GRANTED IN PART: February 9, 1995 GSBCA 12942-C(11663) VEHICLE MAINTENANCE SERVICES, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Robert A. Oliver of Vehicle Maintenance Services, Silver Spring, MD, appearing for Appellant. John E. Cornell and Michael D. Tully, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges DANIELS (Chairman), HYATT, and GOODMAN. GOODMAN, Board Judge. Vehicle Maintenance Services (VMS) has filed an application for reimbursement of fees and expenses pursuant to the Equal Access to Justice Act (EAJA), 5 U.S.C. 504 (1988), in the amount of $1,162,584.63. We grant VMS's application in part. Background In January 1992, VMS appealed a contracting officer's decision dated October 10, 1991, which denied VMS's claim of $1,970,544.14 arising from a contract with respondent, the General Services Administration (GSA), to perform preventive maintenance, inspection, overhaul, and repair of government-owned vehicles at Fort Jackson, South Carolina. VMS's claim consisted of twenty-three separate items. Before a hearing on the merits was held, VMS and GSA settled ten claim items, totalling $60,140.81, for $35,000. VMS accepted an offer of award from GSA in that amount, and the Board entered an order dismissing these claim items with prejudice pursuant to Rule 36(e).[foot #] 1 Vehicle Maintenance Services v. General Services Administration, GSBCA 11663 (Nov. 5, 1992). By decision dated March 11, 1993, the Board granted respondent's motion for partial summary relief and dismissed two claim items, totalling $27,327.53. Vehicle Maintenance Services v. General Services Administration, GSBCA 11663, 93-3 BCA 25,929. A hearing on the merits was held from March 30 to April 2, 1993, with regard to the eleven remaining claim items, totalling $1,884,047.74. By decision dated April 4, 1994, the Board granted VMS's appeal as to four claim items totalling $291,583.19: Diverted Work - $57,150.88; Motor Listed Parts - $8,360.99; Non-Standard Vehicle Labor - $219,099.82; and Ignition System Labor - $6,971.50. Vehicle Maintenance Services v. General Services Administration, GSBCA 11663, 94-2 BCA 26,893. On August 19, 1994, VMS filed an application for reimbursement of fees and costs pursuant to the EAJA. Portions of some of the amounts claimed were incurred before VMS received the contracting officer's decision of October 10, 1991, as indicated below: Before After Receipt Receipt Claimed of CO of CO Amount Decision Decision Project Labor Cost $1,114,854.48[foot #] 2 Long Distance Phone 199.57 167.70 $ 31.87 Material/Supplies[foot #] 3 5,501.12 2,394.85 3,106.27 Delivery Service 236.00 154.00 82.00 Travel 1,309.58 1,309.58 Postage 40.09 40.09 Travel to GSA 423.75 423.75 GSA FOIA Fees[foot #] 4 1,307.20 1,307.20 ----------- FOOTNOTE BEGINS --------- [foot #] 1 58 Fed. Reg. 69,246, 69,265 (1993) (to be codified at 48 CFR 6101.36). [foot #] 2 This amount represents what VMS asserts to be the time value of VMS's owner in pursuing the appeal pro se, while assisted at times by various attorneys. [foot #] 3 For duplication and binding of exhibits and briefs. [foot #] 4 Appellant had requested documents concerning its contract performance pursuant to the Freedom of Information Act, 5 U.S.C. 552 (1988). ----------- FOOTNOTE ENDS ----------- Subtotal $1,123,871.79 5,333.33 3,683.98 Legal Expenses[foot #] 5 38,712.84[foot #] 626,674.26 12,038.58 Total $1,162,584.63 32,007.59 15,722.56 Discussion VMS is a partnership with fewer than 500 employees, with a net worth of less than $7 million, and is therefore eligible to recover under the EAJA. 5 U.S.C. 504(b)(1)(B)(1988). The EAJA permits a "prevailing party" to recover "fees and other expenses incurred by that party" unless the "position of the agency was substantially justified or . . . special circumstances make an award unjust." 5 U.S.C. 504(a)(1). Because appellant received a significant portion of the relief requested, we find that appellant qualifies as a "prevailing party." Hensley v. Eckerhart, 461 U.S. 424, 440 (1983). The Government bears the burden of proving that its position was "substantially justified." Gavette v. Office of Personnel Management, 808 F.2d 1456, 1467-68 (Fed. Cir. 1986) (en banc). "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). The only justification asserted by respondent for defending the various claim items was as follows: If VMS' remedy-to-claim ratio[[foot #] 7]. . . were lower, respondent would be inclined to argue that it was substantially justified in litigating the entire appeal. Given the fact . . . that this claim was readily severable into its constituent claim elements, the record developed by the Board easily supports a finding that respondent was substantially justified in litigating all but Diverted Work ----------- FOOTNOTE BEGINS --------- [foot #] 5 Legal fees and expenses incurred. [foot #] 6 Appellant originally had claimed a total amount of $68,482.84, which included $29,770 billed to VMS, but which was contested and not paid. Appellant subsequently amended its application to include only those fees actually paid. [foot #] 7 By "remedy-to-claim ratio," respondent is referring to the total amount recovered by appellant through settlement and by prevailing on the merits divided by the total amount sought in its claim. ----------- FOOTNOTE ENDS ----------- ($57,150.88) and Non-Standard Vehicle Labor ($219,099.82), which constitute the "lion's share" of the relief granted to VMS in this appeal. Respondent's Reply to Applicant's Request for Reimbursement of Costs at 2 n.2. Thus, respondent concedes that its position as to two claim items was not substantially justified. It offers no explanation regarding the justification of its position as to the settled items and the other two items which were granted by the Board after the hearing on the merits. With regard to these claim items for which the Government has failed to offer justification as to its position, the Board must still determine whether the Government was substantially justified. Appellant's Request for Fees and Expenses With Regard to Settled Claim Items Cannot be Granted on the Existing Record Ten claim items were settled before the hearing on the merits. The fact that a portion of the relief obtained was derived pursuant to a settlement agreement does not preclude entitlement to an award of fees and expenses under the EAJA. Richerson Construction, Inc. v. General Services Administration, GSBCA 11051-C(10653), 94-1 BCA 26,278 (1993). Respondent offers no evidence and very little argument to demonstrate that its position was substantially justified as to these ten claim items. In a letter supplementing its application, VMS has requested that the Board determine that the Government's position on these claims was not substantially justified. Letter from Appellant to the Board (Oct. 29, 1994). It is not appellant's burden to present evidence that the Government was not substantially justified. It is respondent's burden to demonstrate that it was substantially justified. The Government's failure to adequately address this issue does not necessarily relieve the Board of the responsibility to make such a determination. In cases where a record exists such that the tribunal is in a position to make an independent assessment of whether the Government's actions were substantially justified, it is appropriate for the Board to review the record, including the arguments presented in the underlying proceeding, to determine whether the Government's position was substantially justified or not. Griffin Services, Inc. v. General Services Administration, GSBCA 11735-C(11171), 94-3 BCA 27,075. When a matter has settled prior to a hearing on the merits, it is appropriate that the Board 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. Richerson Construction, Inc. The Board has a sparse record concerning the settled claim items. Respondent's offer of award, which was accepted by VMS, stated that respondent's audit of appellant's claim substantiated $31,062 in costs for nine enumerated claim items (which totalled $100,331.90). The offer of award also listed the twenty-three items of appellant's claim, indicating ten which were agreed to as settled (which totalled $60,141.80) and the remainder to be litigated. Eight of the ten settled claim items were those for which respondent's audit had allegedly substantiated costs. The ninth item for which the auditor had allegedly substantiated costs was diverted work, which was not settled and subsequently litigated during the hearing on the merits. The settlement amount was $35,000. The settled claim items were not exclusively those for which the audit had allegedly substantiated costs. There was no mention that respondent's audit had substantiated any costs for two of the ten claim items settled. One claim item for which the audit had alleged substantiated costs was not settled.[foot #] 8 The settlement amount is approximately 58% of the total that appellant sought for the claim items which were settled and 113% of the total costs which were substantiated by the auditor. The fact that the Government chooses to settle a case, even for the full amount requested by appellant, does not exclusively dictate that the Government was not substantially justified. In view of the potential costs of litigation, a settlement may indicate nothing more than an economic decision of the Government unrelated to the factual and legal merits of its case. Logistical Support, Inc., ASBCA 39247, et al., 92-1 BCA 24,375 (1991). From the record which exists as to the settled claim items, we cannot determine whether respondent was substantially justified in defending the settled claim items before