Asia Commerce Network

ARMED SERVICES BOARD OF CONTRACT APPEALS

Application Under the Equal Access )'

to Justice Act of -- )

)

Asia Commerce Network ) ASBCA No. 58623

)

Under Contract No. SP0600-12-D-1010 )

APPEARANCES FOR THE APPELLANT: Eric S. Montalvo, Esq.

Lauren R. Brier, Esq.

The Federal Practice Group

Worldwide Service

Washington, DC

APPEARANCES FOR THE GOVERNMENT: Daniel K. Poling, Esq.

DLA Chief Trial Attorney

Jared M. Miller, Esq.

Matthew Vasquez, Esq.

Trial Attorneys

DI.A Energy

Fort Belvoir, VA

OPINION BY ADMINISTRATIVE JUDGE O'SULLIVAN

ON APPELLANT'S APPLICATION UNDER THE

EQUAL ACCESS TO JUSTICE ACT

Pending before the Board is an application for fees and other expenses pursuant to

the Equal Access to Justice Act (EAJA), 5 U.S.C. § 504. submitted by appellant, Asia

Commerce Network (ACN). The underlying appeal was taken pursuant to the Contract

Disputes Act, 41 U.S.C. §§ 7101-7109. See Asia Commerce Network, ASBCA

No. 58623, 17-1 BCA, 36,872. Familiarity with that decision is presumed. Because we

find that ACN is an eligible, prevailing party, and that the government's position was not

substantially justified, we grant ACN's application but reduce the requested recovery to

that which is allowed by the EAJA.

BACKGROUND

The underlying appeal involved a January 20, 2011 contract to supply jet fuel to

Bagram Air Field, Afghanistan. 17-1 BCA ~ 36.872 at 179.732. On January 17, 2013, the

Defense Logistics Agency (DLA or government) terminated the contract for cause. Id.

at 179,740. Before the Board. the government did not meet its initial burden of proving a

prima facie case of the contractor's default. The government argued that the termination

was justified because ACN failed to deliver fuel by the delivery date and did not comply

with the contract requirements for construction of the pipeline. But the record before the

Board left no doubt that the government waived the delivery date and did not re-establish a

new one. Id. at 179,745. Moreover, the weight of the evidence established that ACN's

performance complied with the terms of the contract. Id. at 179,745-46.

DISCUSSION

As a partial waiver of sovereign immunity, the EAJA is to be strictly construed in

favor of the United States. Ardestani v. I.N.S., 502 U.S. 129, 137 (1991). To recover under

the EAJA, an applicant must timely file its application, establish it is an eligible party as

defined by EAJA, and prove that it was a prevailing party in the underlying action. Rex

Sys., Inc., ASBCA No. 52247, 02-1 BCA •: 31.760 at 156,854. Even if an applicant is

otherwise qualified, an award may be denied if the government's position is determined to

have been substantially justified, or if special circumstances make an award unjust.

5 U.S.C. § 504{a)(l).

DLA docs not oppose ACN's application on the basis of ACN's status as a

prevailing party, the timeliness of the application, or whether its position was substantially

justified. Instead, DLA argues that ACN did not provide evidence it was an eligible party,

nor did ACN properly calculate its fees and costs. (Gov't opp'n at 3-4) In its reply, ACN

submitted additional evidence supporting its position that it is an eligible party. It also

reduced the quantum requested based on calculations made by DLA. (App. reply br.

at 1-3)

Timeliness

A party seeking an award of fees and other expenses shall file its application within

30 days of a final disposition of an adversary adjudication. 5 U.S.C. § 504(a){2). The

30-day filing period is a jurisdictional prerequisite to an EAJA application.

JMT. Machine Co. v. United States, 826 F.2d 1042, 1047 (Fed. Cir. 1987). The Board's

decision sustaining the appeal was issued on October 4, 2017. ACN's application for

award of fees and expenses was filed on November 3, 2017, and is, therefore, timely.

