trouble with a bat boy like this. I appreciate your comments. I know that your comments will be well taken.

Judge RUBIN. It has been an honor to be here.

Senator DECONCINI. Without objection, Judge Rubin's complete prepared statement will be inserted into the record at this point.

[The prepared statement of Judge Carl B. Rubin follows:]

STATEMENT OF JUDGE CARL B. RUBIN, U.S. DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO, REPRESENTING THE JUDICIAL CONFERENCE OF THE UNITED STATES

Mr. Chairman and members of the committee, I am honored to appear before you as a representative of the Federal judiciary. My last appearance in this room occurred on May 13, 1971, after my nomination to the United States District Court for the Southern District of Ohio. I need hardly add that it ranks high on the list of my favorite places.

I propose to comment briefly on the matter pending before you, Bill S. 2354. My remarks, however, should not be deemed as an expression by the judiciary on the merits of the bill. The Judicial Conference of the United States has taken the position that the subject matter of a bill such as this is public policy determination by Congress. This is not to say that we are disinterested in this legislation—quite the contrary. We are vitally interested in anything that will affect the operation of the Federal courts. It is rather that the wisdom of this legislation is within your exclusive province and it is not appropriate for the judiciary to impinge upon that province.

I will confine my remarks to three topics: The impact of this legislation upon the federal courts; the mechanics of fee payment; and the "American Rule." It would appear that there are two potential areas of impact upon the courts. S. 2354 may encourage the filing of such additional suits as to interfere with the orderly processes of judicial administration and it may require additional hearings for the determination of attorney fees. I can comment upon the second problem rather better than the first.

There is a developing principle in some judicial circuits that any award of attorney fees must be based upon a careful and comprehensive examination of the pertinent facts by the trial judge. In class actions, for example, this is becoming an elaborate proceeding. Three circuits have thus far addressed themselves to the question, the Third in Lindy Brothers Builders of Philadelphia v. American Radiator and Standard Corp.; the Second in City of Detroit v. Grannel Corp.; and the Eighth in Grunen v. International House of Pancakes. Any award of attorney fees will require careful judicial inquiry. Obviously, the length of time that this will require is a function of the number of meritorious suits which are filed. The quantity of suits that will be generated is not ascertainable at this time.

If I understand this legislation, it would seem to be, in part at least, intended as a deterrent against Government agencies engaging in needless and harassing litigation. The more successful the bill is in this regard, the fewer cases there will be to occupy the Court's time.

In terms of total cases filed, this bill will undoubtedly cut down the number of minor suits brought seeking recovery of small sums of money. The realities are, however, that such suits rarely, if ever, come to trial. Few defendants will pay $500 to defend a $250 claim. Please understand that I am not condoning this practice I am simply saying that in my experience small claims by Government agencies are paid by the defendants rather than proceed to trial. In almost seven years on the bench, I would estimate that several hundred such claims have been filed, placed on my docket, and disposed of prior to trial. I would estimate that the bill will reduce the number of suits brought by Federal agencies but will increase the number of appeals and that on balance such appeals will consume more judicial time. If the appeal is meritorious, the courtroom doors should not remain closed to those with limited funds.

I would also like to comment upon two aspects of the mechanics of fees. Lines 20, 21 and 22 of page 2 refer to "the lower of the prevailing market rate or $90 per hour." While it does not appear so at the present time, $90 per hour may in the not too distant future be inadequate compensation. There are already fee requests based upon $100 per hour. Rather than seek to amend this provision at a future time, could not the problem be avoided by simply leaving this to the discretion of the trial judge?

May I also suggest that consideration be given to the payment of such fees and costs out of the budget of the agency involved. I have read the statements of both Senators Domenici and Nelson and it is clear that this legislation has been initiated because of harassment of small businesses by Federal agencies. Is it not reasonable to assume that payment of costs and fees out of an agency budget might reduce such harassment and at the very least call to the attention of Congress those agencies whose expenditures reflect such payments?

