Hernandez, Kroone and Associates, Inc. v. United States

In the United States Court of Federal Claims
No. 07-165 C
(Filed January 23, 2014)
HERNANDEZ, KROONE AND )
ASSOCIATES, INC. )
Plaintiff, )
)
v. )
)
THE UNITED STATES, )
Defendant. )
ORDER
On March 29, 2013, the court issued its decision following a two-week trial
of this matter. See Doc. 197. The case is now before the court on plaintiff’s
motion for attorneys’ fees, see Docs. 212 and 216, which is opposed by the
government, see Doc. 221.
I. BACKGROUND
At trial, plaintiff asserted three claims: (1) that the scope of work under the
contract did not include plaintiff’s January 25, 2005 proposal, and plaintiff was
therefore entitled to an award of $240,148 to cover the cost of installing lights and
cameras; (2) that the government improperly took a credit in the amount of $4,320
when a 1-inch water line was substituted for a 1.5-inch water line; and (3) that the
government was liable for the costs of sealing and re-striping the Indio Border
Patrol parking lot, equaling $9,366. See Doc. 197 at 32, 36.
The court rejected plaintiff’s first claim, holding that the January 25, 2005
proposal was part of the contract, and that plaintiff was not entitled to any
additional compensation on that basis. See id. at 36. The plaintiff succeeded in
part on its second claim, recovering $1,555.20, see id. at 37, and succeeded entirely
on its third claim, recovering $9,366, see id. at 38.
The government asserted three fraud counterclaims under 28 U.S.C. § 2514,
41 U.S.C. § 604 and 31 U.S.C. § 3729, seeking $837,884.53 in damages. See Doc.
82 at 15-16; Doc. 188 at 59. The court concluded that “defendant has not met its
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burden of proof under any of the three ‘fraud’ statutes involved,” see Doc. 197 at
47, and went on to find that the government established no basis for recovery under
41 U.S.C. § 7103, see id. at 50.
II. DISCUSSION
A. EAJA Fees
Plaintiff now claims that it is entitled to attorneys’ fees under the Equal
Access to Justice Act (“EAJA”), which provides:
[A] court shall award to a prevailing party other than the United States
fees and other expenses . . . incurred by that party in any civil action
. . . , including proceedings for judicial review of agency action,
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. § 2412(d)(1)(A).
As this court has noted:
To be eligible for such an award, five criteria must be satisfied: (1)
the applicant must have been a “prevailing party” in a suit against the
United States; (2) the government’s position must not have been
“substantially justified;” (3) there cannot be any “special
circumstances [that] make an award unjust;” (4) any fee application
must be submitted to the court within thirty days of final judgment in
the action and also be supported by an itemized statement; and (5) a
qualifying party must, if a corporation or other organization, have not
had more than $7,000,000 in net worth and 500 employees at the time
the civil action was initiated.
United Partition Sys., Inc. v. United States, 95 Fed. Cl. 42, 49 (2010) (citing
Commissioner, Immigration & Naturalization Serv. v. Jean, 496 U.S. 154, 158
(1990); Dallas Irrigation Dist. v. United States, 91 Fed. Cl. 689, 696 (2010); ACE
Constructors, Inc. v. United States, 81 Fed. Cl. 161, 164 (2008). The plaintiff
bears the burden of proving each of these criteria, except that the government must
prove that its position was substantially justified. See id.2
1. Prevailing Party
“Under the EAJA, a prevailing party is one who ‘succeeded on any
significant issue which achieves some of the benefits sought by the suit.’”
Precision Pine & Timber, Inc. v. United States, 83 Fed. Cl. 544, 547 (2008) (citing
Loomis v. United States, 74 Fed. Cl. 350, 353 (2006) (internal citations omitted).
As the Federal Circuit has noted, “[a] party prevails in a civil action if he receives
‘at least some relief on the merits of his claim.’” Davis v. Nicholson, 475 F.3d
1360, 1363 (Fed. Cir. 2007) (quoting Buckhannon Bd. & Care Home, Inc. v. W.
