# GRANTED IN PART: March 29, 2024

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/agency%3Acbca%3A36a3fe0ce7e5c9b3

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

GRANTED IN PART: March 29, 2024

CBCA 7857-C(5964)

HUGHES GROUP LLC,
Applicant,
v.
DEPARTMENT OF VETERANS AFFAIRS,
Respondent.
Robert A. Klimek, Jr. of Klimek & Casale, P.C., Upper Marlboro, MD, counsel for
Applicant.
David G. Fagan, Office of General Counsel, Department of Veterans Affairs, Bend,
OR, counsel for Respondent.
Before Board Judges SHERIDAN, SULLIVAN, and O’ROURKE.
O’ROURKE, Board Judge.
Applicant, Hughes Group LLC (Hughes), filed an application under the Equal Access
to Justice Act (EAJA), 5 U.S.C. § 504 (2018), seeking $149,201.50 in attorney fees and
$8532.12 in costs, for a total of $157,733.62. These expenses relate to Hughes’ appeal of the
decision of respondent, Department of Veterans Affairs (VA or agency), to terminate
Hughes’ contract for cause. Because we find that Hughes met the statutory qualifications for
award and the agency’s position was not substantially justified, we grant Hughes’ application
in the amount of $68,237.97. We deny the remainder of Hughes’ application because we
find that Hughes unduly and unreasonably protracted final resolution of the dispute.

CBCA 7857-C(5964)

2
Background

The Board assumes familiarity with the facts of Hughes Group LLC v. Department
of Veterans Affairs, CBCA 5964, 23-1 BCA ¶ 38,297, in which the Board granted Hughes’
appeal of the agency’s termination for cause and converted it to a termination for the
convenience of the Government. Hughes timely filed an application for attorney fees and
costs under EAJA. Submitted with Hughes’ application were exhibits detailing attorney fees
and costs incurred by two law firms, Klimek & Casale, P.C. (K&C) and Edward Bentley,
Esq. (Bentley), which Hughes retained to represent it in the litigation before the Board. The
accompanying exhibits included an itemized report from K&C of attorney fees for Robert
Klimek, Jr., at the EAJA rate of $125 per hour for a total of $64,787.50; an itemized list of
appeal-related costs from K&C in the amount of $8532.12; and a record of payments to
Bentley totaling $84,414 for invoiced work at Bentley’s rate of $120 per hour.
Notwithstanding the Board’s decision on the merits, the VA objected to any EAJA
award, arguing that the agency’s litigation position was substantially justified and Hughes’
refusal to engage in settlement discussions significantly prolonged the litigation. In addition,
the agency pointed to Hughes’ poor performance during the life of the contract to support its
position during the litigation. The agency also identified six instances where the VA invited
Hughes to negotiate or pursue Board-assisted mediation, beginning as far back as December
2017, and occurring as late as January 29, 2021. In each instance, the VA said it was willing
to convert the termination for cause into a termination for convenience, but Hughes declined
to negotiate a settlement and even questioned the utility of mediating—a posture that resulted
in protracted and costly litigation. This, the VA insists, amounted to a self-inflicted wound
that warrants denial of the requested costs and fees.
Hughes maintains that refusing to settle was a business decision and that a formal
settlement offer was not presented by the VA until January 29, 2021. The offer itself, says
Hughes, was unacceptable because the VA agreed to convert the termination “at no cost to
the Government whatsoever for past or future, direct or indirect costs to include attorneys’
fees or any costs that could be sought under a termination for convenience cost proposal.”
Hughes argues that accepting that offer would have precluded any termination settlement
proposal, as well as attorney fees and any potential claims stemming from the Changes
clause of the original contract.
There is no evidence in the record that Hughes made a counteroffer to the VA’s
formal settlement offer or submitted any requests to the Board pursuant to Rule 54, 48 CFR
6101.54 (2023) (alternative dispute resolution), to secure a more favorable settlement.
During status conferences with the parties to address escalating discovery disputes, the Board
raised concerns about the time and expense of litigation in light of the strong potential for a
negotiated settlement agreement, especially since Hughes’ contract was terminated so close

CBCA 7857-C(5964)

