Petition for Writ of Certiorari — North Star Alaska Housing Corp. v. United States

Supreme Court brief2010

Ask Donna

What actually matters in this document.

Text

Supreme Court, U.S.

FILED

| yr 49) Noto. 107122 dL 20 2010

\ OFFICE OF THE CLERK

: IN THE ;

Supreme Court of the Hnited States

NORTH STAR ALASKA HOUSING CORP.,

Petitioner,

UNITED STATES,

Respondent.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Federal Circutt

PETITION FOR A WRIT OF CERTIORARI

Thomas C. Goldstein

Counsel of Record

Paul W. Killian

Mark J. Groff

Joshua N. Friedman

AKIN GUMP STRAUSS

HAUER & FELD, L.L.P.

1333 New Hampshire

Ave., NW

Washington, DC 20036

(202) 887-4000

tgoldstein@akingump.com

July 20, 2010

a aeRE eRe STERIC

—

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 — WASHINGTON, D.C. 20002

QUESTION PRESENTED

Is a party's bad faith misconduct outside of court

proceedings categorically exempt from an award of

attorneys’ fees under the “bad faith exception” to the

“American Rule” that each party ordinarily pays its

own fees?

PARTIES TO THE PROCEEDING AND

RULE 29.6 STATEMENT

Petitioner is the North Star Alaska Housing

Corporation. Pursuant to Rule 29.6, petitioner is not

owned by any parent company, nor do any publicly

held companies own 10% or more of the corporation’s

stock. Respondent, the United States, was

defendant-appellee below.

11]

TABLE OF CONTENTS

PE EES EOIN Fe ed once snksvasin scenes cncncensnvsnsvaacecsnses i

PARTIES TO THE PROCEEDING AND RULE

OA Mg | y RRR R aR CI ae BM ele at hen serene, an I BN i}

TAR ee Ge SE iii dnt lll

EPR OE FR 8 Eee Fe atnensakidaseav id sidcxsiticaceiudeviios \

PETITION FOR A WRIT OF CERTIORARI.............. 1

FE ITY sda sncisscidcarsdiucdsssrrnataneecageaee 1

Fee I oaas dx sicscinn icin secdeicnepceoseantusie seianieeaee ]

RELEVANT CONSTITUTIONAL AND

Ge Ee EEE Br Ve wincsccsneeccdccnsddccsnnvcaciicsacdss 2

SD LARK ORME GE FRR Be GPR is csccaccincseosdessdasesteneadicvecs 2

REASONS FOR GRANTING THE WRIT................ 10

[. The Question Presented Is the Subject ofa

Three-Way Circuit Conflict. ...........0.....0...00008 1]

Il. The Ruling Below Conflicts with This

CGE FE nvcidcnsacesecoreceatcsnicinisicecneka 20

Ill. The Importance of the Question Presented

Be ive ssiccakciteavouxtecisuevccecaca teen 27

CPOE niikcccsnccadsskivnes ncaciaviedorssidematiueene: 29

APPENDIX A: Order of the Federal Circuit

denying rehearing and rehearing en banc

ee ee MI in vos devon sccnaskcascceincctutnvexsdotisdadcsncarsens la

APPENDIX B: Decision of the Federal Circuit,

FI he a ae ee ea da

APPENDIX C: Decision of the Court of Federal

CAi i Be ooo ieikssics espana staked: 6a

APPENDIX D: Judgment of the Court of Federal

Cla, BOGE BO ee iinet cdanaoscs 2la

APPENDIX E: Decision of the Court of Federal

8 Os oe) rr

APPENDIX F: Decision by the Contracting

I I We I oe cae ccnccovekacdacaseseconceveesesecs: 192a

APPENDIX G: Decision by the Contracting

RU. NE Ft BI se inccvcadacessesdsscnsncevccecskevsivess 204a

APPENDIX H: Decision by the Contracting

Officer, December 7, 2007 .............c.cccocscssscccsscsccess 232a

APPENDIX I: Decision by the Contracting

OC eer, Cctoer 25, BOOT ......cceseveccaccocsscvecscsssessvecss 249a

APPENDIX J: Relevant Portions of the Contract

Disputes Act, 41 U.S.C. §§ 601-613... 265a

TABLE OF AUTHORITIES

Cases

Alyeska Pipeline Serv. Co. v. Wilderness Soc’y,

421 U.S. 240 (1975) ccccccccccssesesscscseseeeseeess 7, 20, 21, 28

Am. Hosp. Ass’n v. Sullivan,

Oe We CAs GE. BOE) cei cccccncccccccescsevecee 14, 15

Am. Postal Workers’ Union v. USPS,

No. 09-1217, 2010 U.S. Dist. LEXIS 46488

Cee ee DUDS, 5. vincusesovecnnassvassunsareecnsnwies 15

American Employers Ins. Co. v. American Sec.

Bank.,

FET Be BOBS GO, Cid, FOO vnicceviecssiccseccscesessessis 15

Ass'n of Flight Attendants v. Horizon Air Indus.,

OIG FB OGL COE UE. TOG) onccccicescesccccscccsancsccecsees 18

Baker v. Bowen,

Be Fe BOT CCE Car. LOGS) ones cecscccsvescessevccssess 17

Bell v. School Bd. of Powhatan County,

321 F.2d 494 (4th Cir. 1968).............2..0..0...2..... 16, 21

Bradley v. School Bd. of Richmond,

ee ee ES oo casday cnn eukcsdiveunctonnarsvareuns ae

Brown v. Sullivan,

$16 F.2d 492 (Oth Cir. 1990) ............0..0.005.+. 9, 18, 19

Centex Corp. v. United States,

486 F.3d 1369 (Fed. Cir. 2007) ................ 8, 9, 10, 14

Chambers v. NASCO, Inc.,

I oo 2 so sea neadinanedinivendeapenesanryl 23, 26

Cobell v. Norton,

407 F. Supp. 2d 140 (D.D.C. 2005) ......ccescecesceeeeeee. 14

District of Columbia v. Straus,

No. 08-2075, 2010 U.S. Dist. LEXIS 35702

Re MIN acs cc acasansucnivevanenpuvvec coiwesiees 15

Ellipso, Inc. v. Mann,

594 F. Supp. 2d 40 (D.D.C. 2009) .....cceecccccesseeeeeees 15

F_D. Rich Co. v. United States ex rel. Indus.

