Full opinion text
MEMORANDUM ORDER VINCENT L. BRODERICK, District Judge. Plaintiffs are seeking a default judgment in this case brought under the Employee Retirement Income Security Act, 29 U.S.C. §§ 1132, 1145, involving nonpayment of contributions allegedly due to employee benefit funds pursuant to a collective bargaining agreement. Jurisdiction over this case arises under 28 U.S.C. § 1331. Plaintiffs appear to be entitled to a default judgment, defendant not having answered or otherwise moved with respect to the complaint served on October 20, 1993, but the amount of attorney’s fees sought exceeds the principal amount in dispute although no active litigation apart from settlement negotiations appears to have taken place. For the reasons indicated in Schueler v. Roman Asphalt Corp., 827 F.Supp. 247, 253-58 (S.D.N.Y.1993), this amount is difficult to justify. The relevance of the Government’s analysis of the bill which later became the Federal Debt Collection Procedures Act of 1990 (the “Act”), 28 U.S.C. § 3001 et seq., in regard to creditors’ attorney’s fees appears to have been overlooked. While not directly binding, the Act is persuasive as the most recent Congressional declaration of an approach to debt collection viewed as appropriate. The most relevant section of the Act is 28 U.S.C. § 3011, which establishes a flat 10% (ten per cent) creditor’s attorney fee as a backup or default option where other amounts are not fixed by statute. The Government’s Section-by-Section Analysis of S 1961,100th Cong., 2d Sess (1987) states in regard to initial legislation similar to the final enactment of 28 U.S.C. § 3011: This section provides that the United States may recover a designated percentage of the debt ... no defendant will be penalized for contesting a claim by incurring additional costs, thus exerting a chilling effect on the exercise of the defendant’s constitutional right to a day in court. That statement in its entirety is attached to this memorandum order as Appendix A, including editorial material explaining the chronology of this document and cross-references to the relevant provisions of the statute as passed by Congress. This matter is referred to United States Magistrate Judge Mark D. Fox for a Report and Recommendation concerning the amounts due for the underlying debts and reasonable attorney’s fees under 29 U.S.C. § 1132(g) and the principles set forth in Schueler v. Roman Asphalt, 827 F.Supp. 247 (S.D.N.Y.1993). SO ORDERED. APPENDIX A The editorial material which follows is reprinted from Manual of Federal Practice, by permission of Shepard’s/McGraw-Hill, Inc., copyright by Shepard’s/McGraw-Hill, Inc. Further reproduction of any kind is strictly prohibited. For subscription information, please contact Shepard’s/McGraw-Hill, Inc., 555 Middle Creek Parkway, Colorado Springs, Colorado 80921; 1-800-525-2474. The text of the Government’s statement itself is of course in the public domain and therefore not editorial material. Government’s Statement and Section-by-Section Analysis Concerning Senate Hearings on S 1961, 100th Cong, 2d Sess (1988) The following Appendix consists of the Government’s Statement including seetionby-section analysis concerning S 1961, 100th Cong, 2d Sess (1987), submitted to the Senate Judiciary Committee and referred to in The Federal Debt Collection Procedures Act of 1988, Senate Judiciary Committee, Hearing before the Subcommittee on Courts and Administrative Practice, on S 1961, S Hrg 100-1047, 100th Cong, 2d Sess 196, 199 (1988). It is presented in the form of proposed committee report language which was not acted upon by the Committee which reported the bill favorably without a written report. The amended S 1961 reflecting changes explained in the Government’s Statement served as the basis for S 84, 101st Cong, 1st Sess (1989), also reported favorably without a written report. S 1961 was passed by the Senate on October 14, 1988 and S 84 on November 3, 1989. S 84 was revised in HR 5640, and enacted in further revised form in 1990 as explained in § 12.1. HR 5640 is discussed in HR Rep No 736, 101st Cong, 2d Sess, reprinted in 1990 US Code Cong & Admin News 6630, and in Representative Brooks’ floor statement, 136 Cong Rec H13288 (daily ed Oct 27, 1990). Many aspects of the final provisions are discussed only in the statement set forth below. Others were changed substantially as reflected in HR Rep No 736 or H13288. Sections of Title 28 as added in 28 USC ch 176 comparable to those referred to in the Government’s Statement concerning various sections of S 1961 are cited in [bracketed italics ]; in most instances the 28 USC provisions are related to but not identical to those contained in S 1961 as amended and passed by the Senate on October 14, 1988. I. STATEMENT At the present time, there are over $32 billion dollars of outstanding non-tax delinquent debts due the United States. With the inclusion of unpaid taxes, penalties and interest, the amount of these delinquent debts approaches $88 billion. In the present era of large budget deficits and resulting difficult budget choices, any improvement in the government’s ability to collect these sums is not only appropriate, but overdue. The present law governing collection of Federal debts is hamstrung by a multitude of inadequate, non-existent or conflicting state statutes. This diverse collection of laws impedes the efficient and effective collection of debts. Without this statute, the present situation can only be expected to worsen. Moreover, the present system for collection of Federal debts is inherently unfair. This proposed legislation aims to correct the inequities that exist for Federal debtors, the Federal government and the American taxpayer. The proposal creates a firm but fair comprehensive statutory scheme for the collection of all Federal debts. Every provision in the Act is based upon existing law of some state. Federal loans are made under uniform Federal standards, Federal taxes are imposed under a uniform Federal tax code and civil penalties and criminal fines are imposed under Federal laws and regulations. However, pursuant to the Federal Rules of Civil Procedure, after a civil money judgment is rendered or a Federal criminal fine imposed, the United States must look to the law of the state where a debtor resides to determine what collection remedies are available to collect the debts owed to the Federal government. There is inherent unfairness in a system which requires borrowers to compete for monies under uniform Federal requirements, but leaves some more and others less obligated to pay those debts based upon the law of the state in which they choose to locate. The same is true of those who are fined by the government, with the success of collection efforts then depending upon the laws of the state where the debtor is located. Some states have strong collection remedies, while others are havens for debtors. Those who reside in states that have strong debt collection statutes bear a disproportionate amount of the burden. The United States must treat all its citizens equally; whether it be the student who needs money for school, an entrepreneur who cannot get a loan for his business from a bank or a veteran who wants to buy a home. Proposed in the Federal Debt Collection Procedures Act is a system whereby those who benefit from the Federal largess are required to pay back their obligations under a uniform Federal system. The Federal Debt Collection Procedures