Prevailing Party

In its decision, the Board affirmed ACN's appeal. finding that the government did

not meet its burden to demonstrate a prima facie case of default by ACN. As a result, the

termination for default was converted to one for convenience. Asia Commerce Network,

17-1 BCA, 36,872 at 179,746. We find, and the government does not contest, that ACN

was the prevailing party.

Eligibility

A party is generally eligible for consideration of an award of costs if it is an

entity having a net worth of no more than $7,000,000 and no more than 500 employees

at the time the adversary adjudication was initiated, in this case April 15, 2013.

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5 U.S.C. § 504(b)(l)(B)(ii). ACN asserts that it is eligible to receive fees and expenses

under the EAJA because it meets the criteria described above. The government disagrees.

To support its position, ACN submitted a declaration of Ahmad Jawed Javed,

president and CEO of ACN, as part of its application (app. hr., ex. 2). It also submitted a

copy of ACN's 2013 bank statements from the National Bank of Pakistan - Kabul Branch

(id. at 2-3). In its answer, the government contested the sufficiency of ACN's evidence to

establish it met the criteria for relief under the EAJA, stating that a bank balance sheet did

not identify net worth by accounting for assets and liabilities (gov't opp'n at 5). The

government also asserted that because ACN was a sole proprietorship, the net worth of

both ACN and Mr. Javed must be combined to determine eligibility under the EAJA (id.

at 6).

In response, ACN included in its reply brief a fixed asset register for assets

maintained from June 20, 2012 through June 30, 2013, a supplemental affidavit of

Mr. Javed, the expert reports of appellant's forensic accounting expert

Mr. James McGovern, ACN's 2013 bank statements, 2012 - 2014 profit and loss

statement, and a General Logistics Group tax report issued by the Government of the

Islamic Republic of Afghanistan (app. reply br., exs. A-H). ACN asserts that these

documents, taken in totality, prove that it meets the eligibility requirements for an award of

fees.

By Order dated September 11, 2018, the Board requested supplemental briefing

from the parties regarding Mr. Javed's net worth and ACN's sole proprietorship status.

Specifically, the Board requested information regarding the difference, if any, between the

meaning of "a sole proprietorship" under US and Afghanistan law, as well as documented

proof of Mr. Javed's personal net worth at the time the appeal was filed.

In its supplemental brief, ACN provided evidence to demonstrate that it had been

improperly characterized as a sole proprietorship, when it was actually a limited liability

corporation (LLC) (app. supp. br. at 1-3). ACN explained that the characterization as a

sole proprietorship came from mistaken reliance on ACN's record entry in the System for

Award Management registration portal (id. at 3). To support its position, ACN stated that

the articles of incorporation, as well as ACN's registration with the Afghanistan Central

Business Registry & Intellectual Property (ACBRIP) clearly characterized ACN as an

LLC, and provided evidence of its registration status with the ACBRIP, a copy of its

Ministry of Commerce and Industries (MoCI) business license, and its articles of

incorporation (id., exs. A-C). The ACBRIP verification, which can be obtained online,

identifies the "business type" for ACN as "Limited Liability Company (Ltd)" (id., ex. A).

The company name listed on the MoCI business license as well as the articles of

incorporation also identify ACN as a "LTD" (id., exs. B, C).

The government did not refute the evidence presented by ACN. Instead, the

government argues that ACN waived its argument that it is an LLC because it did not make

the argument in its reply brief (gov't supp. br. at 2). The government also states that

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the prior affidavits, which identify ACN as a sole proprietorship, should not be overridden

by the subsequent evidence.

The EAJA defines "party'' as "any ... corporation ... the net worth of which did not

exceed $7,000,000 at the time the adversary adjudication was initiated."