Lumber Co.,

ee TE vane rncvccksnccccecveecescesevcness

FTC v. Freecom Comme'ns, Inc.,

401 F.3d 1192 (10th Cir. 2005)..................

FTC v. Kuykendall,

466 F.3d 1149 (10th Cir. 2006) ..........00......

Gray Panthers Project Fund v. Thompson,

304 F. Supp. 2d 36 (D.D.C. 2004) ...........-.

Hall v. Cole,

Hoover v. Armco, Inc.,

915 F.2d 355 (8th Cir. 1990)......................

Hutto v. Finney,

Re ROU Line sscssvevsescncsscesonvseseesss

In re Kempthorne,

449 F.3d 1265 (D.C. Cir. 2006) ..................

Kerin v. USPS,

218 F.3d 185 (2d Cir. 2000)...... diasaaials eer

Lamb Eng’g & Constr. Co. v. Nebraska Pub.

Power Dist.,

103 F.3d 1422 (8th Cir. 1997) ......cceccccccesee.

Maritime Mgmt., Inc. v. United States,

242.7 .3d 1326 (11th Cir. 200))..................

McLarty v. United States,

6 F.30 646 (6th Cir, 1BD3S).........cc0csercceressees

Mobil Oil Corp. v. Independent Oil Workers

Union, 679 F.2d 299 (3d Cir. 1982)...........

Montgomery Ward & Co. v. Pac. Indem. Co.,

ee Be Oe Ce GE. BOTT) cevscccscsscossssccesces

Morganroth & Morganroth v. DeLorean,

213 F.3d 1301 (10th Cir. 2000)..................

Nepera Chem., Inc. v. Sea-Land Seruv.,

194 F.2d 688 (D.C. Cir. 1986) ....................

aaauas 7, 20

inunesansiess 15

20, 21, 22

poteenes 9,15

dasnarehes 13

New York Gaslight Club, Inc. v. Carey,

Be Sr I evince cvchcdcuabiconbonsiscesevesnvaasscaseoers 22

Penner Installation Corp. v. United States,

ae rey eee Se aiccchnatncadissnpagenisendinsnancevecnersca 24

Pennsylvania v. Del. Valley Citizens’ Council for

Clean Altr,

re ee I ovo crsc ccsacdvacssdesteieshcacvecedecersavocass’ 22

Perales v. Casillas,

ee Re TIE Gi, BEI vicccsccicnsccssscconsgncsecosee 17

Richardson v. Comme’ns. Wkrs..,

530 F.2d 126 (8th Cir.), cert. denied, 429 U.S.

ee ee aes igcunddavanaunaies 18

Rolax v. Atl. Coast Line R.R. Co.,

186 F.2d 473 (4th Cir. 1951)....................cceceeee 16, 21

Sanchez v. Rowe,

870 F.2d 281 (Sth Cir. 1969) ............cccscscccccscescscceee 17

Schlein v. Smith,

oD eG Fe Sa OR |” yp ee 14

Shimman v. Int'l Union of Oper. Engrs,

T4464 FBG TEZS CEE Civ. TBBA) ..ccccrcccccsccceccccccsccescess 19

Sims v. Amos,

340 F. Supp. 691 (M.D. Ala.), affd, 409 U.S.

BRR Sele a oe oO oP 21. 32

Sullivan v. Hudson,

i NE occannscisecccasscuskatsvarpoxtasts 21, 22, 23

U.S. SEC v. Zahareas,

874 F.8d G24 (Sth Cir. 2004) ............cccccccsccccscssssccee 18

Vaughn v. Atkinson,

Be Be, Me PD aiinicacenssccsdasidscnsncsdacedturcesecns 20, 22

Williams v. Profl Transp., Inc.,

DOA FB GOT COCR CAP. BOOZ) occ ccccsscescccsvccscscseesccecces 16

Vlll

Zapata Hermanos Sucesores v. Hearthside

Baking Co.,

BAS Fee SO CTE Gir, BOOZ) oon .ccccsccvcssscccsccscccscvesess 12

Statutes and Regulations

tee RI vrs cctesstderteeseikcsadacondersenconences passim

Re I ons os aces canbe vseasecddpsonkaasessuvesscexensvaeesnie 4

I ong soa a pnusenvensonnnenenbeusionts 6

ee oc, os sacasassseusdeacovensscecebe passim

Oe Se IE oo vicsiccscvnsciecssccecesevcesescansecosssvons 27

ee occa dacs dudnhoestussoeaboecsveons 27

I oss ss ses'enkbanbictevnrceuedseecocusebinues 4

ee Oe BID oo csevescccsncccececesscsrvoncrsacncecscsess 4, 24

ee ee avai ca sceconiscuvesncnsnoovsnscdvcscenscescs 4

Congressional Materia!s

H.R. Rep. No. 96-1418 (Sept. 26, 1980), reprinted

SH BO Bie PAPE, BOE cvecicevvccccecorecccescccsceceseses 25

S. Rep. No. 95-1118 (Aug. 15, 1978), reprinted in

TE ee a ccccesncilcsesvousecsctacensereeds 23

Other Authorities

John Cibinic, Jr. et al., Administration of

Government Contracts 1252 (4th ed. 2006)....... 4, 23

Memorandum for the Heads of Executive

Departments and Agencies, Government

Contracting, 74 Fed. Reg. 9755 (Mar. 4, 2009).....28

No. 10-___

ee C—O eee —

IN THE 2

Supreme Court of the United States

NORTH STAR ALASKA HOUSING CORP.,

Petitioner,

UNITED STATES,

Respondent.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Federal Circuit

PETITION FOR A WRIT OF CERTIORARI

OPINIONS BELOW

The court of appeals’ opinion (Pet. App. B, infra)

is reported at 356 Fed. Appx. 415. The Court of

Federal Claims decision (Pet. App. C, infra) denying

petitioner’s motion for attorneys’ fees is reported at

85 Fed. Cl. 241. The Court of Federal Claims opinion

on the merits of petitioner’s underlying claims (Pet.

App. E, infra) is reported at 76 Fed. Cl. 158.

JURISDICTION

The Federal Circuit entered its decision on

December 15, 2009. Pet. App. 4a. The court of

appeals denied petitioner's timely petition for

rehearing en banc on March 22, 2010. Id. 2a-3a.

Chief Justice Roberts extended the time within which

to file a petition for a writ of certiorari to and

including July 20, 2010. App. 09A1194. This Court

has jurisdiction under 28 U.S.C. § 1254(1).

RELEVANT CONSTITUTIONAL AND

STATUTORY PROVISIONS

The Equal Access To Justice Act provides, in

relevant part:

Unless expressly prohibited by statute, a

court may award reasonable fees and

expenses of attorneys, in addition to the costs

which may be awarded pursuant to

subsection (a), to the prevailing party in any

civil action brought by or against the United

States or any agency or any official of the

United States acting in his or her official

capacity in any court having jurisdiction of

such action. The United States shall be liable

for such fees and expenses to the same extent

that any other party would be lable under

the common law or under the terms of any

statute which specifically provides for such

an award.

