_________________________________ GRANTED: July 27, 1993 _________________________________ GSBCA 11051-C(10653) RICHERSON CONSTRUCTION, INC., Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Robert J. Martinez and Sally B. Pfund, of Williams & Jensen, P.C., Washington, DC, counsel for Appellant. Marie N. Adamson and M. Leah Wright, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges DANIELS (Chairman), LaBELLA, and HYATT. HYATT, Board Judge. Following the settlement of its appeal of the General Services Administration's (GSA's) decision to terminate for default contract GS-07P-89-HUC-0017, Richerson Construction, Inc. (RCI) filed an application to recover attorney fees and expenses pursuant to the Equal Access to Justice Act (EAJA), 5 U.S.C. 504 (1988).[foot #] 1 GSA does not dispute RCI's status as a prevailing party or its eligibility to recover EAJA ----------- FOOTNOTE BEGINS --------- [foot #] 1 Pursuant to a stipulation for judgment filed jointly by the parties, the Board granted the appeal and entered judgment converting the termination for default to one for the convenience of the Government. Richerson Construction, Inc., _____________________________ GSBCA 10653 (Dec. 5, 1990). ----------- FOOTNOTE ENDS ----------- costs other than to assert that the Government's actions were substantially justified. We find that the Government's position in terminating the contract for default and defending the ensuing litigation was not substantially justified and that RCI is thus eligible for an award of attorney fees and expenses under EAJA. The application is granted in the amount of $34,984.53.[foot #] 2 Background The events leading to GSA's decision to terminate for default RCI's contract to complete interior space alterations in the Bob Casey Federal Building and Courthouse in Houston, Texas, are chronicled in the Board's decision ruling on the merits of RCI's claim for termination settlement expenses. Richerson Construction, Inc. v. General Services Administration, GSBCA 11161, et al., 93-1 BCA 25,239 (1992). They are briefly summarized here. RCI was awarded a contract to demolish existing office space and to build two new bankruptcy courtrooms and associated office space, including judge's chambers. The specifications had been prepared by a design architect that was also awarded a management and inspection (M & I) contract to supervise construction of the renovations. In its decision granting RCI's appeals relating to its entitlement to recover costs under the termination for convenience of this contract, the Board found that RCI's performance was hindered in many respects by the conduct of the M & I contractor, which arbitrarily rejected RCI's proposed subcontractor and basically administered the contract without due regard to the rules and regulations applicable to such contracts. One of the issues raised in connection with the default termination, but not litigated in the subsequent suit, concerned the pews installed in the courtrooms. It is the Government's position in defense of this cost application that the pews installed were never approved by the M & I contractor and that ----------- FOOTNOTE BEGINS --------- [foot #] 2 The original application, filed shortly after the Board entered judgment based on the settlement of the parties, was in the amount of $37,288.27. This amount was subsequently reduced to correct errors in the billing of certain expenses. After the Board issued its decision in Richerson _________ Construction, Inc. v. General Services Administration, GSBCA ----------- FOOTNOTE BEGINS --------- 11161, et al., 93-1 BCA 25,239 (1992), it requested the parties to supplement the briefing with respect to this cost application. RCI did so, and revised its application to include attorney fees incurred in responding to the Board's inquiry. Respondent submitted a letter to the Board stating its position that the record developed in the subsequent, related litigation should not be taken into account in ruling on this fee application. ----------- FOOTNOTE ENDS ----------- the pews did not comply with the applicable specifications.[foot #] 3 Respondent relies on the alleged nonconformance of the pews as a primary factor justifying the default termination decision. In September 1991, the parties stipulated to acceptance of the pews by GSA. This stipulation was entered into the record in Richerson. The parties also stipulated that costs incurred by RCI in connection with supplying the pews were allowable termination for convenience costs in accordance with FAR Part 31 and that GSA would not assert a credit against the contract amount for replacement of the pews. Richerson, 93-1 BCA at 125,701, n.7. Discussion Substantial Justification The EAJA provides that an eligible, prevailing party under an adjudication conducted by the Government is entitled to an award of attorney fees and expenses unless the Government's position was substantially justified or special circumstances make an award unjust. 5 U.S.C. 504(a)(1) (1988). It is the Government's burden to prove both that its litigation posture and the administrative actions or omissions forming the basis of the adversary adjudication were substantially justified. Schuenemeyer v. United States, 776 F.2d 329, 330 (Fed. Cir. 1985); Ellis v. United States, 711 F.2d 1571, 1575 (Fed. Cir. 1983); Warwick Holding Co., GSBCA 8459-C(5070) et al., 88-3 BCA 21,114, at 106,590. The term "substantially justified" has been construed to connote "'justified in substance or in the main' -- that is, justified to a degree that could satisfy a reasonable person." Pierce v. Underwood, 487 U.S. 552, 565 (1988); see also Quality Diesel Engines, Inc. v. Department of Commerce, GSBCA 12385-C(11672-COM) (July 1, 1993), slip op. at 3; Atlas Construction Co. v. General Services Administration, GSBCA 11088-C(8653), et al., 92-2 BCA 24,944, at 124,329. In assessing whether the Government's position was substantially justified, it is not dispositive that