________________________ DENIED: August 29, 1996 ________________________ GSBCA 13532-C(12596) ED A. WILSON, INC., Applicant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Bonnie Lee Goldstein of Vial, Hamilton, Koch & Knox, Dallas, TX, counsel for Applicant. Kevin M. Myles, Office of Regional Counsel, General Services Administration, Fort Worth, TX, counsel for Respondent. Before Board Judges NEILL, WILLIAMS, and DeGRAFF. DeGRAFF, Board Judge. Ed A. Wilson, Inc. (Wilson) filed this application for an award of costs, including attorney fees. The General Services Administration (GSA) opposes the application. Because Wilson is not eligible for an award, the application is denied. Background After Wilson and GSA entered into a construction contract, a dispute developed concerning whether Wilson was entitled to be paid for repairing a broken fire sprinkler line. When the parties could not resolve the dispute, Wilson filed an appeal at this Board, pursuant to the Contract Disputes Act, 41 U.S.C. 601-613 (1994). Wilson asked that we adjust the contract price upward by $26,293.62. We held that GSA changed the contract when it directed Wilson to repair the damage caused by the broken sprinkler line, and that Wilson was entitled to a contract adjustment of $20,836.61. Ed A. Wilson, Inc. v. General Services Administration, GSBCA 12596, 96-1 BCA 27,934. Wilson timely filed an application for costs, including attorney fees. The application establishes that Wilson's insurer, Bituminous Casualty Corporation (Bituminous), retained the law firm of Vial, Hamilton, Koch & Knox (Vial Hamilton), on September 28, 1993, on behalf of Wilson. Affidavit of Bonnie Lee Goldstein (Goldstein Affidavit) (February 1, 1996) 4. A September 28, 1993 letter from Bituminous to Vial Hamilton reads as follows: Pursuant to our recent telephone conversations, this letter will serve to confirm the assignment of the [Wilson] claim to your firm for the purposes of appealing the written decision of the Contracting Officer. In addition, Ed A. Wilson, Inc. wishes to avoid, if possible, paying additional amounts to the General Services Administration for the [broken sprinkler line]. Pursuant to our agreement, this file will be assigned to Ms. Bonnie [Goldstein], who will file a timely appeal and evaluate the likelihood of recovery through the Board of Contract Appeals. I request that Ms. [Goldstein] review the claim file, which was previously forwarded to you, and evaluate the potential for recovery, the possibility of having to make additional payments to the G.S.A., and the anticipated cost of handling this file on behalf of Ed A. Wilson, Inc. I understand that Ms. [Goldstein] has already spoken with Knox Ross of Ed A. Wilson, Inc., who is our primary contact there. Mr. Ross will be happy to assist your firm in any way that he can. Likewise, I will handle the claim for Bituminous Casualty Corporation and reports should be sent to me . . . . Should any question arise concerning any aspect of this claim, I request that I be contacted . . . . I look forward to working with you and Ms. [Goldstein] in regard to this claim. Appeal File, Exhibit 89. Vial Hamilton was retained by Bituminous on an hourly basis and did not run any risk of not receiving compensation for its services. Goldstein Affidavit 16. Ms. Goldstein performed the bulk of the legal work in this case, with assistance from other attorneys and support staff at the law firm. Goldstein Affidavit 5. Through May 1995, Vial Hamilton sent monthly bills for its services to Bituminous. Goldstein Affidavit, Exhibit A. Vial Hamilton capped its fees at approximately $26,600 in mid-April 1995, and Bituminous paid this amount. Goldstein Affidavit 16; Application of Award of Costs at 7 n.4. Ms. Goldstein states that Vial Hamilton will not receive any more than $26,600 unless Wilson receives a statutory fee award. Ms. Goldstein is of the opinion that Vial Hamilton worked "[i]n essence . . . on a pro bono basis" after it capped its charges to Bituminous. Goldstein Affidavit 16. There is no evidence in the record of an agreement between Wilson and Vial Hamilton concerning either representation or payment of attorney fees. The record contains a certificate of insurance that makes no mention of the responsibilities of either Wilson or Bituminous for payment of legal fees and expenses. Exhibit 3. The record also contains a loan receipt signed by Wilson on August 17, 