You don’t need a resounding victory to be a prevailing party. In this case, the contractor sued the government for breach. The government asserted mutual mistakes as a defense. The court agreed with the mutual mistake and reformed the lease to reflect the parties’ intent. The court awarded the contractor damages based on the reformed agreement. The contractor then moved for fees under the Equal Access to Justice Act. The government opposed the motion, arguing that the contractor was not a prevailing party; the court, after all, had accepted the government’s defense. But the court found that a party prevails under the EAJA if the final decision alters the parties’ relationship in a way that benefits the contractor. Here, while the court accepted the mutual mistake argument, the reformation altered the parties’ relationship in a way that benefitted the contractor.
Westdale Northwest Center, LP v. United States, COFC No. 16-113
Background
The General Services Administration leased office space from Westdale Northwest Center. The lease provided that GSA would pay a share of Westdale’s real estate taxes. But the parties got into a dispute over the taxes owed. GSA believed it had overpaid the taxes and began deducting the amount of overpayment from its rent.
Westdale brought suit in the Court of Federal Claims alleging that GSA had breached the lease. The government countered that the formula in the least used to calculate GSA’s share of taxes was wrong. The government argued the parties had made a mutual mistake regarding the tax formula, and that the court should reform the lease to reflect the parties’ actual understanding.
The court found the government’s mutual mistake argument persuasive. It reformed the lease to reflect the parties’ intended tax base for calculating GSA’s real-estate taxes. The court found that under this reformed tax base, Westdale was entitled to $173,00 in damages.
Westdale then moved for attorneys fees under the Equal Access to Justice Act
Legal Analysis
Prevailing Party
Only a prevailing party may recover fees under the EAJA. The government argued Westdale was not a prevailing party because the court had essentially granted the government’s affirmative defense of mutual mistake. In fact, the court had denied almost all of Westdale’s claims. Westdale had only alleged reformation of the contract as an alternative claim.
But the court reasoned that under U.S. Supreme Court precedent, a party prevails under the EAJA when relief on the merits of the claim materially alters the legal relationship between parties by modifying the defendant’s behavior in a way that benefits the plaintiff. Here, Westdale had broadly prevailed on its argument that the tax base was incorrect and that GSA had wrongly withheld rent. That claim encompassed one count of Westdale’s complaint. The court’s decision altered the parties’ relationship by reforming the lease to include a new tax base. This change in the relationship benefitted Westdale because under the new tax base, it was entitled to damages, and the government’s basis for withholding rent had been rejected.
Substantial Justification
If a prevailing party eligible for a fee award under the EAJA, the burden shifts to the government to show that its legal position was substantially justified. In this case, the government argued its position was substantially justified because the court accepted the government’s position of mutual mistake and had reformed the lease.
The court rejected the government’s position. While there had been a mutual mistake, the government, throughout the litigation, failed to recognize that Westdale was not an original party to the lease. The mutual mistake had been made by a predecessor lessor. Westdale had no reason to know of the mistake in the tax base. The court reasoned that the government unilaterally interpreted the lease in a manner that penalized Westdale for failing to read the minds of GSA officials. Thus, the government’s position was not justified to a degree that could satisfy a reasonable person.
Reduction of Fees
A party’s limited success may require a reduction in fees under the EAJA. Applying this principle, the court found that an award of full fees to Westdale would be excessive. Westdale only received a fraction of the damages it sought, and it only prevailed on one of its five claims. What’s more, that claim happened to mirror the government’s affirmative defense. In light of this, the court determined that Westdale fees should be reduced by 25 percent.
Westdale is represented by Jennifer A. Gerht of Barbee & Gehrt, LLP. The government is represented by Michael D. Austin of the Department of Justice and Helen Kerns of the General Services Administration.
