A Primer on Judgment Funds (and Why You Should Care)
Kudos to Congressman Cory Gardner, who has introduced H.R. 317, the "Judgment Fund Transparency Act of 2013.” This common-sense legislation is an attempt to have Congress and the Executive Branch adhere to the Constitution, as it would require a public accounting of the taxpayer funds distributed via the Judgment Fund to parties who bring successful claims against the Federal government.
But first, we’ll start with the basic question - what is the Judgment Fund and why should the American people care about it?
In short, the Judgment Fund is a pot of taxpayer money used by the Federal government to pay claims asserted against the United States. Among other things, the Fund is used to pay the claims of special interest groups against federal agencies. The pot of money has no fiscal year limitations, and does not require Congress to appropriate funds to it. Moreover, disbursements from it are not attributed to or accounted for by the agencies whose activities give rise to awards paid. Absent a specific statutory requirement, the liable agency is not required to reimburse the Judgment Fund. This pot of money and off-the-books payments made by the federal government clearly violates the constitutional mandate that requires our government to make a regular statement and account of receipts and expenditures of all public money.
History of the Judgment Fund: How did these undisclosed payments originate?
Prior to 1956, most judgments against the United States could not be paid from existing appropriations, but required specific congressional appropriations for payment. In 1956, Congress enacted a permanent, indefinite appropriation ("the Judgment Fund") for the payment of final judgments which were "not otherwise provided for" by other specific appropriations. This fund was intended to provide a mechanism that would alleviate the procedural burdens of judgment payments, allow for prompter payments, and reduce the assessment of interest against the United States (where such was allowed by law) during the period between the rendering and payment of an award.
Subsequently Congress expanded the claims that could be made against the Judgment Fund to include most court judgments against federal agencies and/or Justice Department compromise settlements as well as settlements by Federal agencies at the Administrative level, and including instances where a lawsuit was never even filed.
By expanding the types of claims that could be paid out of the Judgment Fund and authorizing advocacy group citizen suits in the mid 1970’s, Congress opened up payments from the Judgment Fund to thousands of environmental lawsuits and administrative regulatory actions brought against agencies. Many of these actions involved permitting, rulemakings, and environmental reviews. While claims for attorneys’ fees and costs have been made for decades by advocacy groups, these claims have increased dramatically since 2009. Since then, when an environmental lawsuit is filed against an agency (e.g., the U.S. Environmental Protection Agency (EPA)), the agency often refuses to defend its actions and concedes the claims of the environmental group. These concessions have resulted in EPA and other agencies both agreeing to take the actions demanded by the special interest group and agreeing to pay the attorneys’ fees and costs of the groups bringing the litigation.
This type of cooperative settlements between agencies and advocacy groups has been labeled “Sue and Settle” to describe the friendly arrangement between private parties and the federal government. Instead of defending itself when it is sued, the agency agrees that the advocacy group is in the right and enters into a consent decree to implement the demands of the group – most often, to implement certain regulations or take specific actions. In several instances, the scope of the settlement goes beyond the agency’s legal authority. Once a judge signs the consent decree, however, an agency is required to implement its terms, regardless of the limits of the authority given it by Congress. The agency also pays the attorneys fees and costs incurred by the environmental group. All payments made to the advocacy groups are paid from the continuing undisclosed appropriation called the Judgment Fund.
There are no checks in the system to ensure that payments made under consent decrees are valid.
When a federal agency and special interest groups enter into a settlement that involves the payment of money to the interest group, the agency submits the claim to the Department of Treasury for payment. While the Treasury requires the applicant for the funds to complete certain paperwork, the Treasury does not review the merits of settlement or the validity of the agency’s actions that result in payments from the Government, notwithstanding that the judgment appropriations may be made only upon certification by the Financial Management Service, which is part of the Department of the Treasury. The Treasury Department’s review is merely ministerial and perfunctory (i.e. is the paperwork complete?). Therefore, once the agency signs off on the claim, the claim is processed for payment without review.
The claims reporting process is not transparent and makes it difficult for the public to see the claims paid by the federal government under the Judgment Fund.
Neither the Treasury Department nor any federal agency has ever provided Congress with a comprehensive or effective tracking report of payments from the Judgment Fund or ongoing litigation, as is used by the private sector to determine liabilities and to conduct oversight over operations. Rather, the entire federal government Judgment Fund reporting system makes it difficult for the public to see information about claims made against the federal government.
The process employed by the Department of the Treasury starts with a webpage under the Bureau of Financial Management that is very difficult to navigate. The database contains a series of codes that were never adopted by or integrated with agency databases, thus preventing effective data management between Treasury and the agencies submitting claims.
There is a web site access point that the average person can reach that is entitled “Search Judgment Fund Transactions.” It states that claims can be searched by the responsible agency or the responsible department but a user must have a "submitted date" or "payment amount." However, it also states the information displayed on this website is for the purpose of tracking the status of submitted judgment claim funds only and it states this is "FOR FEDERAL AGENCIES ONLY.” It also appears that the Department of Justice maintains a separate database for environmental claims but there is no uniform approach for managing the data and there does not appear to be any efforts between Treasury and Justice to provide information in a format that meets the constitutional mandate of providing a regular statement and account of the receipts and expenditures of all public money” that is paid under the Judgment Fund.
The impacts of the non-disclosure of Judgment Fund payments.
Without disclosure of payments from the Judgment Fund, it is extremely difficult, if not impossible, to reasonably estimate the federal government’s litigation costs, risk and exposure in any given fiscal year.
Without knowing who is being paid under the Judgment Fund and for what reason, not to mention the validity of the claim, Congress cannot oversee and control the federal governments litigation costs, risks and exposure. Simply, without disclosure Congress is being denied the opportunity to take effective mitigation measures against improper agency action that results in claims against the federal government.
Non-disclosure of Judgment Fund payments hides from Congress what might be excessive markers of agency mismanagement and/or structural defects in statutes and programs. And due to a lack of reporting Congress is denied the opportunity to understand claims against agencies that might shed light on how to improve agency operations.
Congressman Cory Gardner’s “Judgment Fund Transparency Act of 2013” is the needed solution.
The U.S. Constitution requires the disclosure of these expenditures. Congress needs this information so that it can perform its oversight functions over the management of agencies and the laws it enacts that are managed by agencies. Finally, common sense requires that the American people who pay these claims paid under the Judgment Fund know why they are being sued, by whom and how much they are paying for federal agency mismanagement. If we are involved in litigation as individuals or corporations, we would be served a copy of the complaint against us that informs us of the wrong we committed and how much we are being asked to pay for the alleged misconduct. We can evaluate these claims and evaluate our options. The same should be true of the claims made by individuals, groups or corporation against the federal government, since we the citizen are paying for the government’s misconduct that results in a lawsuit against it. Asking that we be told who is suing us and for what, is little to ask of our government, notwithstanding that the Constitution requires such disclosure.