28 U.S.C. § 2412(b).

Relevant portions of the Contract Disputes Act,

41 U.S.C. §§ 601-13, are reprinted at Pet. App. J,

infra.

STATEMENT OF THE CASE

The government purposefully breached its

contract with petitioner and refused to cure its

default. Petitioner filed an administrative claim, as

required by federal law. The government then

purposefully corrupted the claims-resolution process

as well. As a result of this course of misconduct,

petitioner was required to further pursue its

remedies through an action in the Court of Federal

Claims. The court found as a matter of fact that the

government had acted in bad faith and ruled for

petitioner on the merits of the majority of its claims.

Petitioner expended significant amounts in

attorneys’ fees. Petitioner moved to recover those

fees based on the course of the government's bad

faith conduct, which included not merely violating

petitioner's rights (by breaching the contract), but

also forcing petitioner to pursue the claims-resolution

process both administratively (by refusing to cure the

breach) and in court (by interfering with the claims

process). The court recognized that several other

courts of appeals would award petitioner its

attorneys fees in these circumstances. But it held

that it was compelled by Federal Circuit precedent to

reject petitioner’s request because the government

had not acted in bad faith in the court proceedings

themselves. The court of appeals summarily affirmed

and denied rehearing en banc.

1. In 1987, respondent United States contracted

for petitioner North Star Alaska Housing Corporation

to design, build, and maintain a housing project at

Fort Wainwright, Alaska. Pet. App. 26a-27a. As

subsequently found by the Court of Federal Claims,

the United States engaged in a “prolonged campaign

designed to harm North Star,” through bad faith

administration, poor performance, and efforts to

interfere with petitioner's own performance of the

contract. Jd. 167a. The government thus pursued

and implemented its “own form of vigilante justice”

and engaged in “pervasive” bad faith that “infected

virtually every aspect of the administration of the

Lease” and “fell far below the standard of good faith

that is integral to the Federal procurement system.”

Id. 102a, 167a, 168a, 18la. Here, “bad faith plainly

animated actions by key government officials that

effectuated not only a breach of the covenant of good

faith and fair dealing, but also many express contract

provisions.” Jd, 106a.

The Contract Disputes Act, 41 U.S.C. §§ 601-13,

as implemented by the Federal Acquisition

Regulation System, 48 C.F.R. §§ 1.000-1.707 (2009),

establishes the scheme that must be followed by a

contractor which objects, to the United States’

contract performance. ‘The contractor may not

proceed immediately to court. Instead, it initially

files an administrative “claim.” The adjudicator of

the claim in the first instance is the “contracting

officer,” 41 U.S.C. § 605(a), who is “responsible for

ensuring performance of all necessary actions for

effecting contracting, [and] ensuring compliance with

the terms of the contract,” 48 C.F.R. § 1.602-2. “The

submission of a claim initiates the disputes process.”

John Cibinic, Jr. et al., Administration of Government

Contracts 1252 (4th ed. 2006) (hereinafter “Cibinic et

al.”).

Petitioner filed a series of claims relating to the

government's breach of the contract. But contrary to

the contracting officer's duty to “[eJnsure_ that

contractors receive impartial, fair, and equitable

treatment,” 48 C.F.R. § 1.602-2(b), the United States

engaged in significant further misconduct designed to

deprive petitioner of a fair adjudication of its claims.

See Pet. App. 157a-67a. As the Court of Federal

Claims subsequently found, there is “clear proof” that

the government “co-opted” the contracting officer who

was responsible for ruling on petitioner’s claims,

conduct that the court characterized as “[a]mong the

most troubling aspects of the case.” Jd. 157a.

Most broadly, the government “successful[ly]”

“coerce[d the contracting officer] into abandoning his

independence.” Jd. 164a. Army administrators

repeatedly and inappropriately interjected

themselves into contracting officer affairs. Jd. 162a-

63a. In addition, the Army enacted a “formal protocol

. under which [Army staff] would review and

comment on draft contracting officer decisions before

they were finalized.” Jd. 162a. This process led the

contracting officer to reverse at least one decision

that would have held in petitioner’s favor. Jd. 163a.

These actions “constituted perhaps the most

pernicious form of bad faith ... as it threatens the

integrity of the dispute resolution process that is

central to the government contracting system itself.”

Id. 160a.

Furthermore, “[a]pparently unsatisfied with

disrupting the internal dispute mechanism, [Army

officials] sought to wield other government processes

to harass,” including urging that -petitioner be

subjected to an audit by the Army’s Internal Review

and Audit Compliance Office. Tellingly, when this

process “yielded little in the way of adverse findings,”

the Army nonetheless “pressed for, and obtained, a

criminal investigation of the matter.” Jd. 166a. The

Court of Federal Claims later concluded that this

effort was, “disturbingly, . . . viewed as a way to

support the development of defenses in this

litigation.” /d. 166a n.71.

As a consequence of the government’s gross

misconduct, petitioner was required to seek further

review of its claims in the Court of Federal Claims,

see 41 U.S.C. § 609(a), where it filed four actions.

Pet. App. 47a, 63a, 83a, 87a. Ultimately, petitioner’s

allegations were consolidated for an eight-day trial in

2005. See Pet. App. 87a-89a.

Petitioner prevailed on the majority of its claims,

including specifically its allegations of breach of

contract and breach of the covenant of good faith and

fair dealing. See id. 106a. To this end, over the

course of eighty-seven pages of its opinion, the court

recounted the government’s’. willful misconduct

summarized above. Jd. 167a.

The court granted petitioner substantial

declaratory relief with respect to the government’s

breaches of contract. Jd. 18la-82a. The court noted

that it possessed limited jurisdiction to award

monetary relief for certain of the claims, however,

reasoning that the Contract Disputes Act’s

submission requirements had not been satisfied. Id.

89a-98a; see id. 179-80a. Moreover, the court rejected

many of petitioners damage calculations as

“premature” because some damages, like those

relating to incentive bonuses, “await{ed] further

determinations on a remand.” Id. 179a-80a.

Accordingly, the court’s final judgment awarded

approximately $250,000 in damages as compensation

owed to North Star for incentive bonuses and certain

breaches of contract. Jd. 2la-22a. The court left it to

the contracting officer to determine in the first

instance petitioner’s additional damages based on the

court’s declaratory findings. In the subsequent

proceedings, the government awarded North Star

more than $1.6 million as further compensation for

the government’s breaches of contract. Jd. 192a-

264a; C.A. J.A. A0141-0142.

The United States did not appeal the findings

that it had engaged in a pattern of gross bad faith

misconduct in the administration of the contract and

in the proceedings of the contracting officer, the

declaratory findings, or the award of damages.