1993. The loan receipt states that, in exchange for a loan made by Bituminous, Wilson would allow Bituminous to begin, prosecute, direct, and control legal proceedings in connection with the sprinkler line break, "at the expense of [Bituminous]." Exhibit 80. Wilson requests $2,131.08 for labor costs incurred by its employees in monitoring the claim, responding to correspondence from GSA, and assisting and advising Vial Hamilton; $3,558.27 for expenses (computer research, photocopies, delivery services, telephone charges, telecopier charges) incurred by Vial Hamilton; and $43,520.50 for attorney fees. The $43,520.50 represents hourly rates ranging from $100 to $185 per hour for five attorneys, plus hourly rates ranging from $35 to $65 per hour for support staff. Goldstein Affidavit 5; Affidavit of Knox Ross (Ross Affidavit) (January 29, 1996) 4. Discussion Wilson applies for fees and expenses pursuant to the Equal Access to Justice Act (EAJA), which provides: An agency that conducts an adversary adjudication shall award, to a prevailing party other than the United States, fees and other expenses incurred by that party in connection with that proceeding, unless the adjudicative officer of the agency finds that the position of the agency was substantially justified or that special circumstances make an award unjust. 5 U.S.C. 504(a)(1) (1994). An "adversary adjudication" includes an appeal taken to a board of contract appeals in accordance with the Contract Disputes Act. 5 U.S.C. 504(b)(1)(C). Wilson's Expenses Section 504 defines "fees and other expenses" as the expenses of expert witnesses; the cost of a study, analysis, engineering report, test, or project; and attorney or agent fees. 5 U.S.C. 504(b)(1)(A). The statute's definition does not include the labor costs sought by Wilson. Thus, we cannot award Wilson the $2,131.08 it requests. Vial Hamilton's Fees and Expenses In response to Wilson's application, GSA argues that Wilson is not eligible for an award because Wilson has not "incurred" Vial Hamilton's attorney fees and expenses as required by the EAJA. Also, according to GSA, the purpose of the EAJA would not be served by awarding fees and expenses to Wilson. Wilson responds that the statute requires that fees and expenses must have been "incurred," but not "paid," and notes that courts have awarded fees and expenses to parties represented by attorneys who received no payment for their services. Wilson asserts that the collateral source rule, sometimes applied in tort cases, permits it to receive an award. Wilson asserts that the purpose of the EAJA would be served by an award of fees and expenses in this case. After carefully considering the language of the statute, the legislative history, the proper method for interpreting 5 U.S.C. 504, and decisions interpreting similar statutes, we conclude that Wilson is not eligible for an award of Vial Hamilton's fees and expenses because Wilson has not "incurred" those fees and expenses. 5 U.S.C. 504 In Ardestani v. Immigration and Naturalization Service, 502 U.S. 129 (1991), the Court set out the principles we should apply when we interpret the language of 5 U.S.C. 504. First, we will look at the words of the statute itself. If there is a plain, natural reading of the statute's terms, then there is also a "'strong presumption' that the plain language of the statute expresses congressional intent," and this presumption is rebutted only in "rare and exceptional circumstances," when "contrary legislative intent is clearly expressed." 502 U.S. at 135-36. Next, unless the legislative history conclusively establishes that Congress meant something other than what the statute says, we will give the statute's terms their plain, ordinary meaning. In Ardestani, the Court found that the words of section 504 were plain and did not include administrative deportation proceedings within the definition of adversary adjudication. Although the legislative history was arguably ambiguous, the Court did not find the clear expression of legislative intent needed to establish conclusively that Congress meant to say something other than what it said in section 504. The Court noted that its conclusion was reinforced by the fact that section 504 is a waiver of sovereign immunity that must be strictly construed in favor of the Government. The United States Court of Appeals for the Federal Circuit recently applied these principles when interpreting 