United States District Court, Northern District of Illinois, E.D
April 28, 1982
COMMODITY FUTURES TRADING COMMISSION, PLAINTIFF,
ROSENTHAL & COMPANY, ET AL., DEFENDANTS.
The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
Commodity Futures Trading Commission ("CFTC") sued
defendants charging their sale of so-called "London commodity
options" violated the anti-fraud provisions of the Commodities
Exchange Act (such sales have since been rendered wholly
illegal by the Futures Trading Act of 1978, 7 U.S.C. § 6c).
This Court's January 26, 1982 order dismissed the action
without prejudice. Now Leonard Pomerantz, Larry Spatz, Don
Braverman, John Dexter and Perry Cracraft have petitioned this
Court for attorneys' fees under the newly enacted Equal Access
to Justice Act, 28 U.S.C. § 2412 (the "Act"). They have also
reasserted a similar claim of much lesser magnitude based on
this Court's Local Civil Rule 4 ("Rule 4").
Before this Court would turn to the various substantive
issues posed by defendants' application under the Act, the
Court asked the parties to brief the threshold question
whether the Act applies retroactively to permit recovery of
fees generated before its October 1, 1981 effective date.*fn1
For the reasons stated in this memorandum opinion and order
the Court determines the issue is certainly not so clear-cut
as to permit rejection of the petition solely on that score.
It therefore defers its decision pending full submissions on
the merits of the application.
Act subsection (d)(1)(A) reads:
Except as otherwise specifically provided by
statute, a court shall award to a prevailing
party other than the United
States fees and other expenses, in addition to
any costs awarded pursuant to subsection (a),
incurred by that party in any civil action (other
than cases sounding in tort) brought by or
against the United States in any court having
jurisdiction of that action, unless the court
finds that the position of the United States was
substantially justified or that special
circumstances make an award unjust.
Its effective date is provided for in the note following
5 U.S.C. § 504:
This Title and the amendments made by this
Title . . . shall take effect on October 1, 1981,
and shall apply to . . . any civil action . . .
pending on, or commenced on or after, such date.
Only two opinions cited by the parties have addressed the
retroactivity question directly. Each held the Act permits
recovery of all attorney's fees generated by an action, so long
as it was pending October 1, 1981. Photo Data, Inc. v. Sawyer,
533 F. Supp. 348 (D.D.C. 1982); Berman v. Schweiker, 531 F. Supp. 1149
No. 80 C 2737 (N.D.Ill. 1982). Neither however considered
the sovereign immunity argument advanced by the government
Certainly the Photo Data and Berman reading of the Act is a
reasonable — perhaps even the normal — one. It proceeds from
the dual premise that:
(1) All actions pending October 1, 1981 are
covered by the Act.
(2) Awards under the Act are for "fees and
other expenses . . . incurred . . . in any civil
action (other than cases sounding in tort)
brought by or against the United States. . . ."
There is no language specifically limiting awards to fees
incurred before the October 1, 1981 date.
But that reading is not the only permissible one. It could
be reached if the effective date provision contained only its
last clause, the one stating the Act "shall apply to . . . any
civil action . . . pending on" October 1, 1981. It thus might
be said to treat the earlier clause ("This Title and the
amendments made by this Title . . . shall take effect on
October 1, 1981. . . .") as surplusage. Under familiar rules of
construction statutes are to be read, if possible, to give
meaning to all their provisions. 2A D. Sands, Sutherland
Statutory Interpretation § 46.06 (rev. 2d ed. 1973). And one
rational reading of the "take effect" clause would be to apply
it to the "fees . . . incurred" language of the Act, so that
the allowance would extend only to "fees . . . incurred" after
the Act "shall take effect on October 1, 1981."
Sovereign immunity, though there have been many statutory
inroads on its once-universal scope, remains a viable
doctrine. See this Court's opinion in Edmondson v. Simon, 87
F.R.D. 487, 490 (N.D.Ill. 1980). One concomitant of the
doctrine is that statutes waiving sovereign immunity are
narrowly construed, requiring a clear showing of congressional
intent, Lehman v. Nakshian, 453 U.S. 156, 160-61, 101 S.Ct.
2698, 2701-02, 69 L.Ed.2d 548 (1981):*fn2
Like a waiver of immunity itself, which must be
"unequivocally expressed," United States v.
