BFW Construction Co.

Plain-English summary

BFW Construction sought attorney's fees under the Equal Access to Justice Act after prevailing in an OSHRC matter. BFW's own net worth was below the $7 million eligibility ceiling, but its corporate parent exceeded that limit. The Commission decided that future cases should use a clearer rule generally aggregating an applicant with controlled or controlling affiliates. It declined to apply that new approach retroactively and held that the judge correctly applied the existing real-party-in-interest test to BFW. The Commission affirmed BFW's eligibility and its $15,049.12 fee award.

Decision snapshot

• Cited standard(s): 29 C.F.R. § 2204.105
• Outcome: BFW's eligibility for an EAJA award and $15,049.12 in attorney's fees were affirmed.
• Key point: A newly announced affiliate-aggregation approach was not applied retroactively to defeat an applicant's fee eligibility under the prior test.

Full text (OSHRC public release)

                         United States of America
        OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION
                    1120 20th Street, N.W., Ninth Floor
                       Washington, DC 20036-3419




SECRETARY OF LABOR,
             Complainant,
                    v.                           OSHRC Docket No. 91-1214
BFW CONSTRUCTION CO.,
              Respondent.


                                    DECISION

Before: WEISBERG, Chairman; GUTTMAN, Commissioner.
BY THE COMMISSION:
On review is a decision of Administrative Law Judge Stanley M. Schwartz awarding
BFW Construction Co. (“BFW”) attorney’s fees under the Equal Access to Justice Act, 5
U.S.C. § 504 (“the EAJA”). BFW is a wholly-owned subsidiary of the Turner Corporation
(“Turner”). The issue before us is whether the judge erred in declining to aggregate the net
worth of BFW, which was less than the $7,000,000 maximum for recovery of fees, with the
net worth of Turner, which alone exceeded $7,000,000. See 5 U.S.C. § 504(b)(1)(B).1 Our
consideration of this case has led us to conclude that the Commission should amend its EAJA
rule at 29 C.F.R. § 2204.105 to address the appropriateness of aggregation in future cases.
For the reasons stated below, however, we affirm the judge’s conclusion that BFW was
eligible for the fee award.

1
Section 504(b)(1)(B) of the EAJA, as amended in 1985, provides that an eligible “party”
includes a business entity, “the net worth of which did not exceed $7,000,000 at the time the
adversary adjudication was initiated, and which had not more than 500 employees at [that]
time . . . .” See 29 C.F.R. § 2204.105(b)(4) and (c) (Commission regulations implementing
this EAJA requirement).
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                           I. Adoption of a New Rule
  When the EAJA was enacted, it required each federal agency to adopt its own rules

implementing the EAJA after consultation with the (former) Administrative Conference of
the United States (“ACUS”). 5 U.S.C. § 504(c)(1).2 ACUS suggested model rules for
agencies. 46 Fed. Reg. 32,900 (1981). Model Rule 0.104(f) provided:
The net worth and number of employees of the applicant and all of its
affiliates shall be aggregated to determine eligibility. Any individual,
corporation or other entity that directly or indirectly controls or owns a
majority of the voting shares or other interest of the applicant, or any
corporation or other entity of which the applicant directly or indirectly owns
or controls a majority of the voting shares or other interest, will be considered
an affiliate for purposes of this part, unless the adjudicative officer determines
that such treatment would be unjust and contrary to the purposes of the Act in
light of the actual relationship between the affiliated entities. In addition, the
adjudicative officer may determine that financial relationships of the applicant
other than those described in this paragraph constitute special circumstances
that would make an award unjust.
46 Fed. Reg. at 32,912. Most federal agencies adopted an aggregation rule that closely
followed model rule 0.104(f). See, e.g., 29 C.F.R. §§ 16.105(f) (Department of Labor),
102.143(g) (National Labor Relations Board), and 2704.104(f) (Federal Mine Safety and
Health Review Commission). However, the Commission declined to adopt that rule, stating
instead that it would decide the aggregation issue “on a case-by-case basis.” 46 Fed. Reg.
48,078, 48,079 (1981), reprinted in 1980-1981 CCH ESHG New Developments ¶ 12,365,
p. 15,458 (October 6, 1981).
We have taken a “second look” at the ACUS model rule, and we hereby announce
that, like many other federal agencies have already done, the Commission will soon propose
adoption of a new aggregation rule based on the ACUS model rule. We have found the
present Commission test developed from federal and Commission case law on the

