SUFI Network Services, Inc.

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of-- )
)
SUFI Network Services, Inc. ) ASBCA No. 55306
)
Under Contract No. F41999-96-D-0057 )
APPEARANCES FOR THE APPELLANT: Frederick W. Claybrook, Jr., Esq.
Brian T. McLaughlin, Esq.
Crowell & Moring LLP
Washington, DC
APPEARANCES FOR THE GOVERNMENT: Lt Col Jam es H. Kennedy III, USAF
Air Force Chief Trial Attorney
Christopher S. Cole, Esq.
Joel B. Lofgren, Esq.
Lt Col Mark E. Allen, USAF
Capt Adam N. Olsen, USAF
Capt Marc P. Mallone, USAF
Jeffrey P. Hildebrant, Esq.
Christine C. Piper, Esq.
Marvin K. Gibbs, Esq.
Trial Attorneys
OPINION BY ADMINISTRATIVE JUDGE JAMES
ON THE PARTIES' MOTIONS FOR RECONSIDERATION
On 5 March 2015 the government moved for reconsideration 1 of the Board's
2 February 2015 decision (SUFI Network Services, Inc., ASBCA No. 55306, 15-1
BCA ii 35,878) on remand from the U.S. Court of Federal Claims (COFC) and the
U.S. Court of Appeals for the Federal Circuit (CAFC) in which we sustained the
captioned appeal in the amount of $111,849,833.83 with interest thereon (in addition
to the $2,790,930.17 awarded by the Board on SUFl's 16 counts not appealed to the
COFC). On 31March2015 SUFI opposed respondent's motion and cross-moved for
reconsideration on Count XVI only. On 30 April 2015 respondent replied to SUFl's
opposition and stated that it had no objection to SUFl's cross-motion for
1
The government has also requested that the Chairman refer its motion to the Board's
Senior Deciding Group. See ASBCA Charter ii 4, 48 C.F.R. chap. 2, app'x A,
pt. 1 and Board Rules, preface II(c), 48 C.F.R. chap. 2, app'x A, pt. 2. SUFI
opposes the request. The request has been denied.
reconsideration. 2 Familiarity with all SUFI decisions by the Board, COFC and CAFC
is assumed. 3
I.
Respondent asserts generally that the Board's 2 February 2015 decision failed
to comply with the CAFC's mandate, found facts that were arbitrary, capricious and
unsupported by substantial evidence, and made substantial errors of law. Respondent
moves to "correct" our decision with respect to SUFI Counts III, XVI, V, VII, XVIII
and IV (gov't mot. at ii, 3, 29, 31, 38, 40-41). SUFI opposes that motion generally on
the ground that it re-argues its previous positions on which it did not prevail, or which
it could have raised, but failed to raise (app. opp'n at 4-5). We decide the specific
issues in each SUFI count in the order raised by respondent's motion (gov't mot.
at 3-41).
Count III. Respondent argues that the Board cited no evidence or findings of
fact that there were "missing government DSN call records" that it withheld or
destroyed, which negates the adverse inference drawn against it on Count III damages
(gov't mot. at 4; gov't reply br. at 1-2). Respondent ignores SUFI VIII,
finding 109(b): "respondent's call records for hallway/lobby DSN phones were
incomplete .... DISA call records lacked local base operator and commercial calls,
were collected on a best efforts basis, had data gaps due to transmission and
processing outages" and finding 116: DISA call records "generally had days, months
and years of lost data due to discarded, corrupted data for 1996-2000 and a PC crash in
2003." 09-1 BCA ,-r 34,018 at 168,238, 168,240. Because the DISA DSN call data
had gaps due to transmission and processing outages, discarded and corrupted data and
a 2003 PC crash, it inescapably follows that such lost call data were "missing
government DSN call records" (gov't mot. at 4; gov't reply br. at 1-2).
With respect to the government's duty to preserve hallway/lobby DSN call data
records, the guest lodging hallway/lobby DSN phones lacked adequate controls to
block "fraud and toll skipping," SUFI notified the government of its duty to remove
hallway/lobby DSN phones from guest lodgings as early as mid-December 1996, and
in 1997 the government began changing the hallway/lobby DSN phones from local to
worldwide service, thus enabling fraud and toll skipping by lodging guests. SUFI VIII,
09-1BCAi-134,018 at 168,235-36, findings 84, 87, 91, 93. Thus, by no later than
1997, the government was on notice of the duty to preserve such call records.
