Trident Marine Const., Inc. v. District Engineer U.S. Army Corps. of Engineers, Detroit Dist., 84-1491

• Decision Date: 09 July 1985
• Docket Number: No. 84-1491,84-1491
• Citation: 766 F.2d 974
• Parties: 32 Cont.Cas.Fed. (CCH) 73,685 TRIDENT MARINE CONSTRUCTION, INC., Plaintiff-Appellant, v. DISTRICT ENGINEER, the UNITED STATES ARMY CORPS of ENGINEERS, DETROIT DISTRICT; Col. Raymond Beurket, Jr., Contracting Officer; Richard Durkin, Regional Administrator; United States Small Business Administration, Chicago Region, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 974

766 F.2d 974

32 Cont.Cas.Fed. (CCH) 73,685

TRIDENT MARINE CONSTRUCTION, INC., Plaintiff-Appellant, v. DISTRICT ENGINEER, the UNITED STATES ARMY CORPS of

ENGINEERS, DETROIT DISTRICT; Col. Raymond Beurket, Jr.,

Contracting Officer; Richard Durkin, Regional

Administrator; United States Small Business Administration,

Chicago Region, Defendants-Appellees.

No. 84-1491.

United States Court of Appeals, Sixth Circuit.

Argued May 1, 1985.

Decided July 9, 1985.

Todd R. Dickinson, Tolley, Fisher and Verwys, Mark Verwys (argued), Grand Rapids, Mich., for plaintiff-appellant.

John A. Smietanka, U.S. Atty., Carol A. Husum, Asst. U.S. Atty., Thomas J. Gezon (argued), Grand Rapids, Mich., for defendants-appellees.

Before ENGEL and MARTIN, Circuit Judges, and TIMBERS, Senior Circuit Judge. ^*

BOYCE F. MARTIN, Jr., Circuit Judge.

Trident Marine Construction, Inc. appeals an order of the district court denying it attorneys' fees pursuant to the Equal Access to Justice Act, 28 U.S.C. Sec. 2412(d). ¹ The district court found that the government's position in the underlying litigation was substantially justified and that attorneys' fees were therefore not permissible under the Act. 587 F.Supp. 799. We affirm.

I.

The underlying action in this case involves the awarding of a government contract by the United States Army Corps of Engineers for the repair of the south breakwater in Muskegon Harbor. In the summer of 1983, the government decided that submission of bids on the contract was to be limited to small businesses as defined in the Small Business Act, 15 U.S.C. Sec. 632. On July 14, 1983, Canonie Construction Company formally protested the decision to set aside the contract for small business. This protest delayed the opening of bids on the project until August 23, 1983. This was a setback to the Corp of Engineers because the contract had to be awarded by September 30, 1983 or the funding would be lost to another project.

On August 23, however, the bid opening was conducted subject to Canonie's protest. Trident Marine Construction, Inc. was low bidder by over $100,000. Zenith Dredging Company was the second lowest bidder. When Canonie found out that Trident was the low bidder, it dropped its protest on September 6, 1983.

On August 30, 1983, Zenith wrote a two-sentence letter to the Corps of Engineers protesting Trident's small business status. At the same time, the Corps of Engineers was preparing its own protest to Trident's small business status. Both of these protests were forwarded to Small Business Administration for review. In its letter to the SBA, the Corps explained that its protest was prompted by several allegations from marine contractors that Trident was affiliated with Canonie and because Trident's and Canonie's management were closely intertwined. The Corps also expressed the concern that the telephone number Trident listed on its bid actually was listed in the name of Canonie.

John Noeth, an industrial specialist for the SBA, received Zenith's and the Corps' protests and initiated the SBA's review. Pursuant to 13 C.F.R. Sec. 121.3-5(b) (1984), Noeth was required to send a copy of both protests to Trident. Although Noeth testified that he gave both protests to his secretary to mail to Trident, the district court found as a matter of fact that Trident only received a copy of Zenith's protest.

In any case, Noeth notified Trident of the SBA's investigation by certified letter, which arrived at Trident's post office box on September 3, 1983. Because James Collins, Trident's sole employee and president, was in Oregon attending to business for Canonie, Trident did not pick up the letter until September 14, 1983. On that day, William Kokal, a subcontract specialist for the SBA who worked with Noeth, reached Collins by phone and informed him that a protest letter had been sent. Collins' wife picked up the protest letter that day.