5 U.S.C. § 504(b)(l)(B)(ii). "Net worth is determined by subtracting an applicant's total

liabilities from its total assets.'' Kostmayer Constr., LLC, ASBCA No. 55053,

09-2 BCA ,i 34,302 at 169,440 (citing Broaddus v. United States Corps of Engineers,

380 F.3d 162, 167 (4th Cir. 2004); Shooting Star Ranch, LLC v. United States,

230 F.3d 1176, 1178 ( l 0th Cir. 2000); City of Brunswick, GA v. United States,

849 F.2d 501,503 (11th Cir. 1988), cert. denied, 489 U.S. 1053 (1989)). The Board has

rejected the argument that the net worth of a corporation's individual shareholders should

be considered in determining the eligibility of the corporation. Kostmayer, 09-2 BCA

, 34,302 at 169,442 (citing Beta Engineering, Inc., ASBCA Nos. 53570, 53571, 03-1

BCA ,i 32,213 at 159,322).

Here, the government's argument that Mr. Javed's net worth must be combined

with ACN's in order to determine eligibility is not persuasive. The Board finds the

supplemental evidence provided by ACN sufficient to establish that ACN is an LLC and

that the prior characterization of ACN as a sole proprietorship was mistaken.

The government alleges that ACN has waived its argument that it is an LLC and

not a sole proprietorship by not addressing the difference in its reply brief (gov't supp. br.

at 2). We disagree. The cases cited by the government to support this position (Mote v.

City of Chelsea, 284 F. Supp. 3d 863, 876-77 (E.D. Mich. 2018); and Chevron Corp. v.

Danziger, 325 F. Supp. 3d 371,386 (S.D.N.Y 2018)) are not binding on the Board and are

distinguishable from the issue at hand. None of the parties in those matters were asked by

the court to provide supplemental factual information. While there was additional briefing

allowed in Mote v. City of Chelsea, it is unclear if the additional briefing was requested by

the court, 284 F. Supp. 3d at 876-77. What is clear though, is that the topic on which the

parties provided additional briefing was a legal issue which ultimately "amounted to

another summary judgment motion based on a new theory that contradicted a position

[taken] in an earlier brief.., Id. This is not the case here. The supplemental evidence

supplied by ACN clarified a factual issue and did not present any new legal theories about

the underlying recovery requested by ACN. The issues found to be waived in the cases

cited by the government were purely legal. Here. the Board, acting as the fact-finder. has

found sufficient evidence to establish ACN's status as an LLC. No new legal arguments

were presented to the Board.

The Board notes that it did not receive the requested evidence of Mr. Javed's

personal net worth. While the government alleges this is detrimental to ACN's recovery,

our finding that ACN is an LLC makes evidence of the owner's net worth irrelevant to the

issue of eligibility to recover under the EAJA.

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The Board must now determine the adequacy of the proof of net worth provided for

ACN. Appellant bears the burden of proving its eligibility for an award. Kostmayer, 09-2

BCA i! 34,302 at 169,442 (internal citations omitted). While "[t]here is no set rule

regarding the adequacy of documentation required to establish an EAJA applicant's net

worth ... the effort required to secure an EAJA award should not result in any additional

major litigation." Id. at 169,443 (citing Hensley v. Eckerhart, 461 U.S. 424,437 (1983)).

Evidence is considered on a case-by-case basis, and supplementation of initial, deficient

applications is generally allowed. Id. (internal citations omitted).

Given the totality of the circumstances in this matter, we find that appellant has

proven that it is eligible for an award. The evidence presented demonstrates that ACN' s

net worth was under $7,000,000 at the time the appeal was filed in April 2013. ACN's

fixed asset register identifies $5,846,009.00 in assets as of June 30, 2013, and more

accurately $5,513,537 after a write-down for depreciation (app. reply br .. ex. A). ACN's

bank statements show that it had a balance of only $656.27 in April 2013 (app. reply br ..

ex. D at 7). ACN did not provide a breakdown or calculation of its liabilities following

contract termination in January 2013. Instead, it provided a profit and loss sheet,

evidencing that from June 1, 2012 until May 30, 2014, ACN incurred a net loss of

$1,964,533.70 (app. reply br., ex. E). In his supplemental affidavit, Mr. Javed attributes

this loss to the termination for default and subsequent lack of payment (app. reply br.,

ex.Bat 2). Taking all of the factors into account and before subtracting liabilities, ACN's

assets are at least $1 million below the requisite eligibility threshold.

