In re Transcon Lines
| Decision Date | 01 February 1995 |
| Docket Number | Bankruptcy No. 93-22207-DN. Adv. No. 92-04510. |
| Citation | 178 BR 228 |
| Parties | In re TRANSCON LINES, Debtor. Leonard L. GUMPORT, Chapter 7 Trustee, Plaintiff, v. INTERSTATE COMMERCE COMMISSION, Defendant. |
| Court | U.S. Bankruptcy Court — Central District of California |
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Patrick L. Shreve, Marjorie S. Steinberg, Gregory D. Schetina, Sung H. Shin, Tuttle & Taylor, Los Angeles, CA, Joseph L. Steinfield, Jr., Robert B. Walker, John T. Siegler, Sims, Walker & Steinfield, P.C., Washington, DC, for plaintiff Leonard L. Gumport, Trustee.
Frank W. Hunger, Asst. Atty. Gen., J. Christopher Kohn, Charles D. Stodghill, Andrea Horowitz Handel, Dept. of Justice, Civ. Div., Washington, DC, Nora Manella, U.S. Atty., Kathryn Ritchie, Asst. U.S. Atty., Los Angeles, CA, for Dept. of Justice.
Robert S. Burk, Gen. Counsel, Henri F. Rush, Deputy Gen. Counsel, Ellen D. Hanson, Sr. Assoc. Gen. Counsel, Virginia Strasser, I.C.C., Washington, DC, Gregory J. Morrow, I.C.C., Los Angeles, CA, for I.C.C.
Leonard L. Gumport, Trustee, Hufstedler, Kaus & Ettinger, Los Angeles, CA, for Transcon Lines.
Marcy J.K. Tiffany, U.S. Trustee, Brian D. Fittipaldi, Attorney-Advisor, Office of U.S. Trustee, Los Angeles, CA, for Office of U.S. Trustee.
Leonard Gumport, chapter 7 trustee of the estate of Transcon Lines, has brought a motion under the Equal Access to Justice Act, 28 U.S.C. § 2412(d), seeking to recover attorney's fees and costs incurred in litigating the legality of certain regulations issued by the Interstate Commerce Commission. Based upon the following discussion, the court finds the award of fees appropriate under the circumstances of this case.
Prior to bankruptcy Transcon Lines ("Transcon") operated a large interstate trucking business. On May 1, 1990, an involuntary petition was filed against Transcon by certain of its pension funds. On May 21, 1990, Transcon consented to the entry of an order for relief under chapter 11. Leonard Gumport was appointed chapter 11 trustee in June, 1990, and upon his request the case was converted to chapter 7 on July 10, 1990. Gumport was appointed chapter 7 trustee on July 17, 1990.
Gumport promptly set about collecting what he perceived to be the primary assets of the Transcon estate, i.e., claims for unpaid freight charges and claims for undercharges allowed by Transcon in violation of the filed rate doctrine which requires that regulated carriers charge only those rates contained in filed tariffs. The ICC responded by seeking to enjoin the Trustee's collection actions. Gumport prevailed on a summary judgment motion before the district court, which was affirmed in part and reversed in part by the Ninth Circuit Court of Appeals. Interstate Commerce Commission v. Transcon Lines, 990 F.2d 1503 (9th Cir.1992), vacated in part and remanded, ___ U.S. ___, 113 S.Ct. 2955, 125 L.Ed.2d 657 (1993), on remand, 9 F.3d 64 (9th Cir.1993), cert. granted, ___ U.S. ___, 114 S.Ct. 1536, 128 L.Ed.2d 189 (1994), judgment reversed, ___ U.S. ___, 115 S.Ct. 689, 130 L.Ed.2d 562 (1995). As a result of the appeals, the action of the Supreme Court and reconsideration by the Ninth Circuit in light of intervening precedent, the Trustee was left, subject to the Supreme Court's second grant of certiorari, with the ability to collect on unpaid bills and "loss of discount" claims.1
Undaunted by its setback at the Ninth Circuit, the ICC took collateral action to thwart the Trustee's collection efforts. On August 26, 1992, the Commission adopted regulations restricting the ability of nonoperating carriers to enforce certain claims against shippers for undercharges. Ex Parte No. MC-208: Nonoperating Motor Carriers — Collection of Undercharges, 8 I.C.C.2d 742 (1992) (the "MC-208 Rules").2 The MC-208 Rules required the Commission's review and consent before a claim could be made against a shipper, including loss of discount claims. The Rules contained no deadline for the Commission's prescreening of claims, allowing collection actions to remain in limbo indefinitely. In addition, both personal and criminal liability could be imposed upon bankruptcy trustees for violations of the MC-208 Rules.