Mitchell, supra, [445 U.S. 535] at 538, [100 S.Ct.
1349 at 1352, 63 L.Ed.2d 607] quoting United States
v. King, 395 U.S. 1, 4, [89 S.Ct. 1501, 1502, 23
L.Ed.2d 52] "this Court has long decided that
limitations and conditions upon which the
Government consents to be sued must be strictly
observed and exceptions thereto are not to be
See also, applying like principles to fee award statutes,
Fitzgerald v. United States Civil Service Comm'n, 554 F.2d 1186
(D.C. Cir. 1977); Nibali v. United States, 634 F.2d 494 (Ct.Cl.
This is not to say that the Court necessarily espouses the
CFTC position. However, petitioners have left unanswered
posed by CFTC.*fn3 At the least further inquiry is necessary
before a definitive decision may be reached. In addition,
requiring the parties to proceed to the merits may more
readily resolve (or avoid) the issue:
(1) If CFTC brings itself within the Act's
"unless" provisions — if its "position . . . was
substantially justified" or if "special
circumstances make an award unjust" — the
retroactivity issue would become moot.
(2) Interim case law development may cast
further light on the problem.
Accordingly the Court reserves judgment on the retroactivity
issue. CFTC is directed to file a memorandum addressed to the
possible applicability of the "unless" provisions, and
petitioners are directed to file a reply memorandum on the
same subject, on a schedule to be established by the Court at
the April 28, 1982 status hearing. Briefing on the
reasonableness of the requested fees and expenses (if
allowable at all) will continue to be deferred.
This opinion now turns to defendants' long-deferred motion
under Rule 4, which provides:
Counsel Fees on Taking Depositions
in Certain Cases
(a) When a proposed deposition upon oral
examination, including a deposition before
action, or pending appeal, is sought to be taken
at a place more than 150 miles from the
courthouse, the court may provide in the order
therefor, or in any order entered under Federal
Rule of Civil Procedure 30(b), that prior to the
examination the applicant pay the expense of the
attendance at the place where the deposition is
to be taken of one attorney for the adversary
party or parties, or expected party or parties,
including a reasonable counsel fee. The amounts
so paid shall be a taxable cost in the event that
the applicant recovers costs of the action or
On December 3, 1976 all defendants applied under Rule 4 for
expenses stemming from a large number of depositions noticed
by CFTC. Judge Crowley (then presiding over this action)
refused to award expenses but entered and continued the motion
so defendants could raise it at a later date. Defendants now
seek reimbursement for expenses (including counsel fees)
generated by some 70 depositions taken more than 150 miles
from the courthouse.
CFTC argues that as a governmental entity it cannot be taxed
expenses unless there has been an express waiver of sovereign
immunity. It contends Rule 4 is not such a waiver and cannot
therefore provide a basis for assessing expenses.
Two holdings in EEOC v. Kenosha Unified School District No.
1, 620 F.2d 1220, 1226-27 (7th Cir. 1980) cast substantial
light on the problem:
Acting under Fed.R.Civ.P. 37(a), the district court in
Kenosha had (a) barred testimony of an EEOC witness because
EEOC failed to produce certain reports and (b) awarded expenses
(including attorney's fees) incurred in filing a motion to
compel against EEOC. Based on sovereign immunity, our Court of
Appeals upheld the preclusion of testimony but reversed the
award of expenses.
In addition the district court had utilized a local rule
much like Rule 4 to require EEOC to pay expenses incurred by
the opposing party in preparing a statistical analysis. On
that score our Court of Appeals held, on sovereign immunity
grounds, the local rule was insufficient by itself to assess
expenses. However the Court upheld the award because it found a
of sovereign immunity in Section 2412 (as it then existed),
id. at 1227-28.
Under Keonsha's teaching, expenses cannot be assessed against
the government solely on the basis of a local rule or a Federal
Rule of Civil Procedure that speaks only in general terms.*fn4
But in view of Section 2412 the Kenosha Court eventually
awarded the cost of the statistical analysis "as an appropriate
exercise of its equity powers under Local Rule 9.02(d)." Id. at
1228. Thus the briefing already ordered in this opinion should
also discuss the extent to which defendants' renewed motion is
or is not controlled by the same standards expressed in the
"unless" provisions of the Act.