The Honorable Dennis DeConcini

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June 5, 1979

We agree with the Administration that the burden of proof should be placed on the party seeking the award. Placing the burden on the government, as is done in S. 265, would automatically lead to the presumption that an agency position is not substantially justified when the agency loses a case. This conflicts with the well-established presumption that the actions of public officials are lawful and performed in good faith.

Finally, we believe that the Administration's draft bill defines those private parties and small businesses who qualify to make application for an award in a more appropriate manner than does S. 265 by providing for a lower, more reasonable ceiling level of financial worth.

Although we support the two bills' common goal of removing financial deterrents for litigants challenging arbitrary government action, we believe that the Administration's proposed legislation sets forth better standards and procedures for achieving this objective.

This letter is written to present the views of the National Labor Relations Board concerning S. 265, now under consideration by the Subcommittee on Improvements in Judicial Machinery. The letter also expresses the views of the General Counsel of the National Labor Relations Board, who has independent statutory responsibilities under Section 3(d) of the National Labor Relations Act for the investigation and prosecution of complaints before the Board - a function which would be substantially affected by the provisions of the proposed legislation. Our concerns about the legislation providing for the award of attorneys fees to certain classes of parties prevailing in litigation initiated by a government agency unless the Agency can establish that its position was substantially justified - center on three aspects of its impact on this Agency's operations. They are (1) the inhibiting effect on the initiation of proceedings to enforce the provisions of the National Labor Relations Act, (2) the danger of creating additional issues for litigation and lessening the attraction of settlements of suits as an alternative to litigation, and (3) the substantial cost of the proposed legislation.

1.

Throughout its history this Agency, absent a settlement agreement, has followed a policy of seeking to obtain an appropriate Board remedy for each charge of unfair labor practice which an investigation by the General Counsel establishes to be meritorious. Similarly, a court judgment will be sought enforcing each Board order not fully complied

with, and contempt proceedings will be initiated where necessary to obtain compliance with court judgments enforcing Board orders. This policy of proceeding fully in all situations having substantive merit is essential to effectuate the policies of the NLRA and to achieve an evenhanded enforcement of the statute.

Effective implementation of this policy requires that the

General Counsel be free to evaluate the merits of charges under investigation and to take to the Board for resolution critical credibility conflicts and other disputed factual questions. It also requires that the General Counsel be free to place before the Board for its consideration a wide variety of factual situations involving new legal principles and changing aspects of established principles. Only under those circumstances will the General Counsel, acting in the public interest, be able to fulfill his statutory role of presenting to the Board for resolution all those matters appropriate for its consideration.

The policy of evenhanded enforcement also requires that the Board, as administrator of a uniform national labor law under the NLRA, be free to maintain its view of that law for all persons, even those within the territory of a circuit court of appeals which has disagreed with the Board in a prior case on the same issue until the question is definitively resolved through Supreme Court review.

We believe that the provisions of S. 265 would substantially inhibit the Board and the General Counsel in their enforcement of the NLRA in the particulars noted above. Concern over whether the action taken subsequently could be "substantially justified" would become a factor in every decision on whether to prosecute or judicially enforce a case which appeared to be meritorious. Since the proposed standard is ambiguous and essentially subjective, the Agency could not predict with any certainty how it would be applied and thus would be prompted to proceed only in the clearest cases and forego novel issues, thereby retarding the development of this law. The Agency would have the burden of justification upon the mere application of the prevailing party. Such an application could be expected in every instance where the General Counsel or Board did not prevail on all aspects of the proceeding.

2. Under the proposed legislation, whenever a request was made for fees and other expenses, the burden would be on the Agency to establish substantial justification for instituting the action. Resolution of that issue could be an extended trial in itself. Since much Board

litigation involves resolution of disputed factual contentions, establishing the justification might require an evaluation not only of the evidence in the record but also of evidentiary material in the investigatory file, and a probe of the deliberative processes of the General Counsel and the Board. Such litigation could be very extensive and only serve to enlarge the fees claimed. To the extent the claim for fees were presented to a court of appeals, it might well have to be referred to a special master for hearing. This additional litigation would drain trained agency staff from other assignments and foreseeably slow the processing of other cases on the merits.

