The Equal Access to Justice Act - are the bankruptcy courts less equal than others?

• Author: Fischer, Matthew J.

INTRODUCTION

In 1980, Congress passed the Equal Access to Justice Act (EAJA),(1) which allows courts and agencies to award costs and fees, including attorney's fees, to parties who prevail in litigation against the federal government.(2) In the absence of another statute specifically providing for a fee award, the EAJA mandates such an award unless the court finds that the government's position was substantially justified or that special circumstances make such an award unjust.(3) Prior to the enactment of the EAJA, the federal government was immune from statutory and common law fee-shifting provisions under the doctrine of sovereign immunity.(4) The EAJA thereby puts the government on equal footing with nongovernment litigants potentially subject to fee-shifting. The EAJA grants fee-shifting authority to "any court having jurisdiction of such action."(5)

Courts and commentators currently dispute whether the EAJA grants the federal bankruptcy courts authority to shift fees against the federal government.(6) A split between the Tenth and Eleventh Circuits frames the controversy. The Tenth Circuit has held that Congress granted EAJA authority to the bankruptcy courts,(7) whereas the Eleventh Circuit has ruled that bankruptcy courts are not "any court" within the meaning of the EAJA and thus cannot shift fees.(8)

The applicability of the EAJA to the bankruptcy courts is important because the federal government is either a lender or guarantor of more than $870 billion in loans.(9) In addition, the government assumes the role of creditor in many of its contractual relations by making progress or advance payments to contractors under long-term deals.(10) The government also often takes title or a secured position in the goods being manufactured under contract, potentially leading to litigation if the contractor files for bankruptcy.(11) The likely bankruptcy of some percentage of government borrowers and contractors will continue to require the federal government to appear in the bankruptcy courts as an interested creditor.(12) The federal government, just like any other creditor, must file a proof of claim in bankruptcy to establish the priority of its liens.(13)

Furthermore, any time a party indebted to the government files for bankruptcy, potential litigation issues arise regarding compliance with the automatic stay, preference, and permanent injunction provisions of the bankruptcy code.(14) The federal government, specifically the Internal Revenue Service, is a frequent violator of the automatic stay(15) and permanent injunction(16) provisions of the bankruptcy code.(17) The prevalence of federal lending and the increase in bankruptcy filings highlight the importance of a resolution to the question of the EAJA's applicability to the bankruptcy courts.(18)

This Note argues that the bankruptcy courts have authority under the EAJA to shift fees against the federal government. Part I discusses the relevant caselaw and examines the basis of the current controversy. Part II examines the statutory language, the legislative history, and the stated purposes of the EAJA and concludes that each of these aspects of the statute demonstrates a congressional intent to grant fee-shifting authority to the bankruptcy courts. Part III considers alternatives to finding bankruptcy court jurisdiction over EAJA disputes, rejecting each as inefficient and unnecessary. This Note concludes that courts should construe the EAJA consistently with its language, history, and purpose, and allow the bankruptcy courts to shift fees and costs against the federal government in appropriate cases.

1. THE CURRENT STATE OF THE CONTROVERSY

   Although three circuit courts have decided cases presenting the issue of whether the bankruptcy courts may shift fees under the authority of the EAJA, only two have explicitly addressed the issue of jurisdiction.(19) In O'Connor v. United States Department of Energy,(20) the Tenth Circuit held that bankruptcy courts could exercise EAJA power because they fall within the EAJA's jurisdictional grant to "any court." The Eleventh Circuit, however, concluded otherwise in Gower v. Farmers Home Administration (In re Davis),(21) holding that the bankruptcy courts cannot exercise EAJA power because they are not "courts of the United States" as defined in 28 U.S.C. [section] 451.(22) This Part examines the position of each circuit in detail to set the stage for the comprehensive analysis of bankruptcy court jurisdiction under the EAJA in Part II.