2
The EAJA is silent as to whether the net worth of a subsidiary should be aggregated with
that of its parent for purposes of determining eligibility.
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aggregation issue to be unwieldy to apply and, because it does not clarify which of the
multiple factors or combination of factors is dispositive, to allow significant and unnecessary
collateral litigation.3 Accordingly, we conclude that the ACUS model rule represents a more
reasoned approach to the aggregation issue than the case-by-case method adopted by the
Commission. As ACUS stated in the preamble to its model rules, “[i]n our view, the intent
of Congress in passing the Act was to aid truly small entities rather than those that are part
of larger groups of affiliated firms,” and the model rule is in accord with that intent. 46 Fed.
Reg. at 32,903. By adopting the clear language of the model rule, the Commission will
realize this intent rather than focusing on details of financial relationships whose significance
is uncertain.4 According to ACUS, “[t]his rule identifies a clear case in which aggregation
of net worth and number of employees is almost always justified, and applicants who fall
within this definition will know from the start that they must provide aggregated eligibility
data.” 46 Fed. Reg. at 32,903 (emphases added).
We further note that other federal statutes intended to assist small businesses draw a
bright line to deny eligibility based on affiliation with a large entity. For example, the 1996
amendment to the EAJA contained in section 231(a) and (b)(2) of the Small Business
Regulatory Enforcement Fairness Act of 1996, 110 Stat. 847, 862-63, provides that “small
entities” (therein authorized, with a few exceptions, to apply for fees under the EAJA for
challenging proposed government penalties unreasonably substantially in excess of what is

3
As the Supreme Court has stated, “A request for attorney’s fees should not result in a second
major litigation.” Hensley v. Eckerhart, 461 U.S. 424, 437 (1983), quoted in H.P. Fowler
Contracting Corp., 11 BNA OSHC 1841, 1847, 1983-84 CCH OSHD ¶ 26,830, p. 34,359
(No. 80-3699, 1984); accord ACUS model rule 0.306(a) (1981) (“[o]rdinarily, the
determination of an award will be made on the basis of the written record”); 29 C.F.R.
§ 2204.307(a)(1) (Commission rule).
4
As demonstrated by Nitro Electric Co., 16 BNA OSHC 1596, 1598, 1993-95 CCH OSHD
¶ 30,335, pp. 41,819-20 (No. 91-3090, 1994), arguments also have been made in these cases
concerning potential financial relationships thus compounding the level of uncertainty in
these determinations.
 4

finally adjudicated) are defined as ones that are “independently owned and operated” (and
not dominant in their field of operation). See 110 Stat. at 863, referring to 5 U.S.C. § 601
(“small business” under § 601(3)), in turn referring to 15 U.S.C. § 632 (section 3 of the
Small Business Act). See also 15 U.S.C. § 78(c)(53)(B)(ii) (definition of “small business
concern” for purposes of federal securities laws); 13 C.F.R. § 121.103(a) & (c) (Small
Business Administration regulations governing many programs).5
II. BFW’
s EAJA Application
Before the judge here determined the amount of the EAJA award,6 the Commission
issued its decision in Nitro Electric Co., 16 BNA OSHC 1596, 1597-98, 1993-95 CCH
OSHD ¶ 30,335, pp. 41,819-20 (No. 91-3090, 1994), in which it applied the real party in
interest doctrine and the eight-factor test from U.S.A. v. Lakeshore Terminal and Pipeline
Co., 639 F.Supp. 958, 961 (E.D. Mich. 1986), and Brock v. Gretna Machine and Ironworks,
Inc., 1989 WL 1813 (E.D. La. 1989). The Commission also relied on another factor:
whether the parent had the financial ability and might be available to advance the funds
needed to mount a defense. The Commission concluded there that the judge’s findings on
the Lakeshore/Gretna factors and his finding that funds were available to Nitro from its
parent showed that the parent company, not Nitro, was the real party in interest.
After Nitro was decided, the judge in the instant case granted the Secretary’s motion
to reconsider his initial ruling that BFW was eligible because only one of the eight factors
favored aggregation, and he again concluded that aggregation was inappropriate.7 The judge

5
Cf. 26 U.S.C. § 1361(b)(1) & (2)(A) (definition in Subchapter S of the Internal Revenue
Code).
6
The judge disposed of the various EAJA issues in a series of orders, which were
incorporated into his last decision in the case.
7
The uncertainty inherent in the real party in interest test is well illustrated by the
proceedings below in this case. For example, BFW admitted that it did not know whether
or not the parent would extend funds because the need had not arisen. Under Nitro, the
(continued...)
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found that neither the balance sheet explanation in the Dun & Bradstreet report (attached to
the Secretary’s motion to dismiss) that BFW was making payments to its parent “per
agreement” nor that report’s mention of “intercompany relations” consisting of “loans and
advances to and from subsidiaries which are settled on agreed terms” established that Turner
would be available to advance funds to BFW, the factor stressed in Nitro.
We have determined that it would be unfair to apply a new rule on aggregation
retroactively. Accordingly, as we conclude that the judge has correctly applied the real party
in interest test in declining to aggregate BFW’s net worth with that of its parent, we affirm
his finding that BFW was eligible for an EAJA award.
III. Order
We affirm the decision of the judge finding BFW eligible and awarding to it
attorney’s fees under the EAJA in the amount of $15,049.12. The Commission will revise
its rules pertaining to EAJA eligibility consistent with this decision.

                                                      Stuart E. Weisberg
                                                      Chairman



                                                      Daniel Guttman
                                                      Commissioner

Dated:

7
(...continued)
litigation of such a hypothetical but acknowledged “potential” could be in order.