Finally, I would like to comment on the broader aspects of fee payment legislation. This is unquestionably a public policy determination. As of this time, there are presently pending at least sixty bills before nine different House and Senate committees that would authorize award of attorney fees to prevailing parties. I have provided a list of those bills as an appendix to this statement. Each of these bills, if passed, reduces the impact of the so-called “American Rule." The Judicial Conference has taken no stand on the merits or lack thereof in the American Rule. There is no evidence to suggest that our system would work better or worse in the absence of such rule and there is equally no evidence that those judicial systems which require the loser to pay attorney fees might function better or worse with the American Rule.

The Judicial Conference, however, feels very strongly that the American Rule should not be attenuated by inches. This is a subject that requires full inquiry. The views of the organized bar and the many public service organizations who would be affected would be helpful and such views should be solicited. A matter as fundamental as this should not be determined without decision.

The bill in question by its terms limits the entities which may benefit from it. It is true that it is only a variation or limitation upon the American Rule, butgiven enough such variations or limitations-the American Rule would stand repealed, although the issue had never been squarely faced.

Let me express my appreciation for this opportunity to express the views of the Federal judiciary. Only involvement in a complex criminal trial prevented Judge Edward Gignoux from testifying before you. Judge Gignoux is one of the most able and articulate judges in the Federal system. I do hope that my appearance as a replacement has not been the equivalent of the batboy hitting for Johnny Bench.

APPENDIX A

BILLS PENDING IN THE 95TH CONGRESS TO AUTHORIZE AWARDS OF ATTORNEYS' FEES IN FEDERAL COURT AND ADMINISTRATIVE AGENCY PROCDEDINGS

H.R. 913, H.R. 975, H.R. 1817, H.R. 1819, H.R. 2035, H.R. 2803, H.R. 4814, H.R. 4903, and H.R. 7455, bills to provide that in civil actions where the United States is a plaintiff, a prevailing defendant may recover a reasonable attorney's fee and other reasonable litigation costs.

These bills are pending before the House Committee on the Judiciary.

H.R. 628, H.R. 911, H.R. 970, and H.R. 1496, bills to amend the Occupational Safety and Health Act of 1970 to provide that any employer who successfully contests a citation of penalty shall be awarded a reasonable attorney's fee and other reasonable litigation costs.

These bills are pending before the House Committee on Education and Labor. S. 270, H.R. 66, H.R. 3361, H.R. 5317, and H.R. 8798, bills to amend Chapter 5 of Title 5, United States Code (commonly known as the Administrative Procedure Act) to permit awards of reasonable attorney's fees and other expenses for public participation in Federal agency proceedings and for other purposes. S. 270 has been referred jointly to the Senate Committees on Government Operations and the Judiciary and the other bills have been referred to the House Committee on the Judiciary.

S. 571. H.R. 2532, H.R. 3449, H.R. 5899, and H.R. 7787, bills to amend Title VIII of the Act commonly called the Civil Rights Act of 1968 with respect to the awarding of attorney's fees and the authority of the Department of Housing and Urban Development to initiate a civil action to enforce the provisions of such title.

These bills are pending before the House and Senate Committees on the Judiciary.

S. 1122, H.R. 6054, and H.R. 6835, bills to amend the Occupational Safety and Health Act of 1970 to insure equal protection of the laws for small business and to provide that any employer who successfully contests a citation or penalty shall be awarded a reasonable attorney's fee and other reasonable litigation costs. S. 1122 is pending before the Senate Committee on Human Resources and the other bills are pending before the House Committee on Education and Labor. 29-886-78

-5

H.R. 1501, H.R. 2026, H.R. 3227, H.R. 3228, H.R. 3734, H.R. 4663, and H.R. 6298, bills to amend Title II of the Social Security Act to provide that attorneys' fees allowed in administrative or judicial proceedings under that title (or under title XVIII of such Act), in cases where the claimants are successful, shall be paid by the Secretary of Health, Education, and Welfare rather than deducted from the amounts awarded claimants.

These bills have been referred to the House Committee on Ways and Means. H.R. 1499, H.R. 2025, H.R. 3225, H.R. 3226, H.R. 3733, H.R. 4662, and H.R. 6297, bills to amend Title 38 of the United States Code in order to provide that the fees payable to agents or attorneys who represent veterans in allowed claims under the veterans laws shall be paid by the Administrator rather than deducted from amounts awarded under the claims.

These bills are pending before the House Committee on Veterans' Affairs. S. 1610, H.R. 8260, and H.R. 8312, bills to authorize the payment of attorney's fees in tax cases.