Va. Dep’t of Health & Human Res., 532 U.S. 598, 603-604 (2001)). Put another
way, a plaintiff prevails “when actual relief on the merits of his claim materially
alters the legal relationship between the parties by modifying the defendant’s
behavior in a way that directly benefits the plaintiff.” Neal & Co., Inc. v. United
States, 121 F.3d 683, 685 (Fed. Cir. 1997) (citing Farrar v. Hobby, 506 U.S. 103,
111-112 (1992)).
The government argues that because plaintiff recovered a relatively small
percentage of the sum it sought in this litigation, it cannot be considered the
prevailing party for purposes of EAJA fees. See Doc. 221 at 9. The size of
recovery, however, clearly does not control determination of prevailing party
status. In Farrar v. Hobby, for example, the Supreme Court held that a plaintiff
who was awarded only nominal damages was the prevailing party, reasoning that
“[a] judgment for damages in any amount, whether compensatory or nominal,
modifies the defendant’s behavior for the plaintiff’s benefit by forcing the
defendant to pay an amount of money he otherwise would not pay.” 506 U.S. at
113.
In this case, plaintiff recovered on two of its three claims, and was awarded
$10,921.20 in damages that the government had refused to pay. The fact that
plaintiff failed to recover for its largest claim is of no moment in determining
prevailing party status. Furthermore, although the government glosses over this
fact in its response brief, plaintiff prevailed entirely with regard to the
government’s counterclaims in which it sought to recover $837,884.53. As such,
plaintiff is the prevailing party for purposes of the EAJA fee analysis.
2. Substantial Justification
An award of EAJA fees is precluded if the government can prove that the
position it took in the case was “substantially justified.” 28 U.S.C. §
2412(d)(1)(A). As an initial matter, in evaluating whether the government’s
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position was substantially justified, the court must consider “the entirety of the
government’s conduct and make a judgment call whether the government’s overall
position had a reasonable basis in both law and fact.” Chiu v. United States, 948
F.2d 711, 715 (1991). As the Supreme Court has explained, whether the
government’s position was substantially justified is a “single finding” that
“operates as a one-time threshold for fee eligibility.” Jean, 496 U.S. at 160 (1990);
see also Manno v. United States, 48 Fed. Cl. 587, 590 (2001). Given the
requirement of a single finding, the court must consider together the government’s
conduct with regard to both its defense of plaintiff’s claims and its assertion of
counterclaims.
Under this standard, the plaintiff cannot recover EAJA fees if the
government demonstrates its position was “‘justified in substance or in the main’—
that is, justified to a degree that could satisfy the reasonable person.” Pierce v.
Underwood, 487 U.S. 552, 565 (1988). The government’s position “can be
justified though it is incorrect, and it can be substantially justified if a reasonable
person could think it correct.” Manno, 48 Fed. Cl. at 589 (quoting Doe v. United
States, 16 Ct. Cl. 412, 419 (1989)). “Substantially justified” is not to “‘be read to
raise a presumption that the Government[’s] position was not substantially justified
simply because it lost the case.’” Scarborough v. Principi, 541 U.S. 401, 415
(2004) (quoting H.R. Rep. No. 96-1005 at 10 (1980)).
Although the court must follow these guidelines, ultimately, the
determination of whether the government’s action meets the “substantially
justified” standard is a “quintessentially discretionary inquiry.” Stillwell v. Brown,
46 F.3d 1111, 1113 (Fed. Cir. 1995) (quoting Chiu, 948 F.2d 715).
The predominant issue in this case was the scope of the contract that the
Corps of Engineers (“COE”) awarded to plaintiff. The scope issue comprised the
majority of the claim plaintiff filed with the contracting officer. See Doc. 197 at
26. The trial testimony of all witnesses dealt with this issue in some regard.
Throughout this dispute, before both the contracting officer and the court, the
government maintained the position that the awarded contract encompassed
plaintiff’s January 25, 2005 proposal. As such, the government consistently
asserted, plaintiff’s claim for additional sums to cover the acquisition and
installation of lights and cameras at the Border Patrol site lacked validity. The
government’s position was soundly based on plaintiff’s contract performance prior
to the inception of the controversy, and the government prevailed on this issue in
litigation. See Doc. 197 at 33-34.