2. Petitioner timely moved in the Court of

Federal Claims to recover its attorneys’ fees. The

Equal Access to Justice Act (HAJA) provides that the

United States shall be lable for attorneys’ fees in

“any civil action brought by or against the United

States .. . to the same extent that any other party

would be hable under the common law or under the

terms of any statute which specifically provides for

such an award.” 28 U.S.C. § 2412(b). In turn, this

Court has held under the “bad faith” exception to the

“American Rule” that a federal court has the inherent

power to hold a party hable for its opponent’s

attorneys’ fees for acts done “in bad faith,

vexatiously, wantonly, or for oppressive reasons.”

Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421

U.S. 240, 258-59 (1975) (quoting F.D. Rich Co. v.

United States ex rel. Indus. Lumber Co., 417

Preliminarily, the Court of Federal Claims

rejected petitioner's assertion that attorneys of the

Department of Justice had acted in bad faith in the

proceedings before the court itself. Pet. App. 10a-

13a. But it regarded as “a closer call” whether fees

should be awarded on the ground that the

government had “corrupted the administrative

process.” Jd. 13a. As to that allegation, the court

reiterated that there was overwhelming evidence of

the government’s bad faith course of misconduct,

continuing through both contract performance and

the subsequent adjudication of petitioner’s claims by

the contracting officer. Jd. Sa. That misconduct

necessitated petitioner appealing to the Court of

Federal Claims. Moreover, the court recognized that

certain misconduct by the government was in

defiance of rulings by the court itself. Jd. 12a

(quoting the court’s merits opinion, Pet. App. 140a-

4la).

The court nonetheless held that it was powerless

to award petitioner attorneys’ fees under existing

Federal Circuit precedent adopting a “restrictive view

of the ‘bad faith’ exception” to the American Rule.

Pet. App. 17a. The court read the Federal Circuit's

decision in Centex Corp. v. United States, 486 F.3d

1369 (Fed. Cir. 2007), to hold that bad faith by the

government outside the context of federal court

litigation — including in “how an agency handles an

administrative claim,” Pet. App. 18a — is exempt as a

matter of law from an award of attorneys’ fees under

the EAJA. Id. 17a.

Although it was undisputed that the United

States’ misconduct had infected the dispute

resolution process and _ necessitated the court

proceedings, and despite the substantial declaratory

relief granted which resulted in a total award

approaching $2 million, the court noted that its prior

denial of “much of the relief requested by” petitioner

demonstrated that even if petitioner had received “a

perfectly fair process” before the claims

administrator, much of its damages claim would have

been denied. Jd. 19a. On that basis, the court opined

that “it is hardly true here that, but for the bad faith,

plaintiff could have avoided this action and the

significant expenditure of judicial resources it

entailed.” Jbid. Finally, the court noted that the

government’s misconduct could be characterized as

an element of petitioner's claim that respondent “had

breached its covenant of good faith and fair dealing.”

Ibid.

The court recognized that the Federal Circuit's

precedent, and in turn the court’s own decision in

this case applying that precedent, conflicts with

decisions of other circuits, which are “arrayed over a

spectrum.” Jd. 14a. The Ninth and Eleventh

Circuits, for example, “have no problem concluding

that the ‘bad faith’ denial of a claim is sanctionable.”

Id. 14a-15a (citing Maritime Mgmt., Inc. v. United

States, 242 F.3d 1326 (11th Cir. 2001) (per curiam);

Brown v. Sullivan, 916 F.2d 492 (9th Cir. 1990)). In

stark contrast, cases “[a]t the other end of the

spectrum..., in more narrowly construing the

sanctioning authority, conclude that fee shifting can

never be based upon ‘bad faith’ conduct that solely

predates the litigation.” Jd. 15a.

3. On petitioner’s appeal, the government did not

contest the Court of Federal Claims’ findings that it

had breached its contract with petitioner or that it

had corrupted the proceedings of the contracting

officer. The government instead asserted that the

judgment should be affirmed because the outcome of

the case was compelled by Centex, supra. According

to the United States, in Centex the Federal Circuit

“acknowledged the existence of out-of-circuit

authority ‘for the proposition that the judicial process

is abused by a defendant’s bad faith response to a

claim for relief after the claim accrues but before the

judicial process is formally invoked,” but “did not

endorse that theory.” Resp. C.A. Br. 10 (quoting

Centex, 486 F.3d at 1372 n.1). The court of appeals

summarily affirmed. Pet. App. 4a-5a.

Petitioner sought rehearing en banc, arguing that

further review of the case was warranted in light of

the acknowledged circuit conflict over whether and to

what extent out-of-court misconduct is immune from

an award of attorneys’ fees. Ordered to respond, the

United States argued that the question had already

been properly settled in the Federal Circuit by

Centex, supra. See Resp. C.A. Opp. to Rhg. En Banc 9

(‘the trial court acted consistent with Centex, and, in

affirming the trial court’s order, this Court did not

overlook or misapprehend any point of law’). The

court denied rehearing en banc. Pet. App. 2a.

This petition followed.

REASONS FOR GRANTING THE WRIT

The opinions of the Court of Federal Claims

establish that the government engaged in a pervasive

pattern of bad faith behavior in the administration of

the parties’ contract and in the adjudication of

petitioner’s claims before the contracting officer. The

direct consequence of that serious misconduct was

that petitioner instituted court proceedings secking a

fair adjudication of its claims. As a consequence,

petitioner unnecessarily incurred _ significant

attorneys’ fees and the judiciary’s time was spent on

this matter unnecessarily. The lower courts

nonetheless concluded that petitioner was ineligible

as a matter of law to receive an award of its

attorneys’ fees under the “bad faith” exception to the

American Rule.

This Court’s intervention to review that holding

is warranted for three reasons. First, the question

presented is the subject of a substantial circuit

conflict. The courts of appeals are starkly divided

into three camps over what circumstances, if any,

justify an attorneys’ fee award against a party for bad

faith misconduct outside of proceedings before the

court itself. Second, the ruling below conflicts with

this Court’s precedents. In this case, the United

States purposefully engaged in an _ uninterrupted

course of bad faith conduct that unjustifiably forced

petitioner to incur significant attorneys’ fees by

_ pursuing its rights first through the administrative

claims process and subsequently in court. This

Court’s decisions provide that an award of attorneys’

fees may be available for bad faith misconduct that,

as in this case, goes beyond merely the acts that give

rise to the party’s claim. Third, the importance of the

case is undeniable. The question presented can arise

with respect to any party in any litigation, whether

or not involving the United States. Certiorari

accordingly should be granted.

I. The Question Presented Is the Subject of a

Three-Way Circuit Conflict.

a. The Federal Circuit affirmed the Court of

Federal Claims’ judgment that petitioner was

precluded from securing an award of attorneys’ fees

because the government did not engage in bad faith

misconduct before the court itself. Pet. App. 18a-20a.