2
The parties' reconsideration filings comprise over 600 pages without attachments or
appendices.
3
Judge Monroe E. Freeman, Jr., who participated in the decision to be reconsidered,
has since retired.
2
The CAFC's remand stated on Count III: "the Board failed to consider whether
an adverse inference should be drawn against the government on the issue of the
missing call records ... even though it was on notice of this potential contract dispute."
SUFI XVI, 755 F.3d 1305 at 1315. On remand, the Board considered findings 84, 87,
91, 93 and drew the adverse inference that the missing DISA call record evidence does
not support the government's defenses to Count III damages derived from SUFI's
surrogate phone X.4619 call data. Proof of intentional destruction of evidence or
wrongdoing is not needed to draw such adverse inference. See Bigelow v. RKO Radio
Pictures, Inc., 327 U.S. 251, 263-66 (1946) (revenue loss from imprecise data was
acceptable; no evidence of destruction of evidence). In this case, that adverse
inference and our retraction of the SUFI VIII "official calls" misinterpretation of the
contract terms specifying SUFI's earned revenues, supported our holding that SUFI's
surrogate phone X.4619 call data evidence was a reasonable estimate of Count III
damages and our rejection of the government's "real-world record facts" which do not
support its theories of discounted damages and revenue comparisons. SUFI XVII, 15-1
BCA ~ 35,878 at 175,396-97. Thus, we need not decide the issue of government
waiver of such damage theories (app. opp'n at 5, 7; gov't reply br. at 6-9). Our
foregoing adverse inference did not dispense with SUFI' s burden of proof of damages
as respondent asserts (gov't reply br. at 11-12).
With respect to the foreseeability of Count III hallway/lobby DSN phone abuse
damages, the CAFC's stated criterion is: "SUFI must prove ... that ... the loss was
foreseeable ... at the time of contracting." SUFI XVI, 755 F.3d at 1312-13 (emphasis
added). SUFI offered DSN network service to the Air Force subject to the condition,
"once adequate controls are developed with safeguards against fraud and toll
skipping." SUFI VIII, 09-1BCA~34,018 at 168,235, finding 84. During the
pre-award site survey, the COTR told SUFI that government hallway/lobby DSN
phones were "Class C" local. Id. at 168,235, finding 87. Contract section E-2
required the government to remove or make non-operational the hallway/lobby DSN
phones. Id. at 168,235-36, 168,241, findings 89-90. These facts gave the government
pre-award notice of foreseeable lost revenues due to toll skipping, including via
hallway/lobby DSN phones.
Respondent's arguments about the foreseeability of lodging phone usage
fluctuations due to "(l) [the 1997 to 2000] de-regulation of the telecommunications
industry, and (2) the terrorist strikes in the U.S. on September 11, 2001, and the
ensuing wars in Iraq and Afghanistan" (gov't mot. at 20-21), involve post-award
events. Pursuant to the CAFC's above-quoted criterion, post-award factors are
immaterial to foreseeability and were a sound basis for the Board's declining to take
judicial notice, and excluding respondent's immaterial evidence, of phone use
fluctuations. Respondent's arguments to measure Count III damages by its
"before/after studies" repeat prior arguments (gov't br. (SUFI VIII) at 136-37; gov't
remand br. at 13, 15-50; gov't reply br. at 9-15) that we rejected, and hence do not
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qualify for reconsideration. See SUFI X, 10-1 BCA ~ 34,327 at 169,533 and decisions
cited therein.
In conclusion, having reconsidered our decision on Count III, we affirm it.
Count XVI. The CAFC remanded Count XVI for the Board to recalculate lost
profits on the basis of a term of 15 years from the date of completion and acceptance
of the telephone system at each site. SUFI XVI, 755 F.3d at 1322. Respondent argues
that the Board erred in deciding that the contract-specified 15-year performance
periods began upon "acceptance" of SUFI' s LFTS at each site, rather than adopting its
argument that such period began at "cut-over," and modifying SUFI's 3-year period to
determine its average annual revenues (gov't mot. at 29-31; gov't reply br. at 17-18).