the Government lost (or chose to settle) the case. Nor is the Government required to establish that its decision to litigate was based on a substantial probability of prevailing. Rather, the test is whether the Government's actions had a reasonable basis in fact and law. See Luciano Pisoni Fabbrica Accessori v. United States, 837 F.2d 465, 467 (Fed. Cir. 1988); Broad Avenue Laundry and Tailoring v. United States, 693 F.2d 1387, 1391 (Fed. Cir. 1982). ----------- FOOTNOTE BEGINS --------- [foot #] 3 The Government adds that the defective pews issue was compounded by other numerous deficiencies and by RCI's untimely performance. These additional allegations were addressed in Richerson and resolved in favor of RCI. _________ ----------- FOOTNOTE ENDS ----------- The fact that the relief obtained by RCI in the underlying litigation was derived pursuant to a settlement agreement does not preclude entitlement to an award of attorney fees and expenses under EAJA. See Austin v. Department of Commerce, 742 F.2d 1417 (Fed. Cir. 1984); Bailey v. United States, 721 F.2d 357 (Fed. Cir. 1983); Building Services Unlimited, Inc., ASBCA 33283, 88-2 BCA 20,611. At the same time, the fact of the settlement does not conclusively demonstrate that the Government's position was not substantially justified[foot #] 4; rather, the Board should evaluate the Government's justification in light of all relevant information in the record, including the degree of relief obtained by appellant. In Building Services, the Armed Services Board observed that "[t]he complete relinquishment of the Government's position in the settlement of the dispute reinforces the conclusion that the Government's position that led to the contracting officer's [action] and the ensuing litigation was not substantially justified." 88-2 BCA at 104,152. GSA asserts that its position in terminating the contract for default was substantially justified, both factually and legally, because, in its view, the pews furnished and installed by RCI in the courtrooms did not conform to specifications. In its opposition to RCI's application, GSA relies on the letter to show cause that preceded the termination for default, which pointed both to RCI's lack of diligence in completing the contract and to the nonacceptability of the pews, which were not approved either by the M & I contractor or by GSA prior to installation. GSA contends that these facts, as set forth in this letter, substantially justified its decision to proceed with the termination and to oppose appellant's appeal of that action. RCI disputes GSA's interpretation of the specifications concerning the construction of the pews, contending that the pews fully conformed to that specification and should have been approved and accepted by GSA. In addition, RCI disagrees vehemently with GSA's contention that it was unduly dilatory in completing the project. RCI thus urges that none of the contentions raised by the Government in support of its termination decision are factually or legally sufficient to constitute substantial justification either of GSA's administrative or litigation posture. Ordinarily, in evaluating the validity of arguments concerning substantial justification, only the record before the ----------- FOOTNOTE BEGINS --------- [foot #] 4 As respondent points out, the fact of the settlement does not automatically constitute an admission of lack of justification on the part of the Government. The courts have recognized, in evaluating the Government's justification for litigation, that quite apart from the merits of a dispute, policy reasons may "dictate a premature termination of the litigation." Dubose v. Pierce, 761 F.2d 913, 920 (2d Cir. 1985), judgment _________________ ________ vacated on other grounds, 487 U.S. 1229 (1988). ________________________ ----------- FOOTNOTE ENDS ----------- tribunal as a result of the trial of the case should be consulted, and new evidence, outside of that record, should not be entertained. See United States v. Property Located at 4880 S.E. Dixie Highway, 838 F.2d 1558 (11th Cir. 1988); Kos Kam, Inc., ASBCA 34684, 88-3 BCA 21,049. When a matter has settled prior to a hearing on the merits, however, it is appropriate to consider evidence that was not in the record of the settled matter in order to make a reasoned determination as to whether the applicant is entitled to an award. See Kuhns v. Board of Governors of the Federal Reserve System, 930 F.2d 39 (D.C. Cir. 1991); Digital Services Group, Inc., DOT BCA 1817E, 93-1 BCA 25,358 (1992). As the court noted in Kuhns, the purpose of excluding additional evidence after a hearing on the merits is to avoid wasteful expenditure of resources in relitigating a matter after the parties have already had the opportunity to be fully heard. At the same time, where the existing record is devoid of sufficient information to assess the justification for the Government's position, it would be inappropriate to preclude the opportunity to supplement the record so as to reach a fair and reasoned determination. In this case, we are in the unusual posture of having a largely complete factual record, developed after the settlement of this matter, as a result of the trial needed to resolve the disputed issues concerning RCI's entitlement to termination for convenience settlement costs. For the most part, the facts and legal issues relevant to supporting the decision to terminate for default were fully aired in this ancillary proceeding. The reasoning in Kuhns and Digital persuades us that it is appropriate to consider the record in this proceeding in assessing the Government's position. The record as developed therein persuades us that the Government's position as to RCI's alleged dilatory performance had little basis in fact or law. GSA's primary basis asserted to support the termination action, in contrast, is one for which relatively little evidence of record is available to permit us to assess its factual or legal