28 U.S.C. 2412(d)(1994), which is the part of the EAJA that applies to court proceedings. Cook v. Brown, 68 F.3d 447 (Fed. Cir. 1995) (no award of attorney fees for work performed by nonlawyer representative). Looking at the words of the statute at issue in our case, we find nothing unclear about the phrase "incurred by that party." One law dictionary defines "incur" as follows: To have liabilities cast upon one by act or operation of law, as distinguished from contract, where the party acts affirmatively. To become liable or subject to. Black's Law Dictionary 691 (5th ed. 1979). According to Webster's Third New International Dictionary (1986), "incur" means to "become liable or subject to," or to "bring down upon oneself." Id. at 1146. The meaning of the word "incur" is unambiguous. Likewise, the statute's direction that we shall make an award of the fees and expenses incurred "by that party" is also clear. The reference to "that party" means the prevailing party, and not the prevailing party's attorney. FDL Technologies, Inc. v. United States, 967 F.2d 1578 (Fed. Cir. 1992). Reading the statute's plain words, fees and expenses "incurred by that party" are those that the prevailing party is liable for or subject to paying. Although nothing in the legislative history of the EAJA defines "incurred by that party," the legislative history is consistent with a plain reading of the statute's words. Congress found that many individuals and small businesses lacked the resources to contest governmental actions, and so they were faced with a hard choice when dealing with the Government. They could submit to what they believed was unreasonable governmental action, or they could assert their rights and face financial hardship because of the cost of litigation. The purpose of the EAJA was to ensure that individuals and small businesses would not be deterred from challenging unjustified governmental actions because of the expense involved. H.R. Rep. No. 1418, 96th Cong., 2d Sess. 5-6, 9-10, 12 (1980), reprinted in 1980 U.S.C.C.A.N. 4984, 4988, 4991; H.R. Rep. No. 120, Part I, 99th Cong., 1st Sess. 4 (1985), reprinted in 1985 U.S.C.C.A.N. 132-33. The fact that the purpose of the statute is to assist those who face the financial hardship and expense of litigation suggests that we should give "incurred" its usual, ordinary meaning and assist litigants who are liable for or subject to paying attorney fees and expenses. There is no legislative history to the contrary, much less the conclusive statement that Ardestani says we need in order to override the strong presumption that the statute means what it says. Citing Cornella v. Schweiker, 728 F.2d 978 (8th Cir. 1984), Wilson argues that the statute does not require that a prevailing party must have "paid" attorney fees and expenses. The court in Cornella awarded attorney fees to a litigant represented by a legal services organization that provided pro bono services. In making the award, the court relied upon legislative history stating that the computation of fees should be based upon prevailing market rates without regard to the fee arrangement between the attorney and the client. The court viewed this legislative history as suggesting that awards could be made when an organization provides pro bono services. As the court explained in a later decision, Cornella holds "that where a pro bono attorney 'forgives' a fee to a client unable to afford legal expenses, that client is eligible for an EAJA award on the basis of that arrangement with the attorney." Securities and Exchange Commission v. Comserv Corp., 908 F.2d 1407 (8th Cir. 1990). The holding in Cornella does not support an award of fees to Wilson. Vial Hamilton is not a legal services organization and did not provide its services pro bono. More important, there is no fee arrangement between Vial Hamilton and Wilson, much less one which calls for Wilson to pay Vial Hamilton a fee that is something less than the market rate or one which calls for Vial Hamilton to forgive its fee. The legislative history that was important to the court in Cornella does not suggest that Wilson is entitled to an award of fees. Wilson argues that the collateral source rule, sometimes applied in tort cases, permits it to receive an award of Vial Hamilton's fees and expenses. We disagree. Our authority to award fees in this case is found solely in the EAJA, and the collateral source rule does