We also find that ACN provided sufficient evidence to establish that it did not

employ more than 500 employees at the time the appeal was filed. While the employee

lists provided by ACN are dated through the end of 2012, Mr. Javed' s supplemental

declaration asserts that most of the staff was let go immediately following the termination

of the contract, and the documents provided accurately reflected "the amount of people

ACN employed at the time of this appeal'' (app. reply br., ex. Bat 2, ex. H). Even so, the

payroll and list of staff provided shows only 15 to 39 individuals were employed with

ACN from September 2012 to December 2012 (app. reply br., ex. H). The Board accepts

Mr. Javed's declaration, coupled with the documentary evidence contained in Exhibit H to

ACN's reply brief, as credible. ACN employed less than 500 people at the time this

appeal was filed, making it eligible for consideration of an award under the EAJA.

Substantial Justification

ACN argues that the government's position in the underlying appeal was not

substantially justified. In its reply brief, the government did not address whether its

position was substantially justified, apparently waiving this argument. Even so,

·substantial justification is determined on the entire record before the Board. Pro-Built

Construction Firm, ASBCA No. 59278, 18-1 BCA ,i 36,975 at 180,116 (citing Job

Options, Inc., ASBCA No. 56698, 11-1 BCA ,i 34,663 at 170,761). The government bears

the burden to show that its position was substantially justified. Amaratek, ASBCA

Nos. 59149, 59395, 15-1 BCA ,i 35,866 at 175,348 (citing Lucia E. Naranjo, ASBCA

5

No. 52084, 00-2 BCA ,i 30,937 at 152. 707). To prevail on a substantial justification

defense, the government is not required to prove that it had a substantial likelihood of

success in the litigation. Rather, the government has the burden of proof to demonstrate

that "a reasonable person could think !the government's position is] correct, that is [that] it

has a reasonable basis in law and fact." Pro-Built, 18-1 BCA ,i 36,975 at 180,116 (citing

Pierce v. Underwood. 487 U.S. 552. 566 n.2 (1988); Rex Systems, 02-1 BCA ,[ 31,760

at 156,854).

In its termination for cause, the government asserted that ACN failed to timely

deliver and was non-compliant with the terms of the contract. However, the record in this

appeal clearly established that the government had waived the original delivery date and

failed to establish a new one. Moreover, the contracting officer (CO), in her testimony,

abandoned this ground for termination, testifying that the termination was driven by her

concern about ACN' s technical capabilities and that the timeliness of deliveries was not a

,r

factor. Asia Commerce Network, 17-1 BCA 36,872 at 179,745.

The second asserted ground for termination, noncompliance with contract terms and

conditions, was not supported by the contract nor by the weight of testimony at trial,

including that of the government's own witnesses. The CO's mistaken impression that

cathodic protection for the pipeline was required by API 5L Standard was debunked at trial

not only by ACN's expert, but also by a DLA engineer testifying as a government witness.

17-1 BCA ,i 36,872 at 179,742. As to whether the pipeline was required to be encapsulated

in concrete, this was not a contract requirement. One government witness testified that

ACN proposed concrete only for two sections of pipe, to protect it from heavy traffic and

to elevate it over water in low-lying areas. Id. at 179,745. Another government witness

testified that enclosing the entire length of a pipeline in concrete is not industry practice,

and two government witnesses plus ACN's expert testified that doing so would not be

effective for containing spills. Id. at 179,746.

Given the foregoing. we fail to see how a reasonable person could think the

government's position had a "reasonable basis in law and fact." Pro-Built, 18-1

BCA ,i 36,97_5 at 180,116. Thus, \Ve find the government's position not substantially

justified.