That ruling is consistent with the precedent of the

Third, Seventh, and Tenth Circuits, which similarly

would have held that petitioner was ineligible as a

matter of law to receive an award of attorneys’ fees.

In Zapata Hermanos Sucesores v. Hearthside

Baking Co., 313 F.3d 385, 391 (7th Cir. 2002)

(Posner, J.), the Seventh Circuit held that the bad

faith exception to the American Rule “is a residual

authority, to be exercised sparingly, to punish

misconduct [] occurring in the litigation itself, not in

the events giving rise to the litigation (for then the

‘punishment would be a product of substantive law—

designed, for example, to deter breaches of contract).”

The court of appeals took care “to repeat” that a

party’s “behavior in the litigation itself... is the only

lawful domain” of such awards. Ibid. In the view of

the Seventh Circuit, seeking to award fees more

broadly would amount to the impermissible assertion

of “a grant of authority to do _ good, rectify

shortcomings of the common law (as by using an

award of attorneys’ fees to make up for an absence

that the judge may deem regrettable of punitive

damages for certain breaches of contract), or

undermine the American Rule on the award of

attorneys’ fees to the prevailing party in the absence

of statute.” Id. at 390-91.

That narrow view of the availability of an award

of fees also comports with the precedent of the Tenth

Circuit. In FTC v. Kuykendall, 466 F.3d 1149 (10th

Cir. 2006), that court held that fees are available only

on the basis of the claims and arguments made in

litigation, and even then, “[i]n order to fall within the

exceedingly narrow bad faith exception to the general

rule, there must be clear evidence tat the challenged

claim ‘is entirely without color and has been asserted

wantonly, for purposes of harassment or delay, or for

other improper reasons.” Id. at 1152 (quoting FTC v.

Freecom Commce'ns, Inc., 401 F.3d 1192, 1201 (10th

Cir. 2005)). See also Morganroth & Morganroth v.

DeLorean, 213 F.3d 1301, 1317 (10th Cir. 2000).

Similarly, in Mobil Oil Corp. v. Independent Oil

Workers Union, 679 F.2d 299 (3d Cir. 1982), Mobil

unsuccessfully challenged an arbitration award, but

the district court found that its litigating position

before the court itself was reasonable. The Third

Circuit held that its conduct was immune from an

award of fees because the bad faith exception to the

American Rule is limited to circumstances in which

“the losing party litigated in bad faith, vexatiously, or

for oppressive reasons. Thus, the issue before us is

whether the district court abused its discretion in

specifically finding that Mobil did not demonstrate

bad faith in conducting this litigation.” Jd. at 305

(citation omitted).

b. The holding of the Federal, Third, Seventh,

and Tenth Circuits that conduct outside court

proceedings is exempt from an award of attorneys’

fees squarely conflicts with decisions of the eight

other circuits to have decided the question presented.

The latter rulings themselves adopt two conflicting

rules.

i. The D.C., Fourth, and Eleventh Circuits

broadly hold that an award of attorneys’ fees may be

available for bad faith conduct that gives rise to a

plaintiffs substantive claim that the defendant

violated a clear duty. On the facts of this case, those

courts would hold that the government’s purposeful

misconduct in breaching its agreement with

petitioner and further corrupting the statutorily

defined claims-resolution process may give rise to an

award of attorneys’ fees.

The Court of Federal Claims in this case itself

recognized that petitioner would be permitted to

pursue attorneys’ fees under the precedent of the

D.C. Circuit, see Pet. App. 15a, but the Federal

Circuit rejected the D.C. Circuit’s position in Centex,

supra, 486 F.3d at 1372-73. See also Cobell v.

Norton, 407 F. Supp. 2d 140, 168 (D.D.C. 2005)

(noting conflict between D.C. Circuit precedent and

decisions of other circuits), mandamus granted on

unrelated question, In re Kempthorne, 449 F.3d 1265

(D.C. Cir. 2006). In the D.C. Circuit, an award of

attorneys’ fees for bad faith is not limited to cases in

which misconduct “occurred in connection with the

litigation,” but also is available independently if a

party engages in bad faith acts that were “an aspect

of the conduct giving rise to a lawsuit” when the

litigant violated “a clear statutory or judicially-

imposed duty.” Am. Hosp. Ass’n v. Sullivan, 938 F.2d

216, 219-20 (D.C. Cir. 1991) (Sentelle, J.). Attorneys’

fees are thus available when “a party, confronted

with a clear statutory or judicially-imposed duty

towards another, is so recalcitrant in performing that

duty that the injured party is forced to undertake

otherwise unnecessary litigation to vindicate plain

legal rights.” Jd. at 220. For example, that court has

awarded attorneys’ fees when an agency issued a

regulation that contradicted a prior stipulation,

leading a party to seek to enjoin the regulation. Ibid.

See also Nepera Chem., Inc. v. Sea-Land Serv., 794

F.2d 688, 702 n.102 (D.C. Cir. 1986) (citing Schlein v.

Smith, 160 F.2d 22, 25 (D.C. Cir. 1947)); American

Employers Ins. Co. v. American Sec. Bank., 747 F.2d

1498, 1502 (D.C. Cir. 1984).

The District Court for the District of Columbia

rigorously adheres to that standard. Thus, in Gray

Panthers Project Fund v. Thompson, 304 F. Supp. 2d

36 (D.D.C. 2004) (Kennedy, J.), the court awarded

fees because the government’s failure to follow

statutory requirements in implementing the federal

Medicare+Choice program made it necessary for the

plaintiff to file suit. The court explained that the

government “engaged in conduct that required

plaintiffs to undertake otherwise unnecessary

litigation to vindicate plain legal rights.” Jd. at 39.

Similarly, in Ellipso, Inc. v. Mann, 594 F. Supp. 2d

40, 44 (D.D.C. 2009) (Lamberth, C.J.), the court

awarded the defendant attorneys’ fees arising from

the plaintiffs filing of a lawsuit when “the key ‘fact’

that [the plaintiff] used to instigate this litigation

was patently false.” See also, e.g., Am. Postal

Workers’ Union v. USPS, No. 09-1217, 2010 U.S.

Dist. LEXIS 46488 (D.D.C. May 12, 2010); District of

Columbia v. Straus, No. 08-2075, 2010 U.S. Dist.

LEXIS 35702 (D.D.C. Apr, 12, 2010).

The Eleventh Circuit has in turn expressly

adopted the D.C. Circuit’s standard. Maritime

Mgmt., Inc. v. United States, 242 F.3d 1326, 1335

(11th Cir. 2001) (per curiam) (“recogniz[ing] bad faith

where ‘a party, confronted with a clear statutory or

judicially-imposed duty towards another, is so

recalcitrant in performing that duty that the injured

party is forced to undertake otherwise unnecessary

litigation to vindicate plain legal rights” (quoting

Am. Hosp., 938 F.2d at 220)).