With respect to the start date for the 15-year period, respondent's argument for
reconsideration repeats its previous arguments on remand (gov't remand br. at 89-97).
As cited in appellant's opposition at 5: "A motion for reconsideration that restates
arguments previously raised and considered by the Board will be denied." Kellogg
Brown & Root Services, Inc., ASBCA Nos. 57530, 58161, 13 BCA ~ 35,379 at
173,602. Moreover, as stated in our decision on remand, the CAFC panel affirmed the
COFC's "conclusion that SUFl's post-termination lost profits should be calculated for
a term of fifteen years from the date of completion and acceptance of the telephone
system at each site" as specified in contract section H.29. SUFI XVI, 755 F.3d
at 1322. Thus "[w]e are not free to disregard the CAFC panel's unambiguous holding
that the 15-year term commenced 'from the date of completion and acceptance' of the
LFTS." 15-1BCA~35,878 at 175,403. Respondent's ground for reconsideration is
invalid.
With respect to SUFI's revenue averaging period, the COFC erroneously stated:
"Neither the DCAA nor the Air Force challenged the use of this [January 2002 through
May 2005] averaging period." SUFI XIV, 108 Fed. Cl. 287 at 320. Respondent
challenged that period of use before the COFC in May 2012 (gov't reply br., attach. 1
at 88-90). However, the CAFC did not remand the revenue averaging period to the
Board for further consideration. SUFI XVI, 755 F.3d at 1321-23. Thus, the Board's
2 February 2015 decision did not violate the CAFC's remand, foreclosing this ground
for reconsideration.
Having reconsidered our decision on Count XVI, we affirm it.
Count V. Respondent argues that supplemental finding S12 (15-1 BCA
~ 35,878 at 175,398): (1) does not identify any facts that support the adverse inference
drawn against the Air Force for its failure to produce government call records, because
witness Margarito Castanon's testimony (tr. 18/138-40) cited in finding S12 does not
address calls from the 34 indirect local numbers patched to long distance commercial
4
numbers for toll skipping, nor does it describe any government wrongdoing "that the
Air Force intentionally, willfully, or through gross negligence destroyed the [call
data]" or acted improperly, and Mr. Castanon's other testimony (tr. 18/6-9) contradicts
the Board's conclusion that the government failed to produce the pertinent call data
records; and (2) is inconsistent with the Board's 19 September 2006 ruling on SUFI's
motion to compel (ex. B 169 at 2), that the documents respondent produced under
SUFI' s specifications 1 and 8 for all documents related to SUFI' s Count V claim were
adequate (gov't mot. at 31-38; gov't reply br. at 15).
The context in which Mr. Castanon described USAFE's limited call data
records - due to their loss from its PC (computer) that sent call data to DISA in Europe
and in USA (tr. 18/25-27) - was the attempt of a lodging guest to dial a local DSN
number for command post patching of the call to a CONUS commercial number
(tr. 18/137-39). This is the factual predicate of SUFI's Count V, Other Operator
Numbers Patching claim. Such limited DISA call data identified the local and long
distance DSN numbers by which the call was patched to a commercial number. That
lost DISA call data, together with the unopposed evidence of lodging front desk
personnel providing guests with phone numbers to circumvent the SUFI system,
(SUFI VIII, 09-1 BCA ii 34,018 at 168,250-51, findings 154-61 ), amply supported the
adverse inference we drew against respondent in our decision on remand on Count V.
15-1 BCA ii 35,878 at 175,398.
Mistaken deletion and inadvertent loss of DISA call data are sufficient proof of
failure to discharge a legal duty. Intentional, willful, or grossly negligent destruction
or spoliation of evidence is not the criterion for wrongdoing supporting a Bigelow
adverse inference. Mr. Castanon's testimony that DISA call data were missing due to
a late 2003 hard drive crash, corrupted 1996-1999 data and mistaken deletion of 2005
data (tr. 18/6-11), addressed specific documents (ex. B-98; supp. R4, tab 326.1), all of
which related to SUFI's Count III, hallway/lobby DSN telephone numbers (R4,
tab 80A at 1724). Mr. Castanon's foregoing testimony was consistent with his
testimony about Count V (tr. 181137-39), and indicates that lost DISA call data
affected both the Count III and Count V claims. See our ruling on reconsideration of
Count III, above.