Additional litigation is also likely to result from a drop in the rate of settlements of meritorious cases which could be expected from enactment of this legilstion. We have long recognized that an inducement in many settlements is the saving of the fees and expenses of litigating the issues. If the mere possibility of recovering those expenses in the event of prevailing before the Agency were available, a significant drop in our very high settlement rate could be expected. In fiscal year 1978 there were 39,652 charges of unfair labor practices filed with the Agency, of which 33.3 per cent, or almost 10,000, were determined after investigation to be meritorious. The pre-trial settlement rate for cases closed that year was 82.2 per cent, with only 1240 proceedings going to hearing. Were the settlement rate to drop only 5 per cent as a result of the availability of fees and expenses under this bill - a not unreasonable estimate the Agency's hearing load would increase by 500 cases - an increase of over 40 per cent. That increase would be projected to engender an additional 125 cases before the courts of appeals on enforcement or review of Board orders.

3. The potential cost to this Agency of the proposed legislation could be quite substantial, with only a portion of the cost attributable to fees payable to prevailing parties. Initially, the Board for budget purposes estimates that a one per cent reduction in the settlement rate costs the Agency at least an additional $500,000 in case processing costs. The 5 per cent reduction estimated here would cost the Agency at least $2,500,000 annually.

As for the possible award of fees and expenses, in the unfair labor practice litigation before the Administrative Law Judges and the Board in fiscal year 1978, the General Counsel's position was sustained in 1221 decisions, or 55.7 per cent, sustained in part in 610 decisions, or 27.3 per cent, and rejected in 360 decisions, or 17 per cent. In the 336

decisions issued by courts of appeals, 218, or 67 per cent, enforced Board orders in full, 58, or 16 per cent, enforced orders in part, and 60, or 17 per cent, denied enforcement or remanded. In addition, there were, during 1978, 294 petitions for injunctions filed by the Board in federal district courts, only 8 of which were denied, and 59 other court actions involving the Board as a party, in only 6 of which the Board's position was not sustained.

Thus, in fiscal year 1978, there were at least 970 administrative proceedings and 132 court proceedings in which applications for fees and expenses by a non-Board party would have been entertainable under this legislation. Projecting this same experience on the 500 case increase in formal hearings due to the reduced settlement rate, results in 222 additional administrative proceedings and 41 additional court proceedings in which such an application would be entertainable, for a total of 1192 administrative proceedings and 173 court proceedings.

From a 1975 study of the number of establishments and workers within the statutory and discretionary standard jurisdiction of the NLRA, it can be estimated that 73%, or 438,000, of the 595,000 establishments within the jurisdiction of the Board, had gross receipts of less than $1,000,000. It is reasonable to assume that at least those employers would be within the proposed statute's definition of "party", based as it is upon a net asset standard of less than $1,000,000, or in the case of corporations and partnerships, less than $5,000,000. Indeed, in view of the net asset standard, it can reasonably be assumed that, at a minimum, 80 per cent of the establishments within the Board's jurisdiction would be entitled to apply for fees and expenses if they were prevailing parties in litigation with the Board. Assuming further that Board litigation is evenly distributed among the various sizes of establishments within its jurisdictions, it follows that in 80 per cent of the proceedings where the Board is not the prevailing party an application for fees and expenses would have to be considered. On the basis of the above figures, this would be in 954 administrative proceedings and 138 court proceedings.

For staffing and budget purposes the Board uses a figure of 24 professional staff days for each administrative hearing and about 30 professional staff days for the briefing and argument of each contested court decision. These figures, about 200 hours for an administrative hearing and 240 hours for a court proceeding, are a reasonable