These bills have been referred to the House and Senate Committees on the Judiciary.

H.R. 5279, H.R. 6528, and H.R. 7299, bills to provide that the Federal Government will reimburse any individual who prevails in a court action if such court action is the result of harassment or other unreasonable conduct by the Federal Government.

These bills have been referred jointly to the House Committees on the Judiciary and Ways and Means.

S. 1839, H.R. 2628, H.R. 5868, and H.R. 6903, bills to amend the Internal Revenue Code of 1954 to provide for payment by the Government of all reasonable litigation expenses to prevailing taxpayers in legal action.

S. 1839 has been referred to the Senate Committee on Finance and the other bills have been referred to the House Committee on Ways and Means.

H.R. 552, a bill to amend the Internal Revenue Code of 1954 to provide that the Federal Government will reimburse taxpayers who prevail in court actions under the internal revenue laws for their litigation expenses and to require the return of certain records or documents obtained by the Federal Government in tax cases. This bill has been referred jointly to the House Committees on Ways and Means and the Judiciary.

H.R. 2034, a bill to provide for the recovery by a prevailing defendant in Federal criminal cases of a reasonable attorney's fee and other reasonable litigation costs. This bill has been referred to the House Committee on the Judiciary. H.R. 2104, a bill to amend the Flammable Fabrics Act, the Federal Hazardous Substances Act, and the National Traffic and Motor Vehicle Safety Act of 1966 to permit awards of reasonable attorneys' fees and other expenses for public participation in proceedings before Federal agencies and for other purposes. The bill was referred to the House Committee on Interstate and Foreign Commerce. H.R. 8081, a bill to provide that the Federal Government shall pay the costs (including attorney's fees) of civil actions brought by the Government against the same party on substantially the same factual grounds, if the Government does not combine all of its theories on which it seeks relief into a single civil action. This bill was referred to the House Committee on the Judiciary.

H.R. 8862, a bill to amend the Rehabilitation Act of 1973 to permit courts to allow a reasonable attorney's fee to prevailing parties, other than the United States, in certain actions under title V of such Act. This bill was referred to the House Committee on Education and Labor.

H.R. 8874, a bill to provide for the payment by the Government of certain attorney's fees for any Federal law enforcement officer that is accused of certain Federal crimes. This bill has been referred to the House Committee on the Judiciary.

H.R. 8988, a bill to amend the Miller Act to authorize the payment of attorney fees and litigation cost to a prevailing plaintiff from performance bonds furnished by Federal contractors. This bill was referred to the Committee on the Judiciary.

H.R. 10105, a bill to amend title 28 of the United States Code to authorize the awarding of attorneys' fees in civil actions before the Federal courts where the interest of justice so require, and for other purposes. This bill was referred to the House Committee on the Judiciary.

H.R. 10106, a bill to authorize the awarding of attorneys' fees to prevailing plaintiffs in actions brought under the National Environmental Policy Act of 1969 and for other purposes. This bill was referred to the House Committee on Merchant Marine and Fisheries.

H.R. 10265, a bill to amend title VIII of the Act commonly called the Civil Rights Act of 1968 with respect to the awarding of attorney's fees and the authority of the Department of Housing and Urban Development to initiated a civil action to enforce the provisions of such title. This bill was referred to the House Committee on the Judiciary.

Senator DECONCINI. Our next witnesses are in the business area. We would like to have them all come forward. We have Mr. John Williams, from the Small Business Legislative Council, and William Rustin from the National Home Furnishings Association, along with Mr. David Voight of the National Federation of Independent Business and Mr. Leonard Senker of the Furniture Rental Association.

We will take you all as a panel. I want to extend my thanks and appreciation for your coming forward. I think your testimony is going to have a great deal of influence on this legislation because you represent, as I have in the past, the small businessman who must face this particular problem. We welcome hearing from you.

