Sufi Network Servs., Inc. v. United States
| Decision Date | 19 October 2016 |
| Docket Number | No. 11-804C,11-804C |
| Parties | SUFI NETWORK SERVICES, INC., Plaintiff, v. THE UNITED STATES, Defendant. |
| Court | U.S. Claims Court |
Application for Attorneys' Fees and Expenses; 28 U.S.C. § 2412 (b), (d); Vexatious Government Litigation; Equal Access to Justice Act; Positions Not Substantially Justified; Special Factors Warranting Upward Adjustment; Interest.
Frederick W. Claybrook, Jr., with whom was Brian T. McLaughlin, Crowell & Moring LLP, Washington, D.C., for Plaintiff.
Douglas T. Hoffman, with whom were Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Robert E. Kirschman, Jr., Director, and Steven J. Gillingham, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, Washington, D.C., for Defendant.
Plaintiff SUFI Network Services ("SUFI") is before this Court again seeking an award of attorneys' fees and expenses against the Government after more than a decade of litigation. The Government disputes nearly every aspect of SUFI's claim, including its liability to pay for any fees at all, the hourly rate at which fees can be recovered, whether interest applies to any fee award, and even whether this Court has the authority to grant SUFI's fee application. Given the breadth of the disagreements between the parties, the Court currently will consider only whether the Government is liable to SUFI for attorneys' fees and expenses, and if so, the hourly rates at which SUFI can recover, and the applicability of interest to any award.
SUFI is a small business, and has endured a lengthy litigation due to the Government's refusal to accept any responsibility for the U.S. Air Force's willful, material breach of its contract with SUFI. Even now, despite SUFI receiving a damages award in excess of $111 million, the Government insists it should not be responsible for SUFI's fees and expenses incurred during that litigation. The Government still attempts to side-step responsibility by arguing that it acted in good faith in advancing a substantially justified position throughout the litigation, and by distancing itself from the bad faith conduct of the Air Force upon which the litigation was based. The Court disagrees with the Government and finds that SUFI is entitled to recover its attorneys' fees and expenses at its law firm's full, current rates with interest.
Over 20 years ago, on April 26, 1996, SUFI entered into a contract with the Air Force to provide long distance telephone service in the guest lodging facilities on Air Force bases in Germany. SUFI Network Services, Inc. v. United States, 108 Fed. Cl. 287, 287 (2012) ("SUFI I"). SUFI agreed to provide the necessary equipment and system operations at its own expense, and in return guests of the bases would use long distance carriers selected by SUFI. Id. The Air Force agreed that SUFI would be the exclusive provider for guests to make long distance phone calls. SUFI Network Services, Inc. v. United States, 755 F.3d 1305, 1305 (Fed. Cir. 2014) ("SUFI CAFC I"). Since the Government invested no funds and the parties intended to share the profits from long distance calls, the contract was considered to be a non-appropriated funds contract. SUFI I, 108 Fed. Cl. at 287.
The Air Force repeatedly and intentionally failed to protect SUFI's interest under the contract, resulting in a material breach of the contract. Id. at 304; SUFI CAFC I, 755 F.3d at 1310; SUFI Network Services, Inc., ASBCA No. 54503, 04-2 BCA ¶ 32,714 (Aug. 17, 2004) ("SUFI II") at 161,869. On August 24, 2004, SUFI informed the contracting officer that it intended to stop work on the contract and it sold the telephone system to the Air Force for $2,275,000. SUFI CAFC I, 755 F.3d at 1311-12.
The disputes clause of SUFI's contract mandated that SUFI first submit a claim to the contracting officer and then, if dissatisfied, appeal any decision to the Armed Services Board of Contract Appeals ("ASBCA"). SUFI Network Services, Inc., ASBCA No. 54503, 04-1 BCA ¶ 32,606 (Apr. 22, 2004) ("SUFI I"). On July 1, 2005, SUFI submitted 28 monetary claims to the contracting officer, totaling $130,308,071.53. The contracting officer only granted a small portion of one claim for $132,922. SUFI I, 108 Fed. Cl. at295. On January 5, 2006, SUFI appealed to the ASBCA and amended its claim to over $163,000,000. Id. After an administrative trial, the Board partially granted 21 out of 28 claims, but awarded only $3,790,496.65 plus interest. Id. SUFI filed three consecutive motions for reconsideration with the Board. In response to each motion, the Board increased SUFI's award to a final total of $7,416,751.52. Id. Each time, the Board found that it had made errors in its adjudication of SUFI's claim, and corrected some of them. Id. at 298. SUFI Network Services, Inc., ASBCA No. 55306, 09-2 BCA ¶ 34,021 (Jul. 15, 2009) ("SUFI IX") at 169,094.