Respondent's 8 September 2006 opposition to SUFI's 9 August 2006 motion to
compel stated:
SUFI' s motion alleges that the Government did not
provide complete answers to its interrogatories and
production requests. The Government attorney answered
the interrogatories with information available on the date it
submitted its responses. The Government has requested
the individuals providing the factual responses to search
5
for additional information. The Government intends to
amend its responses if additional information is available.
(Gov't opp'n dtd. 8 September 2006 at 2) In that context, the Board's 19 September
2006 ruling that respondent's document production was "adequate" meant no more
than it had produced the documents it had to SUFI. Respondent did not identify the
extent ofDISA call data produced to SUFI. The ruling did not state or infer that there
were no missing DISA call data.
The foregoing analyses confirm our holding that our adverse inference
overcame the "evidentiary lacuna" that patched calls were not made to local
commercial numbers. Thus, there is no correction required for our findings and legal
analysis in our Count V decision on remand. However, we clarify supplemental
finding S12 (15-1BCA~35,878 at 175,398) as follows:
S 12. The government did not produce any DISA
call data with respect to SUFI's Count V, Other Operator
Numbers and Patching, that could have confirmed whether
calls by lodging guests were patched to the operator for
long distance toll-skipping, because such data were lost or
missing due to the late 2003 hard drive crash, corrupted
1996-1999 data and mistakenly deleted 2005 data
(tr. 17/285-86, 18/6-9, 25-27, 137-39).
Likewise, we clarify the second sentence in the second paragraph under "DECISION
ON COUNT V" (15-1 BCA ~ 35,878 at 175,398) to state as follows:
The government did not produce any DISA call data with
respect to Count V, Other Operator Numbers and Patching,
that could have confirmed whether calls by lodging guests
were patched to the operator for long distance
toll-skipping, because such data were lost or missing due
to the late 2003 hard drive crash, corrupted 1996-1999 data
and mistakenly deleted 2005 data (finding S12).
To the extent of the foregoing clarifications, we grant respondent's motion for
reconsideration of our Count V decision.
Count VII. Respondent argues that the Board must rescind its ruling on Count
VII and "make [the required] factual finding ... whether the two DSN telephones
[installed by SUFI] were the only administrative telephones available to the Delta
Squadron to conduct its daily business" in the administrative area of the Delta
Squadron Day Room, which "would have undermined the Delta Squadron's ability to
6
perform official business, unless the telephones were replaced" (gov't mot. at 38-39).
SUFI contends that SUFI installed the two DSN phones in the "lounge" area of the
Day Room, not the administrative area (app. opp'n at 13).
In February-June 2003, about three years after the government had removed
five or six DSN phones from the Day Room and SUFI had installed two DSN phones
there (SUFI VIII, 09-1BCA~34,018 at 168,259, finding 202), Delta Squadron
administrative personnel had available and used for official business three government
DSN phones in the administrative area of the Day Room (tr. 10/143, 152, 168-69;
supp. R4, tab 157 at 24, 32). Hence, to our decision on remand we add supplemental
finding S25, following supplemental finding S24 (15-1BCA~35,878 at 175,401):
S25. In February-June 2003, about three years after
the government had removed five or six DSN phones from
the Day Room and SUFI had installed two DSN phones
there (SUFI VIII, 09-1BCA~34,018 at 168,259,
finding 202), Delta Squadron administrative personnel had
available and used for official business three government
DSN phones in the administrative area of the Day Room
(tr. 10/143, 152, 168-69; supp. R4, tab 157 at 24, 32).
Respondent's assertion that the Board failed to make the factual findings on
Count VII required by the CAFC is invalid. Thus, there is no basis to rescind the
holding in our Count VII decision. However, for clarification, we add finding S25
thereto, as set forth above. To the extent of the foregoing clarification, we grant
respondent's motion for reconsideration of our Count VII decision.