Act will provide the necessary legal enforcement tools to assist the Federal government in its effort to recover the dramatically increasing number of debts owed to it. This legislation does not interfere with the state law remedies in any way and does not affect the procedures in state courts. The focus of this legislation is the debtor-creditor relationship between the United States and the debtors who owe it money. The Federal Debt Collection Procedures Act merely creates a Federal procedural system so that the Federal government can better coordinate its debt management effort. Currently, state law determines the remedies to be used in the collection of Federal debts merely because Federal Rules of Civil Procedure 64 and 69 adopt it. Every remedy set forth in this legislation exists in a similar form in one or more existing state statutes. These state provisions, upon which those in the Act are modeled, have withstood challenge in the courts. Careful consideration was given by the drafters to assure that the Act affords Federal debtors full due process protection. The substitution of Federal procedural remedies for those remedies that exist in state statutes does not affect the applicability of state law theories of liability. State law will continue to govern, for example, as to treatment of property held by co-tenants, a corporation’s liability for debts of a shareholder under the alter ego doctrine and a partner’s liability for debts of the partnership. It is entirely appropriate for the Congress to create a Federal scheme for the collection of debts owed the United States. Under Article III, Sections 1 and 2 of the United States Constitution, Congress has the exclusive power to legislate regarding the forms of action and writs to be used in the courts of the United States. In Fink v. O’Neil, this power of Congress was discussed in the context of legislation with a provision similar to Rule 69 of the Federal Rules of Civil Procedure and the Judiciary Act of 1789. Provisions of this Act which established a means of recovery of debts owed to the United States were found to come within the spending power of Congress set out in Article I, Section 8, Clause 1, of the United States Constitution. Since 1979, the General Accounting Office has reported that state law impediments are •among the problems which hamper Federal debt collection litigation and enforcement. In January 1981, the Office of Management and Budget made a government-wide review to identify debt collection problems facing the Federal government. The report was highly critical of the Department of Justice’s debt collection litigation efforts. In subsequent General Accounting Office reports issued in 1985, 1986 and 1988, the problem of the impediments of state law was again identified. At the front end of the credit cycle, the absence of a Federal debt collection procedural statute means that the Federal government does not know in advance what judicial remedies will be available in the event of a default by a Federal borrower. To assure certainty, private sector lenders often stipulate what law will apply in the event of a default by the borrower. The Federal government should not have to deal with its borrowers in such a fashion. Without this proposal, a defaulting borrower can, in large measure, control the government’s ability to collect by changing his location. The enactment of the Federal Debt Collection Procedures Act would allow for more meaningful lending policies to be developed. Federal agencies could be required to create uniform loan documents which would facilitate the handling of delinquent accounts. At the back end of the credit cycle, a uniform procedure will further enhance the Federal government’s ability to collect. For the first time, maximally effective legal training of Federal debt collection attorney and non-attorney personnel could be achieved. Debt collection work is, to a large extent, non-attorney, labor-intensive. Effective training of debt collection agents is critical. The breadth of types of claims that Federal debt collectors are called upon to enforce is as wide as the lending and enforcement responsibilities of the Federal agencies. There is a misconception that Federal debt collection consists primarily of collection of student loans. This is hardly the case. In fact, the United States Attorneys are responsible for collecting from defaulters who have received loans from any of the credit agencies. Federal attorneys collect on multi-million dollar claims for rural electrical cooperatives and multi-family housing complexes. They prosecute and collect against defense contractors and doctors who deal fraudulently with the Federal government. They protect the well being of our citizens and the land by enforcing safety penalties and environmental fines. They ensure the integrity of our Federal tax system by prosecuting and collecting from tax evaders. The ability to collect Federal debts makes a palpable impact on the daily lives in our communities. Pursuant to the Victims of Crime Act of 1984, Federal collection efforts have been infusing millions of dollars into state and local victim and witness assistance programs. Over 95 percent of the criminal fine money collected from Federal defendants is turned over to the states for this purpose. The Federal Debt Collection Procedures Act will provide the necessary legal enforcement tools to assist the Federal government in its effort to recover the increasing number of debts owed to it. Uniform procedures are needed if we are to recover the billions of dollars owed to the United States. SECTION-BY-SECTION ANALYSIS Title I — FEDERAL DEBT COLLECTION PROCEDURES ACT OF 1987 [see 28 USC ch 176] SUBCHAPTER A — DEFINITIONS AND GENERAL PROVISIONS Section 3001 [see 28 USC § 8002 ]. Definitions This section sets forth the definitions which govern the construction of the Act. (a) “Claim” is defined broadly in order to cover all situations in which monies are owed to the United States, however remote or contingent. This term is meant to be interpreted broadly. See, e.g., 11 U.S.C. § 101(4) (1982). It should be noted that criminal and tax judgments are brought within the purview of the Act. (b) “Counsel for the United States” is defined to cover all governmental officials litigating on behalf of the United States for the collection of money. See 28 U.S.C. §§ 516-19, 541-43 and 547. It includes private counsel who bring suit on behalf of the United States in Federal court pursuant to 31 U.S.C. § 3718 and who will conduct debt litigation pursuant to the Act. Private counsel will be subject to restraints on authority as promulgated in regulations by the Attorney General, by contract language and by other sources as appropriate. (c) “Court” is defined as any court created by the Congress exclusive of the United States Tax Court. See 28 U.S.C. § 451. State courts are excluded by implication as the Act is not intended to affect their procedures. (d) “Debt” is defined as liability to the United States on a claim. See 11 U.S.C. § 101(11), from which this definition is derived. (e) “Debtor” is defined as any person who is liable to the United States on a claim. (f) “Debt collection personnel” is defined as debt collection paralegals and support personnel employed by the United States, in addition to attorneys, whose primary duties include collection of money owed the United States. Private counsel personnel are not included. See, e.g., 