Request for reimbursement of attorney fees and other costs related to the pursuit of a partially successful appeal of the agency’s denial of a claim is granted, where the fact that the appellant was only partially successful did not mean the government’s defense was substantially justified. The board also held that its narrow reading of the doctrine of good faith and fair dealing rendered the agency’s actions a clear breach and therefore the government’s defense could not be substantially justified.
Relyant LLC moved the Armed Services Board of Contract Appeals to grant it reimbursement of its reasonable attorneys’ fees and other costs it incurred pursuing its claim against the Army for additional costs under a construction contract performed in Afghanistan.
In an earlier opinion, the board granted Relyant partial relief for a change in specifications under its contract for the provision of relocatable buildings. Relyant had wished to change the specifications for the wall insulation for components of these buildings known as “cans,” and asserted that the government had agreed to the change before rejecting cans that had been manufactured in accordance with the hoped-for design change.
The board concluded that the government had not, in fact, agreed to allow the contractor to alter the manufacturing requirements and that Relyant was aware that no such modifications had been approved. However, the board held that the government significantly delayed its decision denying the appellant’s request for a modification, causing it to incur additional labor costs.
In is request, Relyant sought $103,994.08 in attorney fees and expenses. Though Relyant’s appeal was only partially successfully, the government agreed that Relyant was the prevailing party. However, the government argued that its litigating position was substantially justified, and therefore the appellant was not entitled to its costs.
The government noted that the appellant did not succeed on the merits of its claim that the agency had agreed to the modification, and that Relyant had received only a fraction of the recovery sought. Finally, the government argued that the law on good faith and fair dealing was ambiguous enough to make the government’s defense against such a claim substantially justified.
The board disagreed, explaining that the law regarding substantial justification and the Equal Access to Justice Act is straightforward. To prevail, the government is not required to prove that it had a substantial likelihood of victory in the litigation, but rather demonstrate that a reasonable person could think its position was correct. In other words, the government’s position is more likely to be substantially justified when greater legal uncertainty is presented. Further, the board held it must consider the litigation as a whole, so the government’s position on a single matter was less important than its position on the whole.
The board held that Relyant’s lack of success on one cause of action did not make the government’s defense substantially justified, nor did Relyant’s failure to gain the full recovery it sought.
Turning to the government’s assertions regarding the legal uncertainty surrounding the doctrine of good faith and fair dealing, the board noted that its original decision was crafted so that it was no more expansive than pre-existing law and, if anything, set forth a more limited application than might have been divined by a loose reading of some earlier cases. Consequently, even with a more conservative reading, the government’s inaction was clearly within the definition of a breach of the duty of good faith and fair dealing. Therefore, the government’s defense of the facts was not substantially justified.
The board awarded Relyant the full amount it sought, minus fees related to its unsuccessful motion for reconsideration, finding those costs were clearly severable.
Relyant LLC is represented by James H. Price of Lacy, Price & Wagner, PC. The government is represented by Raymond M. Saunders, Army Chief Trial Attorney, and Major Jason W. Allen, JA, Trial Attorney.