not alter the EAJA's requirement that Wilson must have "incurred" Vial Hamilton's fees and expenses. Reading the phrase "incurred by that party" plainly, Wilson did not incur any attorney fees or expenses. Vial Hamilton was retained by Bituminous. Vial Hamilton sent its bills to Bituminous, which paid the bills. Wilson agreed to permit Bituminous to prosecute this case, at the expense of Bituminous. There is no evidence that Wilson was asked, much less required, to assume liability for any of Vial Hamilton's fees and expenses, or that Wilson became subject to paying those fees. In fact, there is no evidence of any agreement whatsoever between Wilson and Vial Hamilton. Wilson never found itself facing any financial hardship caused by the expense of litigating its case, and so the purpose of the EAJA would not be advanced by making an award to Wilson. Wilson is not eligible for an award of attorney fees and expenses because Wilson has not "incurred" the attorney fees and expenses it asks us to award. 28 U.S.C. 2412(d) We did not find any controlling precedent which squarely addresses the meaning of "incurred by that party" as this phrase is used in 5 U.S.C. 504. But, there are several instructive decisions concerning 28 U.S.C. 2412(d), the section of EAJA that provides for an award to a prevailing party of attorney fees and expenses "incurred by that party" in court proceedings. In Wall Industries v. United States, 15 Cl. Ct. 796 (1988), aff'd, 883 F.2d 1027 (Fed. Cir. 1989)(table), Wall Industries (Wall) and its accounting firm, Arthur Young (AY), entered into an agreement concerning a tax payment. Wall assigned to AY the proceeds of any tax refund that might be paid to Wall. AY paid Wall to settle any claim that Wall might have had against AY. AY took responsibility for conducting litigation to obtain a refund, including selecting counsel and paying all legal fees. Wall did not assume any liability or responsibility for legal fees, and did not become subject to paying the fees. Wall agreed to pay AY everything that it received in the suit, including attorney fees. Wall won the tax refund suit and filed an EAJA application pursuant to 28 U.S.C. 2412(d). After reviewing the language and the legislative history of the EAJA, the court held that Wall was not eligible for an award of attorney fees because it had not "incurred" the fees. The court stated that the statute's use of the word "incurred" was obviously a significant eligibility element, and that the "critical fact in the case at bar is that Wall, the prevailing party, did not 'become subject to [the payment of legal fees] . . . .'" 15 Cl. Ct. at 803. Finally, the court explained that awarding attorney fees to Wall would "defeat the purpose of the EAJA to benefit only the prevailing party who actually absorbed the financial burden of the litigation." Id. In Securities and Exchange Commission v. Comserv Corp., 908 F.2d 1407 (8th Cir. 1990), the court refused to award fees pursuant to 28 U.S.C. 2412, because the litigant "was never exposed to unconditional liability for legal fees" and "never paid any attorneys' fees." 908 F.2d at 1413, 1414. The court agreed with a decision interpreting a similarly-worded fee shifting statute that "fees are incurred when there is a legal obligation to pay them." Id. at 1414. Similarly, in United States v. Paisley, 957 F.2d 1161 (4th Cir.), cert. denied, 506 U.S. 822 (1992), the court refused to award fees pursuant to 28 U.S.C. 2412(d) because the litigants had a legally enforceable right to full indemnification of attorney fees and expenses from a solvent third party. The court stated that the litigants would not have been deterred from litigating had the EAJA not existed, and the deterrent effect of litigation expenses is the "critical concern underlying the EAJA precondition that a fee claimant shall have 'incurred' the expense." 