the settlement was reached. While we may also consider evidence that was not in the record of the settled matters, the record developed for the litigated claim items is not helpful. Each litigated claim item was treated separately with virtually no overlap as to documentary evidence or testimony, and there was no reference to the settled claim items during the hearing. As discussed above, respondent's response to VMS's application contains only the unsupported statement that "the record developed by the Board easily supports a finding that respondent was substantially justified in litigating all but" two claim items for which respondent has conceded its position was not substantially justified. In the absence of any compelling argument, we find ----------- FOOTNOTE BEGINS --------- [foot #] 8 Respondent's audit report is not helpful in determining whether respondent's position as to the settled claim items was substantially justified. The audit report was found by the Board to be an unsupported summary of the auditor's work papers, which were not included in the record of the appeal. The Board also did not find credible the hearing testimony of respondent's auditor. Vehicle Maintenance Services v. General _________________________________________ Services Administration, GSBCA 11663, 94-2 BCA 26,893, at ________________________ 133,873. ----------- FOOTNOTE ENDS ----------- that respondent has failed to establish that its position was substantially justified with regard to the settled claim items. See, e.g., Danrenke Corp., VABCA 3271E, et al., 94-1 BCA 26,504 (1993). Respondent's Position was not Substantially Justified as to the Claim Items Granted by Decision of the Board After a Hearing on the Merits Of the eleven claim items addressed during the hearing on the merits, seven were denied, and four were granted by decision of the Board. While respondent concedes that its position was not substantially justified as to two of the four claims, it fails to address the other two claims granted by the Board. Again, the Government's failure to adequately address this issue does not relieve the Board of the responsibility to review the record and make such a determination. We agree with respondent that it was not substantially justified in its position as to appellant's claim item for diverted work. We found that respondent had breached its requirements contract with appellant by diverting work to be performed under the contract to outside vendors. 94-2 BCA at 133,885-87. We also agree with respondent that it was not substantially justified in its position as to appellant's claim item for non-standard vehicle labor. We found that respondent breached its contract by unilaterally determining rates for such work, rather than negotiating the rates as required by the contract. Id. at 133,890-93. Accordingly, respondent's positions as to these claim items had no reasonable basis in law or fact, and were not substantially justified. Respondent, by conceding its position was not substantially justified as to these two claim items, implies that its position was substantially justified as to the other two claim items which were granted -- motor listed parts and ignition system labor. However, respondent offers no reason to support its position in this regard. The claim item for motor listed parts was granted because "respondent's interpretation [of the contract clause at issue was] based on arguments not supported by any reasonable interpretation of the contract language." 94-2 BCA at 133,888. Similarly, the claim item for ignition system labor was granted because of GSA's unexplained inconsistent payment procedures with regard to this type of labor, and its failure to support its defenses to the claim as stated in the contracting officer's decision from which the appeal was taken. Id. at 133,892-93. Respondent's position as to these claim items had no reasonable basis in law or fact, and respondent has failed to prove that its position was substantially justified. As respondent's position with regard to the four claim items upon which appellant prevailed was not "substantially justified," we now review the fees and expenses claimed to determine which are recoverable. Appellant's Project Labor Costs are not Recoverable The project labor costs in the amount of $1,114,854.48 represent the time value of the effort expended by Mr. Robert Oliver, the non-attorney owner of VMS, in representing VMS. From the date the contracting officer rendered the decision which is the subject of this appeal, Mr. Oliver represented his company pro se before this Board, and was at times assisted by various attorneys. The term "fees and other expenses" is defined in the EAJA to include "reasonable attorney . . . fees." 5 U.S.C. 504(b)(1)(A). We have previously held that the EAJA does not authorize payment to pro se