3

to its originally scheduled expiration date. In response to these entreaties, Hughes expressed
its intention to depose the contracting officer a second time, file a summary judgment
motion, and revise and resubmit to the contracting officer multiple, previously submitted
requests for equitable adjustment (REAs).1
The Board cautioned Hughes, during a December 2, 2020, status conference, that
insufficient time remained in the schedule to fully brief and decide a summary judgment
motion prior to the March 2, 2021, hearing date. Undeterred, Hughes filed a 106-page
summary judgment motion on December 28, 2020, asserting ten different supporting
arguments, several of which involved patent factual disputes. Hughes commented that it was
common practice for parties to file such motions at the conclusion of discovery. That same
day, Hughes served its first set of interrogatories on the VA and its third set of requests for
production of documents.
During a conference call on February 1, 2021, Hughes explained that the REAs were
the reason why Hughes had been hesitant to engage in mediation. Upon hearing about the
forthcoming REAs, the VA was not dissuaded from mediation. The VA responded, “if the
parties are going to settle the appeal, all items relating to the contract, to include any REAs,
had to be addressed together, rather than a piece-meal approach.” The Board further
explained to Hughes that even though the REAs were not part of this appeal proceeding, the
parties were free to address the REAs, and any other matters, in mediation. Despite these
reassurances, Hughes remained steadfast in its position against mediation.
The dispute proceeded to a hearing and the Board issued a decision on the merits. The
Board granted the appeal and converted the termination for cause into a termination for the
convenience of the Government. The agency did not appeal the decision. Hughes
subsequently filed this application for the costs and fees it incurred defending against the
termination.
Discussion
To successfully recover under EAJA, an applicant must:
(1)

1

have been a prevailing party in a proceeding against the United States;

The record contains eight conference memorandums issued by the Board
during the course of the underlying dispute. These memorandums provide a summary of the
issues discussed during the parties’ status conferences with the Board.

CBCA 7857-C(5964)

4

(2)
if a corporation, have not more than $7,000,000 in net worth and five
hundred employees at the time the adversarial adjudication was initiated;
(3)
submit its application within thirty days of a final disposition in the
adjudication;
(4)
in that application, (a) show that it has met the requirements as to
having prevailed and size (numbers (1) and (2) above) and (b) state the amount
sought and include an itemized statement of costs and attorney fees; and
(5)

allege that the position of the agency was not substantially justified.

Paradise Pillow, Inc. v. General Services Administration, CBCA 5237-C(3562), 17-1 BCA
¶ 36,628, at 178,365-66 (citing 5 U.S.C. § 504(a)(1), (2), (b)(1)(B)). In reviewing Hughes’
application, we find that Hughes meets all of the eligibility requirements under EAJA.2
Eligibility alone, however, is insufficient to recover litigation expenses. An agency may
successfully argue that its position during the litigation was substantially justified or that the
award should be reduced because the applicant unduly prolonged litigation. 5 U.S.C.
§ 504(a)(l), (3). Here, the VA advanced both of these arguments, which we evaluate below.
Substantial Justification
Once an applicant has fulfilled the statutory requirements under EAJA, the burden
shifts to the agency to show that its position was substantially “justified to a degree that could
satisfy a reasonable person.” Pierce v. Underwood, 487 U.S. 552, 565 (1988), quoted in
Greenhill v. United States, 96 Fed. Cl. 771, 776 (2011). “Whether or not the position of the
agency was substantially justified shall be determined on the basis of the administrative
record, as a whole, which is made in the adversary adjudication for which fees and other
expenses are sought.” 5 U.S.C. § 504(a)(l); see Chiu v. United States, 948 F.2d 711, 714-15
(Fed. Cir. 1991).
An inquiry into whether the Government was substantially justified extends beyond
its legal stance during litigation and includes factors such as the degree of success achieved
by the contractor in the underlying dispute, whether the Government forced the contractor
to litigate to obtain relief, and whether the Government’s conduct during contract
administration was unjust or unreasonable. See Michael Johnson Logging v. Department of

2

Hughes filed a correction to its application stating it inadvertently omitted the
fact that Hughes had less than 500 employees when the application was filed. The correction
included the required declaration.