28 U.S.C. §§ 549 and 550 which establish the authority for the employment of such personnel in United States Attorneys’ offices. (g) “Disposable earnings” is defined as the amount of earnings left after all deductions required by law. The term “deductions required by law” includes alimony and support payments and similar items to the extent actually required by state or Federal law whether or not pursuant to court order, whether actually and necessarily paid by the obligor or deducted at the source in the case of an employee. This term is modeled on the definition contained in the Federal Consumer Credit Protection Act of 1968 at 15 U.S.C. § 1672(b) and garnishment is limited to twenty-five percent of those earnings. (h) “Earnings” is defined as compensation paid or payable for personal services, whether denominated as wages, salary, overtime, commission, bonus or otherwise, and includes periodic payments pursuant to a pension or retirement program. This definition is also modeled after the definition in the Federal Consumer Credit Protection Act at 15 U.S.C. § 1672(b). (i) “Garnishee” is defined as any person other than the debtor against whom a garnishment has been issued who has or is thought to have possession, custody or control of any property of the debtor. This includes obligations owed to the debtor that are past due or have yet to be incurred (such as future wages). See Va.Code Ann. § 8.01-511 (1985); and 2A Michie’s Jurisprudence of Virginia and West Virginia §§ 87, 94-102 [Ed.1980 and Supp.1987]. (j) “Judgment” is defined as a judgment, order or decree entered in favor of the United States in any court. This definition narrows the one found in Rule 54(a) of the Federal Rules of Civil Procedure by excluding from its ambit any judgment, order or decree entered in favor of a party other than the United States. The term includes criminal and tax judgments and brings them within the purview of the Act. (k) “Judgment creditor” is defined as the United States where applicable. (l) “Judgment debtor” is defined as a person against whom the United States holds a judgment. (m) “Person” is defined broadly to cover natural persons, corporations, partnerships, unincorporated associations, trusts or estates or other entities, public or private, including local governments. Individual Indians and Indian tribes are included because they and the United States have special relationships; in addition, this will clarify that the court has the jurisdiction over cases involving them which may arise under this Act. See Squire v. Capoeman, 351 U.S. 1 (1956). (n) “Prejudgment remedy” lists the specific remedies which can be sought prior to judgment. (o) “Property” is defined as any present or future interest in real, personal or mixed property, whether legal or equitable, tangible or intangible, vested or contingent wherever located and however held. All forms of property are intended to be brought under the purview of the Act, except certain Indian property which is held in trust by the United States for Indians and is not subject to alienation or encumbrance. See General Allotment Act of 1887, 25 U.S.C. § 354. The term “property” is to be interpreted broadly to accomplish the purposes of the Act; this is especially important for cases in which there have been fraudulent transfers or other fraudulent activities by the debtor. See generally 11 U.S.C. § 541. (p) “Service” shall be in accordance with the various provisions of the Federal Rules of Civil Procedure governing service of pleadings, motions, subpoenas, writs and other requests for relief. It may be nationwide in extent under section 3003 notwithstanding otherwise applicable territorial limits of effective service under Rule 4 of the Federal Rules of Civil Procedure. Service by mail under Rule 4 is contemplated and will facilitate the litigative process and the enforced collection of debts owed to the United States. Emphasis on the use of service by mail will reduce the demands on the United States marshals’ limited resources. Their resources will thus be used where required for service at the critical stages of the collection process, e.g., debtor examinations, subpoenas, and writs. It is also contemplated that service by mail will reduce the costs of litigation which are ultimately paid by the debtor. (q) “State” is defined as the several states, the District of Columbia, the Commonwealths of Puerto Rico and the Northern Marianas and any of the territories and possessions of the United States. For a similar provision, see Pub.L. 96-221, § 527, 12 U.S.C. § 86a. (r) “United States” is defined to include any officer or agency of the United States, Federal corporation, Federal instrumentality, department, commission, board or other Federal entity, including the United States Postal Service. (s) “United States marshal” is defined to include any designee or contractor of the marshal. See 28 U.S.C. §§ 561 and 562. Section 3002 [see 28 USC § 3003], Rules of construction This section provides the general rules of construction, and also has four specific rules regarding admiralty, tax matters, criminal matters and receiverships. See 11 U.S.C. §§ 102(3), (5) and (7). The Act provides that it will have no effect on cases arising in admiralty. The practice of admiralty is an area with well-established uniform rules, practices and procedures under Federal law. With regard to Federal taxes, the Act will not impact upon administrative collection procedures under the Internal Revenue Code. Questions regarding tax judgments, including, but not limited to, the interest to be included, the creation, nature, duration and priority of a lien, the debtor’s property subject to or exempt from liability to pay the judgment and the use of the levy procedure, shall be determined under the appropriate provisions of the Internal Revenue Code. However, judicial enforcement of tax judgments may be obtained under the Act; in dealing with tax judgments under the Act, the courts will apply the provisions of the Act so as not to limit or curtail any rights the United States has under the Internal Revenue Code. If the United States has not established any rights under the Internal Revenue Code, then the courts shall determine the rights of the United States under the Act. For example, if lien rights to the debtor’s property have not been established under the Internal Revenue Code prior to the United States obtaining a judgment or after obtaining judgment, then the provisions of the Act will determine the creation of a lien, its duration and priority of the United States and third parties and the property subject to or exempt from enforcement of the judgment if the United States seeks to do so by use of judicial proceedings. The Internal Revenue Code provisions relating to the disclosure and use of returns and return information will continue to govern in all proceedings under this chapter. See 26 U.S.C. § 6203. Under 18 U.S.C. §§ 3565 and 3613, the procedures used to collect taxes are made applicable to criminal judgments. If necessary, criminal judgments 'may be judicially enforced under the Act, but the criminal code will determine many of the rights the United States has to collect fines, penalties, assessments, restitution and forfeitures. Any aspect of enforcement of a criminal judgment not dealt with by the criminal code will be controlled by the provisions of the Act. The receivership provisions of the Act are intended to aid in debt collection