Once Trident had received the protest letter, it had three working days to respond. 13 C.F.R. Sec. 121.3-5(b) (1984). In this case, Trident's response was due by the close of the working day on September 19. To respond to the protest, Trident had to send a completed SBA Form 355, which Trident received along with the protest notification, and other documentation. Id. If Trident did not respond within the three-day period, the SBA would rule that Trident was not a small business, unless the SBA granted Trident an extension within which to file. Id.

Over the next few days, Collins accumulated the necessary information to respond to the protest. On the morning of September 19, Collins spoke with Kokal by phone and told him that Trident's response was being sent to the SBA by Federal Express that morning. ² Kokal did not object to this mailing, but he also did not grant Trident an extension. Later that day, Colonel Raymond Beurket, the contracting officer for the Corps, called Kokal and inquired into the status of the SBA's determination on Trident. Inexplicably, Kokal did not tell Colonel Beurket that Collins had sent the materials that morning, but instead simply stated that the SBA had not yet received any materials from Trident. Colonel Beurket interpreted Kokal's statement as a disqualification of Trident and at 2:00 p.m. he awarded the contract to Zenith.

Within half an hour, Collins heard that the contract had been awarded to Zenith. Collins quickly called Kokal to find out what had happened, and Kokal claimed that he had not even talked with Colonel Beurket. Kokal reminded Collins, however, that Trident's response was due at the end of the day, and Collins immediately asked for an extension. Collins formalized the request for an extension by sending a telegram to that effect. Kokal testified that Trident's request for an extension was denied but that he was unable to reach Collins that day to inform him of that decision.

Over the next few days, Trident sought to convince the SBA and the Corps to rescind the award of the contract to Zenith. The SBA decided, however, to stand by its determination that Trident was disqualified because it had not responded to the protest within the requisite three-day period. On September 23, 1983, Trident filed suit in federal district court seeking to enjoin the award of the contract to Zenith and asking for declaratory relief. After three days of hearings, the district court, on September 29, 1983, granted Trident the relief it sought.

The district court found that Trident was entitled to relief for two reasons. First, the court found that Zenith's protest was legally insufficient under the SBA's regulations, 13 C.F.R. Sec. 121.3-5(a) (1984). Because Zenith's protest was insufficient and because Trident never received the Corps' protest, the court concluded that there was not an effective protest to which Trident had to respond. Second, the court held that the Corps was estopped from awarding the contract to Zenith because it had agreed not to award the contract until it had received the SBA's determination. Although this holding was not particularly clear from the court's bench ruling on September 29, the district court explicitly stated in its opinion rejecting appellant's request for attorneys' fees that it had relied on estoppel as well as the insufficiency of the protest letter in ruling for Trident.

After obtaining the relief it sought, Trident sought reimbursement for its attorneys' fees under the Equal Access to Justice Act, 28 U.S.C. Sec. 2412(d). That section states in relevant part:

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.

28 U.S.C. Sec. 2412(d)(1)(A). The district court denied Trident's request for attorneys' fee, finding that the government's litigating position was substantially justified.

II.

Trident challenges the district court's holding on two grounds. First, it claims the district court erred in holding that it would examine the government's litigating position and not the underlying agency position in determining whether the government's position was substantially justified. Second, Trident claims that even if the government's litigating position is examined, that position was not substantially justified. We will discuss these arguments in turn.

A.

The question of whether the "position of the United States" in the Equal Access to Justice Act is intended to refer to the government's litigating position or the underlying agency position is an issue that has been considered by nine circuit courts. A majority of the circuits have concluded that the government's "position" refers only to its litigating position. Ashburn v. United States, 740 F.2d 843, 849 (11th Cir.1984); Boudin v. Thomas, 732 F.2d 1107, 1116 (2d Cir.1984); United States v. 2,116 Boxes of Boned Beef, 726 F.2d 1481, 1487 (10th Cir.), cert. denied, --- U.S. ----, 105 S.Ct. 105, 83 L.Ed.2d 49 (1984); Spencer v. NLRB, 712 F.2d 539, 557 (D.C.Cir.1983), cert. denied, --- U.S. ----, 104 S.Ct. 1908, 80 L.Ed.2d 457 (1984); Tyler Business Services, Inc. v. NLRB, 695 F.2d 73, 75 (4th Cir.1982); Broad Avenue Laundry and Tailoring v. United States, 693 F.2d 1387, 1390-91 (Fed.Cir.1982). The Third Circuit, however, has concluded that only the underlying agency position should be considered. National Resources Defense Council, Inc. v. U.S. Environmental Protection Agency, 703 F.2d 700, 707 (3d Cir.1983). The Eighth and Ninth Circuits have chosen a hybrid approach by considering both the underlying agency position and the government's litigating position. Iowa Express Distribution, Inc....