Similarly, the Fourth Circuit long ago adopted

the rule that the defendant's primary conduct

underlying the claim may itself give rise to an award

of attorneys’ fees. Bell v. School Bd. of Powhatan

County, 321 F.2d 494, 500 (4th Cir. 1963) (school

board’s “long continued pattern of evasion and

obstruction” to desegregation was “so extreme” as to

justify shifting fees); Rolax v. Atl. Coast Line R.R.

Co., 186 F.2d 473 (4th Cir. 1951) (awarding

attorneys’ fees against labor organization § that

entered into racially discriminatory labor

agreement). That court has continued to adhere to

that rule. Williams v. Prof Transp., Inc., 294 F.3d

607, 614 (4th Cir. 2002).

ul. The Second, Fifth, Sixth, Eighth, and Ninth

Circuits have adopted an intermediate position under

which generally — with some variation between the

courts of appeals — a party may receive an award of

attorneys’ fees based on bad faith misconduct that is

related to the course of the litigation, although that

misconduct need not have occurred in the lawsuit

itself. These courts would hold that the court has the

power to award attorneys’ fees in this case because

the government's misconduct compelled petitioner to

pursue its claims administratively and in the Court

of Federal Claims.

The Fifth Circuit rejects both the position that

fees are narrowly available only for bad faith in the

conduct of the court proceedings, as well as the

opposite rule that. fees broadly may be awarded

purely for bad faith conduct giving rise to the claim.

That court instead has adopted the middle ground

position that “the requisite bad faith may be found in

a party’s conduct in response to a substantive claim,

whether before or after an action is filed, but it may

not be based on a party’s conduct forming the basis

for that substantive claim.” Sanchez v. Rowe, 870

F.2d 291, 295 (5th Cir. 1989) (emphases in original).

Under that standard, the Fifth Circuit notably

holds that governmental misconduct in_ the

administrative process may be a basis for an award of

attorneys’ fees. Thus, in Perales v. Casillas, 950 F.2d

1066, 1071 (5th Cir. 1992), the court held that on

remand the district court was empowered to award

attorneys’ fees against the government when “(1) the

INS used inappropriate factors to adjudicate requests

for relhef; (2) the INS retaliated against class

members through deportation proceedings; and (3)

the INS failed to timely adjudicate requests for relief

after promising to change this policy.” Similarly, in

Baker v. Bowen, 839 F.2d 1075, 1082 (5th Cir. 1988),

in which a plaintiff sought Social Security benefits,

the Fifth Circuit held that the administrative

“Appeals Council failed to fulfill [its] statutory duty

when it affirmed the ALJ, perfunctorily and

automatically, without reviewing all the evidence,”

and that the plaintiff was entitled to attorneys’ fees

because had the appeals council fulfilled “its duty,

there would have been no litigation in this case.”

Ibid.

The Second Circuit has expressly adopted the

Fifth Circuit’s holding. The Second Circuit holds that

“the point at which a complaint is filed does not mark

the line between conduct that may or may not be

considered in awarding fees for bad faith.” Kerin v.

USPS, 218 F.3d 185, 195 (2d Cir. 2000). In Kerin, for

example, the court held that an attorneys’ fees award

was available based on the allegation that the

government had refused to recognize a valid claim

and thereby forced the plaintiff to litigate. Jd. at 195-

96.

The Eighth Circuit adopted the same rule in

McLarty v. United States, 6 F.3d 545, 549 (8th Cir.

1993). That court has further specified that if the

“bad faith” of a party “necessitatled] that an action be

filed,” attorneys’ fees are available. Lamb Eng’g &

Constr. Co. v. Nebraska Pub. Power Dist., 103 F.3d

1422, 1435 (8th Cir. 1997) (discussing Richardson v.

Comme'ns. Wkrs., 530 F.2d 126, 132 (8th Cir.), cert.

dented, 429 U.S. 824 (1976)). It is similarly sufficient

that a party had brought a frivolous claim in bad

faith. /foover v. Armco, Inc., 915 F.2d 355, 357 (8th

Cir. 1990). There is in fact authority in the Eighth

Circuit supporting application of the D.C. Circuit's

broad rule that fees are available for conduct that

underlies the plaintiffs cause of action. U.S. SEC v.

Zahareas, 374 F.3d 624, 627 (8th Cir. 2004) (award of

attorneys’ fees is not limited merely to cases

involving bad faith conduct “in connection with the

litigation,” but is also available for bad faith that

“was an aspect of the conduct giving rise to the

lawsuit”).

The Ninth Circuit has held that a party generally

may not recover fees “solely upon a finding of bad

faith as an element of the cause of action presented

in the underlying suit,” Ass'n of light Attendants v.

Horizon Air Indus., 976 F.2d 541, 550 (9th Cir. 1992),

but it has squarely held that misconduct in an

administrative review process will justify an award of

fees. Thus, in Brown v. Sullivan, 916 F.2d 492, 496

(9th Cir. 1990), an administrative law judge awarded

the plaintiff disability benefits. That ruling was

automatically subject to administrative review before

an Appeals Council, which reversed without the

benefit of a transcript and without providing certain

evidence to the plaintiff. The Ninth Circuit held that

this bad faith conduct by the government entitled the

plaintiff to attorneys’ fees, reasoning that the

government’s conduct violated the “process for review

of benefit allowances,” which is “statutorily defined.”

Ibid. That misconduct “created delays and

necessitated [the plaintiff's] filing the first action in

the district court.” bid.

Finally, the Sixth Circuit applies yet a different

rule that is distinctly more stringent. That court

holds that fees are not available for bad faith giving

rise to the plaintiffs claim; conversely, although the

basis for a fee award is not limited to litigation

misconduct, “the bad faith exception does not apply

where there is no bad faith after the original claim

arises.” Shimman v. Int'l Union of Oper. Eng’rs, 744

F.2d 1226, 1232 (6th Cir. 1984) (en banc) (emphasis

added). The pervasive circuit conflict over the

question presented is illustrated by the fact that the

D.C. Circuit has expressly rejected the Sixth Circuit's

more stringent position. See Nepera, 794 F.2d at 701

n.102.

c. In sum, the eligibility of a party for an award

of attorneys’ fees for the bad faith misconduct of its

opponent outside the proceedings before the court

depends entirely on the pure happenstance of the

particular circuit in which the case is litigated. Eight

different circuits — all of which reject the narrow rule

that only bad faith conduct in the litigation itself may

give rise to a fee award — would have held in this case

that the government’s gross misconduct could be the

basis for petitioner to recover the significant

attorneys’ fees it was forced to expend unnecessarily

in pursuing its administrative and judicial remedies.