Special Circumstances

The government has not contended that there are any special circumstances that

would make an award of fees and costs unjust. 5 U.S.C. § 504(a)(l). We conclude that no

special circumstances exist to preclude an EAJA award.

Request for Attorneys' Fees in Excess of 5 U.S.C. § 504(b)(l)(A)

ACN requests an increased rate of $196.00 per hour for attorneys' fees, based on the

cost of living in the Washington, DC, metropolitan area and the specific government

contract litigation knowledge of appellant's law firm (app. br. at 8-10). In Optimum

6

Services, Inc., ASBCA Nos. 58755, 59952, 17-1 BCA, 36,816, the Board held that it has

no authority to award fees in excess of the $125 per hour in the EAJ A, stating:

With respect to the question of fee enhancement, the

EAJA provides that "attorney ... fees shall not be awarded in

excess of $125 per hour unless the agency determines by

regulation that an increase in the cost of living or a special

factor, such as the limited availability of qualified attorneys

or agents for the proceedings involved, justifies a higher

fee.'' 5 U.S.C. § 504 (b)(l )(A) (emphasis added). Our Board

jurisprudence has long held that the EAJA ·'docs not

confer on the ASBCA discretion to apply cost of living or

special factor increases without an agency determination so

prescribing by regulation." Freedom, NY, Inc., ASBCA

No. 43965, 09-1 BCA ~ 34,097 at 168,595; see also ABS

Baumaschinenvertrieb, Gmblf, ASBCA No. 48207, 01-2

BCA ,r 31.549 at 155.826-27 (declining to enhance fees

where "the Department of Defense has not issued such a

regulation authorizing enhancement of fees based on cost of

living or any other special factors''); Arapaho Commc 'ns,

Inc./Steele & Sons, Inc., Joint Venture, ASBCA No. 48235,

98-1 BCA ,i 29,563 at 146,544 ("No such regulation has

been issued by the Department of Defense. We have no

authority in this instance to award more than [the statutory

rate.]").

Id. at 179,431-32; see also Assessment and Training Solutions Consulting Corporation,

ASBCA No. 61047, 18-1 BCA ,r 37,075 at 180,454. As of the date of this decision, no

such regulation has been issued by the Department of Defense, and the Board has no

authority to award enhanced fees.

In its application, ACN listed the number of hours worked by the attorneys in this

appeal as 1,512.60 and the paralegals and law clerks as 405 (app. br. at 12). Billing

entries were included supporting these figures (app. br., ex. 3A). In its response. the

government agreed that the majority of the bills are related to the appeal, but argued that

14.2 attorney hours and 27 .5 paralegal/law clerk hours were either unrelated to this appeal

or duplicate entries (gov't opp'n at 9-10). ACN agreed in its reply that the hours were

unrelated and/or duplicate, and reduced the total hours requested to 1,498.4 attorney hours

and 377.5 paralegal/law clerk hours (app. reply br. at 2 nn.2-3). After review of the

billing entries, the Board agrees that the reductions are proper. Attorney and

paralegal/law clerk fees arc awarded as follows:

7

- ·-

Type Rate Hours Fees

Attorneys' fees

t------~--------+---

$125/h-our

----

1,498.4 $187,300.00

_p~rnlegal and law clerk fees_J_l~~/h our 377.5 $46,055.00

Total

-------------·--------------- ~---~----

$233.355.00

- - - - - - - - - - - - - - - __ J. _______ - - - - - · - · - - - - - - - -

Request for Expert Fees

Initially, ACN sought to recover expert fees in the amount of $50,649.33, in

addition to attorneys' fees (app. br. at 13-14). In its answer, the government argued that

the claimed expenses exceed those allowed by the EAJA, and if any award is made, it

should be adjusted to the rate which applied to the highest fixed rate by the Classification

Act Schedules for GS-15 in 2014 and 2015 (gov't opp'n at 10-12). In its reply, ACN

agreed with the government's adjustment, and reduced its requested expert witness fee

request to $16,464.55 (app. reply br. at 2 n.4).