litigants for the time they themselves devote to cases. Giancola & Associates v. General Services Administration, GSBCA 12305-C(12128), 93-3 BCA 26,146. The project labor costs sought by appellant are not recoverable under the EAJA. Fees and Expenses Incurred Before the Receipt of the Contracting Officer's Decision are not Recoverable Under the EAJA, a prevailing party may be reimbursed for fees and expenses "incurred . . . in connection with . . . an adversary adjudication." The date of the contracting officer's final decision is the beginning of the "adversary adjudication" for purposes of the EAJA, and costs cannot be recovered which had been incurred before the date on which appellant received the contracting officer's decision. Levernier Construction, Inc. v. United States, 947 F.2d 497 (Fed. Cir. 1991); Tele-Sentry Security, Inc. v. General Services Administration, GSBCA 11639- C(10945(7703)-REIN), 93-2 BCA 25,816; American Power, Inc., GSBCA 10588-C (8752), 91-2 BCA 23,766. As indicated above, $32,007.59 of the fees and expenses claimed (consisting of portions of the amounts claimed for long distance telephone, material and supplies, delivery service, travel, Freedom of Information Act fees, and legal fees and expenses) were incurred before VMS received the contracting officer's decision. These fees and expenses are therefore not recoverable under the EAJA. Fees and Expenses Incurred After the Receipt of the Contracting Officer's Decision are Recoverable 1. Legal Fees and Expenses Of the $38,712.84 in legal fees and expenses claimed, only $12,038.58 were incurred after VMS received the contracting officer's decision. According to the documentation submitted in support of VMS's application, of the $12,038.58 in fees and expenses incurred after receipt of the contracting officer's decision, the fees, billing rates, and expenses are as follows: Law Firm 1 Fees: 4.9 hrs. @ $180/hr. = $882.00 2.2 hrs. @ $40/hr. = 88.00 Total Fees Billed $970.00 Expenses (Telephone, Copier, Postage): $18.58 Lawyer 2 Fees: Retainer 500.00 205.1 hrs. @ $200/hr. = 41,020.00 Total Billed $41,520.00 VMS has actually paid Lawyer 2 $11,750 of the $41,520 billed, and contests the remaining fees. VMS has represented to the Board that it does not intend to pay Lawyer 2 any additional amounts. As the EAJA allows reimbursement for fees and expenses "incurred," we deem the amount actually paid by VMS as the amount "incurred" for purposes of determining recovery under the EAJA.[foot #] 9 Respondent has not addressed whether the number of hours expended by VMS's attorneys was reasonable. VMS has requested reimbursement for approximately 212.2 hours of attorneys' time billed after the contracting officer's final decision. The appeal was litigated for several years, including discovery, a motion for summary relief, and a hearing on the merits. Having reviewed the bills submitted by both Law Firm 1 and Lawyer 2, we find the billing rates and the number of hours expended reasonable for the tasks performed. ----------- FOOTNOTE BEGINS --------- [foot #] 9 Lawyer 2 filed a motion to intervene in this case and requested that the Board aid in resolving the dispute concerning the contested amounts. The Board denied the motion to intervene because the dispute between VMS and Lawyer 2 is not within the Board's jurisdiction. ----------- FOOTNOTE ENDS ----------- The EAJA limits recovery up to $75 per hour. As the payment of $11,750 to Lawyer 2 was for 205.1 hours billed,[foot #] 10 Lawyer 2 was paid an actual rate of $57.29/hr. Accordingly, we find that the maximum amount allowable under the EAJA is as follows: Law Firm 1 Fees: 4.9 hrs. @ $75/hr. = $376.50 2.2 hrs. @ $40/hr.[foot #] 11 = 88.00 Expenses: $ 18.58 Lawyer 2 Fees: 205.1 hrs. @ 57.29/hr. = $11,750.00 Total Legal Fees and Expenses: = $12,224.08 We award legal fees and expenses to the extent allocated to the claims for which we find that the Government's position was not substantially justified, as discussed below. 2. Expenses Paid Directly by VMS VMS seeks reimbursement in the amount of $3,683.98 for other expenses (long-distance phone, materials and supplies for duplicating exhibits and briefs, delivery service, postage, and travel to GSA headquarters) incurred and paid directly in pursuing its appeal after receipt of the contracting officer's decision. We have previously held that whether reimbursement should be made for expenses incurred directly by a pro se litigant is not dependent upon whether the expenses were incurred by a pro se litigant or the litigant's attorney, but rather, upon whether the expenses were "incurred in connection with the proceeding" and necessary for the preparation of the party's case. 5 U.S.C. 504(a)(1), (b)(1)(A) (1988). Recovery of such reasonable expenses is allowed, as the expenses represent costs actually expended, and a