TESTIMONY OF JOHN WILLIAMS, SMALL BUSINESS LEGISLATIVE COUNCIL, ACCOMPANIED BY STEVE YOUNG, LEGISLATIVE REPRESENTATIVE, NATIONAL SMALL BUSINESS ASSOCIATION

Mr. WILLIAMS. Thank you, Mr. Chairman. My name is John Williams. I am Government affairs director for the National Tool, Die & Precision Machining Association which is in turn a member of an umbrella group known as the Small Business Legislative Council, SBLC. Appearing with me is Steve Young of the Government Relations Department of the Small Business Legislative Council. That is an organization of national trade and professional associations whose members are predominantly smaller businesses. An affiliate of the National Small Business Association, or NSBA, the SBLC acts as a unifying voice for over 2 million small business firms, commenting on issues or areas in which our member associations are in substantial agreement. Thirty-five national associations, which appear in attachment A, currently support the Small Business Legislative Council position that:

Legislative initiatives to award attorneys' fees to individuals and small business owners who prevail against the Government are a positive first step toward restraining the somewhat arbitrary nature of the Federal agencies in applying excessive regulation. The small business owner rarely can afford the costs and ramifications of a long and drawn out court fight and appellate procedure, especially if that battle is against the power of the Federal Government. The Small Business Legislative Council supports the purposes of S. 2354 to both help individuals and small businesses, and to stem the flow of excessive regulation.

The importance of the small business community to the national economy is well-known and widely documented. It accounts for 97 percent of the total number of U.S. enterprises, 59 percent of all private employment, 48 percent of the total business output, 43 percent of the total GNP, and is responsible for over one-half of all inventions and product innovations. We therefore wholeheartedly commend Senators Domenici and Nelson, and the members and staff of the Subcommittee on Improvements in Judicial Machinery for their efforts in bringing

this important concept to greater public attention. I was also pleased to see Senator DeConcini's interest.

Legislative proposals for providing attorneys' fees to small business owners and individual citizens who win against the Government represent truly long-overdue initiatives. They can be viewed as perhaps the most valuable first step toward restraining the arbitrary nature of those Federal regulatory agencies that file judicial complaints against small businesses and individuals simply because they realize that a small business owner rarely can afford the ramifications of a legal fight. This is true in many instances.

Mr. Chairman, it is certainly not news to the citizens of this country that the Federal Government has proliferated its reach into many areas by promulgating rules and regulations at an alarming rate over the last several years. We do not deny the need for statutory protection of the health, safety, and general well-being of all Americans. Indeed, government guidelines in many product and service areas have proved to be desirable. However, the small businesses and individual proprietors in this country can unequivocally voice their vehement opposition to excessive regulations that, in essence, provide the ammunition for the guns of government agencies that frequently make a target of small business.

There is no question that, in many cases, the regulatory agencies have sought rulings against small firms that just do not have adequate reosurces to fight back. This process not only establishes precedents for rulings against larger enterprises, but, as has been suggested, builds the "batting averages" of the agencies to justify not only their very existence but larger appropriations from Congress as well.

Ön several occasions more candid employees of regulatory agencies have publicly stated their agency's intent to single out or prosecute small companies rather than take on the giant firms that have large staffs and that could adequately defend themselves against prosecution by the Government. When a House Small Business Committee held hearings in 1976 on antitrust and the Robinson-Patman Act, Dr. F. M. Scherer, for Director of the Bureau of Economics of the FTC, said:

I had not fully realized until I came to Washington how unfairly the burden of Federal regulation and antitrust enforcement falls upon small business as compared to large companies. The corporate giants can and do maintain stables of high-skilled attorneys to advise them how to stay clear of the law and defend themselves if they nevertheless run afoul. Small firms are less able to afford such counsel, and the law firms they retain typically lack the specialized knowledge needed to cope with a body of statutory, case and regulatory law as complex as Robinson-Patman. As a result, they are more likely to get into trouble and to settle by consent if a complaint is brought ***. I had also understood little about the value system of government antitrust attorneys. What I learned since joining the Commission staff is that many attorneys measure their own success in terms of the number of complaints brought and settlements won. In the absence of broader policl guidance, therefore, the typical attorney shies away from a complex, long uncertain legal contest with well-represented giant corporation and tries to build up a portfolio emphasizing small, easy-to-win cases. The net results of these broad propensities is that it is the little guys, not the giants that dominate our manufacturing and trade industries, who typically get sued.

Dr. Scherer's statement points directly to our concern with the "equal access to the courts" concept being addressed here today. Small manufacturers and distributors are not a General Motors or an IBM