litigation. It is not intended that the right of the United States to obtain a receiver in other settings, such as under the Small Business Investment Act of 1958, 15 U.S.C. § 687c, shall be curtailed or limited in any way. Section 3003 [see 28 USC § 8001], Nationwide enforcement This section contemplates both nationwide service of papers and nationwide enforcement of orders and other process in cases under the Act, and thus creates another basis for jurisdiction. The United States may establish venue of suits by other statutory provisions. This section does not affect distances witnesses may be required to travel for various purposes under the Federal Rules of Civil Procedure or other applicable statutes, or the appropriateness of transfers of cases under 28 U.S.C. § 1404 or other provisions. This section authorizes the enforcement of any writ, order, judgment or other process in any judicial district. Under the Act, it is not necessary to register a judgment in another district prior to its enforcement. This provision only applies to writs or orders relating to debts owed to the United States. Title 28 U.S.C. § 2413 is repealed by section 220 of this Act as this remedy is now included under this section of the Act. Congress has previously provided for nationwide service of process. Bankruptcy Rule 7004(d) provides that a summons and complaint in a bankruptcy adversary proceeding, and all other process (except subpoena) may be served anywhere in the United States. The courts have uniformly upheld the constitutionality of nationwide service of process. See Terry v. Raymond International, Inc., 658 F.2d 398, 402 (5th Cir.1981); Fitzsimmons v. Barton, 589 F.2d 330, 333 (7th Cir.1978); Beaulieu v. Electronic Business Systems, 632 F.Supp. 701, 703 (D.Me.1986); In Re Wieboldt Stores, Inc., 94 B.R. 988 (N.D.Ill.1988); In Re Outlet Company Stores, Inc., Bankr. 82, 694, 699 (S.D.N.Y.1988); Matter of Van Huffel Tube Corp., Bankr. 71, 145, 146 (N.D.Ohio 1987); and In Re First Hartford Corp., Bankr. 63, 479, 486 (S.D.N.Y.1986). These courts and others have ruled that nationwide service does not abridge due process. Section 3004 [no 28 USC counterpart]. Priority of claims of the United States Certain priorities as to competing creditor claims are established or recognized under the Act. For example, under section 3306(c)(2)(I), writs of garnishment in favor of the United States are subordinated to writs of garnishment for child support. These priority provisions are superseded by 31 U.S.C. § 3713 in situations where the debtor or his estate is insolvent and they place the United States ahead of all other creditors. This preemption of priority allowing the United States to reduce its losses does not change existing law. Section 3005 [compare 28 USC § 8013]. Claim of United States not barred by state statutes of limitations This section codifies the general rule recognized by the United States Supreme Court in United States v. Summerlin, 310 U.S. 414 (1940), and the Courts of Appeals, see, e.g., United States v. Overman, 424 F.2d 1142, 1147 (9th Cir.1970). Federal statutes of limitation and the general equity powers of the court will control whether or not a Federal claim is time barred. Where a recipient obtains excess payments by fraud, these payments should be recoverable once the fraud is discovered or even much later. See, e.g., United States v. Podell, 572 F.2d 31 (2d Cir.1978). Section 3006. Right of set-off or recoupment [no specific counterpart ] This section makes clear that the Act has no effect on any existing rights of the United States under common law, Federal statute or regulation, to offset or recoup monies owed to the debtor by the United States. For example, where a Medicare provider is overpaid funds, Congress has directed that the overpayment be recouped from subsequent payments. 42 U.S.C. § 1395g(a). Courts have uniformly held that even in the absence of a statutory or regulatory right to recoup or offset, the United States may still recover debts in this manner. See, e.g., Bell v. New Jersey, 461 U.S. 773, (1983); In Re A.H. Robbins Co., Inc., 846 F.2d 267, 271 n. 2 (4th Cir.1988) (citing with approval In Re Midwest Service & Supply Co., Inc., 44 Bankr. 262, 266 (D.Utah 1983)); Onslow County, N.C. v. U.S. Department of Labor, 774 F.2d 607, 610 (4th Cir.1985); First National Bank of Louisville v. Master Auto Service Corp., 693 F.2d 308, 310 n. 1 (4th Cir.1982); Wilson Clinic & Hospital, Inc. v. Blue Cross of S.C., 494 F.2d 50, 52 (4th Cir.1974); Russi v. Weinberger, 373 F.Supp. 1349, 1352 (E.D.Va.1974); and In Re Career Consultants, Inc., 84 Bankr. 419, 426 (E.D.Va.1988). These rulings are intended to remain in full force and effect. Section 3007 [compare 28 USC § 3015]. Discovery This section is intended to establish the broadest possible scope of relevancy for Federal discovery to find assets to pay judgments in favor of the United States, but it does not limit the inherent power of the court to limit discovery requests because of burdensomeness or for other appropriate reasons under the Federal Rules of Civil Procedure within the broad scope of relevancy established by this section as well as the Rules. Sections 3105 and 3307 are also applicable here, as they are to other provisions throughout the Act. This provision makes clear that financial information is an appropriate subject of pretrial discovery; currently such discovery is not always available. Allowing such an inquiry is necessary to determine whether prejudgment remedies or other relief should be sought. Without this information regarding a debtor’s assets, prejudgment remedies may be impracticable. This is a major problem in Federal debt collection. This information can also aid in settling cases before trial. The United States has no enforceable claim in a criminal proceeding until judgment has been entered. In cases having criminal aspects, other provisions of law may affect the scope, nature and right to discovery, see, e.g., 21 U.S.C. § 881(i). The second part of the provision merely establishes what is usually available under state law as a “supplementary proceeding” or a “judgment debtor examination,” and makes clear that, after judgment, discovery may be had before any magistrate or judge at a time or place consistent with the Federal Rules of Civil Procedure. See, e.g., 12 Ariz.Rev.Stat. Ann. § 12-1631, et seq (1986); N.Y.Civ. Prac.L. & R. (McKinney 1978), section 5223; and S.C.Code Ann. § 15-39-310, et seq (Law Co-op 1976). The third provision sets forth the sanctions available to enforce compliance with discovery procedures. The sanctions are those traditionally available at common law or under the Federal Rules of Civil .Procedure. See, e.g., Fed.R.Civ.P. 37. Section 3008 [see 28 USC § 3006 ]. Affidavit requirements This section establishes the standard for allegations in affidavits submitted by the United States in enforcement proceedings. This provision recognizes the need to rely on books, records and computerized data where evidence of reliability exists as provided by the Federal Rules of Evidence, since individuals with personal knowledge are not always available. Hearsay may properly be used in affidavits to obtain relief in Federal cases even apart from this provision, which is declaratory of existing law — provided only that the hearsay be reliable, as is the case with search warrants and indeed generally under Federal Rules of Evidence 801-806. See, e.g., Phillips v. Bruton, 128 S.C. 369, 122 S.E. 514 (1924). Section 3009 [see 28 USC § 3007]. Perishable property This section provides the courts with the power and procedure to deal with the problems related to perishable property whenever they arise during the course of these proceedings. Commercial law has long recognized that where property subject to a lien is rapidly deteriorating, perishing or in danger thereof, the creditor may sell the security with abbreviated or even no notice to the debtor. See U.C.C. § 9-504(3) (1978). States have adopted similar provisions for quick sales of perishable property. See e.g., VA.Code Ann. § 8.01-492 (1950 as amended). Courts have ruled that sales under such circumstances are commercially reasonable, fair and are not subject to later challenges. See Ford Motor Credit Co. v. Solway, 825 F.2d 1213, 1217 (7th Cir.1987) (citing Ill.Rev.Stat. ch. 26, para. 9-504(3); and In Re Umbles Drew-Hale Pharmacy, Inc., 80 Bankr. 