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In addition to the scope issue, plaintiff asserted a claim to recover funds
related to a substitute water line. See Doc. 197 at 36-37. The government’s
position that the substitution of a 1-inch water line for a 1.5-inch water line entitled
it to a credit of $4,320 was factually incorrect. The government’s own expert
witness confirmed that this credit was excessive, and the court awarded plaintiff
$1,555.20 to correct the government’s error. See id.Plaintiff also recovered $9,366 for sealing and re-striping the Indio Border
Patrol parking lot. See id. at 37-38. The sealing and re-striping were necessary to
correct an appearance problem caused by the large aggregate in the asphalt, which
was required by COE. See id. The government asserted an arguable position that
plaintiff’s claim was barred by the California statute of limitations, but the court
ultimately rejected this defense. See id.The court also dismissed the government’s three fraud counterclaims. See
id. at 41-50. There is no evidence in the record that the agency considered any
fraud allegations. Substantial proceedings occurred in this litigation concerning
the scope of the contract prior to the government asserting the counterclaims. The
government’s position with respect to the alleged fraud appears to be based on
what it asserted was an “obviously inflated claim” submitted by plaintiff to the
contracting officer on December 13, 2005. See Doc. 221 at 10. The court noted
suggestions that the December 13, 2005 claim could be excessive, see Doc. 197 at
49 n.7, but the counterclaims were dismissed because the government failed to
present adequate evidence at trial to sustain the claims. See Doc. 197 at 50.
It is clear that the scope of the contract issue consumed a majority of the
time and effort involved in this litigation. The time devoted to the issues of the
substitute water line, the parking lot sealing and re-striping, and the fraud claims
was comparatively minor. This disparity in time and effort between the issues is
illustrated by the voluminous documents introduced into evidence concerning the
scope of the contract. No additional documentation was introduced to support the
fraud counterclaims. The two expert witnesses did not address the fraud
counterclaims, but dealt primarily with the damages issues involved with the
controversy regarding the scope of the contract.
In short, the question of the “single finding” required for determining
whether the government’s position was substantially justified is appropriately
addressed to the major issue in this litigation—the scope of the contract. In this
regard, the court concludes that the government’s position on the scope of the
contract was substantially justified. Plaintiff’s own actions in performance of the
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contract before the controversy arose, and the subsequent decision on the merits of
the issue by the court, confirm this determination. While the government’s
positions on the other minor issues arguably lack the necessary justification to
independently support this conclusion, they represent only a tiny portion of the
parties’ time expended in this matter.
Accordingly, the court holds that the government’s position in this litigation,
as a whole, was substantially justified for purposes of the EAJA fee application.
B. “Bad Faith” Fees
In its brief, plaintiff argues that the government’s attorney acted improperly
in asserting counterclaims against it. See Doc. 216-1 at 11-19. Plaintiff makes this
claim as part of its argument that the government’s conduct was not “substantially
justified.” See id. The allegations, however, may have been intended to assert an
additional basis for fee recovery, namely an exception to the American rule on
attorneys’ fees which permits the prevailing party to recover fees “when the losing
party has ‘acted in bad faith, vexatiously, wantonly, or for oppressive reasons.’”
Alyeska Pipeline, 421 U.S. 240, 247 (1975) (quoting F.D. Rich Co., Inc. v. United
States for the Use of Indus. Lumber Co., Inc., 417 U.S. 116, 129 (1974)).
