cases dealing with this issue is growing. Among those recent enactments are titles II and VII of the Civil Rights Act of 1964 [42 U.S.C. 2000a-3 (b), 2000e-5 (k)]; title III of the Organized Crime Control Act (18 U.S.C. 2520); the Freedom of Information Act [5 U.S.C. 3442a () (4) (E)]; the Consumer Product Safety Act [15 U.S.C. 2059 (e) (4), 2060, 2072 (a), and 2073]; and, most recently, the Civil Rights Attorneys' Fees Awards Act of 1976 (42 U.S.Č. 1988).

Many of the recent statutory fee shifting provisions have specific application to suits involving the Government. The legislative history of the Freedom of Information Act explains the justification for awarding fees against the United States in these terms: "The allowance of a reasonable attorney's fee out of Government funds to prevailing parties in litigation has been considered desirable when the suit advances a strong congressional policy." 93 U.S. Code Congressional and Administrative News, 6267, 6272.

We do not disagree with this judgment, and we have, in fact, supported proposed attorneys' fees legislation such as S. 270, the "Public Participation in Agency Proceedings Act," that takes this approach. We regard the concept embodied in that bill as a worthwhile experiment in the area of attorneys' fee awards since it represents a limited approach and the bill is carefully tailored to achieve its stated objective of improving the quality of agency determinations by providing greater public participation in agency proceedings.

On the other hand, we do oppose broad-brush departures from the traditional American rule that requires litigants to pay their own attorneys' fees whether they win or lose. It is our view that the American rule is generally sound and that the burden of attorneys' fees should be shifted only in order to effectuate specific and compelling public interests, and only then if the monetary and other costs of fee shifting are reasonable.

We believe that in the great majority of litigated cases involving the Government there is either a genuine dispute as to the facts, or the law is unclear as to the respective rights of the opposing parties, or both. It cannot be said that their positions are unreasonable. In such circumstances, it is unfair to saddle the losing party with his

opponent's attorneys' fees as a matter of course. Such a practice might well discourage parties with legitimate legal claims or defenses from resorting to the courts for their vindication. This sort of "chilling effect" could have serious consequences for developing areas of the law, since potential litigants might be loath to espouse novel legal theories for fear of incurring additional expenses if they did not prevail.

Particularly serious in our view would be any "chilling effect" on suits brought by the executive branch which does, after all, have a constitutional obligation to "take care that the laws be faithfully executed." U.S. Constitution, article II, section 3. While we recognize that fee awards can be a deterrent to indiscriminate litigation, we submit that, until the Government is shown to have litigated in bad faith, proposals to penalize the taxpayers for actions undertaken on their behalf by the Government should be viewed with caution.

With these thoughts in mind, I would now like to turn to consideration of S. 2354-the "Equal Access to Courts Act." Part I of that bill provides that attorneys' fees shall be awarded to a specifically defined class of litigants who prevail-or in some circumstances do not prevail at all-in any civil action, other that tort, brought by or against the United States. Part II of the bill provides that attorneys' fees shall be awarded to the same class of litigants who in any agency proceeding are successful in defending against the imposition of a sanction or the issuance of an order by the agency. Further, fees would be awarded for any proceeding that amounts to an appeal of or judicial review of the agency action.

I should note that except for the exclusion of tort actions-this bill is identical to S. 1001 which we have opposed in the past. To facilitate the work of the subcommittee, we are submitting for the record copies of the relevant correspondence regarding earlier versions of the bill. As can be seen from our earlier statements, our principal objection was based upon considerations of potential cost. But putting cost aside for a moment, the original bill represented a fundamental and far-reaching change in the law. Even as now modified by the exclusion of tort actions, it would constitute a radical, and, in our view, unacceptable, departure from the current law.

To begin with, the bill would permit an award of fees to a litigant even if he did not prevail at all, as long as the court found such an award to be "in the interest of justice." While we are not prepared to say that awarding legal fees to a losing party can never be justified, we think that such a provision amounts to an invitation to spurious litigation, particularly in view of the breadth of the phrase "in the interest of justice."

Second, we are concerned that the bill would mandate the awarding of fees to all parties who prevailed at least in part. The court would have no discretion to deny an award, even if that would be fair and appropriate in the circumstances. Thus, the judge would be required to award attorneys' fees without regard to the motivation or interest of the party litigating and without consideration of such factors as the actual time ordinarily necessary to litigate the case or delaying tactics which unduly prolong or complicate the law suit. The Freedom of