   1. The Tenth Circuit Position -- O'Connor

      The Tenth Circuit, in O'Connor v. United States Department of Energy,(23) held that a bankruptcy court may shift fees under the EAJA because bankruptcy courts fall within the plain meaning of "any court"(24) and because the inclusion of bankruptcy courts furthers EAJA policies.(25) The O'Connor court relied on its interpretation of the "plain meaning" of the EAJA, invoking the general principle that "[a] court should venture into the thicket of legislative history only when necessary to determine 'a statutory purpose obscured by ambiguity.'"(26) The O'Connor court held that the plain meaning of "any court" includes the bankruptcy courts.(27)

      The O'Connor court also noted that Congress could have modified the term "any court" if it had intended to limit the jurisdictional reach of the EAJA to a specific subset of courts.(28) The court reasoned that the unmodified use of court supported its view that the plain meaning of "any court" included the bankruptcy courts.(29) In further support of its textual analysis, the O'Connor court also stated that its conclusion comports with the general purpose of the EAJA, namely to encourage citizens to challenge unreasonable government action despite the high cost of litigation.(30)

   2. The Eleventh Circuit Position -- In re Davis

      In Gower v. Farmers Home Administration (In re Davis),(31) the Eleventh Circuit held that the bankruptcy courts lack authority under the EAJA to shift fees because they are not "any court" within the meaning of the EAJA.(32) The Davis court relied on two sources to support its denial of jurisdiction: the precedent of Bowen v. Commissioner of Internal Revenue(33) and the legislative history of the EAJA.(34)

      In Bowen, the Eleventh Circuit held that the tax courts did not have jurisdiction to award EAJA fees to a prevailing party, relying on cross-references within title 28 and the unique position of the tax courts under title 26.(35) The Bowen court first noted that the EAJA allowed recovery of the "costs" enumerated in section 1920 of title 28.(36) Section 1920 is entitled "Taxation of Costs" and partially codifies the equitable power of the federal courts.(37) The Bowen court then noted that section 1920 states that costs may be shifted by a "court of the United States,"(38) a term that is defined in 28 U.S.C. [section] 451.(39) The court reasoned that the EAJA's reference to the costs enumerated in section 1920 also incorporated section 1920's jurisdictional limitation to "courts of the United States" as defined by section 451.(40) Therefore, the Bowen court held that EAJA fees may be shifted only by courts listed in section 451,(41) even though the EAJA contains no explicit reference to section 451. Because section 451 does not include the tax courts, the Eleventh Circuit concluded that the tax courts lack EAJA authority.(42) In Davis, the court held that the analysis of Bowen applied "unambiguously" to bankruptcy courts, which are also not included in section 451.(43)

      In addition to the statutory cross-referencing analysis adopted from the Bowen opinion, the Davis court also relied on a portion of the legislative history of the EAJA to exclude the bankruptcy courts from EAJA jurisdiction.(44) The court quoted House Report 1418, which states:

      Section 2412(b) [of the EAJA] permits a court in its discretion to award attorney fees and other expenses to prevailing parties in civil litigation involving the United States to the same extent it may award fees in cases involving other parties. The courts so empowered are those defined in section 451 of title 28, United States Code.(45)

      This document plainly appears to restrict the courts eligible to shift EAJA fees to those enumerated in section 451. The Davis court buttressed its statutory argument with this seemingly unequivocal legislative history to hold that the bankruptcy courts lacked jurisdiction to award fees under the EAJA.(46)

      The circuit split defines the current state of the law on the bankruptcy court jurisdiction issue. Because the Tenth Circuit refused to examine the legislative history in House Report 1418 that appears to limit EAJA jurisdiction to the "courts of the United States" listed in section 451, evidence that the Eleventh Circuit considered probative, the Tenth and Eleventh Circuits simply argue past each other. No other courts have directly addressed the issue of bankruptcy court jurisdiction under the EAJA.(47) As a result, the bankruptcy courts are left without clear or consistent guidance on this issue.

2. INTERPRETING THE EAJA

   Part I concluded that the current disagreement in the courts over whether the EAJA grants the bankruptcy courts authority to shift fees against the federal government reflects fundamentally different approaches to the question. This Part provides a comprehensive assessment of the arguments on either side, arguing that the EAJA's text, legislative history, and purposes support the conclusion that the statute includes the bankruptcy courts.(48) Section II.A argues that the plain meaning of the statute's jurisdictional grant covers the bankruptcy courts. This section also considers and jects arguments based on cross-references from the EAJA to other statutes. Section II.B argues that the EAJA's legislative history, though complicated, supports the plain meaning of the text. Finally, section II.C demonstrates that including bankruptcy courts within EAJA jurisdiction advances...