I 
109TH CONGRESS 
1ST SESSION 
H. R. 435
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. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 1, 2005
Mr. MANZULLO (for himself and Mr. BLUMENAUER) introduced the following 
bill; which was referred to the Committee on the Judiciary, and in addi-
tion to the Committee on Small Business, for a period to be subsequently 
determined by the Speaker, in each case for consideration of such provi-
sions as fall within the jurisdiction of the committee concerned 
A BILL 
To amend the provisions of titles 5 and 28, United States 
Code, relating to equal access to justice, award of reason-
able costs and fees, and administrative settlement offers, 
and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Equal Access to Jus-
tice 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 mod-
est means, small businesses, and nonprofit organiza-
tions (in this section collectively referred to as 
‘‘small parties’’) through limited recovery of their at-
torneys fees when they prevail in disputes with the 
Federal Government; 
(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 (even for small parties that 
completely prevail against the Government), as well 
as inefficient and costly mechanisms for determining 
the fees recovery; 
(3) among the barriers retained by EAJA are—
(A) EAJA’s ‘‘substantial justification de-
fense’’, whereby the Government can deny at-
torneys’ fees recovery to prevailing small parties 
if the Government can show that its position, 
although proven illegal, was not abusive or en-
tirely unreasonable; 
(B) EAJA’s hourly rate cap on attorneys’ 
fees of $125, which is well below the market
rate for competent legal services in many legal 
markets (especially for complex and high-risk 
litigation against the Federal Government) and 
thus prevents fair reimbursement of attorneys’ 
fees for small parties and discourages com-
petent counsel from undertaking meritorious 
cases on a contingency or reduced-fee basis; and 
(C) EAJA’s outdated small business eligi-
bility requirements, which have not increased or 
indexed for inflation the net worth threshold of 
$7,000,000 established in 1985; 
(4) among the inefficiencies retained by EAJA 
are—
(A) EAJA’s substantial justification de-
fense, which initiates collateral litigation over 
attorneys’ fees recovery that both consumes sig-
nificant Federal resources and prolongs the 
time, expense, and risk of pursuing fees recov-
ery to the prevailing small party; 
(B) EAJA’s omission of any mechanism 
(such as the offer in compromise feature of 
Federal Rule of Civil Procedure 68) that would 
apply after a small party has prevailed on the 
merits of its claim to encourage both sides to
reach a prompt and reasonable settlement of at-
torneys’ fees; 
(C) EAJA’s failure to create an edu-
cational and technical assistance function with-
in an appropriate agency to facilitate more effi-
cient use, settlement, and payment of claims 
under EAJA; and 
(D) EAJA’s failure to reassign congres-
sional reporting obligations to an appropriate, 
existing agency (EAJA lodges annual congres-
sional reporting with the Administrative Con-
ference of the United States, an agency which 
ceased to exist in 1995); 
(5) none of these barriers or inefficiencies exists 
in the primary Federal fee-shifting statute applicable 
to State and local governments, Revised Statutes 
section 722 (42 U.S.C. 1988(b)), resulting in—
(A) an unequal level of accountability to 
Federal law among governments in the United 
States (shielding the Federal Government to a 
greater degree than State and local govern-
ments from the consequences of violating Fed-
eral law); 
(B) an uneven playing field for small party 
victims of Federal law violations (discouraging
resistance to illegal action by the Federal Gov-
ernment); and 
(C) an inefficient use of Federal agency re-
sources (burdening the Federal budget); 
(6) a further barrier and inefficiency is the 
practice of Federal agencies of paying their EAJA 
liabilities from the General Treasury rather than 
their own agency budgets, relieving those agencies of 
the financial consequences of their misconduct (i.e., 
EAJA liability) and burdening the Federal budget 
unnecessarily; 
(7) it is in the national interest to remove these 
barriers and inefficiencies for small parties, particu-
larly small business owners, involved in disputes with 
the Federal Government in order to develop sound 
policies relative to the national economy in which 
small businesses play a significant and strategic role; 
and 
(8) the removal of these barriers and inefficien-
cies is essential to—
(A) equalize the level of accountability to 
Federal law among governments in the United 
States;
(B) discourage marginal or abusive Fed-
eral enforcement actions directed at small par-
ties; 
(C) stop the practice of paying EAJA li-
abilities from the General Treasury, which has 
insulated agencies from the financial con-
sequences of their misconduct and burdened the 
Federal budget unnecessarily; 
(D) refine and improve Federal policies 
through adjudication; 
(E) promote a fair and cost-effective proc-
ess for prompt settlement and payment of at-
torneys’ fees claims; and 
(F) provide a fairer opportunity for full 
participation by small businesses in the free en-
terprise system, further increasing the economic 
vitality of the Nation. 
(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 Fed-
eral law among governments in the United States; 
(2) discourage marginal or abusive Federal en-
forcement actions directed at small parties;
(3) stop the practice of paying EAJA liabilities 
from the General Treasury, which has insulated 
agencies from the financial consequences of their 
misconduct and burdened the Federal budget unnec-
essarily; 
(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 partici-
pation by small businesses in the free enterprise sys-
tem, 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 di-
rected at small parties covered by EAJA; 
(2) alleviate unnecessary burdens of compliance 
with justified enforcement actions directed at small 
parties covered by EAJA; and
(3) minimize impediments to prompt resolution 
and payment of reasonable attorneys’ fees to pre-
vailing small parties covered by EAJA. 