CBCA 7857-C(5964)

5

Agriculture, CBCA 7187-C(5089, et al.), 23-1 BCA ¶ 38,460, at 186,938 (citing Vet4U, LLC
v. Department of Veterans Affairs, CBCA 6612-C(5387), 20-1 BCA ¶ 37,504, at 182,187-88;
Dream Management, Inc. v. Department of Homeland Security, CBCA 5739-C(5517), 17-1
BCA ¶ 36,916, at 179,861; DRC Corp. v. Department of Commerce, GSBCA 15172C(14919-COM), 00-1 BCA ¶ 30,841, at 152,227-28). These three factors provide a
framework for analyzing whether the VA was substantially justified in the underlying
dispute.
The first factor we consider is the degree of success that Hughes achieved in its appeal
of the termination for cause, which was based on Hughes’ poor performance of the contract.
Hughes requested, and was granted, a termination for convenience. Notwithstanding that
result, the VA makes the same argument to contest this application. Even if Hughes’
performance justified adverse action, the Board found that the termination for cause was
legally deficient. Proffering the same failed argument here will not defeat an EAJA award.
“The Government has been cautioned about the folly of simply rearguing the merits of its
case as a defense to an EAJA application.” Allen Ballew General Contractor, Inc. v.
Department of Veterans Affairs, CBCA 3-C(VABCA 6987E), et al., 07-2 BCA ¶ 33,653, at
166,636 (citing Data Enterprises of the Northwest v. General Services Administration,
GSBCA 16536-C(15607), 05-1 BCA ¶ 32,968; David Boland, Inc., VABCA 5858E, et al.,
03-1 BCA ¶ 32,170). Hughes was fully successful in the underlying dispute. The VA did
not appeal the result.
The second factor we consider is whether Hughes had to litigate to obtain relief. Our
predecessor Board found that “when the contractor is entitled to some relief and the
Government forces that contractor to litigate to obtain the relief . . . the position of the
Government is deemed to be not substantially justified.” Universal Development Corp. v.
General Services Administration, GSBCA 12174-C(11251), 93-2 BCA ¶ 25,836, at 128,585
(emphasis added) (citing Gilroy-Sims & Associates v. General Services Administration,
GSBCA 11778-C(8720, et al.), 93-1 BCA ¶ 25,547 (1992)). Here, with the severest of
sanctions asserted against it, Hughes was forced to appeal the termination for cause in order
to obtain relief.
As to the third factor, the VA’s conduct during contract administration, we observed
in our termination decision that the VA gave Hughes numerous opportunities to correct
deficient work, which Hughes repeatedly failed to do. However, instead of taking deductions
from Hughes for those deficiencies—as the contract permitted it to do—the VA stopped
paying Hughes altogether. Hughes continued to work for nearly three months without
compensation, a course of conduct by the VA that was not only unreasonable, but also, as
the Board found, constituted a breach of contract. One week after fully compensating
Hughes for the unpaid work, the VA issued Hughes a defective termination for cause notice
which, among other defects, simultaneously terminated the contract and directed Hughes to

CBCA 7857-C(5964)

6

continue performing for an additional three weeks, which was nearly at the end of the
contract period. In an attempt to cure the deficiencies, the VA issued an amended
termination for cause notice one day prior to the expiration date of the contract.
No reasonable person would conclude that the VA’s conduct in the last four months
of the contract was substantially justified. There were other ways to hold Hughes
accountable for its poor performance, such as allowing the contract to expire and issuing
Hughes an adverse performance rating. Or the VA could have withdrawn the termination
notice instead of amending it and then issued an adverse performance rating. By insisting
on following through with the termination for cause, however, the agency initiated a course
of litigation that was both ineffective and expensive.
Protracted Litigation
The VA’s second argument against an EAJA award is that Hughes unnecessarily
prolonged the litigation by “rejecting the VA’s settlement offers and refusing the VA’s
requests to mediate.” Under EAJA, “[t]he adjudicative officer . . . may reduce the amount
to be awarded, or deny an award, to the extent that the party during the course of the
proceedings engaged in conduct which unduly and unreasonably protracted the final
resolution of the matter in controversy.” 5 U.S.C. § 504(a)(3); see Systems Integration &
Management, Inc. v. General Services Administration, CBCA 3815-C(1512), et al., 15-1
BCA ¶ 35,886, at 175,442; Michael C. Lam v. General Services Administration, CBCA
1472-C(1213), 09-2 BCA ¶ 34,227, at 169,177.
The VA identified an entry in Hughes’ time log showing that the VA contacted
Hughes to “seek settlement” on December 13, 2017—less than one week after Hughes
appealed the termination decision to the Board. An email between the parties four days later
supports this claim but reflects that Hughes was proposing to send the Government a
settlement offer. Either way, neither party reveals the terms of the referenced settlement, and
Hughes did not pursue it. The record also contains an email, dated January 26, 2021, from
the VA to Hughes, stating:
Several months ago, I received the authority to accept the offer to convert the
[termination for default] to a [termination for convenience] in the interest of
resolving the litigation.
[The Contractor Performance Assessment Reporting System (CPARS)] now
states that Hughes was terminated for default but CPARS will be updated and
will . . . reflect that the [termination for default] has been converted . . . .

