785 F.3d 585
Fed. Cir.2015Background
- SUFI contracted with the Air Force in 1996 to install/operate telephone systems on USAF bases in Germany; SUFI provided equipment at no charge in exchange for exclusive long‑distance traffic. The Air Force later allowed alternatives, prompting SUFI to allege material breach.
- The ASBCA found the Air Force in material breach and the parties entered a 2005 Partial Settlement Agreement that preserved SUFI’s right to pursue additional monetary claims and promised interest from the earlier of (i) date the Air Force received the claim or (ii) the date damages were actually incurred.
- SUFI submitted multiple (28) claims to the contracting officer; the contracting officer delayed issuing decisions, and SUFI appealed to the ASBCA; the ASBCA ultimately found for SUFI on many claims but declined to decide entitlement to attorney fees because SUFI had a contingency arrangement and could not then specify amounts.
- On December 29, 2010 SUFI submitted a formal claim for attorney fees; the contracting officer did not issue a timely written decision (more than six months elapsed), and SUFI sued in the Court of Federal Claims after being told it could treat the claim as deemed denied.
- The CFC (1) excused SUFI from exhausting the contractual disputes process due to the contracting officer’s delay/unavailability and material breach; (2) awarded pre‑litigation attorney fees and expenses under common law; (3) awarded fees but denied overhead/lost profits; and (4) awarded interest from the date counsel performed the work. The Federal Circuit affirms in part, vacates the interest ruling, and remands the overhead/lost profit issue.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction / exhaustion of contractual disputes clause | Contracting officer’s delay made the disputes remedy inadequate/unavailable; SUFI was excused from exhausting and could sue in CFC. | SUFI could have pursued ASBCA review under FAR/Board rules as it previously did; delay did not excuse exhaustion. | Delay and counsel’s advice that claim was deemed denied rendered contractual remedy inadequate/unavailable; SUFI excused from exhaustion. |
| Entitlement to attorney fees | Fees incurred preparing/negotiating breach claims were a foreseeable consequence of breach and recoverable under common law (and arguably changes clause). | Fees not recoverable under changes clauses; FAR not applicable to nonappropriated funds contract. | Attorney fees recoverable under common‑law breach principles; affirm fee award. |
| Interest accrual date on awarded fees | Interest should run from when counsel performed the work (earlier date). | Under the Partial Settlement Agreement interest runs from the earlier of receipt of the claim or the date damages were actually incurred; under the contingency arrangement SUFI had not "actually incurred" fees when work was done. | SUFI had not actually incurred fee liability when attorneys performed work under contingency; vacate interest award and remand for recalculation consistent with opinion. |
| Overhead and lost profit for claim‑preparation work | Overhead and lost profit are recoverable under common law as direct and indirect costs caused by the breach. | Such overhead/profit are unreasonable (akin to excessive pass‑through charges) and should be denied. | The trial court erred by applying the FAR passthrough rule; under common law SUFI may recover indirect costs if proven; remand to apply common‑law standards. |
Key Cases Cited
- United States v. Joseph A. Holpuch Co., 328 U.S. 234 (1946) (contractual appeal procedure is exclusive absent clear evidence it is inadequate or unavailable)
- United States v. Anthony Grace & Sons, Inc., 384 U.S. 424 (1966) (contractor’s failure to exhaust may be excused when contracting officer shows unwillingness to act)
- N.Y. Shipbuilding Corp. v. United States, 385 F.2d 427 (Ct. Cl. 1967) (delay by contracting officer can leave nothing for an appeal board to consider)
- Mass. Bay Transp. Auth. v. United States, 129 F.3d 1226 (Fed. Cir. 1997) (breach damages aim to place non‑breaching party in position of full performance)
- Energy Nw. v. United States, 641 F.3d 1300 (Fed. Cir. 2011) (plaintiff may recover both direct and indirect costs caused solely by the breach)
- Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542 (2010) (lodestar method and reasonableness standards for attorney‑fee awards)
- Blum v. Stenson, 465 U.S. 886 (1984) (hourly rate reasonable if in line with prevailing market rates)
- LMI‑La Metalli Industriale, S.p.A. v. United States, 912 F.2d 455 (Fed. Cir. 1990) (time value of money for delay damages must correspond to a dollar figure reasonably calculated)