SEC. 3. REPORTING AND TECHNICAL ASSISTANCE BY OF-
FICE OF ADVOCACY. 
(a) FUNCTIONS OF OFFICE OF ADVOCACY.—Section 
202 of Public Law 94–305 (15 U.S.C. 634b) is amend-
ed—
(1) in paragraph (3), by inserting before the 
semicolon at the end the following: ‘‘and for ensur-
ing 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 Pol-
icy 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 the enactment of this Act, the At-
torney General, in cooperation with the Chief Coun-
sel for Advocacy of the Small Business Administra-
tion, 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 Govern-
ment, 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 pay-
ing 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 bene-
fits of EAJA generally; 
(B) an analysis of the variations in the fre-
quency and amounts of fee awards paid by spe-
cific Federal agencies and within specific Fed-
eral 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, liti-
gated, and paid by, each agency under EAJA; 
and 
(C) recommendations for congressional 
oversight or legislative changes with respect to 
EAJA, including any recommendations for pro-
mulgation or amendment of regulations issued 
under EAJA by specific Federal agencies. 
(2) SPECIFIED
COMMITTEES.—The congres-
sional 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 Entre-
preneurship of the Senate. 
(3) REPORT
ON
SMALL
BUSINESS
AND
COM-
PETITION.—Section 303 of the Small Business Eco-
nomic 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 dis-
putes with the Federal Government), together with 
such recommendations for legislation as the Presi-
dent 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 fol-
lowing: 
‘‘(2) The President, after consultation with the Chief 
Counsel for Advocacy of the Small Business Administra-
tion and the Attorney General, shall transmit simulta-
neously as an appendix to such annual report, a report 
that describes, by agency and department—
‘‘(A) the total number of claims filed, proc-
essed, settled, and litigated by small business con-
cerns under section 504 of title 5, United States 
Code, and section 2412 of title 28, United States 
Code (originally enacted pursuant to the Equal Ac-
cess 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 evalu-
ating 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 com-
ply 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 fol-
lowing: 
‘‘(2) All reports concerning the Equal Access to Jus-
tice Act (Public Law 96–481; 94 Stat. 2325), or the con-
gressional policy to ensure that the justice system remains 
accessible to small business enterprises for the resolution 
of disputes with the Federal Government, shall be trans-
mitted to the following congressional committees: 
‘‘(A) The Committee on the Judiciary and the 
Committee on Small Business of the House of Rep-
resentatives. 
‘‘(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 ‘‘, un-
less the adjudicative officer’’ and all that fol-
lows through the period at the end and insert-
ing 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 fol-
lows through the period at the end and insert-
ing a period; and 
(C) in subsection (d)(3), by striking ‘‘, un-
less 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.—Section 
504(b)(1)(B)(ii) of title 5, United States Code, is 
amended by striking ‘‘$7,000,000’’ and inserting 
‘‘$10,000,000’’. 
(2) 
JUDICIAL
PROCEEDINGS.—Section 
2412(d)(2)(B)(ii) of title 28, United States Code, is 
amended by striking ‘‘$7,000,000’’ and inserting 
‘‘$10,000,000’’. 
(c) ELIMINATION OF RATE CAP.—
(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 in-
serting ‘‘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 ap-
plication 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 appli-
cant may then file the offer and notice of acceptance to-
gether 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 pro-
ceeding finally obtained by the applicant is not more favor-
able 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 add-
ing at the end the following: 
‘‘(E)(i) At any time after an agency receives an appli-
cation 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 appli-
cant may then file the offer and notice of acceptance to-
gether 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 pro-
ceeding finally obtained by the applicant is not more favor-
able 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 be-
fore the first sentence the following: ‘‘At any time
after the commencement of an adversary adjudica-
tion, 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 ex-
penses against the agency should such party pre-
vail.’’. 
(2) 
JUDICIAL
PROCEEDINGS.—Section 
2412(d)(1)(B) of title 28, United States Code, as 
amended by this section, is further amended by in-
serting 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—
(A) by striking ‘‘subsection’’ and inserting 
‘‘section’’; and 
(B) by adding at the end the following: 
‘‘Fees and expenses awarded under this section
may not be paid from the claims and judgments 
account of the Treasury from funds appro-
priated pursuant to section 1304 of title 31.’’. 
(2) 
JUDICIAL
PROCEEDINGS.—Section 
2412(d)(4) of title 28, United States Code, is 
amended by adding at the end the following: ‘‘Fees 
and expenses awarded under this subsection may not 
be paid from the claims and judgments account of 
the Treasury from funds appropriated pursuant to 
section 1304 of title 31.’’. 
(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 sub-
section (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 RE-
PORTING
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 Ad-
ministration, 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 in-
volved in the controversy, and any other relevant informa-
tion which may aid the Congress in evaluating the scope 
and impact of such awards for individuals engaged in dis-
putes 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 annu-
ally 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 Eco-
nomic 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 fol-
lowing new paragraph: 
‘‘(G) ‘prevailing party’ includes, in addition to 
a party who prevails through a judicial or adminis-
trative 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 op-
posing 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 new sub-
section: 
‘‘(g) For the purposes of this section, the term ‘pre-
vailing 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 posi-
tion 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.
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