421, 424-25 (N.D.Ohio 1987) (notice of sale of pharmaceutical products. securing Small Business Administration debt not necessary for deficiency claim where pharmaceuticals were perishable and rapidly declining in value, citing Ohio version of U.C.C. § 9-504(3). This section codifies the principle and case applications. Section 3010 [no 28 USC ch 176 counterpart ]. Immunity This section provides for absolute immunity for counsel for the United States and non-attorney debt collection personnel employed by the United States from civil liability for errors, omissions or negligence in their individual and official capacities arising from performance of their official debt collection duties. Fear of civil liability has a chilling effect on the performance of discretionary duties attendant to debt collection work. This section is not intended to cover private sector attorneys and their personnel who perform debt collection work for the United States. Where injury is caused except through legitimate exercise of discretion, a remedy is, of course, provided under the Federal Tort Claims Act. See 28 U.S.C. § 2679(d) which was recently amended by the Federal Employees Liability Reform and Tort Compensation Act of 1988, Pub.L. No. 100-694, 102 Stat. 4563 (1988); see also 134 Cong.Ree.S. 15597-99 (daily ed. Oct. 12, 1988) (comments of Senator Thurmond and Senator Grassley). Section 3011 [see 28 USC § 3008]. Proceedings before United States magistrates This section makes clear that proceedings under this Act can be assigned to the United States magistrate as under 28 U.S.C. § 636(b). The specific mention of the use of the United States magistrate is intended to encourage their use. Currently, all debt collection by the United States proceeds in Federal courts, the majority of it in district courts. This Act should not change the volume of case filings. The Act does not establish any new causes of action but rather substitutes Federal enforcement procedures for state enforcement procedures. However, some districts may experience an increase in the number of enforcement proceedings because they may not have been available before under the state law which was used. The impact on the district court calendar of any such increase can be alleviated by reference of these proceedings to the magistrates. Section 3012 [see 28 USC § 3009 ]. United States marshal authority to designate keeper This section gives the United States marshal authority to designate another person or Federal agency to be responsible to hold for safekeeping property seized pursuant to the provisions of this Act. The marshals are often unable to serve as keepers because of a lack of the necessary resources or expertise. This provisions expands the power and ability of the marshal set out in 28 U.S.C. § 564. Section 3013 [see 28 USC § 8010]. Co-owned property This section allows enforcement against property which is owned by the debtor along with others. This form of ownership would include, but is not limited to, joint tenancy, co-tenancy, tenancies by the entirety, community property and similar interests. In enforcing the remedies as to co-owned property, the law of the state where the property is located shall determine the extent to which this property may be subjected to payment of the debtor’s debt to the United States. See, e.g., Harris v. Crowder, 322 S.E.2d 854 (W.Va.1984), where property held jointly by a divorced husband and wife was subjected to paying one of the husband’s debts. See also the statutes of the various community property states where there are provisions for payment of the separate debts of one of the spouses out of the community property, e.g., Ariz.Rev.Stat.Ann. § 25-215 (1986). Accordingly, this section will ensure that state laws on co-owned property, including community property, are respected under the Act. Section 3013 has been expressly limited with regard to one kind of co-owned “property,” the interest’ of an individual in a retirement system for Federal military or civilian personnel. These retirement systems include, but are not limited to, the Civil Service Retirement and Disability System, 5 U.S.C. ch. 83, §§ 8301 et al. (1982); the Federal Employees Retirement System, 5 U.S.C. eh. 84, § 8401 et al. (Supp. IV 1986); the Foreign Service Retirement and Disability System, 22 U.S.C. ch. 14, subeh. VIII (1982); the retirement provisions for members of the military services, 10 U.S.C. chs. 61, 63, 65, 67, 69, 71, 73, 75 (1982); and the Central Intelligence Agency Retirement and Disability System, Public Law 88-643, 78 Stat. 1043 (October 13, 1964) as amended, 50 U.S.C. 403. Each of these systems, and others, creates complex schemes of rights and benefits for the covered personnel and for the surviving spouses, former spouses, and children of the covered personnel under the respective systems. It is not the intent of this legislation to disrupt or supersede these provisions of the various benefits plans by permitting state law to apply to create a right or interest of a debtor in the Federal retirement benefits of another person, and thereby make such benefits subject to debt collection, in conflict with the provisions of the retirement system invoked. The Federal courts have generally recognized that the Supremacy Clause of the Constitution, Article VI, section 2, will not permit state law to apply to a statutorily-created or authorized Federal retirement system in conflict with Federal law. This question has frequently arisen in litigation involving the state laws of community property states. See Ridgway v. Ridgway, 454 U.S. 46 (1981); McCarty v. McCarty, 453 U.S. 210 (1981); Hisquierdo v. Hisquierdo, 439 U.S. 572 (1979); Wissner v. Wissner, 338 U.S. 655 (1950); Money v. Office of Personnel Management, 811 F.2d 1474 (Fed.Cir.1987); Roebling v. Office of Personnel Management, 788 F.2d 1544 (Fed.Cir.1986). Where Congress has determined that provisions of state property laws are applicable to Federal retirement benefits, it has done so with exactness and precision. It is not the intent of this legislation, therefore, including section 3013, to create some broad and general exception to the effect of the Supremacy Clause so as to make the interests of an individual other than the debtor in a Federal retirement system subject to state property laws and, thereby, subject to collection of the debt owed to the government by the debtor. It is contemplated that co-owners of property will be afforded the opportunity to pay sums due the United States