With regard to expert witness fees. the EAJA provides that "no expert witness shall

be compensated at a rate in excess of the highest rate of compensation for expert witnesses

paid by the agency involved." 5 U.S.C. § 504(b)(l)(A). The Department of Defense

Federal Acquisition Regulation Supplement (DFARS) 23 7.104(f)(i) provides that payment

"to each expert or consultant for personal services under 5 U.S.C. 3109 shall not exceed

the highest rate fixed by the Classification Act Schedules for grade GS-15.'' See also

Optimum Servs., 17-1 BCA, 36.816 at 179.432.

We apply the DFARS rate and m:vard expert fees as follows:

Expert --·----- Rate Hours Fees ~

J .F. Kiely Service Co. - Senior $62.68 0.5 $31.34

Consultant (2014) - --

J.F. Kiely Service Co. - Daniel Driscoll $62.68 61 $3,823.48

(2014) --· ·- ·-

J.F. Kiely Service Co. - Project Engine er $57.00 5.5 $313.50

(2014)

J.F. Kiely Service Co. -- Daniel Driscoll

(2015)

-~1

$63.3! 88.75 I $5,618.76

---- ----------·-- - - - · - > - - · - - - - - - -

J .F. Kiel Service Co. - Other expen~_es $1,920.58

James McGovern (2014) ___ .____ -·----·· - - $62.68 ~·

5.2 $325.94

James McGovern (2015)_________ _ $63.31 68.8 $4.355.73

r----· -----· - -

Dou Hibsham (2014) ______________ _ -,. $62.68 ___ ]_ 1.2 - $75.22 - -

Total

' - - - - - - - - - · - - - - · - · - - - - ------··- - ----·- --·- - ------- -- --·-- - ---

- ·-·-

$16,464.55

---- - - - - - - - - - - · · - - · · _I

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Travel and Miscellaneous Costs

Lastly, ACN seeks to recover costs related to attorney travel required to litigate this

appeal and miscellaneous costs for travel, copies, postage, deposition costs, exhibit

preparation, and research charges (app. br. at 14-16). In total. ACN requests 21,571.91 in

travel expenses and $13,169.21 in miscellaneous expenses (app. br. at 14-16, exs. 5-6).

The government does not dispute the quantum of expenses sought by ACN, which is

amply supported by invoices, and which appears to be reasonable. The Board grants

ACN's request for travel and miscellaneous expenses of $34,741.12.

CONCLUSION

ACN has established that it is an eligible party entitled to fees under the EAJA.

The government has not carried its burden to prove that its position in this appeal was

substantially justified or that special circumstances exist precluding an award. ACN's

application for fees and costs under the EAJA is granted. ACN is awarded fees and costs

as follows:

Cate~ory Amount

Attorneys' fees - -1 - - - · - - ·

$187,300.00

Paralegal and law clerk fees $46,055.00

--+------------------

Expert Fees & Related Costs

Attorney Travel Costs and

-------------+--------------

I

$16,464.55

$34,741.12

Miscellaneous Attorney Expenses

TOTAL AWARD ~1--: ~ $284,560.67 --

Dated: May 16, 2019

"" /l I

Y,c

Administrative Judge

Anned Services Board

of Contract Appeals

I concur I concur

_.,..---"""'\

-M

RICHARD SHACKLEFORD

~'---

OWEN C. WILSON

Administrative Judge Administrative Judge

Acting Chairman Vice Chairman

Armed Services Board Armed Services Board

of Contract Appeals of Contract Appeals

9

I certify that the foregoing is a true copy of the Opinion and Decision of the Armed

Services Board of Contract Appeals on an application for fees and other expenses incurred

in connection with ASBCA No. 58623, Appeal of Asia Commerce Network, rendered in

accordance with 5 U.S.C. § 504.

Dated:

PAULLA K. GATES-LEWIS

Recorder, Armed Services

Board of Contract Appeals

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