The Trustee responded by initiating an adversary proceeding against the Commission, seeking to enjoin enforcement of the Rules on a number of bases. On October 9, 1992, this court granted a preliminary injunction in favor of the Trustee on the grounds that the MC-208 Rules violated the automatic stay of 11 U.S.C. § 362(a). See In re Transcon Lines (Gumport v. Interstate Commerce Commission), 147 B.R. 770, 774-77 (Bankr.C.D.Cal.1992) ("Gumport v. ICC"). Specifically, this court found that the Commission's enactment of the MC-208 Rules prevented the Trustee from pursuing the Loss of Discount Claims, which constituted an attempt to control property of the estate, in violation of section 362(a)(3).
On December 18, 1992, an order was entered permanently enjoining the Commission from enforcing the MC-208 Rules. The Commission then appealed this court's decision to the Bankruptcy Appellate Panel of the Ninth Circuit. On March 19, 1993, during the pendency of the appeal, the Third Circuit Court of Appeals, in an action challenging the MC-208 Rules on behalf of various bankruptcy estates (including Transcon) and nonoperating carriers, held that the ICC had exceeded its statutory authority under the Interstate Commerce Act ("ICA") in enacting the Rules and set them aside. White v. United States, 989 F.2d 643 (3rd Cir.1993). The Commission did not appeal the White decision.
The Commission next filed a request with the Bankruptcy Appellate Panel to dismiss the appeal of this court's decision and a motion to vacate the order which had been entered earlier. The Trustee joined the Commission's request for dismissal but opposed the motion to vacate the order. On August 11, 1993, the Bankruptcy Appellate Panel entered an order dismissing the appeal but denying the Commission's motion to vacate the order. As a result, this court's earlier judgment is now final.
The Trustee now seeks to invoke the Equal Access to Justice Act ("EAJA"), 28 U.S.C. § 2412(d), in order to recover $42,844.04 in attorney's fees and $4323.80 of costs incurred in litigating the validity of the MC-208 Rules in Gumport v. ICC.
The main issues presented by the Trustee's motion and the Commission's response include: (1) whether the bankruptcy court has jurisdiction to make an award under the EAJA; (2) whether the Trustee qualifies as a party entitled to recover fees and costs under the EAJA; and (3) whether an otherwise lawful award is inappropriate based upon the existence of special circumstances or substantial justification for the Commission's actions.
28 U.S.C. § 2412(d)(1)(A) (emphasis added).
It is the initial position of the Commission that this court has no jurisdiction even to consider the Trustee's motion. Relying upon decisions of the Eleventh Circuit, the Commission argues that the phrase "any court" does not include a bankruptcy court. In Bowen v. Commissioner of Internal Revenue, 706 F.2d 1087 (11th Cir.1983), and In re Davis, 899 F.2d 1136 (11th Cir.), cert. denied sub nom., Gower v. Farmers Home Admin., 498 U.S. 981, 111 S.Ct. 510, 112 L.Ed.2d 522 (1990), the Eleventh Circuit found that since bankruptcy courts are not Article III courts or a "court of the United States" as defined in 28 U.S.C. § 451,3 they do not have jurisdiction to make an award under the EAJA.
Although the Ninth Circuit has not addressed this issue directly,4 a majority of courts have found that a bankruptcy court has jurisdiction to award fees under § 2412(d)(1)(A). In O'Connor v. United States Department of Energy, 942 F.2d 771 (10th Cir.1991), the Tenth Circuit Court of Appeals recognized the decisions of the Eleventh Circuit and met them head on. The Court recognized the overall purpose of the EAJA "is to place the private litigant and the United States on equal footing as regards the award of costs to the prevailing party in litigation involving the government." Id. at 773. It found that the statutory purpose would be furthered by allowing the court most familiar with the underlying dispute to determine whether fees are warranted. The Court also found the language of the statute to be "plain, simple and unambiguous," rendering unnecessary a judicial inquiry into the legislative history. Id. at 773. Quite simply, had Congress intended to limit jurisdiction under the EAJA to "any court of the United States," it could have done so. Id. Accordingly, a bankruptcy court is included as "any court" and has the power to make a fee award. Id.
The O'Connor decision has been followed in In re Shafer, 146 B.R. 477, 481 (D.Kan. 1992), modified 148 B.R. 617 (D.Kan.1992), and In re Tom Carter Enterprises, Inc., 159 B.R. 557, 561 (Bankr.C.D.Cal.1993). See also In re Esmond, 752 F.2d 1106 (5th Cir.1985), In re Newlin, 29 B.R. 781 (E.D.Pa.1983) and In re Hagan, 44 B.R. 59 (Bankr.D.R.I.1984), all of which predate O'Connor and in all of which the bankruptcy court's jurisdiction to award fees under the EAJA was implicit.
The fact that § 2412(d)(2)(F) specifically includes the United States Court of Federal Claims and the United States Court of Veterans Appeals within the definition of "court" does not militate in favor of a narrow definition of "court." That provision, at least with respect to the United States Court of Federal Claims, has been present...
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