and claim over against the debtor should they wish to do so, before their property interests are disturbed, unless this is made impossible by reason of some emergency situation to the extent that temporary relief against the emergency situation is permitted by the Act or other applicable law. Section 3014 [see 28 USC § 8011 ]. Assessment of charges on a claim This section provides that the United States may recover a designated percentage of the debt as its pre-litigation costs, thus avoiding the additional expense and uncertainty of proving actual costs. Similarly, no defendant will be penalized for contesting a claim by incurring additional costs, thus exerting a chilling effect on the exercise of the defendant’s constitutional right to a day in court. See generally, Givens, Creditor’s Right to Collect Attorney’s Fees: The State Law Issue, 95 Banking L.J. 718 (1978). The flat percentage set forth in this section is intended to cover all costs other than those routinely allowed to litigants without specific statutory provision and the special costs for postjudgment collection provided for but limited by section 3302(c). The flat percentage approach is appropriate because it makes a rough allocation of collection costs between the debtor and the creditor (public or private) which must accept a portion of such expense as part of the cost of engaging in a particular type of activity. Deliberate non-payment of a debt clearly due and which the debtor can pay is clearly attributable to the debtor — and in egregious cases is subject to fraud sanctions, including those outside the scope of the Act. Extension of credit to marginal credit risks as a matter of governmental or business policy or strategy, on the other hand, is a cost of doing business. Since these mixed factors are hard to sort out in individual cases, rules of thumb are appropriate. Plaintiff-only fee provisions are generally utilized only where a specific incentive to promote private enforcement of laws for protection of the public is defined as a congressional objective, as in some antitrust cases for example. Fairness demands that litigation cost liability be two-way where a normally less powerful litigant may have to pay the fees of a more powerful one as in many debt collection cases in the public and private sector. This is reflected in numerous state laws, see Givens, supra, p. 17, and is achieved in the Act by the applicability of the Equal Access to Justice Act (28 U.S.C. § 2412) to government litigation generally. Section 3015 [no 28 USC ch 176 counterpart.] Funding This section authorizes the appropriation of the funds necessary to implement the provisions of the Act and makes these funds available for one year. Section 3016 [no direct 28 USC ch 176 counterpart, but some discussion relevant to 28 USC § 8012]. Investigative Authority This section permits the United States to initiate an investigative proceeding to determine whether a claim for relief should be asserted under applicable law whenever it has reason to believe an activity in violation of legal standards threatens to deprive it of a claim. The section avoids the problem that facts sufficient to state a claim against a party must otherwise be present before discovery under the Federal Rules would be available to determine its liability. The section would be applicable when a party’s activities which violate state or Federal law may result in depriving the United States of an opportunity to recover on obligations owed to it. For example, if an advertisement states that all who take Course X with Federally-guaranteed loans will be able to get jobs in Field Y at $45,000 or more and this is clearly known not to be so, the ability of the United States to recover on the loans involved is obviously jeopardized. See Berger, Study Faults, Trade School Results, N.Y. Times, Feb. 28,1989, at 24, col. 1. There would be a clear risk in this instance that the students, because of the false representations given them, will incur obligations to. the United States which they will be unable to pay. The false representations might violate 18 U.S.C. §§ 1341-1346 or state law, or both. This provision of the Act was modeled on similar statutes authorizing “civil investigate demand” (CID) powers. The Hart-ScottRodino Antitrust Improvements Act of 1976, codified at 15 U.S.C. § 1312 (1982), provides: (a) Issuance; service; production of material; testimony. Whenever the Attorney General, or the Assistant Attorney General in charge of the Antitrust Division of the Department of Justice, has reason to believe that any person may be in possession, custody, or control of any documentary material, or may have any information, relevant to a civil antitrust investigation, he may, prior to the institution of a civil or criminal proceeding thereon, issue in writing, and cause to be served upon such person, a civil investigative demand requiring such person to produce such documentary material for inspection and copying or reproduction, to answer in writing written interrogatories, to give oral testimony concerning documentary material or information, or to furnish any combination of such material, answers, or testimony. Whenever a civil investigative demand is an express demand for any product of discovery, the Attorney General or the Assistant Attorney General in charge of the Antitrust Division shall cause to be served, in any manner authorized by this section, a copy of such demand upon the person from whom the discovery was obtained and notify the person to whom such demand is issued of the date on which such copy was served.” (Emphasis added.) A party may challenge the issuance of a CID on grounds of reasonableness generally. See e.g., GAF Corp. v. Eastman Kodak Co., 415 F.Supp. 129 (S.D.N.Y.1976) (use and production of documents); Assoc. Container Tranp. (Australia), Ltd. v. United States, 705 F.2d 53 (2d Cir.1983) (appropriateness of enforcement of CID approved despite objections of relevance and act of state doctrine); Phoenix Bd. of Realtors v. United States Department of Justice, 521 F.Supp. 828 (D.Ariz.1981) (court upheld and enforced CID on challenges of relevance, reasonableness, oppressiveness and burdensomeness); Sterling Drug, Inc. v. Clark, 1968 Trade Cas. (CCH) par. 72629 (S.D.N.Y.1968) (allegations of burdensomeness and harassment re CID rejected); Petition of Gold Bond Stamp Co., 221 F.Supp. 391 (D.Minn.1963) aff'd. 325 F.2d 1018 (8th Cir.1964) (claims of privilege and burden evaluated); and Petition of Emprise Corp., 344 F.Supp. 319 (W.D.N.Y.1972) (challenge to relevance of information sought by CID heard and rejected). Similarly, the Federal Trade Commission (FTC) has broad powers to investigate violations before filing suit. The FTC’s authority is contained in 15 U.S.C. § 57b-l (1982) which provides: Section 57b-l. Civil investigative demands. (c) Issuance of demand; contents; service; verified return; sworn certificates; answers; taking of oral testimony. (1) Whenever the Commission has reason to believe that any person may be in possession, custody, or control of any documentary material, or may have any information, relevant to unfair or deceptive acts or practices in or affecting commerce (within the meaning of section 45(a)(1) of this title), the Commission may, before the institution of any proceedings under this Act, issue in writing, and cause to be served upon such person, a civil investigative demand requiring such person to produce