The principal role of this Court’s. certiorari

jurisdiction is to resolve just such conflicts, and the

Court’s intervention is plainly warranted.

II. The Ruling Below Conflicts with This

Court’s Precedents.

This Court has held under the “bad faith”

exception to the “American Rule” that a federal court

has the inherent power to hold a party liable for its

opponent’s attorneys’ fees for acts done “in bad faith,

vexatiously, wantonly, or for oppressive reasons.”

Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421

U.S. 240, 258-59 (1975) (quoting F.D. Rich Co. v.

United States ex rel. Indus. Lumber Co., 417 U.S.

116, 129 (1974)). The lower courts held as a matter

of law that this power applies only if the bad faith

misconduct occurs before the court itself. That

narrow conception of the federal courts’ inherent

power 1s unwarranted.

In Vaughn v. Atkinson, 369 U.S. 527 (1962), the

Court held that an award of attorneys’ fees was

appropriate because the defendant had refused to pay

the plaintiff maintenance and cure required by

maritime law. The Court reasoned that the plaintiff

was “forced to hire a lawyer and go to court to get

what was plainly owed him under laws that are

centuries old.” Jd. at 531.

Subsequently, in Hall v. Cole, 412 U.S. 1, 15

(1973), this Court held that in awarding fees “bad

faith’ may be found, not only in the actions that led to

the lawsuit, but also in the conduct of the litigation.”

In reaching that conclusion, the Court favorably cited

the Fourth Circuit’s decisions awarding attorneys’

fees on the basis of bad faith conduct giving rise to

the plaintiffs claim, see Bell and Rolax, supra,

describing those decisions as_ reflecting the

“unquestioned” power of a federal court to “award

counsel fees to a successful party when his opponent

has acted” in bad faith. Jd. at 5. In Bradley v. School

Bd. of Richmond, 416 U.S. 696, 706, 721 (1974), the

Court reaffirmed “the common-law availability of an

award” in such circumstances.

This Court moreover summarily affirmed an

award of attorneys’ fees necessitated by the Alabama

legislature’s efforts to avoid reapportioning voting

districts as required by the Fourteenth and Fifteenth

Amendments. Sims v. Amos, 340 F. Supp. 691 (M.D.

Ala.), aff'd, 409 U.S. 942 (1972). The district court

reasoned that these fees were justified either because

of the State’s bad faith, 340 F. Supp. at 693-94, or

because of “far broader considerations of equity”

arising from the plaintiffs role as “private attorneys

general,” id. at 694. Subsequently, in Alyeska, this

Court rejected the assertion that Simms rested on the

“private attorney general” concept, explaining that

“there was an alternative ground available—the bad

faith of the defendants—upon which to base the

award of fees.” 421 U.S. at 270-71 n.46.

Even if, contrary to those precedents, the

inherent power to grant fees were limited to cases of

bad faith conduct before the court, petitioner would

be eligible for such an award in this case. In Sullivan

v. Hudson, 490 U.S. 877 (1989), this Court squarely

held that the EAJA’s attorneys’ fees provisions

extend to proceedings before an administrative

22.

agency that is part of a claims-resolution process.

The Court reasoned:

Our past decisions interpreting other fee-

shifting provisions make clear that where

administrative proceedings are intimately

tied to the resolution of the judicial action

and necessary to the attainment of the

results Congress sought to promote by

providing for fees, they should be considered

part and parcel of the action for which fees

may be awarded.

Id. at 888. In reaching that conclusion, the Court

relied on prior decisions holding that fees were

available under the Clean Air Act for “the costs of

representation before federal and state

administrative agencies,” id. (citing Pennsylvania uv.

Del. Valley Citizens’ Council for Clean Air, 478 U.S.

546 (1986)), as well as under Title VII “for services

performed in state administrative and_ judicial

enforcement proceedings,” id. at 888-89 (citing New

York Gaslight Club, Inc. v. Carey, 447 U.S. 54

(1980)).

Applied to this case, this Court’s precedents

provide that the government is subject to an award of

attorneys’ fees for violating its clear obligations by

breaching its contract with petitioner and _ for

corrupting the proceedings before the contracting

officer. The Court’s rulings in Vaughn, Hall, and

Sims establish that a federal court’s inherent power

to award fees extends to cases in which a party is

forced to institute litigation because of its opponent’s

purposeful violation of clear legal rights. The bad

faith exception in part serves to make a party “whole

for expenses caused by his opponent’s obstinacy.”

Chambers v. NASCO, Inc., 501 U.S. 32, 46 (1991)

(quoting Hutto v. Finney, 437 U.S. 678, 689 n.14

(1978)).

This is such a case. The government engaged in

gross bad faith behavior that forced petitioner to file

a claim under the Contract Disputes Act. The

government then continued in its outrageous course

of conduct, corrupting the statutory claims resolution

process, preventing a fair adjudication by the

contracting officer, and requiring petitioner to pursue

its further remedies before the Court of Federal

Claims.

Petitioner’s eligibility for fees is all the more clear

because in a case under the Contract Disputes Act

the proceedings before the contracting officer are

“intimately tied” with the judicial process. Sullivan,

490 U.S. at 888. Given the “interlocking system of

judicial and administrative avenues to relief,” the

“exclusion” of the proceedings before the contracting

officer “from the fee provisions would clearly clash

with the congressional design behind the statutory

scheme whose enforcement the fee-shifting provisions

was designed to promote.” Jd. at 889. The design of

the statutory scheme is to “equalize the bargaining

power of the parties [to a government contract] when

a dispute exists; . . . and insure fair and equitable

treatment to contractors and government agencies.”

S. Rep. No. 95-1118 (Aug. 15, 1978), reprinted in 1978

U.S.C.C.A.N. 5235, 52385. Specifically, as the

individual responsible for resolving disputes between

contractors and the government, a contracting officer

serves as a “quasi-judicial official when rendering a

final decision.” Cibinic et al., supra, at 1286. In this

role, the contracting officer’s duty to provide

“impartial, fair, and equitable treatment” (48 C.F.R.

§ 1.602-2(b) (Oct. 1, 2009)) requires that he “act

impartially,” not “as a representative of one of the

parties” (Penner Installation Corp. v. United States,

116 Ct. Cl. 550, 557 (1950)).

In this case in particular, the administrative and

judicial proceedings were intimately related. After

petitioner was forced to institute proceedings before

the Court of Federal Claims, the government willfully

acted in contravention of the court’s rulings. The

court specifically found that the government engaged

in misconduct in direct response to rulings by the

court favorable to _ petitioner and that that

malfeasance deprived petitioner of compensation to

which it was entitled. See Pet. App. 140a-41a.