On November 30, 2011, over six years after submitting claims to the contracting officer and after eleven decisions from the ASBCA, SUFI filed an appeal before this Court. SUFI I, 108 Fed. Cl. at 295. Upon review of the Board's record and the parties' arguments, the Court found that, despite the Board's reconsideration of its awards, the Board's decision still suffered from many legal errors. Id. at 307-08, 310-12, 317. The Court observed that Id. at 296. The Court awarded SUFI $118,764,081.34 in damages. Id. at 296. These damages were $111,000,000 higher than the Board's award.
In January 2013, the Government appealed to the Federal Circuit and SUFI cross-appealed. The Federal Circuit largely upheld this Court's findings of error in the Board's decisions. SUFI CAFC I, 755 F.3d at 1313. However, the Federal Circuit vacated the Court's monetary award and ordered that the matter be remanded to the Board to determine the appropriate damages. Id. at 1326. This Court retained jurisdiction during the remand. Id.
SUFI was required, once again, to prepare and argue before the ASBCA. On February 2, 2015, the Board issued its final decision and awarded SUFI $111,849,833.33 plus interest. SUFI Network Services, Inc., ASBCA No. 55306, 15-1 BCA ¶ 35,878 (Mar. 29, 2015). Both parties filed motions for reconsideration to correct computational errors in the Board's award. On May 20, 2015, the Board denied the Government's motion to reconsider and granted SUFI's motion, further increasing SUFI's award by $1,404,665.10. Id. at ¶ 35,992. Both decisions from the Board's panel were unanimous and the final award, $113,254,498.43, was only $5,509,582.91 less than this Court's award and was $105,837,746.91 in excess of the Board's initial, pre-remand award.
But the Government was not yet finished. It filed a request for review of its own Board's decision with this Court. SUFI Network Services, Inc. v. United States, 122 Fed. Cl. 257, 263 (2015) ("SUFI II"). This Court dismissed, holding that, in a Wunderlich Act review, "only the contractor has the right to appeal from a Board decision." Id. at 259. Importantly, this Court addressed the decades old Supreme Court precedent establishing that, in a Wunderlich Act case, the Government cannot appeal from a decision by its own authorized representative absent a claim of fraud or bad faith. Id. at 261-62 (citing S&EContractors, Inc. v. United States, 406 US 1, 8 (1972)); SUFI Network Services, Inc. v. United States, 817 F.3d 773, 777 (Fed. Cir. 2016) ("SUFI CAFC II"). The Federal Circuit summarily affirmed, again stating that the Government cannot seek any review of the Board's decision. SUFI CAFC II, 817 F.3d at 778. The Government cited no authorities that were on point. Id. Moreover, the Federal Circuit held that, even if it had not summarily affirmed, there is no evidence that the Board acted in bad faith. Id. at 779.
Before the Court now, and hopefully for the last time, SUFI seeks its attorneys' fees and expenses during all stages of this action under 28 U.S.C. § 2412 (2012). Appl. at 1. SUFI claims it is entitled to recover its fees at full, current law firm rates either under 28 U.S.C. § 2412(b) for the Government's bad faith litigation or under 28 U.S.C. § 2412(d) as an eligible small business. Id. SUFI filed its fee application on June 17, 2016. The Government filed its response in opposition to SUFI's application on September 1, 2016. SUFI filed a reply on September 23, 2016. The Court heard oral argument on October 6, 2016. The parties agreed to bifurcate the issues of liability and damages. Under that agreement, this Court will only consider the issues of whether SUFI is entitled to fees and, if it is entitled, the applicable hourly rate and when interest began to accrue. Order Granting Motion to Bifurcate, No. 11-804C, Dkt. No. 82 (July 6, 2016).
Throughout this lengthy litigation, the law firm of Crowell & Moring in Washington, D.C. has represented SUFI before the Board, this Court and the Federal Circuit. Appl. at 1. It began work as SUFI's counsel in 2004 and continues to represent SUFI today in this matter. Id. at 31.
There have been one contracting officer decision, thirteen Board decisions, three decisions from this Court (including this one), and two Federal Circuit decisions within an eleven-year period. The Court hopes to finally put this case to rest.
In general, 28 U.S.C. § 2412 is intended to put the private litigant and the Government on equal footing regarding the costs of litigation. S. REP. No. 89-1329, at 2 (1966). The primary purpose of 28 U.S.C. § 2412(d), or the Equal Access to Justice Act ("EAJA"), is to reduce a potential plaintiff's economic deterrents to contesting unreasonable government action by holding the Government liable for attorneys' fees and expenses when the Government's position was not substantially...
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