such documentary material for inspection and copying or reproduction, to file written reports or answers to questions, to give oral testimony concerning documentary material or other infonnar tion, or to furnish any combination of such material, answers, or testimony. (Emphasis added.) The CIDs have been upheld as constitutional. Hyster Co. v. United States, 338 F.2d 183 (9th Cir.1964); Petition of Columbia Broadcasting System, Inc., 235 F.Supp. 684 (S.D.N.Y.1964). Other agencies have utilized CID powers to accomplish their statutory duties. See, e.g., O’Byrne v. Cheker Oil Co., 727 F.2d 159, 165 (7th Cir.1984) (Federal Energy Administration civil investigative demand). The Internal Revenue Service proceeds in the same manner with administrative summonses. Throughout the Code of Federal Regulations (C.F.R.) are similar grants of investigative powers. See, e.g., 14 C.F.R. §§ 13.3(c), 13.103, 13.111 (Federal Aviation Administration to conduct investigations of alleged violations of Federal Aviation Act of 1958, or Hazardous Materials Transportation Act); 47 C.F.R. §§ 1.311-1.340 (discovery in proceedings before Federal Communications Commission); 18 C.F.R. §§ lb.l-lb.20 (investigative procedures of Federal Energy Regulatory Commission); 46 C.F.R. §§ 502.61-502.74, 502.201-502.210, 502.281-502.289 (investigative procedures of Federal Maritime Commission); 24 C.F.R. § 3282.155 (HUD investigative powers for manufactured housing standards); and 49 C.F.R. §§ 510.1-510.12 (investigative powers of National Highway Traffic Safety Administration). Each of these regulatory investigative systems uses the same language, procedures and rules as set forth in the bill. It should be noted that a civil investigative demand such as that here is not self-enforcing. Thus, if a party refused to comply, the United States would have to seek an enforcement order from a district court. At that time, the party objecting to the investigation would have its full due process rights to protect its interests in privacy, or otherwise. Section 3017 [compare 28 USC § 8012 except that S 1961 version provided for direct initial governmental suit against third-party provider]. Subrogation While failure of performance on the part of third parties providing goods or services to recipients of loans guaranteed by the United States affords no defense against the United States in its actions to recover the funds, such failure may, of course, provide a basis for recovery against the provider. This provision thus contemplates that the government will, through appropriate means, assist in providing information about such options where it appears that claims against third parties may be proper. This will benefit not only the debtor who may have been defrauded, but also the interests of the United States, in several respects: 1. By helping to prevent the erroneous impression from arising that the government is acting as a debt collector for providers who may have acted improperly. This is important both to the government’s reputation with the citizens involved and to assure maximum cooperation with proper debt collection efforts by both the public and courts which are properly sensitive to these problems. 2. By providing another means of law enforcement against irresponsible providers as the marketplace would in the absence of a public sector guarantee of the debt, inasmuch as assertion of defenses such as breach of warranty may normally prevent private creditors who act improperly from collecting. Through this means, the debt collection effort can thus not only aid the government’s endeavor to bring in revenue to offset its expenditures under loan and loan guarantee and similar programs, but also promote the objectives likewise sought by anti-fraud statutes, such as the Federal Trade Commission Act (see 15 U.S.C. §§ 45, 53(b)) and mail fraud statute and its companion and injunctive enforcement provisions (18 U.S.C. §§ 1341-45). Inability to collect debts where the customer has a counterclaim or defense is an important means of policing in the private sector, inhibited from fulfilling its function if governmental guarantees assure payment to a provider, unless the customer is aware of mechanisms to assert rights created by law. See generally, New York Regional Office, Federal Trade Commission, Report on Debt Collection Hearings (1973). Normally, where a governmentally-granted or guaranteed loan is not involved, a consumer may assert against a creditor acting in concert with a seller of goods or services a claim or defense available against the seller. 16 C.F.R. § 433.1^33.3; Smith, “Preserving Consumers’ Claims and Defenses,” 63 A.B.A.J. 1401 (October 1977). The procedure to be followed under the present section is designed to achieve a similar objective, but without impeding governmental collection of obligations due the United States. Under Rule 14(a) of the Federal Rules of Civil Procedure, third party claims may be asserted by a defendant against “a person not a party to the action who is or may be liable to the third-party plaintiff for all or part of the plaintiffs claim against the third-party plaintiff.” Where such a third party may be liable to the defendant for sums due, the debtor has an absolute obligation to the United States, but may be able to collect this amount in whole or in part from the provider. The provider’s liability may be based on other aspects of the same transaction giving rise to the claim of the United States, arising under other legal principles, including state law or any applicable Federal law (e.g., the Truth in Lending Act, 15 U.S.C. § 1635 or MagnusonMoss Federal Warranty Act, 15 U.S.C. §§ 2301 et al., or other statutes). See American Fidelity & Casualty Co. v. Greyhound, Corp., 232 F.2d 89 (5th Cir.1956); see also Moor v. Alameda County, 411 U.S. 693 (1973); Dery v. Wyer, 265 F.2d 804 (2d Cir.1959). It is contemplated that ancillary jurisdiction over such cases would be exercised by the Federal courts where appropriate. No independent ground of jurisdiction is needed where a proper third party claim is asserted. Revere Copper & Brass, Inc. v. Aetna Casualty & Surety Co., 426 F.2d 709 (5th Cir.1970). To date, the courts have not delayed processing the claims of the United States pending resolution of third party claims, nor is it contemplated that the courts will do so; if such delay would result, the third party claim can be severed. In some cases, debtors may invoke Rule 14(a) or the United States may choose to inform debtors of their existing rights to do so; in other instances, a large number of third party proceedings against a particular third party provider might be cumbersome or cause delay, particularly if debtors are not represented by counsel. Under these circumstances, section 3017 permits the United States to recover funds owed to it where the initial debtors may be numerous and impecunious but have claims against a third party arising out of the transaction which brought about the debt, and which can be recovered much more economically in some instances. In the example discussed in connection with section 3016, the United States would be permitted to proceed against the institution guilty of fraud to recover sums due the students under state. or Federal law, which would then be applied to the debts owed to the United States by the students. The effect of invocation of section 3017 would be the same as that of filing of third party complaints by the original