validity. This relates to the question whether the pews installed in the courtrooms conformed to specifications or not. The parties are diametrically opposed in their arguments pertaining to this issue. The Board does not have a factual record on which to review and resolve this issue. What is available, however, is the fact that the Government entered into a stipulation, after the filing of this application, in which it agreed that the pews would be deemed to have been accepted and that costs would be recovered in accordance with the applicable Federal Acquisition Regulation (FAR) provision. The Board has construed that very stipulation to bind the Government in related litigation with RCI's surety. Employers Mutual Casualty Co., GSBCA 11003, 92-1 BCA 24,594, aff'd on reconsideration, 93-1 BCA 25,482 (1992). The rationale supporting this conclusion is even more pertinent in this case, involving the same parties that entered into the stipulation. In Employers Mutual, the Board, quoting John McShain, Inc. v. United States, 375 F.2d 829, 831 (Ct. Cl. 1967), observed that "[a]s a general proposition, '[a] stipulation is a judicial admission binding on the parties making it absent special consideration.'" 92-1 BCA at 122,709. This precedent requires us to give conclusive effect to this stipulation. Thus, we cannot accept the Government's contention that nonconformance of the pews substantially justified its litigation posture. To summarize, after reviewing the facts and legal arguments pertinent to the Government's administrative and litigation posture, we cannot find that its actions were substantially justified. It is noteworthy that in settling the default action the Government completely relinquished its position, granting RCI the full relief it sought in that proceeding. Building Services, 88-2 BCA at 104,152. The proof adduced by appellant in subsequent ancillary litigation and the stipulation accepting the pews further support the conclusion that the termination for default of RCI's contract was clearly improper. GSA has not established that its position in the adversary adjudication was substantially justified. RCI is, therefore, entitled to an award of reasonable fees and expenses. Entitlement to Claimed Fees and Expenses Appellant has submitted an application detailing some $34,984.53 in legal fees and expenses stated to be attributable to RCI's defense of the default termination action. GSA challenged the adequacy of RCI's documentation of certain of these expenses;[foot #] 5 these objections have been satisfactorily addressed, and amounts reduced in appellant's response to the Government's opposition to its application. More significantly, GSA, citing Oliveira v. United States, 827 F.2d 735 (Fed. Cir. 1987), questions whether certain of the attorney fees were genuinely attributable to legal representation required in connection with the default proceeding and suggests that the hours spent on certain tasks were excessive. First, we note that the itemized bills submitted by appellant's counsel in support of the application are fully and properly documented in accordance with applicable case law. Naporano Iron and Metal Co. v. United States, 825 F.2d 403 (Fed. Cir. 1987); Spectrum Leasing Corp. v. General Services Administration, GSBCA 10902-C(7347), et al., 93-1 BCA 25,317 ----------- FOOTNOTE BEGINS --------- [foot #] 5 The amount initially claimed was $37,288.27. In response to GSA's objections to certain of the expenses (relating to travel) claimed, RCI reviewed its application and discovered several errors concerning expenses incurred that were not properly attributed to the default termination action. RCI has deleted these charges and has provided additional documentation and explanation to support its expenses, which include courier, legal database searches and telephone charges. We are persuaded that the documentation is adequate and that the expenses now itemized ($1,842.03) are reasonable. ----------- FOOTNOTE ENDS ----------- (1992). Appellant's bills reflect the specific task performed, by whom, and the number of hours required to perform the task. GSA also challenges RCI's entitlement to recover legal expenses reflecting consultations with Employers Mutual Casualty Company (EMCC), RCI's surety. EMCC took over the work after RCI was terminated for default. GSA suggests that, to the extent that these contacts were for the purpose of providing legal advice to the surety in its dealings with the Government, they are not properly chargeable to the default termination litigation. RCI explains, in response, that the contacts made with RCI's surety were required to obtain documents and information needed in connection with its pursuit of the default action. After reviewing the itemized billings, we are persuaded that the time charged to consultation with EMCC is appropriately chargeable to this action and that the hours billed were not excessive. GSA also questions the number of hours spent on particular activities, such as drafting pleadings and preparing a supplemental appeal file. RCI responds that the hours drafting the complaint are fully justified given the need to investigate the facts to be alleged and research applicable law so as to properly focus the issues in dispute. Similar justifications exist for time spent reviewing documents and exercising judgments as to which should be included in a supplemental appeal file. Based on our review of the record, we conclude that the hours billed by RCI's attorneys are not only appropriate, but are eminently reasonable given the high quality of work produced and the result achieved. Decision The application for fees is GRANTED. RCI is awarded $34,984.53 in fees and expenses to be paid in accordance with the provisions of 5 U.S.C. 504(d) (1988). _____________________________ CATHERINE B. HYATT Board Judge We concur: _____________________________ ______________________________ STEPHEN M. DANIELS VINCENT A. LaBELLA Board Judge Board Judge