CBCA 7857-C(5964)

7

Please advise Mr. Hughes position as you previously rejected this offer and
stated your client was not interested in mediating the case but I believe we
were not on the same page about what was meant by mediation.
This offer makes no mention of precluding costs. Since a conversion was all that
Hughes could achieve in the litigation before the Board, this offer seemed completely
responsive to Hughes’ demands.3 Hughes cautiously responded that it needed to know what
the VA wanted in exchange for the conversion. Three days later, the VA clarified its offer.
“The Government agrees to covert [sic] the termination for default to a termination for
convenience at no cost to the Government whatsoever for past or future, direct or indirect
costs to include attorneys’ fees and or any costs that could be sought under a termination for
convenience cost proposal.” The stipulation of having to waive attorney fees and give up the
opportunity to submit a termination for convenience cost proposal made the offer
unacceptable from Hughes’ perspective because it was less than what Hughes could
potentially achieve at the Board. A conversion from the Board would open the door to an
EAJA application and a termination cost proposal. There was no guarantee that Hughes
would prevail in either case, but litigating and winning on the termination issue at least
preserved the opportunity for Hughes to submit such claims.
At that time, neither the Board nor the VA knew that Hughes was working on revising
and resubmitting REAs that Hughes had presented to the VA in the past. Hughes first
disclosed this during the Board’s conference call with the parties on February 1, 2021, and
said it was the reason that Hughes was hesitant to pursue mediation. Any confusion that
Hughes may have had about what issues could be considered during mediation, or presented
in a settlement offer, was cleared up during that call when the VA stated, “if the parties are
going to settle the appeal, all items relating to the contract, to include any REAs, had to be
addressed together, rather than a piece-meal approach.”
In case Hughes did not understand, the Board further explained during the call that
“even though the REAs were not part of the appeal proceeding, the parties were free to
address the REAs, and any other matters in mediation.” Indeed, from that day forward, there
can be no doubt that Hughes understood that settlement negotiations did not exclude other
costs and that Hughes had nothing to lose by presenting a counteroffer or pursuing Boardassisted mediation. Despite these clarifications, Hughes continued to pursue litigation and
increase its costs. After years of urging by the VA and the Board, Hughes would not even

3

The offer to update CPARS did not make this settlement offer better than what
Hughes could achieve in litigation, since CPARS could not reflect a termination for cause
if the Board were to convert it to a termination for convenience. According to the offer, the
VA was not proposing a favorable CPARS rating.

CBCA 7857-C(5964)