obligors under Rule 14 of the Federal Rules of Civil Procedure to recover sums due them, which, in turn, would be paid to the United States to satisfy its original complaint. Section 3017, however, permits this result to be achieved economically because a large number of individual parties need not file third party complaints under Rule 14. The Act contemplates as previously described that the United States will explain Rule 14 procedure to debtors in appropriate eases. But Rule 14 process may be difficult tó implement where a large number of obligors are involved who cannot afford counsel and do not understand legal procedure. The circumstances in which the original obligor is a necessary or otherwise appropriate party in a proceeding under section 3017 will be determined under general principles pursuant to the Federal Rules of Civil Procedure. Section 3017 seeks to promote four objectives: (1) It permits the United States to recover sums due it more efficiently and economically through a single action in which a much larger amount may be obtained; (2) It assists the functioning of the marketplace by avoiding a situation in which a provider who would encounter defenses such as fraud, breach of warranty, failure of consideration or breach of contract in an ordinary private transaction is nevertheless able to recover in full because of the presence of a Federal credit program; (3) It avoids hardship to an obligor who must otherwise pay the United States to the extent of available assets, without being able to recover offsetting sums due from a third party unless able to obtain counsel or handle what may at times be extensive litigation without legal representation; (4) It protects legitimate competitors of a provider engaged in improper practices from being placed at an unfair advantage by illegal conduct which goes unremedied. Section 3018 [see Federal Debt Collection Procedures Act § 3631 ]. Effective date This section establishes an effective date for the provisions of this Act 180 days after enactment and makes the Act applicable to all claims, litigation and judgments in favor of the United States regardless of when they occurred. SUBCHAPTER B — PREJUDGMENT REMEDIES The prejudgment remedies provided for in the Act are modeled on existing state law. Often, use of prejudgment remedies is not practicable due to the lack of information regarding a debtor’s assets. It is anticipated that the prejudgment remedies provided for in the Act, in tandem with the discovery provisions, will create a practicable system by which the United States can secure its position vis-a-vis delinquent debtors who are intent upon evading collection efforts to recover monies due to the United States. The pre-conditions set forth in sections 3101 and 3102 apply to all prejudgment remedies, including those more- specifically described in subsequent sections of the Act. Section 3101 [compare 28 USC § 3101, replacing S 1961 §§ 3101-3102 ]. Prejudgment remedies with prior notice These provisions are intended to create a practical method for the United States to obtain prejudgment remedies to secure payment of monies owed to the United States if and when a judgment is later obtained. Currently, prejudgment remedies under state statutory schemes vary greatly. In many states, use of prejudgment remedies is impractical. See Crandall, Debtor-Creditor Law Manual, § 6.04[5][6] (1985). Under other state statutory schemes, the Federal government can obtain prejudgment relief, when circumstances merit, in an expedient fashion. See Cal.Civ.Proc.Code, §§ 481.010-488.570 (West 1979 & Supp.1989). The Act will eliminate these differences. Due process requirements have been given careful consideration. The provisions of the Act are modeled upon existing statutory language from the laws of various states. See, e.g., Ariz.Rev.Stat.Ann. § 12-2403 (1982). Under the Act, Federal debtors are afforded notice and a prompt opportunity for hearing. See Sniadack v. Family Finance Corp., 395 U.S. 337 (1969). Debtors continue to be able to seek relief from any prejudgment remedy under the Federal Rules of Civil Procedure. Absent a timely request for a hearing, as stated in the notice set forth in subsection (c), the United States may proceed with the prejudgment remedy sought with the court’s permission. A late request for a hearing thus does not by itself automatically stop any prejudgment remedy from proceeding. Although a request for a hearing after the time specified in subsection (e) could be treated by the court as an application under section 3307 for a protective order, or under section 3105 for injunctive relief if warranted by the circumstances, under section 3101(f), a hearing before the prejudgment remedy is granted (even if then not yet effectuated), is no longer a matter of right after the twenty-day period has expired. As indicated by the Federal Rules of Evidence and case law concerning prejudgment decisions which afford somewhat more evidentiary leeway than at trial, hearsay may be used if it is reliable and there is a reasonable necessity for using it, but underlying records such as statements of account should ordinarily be attached if readily available. These criteria apply to both the required showing that the underlying claim has merit and that there is a reasonable need for the prejudgment remedy sought. Sections 3105 and 3307 are applicable to requests by the United States or any debtor for pre- or post-implementation relief with regard to prejudgment remedies under sections 3101 and 3102. These provisions require notice to the debtor before the court allows the writs to issue; the same remedies are available under section 3102 without prior notice after other prerequisites set forth therein are met. The requirement that the clerk of court “shall issue notice” in subsection (c) is parallel to the issuance of a summons. The party invoking a prejudgment remedy is responsible for the document. The clerk’s duty is simply to issue it under the clerk’s name and the court’s seal. Section 3102 [compare 28 USC § 8101 ]. Prejudgment remedies without prior notice This provision allows the United States to obtain expedited prejudgment remedies without notice before the writs are issued. The court maintains supervision of the issuance of these writs; they are not perfunctorily issued by the clerk. The court must be satisfied that specific prerequisites are established by the United States before the writs are issued. The debtor is given notice of the writ concurrently with the exercise of the remedy by the United States. A prompt hearing is then allowed where the debtor can challenge the proceeding. These extraordinary remedies are only available in circumstances in which the debt- or is evading the jurisdiction of the United States or evidencing the intention of defrauding the United States. For example, temporary absence from the United States would justify a prejudgment remedy if necessary to protect assets to pay the claim under these circumstances or if there is reason to believe the travel has the purpose or effect of hindering, delaying or defrauding creditors. If, for example, a person, whose known assets consist principally of bearer securities which are in a vault controlled by an agent who will obey telephonic instructions for shipment, boards a plane for a foreign country, prejudgment steps to secure those securities would be appropriate under subdivision (8). The terms “illegally” or “by fraud” in