litigant's costs can be expected to be the same whether represented by counsel or not. American Power, ----------- FOOTNOTE BEGINS --------- [foot #] 10 While VMS and Lawyer 2 are involved in a dispute concerning payment of the contested fees, there is nothing in the record to indicate that VMS contests the number of hours allegedly expended by Lawyer 2. [foot #] 11 Apparently, this individual was a law clerk or paralegal. We allow recovery at the rate billed to the client. See Spectrum Leasing Corp. v. General Services Administration, ----------- FOOTNOTE BEGINS --------- GSBCA 10902-C (7347), et al., 93-1 BCA 25,317 (1992). ----------- FOOTNOTE ENDS ----------- Inc. As the expenses sought were incurred in connection with the appeal and were necessary for the presentation of the case, these expenses are recoverable under the EAJA. We award them to the extent allocated to the claims for which the Government's position was not substantially justified, as discussed below. 3. Award of Fees and Expenses Appellant's claim was divided into twenty-three claim items, and these claim items were treated separately for purposes of settlement and a resolution on the merits. Appellant settled ten claim items, and two additional claim items were dismissed before a hearing on the merits. Eleven claim items were heard on the merits, and four were granted. Respondent has failed to prove that its position was substantially justified as to the ten settled items and the four items granted by the Board. Where respondent is substantially justified in its position as to some, but not all, claim items, it is within our discretion to adjust the amount of attorney's fees and other expenses in accordance with appellant's success in litigating its appeal. In making an allocation of fees and expenses, the Board is not bound by a set formula. Jordan & Nobles Construction Co., GSBCA 11277- C(8349), et al., 93-1 BCA 25,262 (1992). The legal bills submitted by VMS indicate the individual performing the work, a brief description of the task performed and the time per task.[foot #] 12 No attempt was made by the billing attorney to allocate the time expended for each task performed to specific claim items. Similarly, appellant's costs which it incurred and paid directly are not apportioned to specific claim items. In similar instances, we have exercised our discretion and awarded fees and expenses in proportion to the percentage of recovery achieved by appellant in relation to its total claim. This avoids an award of fees and expenses incurred in defending claim items in which appellant did not prevail on the merits, and results in a recovery of an amount which is reasonable in relation to the result obtained. See, e.g., Tele- Sentry Security, Inc. Such an approach is appropriate in this instance. As we lack information from appellant and its attorneys as to the amount of effort expended on each claim item, we believe an award of fees and expenses in proportion to the percentage of recovery achieved by appellant in settlement and litigation in relation to the total claim would reasonably approximate the value of the effort performed for the claim items for which respondent's position was not substantially justified. The amounts sought for the claim items vary substantially, and it ----------- FOOTNOTE BEGINS --------- [foot #] 12 Examples of the descriptions of tasks performed include discovery consultation, review discovery requests, telephone conference, summary judgment/draft response, hearing preparation, and hearing. ----------- FOOTNOTE ENDS ----------- would not be reasonable to assume equal effort was expended in the pursuit of each item. The total amount of the ten claim items settled and the four granted for which we find respondent's position not to have been substantially justified is 16.57% of the total amount claimed.[foot #] 13 Applying this percentage to the recoverable fees and expenses yields the following: Legal Fees and Expenses $12,224.08 Expenses Paid by VMS 3,683.98 Total $15,908.06 x 16.57% $ 2,635.97 Decision For the reasons stated above, appellant's application is GRANTED IN PART. Appellant is awarded $2,635.97 pursuant to 5 U.S.C. 504, to be paid without interest. ________________________ ALLAN H. GOODMAN Board Judge ----------- FOOTNOTE BEGINS --------- [foot #] 13 Settlement amount for ten claim items prior to a hearing on the merits: $ 35,000.00 Motor Listed Parts $ 8,360.99 Ignition System Labor 6,971.50 Diverted Work 57,150.88 Non-Standard Vehicle Labor 219,099.82 Total Awarded by Board $291,583.19 Total Received in Settlement and by Award of the Board $326,583.19 Total Claim $1,970,544.14 $326,583.19 $1,970,544.14 = 16.57% ----------- FOOTNOTE ENDS ----------- We concur: _____________________ ________________________ STEPHEN M. DANIELS CATHERINE B. HYATT Board Judge Board Judge