8

attempt a less costly, more efficient means of resolving the termination. Paying Hughes to
sit on its rights and drive up costs is not conduct that merits endorsement. An EAJA award
for any amount past the February 1, 2021, conference call would only serve to encourage
additional litigation—not efficiently resolve it. Had Hughes presented such a counteroffer
and the VA balked at it, that would be a different story.
“The Supreme Court has instructed that the amount of fees to be awarded is a matter
for the Board’s discretion.” Golden West Environmental Services v. Department of
Homeland Security, DOT BCA 2895A, 05-1 BCA ¶ 32,869, at 162,897 (citing Hensley v.
Eckerhart, 461 U.S. 424, 437 (1983); Chiu, 948 F.2d at 713). Hughes may have prevailed
at the hearing, but the Board found ample evidence of Hughes’ deficient performance
throughout the contract—so deficient, in fact, that we noted in our decision that a termination
for cause may have been sustained had the VA not improperly withheld payment for three
months, thereby breaching the contract and rendering the default decision defective. It was
not lost on the Board that Hughes’ performance failures led to the litigation in the first place.
Instead of dedicating sufficient resources to cure those failures, however, Hughes chose to
fund protracted litigation—a choice we decline to ratify through an unrestricted award of
fees.
A review of Hughes’ EAJA application reflects a Pyrrhic victory. Hughes seeks
substantial costs for two law firms to defend against a claim in which the Government had
the burden of proof, no experts were required, and no monetary damages were sought by
Hughes. The administrative record is replete with conference memorandums and orders
from the Board requesting status updates. Some of these can be attributed to the COVID-19
pandemic hindering discovery, but many of them are due to Hughes’ own delays, for which
it now seeks compensation. On the whole, we find that the administrative record reflects a
practice by Hughes of unduly and unreasonably prolonging litigation. Reimbursing Hughes
for excessive or unnecessary costs and fees would be unjust and violate the provisions of
EAJA. See 5 U.S.C. § 504(a)(3), (b)(1)(A). For these reasons, we deny all costs and fees
incurred beyond February 1, 2021, which was when the full scope of settlement negotiations
was clearly explained to Hughes. We further find that Hughes’ “kitchen sink” motion for
summary judgment, submitted less than two months before the scheduled hearing date,
served no litigation purpose and did not inform the Board’s decision. Therefore, costs and
fees related to that motion are also denied.
Finally, Hughes seeks fees and costs from two law firms. It is not uncommon for
attorneys who have long supported a small business client, but who are unfamiliar with the
practice of federal government contracts, to withdraw their appearance and allow their clients
to pursue a matter with more specialized counsel. Simply because Hughes retained two firms
and incurred costs from both of them does not mandate payment to both. This was not a

CBCA 7857-C(5964)

9

complex case. In reviewing itemized lists of costs and fees from both firms, however, we
find a reasonable division of the work and no overlapping fees or costs.
EAJA Award
Consistent with the above determinations, we make the following EAJA award to
Hughes. For the period between the date of the contracting officer’s initial final decision
(November 3, 2017) to the date that Hughes clearly understood that mediation and any
resulting settlement could include discussions about costs and forthcoming REAs
(February 1, 2021), Hughes presents billing records from Klimek totaling 378.3 hours at the
$125 EAJA hourly statutory cap. We reduce those hours to 338.4 to account for hours billed
beyond that date and for hours that relate to change orders, CPARS, discussions about other
contracts that Hughes bid on, the motion for summary judgment (with the exception of some
discussions and research very early on in 2017 and 2018), and review of other irrelevant
contracts. We apply the EAJA hourly rate of $125 to 338.4 hours, for a total of $42,300. In
addition to those attorney fees, we find costs in the amount of $8369.97 to be reasonable
since most of those costs relate to production of deposition transcripts and travel related to
discovery. The only cost denied was the rental fee for the conference room for the hearing,
since the hearing took place after February 1, 2021.
Billing records from Bentley for the same time frame—November 3, 2017, to
February 1, 2021—show 392.1 hours, billed at $120 per hour. We subtract from that all
costs and fees related to the motion for summary judgment (with the exception of some
discussions and research very early in 2017 and 2018) and time related to “coming up to
speed” after long periods of dormancy, which reduce the hours to 146.4. We multiply that
number by the rate of $120, for a total of $17,568 in attorney fees to Bentley. Based on these
totals, we award Hughes $59,868 in attorney fees and costs in the amount of $8369.97,
amounting to a total EAJA award of $68,237.97.
Decision
The application is GRANTED IN PART. Hughes is awarded fees and costs totaling
$68,237.97.

Kathleen J. O’Rourke
KATHLEEN J. O’ROURKE
Board Judge

CBCA 7857-C(5964)

10

We concur:

Patricia J. Sheridan
PATRICIA J. SHERIDAN
Board Judge

Marian E. Sullivan
MARIAN E. SULLIVAN
Board Judge

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Acbca%3A36a3fe0ce7e5c9b3. Public record. Not legal advice.