Count XVIII. Respondent argues that the Board's statement that on Count
XVIII, "the parties agree within one penny of the amount to be awarded to SUFI,"
(15-1BCA~35,878 at 175,405), is mistaken because for Count XVIII respondent
proposed $178,265.87, not the $209,351.16 claimed by SUFI (gov't mot. at 40), and
awarded by the Board on remand. 15-1BCA~35,878 at 175,405.
SUFI argues that respondent tacitly admitted that if two errors in respondent's
calculations- viz., double-counting the $22,129.36 in extra work previously granted by
the Board and failing to include 202 hours of extra work performed by Ms. Ansola at
the corrected hourly rate of $3 7 .26, plus 10% profit as ordered by the CAFC remand,
(SUFI IX, 09-2 BCA ~ 34,201at169,094)- are corrected, the parties' computations do
not differ (app. remand reply br. at 56-58).
Respondent rejoins that "the court" never found that SUFI was entitled to the
202 additional hours SUFI claimed for Ms. Ansola's extra work (gov't remand reply
br. at 83). While the COFC made no findings about extra work hours (108 Fed. Cl.
7
287 at 311-12), the Board found that Ms. Ansola's 200 additional hours were included
in SUFl's 13 February 2007 updated claim, (SUFI VIII, 09-1 BCA ii 34,018
at 168,230, finding 72), and we have verified that by clerical error Ms. Ansola's
2 hours of extra work on 22 August 2002 were omitted from SUFl's Count XVIII
claim (ex. B205, tab 19A at 463, 471; app. remand reply hr. at 57 n.19). Therefore,
respondent's calculation of Count XVIII damages required corrections, as SUFI
demonstrated, and SUFl's calculation of$209,351.16 (app. remand reply hr. at 58) is
correct. Having reconsidered our decision on Count XVIII, it is affirmed.
Count IV. Respondent argues that awarding SUFI lost revenues on Count XI
German Troops Housing at Sembach Building 212 would duplicate the lost revenues
awarded on Count IV, A&B Bed Switch, Use of Pins and LTS Switch at
Spangdahlem, Rhein Main, Ramstein, Vogelweh and Landstuhl base lodgings (gov't
mot. at 40-41). Our 2 February 2015 decision correctly determined that there was no
duplication of recovery with respect to Counts IV and XI. See 15-1BCAii35,878
at 175,402-03. Respondent's motion for reconsideration repeats the same argument
asserted in its remand brief (at 88). See id. at 175,402. Accordingly, respondent's
argument is not a basis for reconsideration. See SUFI X, 10-1 BCA ii 34,327 at
169,533 and decisions cited therein. Having reconsidered our decision on Count IV, it
is affirmed.
II.
On 31March2015 SUFI moved for reconsideration of the Board's 2 February
2015 decision on Count XVI lost revenues, seeking a $1,404,665 .10 increase of the
amount awarded. The government's 30 April 2015 response to that motion stated:
"The Respondent has no objection to the proposed calculation adjustments contained
in Appellant's Motion for Reconsideration to Correct Calculation of Lost Profits
Amount." Accordingly, we grant SUFI' s motion and award $57,17 5.117.10 for
Count XVI damages, a $1,404,665.10 increase of the amount awarded in our
2 February 2015 decision.
CONCLUSION
We deny respondent's motion for reconsideration, except for the clarification of
supplemental finding S 12 and the second sentence in the second paragraph under our
"DECISION ON COUNT V," and the addition of supplemental finding S25 in our
ruling on Count VII. We grant SUFI's motion for reconsideration and award
8
$57, 175,117 .10 in Count XVI damages, a $1,404,665 .10 increase of the amount
awarded in our 2 February 2015 decision on remand. SUFI is entitled to interest on
this revised amount for Count XVI at the Federal Reserve Board monthly prime rate,
as held in our remand decision. See 15-1 BCA ii 35,878 at 175,405.
Dated: 20 May 2015
Administrative
Armed Service rd
of Contract Appeals
I concur
--
Administrative Judge
Acting Chairman
Armed Services Board
of Contract Appeals
I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA No. 55306, Appeal of SUFI
Network Services, Inc., rendered in conformance with the Board's Charter.
Dated:
JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals
9