Moreover, despite an absence of “adverse findings,”

Army officials utilized internal and_= criminal

investigative resources to “delay resolution of this

case by more than a year, during which period [they]

continued to abuse [petitioner] on an almost daily

basis.” Pet. App. 166a. The government viewed this

misconduct “as a way to support the development of

defenses in this litigation.” Jd. 160a (emphasis

added). As the Court of Federal Claims recognized,

this “most pernicious form of bad faith . . . threatens

the integrity of the dispute resolution process that is

central to the government contracting system itself.”

Pet. App. 155a. The Federal Circuit's conclusion that

the federal courts are powerless to sanction such a

course of ongoing bad faith misconduct that occurs in

the midst of, and is directly related to, judicial

proceedings is meritless.

Holding the government categorically immune

from an award of fees in these circumstances would

furthermore conflict with Congress’s “premise” in

enacting the EAJA: “that certain individuals,

partnerships, corporations and labor and other

organizations may be deterred from seeking review of

or defending against unreasonable governmental

action because of the expense involved in securing

the vindication of their rights.” H.R. Rep. No. 96-

1418 (Sept. 26, 1980), reprinted in 1980 U.S.C.C.A.N.

4984, 4986-87. Congress feared that “the

government, with its greater resources and expertise

can in effect coerce compliance with its position.”

1980 U.S.C.C.A.N. at 4988. By interposing a

contracting officer as an intermediate step in the

process of adjudicating disputes over government

contracts, Congress did not intend to heighten the

already significant inequality in resources and deter

private parties from vindicating their rights against

the government.

The negative consequences of the Federal

Circuit’s ruling for the public fisc are apparent as

well. If the government is able to leverage its vast

legal resources through bad faith dispute resolution,

the resulting risk premium required by parties who

enter into agreements with the government will

necessarily increase.

Nor does the government conveniently acquire

immunity from an award of fees for its pervasive bad

faith misconduct because petitioner did not prevail on

all of its claims before the Court of Federal Claims.

In point of fact, the court ruled for petitioner on the

merits of most of its allegations. Although the court

disagreed with the opinion of petitioner’s damages

expert, the fact that petitioner was ultimately

awarded nearly $2 million in damages in the case

shows that its claims were significant and

meritorious.

But in any event, the fact that petitioner did not

entirely prevail before the Court of Federal Claims is

not relevant to its right to attorneys’ fees. “A court’s

inherent power to award attorney’s fees pursuant to

the bad faith exception ‘depends not on which party

wins the lawsuit, but on how the parties conduct

themselves during the litigation.” Lamb, 103 F.3d at

1435 (quoting Chambers, 501 U.S. at 53). In this

case, an award of fees is appropriate because the

government’s bad faith conduct deprived petitioner of

the fair adjudication of its claims to which it was

entitled before the contracting officer, necessitating a

“significant expenditure of judicial resources” (Pet.

App. 19a) in the course of petitioner’s appeal.

Nor is there merit to the Court of Federal Claims’

remaining suggestion (ibid.) that petitioner’s success

on the merits of its claim that the government

breached the covenant of good faith and fair dealing

could perversely disentitle petitioner to an award of

attorneys’ fees. There is no basis in law or logic to

hold that, although a party’s bad faith misconduct

generally subjects it to an award of fees, that

sanction must be denied whenever the plaintiff

proves bad faith as an element of its substantive

claim. An award of attorneys’ fees vindicates the

judiciary’s interest in the integrity and efficiency of

the legal process — including in cases in which a party

in bad faith forces its opponent to institute litigation

unnecessarily. In this case, the damages awarded to

petitioner on its substantive claims _ related

exclusively to the government’s breach of the parties’

contract; those damages did not in any respect

purport to compensate petitioner for the significant

attorneys’ fees that petitioner incurred as a result of

the government’s gross misconduct.

Because the ruling below conflicts with this

Court’s precedents and Congress's design in enacting

the Contract Disputes Act and the EAJA, certiorari is

warranted.

III. The Importance of the Question Presented

Is Manifest.

This Court’s intervention is finally warranted

because the question presented has the potential to

arise in any case litigated in federal court, whether or

not the government is a party. The EAJA provides

that the United States shall be liable for attorneys’

fees in “any civil action brought by or against the

United States ... to the same extent that any other

party would be liable under the common law or under

the terms of any statute that provides for such an

award.” 28 U.S.C. § 2412(b). The numerous federal

appellate rulings giving rise to the conflict between

the circuits, see Part I, supra, demonstrates that the

issue recurs with great regularity. |

The importance of this case is only heightened by

the fact that it arises from the Federal Circuit, which

exercises exclusive jurisdiction over government

contract disputes. See 41 U.S.C. §§ 607(g)(1)(a),

609(a)(1). The Federal Circuit’s narrow conception of

the court’s power to award attorneys’ fees is a

distinctly minority view, yet it governs all contractual

relationships between private parties and _ the

government. In 2008, the government spent over

$500 billion on contracts with private individuals.

See Memorandum for the Heads of Executive

Departments and Agencies, Government Contracting,

74 Fed. Reg. 9755 (Mar. 4, 2009).

Finally, this case presents an ideal vehicle

through which to resolve this circuit conflict.

Petitioner is a government contractor litigating a

purely federal question — the proper application of

the Equal Access to Justice Act to the bad faith

exception to the American Rule recognized by this

Court. Accordingly, this appeal does not involve the

potentially thorny terrain of applying a federal fee-

shifting rule to a violation of state substantive law,

which would implicate the “very different situation

[that] is presented when a federal court sits in a

diversity case.” Alyeska, 421 U.S. at 259 n.31; see

also Montgomery Ward & Co. v. Pac. Indem. Co., 557

F.2d 51, 57 n.8 (3d Cir. 1977).

Further, the Court in this case can decide the

question of law of the circumstances in which

attorneys’ fees are available under the bad faith

exception to the American Rule without resolving

whether such an award is appropriate on the facts of

this particular case. The Court of Federal Claims’

initial findings, subsequently reaffirmed by the court

in its opinion addressing petitioner’s claims to

attorneys’ fees, establish that the government

engaged in pervasive bad faith both in_ the

administration of the contract and the adjudication of

petitioner’s claim. Those findings demonstrate, at

the least, that petitioner’s claim to attorneys’ fees is

substantial. After resolving that the lower courts

erred in holding as a matter of law that petitioner is

categorically ineligible for an award of fees, this

Court can remand for a determination of whether an

award is appropriate on the facts of this case and

what portion of petitioner’s fees should be awarded.

CONCLUSION

For the foregoing reasons, the petition for a writ

of certiorari should be granted.

Respectfully submitted,