Specifically, plaintiff alleged that the government’s attorney stated an
intention to use this case to “set a new standard for FCA counterclaims against
small companies,” and said that “he had recently moved to the DOJ from a large
law firm in order to augment his trial experience before returning to private
practice.” Id. at 15. Plaintiff then describes, at length, several publications that it
claims should call into question the government’s motives in asserting
counterclaims in this case. See id. at 15-19.
Even assuming that the statements and articles that plaintiff submits are
admissible, they are not probative of the government’s motive behind its litigation
position. As such, there is no evidence of bad faith, vexatiousness, wantonness or
oppression on which the court could award fees in this case.
C. EAJA Costs
Despite the fact that plaintiff is not entitled to EAJA fees under 2412(d),
because the court has determined that it is the prevailing party, it may recover
limited, specific costs:
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Except as otherwise specifically provided by statute, a judgment for
costs, as enumerated in section 1920 of this title, but not including the
fees and expenses of attorneys, may be awarded to the prevailing
party in any civil action brought by or against the United States or any
agency or any official of the United States acting in his or her official
capacity in any court having jurisdiction of such action. A judgment
for costs when taxed against the United States shall, in an amount
established by statute, court rule, or order, be limited to reimbursing in
whole or in part the prevailing party for the costs incurred by such
party in the litigation.
28 U.S.C. § 2412(a)(1). The costs that plaintiff is permitted to recover include the
following:
(1) Fees of the clerk and marshal;
(2) Fees for printed or electronically recorded transcripts
necessarily obtained for use in the case;
(3) Fees and disbursements for printing and witnesses;
(4) Fees for exemplification and the costs of making copies of any
materials where the copies are necessarily obtained for use in
the case;
(5) Docket fees under section 1923 of this title;
(6) Compensation of court appointed experts, compensation of
interpreters, and salaries, fees, expenses, and costs of special
interpretation services under section 1828 of this title.
28 U.S.C.A. § 1920. The statute further provides that “a bill of costs shall be filed
in the case and, upon allowance, included in the judgment or decree.” Id.A bill of costs must typically be filed within thirty days after the date of final
judgment. See RCFC 54(d)(1)(B). In this case, plaintiff requested costs as part of
its application for attorneys’ fees. See Doc. 216-1 at 27-28. Plaintiff specifically
noted that “for convenience, HKA is also electing to pursue those costs to which it
would be entitled under 28 U.S.C. § 2412(a) in the instant EAJA motion in lieu of
filing a Bill of Costs.” Id. at 27. In its response, the government did not object to
an award of costs. See generally Doc. 221. Although combining the costs allowed
under 2412(a) with the request for fees under 2412(d) is not the preferred method
of recovering costs, because the plaintiff timely filed the motion that included the
request for costs under 2412(a), the court will consider its initial filing timely.
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Since the court is not awarding costs in the context of the motion for
attorneys’ fees, however, plaintiff must file a bill of costs with the clerk, according
to the procedure set forth in Court of Federal Claims Rule 54(d)(1). Plaintiff’s
filing will be deemed a supplement to its initial request, and must include only
costs extracted from those that it has previously submitted. See First Fed. Sav. &
Loan Ass’n. of Rochester v. United States, 88 Fed. Cl. 572, 593-595 (concluding
that Court of Federal Claims Rule 54 only prohibits time extensions of the initial
filing for fees and costs, and does not strictly apply to subsequent filings).
III. CONCLUSION
Plaintiff’s motion for attorneys’ fees, Docs. 212 and 216-1, is DENIED, but
as the prevailing party, plaintiff is entitled to recover costs.
Plaintiff is directed to file its bill of costs no later than 30 days from the date
of this order, and the government will have the opportunity to file any objections in
accordance with the applicable rule.
SO ORDERED.
s/ James F. Merow
James F. Merow, Senior Judge
United States Court of Federal Claims
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