957 F.2d at 1164. In summary, in cases decided under 28 U.S.C. 2412(d), a party has "incurred" fees and expenses if it is subject to paying legal fees, absorbs the financial burden of the litigation, is unconditionally exposed to liability for fees without a right to indemnification from a third party, or has a legal obligation to pay the fees and expenses. The purposes and the wording of 28 U.S.C. 2412(d) and 5 U.S.C. 504 are precisely the same, and the decisions concerning section 2412 persuade us that our conclusion concerning Wilson's eligibility for an award of fees and expenses is correct. Other statutes The word "incurred" is not obscure or unusual in fee shifting statutes which waive the Government's sovereign immunity. Pursuant to 26 U.S.C. 7430, 42 U.S.C. 4654, and 28 U.S.C. 593, all of which are waivers of sovereign immunity and all of which provide for awards of fees "incurred," courts have awarded fees to parties that paid, were liable for, or were obligated to pay attorney fees. The manner in which courts read these statutes is quite similar to the courts' readings of 28 U.S.C. 2412(d), and support our conclusion as to the proper interpretation of 5 U.S.C. 504. United States v. Hodgekins, 832 F. Supp. 1255 (N.D. Ind. 1993), aff'd, 28 F.3d 610 (7th Cir. 1994); In re Donovan, 877 F.2d 982 (D.C. Cir. 1989); United States v. 122.00 Acres of Land, 856 F.2d 56 (8th Cir. 1988); Branning v. United States, 7 Cl. Ct. 777 (1985), aff'd, 784 F.2d 361 (Fed. Cir. 1986); Florida Rock Industries, Inc. v. United States, 9 Cl. Ct. 285 (1985). Federal Circuit Neither party directed our attention to any decision of our appellate authority which resolves the issue presented in this case, and we found no such decision. We did find, however, some decisions which merit a brief discussion. Occasionally, the Court awards fees when an attorney employed by a union represents a Government employee in a personnel action. E.g., Devine v. National Treasury Employees Union, 805 F.2d 384 (Fed. Cir. 1986), cert. denied, 484 U.S. 815 (1987) (award pursuant to 28 U.S.C. 2412); Goodrich v. Navy, 733 F.2d 1578 (Fed. Cir. 1984), cert. denied, 469 U.S. 1189 (1985) (award pursuant to 5 U.S.C. 7701(g)(1)(1982)). The holdings in these cases are not controlling, because the issue presented to the Court for decision was whether an award could be made for more than the attorneys' salaries, and not whether fees were "incurred" by the employees. In Goodrich, the Court noted that the Merit Systems Protection Board (MSPB) held in O'Donnell v. Department of Interior, 2 M.S.P.R. 445 (1980), that attorney fees are "incurred" if they are incurred on behalf of an employee, even if the employee does not pay the fees. In reaching this conclusion, the MSPB relied almost entirely upon cases interpreting Civil Rights Act fee shifting statutes, and did not rely upon a single decision involving a statute which contained the word "incurred" or any similar language. Because the Court was not called upon to examine the holding in O'Donnell, we do not view the Court's mention of the O'Donnell decision as governing the outcome of our case. In several relatively recent decisions, the Court placed a great deal of emphasis upon the agreement between the client and the attorney in order to decide when and whether fees sought pursuant to 28 U.S.C. 2412 had been "incurred." TGS International v. United States, 983 F.2d 229 (Fed. Cir. 1993); Knight v. United States, 982 F.2d 1573 (Fed. Cir. 1993); Phillips v. General Services Administration, 924 F.2d 1577 (Fed. Cir. 1991). Like the earlier decisions of our court of appeals, the holdings in these three cases do not resolve the issue presented to us, because the Court's opinions do not contain an analysis of how the Court arrived at the meaning of "incurred," and the facts of these three cases are significantly different from the facts of our case. These recent cases suggest, however, that the lack of an agreement between Wilson and Vial Hamilton or between Wilson and Bituminous concerning the payment of fees is important to the proper resolution of our case. Summary We hold that when 5 U.S.C. 504 provides that we may award fees and expenses "incurred by that party," the statute means those fees and expenses which the prevailing party is either liable for or subject to paying. The meaning of the statute's words is plain and is not contradicted by legislative history. Our conclusion is consistent with decisions interpreting other statutes, including the part of the EAJA that applies to court proceedings. Finally, our conclusion is reinforced by the fact that the EAJA is a waiver of sovereign immunity and should be strictly construed in favor of the United States. Decision Wilson's application for an award of costs is DENIED. ______________________________ MARTHA H. DeGRAFF Board Judge We concur: _______________________________ ________________________________ EDWIN B. NEILL MARY ELLEN COSTER WILLIAMS Board Judge Board Judge